Resource or input risk

Water Desalination Water Desalination

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 desalination facility is seawater. The Contracting Authority generally bears primary responsibility in the event that intake water is contaminated. The other main input or resource required for a desalination facility is power. The Contracting Authority typically bears the primary responsibility to ensure an uninterrupted supply of power to the facility. The price of electricity or gas is often a pass-through cost.

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

The Private Partner may be incentivized, through a sharing mechanism, to achieve certain efficiencies in energy consumption throughout the concession period.

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

Where certain performance indicators cannot be met due to contaminated intake or shortage of water, the Private Partner may be eligible to seek relief and/or compensation.

The cost of power is generally a pass-through cost with the Contracting Authority bearing the cost of any adjustments in the price, subject to any energy usage efficiency sharing mechanism.

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, however energy costs may still vary significantly over the course of project that must be accounted for.

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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 desalination facility is seawater. If the Contracting Authority is responsible for providing seawater, then the Contacting Authority will generally bear primary responsibility in the event that intake water is contaminated. If the Private Partner bears responsibility for procuring seawater, then the Private Partner will general bear primary responsibility in the event that the intake water is contaminated.

The other main input or resource required for a desalination facility is power. The Contracting Authority typically bears the primary responsibility to ensure an uninterrupted supply of power to the facility. The price of electricity or gas is often a pass-through cost.

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

The Private Partner may be incentivized, through a sharing mechanism, to increase efficiencies in energy consumption throughout the concession period.

In emerging markets, the Private Partner is generally unable to pass any cost increases through to an end user.

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

Where the Contracting Authority bears the risk of providing seawater, certain performance indicators cannot be met due to contaminated intake or shortage of water, the Private Partner may be eligible to seek relief and/or compensation.

The cost of power is generally a pass-through cost with the Contracting Authority bearing the cost of any adjustments in the price, subject to any energy usage efficiency mechanism.

Comparison with Developed Market

Emerging markets are generally more susceptible to contamination events and electricity and water availability may be less reliable.

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