Update Note 1 - Compensation on Early Termination

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The report outlines the principles for determining equitable compensation in the event of early termination of concession contracts, emphasizing that the defaulting party should not benefit from the termination and the non-defaulting party should recover reasonable costs incurred due to the termination [5][14][26] Summary by Sections 1. Authority Default - In cases of early termination due to Authority Default, the Concessionaire should not be better or worse off, with compensation calculated based on the present value of forecast pre-tax nominal net operating cashflows, costs of materials ordered, redundancy payments, and other reasonable costs incurred [9][11][12] 2. Concessionaire Default - For early termination due to Concessionaire Default, the Authority should also not be better or worse off, with careful consideration needed to define Material Default events to avoid excessive consequences [14][15] - Two approaches for calculating termination sums are outlined: Retendering Approach and No Retendering Approach, with the former allowing the Authority to retender the contract and the latter requiring an independent expert to assess the Estimated Market Value [17][20] 3. Force Majeure - In the event of termination due to Force Majeure, the compensation to the Concessionaire is based on the Fair Value of completed Installation Works and Equipment, with specific deductions and additions outlined [26][28] 4. Glossary of Terms - Definitions provided include "Fair Value," which refers to the depreciated value of capital expenditure incurred by the Concessionaire, and "Sub-Contractor Breakage Costs," which are losses incurred due to early termination [29][31]