...PPP Compensation Mechanisms Common: Across the world, infrastructure projects developed by the private sector under long-term concessions with government agencies commonly include provisions for the payment of compensation to the concession holders if the concession is terminated before its maturity. This is to compensate private shareholders and lenders for their investment given the loss of future income. Secured lenders typically have first claim over compensation proceeds, which tend to be cash payments. Compensation Depends on Cause: Termination without cause by the public sector grantor would usually lead to full repayment of debt including any swap breakage costs and equity compensation. Termination due to poor performance by the project company would either be based on the market value of the concession once retendered or a high percentage of outstanding debt and breakage costs. Compensation mechanisms seldom support project debt ratings, which are based on the probability of default....
