THIS DOCUMENT HAS BEEN PREPARED FOR THE PURPOSES OF THE PPP IN INFRASTRUCTURE RESOURCE CENTER FOR CONTRACTS,
LAWS AND REGULATIONS.
IT IS A DOCUMENT FOR GENERAL GUIDANCE PURPOSES ONLY AND SHOULD NOT BE USED AS A SUBSTITUTE FOR SPECIFIC LEGAL ADVICE FOR A PROJECT.
Short-Form Generic Risk Allocation Table for Toll Roads
## CATEGORY DESCRIPTION CAUSES MITIGATION ALLOCATION
1. Technical specifications The possibility that individual Law quality of works, non-compliance with Independent construction quality control. Concessionaire
risk technical characteristics of the construction standards
motorway do not meet standards Development of penalty deductions
and specifications. mechanism to include in the agreement with
contractors.
2. Completion risks The possibility that the completion of Difficulties with rearrangement of utilities. Estimation of losses that may be incurred in Concessionaire, if the
construction works may be delayed case of delayed introduction of the delays cannot be
Complications due to geological and motorway. attributed to the
hydrological conditions. Grantor.
Penalty deductions.
(see also Right-of-way risks and
Regulatory risks).
3. Cost over-run risk The possibility that during the design Mistakes in construction cost estimates. Fixed price contracts for supply of Concessionaire
and construction phase, the actual construction materials.
Project costs will exceed projected Increase in construction materials prices.
Project costs. Contract provisions for contingencies.
Increased costs through the fault of
contractors.
Contingencies.
4. Design risk The possibility of mistakes in project Traffic forecast mistakes. Technical inspections and agreement of the Concessionaire
solutions. project parameters between the
Technical solutions mistakes. Concessionaire and the Grantor.
Independent Expert appointment to resolve
disputes on expedited basis.
5. Environmental risk The possibility of adverse impact on Mistakes made at the design stage in Thorough due diligence by the bidders of In relation to (i),
the environment: estimating environmental restrictions. the WHSD right-of-way conditions. Concessionaire.
1 – due to Concessionaire’s Violations during construction, Independent surveys of the Project Site. In relation to (ii)
activities during construction and maintenance and rehabilitation of the Grantor
operation of the project; project. monitoring of environmental impact and
remediation works.
2 – due to activities of the Grantor Discovery of latent sources of man-caused
and third party before the transfer. pollution during the construction.
PPP in Infrastructure Resource Center for Contracts, Laws and Regulations (PPPIRC) Robert Phillips, LEGPS
[Link] March 2008
THIS DOCUMENT HAS BEEN PREPARED FOR THE PURPOSES OF THE PPP IN INFRASTRUCTURE RESOURCE CENTER FOR CONTRACTS, LAWS AND REGULATIONS.
IT IS A DOCUMENT FOR GENERAL GUIDANCE PURPOSES ONLY AND SHOULD NOT BE USED AS A SUBSTITUTE FOR SPECIFIC LEGAL ADVICE FOR A PROJECT.
## CATEGORY DESCRIPTION CAUSES MITIGATION ALLOCATION
6. Exchange rate risk The possibility of negative exchange Increased construction cost in case of Hedging instruments. Concessionaire
rate fluctuations. negative exchange rate fluctuations.
Index-linked adjustment of construction
investment and operating maintenance
costs.
7. Force Majeure risks The possibility of the occurrence of Various natural and man-made causes. Dedicated financial reserves. Concessionaire,
certain unexpected events that are
beyond the control of the Parties Insurance of natural disaster risks. Grantor
(natural disasters, civil riots) Relief events.
Indemnity of the Concessionaire from
liability for the duration of the force majeur
events.
8. Inflation risk The possibility that the actual Adverse macroeconomic events Toll-rate adjustment. Grantor
inflation rate will exceed the
projected inflation rate. Recurrent market analysis and adjustment
of toll-rates to meet market conditions.
9. Insolvency risk The possibility of the insolvency of Increased debt liabilities under the Project. Insurance of project assets. Concessionaire
the Concessionaire.
Law revenue of the Concessionaire Limitations on debt and funding
commitments of the Concessionare.
10. Insurance risk The possibility that insurance Self-insurance via dedicated monetary Jointly the Grantor and
services become inaccessible. funds. the Concessionaire
Risk sharing between the Grantor and the
Concessionaire.
11. Loan interest rate risk The possibility of increase of the Factors affecting the availability and cost Hedging instruments. Concessionaire
interest rate at construction and of funds.
operations stages. Fixed rate loans
12. Maintenance risk The possibility that project Unexpected depreciation of the pavement Penalty deductions and monitoring. Concessionaire
maintenance and rehabilitation costs due to climate conditions, increased traffic
assets may vary from the projected including HGVs. Contracting operation of the motorway to a
maintenance and rehabilitation highly qualified contractor, who can provide
costs. Increase in prices for materials necessary financial guarantees to his commitments.
for maintaining the project in required
condition.
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PPP in Infrastructure Resource Center for Contracts, Laws and Regulations (PPPIRC) Robert Phillips, LEGPS
[Link] March 2008
THIS DOCUMENT HAS BEEN PREPARED FOR THE PURPOSES OF THE PPP IN INFRASTRUCTURE RESOURCE CENTER FOR CONTRACTS, LAWS AND REGULATIONS.
IT IS A DOCUMENT FOR GENERAL GUIDANCE PURPOSES ONLY AND SHOULD NOT BE USED AS A SUBSTITUTE FOR SPECIFIC LEGAL ADVICE FOR A PROJECT.
## CATEGORY DESCRIPTION CAUSES MITIGATION ALLOCATION
13. Demand risks The possibility that the demand for Competing highways (decreased need for Government support to the Concessionaire Jointly the Grantor and
motorway may be less than the project). the Concessionaire
projected.
Non-implementation of works to link the
WHSD to the street and road network.
Consumer opposition to operation of the
motorway by the Concessionaire
(outsourcing of the services) and to tolling.
Inadequacy of actual toll rates to projected
toll rates.
14. Right-of-way risks Delayed acquisition of the right-of- Erroneous data on town-planning Advance land acquisition. The Grantor
way and its total impossibility. conditions and restrictions.
Government and Environmental expertise
Discovery of archeological articles within (analysis) of the project.
the right of way of the Project.
Obtaining the necessary consents related to
the alignment of the project.
15. Political risks The possibility of (i) Unforeseeable Changes of law during construction and Distinguish between general and In relation to (1) –
Conduct by the Grantor or by any operation of the motorway: discriminatory Unforeseeable Conduct. Grantor.
other government authority that
materially and adversely affects the (1) – that adversely affect the financial In relation to discriminatory Unforeseeable In relation to (2) – the
expected return on Equity, debt results of the Concessionaire’s activates; Conduct, special compensation. parties settle the issue
via negotiations or at
service or otherwise results in (2) – that render the Concession In relation to expropriating actions, court.
increased costs to the Agreement invalid. termination and compensation.
Concessionaire, or (ii) expropriation
or nationalisation of the assets of the
Concessionaire.
16. Regulatory risk The possibility that Consents Relating to planning and environmental A legal scan for all consents undertaken Jointly the Grantor and
required from other government risks during the feasibility phase of the Project. the Concessionaire
authorities will not be obtained or, if Implementation by the Grantor of an inter
obtained, can only be implemented governmental liaison process with the
at a greater cost than originally responsible government authorities before
projected. the land preparation phase.
Due Diligence by Private Party to identify
the Consents required for its operating
requirements.
Due Diligence by the Concessionaire to
identify the Consents required for its
operating requirements.
3 of 4
PPP in Infrastructure Resource Center for Contracts, Laws and Regulations (PPPIRC) Robert Phillips, LEGPS
[Link] March 2008
THIS DOCUMENT HAS BEEN PREPARED FOR THE PURPOSES OF THE PPP IN INFRASTRUCTURE RESOURCE CENTER FOR CONTRACTS, LAWS AND REGULATIONS.
IT IS A DOCUMENT FOR GENERAL GUIDANCE PURPOSES ONLY AND SHOULD NOT BE USED AS A SUBSTITUTE FOR SPECIFIC LEGAL ADVICE FOR A PROJECT.
## CATEGORY DESCRIPTION CAUSES MITIGATION ALLOCATION
17. The risk that the Project Risk of value loss on the transfer of Insufficient maintenance of the motorway. Concessionaire maintains and rehabilitate Concessionaire
Assets at termination or the project or at termination of the the motorway and toll plazas.
expiry of Concession Concession Agreement. Delayed overhaul and preventive
Agreement will not be in maintenance. Government supervision of the condition of
the prescribed condition. the assets.
Carelessness of contractors.
18. Resource or input risk The possibility of a failure or Supply contracts for supply of total project Concessionaire,
shortage in the supply of the inputs requirements. unless the inputs are
or resources required for the supplied by the
operation of the project. Grantor.
19. Tax rate change risk The possibility that changes in Adverse political and macroeconomic If change arises from discriminatory Concessionaire only
applicable tax rates (income tax changes. Unforeseeable Conduct, then special and jointly
rate, VAT) or new taxes may compensation. Concessionaire and
decrease the anticipated return on Grantor.
equity.
20. Technology obsolence risk The possibility that (i) the technology The use of obsolete materials and Obligation on Concessionaire to refresh Concessionaire
inputs for the outsourced institutional equipment at construction and operation technology as required from time to time to
function may fail to deliver the stages. meet the output specifications.
required output specifications, or (ii)
technological improvements may Penalty Deductions for failure to meet
render these technology inputs out- output specifications.
of-date.
21. Utilities risk Shortage of utilities (e.g. water, Failure of the utility companies to provide Emergency back-up facilities. Grantor
electricity, etc.), necessary for utility services.
construction and/or operation of the
project.
4 of 4
PPP in Infrastructure Resource Center for Contracts, Laws and Regulations (PPPIRC) Robert Phillips, LEGPS
[Link] March 2008
