Generally speaking, the project company has to adequately plan its financial needs, building up in the financial plan the necessary contingent funds. Reserves for renewals and major maintenance have already been mentioned. Another common reserve, as requested by the lenders, is the debt service reserve to meet unexpected shortfalls in cash flows.
One area where the risk of availability of additional funding should be carefully considered so as to mitigate the risk for the benefit of the private partner relates to potential funding needs for unexpected events that are compensation events. Events such as force majeure, or a change in scope of the works, will likely require an additional investment. It is common practice that the contract establishes the obligation of the private partner to finance a loss even in a compensation event, receiving the compensation by means of a rebalancing (for example, increasing the service payment amount). See section 8.4.
Lenders are not in a position to grant access to additional funding in advance. However, there are exceptions in limited circumstances and for a limited period of time (for example, during construction, granting a contingency line of finance), but it is always at a cost that may not provide Value for Money. Financial investors are also affected by severe restrictions that can prevent them from having available funds for potential needs that may or may not materialize.
In such instances, it is good practice that the contract provides for the flexibility of the private partner to potentially demonstrate that the funds are not available, or that the obligation to raise the additional funds is only on the basis of best efforts.
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