Some Privatization projects will generate substantial third party revenues, such as user charges. In projects where this is the case, some or all market risk is likely to be passed to the private partner. To reflect this, the Work Team, in conducting the VFM analysis, shall undertake the following steps:
a) Derive the income cash flows for the PSC financial model based on the results arising from the Demand or Market Study (i.e., tariffs and related user demand) undertaken as part of the Third File.
b) Derive the income cash flows for the Privatization Option based on the same assumptions used for the Privatization (this to be able to compare on a similar basis with the PSC).
c) Calculate the NPV for the PSC.
d) Derive the minimum revenue share percentage under the Privatization Option that would be required to achieve an NPV for the Privatization option that is similar to the PSC NPV above.
This minimum revenue share percentage shall be one of the key areas of review as part of the Third File review and approval process.