Common use of Weighted Average Cost of Capital Clause in Contracts

Weighted Average Cost of Capital. (A) The amount specified for RRAt in paragraph 2.2 assumes, at the date of this Agreement, that the Weighted Average Cost of Capital (“WACC”), as established by the Regulator from time to time, is 7½% per annum. (B) In the event that the Regulator, at any stage during the term of this Agreement, amends WACC from its existing level, RRAt shall be calculated as follows and not in accordance with the formula set out in paragraph 2.2: Y = Σ [(PO1 x RRAw) + (PO2 x RRAw) + …. + (POn x RRAw)+…. + (POmax x RRAw)] where Y means the present value in relevant year t of the outstanding amount of the Network Rail Recoverable Advance; m means the number of years from the Commencement Date to the relevant year in which such amendment to WACC comes into effect; POn means the discount factor which, if applied to RRAw in year n gives the present value of RRAw in relevant year t with WACCold applied; max means, as applied to POmax, 30-m; RRAw is equal to RRAt-1 [1 + RPI t-1]; and WACCold means the percentage per annum for WACC prior to such amendment of WACC by the Regulator, having calculated the value of Y, RRAt should then be derived from the following formula: Y = Σ [(PN1 x RRAt) + (PN2 x RRAt) + …. + (PNn x RRAt) + ….+ (PNmax x RRAt)] where Y means the present value in relevant year t of the outstanding amount of the Network Rail Recoverable Advance; m means the number of years from the Commencement Date to the relevant year in which such amendment to WACC comes into effect; PNn means the discount factor which, if applied to RRAt in year n gives the present value of RRAt in relevant year t with WACCnew applied; max means, as applied to PNmax, 30-m; and WACCnew means the percentage per annum for WACC as amended by the Regulator during relevant year m, but so that in any subsequent relevant year during the term of this Agreement RAAt shall, unless the Regulator further amends WACC (in which case the provisions of this paragraph 2.3(B) shall apply mutatis mutandis), be calculated in accordance with the formula set out in paragraph 2.2.