Risk Management in Transport PPP Projects
In the Islamic Countries
191
Table 35: Risks to consider for risk identification, based on PPP guidelines
Risk Description
1 Land availability
and acquisition
 Land needed for the project is unavailable;
 There is uncertainty over the cost to acquire the needed land and its timing.
2 Land unsuitability  Unanticipated adverse ground conditions are discovered.
3 Environmental risk  The project causes major environmental impacts on surrounding natural
resources.
4 Health, safety and
permits/licenses
 Regulations or standards on health, safety, permitting, licenses, etc. are not
respected.
5 Currency
availability and
transferability
 Foreign currency is unavailable to transfer funds from local to hard currency;
 Profits earned by the project inside the country cannot be repatriated to its
owners outside the country.
6 Operating costs  Operating costs are higher than expected.
7 Interest rate  Interest rates on the loans used for construction increase.
8 Exchange rate  Local currency depreciates relative to the hard currencies in which the
project’s loans and equity investments are denominated.
9 Market  The quantity of outputs or services demanded by users or the off-taker is less
than expected;
 The PPP project’s tariffs or prices are not adjusted according to the escalation
formula agreed upon.
10 Responsibility of
design
 The government provided a faulty or inappropriate design.
11 Detailed design,
specifications and
standards
 The project’s performance standards or design specifications are
inappropriate for the project’s needs.
12 Design data  Wrong or inaccurate data has been used during construction.
13 Procurement and
construction
 Completion of the project construction was delayed.
14 Construction cost  Total construction cost was more than anticipated.
15 Program  Project completion is delayed or there is a cost over-run due to faulty work
scheduling.
16 Operation  The project is unable to function and operate as fully as had been anticipated.
17 Maintenance  The project’s assets are not properly maintained.
18 Ancillary features  Ancillary infrastructure services that the project needs (e.g. approach-roads,
interconnection facilities, etc.) are not provided and completed on time.
19 Transfer  The condition of the assets at the end of the contract term when they are
transferred back to government shows no compliance with the PPP
contract’s maintenance & performance standards.
20 Regulatory risk  Terms and conditions of the PPP contract regarding the operator’s ability to
collect revenues and seek reasonable tariff increase according to the
contract’s price escalation formula are not fulfilled;
 New laws or regulations are passed, increasing the costs or reduce the
revenue of the PPP contractor without fair compensation.
21 Political/sovereign
risk
 The government nationalizes the project.
22 Force majeure  The project is not able to perform due to natural catastrophes (earthquakes,
flooding, etc.).
Source: PPP unit, Ministry of Finance (2019).