20
20
Origin Invest Project Finance
January 2010
Project Risks - Critical Factors
Rating A BBB BB
Strength Superior Adequate Weak
Operating and Maintenance
Risks and Costs
· Proven technology with
predictable operating
characteristics and
performance.
· Strong contract
protections on key
operating parameters.
· High replaceability of
operators with predictable
O&M costs that are a
low percentage of cost
structure and high
breakeven resilience.
· Proven technology
with reasonably stable
operating performance
and costs.
· Some contract protection.
· Reasonable replaceability
of operators with
reasonably stable O&M
costs that are a low to
medium percentage
of cost structure
and reasonably high
breakeven resilience.
· Relatively new technology
or complex operation
resulting in uncertainties
in production interruption
or reduction and/or cost
escalation.
· Low replaceability of
operators with unstable
O&M costs that are a
material percentage of
cost structure and modest
breakeven resilience.
SPONSORSHIP, FINANCIAL, LEGAL AND OTHER CONSIDERATIONS
Sponsor Strengths and Equity
Contributions
· Highly experienced
sponsor(s) with acceptable
credit quality and proven
expertise in project type.
· Demonstrated sponsor
commitment to the project
in the form of strong
equity contribution and/or
other business and credit
supports.
· Experienced sponsor(s)
with acceptable credit
quality.
· Demonstrated sponsor
commitment in the project
with reasonable equity
contribution and support.
· Sponsor(s) with limited
or no track record in the
type of projects being
developed and financed.
· Sponsor(s) with weak
credit quality.
· Weak equity contribution
and/or credit support.
Financial Risk
· Reliable financial
projections based on
assumptions supported by
definitive data and high
statistical confidence for
relatively new projects
or established financial
performance track record
for long-existing projects.
· Strong debt service
coverage given the
contract and structure
features. All other relevant
metrics (such as leverage
ratio for projects under
construction) are robust.
· Multiple reserves meeting
or exceeding traditional
project finance standard.
· Acceptable financial track
record or reasonable
projections based on
adequate data and
statistical confidence.
· Solid debt service
coverage and other
relevant ratios given the
project type.
· Reserves meeting
traditional project finance
standard.
· Limited financial history or
projection.
· Financial ratios are weak
without adequate
structural enhancement or
protection.
· Inferior reserves.
Country and Political Risk
· Countries with a mature
and established legal
framework for project
finance and a reasonable
presumption of due
process.
· Stable political,
regulatory and economic
environments resulting
in minimal or no
uncertainties in terms of
contract enforcement,
currency transfer and
convertability, asset
ownership, or potential
war or civil unrest.
· Countries with reasonably
stable political,
regulatory or economic
environments.
· In cases where there exist
potential issues in terms
of country or political
risk, these risks are well-
mitigated.
· Countries with one or
more political risk factors
that are difficult to
gauge or mitigate due
to weakness in the legal
framework or uncertainty
in political, regulatory or
economic environments.