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WorksheetsChapter 5. SC Session
Total questions: 25
Worksheet time: 13mins
Which correctly describes an input to the Structuring and Drafting Phase from the Appraisal Phase?
Request for proposal
Request for qualification
Final draft contract
Scope and detailed project outline
Which type of ‘structuring’ defines the contract term?
Risk structure
Financial and budgetary or fiscal structure
Tender/procurement structure
Resource structure
Which of the main tasks in the Structuring Phase may use data rooms?
Pre-tender interaction
Drafting the contract and packaging the tender documents
Finalising due diligence and preparation
Establishing the project team
Which statement about financial structuring from the public perspective is true?
The higher the payments, the lower the burden for either the government or the public
Prospective bidders should NOT be enabled to set the bar for commercial feasibility
The higher the user tariff levels, the higher the commercial feasibility
The level of user charge or NPV of government payments should be fixed if there is strong competition
Which statement about the optimum term for a PPP contract is true?
A PPP DBFOM contract should fall within a range of 15-30 years
The term should capture key life-cycle costs
The term should be shorter than the debt term available
The term should equal the maximum debt term achievable minus a “loan tail” cushion
Which is NOT a factor in favour of long-term PPP contracts?
Higher debt terms permit higher leverage
Higher fiscal commitment in overall aggregated terms
Lower yearly burden in government-pays PPP
Tariff levels remain socially acceptable
Which of the following are appropriate reasons for a government to provide pure co-financing in a PPP?
1) To solve a viability gap in a socially and economically sensible project
2) To increase Value for Money and reduce risks to the private partner
3) To increase the commercial feasibility of a viable privately financed project
4) To increase affordability by lowering the cost of capital
1, 2, 3
1, 2, 4
1, 3, 4
2, 3, 4
Which correctly describes a public participative soft loan?
Usually subordinate to the equity provided by the investor
Provided on favourable or below-market conditions in terms of price or tenor
The government receives part of the upside of a project in exchange for the below-market conditions
Increases the long-term burden committed in the payment mechanism of a government-pays PPP, or increases the feasibility gap in a user-pays PPP
Identify the missing word(s) in the following sentence:
When providing complementary revenues in a user-pays PPP through public budgetary payments, it is preferable to structure these as [ ? ] payments
service-type
irrevocable
unconditional
pure co-financing
Which of the following statements about equity participation in a PPP by the government are true?
1) Equity participation by the government can discourage bidders and create conflict.
2) Government can only share in profits if it takes an equity stake in a PPP.
Only 1 is true
Only 2 is true
Both 1 and 2 are true
Neither 1 or 2 is true
Which indirect means of increasing commercial feasibility and/or reducing the budgetary burden of a PPP requires the public party to assume the risk of devaluation and its impact on the project debt raised by the SPV in hard currency?
Explicit/financial guarantee or direct guarantee from the treasury
Foreign exchange risk guarantee
Contractual guarantee
Guarantees in respect of government counter-party risk
Which is an appropriate reason for government to retain user revenues and structure a PPP so that the private partner’s revenue consists entirely of government payments?
The user charges are insufficient to meet the private partner’s costs and provide a return on investment
The private partner wants to avoid the use of a volume/usage or availability/quality based payment regime
The government wants the private party to retain the risk and reward from the PPP
The government wants to offset part/all of the payment to the private partner and retain the risk and reward of the PPP
Which structuring parameter in a user-pays PPP is appropriate?
The private partner should define the toll/tariff
Concession fees should be considered when the value of excess revenue is unclear
Government can decrease the tariff and pass excess revenue benefit through to final users
Government should increase its grant when demand risk is considered significant
What is the focus of the final structure in shadow tariff or shadow toll projects?
Increase the excess revenue generated
Delineate and limit the volume of risk
Reduce payments over time
Lower total volume of payments in NPV terms
Which of the following statements about availability payment mechanisms are true?
1) An asset can be deemed ‘unavailable’ for the purpose of calculating payment deductions, even while it is being used.
2) When a deduction, based on unavailability or condition criteria, is calculated to be of a higher value than the unitary payment during a period, the private partner is required to make payments to the procuring authority.
Only 1 is true
Only 2 Is true
Both 1 and 2 are true
Neither 1 or 2 is true
Which statement about breaches to availability or condition criteria is true?
No payment deduction will be made if it is rectified within the rectification period
Any breach should result in a payment deduction, regardless of when it was rectified
Calculation of payment deductions is based on when the rectification period is finished
Every breach should have a rectification period
Which is a definition of endogenous risks?
Risks that the either party cannot assess
Risks that the private partner can do something about to ensure the expected outcome
Risks that the private partner cannot control
Risk that the procuring authority cannot control
Which is an appropriate allocation of uninsurable risks?
Shared by both parties
Transferred to an agent in the market place
Transferred to the private partner
Retained by the public authority
Which are purposes of a risk register?
1) To handle overlaps and avoid ‘blind spots’ from paying too much attention to certain risks.
2) To record the decision on the risk allocation for incorporation into the contract.
3) To group risks into consistent categories and avoid double counting.
4) To conduct an orderly quantitative risk assessment to define the financial base case.
1, 2, 3
1, 2, 4
1, 3, 4
2, 3, 4
Which statement applies to the risk assessment conducted in order to allocate risks?
Calculates the most likely possible outcome
Calculates the full range of outcomes, including their probabilities
Usually quantitative in nature
Usually qualitative in nature
Which risks should the public authority undertake early mitigation measures for?
Retained risks
Shared risks
Transferred risks
All risks
Which is a general rule for the allocation of risks?
Risks that are not faced by ordinary businesses should be transferred
Some exogenous risks that may affect the business outcome should be transferred
Where appropriate, all risks inherent in the scope of the contract should be transferred
Force majeure events should be transferred
Which does NOT describe a force majeure event?
Related to the performance of the private partner
Always related to exogenous factors
Difficult to estimate in terms of likelihood
Impossible to assess in terms of impact estimates
Which category of risk should be borne by the public party?
Permits
Revenue risks linked to availability and quality issues
Residual value and hand-back conditions
Land availability and acquisition
Which statement about compensation events and rebalancing is NOT true?
The private partner may be requested to finance the loss
Events that impact on Capex will be compensated by a government direct payment
It is good practice to use the NPV of the project revenues and costs as the indicators to be restored
Events that affect future revenues will be compensated by supplementary payments or an increased service price/tariff
