Strategic risk

Hydro power Hydro power

Description (What is the Risk)

Change in shareholding of Private Partner.
Conflicts of interest between shareholders of Private Partner.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

Change of control will often be prohibited or limited until the commercial operation date or a specified period thereafter.

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

When structuring the project company, the Private Partner may consider using a holding company structure whereby the shares in the project company are held by a holding company. Any change of transfer of interest in the project can then be done at the level of the holding company.

Comparison with Emerging Market

Developed markets tend to be less restrictive on shareholding changes than emerging markets.

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Description (What is the Risk)

Change in shareholding of Private Partner.
Conflicts of interest between shareholders of Private Partner.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

Share transfers are often prohibited until five years after the commercial operation date and thereafter the lead shareholder may be required to maintain a majority shareholding for a specified period thereafter. In addition to requirements under the power purchase agreement, the shareholders may make direct undertakings to the Contracting Authority.

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

When structuring the project company, the Private Partner may consider using a holding company structure whereby the shares in the project company are held by a holding company. Any change of transfer of interest in the project can then be done at the level of the holding company.

Comparison with Developed Market

Contracting Authorities in emerging markets tend to have a greater degree of control over shareholding changes for a longer period of time than developed markets.

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