Summary of inflation risk

Assuming the Service Payments is indexed at CPI;

•  for Group 2 Services - the government is bearing the majority of inflation risk and only a very small portion of this risk lies with the private sector, as not all costs will increase at the same rate as CPI. The private sector may bear some wage risk on any management and agency staff, and the formal readjustment of the Service Payment level only occurs once the 5 per cent threshold is breached periodically.

•  for Group 1 Services - the Project Company bears the risk that the actual real price increases over the Project Term is greater than that estimated for the build up of the Service Payment. As stated earlier, there will be no compensation paid by the government to the Project Company for any price changes for these Services.