Strategic risk

Port Port

Description (What is the Risk)

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

Conflicts of interest between shareholders of Private Partner.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The Contracting Authority wants to ensure that the Private Partner to whom the project is awarded remains involved.

Any bid will be awarded on the basis of the Private Partner's technical expertise and financial resources and for this reason the sponsors of the Private Partner should remain involved in the project.

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

The Contracting Authority will limit the Private Partner's shareholder's ability to change their shareholding for a period (i.e. there is typically a lock-in for at least the construction period) and thereafter may impose a regime restricting change in control without consent or where pre-agreed criteria cannot be met.

The tender documentation should set out proposals for any restrictions on the shareholders of the Private Partner.

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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

The Contracting Authority wants to ensure that the Private Partner to whom the project is awarded remains involved.

Any bid will be awarded on the basis of the Private Partner's technical expertise and financial resources and for this reason the sponsors of the Private Partner should remain involved in the project.

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

The Contracting Authority will limit the Private Partner's shareholder's ability to change their shareholding for a period (i.e. there is typically a lock-in for at least the construction period and in some cases for up to the first 15 years of operations).

The tender documentation should set out proposals for any restrictions on the shareholders of the Private Partner.

In particular any incoming shareholder will need to have the requisite financial capacity and technical expertise to be a sponsor in a port operating company.

The Contracting Authority will limit the Private Partner's shareholder's ability to change their shareholding for a period (i.e. there is typically a lock-in for at least the construction period and in some cases for up to the first 15 years of operations).

The tender documentation should set out proposals for any restrictions on the shareholders of the Private Partner.

In particular any incoming shareholder will need to have the requisite financial capacity and technical expertise to be a sponsor in a port operating company.

Comparison with Developed Market

In emerging markets there is typically more restriction on any change of control in the Private Partner given the riskier nature of emerging market projects.

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