Financial Risk Assessment of Public Private Partnership Project

Abstract

Public Private Partnership (PPP) is one of the significant ways of financing infrastructure development in countries. Financial feasibility is a prerequisite for any financial assistance. Financial feasibility is required for an assessment of financial viability and profitability. The major risk associated with PPP Projects are debt repayment risks and revenue risks. The author presents a pragmatic sensitivity analysis for an assessment of financial feasibility for any PPP project, as affected by toll structure, traffic, inflation rate, debt-equity, interest rate on debt, concession period, maintenance and operation costs and government grants. This approach considers the cost of construction, maintenance and operation to run a sensitivity analysis for financial risk assessment. Financial viability factors have been considered for developing a risk profile, which in turn gives a detailed result. A realistic case study of Thane-Borivali highway tunnel project has been considered for showing the approach more precisely.

Keywords: Public Private Partnership (PPP), Scenario analysis, Sensitivity analysis and DSCR (Debt Service Coverage Ratio)