Fitch: Cost Risk Critical for Availability-Payment Based P3s

NEW YORK--(BUSINESS WIRE)-- The long term nature and lack of financial wiggle room inherent in availability-payment (A/P) based public private partnership (P3) projects could make them susceptible to cost increases during operations, according to Fitch Ratings in a new report.

Long staples in Europe and Canada, A/P P3s are growing in the U.S. and emerging markets like Mexico. These projects primarily involve civil and social construction that is mostly proven and reliable, though the complexity and scale of a project can result in varying risk profiles in operation, according to Senior Director Scott Zuchorski.

'Projects with a more predictable cost profile like most social and civil assets with small footprints or limited exposure to volatile commodities are more predictable,' said Zuchorski. 'Conversely, projects with uncertain operating and lifecycle cost profiles and those with considerable interface risks will need greater financial margins to achieve similar credit quality.'

Fitch has identified the following three elements for assessing a project's overall exposure to cost risk:

--Scope Risk;

--Cost Predictability;

--Cost Volatility & Structural Protections.

In developing its framework for analyzing O&M and lifecycle cost risk Fitch met with over a half dozen technical advisors in North America and Europe to gain greater insights on P3 experiences to date. 'Scope risk appears to be the most common reason a project's O&M and/or lifecycle costs exceed expectations,' said Zuchorski.

'Analyzing Cost Risks in PPP Projects' is available at 'www.fitchratings.com' or by clicking on the above link.

Additional information is available at 'www.fitchratings.com'.

Analysing Cost Risks in PPP Projects

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867359

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View source version on businesswire.com: http://www.businesswire.com/news/home/20150622005838/en/

Fitch Ratings
Scott Zuchorski
Senior Director
+1 212-908-0659
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY, 10004
or
Stefan Baatz
Senior Director
+44 20 3530 1134
or
Cherian George
Managing Director
+1 212-0908-0519
or
Media Relations
Sandro Scenga, New York, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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