The general principle behind consenting to a refinancing is that the State should be 'no worse off' as a result of the refinancing (other than changes in the base interest rate which is a State retained risk). To ensure that the State is no worse off, the government party should carefully examine any changes in the State's risk position as a result of the refinancing. Any new or increased risks allocated to the government party, will need to be accompanied by adequate compensation provided by the private party.
Typically, the government party does not take any risk on refinancing losses (e.g. losses accruing as a result of higher fees and margins or changes in the debt profile compared to that originally forecast), rather this risk is entirely borne by equity. However, in some Partnerships Victoria projects procured during the GFC, the government party did agree to share in refinancing losses. In this context, being no worse off means the government party should be no worse off than the agreed contractual position - that is, the government party will bear its share of the refinancing losses, but should not be required to also take on additional risks unless it is adequately compensated.