Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement
2.
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement
Table of contents
Page
1.
Relationship with the Standardised Public Private Partnership Provisions 4
2.
Project Finance ................................................................................................ 4
3.
Generic nature of the PPP Agreement ............................................................ 4
4.
Clause 1.1.1 – definition of "the Act" .............................................................. 5
5.
Clause 1.1.29 – definition of "Independent Expert" ....................................... 5
6.
Clause 5.3.1.-- ownership and return of the Project Site and the Facility .... 6
7.
Extent of the Project ........................................................................................ 6
8.
The situation where the Facility is already erected on the Project Site ....... 6
9.
Sale of Institution Assets ................................................................................ 7
10.
Rights of access, traversing rights and sharing of common facilities ......... 8
11.
Clause 7 – Institution assistance and rights and limitations on liability ...... 9
12.
Clause 8.3.2 and Schedule 7 ........................................................................... 9
13.
Clause 11 – Key Personnel and removal of personnel .................................. 9
14.
Clause 13 – Access to documents, copyright and related matters .............. 9
15.
Clause 17 – Performance Bond and Final Bond .......................................... 10
16.
Clause 18 – Commencement and Completion of Works ............................. 10
17.
Operator .......................................................................................................... 11
18.
Clause 20.4 – marketing ................................................................................ 12
19.
Clause 21 – PPP Fee ...................................................................................... 12
20.
Clause 22 – User charges in respect of Operation and Maintenance ......... 13
21.
Clause 23 – Penalties ..................................................................................... 13
22.
Clause 24 – Default interest........................................................................... 13
23.
Clause 27 – Consequences of a Relief Event ............................................... 13
24.
Termination Amount on Private Party Default ............................................. 14
25.
Clause 31 and a direct agreement with a lender to the Private Party ......... 14
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement
3.
26.
Clause 31.3 – Equity and Shareholder Loan compensation on Institution
Default ....................................................................................................................... 15
27.
Clause 38.2 – certificate of indebtedness..................................................... 15
28.
Institution's right to step in ........................................................................... 15
'23
Institution Step-in........................................................................................... 16
29.
Capital grants by the Institution or a Responsible Authority ...................... 17
30.
Final Bond ...................................................................................................... 17
31.
Documents to be included in Project Documents ....................................... 18
32.
Sale of business upon termination or expiry ............................................... 18
33.
Schedule 4 - Environment and heritage obligations.................................... 18
34.
Schedule 5 – Black Economic Empowerment obligations .......................... 21
35.
Schedule 12 - Penalties ................................................................................ 21
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement
1.
Relationship with the Standardised Public Private Partnership Provisions
The PPP Agreement is based on the Standardised Public Private Partnership
Provisions ("the Standardisation") issued as National Treasury PPP Practice
Note number 01 of 2004, available on www.ppp.gov.za. It is not the intention to
repeat the provisions of the Standardisation in these Notes but to supplement
them. Accordingly, it is advised that persons using the draft PPP Agreement for
large cap tourism PPPs and these Notes consult the Standardisation in
conjunction with these Notes and the PPP Agreement.
2.
Project Finance
The draft PPP Agreement for tourism PPPs assumes that finance is raised by the
Private Party in the form of corporate finance supported by the balance sheets of
its shareholders. In the event that project finance is used, relying on the cash flows
of the project, (limited or non-recourse debt) then this PPP Agreement must be
amended in accordance with the Standardisation, making suitable provisions for
the lenders. Institutions are advised in such circumstances to seek the advise of
National Treasury's PPP Unit.
3.
Generic nature of the PPP Agreement
3.1
The draft PPP Agreement is relatively generic and non-project specific. It
should be more closely moulded to the specifics of the Project if, and once,
decisions have been taken on Project specific issues.
Once decisions in
respect of the Project have been taken, then the following clauses in the PPP
Agreement must be amended:
3.1.1
clause 1.1.15 (definition of "Development Period"), clause 1.1.20
(definition of "Expiry Date"), clause 1.1.36 (definition of "Long Stop
Date") and clause 4.1.2 (the time period of the Development Period) ;
3.1.2
clause 1.1.44 (definition of "Operation and Maintenance"): definition
should describe the Operations that the Private Party is required to
provide at the Facility in respect of the Project;
3.1.3
clause 1.1.61 (definition of "Protected Area"):
this definition should
include a description of and the name of the site where the Project is to
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement
5.
take place, such as (for example) the name of the relevant dam or river
or park or Protected Area;
3.1.4
clause 1.2.2 and wherever else the phrase "month and year in which
the Signature Date appears": the month and year in which signature of
the PPP Agreement occurs should be inserted as they will form the base
date off which inflationary increases will happen;
3.1.5
clause 2.2: the description of the physical structures and the activities
that the Private Party is to provide and undertake must be inserted into
this clause;
3.1.6
clause 3.2 and clause 7.2: whether the Private Party will have exclusive
use of the Institution Assets and the Project Site will depend on the
nature of the Project and what other uses the Institution wants to make of
the Project Site. If the Private Party is not to have exclusive use of the
Project Site, then the wording in square brackets in clauses 3.2 and 7.2;
3.2
In certain clauses, numbers of days or amounts are either in square brackets,
bold and italics or have not been filled in. The Institution and the Transaction
Advisors must fill in these numbers of days and amounts after considering
what would be appropriate in respect of the Project to which the PPP
Agreement relates.
4.
Clause 1.1.1 – definition of "the Act"
This definition should refer to any legislation that specifically governs the Institution
and permits the Institution to undertake the PPP and enter into the PPP
Agreement.
If there is no such legislation and/or the Institution derives its
Institution, power and capacity from the common law or a statute such as the
Constitution, then this definition may not be necessary.
5.
Clause 1.1.29 – definition of "Independent Expert"
A Project may require different experts to determine a dispute between the
Parties. For example, a Project in respect of a water PPP may require a financial
expert to determine certain financial issues and an expert in riverine biology and
Project in respect of a game reserve may require experts in respect of flora and
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement
6.
fauna. The clause contains 4 types of experts but the number and type of the
experts may need to be expanded in respect of a specific Project.
6.
Clause 5.3.1.-- ownership and return of the Project Site and the Facility
Where the institution is not the owner but has delegated rights from the owner, this
clause should be used as an alternative to clause 5.3.1.
The Private Party agrees and acknowledges that the Project Site is registered in
the name of [insert name of relevant government department or entity in
whose name the Project Site is registered] and that [insert name of relevant
government department or entity in whose name the Project Site is
registered] has delegated to the Institution the power and authority to conduct the
Project on the Project Site and to grant the rights detailed in this PPP Agreement
in respect of the Project Site to the Private Party.
7.
Extent of the Project
It is possible that a Project could require the Private Party to undertake certain
conservation functions of the Institution in respect of the entire Protected Area. In
this situation, the RFP documents must clearly specify that the Private Party must
be required to undertake these conservation functions and the Operation and
Maintenance Specifications and the Environmental Specifications must specify in
detail what the conservation functions are and what obligations, duties and
functions the Private Party is required to undertake and perform.
8.
The situation where the Facility is already erected on the Project Site
8.1
It is possible that the Facility has already been erected on the Project Site
when the PPP is undertaken. If this is the case, two situations are possible:
8.1.1
the first is where the Private Party will have to restore, renovate and/or
refurbish the Facility; and
8.1.2
the second is where the Private Party can use the Facility in the state in
which it is delivered to the Private Party by the Institution.
8.2
In the first situation, all of the provisions in respect of the undertaking of the
Works in accordance with the Construction Specifications and to the
satisfaction of the Independent Certifier, by the Long Stop Date will still be
7.
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement
necessary. In this situation, the definition of Works will need to deal with the
restoration, renovation and refurbishment of the Facility (rather than the
design, construction etc) and the Construction Specifications in Schedule 1
will need to provide the detail of the restoration, renovation and/or
refurbishment that needs to be undertaken in respect of the Facility.
Accordingly, the definition of Works should read as follows:
"Works"
-
the restoration, renovation and
refurbishment
pursuant
to
of
the
the
Facility
Project
Deliverables but excluding the
Operation and Maintenance, as
detailed in Schedule 1.
8.3
The second situation is anticipated to occur rarely.
In this situation, the
following definitions, clauses and schedules will need to be deleted and the
transaction advisors will need to pay particular attention to ensuring that the
PPP Agreement is amended to incorporate consequential changes to the
provisions of the PPP Agreement and to detail that the Facility has already
been designed, constructed, commissioned and is completed and is being
provided to the Private Party in a readily useable state.
8.3.1
The definitions to be deleted are the following: Completion Certificate,
Construction Specifications, Development Period, Independent Certifier,
Independent Certifier Agreement, Long Stop Date and Works.
8.3.2
The clauses to be deleted are clauses 14.2.2, 18, 30.15 and 30.1.7.
8.3.3
The schedules that may be deleted are Schedules 1, 3 and 11.
8.3.4
Clause 9 will need to be amended to remove any references to the
Construction Specifications in the title and by deleting clause 9.2.5.
9.
9.1
Sale of Institution Assets
In certain PPP projects, the Institution may wish to sell certain of the
Institution Assets to the Private Party.
In this situation, the following
definitions need to be inserted into clause 1.1 in the correct alphabetical
positions:
8.
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement
"Purchase Price"
-
the purchase price to be paid by
the Private Party to the Institution
in respect of the Sale Assets,
which price is in the amount of
R[insert amount];
"Sale Assets"
-
those Institution Assets which are
listed on Schedule [ ] and which
are sold by the Institution to the
Private Party;
9.2
The following clause should be inserted into the PPP Agreement as clause 5:
'Sale of Sale Assets
On and with effect from the Effective Date, the Institution sells the Sale
Assets to the Private Party, who purchases the Sale Assets from the
Institution. The Sale Assets are sold to the Private Party voetstoots.
The Purchase Price shall be paid by the Private Party to the Institution
by way of electronic transfer into the following account [insert account
details] on the Effective Date and upon receipt of the Purchase Price,
the Institution shall deliver the Sale Assets to the Private Party by
granting access to the Project Site to the Private Party.'
9.3
A new Schedule should be attached to the PPP Agreement and this Schedule
should list all of the Sale Assets.
10. Rights of access, traversing rights and sharing of common facilities
If the Private Party is to be granted specific rights of access to or rights to traverse
other parts of the Protected Area or is going to be required to share any common
areas or parts of the Protected Area, then this will need to be specifically provided
in clause 5 and the following clause can be inserted as clause 5.1.15:
'5.1.15 The Private Party shall be entitled to [access/cross/have
common use of, together with any other persons to whom the
Institution grants similar rights,] the following areas of the
Protected Area:
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement
9.
[insert list of areas of the Protected Area].'
11. Clause 7 – Institution assistance and rights and limitations on liability
The wording in square brackets in clause 7.2 should be deleted if the Institution or
another Responsible Authority may wish to grant rights to other persons to
conduct similar PPPs to the Project or may itself wish to conduct a similar project
to the Project, in respect of the Park or place at which the Project Site is situated.
If the Institution is prepared not to have the ability to grant such rights to another
person or itself conduct such a project, then the square brackets can be deleted
and the wording retained. Whether the Institution undertakes not to grant a similar
PPP to another Private Party or to operate a similar project itself will depend on
the quality of the asset on which the Project takes place and whether that asset
can successfully sustain two similar projects, yielding the required returns. In
addition, the Institution must also decide whether the exclusivity of rights, if given,
extends to the Project Site only or to the entire Protected Area.
12. Clause 8.3.2 and Schedule 7
The wording in square brackets in clause 8.3.2 and its subclauses and the whole
of Schedule 7 can be deleted if there are no Consents which the Institution is
going to obtain.
13. Clause 11 – Key Personnel and removal of personnel
If the Institution is going to require the Private Party to take over the employment
of any employees of the Institution, then section 197 of the Labour Relations Act,
1995 will be applicable. Specialist legal advice will be necessary in respect of the
procedures that need to be followed and the requirements of said section 197, as
well as any legal agreements that may need to be entered into pursuant to the
transfer of the employment of the relevant employees.
14. Clause 13 – Access to documents, copyright and related matters
If intellectual property rights, trade marks and branding are important issues in
respect of a particular Project, the Institution is advised to consult specialist
intellectual property attorneys as to advice on these issues and specific provisions
that may need to be inserted into the PPP Agreement.
10.
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement
15. Clause 17 – Performance Bond and Final Bond
15.1
The amount of the Performance Bond during the Development Period should
not be less than a percentage of the cost of the Works, which percentage
should be determined with specific reference to the particular Project. In
addition, the amount of the Performance Bond during that period may also
cover additional damages and costs that the Institution may incur should the
Private Party default on its obligations during that period. During the Project
Term, the Performance Bond amount should not be less than the Minimum
PPP Fee and may also cover any additional damages and costs that the
Institution may incur should the Private Party default during that period. The
Performance Bond will need to be issued in respect of a specific amount in
respect of each period as financial institutions and corporate entities will not
issue bonds in respect of potentially unlimited amounts.
15.2
The amount of the Final Bond and when the Final Bond should be provided
for the first time should reflect the financial costs of the maintenance to be
done in the last few years of the Project and when the final maintenance
should commence.
For example, if there are large replacements of
equipment (such as kitchen equipment) required 5 years before the Project
Term expires, then the amount of the Final Bond will be larger than and it will
be required to commence sooner than, the Final Bond in respect of a Project
where there is no major maintenance in the last 5 years of the Project and the
routine maintenance is of relatively low value.
16. Clause 18 – Commencement and Completion of Works
16.1
The PPP Agreement is drafted on the basis that an Independent Certifier who
has the expertise to monitor and sign off the Works will be appointed. This is
to avoid the situation where the Institution monitors and signs off on the
Works as this may result in the transfer back to the Institution of the risk in the
design and construction of the Facility, which is to be avoided. It will be
necessary for the Institution and the Private Party to enter into an agreement
with the Independent Certifier, who will be appointed by both the Parties and
will be paid by both the Parties in equal portions.
A draft Independent
Certifier Agreement is attached to the PPP Agreement as Schedule 11.
11.
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement
17. Operator
17.1
In some PPP projects, the Private Party might not carry out the Operation and
Maintenance itself but may appoint a sub-contractor to conduct the Operation
and Maintenance on its behalf.
This situation may arise where certain
members of the Private Party will not be involved in the Operation and
Maintenance and certain members of the consortium that bid for and was
awarded the Project will be involved in the Operation and Maintenance but
will not be members of the Private Party.
17.2
If the Operation and Maintenance is to be carried out by an Operator and not
by the Private Party itself, then the following provisions will need to be
inserted into the PPP Agreement:
17.2.1
the following definition of "Operator" will have to be inserted into clause
1.1 in the correct alphabetical order:
"Operator"
-
the
Subcontractor
who
is
appointed by the Private Party
to conduct the Operation and
Maintenance;
17.2.2
the following clauses should be inserted into clause 8.1 as clauses 8.1.3
and 8.1.4 respectively:
'8.1.3
A copy of the Subcontract between the Private Party and the
Operator shall be submitted to the Institution before the
Private Party enters into that Subcontract and the Institution
(acting reasonably) may impose requirements that it deems
desirable in respect of the terms and conditions of that
Subcontract, with which the Private Party shall comply;
8.1.4
Once the Subcontract between the Private Party and the
Operator has been signed, the Private Party shall provide
the Institution with a signed copy of that Subcontract and
then shall provide the Institution with a copy of any proposed
amendments, variations or cancellations to or of the terms
and conditions of that Subcontract. The Institution (acting
reasonably) may impose those requirements that it deems
12.
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement
desirable in respect of any such amendment, variation or
cancellation and the Private Party shall comply with those
requirements. The Private Party shall give the Institution a
copy of the signed amendment, variation or cancellation
agreement;'
17.2.3
the following clause should be inserted into clause 8.4 as clause 8.4.10:
'8.4.10 as at the Signature Date:
8.4.10.1
the authorised and issued share capital in the Operator
and the share premium on that issued share capital,
8.4.10.2
as well as any shareholder loans to the Operator
are as detailed in Schedule 16, and
8.4.10.3
the shareholders in the Operator,
are all as detailed in Schedule 16.'
17.2.4
Schedule 16 must be amended to record the equity arrangements of the
Operator as well as of the Private Party and so the title of this Schedule
must be amended by inserting the following phrase at the end of the title:
'and of the Operator'.
18. Clause 20.4 – marketing
The Request for Proposals needs to specify that one of the output specifications
required as part of the bidders' bid submissions must be a marketing plan in
respect of the Facility and the Operation and Maintenance.
19. Clause 21 – PPP Fee
The amount of the PPP Fee in clause 21.1 is to be determined by the Institution
prior to issuing the RFP and should be stated in the RFP.
The percentage
detailed in clause 21.2 is to be derived from the preferred bidder's proposal.
13.
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement
20. Clause 22 – User charges in respect of Operation and Maintenance
If the Project is a restaurant, tea room or other retail facility, the Institution may
have an interest in the user charges being charged by the Private Party to the
members of the public. In this situation, the following provision should be inserted
into clause 22 as clause 22.5:
'22.5
The Private Party shall charge the user charges specified in
Schedule [x] in respect of the items sold at the Facility. Such user
charges are indexed to CPIX.
If the Private Party wishes to
increase or decrease such user charges (indexed to CPIX) by more
than 20%, it shall first obtain the prior written consent of the
Institution to such increase or decrease before it undertakes it and it
shall provide the Institution with its reasons for such increase or
decrease.
The Institution, acting reasonably, may withhold its
consent to such increase or decrease, provided that the Institution
shall have no liability to the Private Party of any nature whatsoever
as a result of or arising out of any withholding of its consent.'
21. Clause 23 – Penalties
The amounts of the penalties and the breaches in respect of which they are to be
imposed must be determined with specific reference to the Project in respect of
which the present PPP is being undertaken. The levels of the penalties should be
set so as to be punitive but not to bankrupt the Private Party.
22. Clause 24 – Default interest
The name of the bank with whom the Institution banks should be inserted into this
clause 24. In addition, it may be appropriate in some projects to increase or
reduce the percentage of 2% and the Institution may do so.
23. Clause 27 – Consequences of a Relief Event
It is possible that the occurrence of a Relief Event may place financial strain on a
Private Party, even if there is Project Insurance in respect of such an event and its
consequences as the Delay in Start Up and Business Interruption Insurances may
only be available after a certain period of time has elapsed.
In such
circumstances, the Private Party may ask for relief from payment of the PPP Fee
14.
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement
and/or an extension of the Project Term. The Institution should carefully consider
the consequences to it of granting either or both forms of relief and should grant
whichever form of relief is least adverse to it. Relief from payment of the PPP Fee
should be granted in preference to an extension of the Project Term.
24. Termination Amount on Private Party Default
The present drafting of the PPP Agreement provides for a retendering option, in
terms of which the Institution pays the Private Party the highest price bid by the
tenderers.
25. Clause 31 and a direct agreement with a lender to the Private Party
25.1
It is possible that, if the Private Party is borrowing monies from a financial
institution in order to under take the Project, that financial institution will
require the Institution and Private Party to enter into a direct agreement with
it, granting it certain rights (including step-in rights) upon the occurrence of a
Private Party Default.
A draft direct agreement is available in the
Standardised PPP Provisions Part O: Standard Direct Agreement, available
on www.ppp.org.za..
25.2
If a direct agreement is to be entered into in respect of the relevant Project,
the draft form of that direct agreement should be attached to the PPP
Agreement as Schedule 18 – Form of Direct Agreement.
25.3
In addition, the following definitions will need to be inserted into the PPP
Agreement, in the correct alphabetical position:
25.3.1
"Credit Agreement"
-
has the meaning assigned to it in the
Direct Agreement;
25.3.2
"Debt"
-
at any date, all amounts due and
payable by the Private Party that are
outstanding under the Credit Agreement
at that date, but excluding all default
interest, breakage premiums as well as
all fees, costs and expenses whatsoever
in
connection
with
any
hedging
15.
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement
arrangements
entered
into
by
the
Private Party;
25.3.3
"Direct Agreement"
-
the agreement so titled between the
Lender (or their nominated agent), the
Private
Party
concluded
and
the
Institution
simultaneously
herewith,
substantially in the form of Schedule 19;
25.3.4
"Lender"
-
any person providing finance to the
Private
Party
under
the
Credit
Agreement.
In addition, clause 31.3.1 of the PPP Agreement should be amended by
deleting the present wording and replacing it with the following wording: 'the
amount of the Debt at the Termination Date'
26. Clause 31.3 – Equity and Shareholder Loan compensation on Institution
Default
The percentage return on the Equity and Shareholder Loan outstanding balances
that the Private Party would want on to be paid on termination for Institution
Default must be inserted by the Private Party as part of its mark up of the PPP
Agreement that is submitted together with its response to the RFP.
27. Clause 38.2 – certificate of indebtedness
This provision helps the Institution with discharging the burden of proof it is
required to discharge in respect of claiming monies owed to it by the Private Party.
28. Institution's right to step in
If the Project Site is of the type of nature or in a position where it may be desirable
for the Institution to be able to take possession of it for reasons of health, safety or
security or for environmental reasons without terminating the PPP Agreement and
the Project, then the following clause should be inserted into the PPP Agreement
as clause 23. The effect of this clause is that the Institution can take over the
Project Site and suspend the Project for the duration of the event causing it to take
the Project Site over, without having to terminate the PPP Agreement and having
16.
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement
to pay the termination sum for Institution Default, which could be a substantial
sum. Instead, the Institution pays the smaller sum of the Private Party's monthly
income for the period that the Institution has 'stepped in'.
'23
23.1
Institution Step-in
If the Institution reasonably believes that it needs to take any
action in connection with the Facility and/or the Operation and
Maintenance because a serious risk arises to the health or
safety of persons or property, or to the Environment, or to
national and public safety and/or to discharge a statutory duty,
then the Institution shall be entitled to take action in
accordance with the following provisions.
23.2
If the Institution wishes to take action in terms of clause 23.1,
it shall as soon as possible after deciding to do so, notify the
Private Party in writing of:
23.2.1
the action it wishes to take;
23.2.2
its reasons for taking such actions;
23.2.3
the date when it wishes to commence such action;
23.2.4
the time period (the "Step-in Period") which it
reasonably believes will be necessary for such action
and which must be a fixed period; and
23.2.5
to the extent practicable, the effect on the Private Party
on its obligations to perform the Project Deliverables
during such time period.
23.3
Following the Operation of such notice, the Institution shall
take such action as notified under clause 23.2 and any
ancillary action as it reasonably believes is necessary (the
"Required Action") and the Private Party shall give all
reasonable assistance to the Institution in the conduct of such
Required Action.
17.
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement
23.4
For so long as and to the extent that the Required Action is
taken, and this prevents the Private Party from providing any
part of the Project:
23.4.1
the Private Party shall be relieved from its obligations in
respect of that part of the Project; and
23.4.2
in respect of the time period over which such Required
Action is conducted and provided that the Private Party
provides the Institution with such reasonable assistance
as the Institution may need in the conduct of such
Required Action (such assistance, however, to be at the
expense of the Institution to the extent of any
incremental costs), the Institution shall pay to the Private
Party an amount of monies that is equal to the revenue
that the Parties agree or it is determined in terms of
clause 38 would have been earned by the Private Party
at the time of and during the period of the Required
Action if the Private Party was fulfilling all its obligations
in respect of the Project that are affected by the
Required Action.'
29. Capital grants by the Institution or a Responsible Authority
In the event that the Institution makes a capital grant contribution to the capital
cost of the Project, these payments to the Private Party must only be made
according to a Milestone Completion Schedule upon sign-off at each milestone by
the Independent Certifier. These milestones will need to be very precisely defined
by the Institution. In addition, advice should be taken at the time of undertaking the
relevant project as to whether it is necessary specifically to exclude the capital
grant from the definition of "Gross Revenue". In drafting this aspect of the PPP
Agreement, the Institution should seek the advice of the PPP Unit.
30. Final Bond
30.1
In certain Projects, it may be appropriate to require the Private Party to
provide a final bond in respect of its obligations to provide maintenance, in the
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement
18.
last few years of the Project Term, as detailed in the PPP Agreement in
clause 17 and Schedule 10.
30.2
In other instances, however, the economic and financial aspects of the
relevant Project may mean that the Project cannot bear the cost of providing a
final bond or a maintenance reserve account (as a substitute for the final
bond).
30.3
The Institution must consider each Project to ascertain whether it can bear the
cost of providing a final bond, and if it cannot, the Institution may need to
consider putting in place alternative means of managing the risk that the
Private Party fails to perform maintenance in the last few years of the Project,
such as a regime of increased inspections and penalties if maintenance is not
performed.
31. Documents to be included in Project Documents
The Project Documents would include all agreements and subcontracts that are
necessary in order to enable the Private Party to undertake the Project. Such
documents will usually include the shareholders agreement, all subcontracts and
any funding agreements.
32. Sale of business upon termination or expiry
Upon the termination or expiry of the PPP, it may be necessary for the existing
Private Party to effect a sale of business to the person who will take over the
Project.
As the Project Assets already belong to the Institution, this sale of
business would be in respect of the transfer of the employees and any assets of
the Private Party that are required for the conduct of the business. At the time that
the Project terminations or expires, it will be necessary to take specific legal advice
as to whether it is necessary for the Private Party to enter into a sale of business
and this will be dependent largely on the tax and employment laws in place at that
time.
33. Schedule 4 - Environment and heritage obligations
33.1
The Institution remains responsible for the conservation of the Project Site,
even though part or all of this task may be contracted out to the Private Party
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement
19.
in the PPP Agreement. This needs to be borne in mind by the Institution
when deciding on the environmental requirements for a specific Project.
33.2
Schedule 4, which deals with environmental issues, will have 3 parts as
follows: a part that sets out the environmental guidelines for the Protected
Area; a second part that contains the management plan and a third part that
specifies the specific environmental requirements and guidelines for the
Project.
These various parts of Schedule 4 need to reflect the specific
requirements of the Institution in respect of the Protected Area where the
Project is being undertaken and in respect of the Project itself, as well as the
reporting requirements of the Institution in respect of the environmental
aspects of the Project.
33.3
If it is already known that there are things and objects that are governed by
the National Heritage Resources Act, 25 of 1999 on the Project Site or if there
is a strong possibility that such things and objects will be discovered during
the conduct of the Works, then the following clauses should be inserted into
the PPP Agreement:
'heritage matters discovery
Upon the discovery of any heritage object or resource (as
defined in the National Heritage Resources Act, 1999 or any
corresponding provincial legislation) during the course of the
Works, the Private Party shall:
promptly notify the Institution of such discovery;
take all necessary steps not to disturb the heritage object or
resource, including cease any Works to the extent that the
carrying out of such Works might reasonably endanger the
heritage object or resource or prevent or impede its
excavation or preservation; and
take all necessary steps to preserve the heritage object or
resource in the same position and condition in which it was
discovered.
20.
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement
action
The Institution shall promptly and in any event within [x]
Business Days of the notice in clause [above] issue an
instruction to the Private Party specifying what action the
Institution requires the Private Party to take in relation to
such discovery.
The Private Party shall promptly and diligently comply with
any instruction so issued at its own cost, unless such
instruction results in a change to the Works or the
Operation and Maintenance, in which case the Parties may
amend this Agreement and the Institution will compensate
the Private Party for any increases in its costs and
expenses that arise as a direct result of such discovery and
the resultant amendment to this Agreement.
Whilst the Private Party is complying with the instructions of
the Institution, it will be relieved of any obligations with
which it is unable to comply as a result of those instructions
and will be given any extensions of time in respect of the
completion of the Works and the Scheduled Operation
Commencement Date will be moved, to the compliance
with
the
Institution's
instructions
necessitates
such
extensions and movement.
If directed by the Institution or Responsible Authority, the
Private Party shall allow representatives of the Institution or
Responsible Authority to enter onto the Project Site for the
purposes of removal or disposal of such discovery;
provided that such entry shall be subject to the Institution or
Responsible Authority complying with all relevant safety
procedures which shall include any relevant health and
safety plans for the construction of the Facilities and any
reasonable directions regarding the safety of the Project
Site that may be issued by or on behalf of the Private
Party.'
Module 3 Template 9 Drafting notes to the large cap tourism PPP agreement
21.
34. Schedule 5 – Black Economic Empowerment obligations
34.1
Schedule 5 should contain the Black Economic Empowerment specifications
specifically devised in respect of the relevant Project and also in respect of
the nature, details and extent of the involvement of local communities in the
relevant Project. The requirements in respect of the nature, details and extent
of the participation of local communities in the relevant Project will have to be
devised specifically in respect of that Project by the Institution undertaking
that Project.
34.2
It is intended that the Private Party will report on its compliance with the
requirements of Schedule 5 at the end of each quarter of a Project Year and
the measurement of compliance with these requirements will be done at the
end of each quarter of a Project Year. The application of any penalties and
Private Party Default provisions will be done on an annual basis at the end of
each Project Year.
34.3
The participation of a Community Trust may or may not be a requirement of
the Institution in respect of a particular Project. If such participation is not a
requirement, then all provisions in respect of the Community Trust must be
deleted from the definitions in Schedule 5.
35. Schedule 12 - Penalties
The PPP Agreement makes provision for the Institution to apply a penalty regime
that would apply in circumstances where the Private Party is in breach of its
obligations under the PPP Agreement, but such breach is not with regard to a
material obligation. Examples would be if the Private Party exceeds the amount of
water it is allowed to consume, or fails to meet one of its BEE obligations, or
exceeds its agreed staff numbers in any one year. An Institution must carefully
consider whether such a penalty regime is necessary, and if so, what appropriate
penalties should be imposed, and insert this regime into the PPP Agreement.