These Factors Turn Mega Seawater Osmosis Projects into Successes

Related Vendors

Glatt Ingenieurtechnik GmbH

CAC ENGINEERING GMBH

Pörner Ingenieurgesellschaft mbH

IDE Technologies

Identification of the project risks begins at the outset of the tender process and can serve as an ‘early warning system’ for predicting potential pitfalls on the way to executing the project. Once the risks are

identified, the extent to which they can be mitigated or shared will impact the project’s chances for success.

Structure for Winning Tenders

There are principal conditions that are necessary for structuring a winning bid and reaching financial close. The presence of a positive legal, regulatory and governmental environment is required. These could include supportive regulation and legislation facilitating PPPs, tax and investment waivers or incentives, and government guarantees. A low political and credit risk, potentially mitigated by sovereign guarantees or political and/or credit risk insurance, which improves bankability and enables lower funding costs and longer tenors is essential.

The plan should also include robust technological solutions and innovative design, leading to cost reduction. Furthermore, a competitive financing package and the ability to raise funds at a low price and based on hedged risks embedded in the project agreements will also help in winning bids. It is also favorable to have balanced concession and project agreements, where lenders participate in early stages of negotiation and risks are allocated to parties according to their relative ability to control them. Lastly, the plan should consider the feasibility of an Independent Power Producer (IPP) where possible, to lower energy costs.

The Water Purchase Agreement – Backbone of BOT

The backbone of the BOT structure is the Water Purchase Agreement, which is based on international practices and embodies the proper division of risk. It should adequately reflect four conditions—the take or pay principle and mechanism, transparency with respect to macro-economic risks (exchange rates, inflation, electricity price), dispute resolution, compensation, termination and step-in rights, and the off-taker’s willingness to undertake risks that are uninsurable, or that are beyond the control of the developer.

Examples are risks derived from local land use, zoning or statutory restrictions, and irregular supply of high voltage energy to the plant.

(ID:42505561)