FNCE90048 Project Finance

Lecture 3

Project Risks and Mitigations I

Lecturer – Tony Cusack

March 2021
 Lecture 3 topics

• Review Lecture 2 questions

• Part 1 – risk analysis, assessment, allocation and identification
• Part 2 – specific construction phase project risks
• Part 3 – specific project risks that can be present in both construction
and operating phases

March 2021 FNCE90048 Lecture 3 2

 Lecture 2 questions
1. Identify some of the main costs of a large-scale project. How are they estimated?
2. Why are some items on slide 19 shown in red?
3. Discuss the different forms of equity capital that can be used in project financing.
Identify circumstances to which these different forms of equity would be suited.
4. Identify and describe the different forms of debt available for project financing.
5. What is a Letter of Credit facility? In what circumstances would it be used in project
financing? What are its advantages and disadvantages?
6. Discuss the pros and cons of up-front project financing with bonds as opposed to
bank syndicate borrowing.
7. Describe ECAs and MLAs and discuss their roles in project financing.
8. How might an SPV maximise the debt financing outcome?
March 2021 FNCE90048 Lecture 3 3
 Lecture 3 – Part 1

• Risk analysis, assessment, allocation and identification

– before focusing on specific risks that arise in projects, we look at the
process behind dealing with risks

March 2021 FNCE90048 Lecture 3 4

 Bonds

March 2021 FNCE90048 Lecture 1 5

 What is risk?

• risk, in traditional terms, is typically viewed as something negative

– e.g. Webster’s dictionary, defines risk as “exposing to danger or hazard”
• but you should recall that in the context of corporate finance, the technical
definition of ‘risk’ is that it represents the possibility of a deviation between
actual and expected (mean) outcomes
• i.e. in corporate finance, there can be both positive and negative risks, such
that risk is not to be purely thought of as synonymous with the possibility /
cause of loss, but represents variability
• in project finance, the risks that firms typically focus on and seek to manage
are sources of variability that may result in an adverse impact or outcome
March 2021 FNCE90048 Lecture 3 6
 What risks do businesses face?

• business risk arises as a result of uncertainty in the future

• in terms of impact on a business, this uncertainty means that future events
and circumstances could result in economic losses being suffered
• broadly speaking, economic losses take the form of:
1. loss of or reduction in expected revenues
2. increases in expenditure
3. damage to or destruction of business property or assets
• risk analysis is performed to identify all risks that may arise in relation to the
activity / project, to avoid or reduce economic losses being suffered

March 2021 FNCE90048 Lecture 3 7

 Project finance risks

• in project finance, risk analysis has further importance, as follows:

– identify and allocate particular risks to that party in the project most
appropriately placed to bear that risk
– provide efficient returns based on the risk-reward relationship
– mitigate the residual risk in the project
– initially provide limited recourse in a non-recourse (SPV) structure
• the only risks relevant to a project are those to which it has an exposure
• Q: a power producer wishes to expand internationally – what are the risks
associated with constructing a new power plant in an emerging country?

March 2021 FNCE90048 Lecture 3 8

 Project finance risk analysis

• Yescombe suggests that project finance risk analysis should be based on:
– a due diligence process intended to ensure that all the necessary information
about the project is available
– identification of risks to which the project is exposed, based on the due diligence
– allocation of risks (to the extent possible) to appropriate parties to the project
through provisions in the project contracts
– quantifying and considering the acceptability of the residual risks that remain with
the project SPV
• note, risk assessment and due diligence are not procedures that relate only to
project finance, as all business activity involves risk in some way

March 2021 FNCE90048 Lecture 3 9

 Project finance risk analysis

• however, a particular characteristic of project finance is that the risk analysis

provides the basis for a systematic risk allocation – usually by way of contracts
– that is the key to raising debt finance
• so, like in any business, in each project there needs to be a process that
enables appropriate identification of risks and allows for quantification of the
potential impact of each risk event
– a useful tool is a ‘risk matrix’, which sets out: (1) the likelihood of a risk occurring,
and (2) an estimate of the relative seriousness (amount of loss) of each risk
– every different risk that is identified is placed in the relevant cell enabling
assessment of each project risk together

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 Risk Assessment Matrix – example 1

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 Project finance risk analysis

• in practice, many variants of the risk assessment matrix are used, but the
objective remains constant, i.e. assessment of identified risks
• the SPV – usually assisted by consultants – will prepare the risk assessment
and it will be presented to and discussed with lenders
– i.e. before the formal loan application, for lenders to identify key issues
• this process also provides a good illustration of the reality that in project
contract negotiations, different project parties have differing objectives
• for example, lenders typically focus their risk assessment on the financial
impact that a particular identified risk may have on the project’s viability,
regardless of the likelihood of it actually happening
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 Risk Assessment Matrix – example 2

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 Risk allocation

• the key principle underlying risk allocation in project finance is that risks
should be borne by those who are best able to control or manage them
• for example, the risk of late completion of construction of a project (and in
particular, its financial consequences) should ultimately be borne by the
construction company, e.g. EPC contractor
– what are the financial consequences of late completion?
– how is this risk transferred to the EPC contractor in practice?
– note that there are exceptions, e.g. if the late completion arises from
events outside the EPC’s control (such as force majeure), then it will not be
held liable (this should be covered in the EPC contract)
March 2021 FNCE90048 Lecture 3 14
 Risk allocation

• clearly, careful thought must be given to appropriate risk sharing between

parties for risk allocation to be effective
• note that transfer of all risk away from the project entity to other parties is
usually not viable (nor desirable)
– what is the expected impact on returns if all risk is transferred?
• since other parties are asked to assume more risk, they will also expect the
appropriate equity return for doing so
• i.e. the fundamental principle of corporate finance again applies – higher risk
needs to be rewarded by a higher expected return (think of shares, etc.)

March 2021 FNCE90048 Lecture 3 15

 Project risk categories

• Yescombe divides project finance risks into three main categories:

– Commercial risks (also known as project risks) are those inherent in the
project itself, or the market in which it operates
– Macroeconomic risks (also known as financial risks) relate to external
economic effects not directly related to the project (i.e. inflation, interest
rate and currency exchange rates)
– Political risks (also known as sovereign risks) relate to the effects of
government action or political force majeure events such as war and civil
disturbance (especially, but not exclusively, where the project involves
cross-border financing or investment)
March 2021 FNCE90048 Lecture 3 16
 Identifying specific project risks

• whilst Yescombe’s risk categories are generally appropriate, effective risk

analysis requires a more detailed assessment of possible risk events
• it should be noted that there is no universally accepted list of project risks,
and many different labels are applied to risks
• we will follow Tinsley’s list of 16 risks, as they essentially cover those risks
identified in other sources, and because Tinsley’s view is that any risk
category that cannot be clearly linked to a cash flow line is not of much use
– i.e. he believes that general risk labels such as commercial, business, project,
etc., are too vague to link to cash flow
– recall that risk is essentially economic loss, so it relates to variable cash flow

March 2021 FNCE90048 Lecture 3 17

 Tinsley’s 16 risks

Operating Risk (3 types): 9. Infrastructure

1. Technical 10. Environmental
2. Cost
11. Country / Political
3. Management
12. Force Majeure
4. Sponsor/Participant
5. Engineering 13. Foreign Exchange
6. Completion 14. Syndication
7. Supply/Traffic/Reserve 15. Interest/Funding
8. Market 16. Legal

March 2021 FNCE90048 Lecture 3 18

 Re-ordering Tinsley’s risks

• in examining project risks, we will proceed with a rough chronological re-

ordering (based on project phases)
– construction: completion, engineering, infrastructure, transportation,
sponsor, syndication
– ongoing: interest rate / funding, foreign exchange, environmental, country,
political, social, force majeure, legal
– operations: market, supply, operating – technical, management and cost
• but it must be appreciated that risk is not static and certain different risks will
be more (or less) relevant in different projects at different times

March 2021 FNCE90048 Lecture 3 19

 Lecture 3 – Part 2

• Part 1 – risk analysis, assessment, allocation and identification

• Part 2 – specific construction phase project risks
– different risks arise at different times in a project’s life cycle – some are
present in construction phase only (i.e. those that relate to construction of
the project assets), others arise only once operations have commenced,
and many others may be present throughout the life of the project
– in this part, we focus on the first group, construction phase risks

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 Completion / construction risk

• as has been discussed previously, in every project there will be risk related to
completing construction of the asset / facilities
– this is completion risk (also called construction risk or cost-overrun risk)
• at its extreme, this risk causes the result that the project structure is not
completed, so it never begins operations
• in practice, non-completion of an asset structure – where construction starts
but is abandoned when not fully completed – is rare (why?)
• far more common is the situation where the cost to complete exceeds
(sometimes by double or more) the budgeted project cost

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 Completion / construction risk

• so, the main completion risk is the risk of cost over-runs in construction, and
the problem that arises therefore relates to how the extra costs are funded
– extra equity will result in a reduced, perhaps negative, NPV
– extra debt might not be available, and even if it is, will typically be on less
favourable terms (interest rate, seniority, maturity)
• this risk is clearly associated with the accuracy of project cost forecasts
• given the potentially huge amount of losses that could be suffered, this risk is
at the serious end of the risk spectrum for the most projects
• completion risk is generally not taken by financiers in project lending – why?

March 2021 FNCE90048 Lecture 3 22

 Completion risk factors

• Yescombe suggests that completion risk is a function of the risks that are
inherent in the construction process, including:
– site acquisition and access, obtaining construction and operating permits
– risks relating to the EPC contractor, including construction cost overrun
– delays in completion
– inadequate performance of equipment at completion (is this correct?)
• these are the types of factors could have a negative impact on completing the
project construction on time and within budget
• completion risk is also important in the context of the limited / non recourse
arrangement – given non recourse is triggered by completion of construction
March 2021 FNCE90048 Lecture 3 23
 What is completion?

• the question arises: what is completion in project finance?

• it is common for three different levels of completion to be recognised:
1. Physical completion
– project is physically complete according to technical design criteria
2. Mechanical completion
– project can sustain production at a specified capacity for a certain period
3. Financial completion (financial sustainability)
– project can generate a certain level of revenues, or produce at under a certain
unit cost, for a specified period, and/or meets financial ratios (e.g. current ratio,
Debt/Equity ratio, Debt Service capacity), etc.
March 2021 FNCE90048 Lecture 3 24
 Completion tests
• formally, lenders will include objective completion test(s) to be met to satisfy
the non-recourse (completion) trigger in the loan agreement
• completion test may be defined as “a step by step evaluation of a (physically)
completed project’s ability to (1) meet its design specifications, (2) perform as
planned, and (3) generate the expected cash flows”
• we find that project finance completion tests are usually more extensive than
simple physical completion of the asset structure
– this contrasts with completion tests typically used in relation to a contractor in
standard commercial construction contracts, i.e. physical completion suffices
– it is because financiers have become more experienced in recognising likely
areas, and acceptable levels, of risk
March 2021 FNCE90048 Lecture 3 25
 Completion tests

• examples of completion tests used in project finance include:

– physical completion of the assets / facilities (the minimum standard)
– continuous operations for “x” consecutive months
– (90%) of designed production / throughput achieved / delivered
– reserve life greater than “x” years (if a resources development – see next slide)
– achieve a defined operating cost per unit
– on specified product(s) or output(s) – amount or type
– sales completion test (an agreed level of sales has been met)
– present values of cash flows greater than (e.g.) 150% of loan outstanding
– financial covenants on working capital, debt, equity, net assets, etc. are satisfied
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March 2021 FNCE90048 Lecture 3 27
 Completion, completion tests and completion risk

• it is obvious that completion, completion tests and completion risk are

related to one another; however, they are different and specific issues
• completion relates to the end of construction (but ‘end’ is dependent upon
project specifics), i.e. project is ready to operate
– when formal completion occurs, the project loan becomes non-recourse
• completion tests are the standards applied to confirm that completion has
occurred – they are agreed between the borrower (SPV) and lender up front
• completion risk is that group of risks that might prevent completion from
being achieved, or if not preventing completion, these risks can mean that it
costs much more than budgeted to achieve completion
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 Example – past exam (MCQ)

Which of the following would NOT be an appropriate completion test for an Oil
Operations project?

a) Continuous operations for four consecutive months

b) Physical completion of the toll road
c) PV of forecast cash flows is greater than 140% of loan outstanding
d) Reserve life greater than twice the life of the permanent loan
e) Satisfying financial covenants relating to the project’s gearing ratio

March 2021 FNCE90048 Lecture 3 29

 Engineering risk

• also known as design risk, it relates to the design and construction of the core
asset(s) to be used in the project
• Tinsley calls this a “poorly understood risk … often considered part of completion
risk, since engineering and design flaws tend to become noticeable as the project
encounters difficulty in construction or start-up”
• the risk here relates to poor quality engineering/design work, and can arise from
poor professional advice, or selection of an inappropriate or inexperienced firm for
the technology or location involved, or poor design estimates
• this risk can have a serious impact on the cash flow stream, both in relation to any
further capital spent pre-completion to counter the problem, and also in not
meeting optimal operating capacity (reduced revenue)
March 2021 FNCE90048 Lecture 3 30
 Engineering risk example

• like completion risk, engineering risk can be at the serious end of the risk
spectrum, particularly when it involves a new technology or a significant
scale-up of an existing technology
• e.g. Cominco Ltd, a Canadian lead and zinc producer, announced that it had
abandoned any hope of restarting its new lead smelter, which had been
shuttered for three years because of production problems
• it also announced that it was considering converting the smelter to a “more
promising” smelting process, which would cost an estimated C$100 million,
and that it might seek compensation from the manufacturer of the smelter

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 What is your answer?

• following the announcement described on the previous slide, the price of

Cominco shares:
a) went up
b) went down
c) stayed the same
d) there is insufficient information to decide

• choose one and justify your answer

March 2021 FNCE90048 Lecture 3 32

 The relevance of technology

• proven technology is considered safer to project finance, which suggests (and

empirical evidence supports) that in project finance, any project using “new
technology” is deemed very risky
• the market is littered with failed project financings due to “new technology”
• for example:
– BHP Hot Briquetted Iron Plant
– BHP Ravensthorpe Plant
– Airbus A380
• conversely, the payoff from successful new technology can be massive

March 2021 FNCE90048 Lecture 3 33

 Infrastructure risk

• (other than that being developed as the core asset in an infrastructure project
itself) infrastructure risk relates to issues arising from the non-core asset
infrastructure that must be constructed to make the project facility functional
– e.g. pipelines, office buildings, fencing, roads, electricity supply, etc.
• accordingly, it is an important component of many (most) projects
• infrastructure often comprises non-complex, standard items (as listed above)
and in those cases, infrastructure risk is relatively low
– in some cases, there is an overlap with design risk
• in any case, the SPV will need to provide assurance that the chosen
infrastructure is and will remain technologically and economically appropriate
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 Engineering, design, infrastructure risks

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 Transportation risk

• Tinsley also includes transportation risk in infrastructure risk, although it

could be also viewed as a separate risk
• his justification is that transportation, like infrastructure, is ancillary to the
core asset (e.g. production facility) and core activity (e.g. production)
• transportation risk arises because materials handling, road transport and/or
shipping fees required to deliver or export building and/or raw materials
and/or production (output) can sometimes be extremely costly
• in addition, there may be a risk associated with port capacity, which may be
limited in remote projects (i.e. the port might not be set up for large-scale
export, because large tankers can’t dock there)
March 2021 FNCE90048 Lecture 3 36
 Lecture 3 – Part 3

• Part 1 – risk analysis, assessment, allocation and identification

• Part 2 – specific construction phase project risks
• Part 3 – specific project risks that can be present in both construction
and operating phases
– as noted, many risks may be present throughout the life of a project due to
their nature, e.g. interest rate risks, political risks, environmental risks
– in this part, we focus on these types of risks

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 Sponsor / participant risk

• the idea here is that the relative strength of the companies in the project may
have an impact on the project financing, especially if one or more participants
is weak – either financially or technically
• if there is a weak or inexperienced participant in a joint venture, the sponsor
risk is that they may be unable to meet their obligations (equity contribution,
technical support, etc.)
• in most cases, this risk is at the very low end of the scale

• Note: this risk and syndication risk are not project risks as such – rather, they
can be considered as financing or funding risks

March 2021 FNCE90048 Lecture 3 38

 Sponsor / participant risk

• however, there is an additional participation risk for some large sponsors

– often, they feel they cannot walk away from a project that has been
project financed, since it has their name associated with it
• in other words, to avoid reputational risk, sponsors might support a failing
project even after it has become non-recourse to them (no legal obligation)
• indeed, some lenders and ratings agencies depend on these companies
feeling that way, which means that the credit assessment essentially relates
to the sponsor(s) and not just the project (contrary to how it is sold)
• for this reason, some financially strong sponsors might choose to project
finance less often
March 2021 FNCE90048 Lecture 3 39
 Syndication risk

• sometimes referred to as financing or underwriting risk, this risk arises when,

even once the terms and conditions of the project financing have been
negotiated and documented, a problem arises with the debt funding
• the risk is that one or more of the lending syndicate members (banks) fails to
fulfil their commitment to providing their portion of the debt funding to the
project (is it a serious risk in most projects?)
• i.e. due to the usually large amounts involved, most projects involve a
‘layering’ of financing via a syndicate of lenders (banks)
– of course, if the loan is only given by one lender, then this risk category either
does not apply or is very serious

March 2021 FNCE90048 Lecture 3 40

 Funding risk

• some sources specify funding risk separately, referring to the risk that the
funds necessary for the project are not available
• this risk is real, but is not a project risk that impacts the raising of funds
• it relates to the two risks just covered: either equity participants failing to
contribute their agreed amount (sponsor risk), or the lenders are unable to
provide the specified debt amount (same as syndicate risk)
• a different aspect is where debt providers are unwilling to provide the full
amount of debt requested (note: this risk is in pre-construction phase)
– what to do? other debt? more equity? change project?

March 2021 FNCE90048 Lecture 3 41

 Interest rate risk

• Tinsley refers to interest / funding risk, but then his discussion focuses only on
interest rate risk
• this risk arises because most project financings are funded on a variable or
floating interest rate basis due to the term of the loan and the necessity for
flexibility in drawdowns and repayment (what if the loan is at a fixed rate?)
• if interest rates rise to any significant degree, a greater proportion of the
available cash flow is obviously required to repay interest
• this obviously results in a corresponding reduction in free cash flows,
meaning that there may not be sufficient available cash to repay the principal
on borrowings when due
March 2021 FNCE90048 Lecture 3 42
 Foreign exchange risk

• foreign exchange (FX) risk occurs as a result of exposure of project cash flows
to differing currencies
• e.g. when project revenues differ from the currency of the project financing
(and repayment obligations)
• lenders usually avoid FX risk in project financing, on the basis that the SPV will
have a hedging policy to address FX risk
– this means that sponsors might still be held liable for FX losses in
operations (i.e. some recourse to sponsors is retained despite completion)
• note, lenders often seek to become the official provider of hedge transactions as
part of the agreement to lend to the project (a motivation to participate)

March 2021 FNCE90048 Lecture 3 43

 Environmental risk

• environmental risk must be addressed by all projects in all locations

• it is what you expect it to be, comprising:
– pollution (air, land, water, noise?)
– deforestation and land degradation
– wildlife habitat destruction
– heritage site damage
– GHG emissions
– chemical hazards and radiation
– etc.

March 2021 FNCE90048 Lecture 3 44

 Environmental risk

• unsurprisingly, environmental risks generally arise due to the project’s nature

(e.g. hydrocarbons, chemicals) or location (e.g. near towns or in proximity to
wilderness, heritage, native reserve, or scenic areas)
• these days, a project financing cannot proceed without favourable assurance
of environmental compliance from the appropriate regulatory bodies with
which the sponsors must deal
• in addition, many ECAs and MLAs will not even consider a project finance
application until it can demonstrate this compliance
– i.e. show evidence of an environmental management plan

March 2021 FNCE90048 Lecture 3 45

 Example: Chad-Cameroon Pipeline

March 2021 FNCE90048 Lecture 3 46

 Country / political risk

• also known as sovereign risk, this comprises a mix of risk categories including:
– expropriation, direct or ‘creeping’
– currency inconvertibility
– regulatory changes
– tax risks
– bureaucracy
– accessibility to site and facilities
– non-government activism
• indeed, many sources treat this as three separate risks: country risk, political
risk and social risk – we will follow this treatment as well
March 2021 FNCE90048 Lecture 3 47
 Country risk

• country risk may be defined as those risks relating to the economic activities
within a country
• examples of country risk include work stoppages, civil unrest, bureaucracy
and process delays, inaccessible sites, guerrilla sabotage of projects, exchange
controls, inflationary conditions, political force majeure events, etc.
• any of these factors could have a negative impact on either the construction
or operations of a project, causing delays and extra costs
• a difficult aspect of country risk assessment is the impact of non-government
political activists
– i.e. trade unions, landowners, environmentalists, lawyers
March 2021 FNCE90048 Lecture 3 48
 Political risk

• political risk is a different focus; it relates to changes in a country’s political

landscape, e.g. change of administration, as well as changes in national
policies, laws, regulatory frameworks
• for example, environmental laws, energy policies and tax policies are
particularly important to pipeline projects
• projects in developing countries can face significant political risks, albeit
usually in subtle forms such as price regulation, restrictions on work permits
for foreigners, renegotiation of contracts, and even buyouts of equity
• a serious but relatively uncommon risk is expropriation, which involves the
seizure of project assets by or on behalf of the host government
March 2021 FNCE90048 Lecture 3 49
 Political risk

• another political risk is currency inconvertibility, which relates to restrictions

on converting local currency to home, or other “hard” currency
– this risk is different to foreign exchange risk, as it usually arises due to arbitrary
government action taken in response to domestic balance-of-payments problems
• other risk factors that must be judged on a case-by-case basis include the
following:
– tax and ownership changes (creeping expropriation)
– operating constraints arising from change of government or change of laws
– funding constraints (e.g. variable deposit or bonding requirements)

March 2021 FNCE90048 Lecture 3 50

 Political risk example

• in Thailand’s Bangkok Second Stage Expressway project, the government

failed to abide by the agreement and ordered the private toll road opened
and lowered the amount its foreign owners could charge in tolls
• the local sponsor, Thai Expressway and Rapid Transit Authority, obtained a
court order to force the project sponsors to open the toll road at a lower cost
(i.e. charge tolls below the level included in cash flow forecasts)
• despite examples like this, it would be wrong to confine assessment of
political risks to the developing world
• e.g. regulatory bodies in the US don’t have a good track record in relation to
changing rate regulations once new power plants are operating

March 2021 FNCE90048 Lecture 3 51

 Social risk

• whilst Tinsley includes it in country / political risk, social risk is probably best
thought of as a separate risk, because it is a specific and different risk
• social risk arises when there is a real or perceived adverse impact of a project
on the local population or groups of people
• it might manifest in protests, strikes, sabotage, pressure on local governments
to act against the project, etc.
• so, there will be cases where the project SPV will need to evaluate the
potential social impacts of a project, including gender and human rights
impacts, at the outset and at each phase of the project

March 2021 FNCE90048 Lecture 3 52

 Force majeure

• there are four types of force majeure risks:

– acts of man (e.g. strikes, sabotage) – also related to social risk
– acts of nature (e.g. flood, earthquake), i.e. natural disasters
– acts of government (e.g. embargo, military coup) – related to political risk
– impersonal acts (e.g. market freezes, pandemics …)
• as shown above, some force majeure events coincide with the other risk
categories such as technical risk (e.g. water inflow from flood) or political risk
(e.g. government regulations)
• for this reason, we typically focus on the natural disaster element of this risk

March 2021 FNCE90048 Lecture 3 53

 Legal risk

• legal documentation, i.e. contracts, are the mechanism for apportioning the
risks among the lenders, insurers, governments, contractors, and sponsors
• the risk that arises is that professional advisers will inadvertently create risks
in the documentation, or fail to include necessary provisions
– created risks can affect the tax position, tenure, security, enforcement, and other
attributes that are negotiated in the whole risk-allocation process
– a different risk is that relating to unanticipated outcomes, relating to situations
that aren’t dealt with in the contract
• this risk of professional advisers creating unworkable, faulty or unenforceable
documentary structures is difficult to mitigate

March 2021 FNCE90048 Lecture 3 54

 Lecture summary

• risk analysis is not unique to project finance, but it has special importance due
to the essence of project finance being allocation of risks to participants
• the process of risk identification must be careful and thorough, to ensure
effective classification / quantification of potential risk events and enable
appropriate mitigation(s) to be implemented
– risk mitigation will be covered in detail next two lectures
• identified risks will be project specific, but broadly speaking, the most serious /
important risks in every project are completion or construction risk, and then
operations type risks (impacting revenue and costs)
– in some cases, other risks (e.g. political) will be at the serious end
March 2021 FNCE90048 Lecture 3 55
 Lecture 3 questions

1. If you were in the business of operating toll roads, what are the risks
associated with constructing a new toll road in a developed country?
2. What is the role of a Risk Assessment Matrix in project financing?
3. What is the significance of completion in a project? What is the difference
between completion, completion risk and completion tests?
4. Identify and describe different types of completions tests, suggesting
appropriate circumstances in which specific tests would be used.
5. Why is it that lenders are often reluctant to provide project finance debt to
projects set up to apply new technology?
6. What types of exposures would be categorised as environmental risk?
March 2021 FNCE90048 Lecture 3 56