Resource or input risk

Water Distribution Water Distribution

Description (What is the Risk)

The risk that the supply of inputs or resources required for the operation of the project is interrupted or the cost increases.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The main input or resource required for a water distribution project is water. This is usually within the ownership or control of the Contracting Authority and, accordingly, it generally bears principle responsibility for the quantity and quality of the water supplied at the delivery point.

The other main input or resource required for a water distribution network is power for pumping. The Contracting Authority typically bears the principle responsibility to ensure an uninterrupted supply of power to the facility. The price of the power is often a pass-through cost. The Private Partner will generally bear the risk of all other resources to operate the project, such as labour supply.

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

The Private Partner may be incentivised to increase efficiencies in energy consumption throughout the term by a mechanism to share the savings.

The Private Partner will be limited, however, in its ability to pass through any costs to the end consumer due to the fixing of water tariffs in the concession.

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

Where the Contracting Authority is unable to meet its contracted thresholds for the quantity and/or quality of water, or is unable to secure the supply of the resources it is responsible for (such as a continuous energy supply) the Private Partner may be eligible to seek relief and/or compensation.

Comparison with Emerging Market

Developed markets generally do not experience market volatility to the extent of emerging markets, and resource availability is less of a concern. Energy costs may still vary significantly over the course of project that must be accounted for and may not be able to be passed through to consumers.

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Description (What is the Risk)

The risk that the supply of inputs or resources required for the operation of the project is interrupted or the cost increases.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The main input or resource required for a water distribution project is water. This is usually within the ownership or control of the Contracting Authority and, accordingly, it generally bears principle responsibility for the quantity and quality of the water supplied at the delivery point.

The other main input or resource required for a water distribution network is power for pumping. The Contracting Authority typically bears the principle responsibility to ensure an uninterrupted supply of power to the facility. The price of the power is often a pass-through cost.

The Private Partner will generally bear the risk of all other resources to operate the project, such as labour supply.

Time and cost risks associated with water and power supply are typically retained by the Contracting Authority. All other time and cost risks would be borne by the Private Partner and typically passed on to contractors.

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

The Private Partner may be incentivised to increase efficiencies in energy consumption throughout the term by a mechanism to share the savings.

The Private Partner will be limited, however, in its ability to pass through any costs to the end consumer due to the fixing of water tariffs in the concession.

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

Where the Contracting Authority is unable to meet its contracted thresholds for the quantity and/or quality of water, or is unable to secure the supply of the resources it is responsible for (such as a continuous energy supply) the Private Partner may be eligible to seek relief and/or compensation.

Comparison with Developed Market

Emerging markets are generally more susceptible than developed markets to contamination events and market volatility/major cost variations, including labour security and costs.

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