Environmental Engineering Reference
In-Depth Information
$140 billion dollars or, in other words, 85 % of all project-finance funding for
PPPs.
98
Direct agreements
between banks and the public sector,
99
credit agreements,
100
cash-flow agreements
101
between banks and the private partner and possible central
bank guarantees
102
complete the complex contractual setup for successful project
funding.
'
1.3.4 Types of Risk
All the risks can be separated into two categories: namely, procedural risks and
project risks.
103
Procedural risks encompass everything from execution of the
contract to political and legal acceptance, while project risks encompass the
construction, operation and transfer phases.
104
1.3.4.1 Procedural Risks
To avoid any risks concerning the execution of the contract, a
Service Level
'
Agreement
(SLA) should be concluded in advance, which sets standards and
formulates contractual penalties for disobeying these standards.
105
In terms of
procedural risks, the two other major issues that a project faces if it is situated in
a foreign country are political and legal risks.
Political risks include practically all governmental activities, such as an unex-
pected change to the political system
106
and the risk of any kind of state interfer-
ence.
107
However, political commitment and legal stability are meaningless if the
agreements are not adequately enforced by the government.
108
One way to ensure
the security of the project would be to apply the
'
'
material adverse government
98
Yescombe (
2007
), 126; cf. Kn
¨
tel in Siebel et al. (
2008
), para 1254.
99
Yescombe (
2007
), 210.
100
Dorner (
1994
), 75 (85-86).
101
Harries (
1996
), 19 (21); “Escrow Accounts” should be suited in countries of the Western
hemisphere, in: Schoeltzke and Claus (
2007
), 133 (138).
102
Verveniotis (
1996
), 115 (125); Wahl (
1994
), 15 (19-20).
103
Hofler (
2007
), 35 (39).
104
Hofler (
2007
), 35 (39).
105
Hofler (
2007
), 35 (39); Kn¨ tel in Siebel et al. (
2008
), para 1415; Bertelsmann Stiftung
et al. (
2011
), 50-51.
106
Berger (
2003
), 65 (65); cf. Joff´ (
2000
), 33 (36); HyunChan et al. (
1997
), 93 (100);
Kumaraswamy and Zhang (
2001
), 195 (198); Palmer (
2009
), 14; Metje (
2008
), 54; cf. Happ
(
2002
), 39 (40).
107
Metje (
2008
), 53.
108
Christiansen (
2008
), 143 (150).
