Strategic risk

Power transmission Power transmission

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

Contracting Authority wants to ensure that the Private Partner to whom the project is awarded remains involved during construction and a specified period during operation.

Bid awarded on basis of Private Partner's technical expertise and financial resources therefore sponsors should remain involved.

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

Contracting Authority will limit Private Partner's ability to change shareholding for a period (i.e. lock-in for the construction period and for a minimum period of time thereafter, e.g. two years post energization).

Pre-tender proposal should set out proposals for governance of Private Partner.

Comparison with Developed Market

In emerging markets lock-in periods and subsequent controls are typically more restrictive than in developed 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

Contracting Authority wants to ensure that the Private Partner to whom the project is awarded remains involved during construction and a specified period during operation.

Bid awarded on basis of Private Partner's technical expertise and financial resources therefore sponsors should remain involved.

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

Contracting Authority will limit Private Partner's ability to change shareholding for a period (i.e. lock-in for the construction period and for a minimum period of time thereafter, e.g. two years post energization).

Pre-tender proposal should set out proposals for governance of Private Partner.

Comparison with Developed Market

In developed markets the Private Partners' desire for certainty of involvement of key participants will need to be balanced with the private sector's requirements for flexibility in future business plans, particularly in the equity investor markets.

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