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CORPORATE FINANCE Pre-conference Masterclass Project Financing for Infrastructure Projects 19 August 2008 ADVISORY Agenda Part 1: Introduction to Project Finance Part 2: Project Structures Part 3: Documentation Part 4: Project Issues Rail & Road Focus 2 Part 1: Introduction to Project Finance What is “Project Finance”? “A financing of a particular project or asset in which a financier is satisfied to look initially to the cash flows and earnings of project or asset as the source of funds from which a loan will be repaid and to the assets of the project as collateral for the loan.” Financiers look to the cash flow of the financed asset for repayment. Contrast with corporate finance. 3 Part 1: Introduction to Project Finance Corporate Finance The balance sheet of the borrower is exposed to the project risk Corporate debt is often secured against the assets of the entire firm, not just the project. − This means that if the project fails, creditors will be able to make claims against all assets of the borrower even those that are not related to the project Corporate debt is held on the balance sheet of the firm, increasing its leverage. − Higher leverage will affect the ability of the firm to raise further debt financing in the future − Seen as weakening effect on the borrower’s balance sheet 4 Part 1: Introduction to Project Finance Project Finance A financing method that can help borrowers deal with project-specific risks and limit exposure to the downside risk of the project. Financier’s recourse is limited project revenues and assets (limited recourse financing) 5 Part 1: Introduction to Project Finance Comparisons Between Project Finance & Corporate Finance Features Financing Project Finance Financiers look at cash flows of a single asset (the project) for repayment. Security No / limited guarantees for project finance debt Corporate Finance Financiers look to the overall strength of a company’s balance sheet and projections, which is usually derived not from a single asset but a range of assets and businesses. All assets of the company can be used for security Project contracts are usually the main Has access to whole cash flow from security for lenders; project companies’ physical assets are likely to be worth much < the debt spread of business as security, thus even if project fails, corporate lenders can be repaid. 6 Part 1: Introduction to Project Finance Features Control Duration Project Finance Project has a finite life as such the debt must be repaid by the end of this life Lenders exercise close control over activities of Project Company to ensure value of project is not jeopardise. Corporate Finance Company assumed to remain in business for an indefinite period and losses can be rolled over. Leaves management of company to run business as they see fit 7 Part 1: Introduction to Project Finance Project Finance A method of mobilizing corporate finance through a newly organized company, partnership or contractual joint venture, called a project vehicle. Co. loans are generally non-recourse or limited recourse to the sponsors of the project. The funding for the Project Company has 2 elements: 1. Equity; and 2. Project-Financed debt 8 Part 1: Introduction to Project Finance Typical Project Contractual Structure Direct Agreement Periodic Payments Debt Providers Loans Debt Service SPV typically includes a • Construction investor • Facilities Management investor • Equity Investor/ Project Manager Procuring Entity Receives Services Equity Returns Project Co. (Special Purpose Vehicle) Equity Equity Providers Stake Subcontracts Subcontractors (infrastructure builders, equipment suppliers, O&M contractors etc.) 9 Part 1: Introduction to Project Finance Why Project Finance? Benefits for Investors − Projects are highly leveraged leads to a higher return on equity (ROE). − Risk spreading – enables risk of investment to be divided up between investors − Limited ‘risk contamination’ between the project and the rest of the investor’s business (risk is quarantined to invested equity) − Increased borrowing capacity of investors with the reallocation of project risks to other contracting parties − Avoids restrictive covenants on the corporate balance sheet arising from a project’s debt financing. − Small amount of equity commitment required enables parties with different financial strengths and skills to work together. − Matches each commercial undertaking with the specific assets and skills required to build and operate it. 10 Part 1: Introduction to Project Finance Why Project Finance? Benefits for Investors − Off balance sheet financing where equity represents a minority investment 11 Part 1: Introduction to Project Finance Why Project Finance? Benefits for the Public Authority (PA) − The increase in investor’s financial capacity creates a more competitive market for projects, to the benefit of the PA. − Involvement of 3rd parties (lenders and advisers) would mean that a rigorous review of the risk transfer is carried out and any weaknesses exposed (independent due diligence undertaken by financiers) − Highly leverage inherent in a project-finance structure helps to ensure the lowest cost to PA. − There is transparency as project financing is self-contained and the true costs of the service can more easily be measured/monitored. 12 Part 1: Introduction to Project Finance 3 Main Sectors Using Project Finance 1. Natural Resources Sectors Mining, oil & gas 2. Energy Sectors Independent power projects (IPPs) in the electricity sector, primarily for power generation using BOO/BOT structures, gas for power gas pipelines & liquefied natural gas 3. Infrastructure Sectors Public Private Partnerships Public Infrastructure (eg. toll roads, schools, hospitals etc) 13 Part 1: Introduction to Project Finance The Project Finance Market 14 Part 1: Introduction to Project Finance Programme for Project Financing Project • • • • • • • • • • • • • • • • • • • • • Test/Event/Milestone Sponsors approve Project Feasibility Study Appoint project legal counsel and financial advisor Appoint other advisors (e.g. Insurance environmental) Agree borrowing structure Negotiate additional equity Establish project vehicle Agree project documents with contractors/ operators/ suppliers/ offtakers Develop financing term sheet Prepare information memorandum Select arrangers/banks Agree loan documentation Agree security and other documentation Obtain all consents and permits for project Obtain sponsor board/shareholder approval Bank’s technical advisor to approve technical aspects of project Bank’s insurance advisor to approve project insurances Agree financial model Agree legal opinions Finalise conditions precedent Signing and financial close First drawdown Weeks 1-4 5-8 9-12 13-16 17-20 21-24 25-28 29-32 33-36 37-40 41-44 45-48 49-52 15 Part 1: Introduction to Project Finance Parties to a Project Financing Typical participants in a project financing structure (Figure 1) include: Project Sponsor (typically the equity providers) Procuring Entity/Off-taker Lenders/Financiers Subcontractors (infrastructure builders, equipment suppliers, O&M contractors etc.) Insurers Advisers – legal, technical and financial 16 Part 1: Introduction to Project Finance Typical Project Contractual Structure Direct Agreement Periodic Payments Debt Providers Loans Debt Service SPV typically includes a • Construction investor • Facilities Management investor • Equity Investor/ Project Manager Procuring Entity Receives Services Equity Returns Project Co. (Special Purpose Vehicle) Equity Equity Providers Stake Subcontracts Subcontractors (infrastructure builders, equipment suppliers, O&M contractors etc.) 17 Part 1: Introduction to Project Finance Parties to a Project Financing Fig. 1 18 Source: Key Project Parties, A Guide to Project Finance (Denton Wilde Sapte) KPMG’s Role in Project Finance 19 Agenda Part 1: Introduction to Project Finance Part 2: Project Structures Part 3: Documentation Part 4: Project Issues Rail & Road Focus 20 Part 2: Project Structures Contents Sources of Project Finance − Bank Debt − Capital Markets − Investment Funds − Government − Multilateral Agencies − Islamic Financing Project Finance Arrangements − BOT − Forward Purchase Model − PFI/PPP 21 Part 2: Project Structures Structure Use of special purpose vehicle (SPV). Project sponsor holds the project through a special purpose vehicle. If there is more than one participant in the project, the SPV can be structured as: − Incorporated Joint Venture (most typical for roads/transport projects) − Partnership − Unincorporated Joint Venture Partnership (resources project) − Unit trusts 22 Part 2: Project Structures Sources of Project Finance Bank Debt Islamic Finance Capital Markets Sources of Project Finance Multilateral Agencies Investment Funds Government 23 Part 2: Project Structures Sources of Project Finance Bank Debt − Foreign and local commercial banks. − Foreign banks important in Emerging Market Project Finance. − Cross-border loans to developing countries tend to be covered. − EG: OCBC, HSBC, CIMB, RHB Capital Markets − Stock and bond issuance. − Securities markets allow finance to be raised for riskier projects. − Bond market offers long-term fixed rate funding (which is cheaper than bank loans). 24 Part 2: Project Structures Sources of Project Finance Bank Debt vs Capital Markets − Size – Bonds used for larger projects − Cost – Bonds typically tend to have a lower cost than bank loans (but query credit crisis and roles of monolines) − Term – Bonds typically have longer tenor which suits profile of certain projects − Flexibility – Bank loans are generally more flexible as bonds have wide spread and investors base (eg. waivers and amendments etc) 25 Part 2: Project Structures Sources of Project Finance Investment Funds − Created by investment banks, multilateral banks and insurance companies. − Channel equity and (sometimes) debt from institutional investors to power, telco and transport projects. − EG: Asian Giants Infrastructure Fund (AMP), Macquarie European Infrastructure Fund 2 (Macquarie) Government − Financial support for (typically) major infrastructure projects: 1. State may take on development of infrastructure integral to success of project (EG: port or gas pipeline) 2. Grants for infrastructure development, R&D etc. 3. Compensates private sector through government availability payments and shadow/ real toll 26 Part 2: Project Structures Sources of Project Finance Multilateral Agencies − World Bank, ADB, AfDB, IsDB etc. − Provide loans, grants, guarantees etc. − Focus on the development/reconstruction of key infrastructure in emerging economies. − EG: Western Regional Road Corridor Development Project (Phase I) in Mongolia (US$112.1m, of which US$40m is an ADB Grant) Islamic Finance − Sharia Law prohibits Interest (Riba), Uncertainty (Gharar) & Gambling (Maisir). − Sharia boards have to ascertain if transactions are Sharia-compliant. − Can be conceptualised as Structured Finance. − EG: US$425m Islamic project financing arranged for the US$615m construction of a third terminal port in Jeddah, Saudi Arabia 27 Part 2: Project Structures Sources of Project Finance Leasing − Most common for assets such as ships, aircrafts etc. − Lessor typically looks to receive a guarantee or letter of credit to cover it against any project risk that it may be exposed to. − Intercreditor arrangements tedious to structure but may be worth it if overall tax benefits for the project are significant. Forward Purchase Model − Project lender makes advance payment for the purchase of products generated by the project which will be deliverable to the lender following the completion of the project. − Project company uses these proceeds for the construction and development of the project. − Lender either sells the products itself or to the project company. − EG: Oil and gas, minerals etc. 28 Part 2: Project Structures Project Finance and Traffic/Transport Projects 29 Part 2: Project Structures Public Private Partnerships PPP key features − design, build, finance, operate the infrastructure over a specified period (>20 years) − Private sector sets up an SPV − Project finance structures used − provision of end-to-end services – eg. roads/public transport − Private sector gets a return over service term (eg. tolls, fares or service payments) − non-governmental income stream (third-party revenue) eg tolls and advertising etc − risk allocation to most suitable party (demand risk) 30 Part 2: Project Structures Long-term output based contract − for delivering a specified asset condition and service − with appropriate incentives for performance over the life of the contract − capital costs paid over the lifetime of the contract, revenue not capital spending Private sector involvement − in the design, build and operation of infrastructure projects . . . and they take responsibility for performance − to decide what is the most effective mechanism for delivering the specified outputs RISK TRANSFER 31 Part 2: Project Structures Private sector financing (both equity and debt) − underpins business responsibility to deliver under contracts − improve scrutiny of contractors ability to deliver contracts − certainty of financing through long-dated funding structures − uses $ payment structure to incentivise correct behaviour 32 Part 2: Project Structures Simplified contractual structure of a PPP Public Sector Service Fee (ongoing) Concession Deed Construction Contract Construction Contractor Special Purpose Vehicle Performance Guarantee Debt Servicing Financier Debt/Equity Underwriting Operations/Facilities Manager Maintenance/ Facilities Management Long-Term Asset Management Services Project Sponsors Parent Company Support 33 Agenda Part 1: Introduction to Project Finance Part 2: Project Structures Part 3: Documentation Part 4: Project Issues Rail & Road Focus 34 Part 3: Documentation Role of Documentation Apportionment of project risks; and Implement agreed risk allocation between the parties Structure of Documentation No standard set of documentation – but can be grouped as follows: Shareholder/sponsor arrangements Loan and security documents Project documents 35 Part 3: Documentation Diagram LENDING DOCUMENTS Loan Agreements with: Banks/ Export Credit Agencies/ Multilaterals SHAREHOLDER/ SPONSOR DOCUMENTS Pre-development Agreements/ Shareholders’ Agreement/ Sponsor Support Agreement PROJECT/ SPECIAL PURPOSE VEHICLE SECURITY DOCUMENTS Security Documents covering all project assets PROJECT DOCUMENTS Construction Agreement, Operation and Maintenance Agreement, Fuel Supply Agreement, Sales/Offtake Agreement 36 Part 3: Documentation Shareholder/ Sponsor Documentation Shareholder agreements/ joint venture agreement Regulates the relationship between shareholders − Injection of share capital; how, when and in what form; − Funding of the project company; − Voting rights − Dividends policy − Management of the SPV − Disposal of shares and pre-emption rights − Resolution of disputes 37 Part 3: Documentation Support Agreements (tripartite agreement) Management and technical assistance required from shareholders/sponsors Equity injection or shareholder loans that might be required Disposal of shares/interests Security requirements 38 Part 3: Documentation Loan and Security Documentation Term Sheets − Prepared during due diligence process − Regulate the terms and conditions of project loan − Subject to condition precedents − Prepared for the purpose of agreeing financing terms − Typically only valid for a limited period of time (three months) Project Loan Agreement − Fully develop and document the terms and conditions of project loan − Key financing document 39 Part 3: Documentation Project Loan Agreement Disbursements and Repayment Terms − Drawdowns Multiple disbursements Tied to construction schedule Subject to conditions precedent − Repayment of Loan Interest capitalised during construction phase Typically six-monthly repayment schedule (principal + interest) Commencing on service availability Two debt service methodology: − annuity payments; or − equal principal payments 40 Part 3: Documentation Debt Service Payment Profile under Two Payment Methods Annuity Level principal Principal Interest -2 -1 Interest Amount Amount Interest Principal Interest 1 2 3 4 5 6 7 8 Principal repayment -2 -1 1 2 3 4 5 6 7 8 Interest payment Source: Project Development, Financing large Projects (M. Fouzul Kabir Khan, Robert J. Parra) 41 Part 3: Documentation Project Loan Agreement Fees and Expenses − Fees and expenses paid to lenders − Commitment fee (25-75bps pa) calculated over the undisbursed balance lenders have committed − Monitoring fees (25% bps) – administrative charge for monitoring the project (particularly over construction period) Conditions Precedents − Preconditions for disbursements of loans − Documentary CPs Delivery of project agreement Security documentation Legal opinions − Non-documentary CPs Equity injection Fees and expenses paid 42 Part 3: Documentation Project Loan Agreement Conditions Precedents (cont’d) − Additional CPs required for subsequent disbursements Auditor to confirm project costs Certification of construction milestone/s − Confirmation of Representation &Warranties − No default on part of borrower − No Material Adverse Change Representation &Warranties − Minimises lenders’ due diligence costs − Non-complianance with or untruth constitutes a default under the loan − Typical R&Ws 43 Part 3: Documentation Project Loan Agreement Loan Covenants − Positive Covenants − Negative Covenants − Positive Covenants Maintenance of project accounts Cash waterfall – priority of payments from project cashflow Maintain project cover ratios (LLCR/DSCR) Furnishing information (eg. access to inspect, financial, technical and operational information) Corporate status/validity of authorisation Maintenance of insurance Payment of taxes and other statutory fees Compliance with environmental requirements 44 Part 3: Documentation Loan Covenants − Positive Covenants Cover Ratios − Amount of debt raised is determined by the projected cashflow − Looks at the ability of the cashflow to service debt with a “safety” margin (ie. equity distributions) − Annual Debt Service Cover Ratio (CADS / debt service (1.10-1.2X)) − Loan-life Cover Ratio (NPV of CADS over loan /Debt outstanding) − Project Life Cover Ratio (NPV of CADS over project /Debt outstanding) 45 Part 3: Documentation Project Loan Agreement − Negative Covenants Restriction of use of free casflow No distributions (other than that allowable under the cash waterfall) No disposal of assets No further indebtedness No creation of additional security over project assets No change of business No amendments to material contracts 46 Part 3: Documentation Project Loan Agreement Payments Waterfall − First – to meet Operating Costs falling due − Second – Debt service costs (interest then principal) − Third – payment to debt service reserve account − Fourth – payment to maintenance reserve account − Fifth – Distribution to equity 47 Part 3: Documentation Project Loan Agreement Events of Default Relieves lenders of their commitments Entitles them to enforce; including − Accelerate the loan (ie. demand that loans be made due and payable) − Step-in rights can be exercised − Realisation of security Payment defaults − Non-payment − Cross-default under other credit arrangements Representational defaults − Misrepresentations − Non-compliance with covenants − Insolvency 48 Part 3: Documentation Security Documentation Charge over project assets (fixed or floating charge) Direct agreements (or alternatively lenders tripartite agreement) − Protect lenders against default by Borrower under the principal contract (eg. the Project Agreement) − Notice to be given to lenders of any default − Project counterparty to suspend any termination rights − Step in right on the part of the lenders − Requires counterparty to make any due payments direct to Lenders 49 Part 3: Documentation - Direct Agreement Procuring Entity Direct Agreement Debt Providers Periodic Payments Receives Services Equity Returns Loans Debt Service Project Co. (Special Purpose Vehicle) Equity Stake Equity Providers Subcontracts Subcontractors (infrastructure builders, equipment suppliers, O&M contractors etc.) 50 Part 3: Documentation Project Agreement Concession Agreement − Design, Build, Finance and Operate − Regulates the rights/obligations of concession grantor and SPV during the concession − Allocates the risks of the project as between concession grantor and SPV − Typical terms: Grant of concession – defines term of concession Duties and obligations imposed on SPV/ Concession grantor Payment of concession fees/ retention of tolls etc Default/Event of Default Restriction of transfers and assignments Termination regime 51 Part 3: Documentation Other Documents Construction Agreement Operating and Maintenance Agreement 52 Part 3: Security Techniques Security Techniques Security − No recourse to project company’s assets other than project assets − Lenders looks primarily to project assets and cashflow generated by project to repay loans − Valid and effective security interests are crucial Motivation − Ability to sell project assets and recover debt − Defensive mechanism to prevent other creditors taking security over project assets − Control destiny of the project should something goes wrong − Prevents SPV from disposing secured assets without lenders’ consent 53 Part 3: Security Techniques Security Techniques Scope of Security − Project Agreement − Subcontracts - Construction Contract, O&M Contract − Plant and machinery − Real property − Project insurances − Pledge over bank accounts − Shares of SPV Enable lenders to take over management of SPV 54 Part 3: Security Techniques Security Techniques Issues with respect to Security − Selection of governing law (UK and NY law) − Common law countries (eg. UK, Singapore, Australia) – concept of trust, assignments well-known and well-developed − Concept of floating charge (eg. receivables, bank accounts) − Charge over future assets − Restrictions on assignments (eg. Host country may prohibit creation of security of land in favour of foreign lenders) − Bankruptcy laws may prevent enforcing security (Chapter 11 in US) 55 Agenda Part 1: Introduction to Corporate Finance Part 2: Project Structures Part 3: Documentation Part 4: Project Issues Rail & Road Focus 56 Part 4: Project Issues Risk Evaluation and Transfer Project finance requires − the examination of detailed specific risks − the examination of the effect of the risk eventuating − the allocation of the identified risks − the examination of avenues to mitigate the risks Phases of Risks − General risks – political risks and economic risks − Construction phase risks – site, construction and completion risks − Operation phase risks – operational risks Ostregion Case 57 Part 4: Project Issues Risks passed to private sector Category Examples Site risks Existing structure Site conditions Some Environmental risks Clean-up and rehabilitation Availability of site Design, construction and commissioning risk Design Construction (excl force majeure/government intervention) Commissioning Financial Financing availability Tax changes Operating Inputs Maintenance and refurbishment 58 Part 4: Project Issues Risks passed to private sector Category Examples Operating Operator failure Technical obsolescence Market General economic downturn Competition Demographic change Industrial relations Risk of strikes, industrial action Asset ownership Default and termination Technical obsolescence 59 Part 4: Project Issues Shared risks Category Examples Site Risks Some Environmental risks (contamination) Market Inflation risk Government may redress impacts of government subsidised competition Legislative Changes in law Force Majeure Floods, earthquakes, terrorism, etc 60 Part 4: Project Issues Risks retained by the public sector Category Examples Site risks Some Environmental risks Native title Sponsor Probity Financial Technical and operational Financial Interest rates pre completion Further finance requirements Operating Changes in output specification outside agreed range Asset ownership Residual value on transfer to government 61 Contacts For further details please contact: David Ng Lieven Jacquemyn Director, Global Infrastructure and Projects Group Director, Global Infrastructure and Projects Group KPMG Corporate Finance 16 Raffles Quay #22-00 Hong Leong Building Singapore 048581 KPMG Corporate Finance 16 Raffles Quay #22-00 Hong Leong Building Singapore 048581 Tel: +65 6213 2416 Mobile: +65 8201 0096 Email: davidng@kpmg.com.sg Tel: +65 6213 3945 Mobile: +65 8168 1398 Email: lieven_jacquemyn@kpmg.com.sg 62 Thank You [...]... sector, primarily for power generation using BOO/BOT structures, gas for power gas pipelines & liquefied natural gas 3 Infrastructure Sectors Public Private Partnerships Public Infrastructure (eg toll roads, schools, hospitals etc) 13 Part 1: Introduction to Project Finance The Project Finance Market 14 Part 1: Introduction to Project Finance Programme for Project Financing Project • • • • •... overall tax benefits for the project are significant Forward Purchase Model − Project lender makes advance payment for the purchase of products generated by the project which will be deliverable to the lender following the completion of the project − Project company uses these proceeds for the construction and development of the project − Lender either sells the products itself or to the project company... investors to power, telco and transport projects − EG: Asian Giants Infrastructure Fund (AMP), Macquarie European Infrastructure Fund 2 (Macquarie) Government − Financial support for (typically) major infrastructure projects: 1 State may take on development of infrastructure integral to success of project (EG: port or gas pipeline) 2 Grants for infrastructure development, R&D etc 3 Compensates private sector...Part 1: Introduction to Project Finance Why Project Finance? Benefits for Investors − Off balance sheet financing where equity represents a minority investment 11 Part 1: Introduction to Project Finance Why Project Finance? Benefits for the Public Authority (PA) − The increase in investor’s financial capacity creates a more competitive market for projects, to the benefit of the PA −... KPMG’s Role in Project Finance 19 Agenda Part 1: Introduction to Project Finance Part 2: Project Structures Part 3: Documentation Part 4: Project Issues Rail & Road Focus 20 Part 2: Project Structures Contents Sources of Project Finance − Bank Debt − Capital Markets − Investment Funds − Government − Multilateral Agencies − Islamic Financing Project Finance Arrangements − BOT − Forward Purchase... 2: Project Structures Structure Use of special purpose vehicle (SPV) Project sponsor holds the project through a special purpose vehicle If there is more than one participant in the project, the SPV can be structured as: − Incorporated Joint Venture (most typical for roads/transport projects) − Partnership − Unincorporated Joint Venture Partnership (resources project) − Unit trusts 22 Part 2: Project. .. Capital Markets − Stock and bond issuance − Securities markets allow finance to be raised for riskier projects − Bond market offers long-term fixed rate funding (which is cheaper than bank loans) 24 Part 2: Project Structures Sources of Project Finance Bank Debt vs Capital Markets − Size – Bonds used for larger projects − Cost – Bonds typically tend to have a lower cost than bank loans (but query credit... Parties to a Project Financing Typical participants in a project financing structure (Figure 1) include: Project Sponsor (typically the equity providers) Procuring Entity/Off-taker Lenders/Financiers Subcontractors (infrastructure builders, equipment suppliers, O&M contractors etc.) Insurers Advisers – legal, technical and financial 16 Part 1: Introduction to Project Finance Typical Project. .. investor • Equity Investor/ Project Manager Procuring Entity Receives Services Equity Returns Project Co (Special Purpose Vehicle) Equity Equity Providers Stake Subcontracts Subcontractors (infrastructure builders, equipment suppliers, O&M contractors etc.) 17 Part 1: Introduction to Project Finance Parties to a Project Financing Fig 1 18 Source: Key Project Parties, A Guide to Project Finance (Denton... 2: Project Structures Long-term output based contract − for delivering a specified asset condition and service − with appropriate incentives for performance over the life of the contract − capital costs paid over the lifetime of the contract, revenue not capital spending Private sector involvement − in the design, build and operation of infrastructure projects and they take responsibility for ... transport projects − EG: Asian Giants Infrastructure Fund (AMP), Macquarie European Infrastructure Fund (Macquarie) Government − Financial support for (typically) major infrastructure projects: ... hospitals etc) 13 Part 1: Introduction to Project Finance The Project Finance Market 14 Part 1: Introduction to Project Finance Programme for Project Financing Project • • • • • • • • • • • • • • •... operation of infrastructure projects and they take responsibility for performance − to decide what is the most effective mechanism for delivering the specified outputs RISK TRANSFER 31 Part 2: Project