2.4 Financial Management

The manner in which the expenses to be incurred and revenues to be earned will be recorded and disbursed should be precisely specified in a project agreement. Typical provisions relating to financial management include the toll structure; toll collection; method of toll adjustment; currency protection for a variety of currency risks, availability of foreign exchange, devaluation; and consent to escrow account.

2.5 Transfer

In case of PPP model such as BOT, the project facility is transferred to the government after the end of the concession period. The procedure based on which the facility will be transferred to the government should be specified in the project agreement. Typical provisions for transfer defines the scope of the transfer; maintenance and monitoring schedule prior to the transfer date; supply of spare parts after the transfer; transfer of insurance and contractor warranties; technology transfer; environmental compliance; warranties; release of maintenance bonds; and transfer procedure.

2.6 Obligations of Government and Project Company

The project agreement should specify in detail the obligations to be fulfilled by both the parties to the contract. With respect to the government, one of the key obligations is protect the project company against the consequences of changes in the laws and regulations of the host country. Assist the project company in obtaining and sustaining permits and approvals. On the other hand, project company must comply with the laws and regulations of the host country during implementation of the project. Reasonable steps have to be taken by Project Company and subcontractors to ensure that the environment is protected throughout the project. Other obligations of the project company, inter alia , are compliance with safety standards; obtainment and renewal of approvals and permits; use of competitive national constructors, services and goods ; protection of labour rights ; employment and training of national personnel ; and technology transfer .

2.7 Breach of Contract:

Adherence to contract terms relating to the performance of obligations is very important as failure by one party to adhere to the contract terms might have serious consequences for the other party and lenders. Precise stipulations defining the obligations to be performed and consequences of a failure to perform those obligations should be included in the project agreement. In addition, the remedies available under the contract to the government and Project Company if the other party fails to perform its obligations should also be highlighted in the project agreement. For example, lenders should be entitled to step in and exercise the rights of the project company, upon occurrence of default under the financing documents. Or, provide the opportunity to the government to cure the default by the project company.

2.8 Contract Termination

Project agreement is terminated under circumstances where the government/project company is in substantial breach of the contract and when contract cannot be performed for a substantial period of time. The project agreement needs to specify under what circumstances the government and project company can exercise the right to terminate the contract. Besides, this section should also highlight the rights and obligations of the parties upon termination, the compensation payments to be given to the affected parties.