When governments classify PPP projects off-balance sheet for national accounts and EU reporting purposes, therefore, not increasing national debt, often this classification is the result of a detailed analysis considering the balance of risks. Regarding financial impacts, the off-balance sheet national debt categorization mainly accounts for future, precise obligations in the form of pre-determined amounts of availability payments and unitary charges, gate fees, and other similar payments depending on the sector of the PPP.

Yet, in both concessions and PPPs (if structured to be financed with limited recourse towards the sponsors), in addition to the availability payments mentioned above, there are sizeable contingent liabilities in the form of the so-called early termination compensations.

In project finance, the public sector backs up the early termination compensations (regardless of the identity of the party defaulting). In this context, it is not enough to account for the pool of availability payments in multi-annual budgets (or even not to account if they obtain the off-balance sheet Eurostat classification). Countries active in PPPs, PFIs, and concessions should have a central repository of all termination compensations. The relative authorities should perform the valuation of such contingent settlements (tested and updated every “x” months) and weigh them on the probability of default. This analysis is necessary for macroeconomic risk management and anticipating the risk of over-heating of the PPP market or a PPP bubble from the combination of long-term contracted availability payments and the activation of contingent liabilities from early termination.