“A Case Study on Project Risks and Risk Mitigation”North Luzon Expressway Project(A Public-Private Partnership in the Phil...
Project Key features<br />The concession is held by Manila North Tollways Corporation (MNTC),the project company, which is...
Key Issues<br /> <br />MNTC will put up the money (invest and borrow) on its own without government financial guarantee.<b...
Risk Mitigation in the NORTH LUZON EXPRESSWAY PROJECT<br />Economic Risk<br /> <br />Mitigation:<br /> <br />The Governmen...
Risk Mitigation<br /> <br />Traffic Risk<br /> <br />Mitigation:<br />Existing traffic with capacity reached on certain se...
Risk Mitigation<br />Currency devaluation<br /> <br />Mitigation:<br />Significant pass-through in the application of the ...
Ppp in highways, latvia
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Ppp in highways, latvia

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Ppp in highways, latvia

  1. 1. “A Case Study on Project Risks and Risk Mitigation”North Luzon Expressway Project(A Public-Private Partnership in the Philippines)<br />Amol Azad<br />MBA (Marketing)<br />
  2. 2. Project Key features<br />The concession is held by Manila North Tollways Corporation (MNTC),the project company, which is a joint venture of several national and international companies.<br />Involves rebuilding and modernization of the NLE tollway system according to government required standards and levels of service. <br />Operation of the tollway. <br />Maintenance of the pavement and the toll collection system. <br />Returning the tollway system to government at no cost after concession period ends.<br />The corporation was required to raise finance on its own without government guarantee.<br />
  3. 3. Key Issues<br /> <br />MNTC will put up the money (invest and borrow) on its own without government financial guarantee.<br />MNTC will build the tollway and take full construction risk.<br />MNTC will operate, maintain and manage the tollway for 30 years (or until 31 December 2030) in accordance with government standards with no funding support from the Government.<br />The Project roads are owned by the Grantor subject to the rights and privileges of MNTC to construct, operate and maintain the tollway system.<br />Government will not take market risk. If revenues are not sufficient, government will not bail out MNTC.<br />To recover the investment, MNTC will collect tolls through the authorized toll rates and the approved adjustment formula.<br />Multilateral & Bilateral Financial Institutions are playing a key role.<br />
  4. 4.
  5. 5. Risk Mitigation in the NORTH LUZON EXPRESSWAY PROJECT<br />Economic Risk<br /> <br />Mitigation:<br /> <br />The Government of Philippines, did not participate in funding, it was mitigated via financing through Multilateral Agencies such as IFC, MIGA and of course ADB.<br /> <br />Construction Risk<br /> <br />Mitigation:<br />‘Delay In Service’ Insurance<br />Overrun Undertaking<br />Deficiency/Shortfall Agreement<br />Completion Undertaking<br /> <br />
  6. 6. Risk Mitigation<br /> <br />Traffic Risk<br /> <br />Mitigation:<br />Existing traffic with capacity reached on certain segments<br />More than 20 years history as tolled road<br />No alternative road <br />Conservative forecasts, robust cash flows<br />Toll rate increases<br /> <br />Mitigation:<br />Automatic approval under the STOA<br />Toll rates to be revised every two years<br />Grantor compensates in case toll rates not increased<br />Projected tolls lower than in comparable roads<br />
  7. 7. Risk Mitigation<br />Currency devaluation<br /> <br />Mitigation:<br />Significant pass-through in the application of the toll<br /> adjustment formula<br />Starting toll rate is fully hedged<br />Cash flow strong enough to take care of sensitivities<br /> <br /> <br />O&M Risks<br /> <br />Mitigation:<br /> <br />O&M expertise from Transroute via technical assistance<br />agreement<br />Regular / periodic maintenance planned<br />Bonus / penalties to minimize leakages<br />

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