The final Privatization Option will comprise of cash flows over the period of the project set out in a spreadsheet and will include:
a) Costs, income, financing cash flows.
b) Conversion of these into a payment schedule over the life of the envisaged Privatization Contract i.e., annual net payments.
c) Add the projected costs of project management and monitoring over the life of the Privatization Contract to arrive at net cash flows i.e., annual net payments plus project management and monitoring costs.
The Work Team shall then discount these net cash flows using a discount rate that reflects the Government's cost of borrowing capital for a similar period as the duration of the project. The discount rate for the purposes of the VFM analysis shall be obtained from NCP. Using this discount rate, the Work Team shall calculate the net present value (NPV) resulting from the Privatization financial model cash flows.