Demand risk

Solid waste collection, disposal, landfill and recycling Solid waste collection, disposal, landfill and recycling

Description (What is the Risk)

The availability by both volume and quality of waste or refused derived fuel to a project or the demand for the product of service of a project by consumers/users

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The default position for waste management BOT projects in developed markets is for the Contracting Authority to retain some risk on waste availability by providing either exclusivity of all waste arising in a local area or by guaranteeing waste tonnages to be delivered at the facility.

The Private Partner takes the risk of securing sufficient third party waste to fill additional capacity to make up its revenue base case.

Mitigation Measures (What can be done to minimize the risk)

The Contracting Authority should do a full assessment of demand risk and should ensure that the concession agreement appropriately addresses and allocates the risk for everything that will impact on demand.

The parties should also develop a comprehensive market strategy for procurement of substitute waste.

Government Support Arrangements (What other government measures may be needed to be taken)

As the Contracting Authority will be retaining demand risk, it will need to ensure that it is comfortable (both politically and economically) with demand forecasts.

Comparison with Emerging Market

In developed markets, the Contracting Authority should have access to various data sources to develop realistic and attainable waste arisings and revenue forecasts, such that the Contracting Authority is well placed to manage demand and gatefee risk.

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