26.2.1  Payment amount

(a)  On termination of the project agreement for each type of Force Majeure Termination Event, government must, subject to Chapter 21 (Force majeure), pay to the private party:

(i)  an amount equal to:

(A)  the lower of senior debt owing to financiers at the Termination Date and the amount forecast in the Base Case Financial Model (as varied from time to time in accordance with section 14.5 of Chapter 14 (Payment provisions)) to be owing to financiers as at the Termination Date125, ; and

(B)  any break costs payable to the financiers or benefits receivable by the private party from or to the financiers under the finance documents as a direct result of early termination, including hedging arrangements (not included in paragraph (A) above).  Any break gains must be deducted.

less the deductions listed in section 26.2.2 below ("Force Majeure Compensation Amount"); and

(ii)  in certain jurisdictions only, half of equity as shown in the balance sheet of the private party at the time of termination, at par.  

(b)  The Force Majeure Compensation Amount is based on the assumption that the debt finance component of the project is bank debt. In a project financed by bonds, government will only pay the par value of the bonds outstanding (together with any accrued and unpaid interest) less any deductions.

(c)  To the extent that the project is fully or partly financed by a hybrid issue or another form of finance, appropriate amendments to the senior debt element of any payment will need to be made.  

(d)  In regard to paragraph (a)(i)(A) above, mezzanine and "other subordinated debt" will be afforded the same protection as senior debt for the purposes of the Force Majeure Compensation Amount, but only to the extent that such debt has the essential characteristics of senior debt (other than to the extent that it is subordinated to pure senior debt). This will be determined on a project-specific basis depending on the debt structure of the private party. If subordinated debt has the characteristics of equity, some governments will not provide any compensation, whilst others will compensate half of the subordinated debt.

(e)  In regard to paragraph (a)(i)(B) above, break costs will be subject to the private party's obligation to mitigate any such break costs.  

(f)  Where the Force Majeure Compensation Amount could potentially include amounts to be refinanced by an anticipated contribution from equity at the end of the construction phase, government may seek to cap the Force Majeure Compensation Amount to the level of what would have been the long term senior debt after that anticipated equity contribution.

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125  In either case, in some jurisdictions, ensuring that any senior debt payments of principal made by government during any period of suspension (arising from a Force Majeure Event) are appropriately taken into account (see section 21.2.5).