(a) (Modification Amount):
Where there is an Equipment Modification in respect of an item of Group 1 Equipment or an item of Group 2 Equipment, the Modification Amount for that item will be calculated as follows:
MA = ECC + EMC + ELC
where:
MA = the Modification Amount, which may be a positive number (being an amount payable by the State to Project Co) or a negative number (being an amount payable by Project Co to the State);
ECC = the Equipment Capital Cost calculated in accordance with Section 6.2(b);
EMC = the Equipment Maintenance Cost calculated in accordance with Section 6.2(c); and
ELC = the Equipment Lifecycle Cost calculated in accordance with Section 6.2(d).
(b) (Equipment Capital Cost):
(i) For each item of Group 1 Equipment or Group 2 Equipment that is the subject of an Equipment Modification, the Equipment Capital Cost will be calculated as follows:
ECC = (PCnE - PCoE) + (AW - RW)
where:
ECC = the Equipment Capital Cost, which may be a positive number (being an amount payable by the State to Project Co) or a negative number (being an amount payable by Project Co to the State);
PCnE = the Purchase Cost of the new or additional Equipment included in the Equipment Modification;
PCoE= the Purchase Cost of the original Equipment or any Equipment the purchase of which is avoided as a result of the Equipment Modification;
AW = Construction Base Costs for the additional Works (excluding PCnE) required to be undertaken as a direct consequence of the Equipment Modification; and
RW = the Savings from any reduction in Works as a direct consequence of the Equipment Modification.
(ii) No Margins or Agreed Margins are payable in respect of the Equipment Capital Cost, save that where the aggregate Equipment Capital Cost from all Equipment Modifications for Group 1 Equipment or Group 2 Equipment during the Development Phase is:
A. a positive value then the Construction Margin set out in Table 2 will apply to and be added to the Equipment Capital Cost for that additional Equipment Cost; or
B. a negative value then the Construction Margin set out in Table 2 will apply to and be added to the deducted amount so as to increase that deducted amount.
(c) (Equipment Maintenance Cost):
(i) The Equipment Maintenance Cost will be calculated as follows:
EMC = EMCN - EMCO
where:
EMC = the Equipment Maintenance Cost, which may be a positive number (being an amount payable by the State to Project Co) or a negative number (being an amount payable by Project Co to the State);
EMCN = the Equipment Maintenance Cost applicable to the new item of Equipment, which will be calculated for each year remaining in the Operational Phase from the Date for Commercial Acceptance or the date of the Equipment Modification (whichever is the later) by multiplying the Purchase Cost of the new item of Equipment by the Maintenance Rate determined in accordance with section 6.2(c)(ii); and
EMCO = the Equipment Maintenance Cost applicable to the original item of Equipment, which will be calculated for each year remaining in the Operational Phase from the Date for Commercial Acceptance or the date of the Equipment Modification (whichever is the later) by multiplying the Purchase Cost of the original item of Equipment by the Maintenance Rate determined in accordance with section 6.2(c)(ii).
(ii) The Maintenance Rate must be calculated as follows:
A. in relation to EMCN, it is the rate agreed by the parties or failing agreement, the lower of:
1) that applicable to the calculation of EMCO; or
2) that is determined by the State (acting reasonably) having regard to the recommendations of the relevant manufacturer; and
B. in relation to EMCO, it is the rate specified in respect of the original item of Equipment in the Asset Management Plan or, subject to Section 6.2(c)(iii), if there is no applicable rate, a rate agreed by the parties or failing agreement, either party may refer the matter to expert determination in accordance with clause 48.1.
(iii) Where the Equipment Modification is due to a new item of Equipment being added to the PSDR, EMCO is equal to zero, and EMCN will be calculated using the lower of:
A. the Maintenance Rate applicable to the most appropriate equivalent item of Equipment in the PSDR (if applicable); or
B. that recommended by the relevant manufacturer,
unless either the State Representative or Project Co can demonstrate that this should not be the case, in which case it must be a rate agreed by the parties or, failing agreement, either party may refer the matter to expert determination in accordance with clause 48.1.
(iv) No Margins or Agreed Margins will be payable to either Project Co or to the Services Contractor in relation to the Equipment Maintenance Cost.
(d) (Equipment Lifecycle Cost):
(i) For each item of Group 1 Equipment or Group 2 Equipment that is the subject of an Equipment Modification, the Equipment Lifecycle Cost will be calculated as follows:
ELC = ELCN - ELCO
where:
ELC = the Equipment Lifecycle Cost, which may be a positive number (being an amount payable by the State to Project Co) or a negative number (being an amount payable by Project Co to the State);
ELCN = the Equipment Lifecycle Cost applicable to the new item of Equipment, which will be calculated for the period remaining in the Operational Phase from the Date for Commercial Acceptance or the date of the Equipment Modification (whichever is the later) by aggregating the Purchase Cost of that item in each year which corresponds with the Replacement Frequency determined in accordance with section 6.2(d)(ii); and
ELCO = the Equipment Lifecycle Cost applicable to the original item of Equipment, which will be calculated for the period remaining in the Operational Phase from the Date for Commercial Acceptance or the date of the Equipment Modification (whichever is the later) by aggregating the Purchase Cost of that item in each year which corresponds with the Replacement Frequency determined in accordance with section 6.2(d)(ii).
(ii) The Replacement Frequency refers to the number of times an item of Equipment is expected to be replaced by Project Co during the Term and must be calculated as follows:
A. in relation to ELCO, it is the frequency (rounded down to the nearest whole number) indicated in the Asset Management Plan or, subject to section 6.2(d)(iii), if there is no applicable frequency it is a frequency agreed by the parties or, failing agreement, either party may refer the matter to expert determination in accordance with clause 48.1; and
B. in relation to ELCN, it is the lower Replacement Frequency as between that which is:
1) applicable to the calculation of ELCO; and
2) determined by the State (acting reasonably) and in accordance with the recommendation of the Manufacturer (if any)
unless Project Co can demonstrate that, where the lower Replacement Frequency is ELCO, this should not be the case, in which case it is a rate agreed by the parties or, failing agreement, either party may refer the matter to expert determination in accordance with clause 48.1.
(iii) Where the Equipment Modification is due to a new item of Equipment being added to the PSDR, ELCO is equal to zero, and ELCN will be calculated assuming the same Replacement Frequency applicable to the equivalent item of Equipment in the PSDR or if:
A. there is no equivalent item; or
B. the Replacement Frequency of the equivalent item of Equipment in the PSDR is significantly different to the new item of Equipment,
at the rate agreed by the parties or, failing agreement, determined either party may refer the matter to expert determination in accordance with clause 48.1.
(iv) No Margins or Agreed Margins will be payable to either Project Co or to the Services Contractor in relation to the Equipment Lifecycle Cost.