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Risk - Identification, Allocation and Mitigation in Infra Projects PGDM
Risk - Identification, Allocation and Mitigation in Infra Projects PGDM
Risk - Identification, Allocation and Mitigation in Infra Projects PGDM
ROAD SECTOR
India has the second largest road network across the
world at 4.7 million km.
This road network transports more than 60 per cent of
all goods in the country and 85 per cent of Indias total
passenger traffic.
Road transportation has gradually increased over the
years with the improvement in connectivity between
cities, towns and villages in the country.
The Indian roads carry almost 90 per cent of the
countrys passenger traffic and around 65 per cent of
its freight.
In India sales of automobiles and movement of freight
by roads is growing at a rapid rate.
Cognizant of the need to create an adequate road
network to cater to the increased traffic and
movement of goods, Government of India has set
earmarked 20 per cent of the investment of US$ 1
trillion reserved for infrastructure during the 12th Five-
Year Plan (201217) to develop the country's roads.
Most of the Road Projects of Central and State Govt
Market size
The value of roads and bridges infrastructure in
India is projected to grow at a Compound Annual
Growth Rate (CAGR) of 17.4 per cent over FY12
17.
The country's roads and bridges infrastructure,
which was valued at US$ 6.9 billion in 2009 is
expected to touch US$ 19.2 billion by 2017.
The construction of highways had reached an all-
time high of 6,029 km during FY 2015-16, and the
increased pace of construction is expected to
continue for the coming years.
The financial outlay for road transport and
highways grew at a CAGR of 12.5 per cent
between FY2010-2016.
The plan outlay for FY2016-17 stepped up
Risks in Road Project Life Cycle
Title 1
SOLAR PV PROJECTS
RISK ALLOCATION MITIGATION
LAND PURCHASE & DEVELOPER/PROMO DISB. ONLY AFTER
SITE RISK- TERS FULL LEGAL &
DEVELOPED: ACTUAL
LEGAL & ACTUAL POSSESSION, ALL
POSSESSION PERMISSIONS,SURV
GOVT PERMISSION EYORS REPORT,LIE
ACCESS RIGHT REPORT,GROUND
SECURITY WATER REPORT, ETC
HERITAGE&EXCAVAT
IONS
POLLUTION
LATENT DEFECTS
LAND PURCHASE & DEVELOPER/PROMO SAME AS ABOVE,
SITE RISK- TERS PROJECT COST TO
DEVELOPED: TAKE CARE OF
LEGAL & ACTUAL DEVPMNT
POSSESSION EXPENSES, LIE,
GOVT PERMISSION SURVEYORS
ACCESS RIGHT
SECURITY
HERITAGE&EXCAVAT
RISK ALLOCATION MITIGATION
ENVIRONMENTAL DEVELOPER/ EPC ENSURE ALL
AND SOCIAL RISKS: CONTRACTOR PERMISSIONS
RELOCATION, TAKEN, GRAM
POLLUTION,FOSSIL PANCHAYAT, PCB
AND FAUNA APPROVAL
,COMPENSATION
PAID ETC
DESIGN RISK: DEVELOPER/EPC LIE REPORT,
TECHNOLOGY CONTRACTOR COMPARISON OF
INTEGRATION TECHNOLOGIES,
OUTPUT REPUTED EPC
SPECIFICATIONS CONTRACTOR,
PENALTY CLAUSES,
PERF. GUARANTEE
CONSTRUCTION DEVELOPER/ EPC LIE REPORT,
RISK: CONTRACTOR/ COMPARISON OF
LAND DISPUTE MACHINERY TECHNOLOGIES,
IP RISK SUPPLIERS REPUTED EPC
DEFECTIVE CONTRACTOR,
MATERIAL PENALTY CLAUSES,
LATENT DEFECTS PERF. GUARANTEE
RISK ALLOCATION MITIGATION
COMPLETION RISK: DEVELOPER/PROMOTE FIXED TIME/FIXED
COST OVER RUN RS COST CONTRACT
TIME OVER RUN REPUTED
INEXPERIENCED CONTRACTORS
CONTRACTOR INMEMNITY
TECHNOLOGY ISSUES /GUARANTEE FOR
FUNDING ISSUES TECHNOLOGY ISSUES
DISPUTE AMONG PERFORMANCE
PROMOTERS GUARANTEE
PROMOTER
GUARANTEE
COMMITMENT OF
BANKS
PERFORMANCE RISK: DEVELOPER/ EPC PERFORMANCE
OUTPUT NOT CONTRACTOR/ O&M GUARANTEE.
OPTIMUM CONTRACTOR REPUTED EPC AND
POWER PRODUCTION MACHINERY/MODULE/I O&M CONTRACTOR
LOWER/ HIGHER NVERTER SUPPLIERS LIQUIDATED DAMAGES
QUALITY OF POWER INDEMNITY BONDS
NOT AS PER INSURANCE
SPECIFICATIONS
INPUT RESOURCE DEVELOPER/O&M PROPER DESIGN
RISK: CONTRACTOR /ROTATING
SOLAR RADIATION PROPER PROJECT
LEVEL PLANNING
WEATHER CONDITIONS MAINTENANCE OF
RISK ALLOCATION MITIGATION
DEMAND RISK: DEVELOPER/ GOVT TAKE OR PAY
EVACUATION RISK DEPT/OFFTAKERS CONTRACT
OFFTAKE NOT MUST TAKE
REGULAR CONTRACT
GRID PROBLEM INDEMNITY FROM
FINANCIALS OF OFFTAKERS
OFFTAKERS PPA WITH PENALTY
COMPETITIVE CLAUSES
PRICING ALTERNATE
EXCESS SUPPLY OF OFFTAKERS
POWER
ALTERNATE
SUPPLIERS
MAINTENANCE DEVELOPER/ EPC BREAKDOWN
RISK: CONTRACTOR/O&M PENALTY
BREAK DOWN OF CONTRACTOR PERFORMANCE
PANELS/INVERTERS GUARANTEE
SOLAR PANELS NOT REGULAR
MAINTAINED MONITORING OF
INSULATION ISSUES O&M
PERFORMANCE
FORCE MAJEURE DEVELOPER/ GOVT/ SOUND PPA
RISK ALLOCATION MITIGATION
EXCHANGE AND DEVELOPER/PROMO FIXED RATE LOAN
INTEREST RATE TERS HEDGING
RISK CONTRACTS
INTEREST RATE
SWAPS
PROMOTER
GUARANTEES
CREATING
RESERVES
INSURANCE RISK: DEVELOPER/EPC LIA
NON AVAILABILITY CONTRACTOR/O&M DEVELOPER/PROMO
OF INSURANCE CONTRACTOR TER GUARANTEE
INADEQUACY OF
INSURANCE
POLITICAL RISK: DEVELOPER/ GOVT WAIVER OF
GOVT TAKE OVER AGENCY SOVEREIGN
CHANGE OF POLICY IMMUNITY
EXPROPRIATION INSURANCE
LACK OF BUDGET PROMOTER
CHANGE OF GOVT. GUARANTEE
RISK ALLOCATION MITIGATION
INFLATION RISK: DEVELOPER/GOVT PASS THROUGH
LOWER IRR CONTRACT
INABILITY TO SERVICE REFIXING PPA
DEBT PERIODICALLY
COST OVERRUN FIXED RATE
CONTRACTS FOR
SUPPLIES
INSURANCE
STRATEGIC RISK: DEVELOPER/ COMMITMENT OF
CHANGE OF PROMOTERS PROMOTERS.
SHAREHOLDING OF PRIOR PERMISSION OF
PROMOTERS BANKS.
CONFLICT OF INSURANCE
INTEREST ISSUES
DISRUPTIVE DEVELOPER/ GUARANTEE FROM
TECHNOLOGY RISK TECHNOLOGY TECHNOLOGY
SUPPLIER SUPPLIER
CAREFUL WORDING OF
PPA CONTRACTS
REDUCING COST OF
PRODUCTION
EARLY TERMINATION DEVELOPER/ EPC ADEQUATE
RISK CONTRACTOR COMPENSATION
RISK ALLOCATION MITIGATION
CHANGE IN DEVELOPER/ DEBT SERVICE
TAXATION BENEFITS PROMOTERS RESERVE
REP OBLIGATIONS PROMOTER
CHANGED GUARANTEE
CHANGE IN EPC CONTRACTOR
ACCELERATED GUARANTEE
DEPRECIATION
LAWS
INDIGENOUS
SOURCING OF
MODULES
INCENTIVES RISK
GENERAL COST OF INSERTING PROPER
OBSERVATIONS. MITIGATION MAY BE COVENANTS AND
SUBSTANTIAL. CLAUSES IN LOAN
DEVELOPER HAS TO AGREEMENT.
AGREE TO BEAR THE
ADDITIONAL COST.
DEVELOPER MAY
NOT ACCEPT THE
RISKS AS