5.2 Definition of direct project risks

TABLE 5.2 Definition of direct project risks

CATEGORY RISK

Land availability and Land is not available at the time of commercial closure (APMG International 2018g) or delays the acquisition delivery of publicly provided infrastructure. Permits and licensing The public authority has difficulty obtaining permits and licenses for the project. Stakeholder management Incumbent service providers undermine, disrupt, or challenge the project during implementation, or delays in implementing the structure of their participation delay their start of operations. Change in scope of work An unforeseen change in project design or service requirements delays implementation (APMG International 2018c). Environmental and social Any unforeseen change in the project scope may exacerbate a negative environmental (APMG International 2018e) or social outcome. The design or intervention needs to be modified (or stopped) because the design does not include appropriate consideration of stakeholders’ social or environmental concerns.

Financing

Project costs and risks are miscalculated, the private party assumes an unintended risk, or the government assumes a risk it is not well suited to assume absent a guarantee, which increases financing costs.

Financial closure

A failure to raise the finance required, to satisfy conditions precedent, or to complete negotiations with lenders delays or prevents financial closure. Collection, fraud Users willingly avoid payment, or drivers or other employees divert cash revenues from the project. Collection, affordability Payment becomes unaffordable for users (APMG International 2018f). Financial coordination Project revenues are not distributed correctly due to errors in the revenue system, a complicated payment mechanism, or fraud. Changes in ownership A new controlling shareholder is not as capable as, and does not have the capacity of, the original partner (APMG International 2018l). Construction delays Construction does not get completed on time for operations to commence. Geotechnical Unexpected geological or geotechnical conditions affect designs (APMG International 2018h).

Completion and commissioning

There is a failure to meet an outcome as prescribed (in relation to infrastructure, rolling stock, systems, technology) or a component as commissioned in order to meet the completion acceptance criteria, thereby causing a delay in earning revenues (APMG International 2018d). Interface risk Operations begin without all project components (infrastructure, rolling stock, systems, technology) ready to operate together. Quality and level of service Services are not available for use or do not meet the quality or expected performance levels, which includes providing enough buses to satisfy demand and meeting schedules for the private partner (APMG International 2018a).

Demand

Demand forecasts are inaccurate, or the project does not comply with assumptions used to estimate demand.

Congestion Government fails to secure infrastructure or technology, such as exclusive lanes for bus rapid transit (BRT) systems, or to provide priority signaling for buses in free-flow or BRT systems, which results in congestion. Transportation fares The project fails to generate enough revenue to cover the cost of operations and debt service because fares are lower than anticipated or are not being updated. Technology obsolescence Certain equipment becomes inadequate for the service, or the service becomes outdated (APMG International 2018k).

Fuel

Competition from incumbent

Fuels (or electricity) required are not consistently available in required quantities at reasonable prices. There is unplanned competition from informal transportation services or incumbent operators whose services should have been restructured.

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