The State's right to withhold consent is an important protection for the State against the risks that may arise as a result of a change in control or ownership. However, the contract director should be aware of the potential consequences for the private party if the State withholds consent. The consequences may include the following:
• The proposed change in control or ownership may reflect the fact that the existing investor has a risk appetite and capabilities appropriate for the higher risk early stages of a project, but less appropriate for the current status of the project (particularly if the project is now in its service delivery phase and performing well). In these circumstances, the existing investor may wish to sell out to an incoming investor with a preference for the long-term, lower-risk investment opportunity presented by the operating project. If the change cannot proceed because the State does not give consent, this may create difficulties in the relationship between the State and the private party, as there may not be a strong alignment of interest in the long-term project outcomes.
• The proposed change in control or ownership may be intended to allow an existing investor to recycle their capital, raising funds for investment in new projects. If the change cannot proceed because the State does not give consent, this may prevent the investor investing in new State projects.