The decision by the private party to refinance may be accompanied by a request for an extension to the project deed. By extending the project deed, the private party may be able to extend the term of its debt finance and therefore borrow more for modifications, resulting in a refinancing gain.
There can be justification for the government party agreeing to extending the project, specifically when extending the term will enable the government party to secure future services at currently contracted prices, which may be cheaper than those available in the future.
Government parties need to carefully assess both the benefits and risks relating to any proposed extension of the project deed term, with the decision being taken on operational and value for money factors. Government parties should not extend the original project deed term unless doing so would have been justified on a separate stand-alone basis, regardless of the refinancing event.
Requests for contract extensions should be considered in consultation with the Partnerships Victoria team at DTF, to ensure the implications for the government party, including any need for additional budget cover and change in risk are understood.