The guarantee undertakings may be an integral part of the PPP contract provisions, and may be in various forms as follows:
• Service use guarantee (or revenue guarantee)
This guarantee is a common guarantee in the PPP contracts used in the transportation sector. Under this guarantee, the state guarantees to the project company providing a minimum service use such as the passage of a specific number of cars on a daily basis in case of establishing a Toll Road, or guarantees a minimum daily revenues. If the daily revenues are less than the amount agreed upon, the state shall guarantee paying the difference. The direct beneficiary from this guarantee is the project company and not its creditors. If the company costs are not managed properly, the project company is likely to fail to pay its debts to the creditors.
• Guarantee of minimum service fees
Under this guarantee, the state guarantees to the private partner paying a minimum service fees that it had committed whatever the performance of the project company is. The project company lenders usually make sure that this guarantee is provided to ensure obtaining their debt or part thereof, even if the project company performance is weak or if the PPP contract is terminated for any reason whatsoever.
• Guarantee of Law and Regulation Amendment
The private partner usually requests, especially in the states with weak regulatory framework, to provide this type of guarantee. The state provides the protection from any future regulatory policy, provided that the contract shall not be unilaterally changeable .