1. PROJECT FAILURE: WHAT HAPPENS IF A PROJECT GOES BAD? Douglas Younger

2. I. Key Project Failure Risks Credit Risk toll risk authority payment risk  appropriation risk  funding shortfall Project Risk contractor performance service provider performance Project Co stranded risk Lender Risk lender failure/insolvency 2

3. II. Failure Mitigants Credit Risk Senior government guarantees (e.g. provincial guarantee of health authority payment obligations) Authority reserve accounts 3

4. Failure Mitigants Project Risk Failure Mitigants Project Risk Construction Security parent company guarantee letter of credit performance bonding subguard (subcontractor default insurance) insurance lien holdback account construction delay account (anticipated delay liquidated damages) delay liquidated damages 4

5. Failure Mitigants Project Risk (continued) Failure Mitigants Project Risk (continued) Operations and Maintenance Security parent company guarantee letter of credit insurance major maintenance/lifecycle reserve account Project Co Security equity distribution lock-up assignment of contracts general security agreements blocked accounts agreements insurance Authority risk retention (e.g. supervening events) 5

6. III. What Happens if Mitigants Fail? Lenders’ Direct Agreements: (a)with Authority (b)with Subcontractors moratorium on Authority termination rights (90 days); bank vs. bonds approvals step-in rights novation rights 6

7. III. What Happens if Mitigants Fail? (continued) Credit Agreement/Trust Indenture acceleration security realization receivership CCAA Project Agreement Termination transfer of Project Co assets; priority as between Authority and lenders’ security (Bank of Scotland v. Neath Port Talbot County Borough Council) compensation on termination 11510641.1 7