The government party's role and obligations in respect of refinancing will be set out in the project deed. The government party is required to provide or withhold its consent to the refinancing proposal and/or variation to the finance documents within a specified period. The definition of refinancing and the scope of the associated consent rights will determine the contract director's actions and necessary resources. DTF will manage all PPP refinancing events in consultation with contract directors to ensure a timely and consistent approach to assessing and consenting to refinancing requests.
Each project deed will specify the particular consent requirements and process to be followed. Unless the project deed expressly provides otherwise, the following principles should apply when assessing or reviewing refinancing requests from the private party, and should be agreed between the government party and the private party as a condition of approval for changes to the finance documents:
• any refinancing gain must be shared between the government party and the private party on a 50:50 basis, provided that the projected equity return at the time of the refinancing is above that reflected in the original base case financial model;
• the outcome of the refinancing should not threaten the perceived value for money of the project;
• a refinancing should not jeopardise the stability and success of the long-term contractual relationship between the private party and the government party;
• the reasonableness of any fees payable by the private party in relation to the refinancing should be carefully assessed, as the fees may be an indirect means of extracting funds from the transaction without needing to share gains with the government party;
• any gains which are to be received must be carefully weighed up against the extra risk which may arise as a result of the refinancing;
• appropriate benefits such as compensation should go to those bearing risks;
• it is reasonable for the government party to seek compensation for any increased exposure to termination liabilities arising from a refinancing; and
• the government party's reasonable third-party costs for assessing the refinancing request must be met by the private party.