| Project Finance has become an increasingly attractive | | | | hydro-related project, some river deities have to be |
| technique for financing infrastructure projects in | | | | pacified and the project could be delayed for the |
| developing countries over the last twenty years. | | | | mere reason that some chiefs or local leaders might |
| Furthermore, the use of project financing raises | | | | politicised the whole customary rites to the extent |
| difficult legal issues with respect to the ability of | | | | that the project cost might swell or even be called |
| developing countries' governments to control the | | | | off. |
| provision of public services that are intimately | | | | Even though we are not analysing the responsibilities |
| connected to these infrastructure projects. Project | | | | of the seller and buyer in a PPA, suffice it to say |
| finance has several advantages, such as the | | | | that both parties' responsibilities are considered vital |
| opportunity for investors to participate directly in an | | | | hence the need to have proper enabling environment |
| otherwise inaccessible and lucrative-albeit | | | | especially politically in order to execute the project |
| risky-market and the ability to participate in high-risk | | | | successfully. This will have to come about with the |
| investments without diminishing creditworthiness. | | | | help of the Government in power. |
| Lenders for projects are primarily large international | | | | Actually, developers have built up experience in |
| commercial banks, such as ABN Amro and Citibank, | | | | negotiating PPAs and factor in time for negotiations |
| or multilateral lending agencies, such as the | | | | which are necessary to get a satisfactory deal. Wind |
| International Finance Corporation (IFC) and the | | | | energy schemes are generally seen as a low risk |
| European Bank for Reconstruction and Development | | | | technology, compared to other renewable energy |
| (EBRD). They will in no doubt, therefore, seek to put | | | | technologies. |
| in some issues in a term sheet. | | | | Nevertheless some developers have noted that PPAs |
| The first step in setting up a project financing usually | | | | are generally not long enough and that it takes time |
| involves the sponsors or developers forming a | | | | to find a suitable solution which can lead to delays. |
| project company known as a special purpose vehicle | | | | Most comments in relation to PPAs focused on the |
| or entity, which is designed to construct, own, and | | | | need to maintain certainty in the Renewable |
| operate the project facility. Thus project finance | | | | Obligation in order to avoid destabilising the market. |
| benefits sectors or industries in which projects can | | | | One smaller developer noted that 'political change is a |
| primarily be structured as a separate entity from | | | | big worry...we wouldn't be able to finance projects if |
| their sponsors or developers. | | | | the RO changed'. |
| Thus it is the project company, which is the entity | | | | The minimum investment criteria for renewable |
| that is borrowing funds for the project. The lenders | | | | energy projects varied from respondent to |
| loan money to the project company with the assets | | | | respondent, but typically investors do not want to |
| and cash flow of the project acting as the security | | | | commit to projects until financial close or beyond, |
| interest for the project loans. | | | | when all project risks have been satisfactorily |
| Definitions and Meanings | | | | mitigated in terms of planning, technology, |
| European Investment Bank defines project finance as | | | | performance and long-term revenue security (PPA). |
| "a loan made primarily against cash flows generated | | | | Some investors will look for a minimum project size, |
| by the project, rather than relying on a corporate | | | | in terms of installed capacity or output per annum, |
| balance sheet, the security value of the physical | | | | whilst others will look for a minimum amount of debt |
| assets or other forms of security". | | | | to be provided at an internally acceptable rate of |
| A project developer is the sponsor or the borrower | | | | return. |
| for the project. | | | | Mitigating the Risks |
| A power purchase agreement (PPA) is an agreement | | | | In the World Report 2006 by UNCTAD,some key |
| which serves as one of the pre-requisites for the | | | | causes of delay were discussed. |
| lender to borrow funds for a project. It is a contract | | | | Although of the perceived risks, no single element |
| that "there will be ready market for the project on | | | | was unanimously highlighted from the responses as |
| completion". | | | | the most significant cause for delay. It was reported |
| A term sheet is an outline of the principal terms and | | | | that, beyond planning approval, mitigating risks to |
| conditions proposed for the project and investment. | | | | enable finance and insurance to be secured is the |
| It is not in itself a legal document but a sort of draft | | | | next most significant barrier highlighted by all of the |
| proposals subject for approval by all parties involved. | | | | developers. The ability for a developer to raise |
| Types of Risks | | | | finance is greatly affected by the perceived risks of |
| In project transactions, there are typically numerous | | | | the project and or the developer himself. Financial |
| parties from different jurisdictions involved, and | | | | investors or lenders will typically require all risks |
| accordingly, the laws of many different jurisdictions | | | | associated with fuel supply, planning conditions, |
| are potentially applicable to any given transaction. | | | | construction & completion, and wayleave rights, |
| Thus the uncertainties or fears expressed by each | | | | power purchase agreements, technology and the |
| party translate to a risk of a sort. It becomes | | | | EPC contract mitigated prior to their participation, |
| important that the terms sheet or the PPA or the | | | | which would normally not be before project financial |
| PSA be analysed accordingly and where necessary, | | | | close has been reached. This will also inevitably be a |
| find the appropriate legal regulations or instruments to | | | | concern to a project developer. |
| mitigate any risks. | | | | Nonetheless, the following approaches have been |
| Risks are different for each project - they are often | | | | suggested as ways and means to reduce or eliminate |
| country-specific, and differ depending on the kind of | | | | the risks mentioned above. Among them are: |
| project one wishes to undertake. | | | | Track record of country: |
| There are, generally different kinds of risks with the | | | | With regard to political risk, the solution lies in having |
| magnitude being different from one project to | | | | a stable political atmosphere in the country in which |
| another project. Some of the acceptable forms of | | | | the project developer is investing. And because of |
| risks that should be considered at all costs are as | | | | the way some political leaders influence the populace |
| follows: | | | | with their ideologies, it id expedient that there is a |
| - Sponsor risks | | | | sound legal framework like rule of law in place to |
| - Pre-completion risks | | | | combat the way issues are politicised.Sometimes it is |
| - Inflation and foreign exchange risk | | | | clear that personal ideologies are made to take |
| - Operating risks | | | | precedence over what will benefit the whole nation. |
| - Technological risks | | | | Another mitigating approach is to have proper laid |
| - Completion risk | | | | down investment and other financial regulations in |
| - Input risk | | | | place which can help out project developers reduce |
| - Approvals, regulatory and environmental risk | | | | or eliminate political risk in a PPA.Local knowledge is |
| - Offtake and sales risk | | | | also very important. A recent issue reported in the |
| - Political risks | | | | News and the Financial Times about locals in Ethiopia |
| Believe it or not, when all the risks-financial, | | | | killing 9 Chinese workers among 74 people working in |
| construction & completion risks, technology | | | | an exploration site in Ethiopia because of what the |
| & performance risks, foreign exchange & | | | | locals described as "not having their permission to |
| availability risks- are critically analysed, it could be | | | | mine in their territory". This kind of issue could have |
| deduced that they are to a greater extent linked to | | | | been avoided should the Chinese knew about the |
| government's policies; in other words, political | | | | local perception about their presence with regard to |
| activities or ideologies. Linking political risk to | | | | the project and adhered to. In most instances, sound |
| regulatory risk in most of his study, Louis T. Wells, Jr | | | | macro-economic indicators i.e. sovereign credit rating, |
| described Political and regulatory risks as a key | | | | for reserves, trade balance, future government |
| impediment to private investment in the | | | | obligations are very important to lenders and provide |
| infrastructure sectors of developing and transition | | | | guarantee to the project risks being minimised. |
| economies; and are defined as" threats to the | | | | Insurance by World bank or credit export agencies: |
| profitability of a project that derive from some sort | | | | The risks of a Government changing its position in |
| of governmental action or inaction rather than from | | | | terms of law could be covered on the political risk |
| changes in economic conditions in the marketplace: in | | | | insurance market. Occasionally, export credit agencies |
| each case, action or inaction by political authorities or | | | | enabled equipment suppliers to sell on credit by |
| their agents, rather than changes in supply and | | | | covering most of the buyers' credit risk. The market |
| demand of goods and services, must be the | | | | for political risk insurance in developing countries is still |
| proximate cause of the change in profitability"(Moran | | | | small. This is because; first, significant South-South |
| H Theodore ,1999). Planning and political risk occurs | | | | FDI is a recent phenomenon, and as a result, |
| due to the long gestation periods of infrastructure | | | | demands for political risk insurance from |
| projects. During these long periods, projects are | | | | developing-country. Traditionally focusing on trade, |
| vulnerable to changes in policy (Vickerman, 2002). | | | | export credit agencies (ECAs) in developing countries |
| Despite the appeal of project finance, the extensive | | | | have not yet fully developed political risk insurance |
| amount of political risk associated with it is very high. | | | | services for investors and their capacity to |
| For this report, political risk is going to be mentioned | | | | underwrite is limited. There are, however, indications |
| and analysed most as the main risk to the project | | | | that concerns about political risk and awareness of |
| developer. | | | | risk mitigators are growing as investors from |
| Political risk: | | | | developing countries seek out business opportunities |
| Generally, the main known political risks are the | | | | in other developing countries. |
| following: | | | | Occasionally, export credit agencies enabled |
| -Expropriation: | | | | equipment suppliers to sell on credit by covering most |
| The act of taking something from its owner for | | | | of the buyers' credit risk. But in recent years, several |
| public use. There are many instances in the former | | | | new risk mitigation instruments have become |
| eastern Europe and especially in Africa, where | | | | available. |
| governments decide at the break of the day to take | | | | Lease-purchase scheme: |
| something from a private individual for the use and | | | | The full package of risk mitigants used in typical |
| benefit of the public in the name of what they term | | | | project finance can carry a high cost, too high for |
| as "people's power" ," revolution" and so on. This is | | | | smaller projects. But some of the concepts of |
| very upsetting and makes project development a | | | | project finance can be used even in rather small |
| high risk to a project developer. | | | | projects in order to reduce risks. For example, the |
| -Nationalisation: | | | | "limited recourse" aspect of project finance has been |
| Transfer of business from private to state | | | | used in a lease-purchase scheme for small |
| ownership. This is not usually experienced in the west | | | | hydropower plants in Cambodia. It works like this; |
| as in South America and Africa. Political ideologies in | | | | local entrepreneurs prepare the project, showing that |
| most part of these continents are influenced by | | | | the proposed plant is economically and financially |
| one-party state cronies who believe in nationalism | | | | viable. On the basis of this feasibility study, they can |
| than in capitalism. There is the saying that "once | | | | then negotiate a power purchase agreement with |
| bitten, twice shy"; most of these governments are in | | | | the national utility, Electricité de Cambodge |
| the developing countries and have the fear that as | | | | (EdC), and they would also sign a lease-purchase |
| the west colonised them in the past it could happen | | | | agreement for the hydropower plant; both will come |
| again. | | | | into operation only once the plant has actually been |
| -Change of law: | | | | constructed. On the basis of these two agreements, |
| The host government can change the laws overnight | | | | the entrepreneur can then obtain short-term |
| and this can affect a project. Sometimes for | | | | construction loans from local banks and equipment |
| economic and political reasons, tax laws are enacted | | | | suppliers - in other words, until the plant is |
| which might not be to the advantage of the project | | | | constructed, the entrepreneur takes all the risks. |
| developer in terms of the cost increase to certain | | | | However, once the plant is operational, the |
| elements which could increase the purchase price of | | | | lease-purchase agreement becomes operational: EdC |
| the product on completion and can jeopardise the | | | | buys the plant from the entrepreneur for the total of |
| PPA.For example an increase in the fuel tax can | | | | his construction loans, which can then be reimbursed. |
| affect the supply of fuel to the project. | | | | EdC leases back the plant to the entrepreneur, and |
| Environmental-related issues are also to be blamed | | | | deducts the payments due for the lease from the |
| for reasons in change of law to please | | | | electricity payments it makes under the PPA. After a |
| environmentalist pressure group and sometimes for | | | | fixed lease period, the entrepreneur can buy the |
| political reasons. Any or all of these could one way or | | | | plant from EdC for a symbolic US$ 1. This scheme |
| the other affect the project developer in an on-going | | | | considerably reduces financing risks and, therefore, |
| project or proposed project. | | | | costs, and makes this form of renewable energy |
| Furthermore, there could be a breach of contract for | | | | competitive with conventional energy sources. This |
| political reasons. | | | | scheme in my opinion will work not for small projects |
| Thus accordingly, Theodore, (1999) divided the | | | | but also many projects in general considering the fact |
| political and regulatory risks that private infrastructure | | | | that the lease-purchase scheme becomes operational |
| investments and for that matter the project | | | | after the project has been completed. |
| developer are exposed to, into three overlapping | | | | Receivable-based finance: |
| categories:a) Parastatal performance risks: risks of | | | | The crux of the receivables-based financing structure |
| non-compliance with supplier agreements or purchase | | | | lies in leveraging contractual obligations within the |
| agreements by the government or government | | | | value chain. Receivables from the power purchaser or |
| entities leading to political risk. This is to say that | | | | receivables from other partners in the chain can be |
| government agents or authorities will fail to honour | | | | used either as security or for directly meeting the |
| their part of the obligation thereby politicizing the | | | | financial obligations related to the renewable energy |
| issue.b) Traditional political risks: risks relating to | | | | project. |
| political uncertainty, lack of Government support, | | | | Structured finance techniques: |
| delay in clearances (which primarily have to be taken | | | | Structured finance can help overcome some of these |
| from government authorities), currency convertibility | | | | barriers and manage many of the risks, though not all |
| and transferability, expropriation and breach of | | | | (policy-and regulation-related issues need to be dealt |
| investment agreement. This could take any form | | | | with by Governments; limited local managerial |
| from delaying permits to failing to sign licenses on | | | | capacity or poor understanding of renewable energy |
| time because someone is not happy because no gifts | | | | projects in local banks can be tackled by |
| might have "passed under the bridge". There is | | | | donor-funded capacity-building programs, etc.). |
| therefore, the tendency that the project developer | | | | Financial risks can be mitigated through the |
| will face this exposure, which lenders would not be | | | | incorporation of certain elements into the financing |
| happy with.c) Regulatory risks: risks arising from the | | | | structure (e.g. escrow accounts), while others can be |
| application and enforcement of regulatory rules, both | | | | shifted to third parties. The possibilities for shifting |
| at the economy-wide and the industry- or | | | | risk are improving. For example, the possibilities to |
| project-specific level. They overlap because they | | | | shift risk to the capital market, through securitization, |
| affect one or the other politically. Within emerging | | | | have much improved. |
| economies and under developing countries, regulatory | | | | Structured finance techniques, which are widely used |
| bodies are being set up as independent bodies to | | | | by financiers in the commodity sector to mitigate a |
| minimise the political risk faced by the investors. | | | | series of risks, can help to reduce the "funding gap" |
| However, in many instances, these so called | | | | for renewable energy projects, and can help |
| independent bodies may come under tremendous | | | | Governments and aid agencies to improve the |
| pressures from their governments and tend to get | | | | leverage that they achieve with their financial |
| influenced. For instance, a regulator, for political | | | | support. Several case studies illustrate how this can |
| reasons, may make decisions relating to tariffs that | | | | lead to successful projects. Renewable energy is a |
| render a project unattractive to investors, | | | | sector in full expansion -even though it is still far from |
| sometimes with the view to transfer the deal to a | | | | replacing hydrocarbons as the major source of |
| family friend or a political crony. This is a very | | | | energy. Renewable energy offers great opportunities |
| common practice in Ghana. | | | | for developing countries, in particular for areas that |
| Furthermore, infrastructure projects are subject to | | | | are not immediately adjacent to existing electricity |
| continuous interface with various other regulatory | | | | grids. However, private sector financiers are often |
| authorities that expose them to possible regulatory | | | | wary of funding renewable energy projects - a |
| actions thus affecting their profitability. It is | | | | sector with which they are often not very familiar |
| conceivable that explicit tariff formulae ensuring | | | | and which carries certain risks. Governments and aid |
| remunerative pricing at the start of the project can | | | | donors support the expansion of the sector, but |
| be negated subsequently by regulatory authorities on | | | | often have difficulty finding sustainable models. |
| the grounds that tariff was too high. This issue is also | | | | UNCTAD has done considerable work on the use of |
| very common in Ghana where the term "big | | | | structured finance techniques in developing countries, |
| elephant" has become synonymous with projects | | | | particularly for the commodity sector. Use of such |
| that have been abandoned over the years due to | | | | techniques reduces the risks taken by the financier, |
| the above political reasons. | | | | including by shifting risk from the borrower to other |
| Nonetheless, the following risks can be argued to | | | | parties who are more creditworthy, leaving the |
| have their roots in one political activity or the other. | | | | financier with performance risks rather than credit |
| Legal risks | | | | risks on the borrower. The general principles of |
| Following change of law in political risk discussed | | | | structured finance and its potential uses for |
| above, possible legal risks to a project developer | | | | developing countries are discussed in several |
| include inadequate legal, legislative, and regulatory | | | | UNCTAD reports, as are some particular applications |
| framework on sales tax, export & import | | | | (e.g. warehouse receipt finance). |
| restrictions, pensions, health and safety rules and | | | | Turnkey construction contract: |
| penalties for non-compliance. Sometimes the case | | | | With regard to construction & completion risks, |
| and administrative laws in the country concerned are | | | | a strong Turnkey construction contract is |
| not developed. These issues are of great concern to | | | | recommended with performance LDs to overcome |
| lenders and for that matter the project developer will | | | | cost and schedule overruns which could affect the |
| have to deal with this risk. | | | | project construction & completion. Lenders can |
| Construction & completion risk | | | | also minimise this risk by analysing whether or not |
| Another key risk is construction and completion risk. | | | | the various contractors' area financially capable and |
| In the event when construction of the project is | | | | that their obligations are covered by performance |
| delayed for any reason whatsoever, the completion | | | | bonds or other third party sureties. In another report |
| date might be affected.Levnders, therefore, focus | | | | , another suggestion of fixed price EPC contract with |
| upon cost & schedule overruns and time-delay | | | | delay LDs was provided to combat cost and schedule |
| risks of the project in great detail. | | | | overruns. It further indicated that, a World Bank |
| Sponsor risks | | | | Study of 80 hydro projects studied, 76 projects |
| This risk deals with n two significant issues which | | | | exceeded their final budgets, with half of those |
| banks are so much concern with. They are equity | | | | exceeding the cost by at least a quarter. With a |
| commitment and corporate substance (i.e. corporate | | | | strong turnkey construction contract, this risk could |
| strengths and experience).On corporate substance; | | | | be avoided. Another solution is putting in place a |
| banks consider that sponsor risk has something to do | | | | sponsor completion support in form of contingency |
| with completion date and for that matter completion | | | | facility, stand-by equity or credit by a credit agency. |
| risk. For this reason, whether or not the sponsor or | | | | Guaranteed-price PPA: |
| project developer has sought pre-completion | | | | There should be long-term guaranteed power |
| guarantees, the banks looks further by working with | | | | purchase agreement or contracts for projects to |
| corporate sponsors with substantial technical | | | | serve as a key element that can eliminate the price |
| expertise and financial depth. because of the belief | | | | and volume risks from energy projects for example. |
| that "one puts his money where his heart belongs", | | | | Contracts could also be drawn such that banks are |
| regarding equity, lenders will normally require a | | | | offered an outstanding Offtake agreement if the |
| contribution between 15% to 50% of the project | | | | other party's (purchaser) financial standing is not |
| cost to ensure the sponsor is committed to | | | | certain and the generator has the ability to set |
| complete the project on schedule. | | | | output pricing for the whole time of the contract. |
| Financial risks | | | | Finally on Offtake and sales risks, it is recommended |
| Financial risks usually cover interest rates, foreign | | | | that sponsors consider the fact that lenders will wish |
| exchange rate & availability risk, currency and | | | | to take security to guarantee power and heat sale |
| inflation. Inflation really affects the project developer | | | | contract. Lenders could also be assured that should |
| in a PPA for reasons like raising the cost of the | | | | the volume and price risk surface again, the sponsor |
| project which can delay its completion due to lack of | | | | will be prepared to consider paying a portion of the |
| funds. Some governments are also skeptical about | | | | debt. |
| foreign investment in their country and sometimes | | | | On sponsor risks, the effect of reducing this risk is |
| prevent the repatriation of funds by foreigners | | | | that an invitation could be extended to a more credit |
| outside. Devaluation and interest rate just like inflation | | | | worthy sponsor for partnership in the project. |
| can also affect the projects negatively especially | | | | Furthermore, smaller sponsors can have their |
| when provision has not been made in the PPA for | | | | governments guarantee some projects or approach a |
| that. International funds are often cheaper than local | | | | bank for structured finance after asking for a credit |
| ones, but given the fact that the energy generated | | | | rating form a recognised agency and transfer the risk |
| is sold locally, and paid in local currency, using foreign | | | | to a third party. |
| loans creates exposure to the risk of currency | | | | With regard to technology & operations risk, the |
| depreciation. | | | | project developer must try to reduce these risks and |
| Environmental risks | | | | so must show that the technology is not new and |
| Global warming is becoming 'national word' if not a | | | | has a high success rating. It should also be |
| household word. Thus environmental risk is of great | | | | demonstrated that the contractor in charge of the |
| concern to both the government and a project | | | | building of the project is competent and conversant |
| developer because of the aftermath of certain | | | | with the mtechnology.Operations and Maintenance of |
| projects like land degradation, pollution of rivers, and | | | | the project on completion must also be assured ion |
| air. Lenders are concerned about their liability to meet | | | | addition to the fact that warranties and guarantees |
| vast claims arising out of pollution caused by | | | | have been thoroughly negotiated. This could be |
| borrowers and so demand high in a PPA.In a PPA, for | | | | achieved by engaging the services of a recognised |
| example, the sponsor or the project developer is | | | | contractor with the relevant skills and competency. |
| responsible to provide "reasonable and customary | | | | This is known to be highly acceptable by banks as |
| measures within its control required to ensure the | | | | reduced operation and technology risk. |
| protection and security of the site". This goes to say | | | | Ghana has recently celebrated its golden jubilee of |
| that the project developer is responsible to secure | | | | becoming an independent state dealing with its own |
| regulatory and other approvals like licences and other | | | | affairs so to speak; however, politics has not |
| local permits needed for the project. The significance | | | | changed much because politics is the ideologies of |
| of this is that until recently, project developers leave | | | | individuals. For that reason, so many people within |
| land unattended after exploratory activities and | | | | one political party or government can bring different |
| corporate social responsibility was not known to | | | | ideas to bear on the politics of a nation affecting |
| corporate bodies but now it is gaining roots. To | | | | project finance one way or the other. It is the |
| please the locals, corporate bodies have to take | | | | inability of the synchronization or blending of these |
| extra responsibilities because of the aftermath of | | | | ideas that is really a matter of concern for political |
| certain projects. This could even serve as guarantee | | | | risk in project financing. If these could be suppressed |
| for borrowers. | | | | or eliminated, then political risk and all the related risks |
| Offtake and sales risk | | | | can be mitigated. The list for project risk could be |
| The uncertainty that the project will fail to take off | | | | endless considering the fact that people as well as |
| and bring in adequate income to offset the cost of | | | | governments' fear and anticipation are very |
| the project is known as Offtake and sales risk. When | | | | uncertain.However; the risks could be somewhat |
| a project fails to generate the required income, | | | | minimised or eliminated. |
| lenders cannot be repaid. Sometimes the selling of | | | | Reference |
| the output to the market is also uncertain. Banks in | | | | 1. Evaluation of PPP by EIB by (on line) (accessed on |
| effect have high interest in anything that might | | | | 10th February,2007) |
| affect this risk and so will look for assurances in the | | | | 2. Hoffman, S.L. (2001) the Law and Business of |
| business plan of the project developer. The onus of | | | | International Project Finance-a Resource for |
| this risk is that the project developer had to make | | | | Governments, Sponsors, Lenders, Lawyers and |
| extensive market analysis to get to know the | | | | Project Participants.2nd Edition, New York, |
| market demand for the product or output. It could | | | | Transnational Publishers. |
| be energy alright but if the macroeconomic situation | | | | 3. HWWA Discussion Paper 263,January 2004 |
| of the country concerned is not sound, the income | | | | "Measuring The Potential Of Unilateral CDM-A Pilot |
| generated could not meet the investment. Ghana had | | | | Study"(on line) available from hm-treasury.gov.uk |
| a similar experience in the late 90s when the | | | | media (accessed 10th February,2007) |
| government in power decided to extend electricity | | | | 4. Yescombe, E.R. (2002) Principles of Project |
| grid to the rural areas where .It became a big issue | | | | Finance.UK, Academic Press. |
| as the villagers could not afford the payment of the | | | | 5. "Proposed Credit to Bosnia and Herzegovina for |
| tariff , the government could not pay either and the | | | | 3rd Electric Power Reconstruction Project" available |
| electricity corporation had to run a huge debt. | | | | on www-wds.worldbank.org/servlet/WDS content. |
| Technology & operation risk: | | | | Accessed on 10th February,2007) |
| Technology risk is usually when the technology being | | | | 6. abnamro.com/btcpipeline (accessed on 10th |
| applied or proposed for the project is "very new" | | | | February,2007) |
| and not really known by the lenders. Lenders are | | | | 7. member.aol.com/projectfinance/ (accessed on 10th |
| particularly concerned about such projects and will do | | | | February,2007) |
| anything to minimise such risk. Operation risk deals | | | | 8. World Investment Report 2006.FDI from |
| with the aftermath of the project and it running.i.e | | | | Developing and Transition Economies: Implications for |
| the risk that forecasted cash flows arising from the | | | | development. available online (accessed on |
| failure of operations of the project. Banks are not | | | | 10-02-2007) |
| only concerned with the competency and financial | | | | 9. "Barriers to commissioning Projects" 2005 by Land |
| capability of the contractor but also those who are | | | | Use Consultants in association with IT Power for DTI |
| going to run the project must apply the relevant | | | | & Renewable Advisory Board. available |
| technology for its day to day activities in order to | | | | online(accessed on 20-04-07) |
| generate the required cashflow. | | | | 10. "Encouraging investment in infrastructure services: |
| - Others like local knowledge, customs of the local | | | | political and regulatory risks" by S. |
| people, for example if it has to deal with | | | | |