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Sector: Ports  |  Module 3: Tools and Resources

Readiness Filters

Readiness Check 2: Project Feasibility
Example risk matrix for the Ports
Risk type Description Allocation Mitigation
Pre-operative task risks
Delays in land acquisition Refers to the risk that the project site will be unavailable or unable to be used within the required time, or in the manner or the cost anticipated or the site will generate unanticipated liabilities due to existing encumbrances and native claims being made on the site.    
External linkages Refers to the risk that adequate and timely connectivity to the project site is not available, which may impact the commencement of construction and overall pace of development of the project. Examples of connectivity for a port are road and rail links.    
Financing risks Refers to the risk that sufficient finance will not be available for the project at reasonable cost (eg, because of changes in market conditions or credit availability) resulting in delays in the financial closure for a project.    
Planning risks Refers to the risk that the pre-development studies (technical, legal, financial and others) conducted are inadequate or not robust enough resulting in possible deviations from the outcomes that were planned or expected in the PPP project development.    
Construction phase risks
Design risk Refers to the risk that the proposed design will be unable to meet the performance and service requirements in the output specification. It can result in additional costs for modification and redesign.    
Construction risk Refers to the risk that the construction of the assets required for the project will not be completed on time, on budget or to specification. It may lead to additional raw materials and labour costs, additional financing costs, increase in the cost of maintaining existing infrastructure or providing a temporary alternative solution due to a delay in the provision of the service.    
Approvals risk Refers to the risk that delays in approvals to be obtained during the construction phase will result in a delay in the construction of the assets as per the construction schedule. Such delays in obtaining approvals may lead to cost overruns.    
Additional Site Risk Refers to the risk that the planned site will be inadequate to cater for the estimated traffic at the port facilities being developed. In that case, an additional site might need to be provided by the port authority to the concessionaire.    
Operation phase risks
Technology risk Refers to the risk that the technology used in the design of the port or in the port services will unexpectedly become out of date during the life of the PPP and will not be able to satisfy the requirements in the output specifications. It would result in increased costs of a replacement technology.    
Operations and maintenance risk Refers to the risks associated with the need for increased maintenance of the assets over the term of the project to meet performance requirements. In the Ports sector this can include the risk of siltration, which would lead to higher operating costs for dredging, and the risk that existing civil works will be found to require additional maintenance.    
Traffic risk Refers to the risk that demand for a service will vary from the initial forecast, such that the total revenue derived from the project over the project life will vary from initial expectations. This volume-related revenue risk is only for projects which have tariffs from port operations as a revenue source. There is no risk of this sort in management contracts, in which revenue is from a fixed fee or performance-based payment.    
Payment risk Refers to the risk that tariffs for port services are not collected in full or are not set at a level that allows recovery of costs. This is a risk for the private sector in all ports projects where revenue is from tariffs. The public sector faces this risk under management contracts.    
Financial risk Refers to the risk that the concessionaire introduces too much financial stress on a project by using an inappropriate financial structure. It can result in additional funding costs for increased margins or unexpected refinancing costs.    
Handover risks
Handover risk / Terminal value risk Refers to the risk that the concessionaire will default in the handover of the asset at the end of the project life, or that it will fail to meet the minimum quality standard or realisable value of the asset that needs to be handed back to the public entity.     
Other risks
Change in law Refers to the risk that the current legal / regulatory regime will change, having a material adverse impact on the project.    
Force Majeure Refers to the risk that events beyond the control of either entity may occur, resulting in a material adverse impact on either party's ability to perform its obligations under the PPP contract. These events are sometimes also called "Acts of God", to indicate that they are beyond the control of either contracted party.    
Sponsor risk Refers to the risk that the Sponsor will prove to be an unsuitable partner for the project, for example due to poor project management or a failure to fully recognise the agreed terms of the Concession Agreement.    
Concessionaire event of default Refers to the risk that the concessionaire will not fulfil its contractual obligations and that the government will be unable to either enforce those obligations against the concessionaire, or recover some form of compensation or remedy from the concessionaire for any loss sustained by it as a result of the breach.    
Government event of default Refers to the risk that the government will not fulfil its contractual obligations and that the private entity will be unable to either enforce those obligations against the government, or recover some form of compensation or remedy from the government for any loss sustained by it as a result of the breach.    

 

   
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