Financial Model Assumptions

In the Financial Model all:

•  NPV calculations must be undertaken assuming a discounting base date of [#insert]; and  [Guidance note: Insert relevant date and year]

•  amounts must be GST exclusive with the GST payable to be shown separately.

The Financial Model must reflect the following assumptions:

•  Financial Close at [#insert];  [Guidance note: Insert relevant date and year]

•  the annual Consumer Price Index (CPI) rate is to be [#insert] per cent; 

•  the annual Wages Price Index (WPI) rate is to be [#insert] cent;

[Guidance note: Insert additional indices and rates in percentage terms, if applicable to the Project (eg Health Price Index).]

•  an escalation base date of [#insert];  

•  [the Financial Model must include any commitment fees associated with the financing arrangements for the Pre-Agreed Modification (to be modelled on the basis that the Pre-Agreed Modifications are not implemented); and]  

•  the NPV of the Service Payments [#and the #State Contribution / #State Contributions] to be made by the State must be calculated using nominal cash flows at the end of each period and using the relevant nominal Proposal Evaluation Discount Rate, as set out in Section 8.1.2 (Discount Rates) of Volume 1, Part A (General Information and Instructions to Respondents).

Respondents should note that the Proposal Evaluation Discount Rate used to evaluate each Proposal will be adjusted to reflect the level of systematic risk in their submissions relative to that contained in the State's preferred risk allocation; and

In addition to the above assumptions:

•  Respondents must clearly identify the underlying interest rate, swap margin, Financier's margin and other funding costs separately in the Financial Model.  The underlying interest rate assumption should be quoted as available in the market at 10:15am one week prior to the closing date (specified in the definition of Closing Time and Date in the Glossary, unless otherwise advised in writing by the State) and the data source should also be provided.  All interest rate assumptions must be provided as at this date and time and the underlying cost of funding assumptions contained in the Proposal must be clearly stated.  

•  Respondents must separately identify the Financiers' margin and costs in the Financial Model and any swap credit spreads or liquidity margins they would expect to incur.  The underlying interest rate assumptions input into the Financial Model must be set consistent with the methodology documented in the Respondent's Financial Close Adjustment Protocols (refer Proposal Requirement C5.3 (Financial Close Adjustment Protocols)).  That is the Respondents must employ a 'full dry run' verified by the respective hedge banks; 

•  assumptions on any working capital, deposit and overdraft rates must be explicitly stated;

•  no adjustments to the Service Payments must be made for any abatements;  [Where the Performance Regime includes other components in addition to abatements, this should be included (e.g. non-payment of a service linked fee)]

•  where applicable, Respondents must explicitly state any assumptions regarding assumed Refinancing and must separately identify these in the Financial Model; and

•  Respondents use of indexation factors is limited in accordance with Section 6.5.2.2 (Indexation and Profile) of Volume 1, Part A (General Information and Instructions to Respondents).