Performance/price risk

Power transmission Power transmission

Description (What is the Risk)

The risk that the asset is able to achieve the performance and reliability metrics and the price or cost of doing so.
Damage pollution accidents.
Meeting handback requirements.
Health and safety Vandalism.
Equipment becoming prematurely obsolete.
Expansion.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The Private Partner bears the risk of meeting the performance and reliability specifications. However, the Contracting Authority is responsible for enforcing the regime and for ensuring that the performance and reliability specifications are properly tailored to what the Private Partner can deliver. Consideration needs to be given to the ability of the Private Partner to achieve the necessary performance and reliability levels, and the appropriateness of the metrics given the nature of the project.

During the concession period, the Private Partner will retain care custody and control of the transmission facility and primarily bears the risks associated with damage, pollution, accidents, meeting the handback requirements, health and safety, and vandalism.

Since power transmission projects are availability-based, the Contracting Authority will primarily bear the risk of the transmission system operating characteristics exceeding the design parameters of the project.

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

The onus falls upon the Contracting Authority to draft attainable standards based on relevant market data and policy objectives. Performance based on reliability and availability of service can be measured against pre-determined schedules or standards.

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

Where certain performance indicators cannot be met due to actions by the Contracting Authority or unforeseen circumstances, the Private Partner may be eligible to seek relief or compensation.

Comparison with Emerging Market

In developed markets, the Contracting Authority should have access to various data sources to develop realistic and attainable performance specifications and models.

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Description (What is the Risk)

The risk that the asset is able to achieve the performance and reliability metrics and the price or cost of doing so.
Damage Pollution Accidents.
Meeting handback requirements
Health and Safety Vandalism.
Equipment becoming prematurely obsolete.
Expansion.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The Private Partner bears the risk of meeting the performance and reliability specifications. However, the Contracting Authority is responsible for enforcing the regime and for ensuring that the performance and reliability specifications are properly tailored to what the Private Partner can deliver. Consideration needs to be given to the ability of the Private Partner to achieve the necessary performance and reliability levels, and the appropriateness of the metrics given the nature of the project.

During the concession period, the Private Partner will retain care custody and control of the transmission facility and primarily bears the risks associated with damage, pollution, accidents, meeting the handback requirements, health and safety, and vandalism.

Since power transmission projects are availability-based, the Contracting Authority will primarily bear the risk of the transmission system operating characteristics exceeding the design parameters of the project.

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

The Private Partner may need to require the Contracting Authority to reduce the performance requirements during the settling in period and possibly readjust the performance metrics once the performance of the system, as integrated into the existing system, is better understood. This would mitigate the risk of long-term performance failure.

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

Where certain performance indicators cannot be met due to actions by the Contracting Authority or unforeseen circumstances, the Private Partner may be eligible to seek relief or compensation.

Comparison with Developed Market

For emerging markets, particularly in the case of market first projects, the preparation of attainable standards by the Contracting Authority may be complicated by the lack of outage and performance data pertaining to the interconnected system.

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