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    2019 PPPs Benjamin Herisset Day 1

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    Sam YU
    The document summarizes recommendations from the UNCITRAL Legislative Guide on allocating and avoiding risks in public-private partnerships (PPPs). It emphasizes the importance of negotiating risk allocation between parties and providing regulatory guidance. The main categories of project risks include disruption, political risk, construction/operation risks, commercial risk, and financial risks. The guidelines state risks should be allocated to the party best able to assess, control, manage, and bear the cost of each risk. Risk allocation in practice can differ based on political and financial considerations. Guarantees from stakeholders can help mitigate risks.

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    2019 PPPs Benjamin Herisset Day 1

    Uploaded by

    Sam YU
    49 views10 pages
    The document summarizes recommendations from the UNCITRAL Legislative Guide on allocating and avoiding risks in public-private partnerships (PPPs). It emphasizes the importance of negotiating risk allocation between parties and providing regulatory guidance. The main categories of project risks include disruption, political risk, construction/operation risks, commercial risk, and financial risks. The guidelines state risks should be allocated to the party best able to assess, control, manage, and bear the cost of each risk. Risk allocation in practice can differ based on political and financial considerations. Guarantees from stakeholders can help mitigate risks.

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    The document summarizes recommendations from the UNCITRAL Legislative Guide on allocating and avoiding risks in public-private partnerships (PPPs). It emphasizes the importance of negotiating risk allocation between parties and providing regulatory guidance. The main categories of project risks include disruption, political risk, construction/operation risks, commercial risk, and financial risks. The guidelines state risks should be allocated to the party best able to assess, control, manage, and bear the cost of each risk. Risk allocation in practice can differ based on political and financial considerations. Guarantees from stakeholders can help mitigate risks.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    49 views10 pages

    2019 PPPs Benjamin Herisset Day 1

    Uploaded by

    Sam YU
    The document summarizes recommendations from the UNCITRAL Legislative Guide on allocating and avoiding risks in public-private partnerships (PPPs). It emphasizes the importance of negotiating risk allocation between parties and providing regulatory guidance. The main categories of project risks include disruption, political risk, construction/operation risks, commercial risk, and financial risks. The guidelines state risks should be allocated to the party best able to assess, control, manage, and bear the cost of each risk. Risk allocation in practice can differ based on political and financial considerations. Guarantees from stakeholders can help mitigate risks.

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    Assessing, Allocating and

    Avoiding Risks in PPPs:


    Recommendations contained in
    the UNCITRAL Legislative Guide
    on PPPs
    Project Risks and Risk Allocation
    • Recommendations contained in the expanded Chapter II on
    “Project planning and preparation”
    • Guide emphasizes the importance of negotiation between
    the parties to allocate the various risks of the project
    • Countries may wish to provide legislative or regulatory
    guidance on the parameters to take into account when
    allocating risks
    Adequate risk allocation is key for :
    - Reducing project costs
    - Ensuring the successful implementation of
    the project
    Overview of main categories of project risks
    • Project disruption caused by events outside the control of the
    parties
    • Political risk
    • Construction and operation risks
    • Commercial risk
    • Exchange rate and Financial risks
    Guidelines on Risk Allocation
    Risk to be contractually allocated to the party who
    is best suited to assess, control, manage and bear
    the risk; i.e. party who has
    • Best access to hedging instruments; or
    • Greatest ability to diversify the risk; or
    • Greatest ability to mitigate the risk at the lowest cost,
    especially the technical risk
    Practice can differ:
    - Political considerations motivated by the public
    interest in the project or other factors

    - Financial ability of the party to bear the risk,


    should it occurs, leads to paramount consideration
    given to the financial strength of the parties
    Allocation of risk in practice as
    explained in the Guide (1)
    Private partner Contracting authority

    • Development and operation of • Adequacy of technical


    the infrastructure specifications given during
    • Design and construction bidding process
    • Performance… • Political risk
    • Price control
    • Expropriation…
    Allocation of risk in practice as
    explained in the Guide (2)
    • Distribution of risk between the private partner and the
    contracting authority is not always self-evident
    • Financial aspects of the PPP contract (such as interest rate / inflation risk vs. price
    control)
    • Extraneous events outside of the control of the parties (war, civil disturbance) may
    be subject to special arrangements + commercial insurance

    • Some sectors require specific allocation of risks (energy) or the sharing of the risk
    between the private partner and the contracting authority (water treatment)
    Guarantees offered by stakeholders may alter
    the risk allocation
    • Allow for risk mitigation and risk reduction, such as MIGA’s
    guarantees:

    • Transfer restrictions
    • Expropriation
    • Breach of contract
    • War and civil disturbance
    • Non-honoring of financial obligations (MIGA)
    Where to get more information
    • http://www.uncitral.un.org
    • One-stop-shop for legal texts in the 6 official UN-languages

    • uncitral@un.org
    • Email us when you have specific queries

    • THANK YOU !

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