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43Управление рисками в проектах государственного-частного партнерства: применение современного подхода и его совершенствование
Адамия Тамара Теймуразовна
аспирант, Департамент мировой экономики и мировых финансов, Финансовый Университет при Правительстве Российской Федерации, adamiatamara@yandex.ru
Третьякова Галина Викторовна
кандидат педагогических наук, доцент, Департамент языковой подготовки, Финансовый университет при Правительстве Российской Федерации
Государственно-частное партнерство — это форма отношений между государством и бизнесом, от которой выигрывают обе стороны сотрудничества. Не существует эффективных инструментов и методов для комплексной оценки многочисленных рисков, возникающих при запуске проектов в рамках моделей государственно-частного партнерства (ГЧП). Таким образом, возникает противоречие между необходимостью дальнейшего развития механизма ГЧП при реализации проектов инвестиционного строительства и отсутствием механизмов комплексной оценки рисков, возникающих в таком случае. Это противоречие вызвало проблему исследования -отсутствие механизма проведения качественной и количественной оценки совокупности рисков, что не позволяет финансовым консультантам в полной мере определить эффективность предложенных моделей ГЧП. Целью статьи является разработка системы управления рисками для проектов государственно-частного партнерства: изучить существующие подходы к классификации и оценке рисков государственно-частного партнерства и тем самым внести вклад в их дальнейшее развитие.
Ключевые слова: государственно-частное партнерство, риск-менеджмент, матрица рисков, публичный сектор, частный сектор, финансирование проектов, инвестиции.
Public-private partnership (PPP) is a combination of medium and long-term interaction between the state and business (private sector) to solve socially significant problems on mutually beneficial conditions.
Nowadays mutually beneficial cooperation between the public and private sectors, aimed at solving socially significant problems is becoming increasingly important. First of all, the reasons why PPP has become more widely used in recent decades lie in the complication of social-economic life itself, which complicates the task of the state in fulfilling socially significant functions. The interest for the business is associated with new objects for investment.
The financial mechanism for the implementation of PPP projects has a certain structure and is performed under the certain conditions, environments, however, in practice, the process of its implementation occurs through the management of financial cashflows of specific projects. Financial management is multifaceted and includes financial planning, accounting and analysis, financial control and other areas. All of them play a significant role and are necessary for the successful implementation of any investment project, including a public-private partnership project. Each of these areas supports the viability of the project, reducing the risk of additional problems in the process of its implementation. To manage the risks associated with the implementation of the project, there is one more area in financial management - risk management. Thus, risk management is one of the components of the financial management of PPP projects, aimed at identifying the main potential risks and minimizing their impact on the financial result.
Let us consider in more details the mechanism of risk sharing between the state and the private sector. Public-private partnership includes the transfer of risk to private partners, as they manage it more efficiently. However, the state should also accept partial responsibility for possible losses and mitigate, as far as possible, undesirable consequences for the private sector.
The risk allocation between the partners is at the heart of any PPP contract design and is more complex than a conventional construction project. Both partners should clearly understand the various risks involved and agree to an allocation of risks between them, [1, p.10].
Identification of all possible risks. For a successful start of the project, the parties should identify and list the main risks that are typical in the implementation of projects related to the development of infrastructure and the provision of related services. One of the most effective tools for this is the risk matrix, which can be developed and applied at each phase of the project, it is used to determine the most preferred areas for government allocation of
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funds. It can also be used to create a list of all possible risks associated with the project, possible limitations and their prevention, not only at the preparation stage, but also in the subsequent. At the stage of negotiations, the matrix can be used as a tool for managing and considering all possible risks, including them in the contract, and after signing it - as a set of actions to prevent risks that could have a significant impact on the fulfillment of the contract.
Risks are inherent in all PPP projects as in any other infrastructure projects. They arise due to uncertain future outcomes which may have direct effect on the provision of services by the project, and/or the commercial viability of the project. The risk allocation to parties in contract and the management of risks are, therefore, at the heart of a PPP design. This is also an important element in establishing the business case for a PPP project.
Classification of all possible risks. There is no single answer to the question on risk classification, in modern economic literature various authors present various options for classifying risks. Since any classification is based on a specific attribute, this attribute should possess such properties to ensure capture of the greatest number of risks in their entire set. Not a single classification covers all the many risks at once, but the selected risks nevertheless allow us to cover the main risks. So, the vast majority of foreign authors identify the following risks: operational, market, and credit, and the main categories of risks in an investment construction projects may include:
1. Construction and completion risks (delays in construction or cost overruns);
2. Technology risk (new and untried technology, whose performance cannot be checked against existing references);
3. Sponsor risk (ability of private sponsor(s) to deliver the project);
4. Environmental risk (environmental constraints in construction and
operation);
5. Commercial risk (lower demand and/or revenues than the ones projected);
6. Operating risk (inefficiency in operation leading to higher operating cost);
7. Financial risks (change in interest and currency exchange rates, and tax
laws);
8. Legal risk (change in legal regime);
9. Regulatory risk (change in regulatory regimes);
10. Political risk (change in government policy or action that affects the business case of the project);
11. Market risk (in the context of shareholders' capital diversification);
12. Force majeure (risks due to unpredictable natural and man-made events such as earthquake, flood, civil war, etc.).
The matrix can be developed through the all identified major categories of risks together with their sub-categories and probability of occurrence over the proposed contract tenure of the project. An example of a simplified risk matrix is shown below (Table-1).
It is generally accepted that public-private partnership projects are less risky due to the fact that one of its participants is the state as a guarantor of the legal and political stability of the agreement. However, the above matrix is also used at the stage of preparing documentation in order to analyze in advance the alleged support from the state. Given the scale of PPP projects, it
is necessary to hedge the risk of non-receipt of state support and conduct continuous monitoring of the project - from submitting documents for receiving state support to the full implementation of the project.
Table 1 Risk matrix
Category of risk Description Mitigation measures Allocatio n
Developme ntal risk Insufficient perpetration and project planning leading to delays in procurement and financial loss i. Feasibility study (that includes comprehensive analysis of risks, possible effects and how to address them as well as de-risking to the extent possible); ii. Institutional due diligence; iii. Competent transaction advisor. Governm ent/ impleme nting agency
Sponsor risk Financial strength (ability to participate with equity, can arrange third party equity, financially solvent and financial requirement does not exceed capacity) i. Credit references and rating; ii. Minimum level of equity stake; iii. Bank guarantee and undertaking; iv. Financial statement analysis; v. Ensure adequacy of finance under loan facilities; vi. Use of non-financial evaluation criteria and due diligence on private parties. Governm ent/ impleme nting agency
Cost overrun risk During the design and/or construction phase, the actual project costs exceed the estimated cost i. Fixed price and fixed time EPC; ii. Review by lender's engineer; iii. Contingency provisions; standby debt facilities/additional equity commitments (commitments are needed upfront). SPV/PP (can pass on to EPC contracto r)
Time overrun risk Takes longer time to complete the project i. Technical competence and experience of EPC contractor and subcontractors ii. Penalty regime SPV/PP (can pass on to EPC contracto r)
Demand/ revenue risk Insufficient demand and/or revenue (due to low demand, leakage, competing facilities, capacity, price setting, augmentation) i. Realistic demand studies, sensitivity analysis ii. Regular monitoring iii. Contractual framework iv. Price indexation SPV/Gov ernment
Source: United Nations. ESCAP. Public-private partnership in infrastructure.
URL: https://www.unescap.org/ Notes:
EPC - Engineering, Procurement and Construction; IA - Implementation Agency;
PP-Private party in contract with the IA or Government; SPV - Special purpose vehicle.
Government means government in general or the concerned ministry, department or an organ of government as the case may be.
Analysis and assessment of the risk of participation in PPP. The next step involves assessing the effects of the risks in quantitative and/or qualitative terms for all possible risk factors. The risks may affect the service outcome of the project (for example, the project fails to deliver on time or provides service at a lower level), or the commercial viability of the project (for example, lower return on investment, or difficulties in debt servicing), [2, p. 329]. As a rule, mitigation measures are available for most risks. Adequate risk assessment and the use of appropriate risk management methods allows to build the optimal strategy for the project through the risk-return model, and not only in the short and medium term, but also, as a result, to optimize work in the long term, and to evaluate the necessary amount of funds to cover possible losses.
The problem of assessing and managing financial risks in public-private partnership projects is relevant both in theoretical and methodological terms. The formation of a risk management system on a project should not occur spontaneously, goals and actions should be clearly defined, and temporary uncertainty should be excluded, risk management should in practice be an element of the financial management process. In methodological terms, this issue is also relevant, since there is a need to update the methodological base for assessing various risk categories specific to projects using the PPP mechanism, including assessing risks that are not part of the current risk spectrum. Such an assessment would make it possible to diagnose a threat at an early stage and, accordingly, provide a wider field for financial maneuver. In other words, there is a need to develop more flexible methods that would allow us to assess the financial risks of PPP investment projects with a different risk profile.
The above arguments lead to the conclusion that in order to develop the optimal strategy and tactics for organizing the implementation of public-private partnership projects under modern conditions in Russia, it is necessary to conduct a systematic risk analysis, which also implies the unconditional integration of risk management in the decision-making process at all levels of financial management. The experience of implementing foreign (western) projects shows that the concentration of efforts to develop risk management technologies lays the foundation on which the sustainable work of the project is built in the future. The specific features of the social infrastructure market are another argument in favor of considering the risk management process as one of the main links in managing the implementation of PPP projects.
Therefore, calculating the occurrence probability of the project's adverse consequences, and the ability to achieve the planned results, private and public partners of the project can only perform it within the framework of joint risk management during the implementation of the public-private partnership project, which implies the identification of risks at the planning stage of the PPP project, their classification, analysis and risk assessment of participation in a such project.
An effective risk management strategy is to consider appropriate risk mitigation measures at the project planning stage. If necessary, their consideration should be reflected in the development and negotiation of the
contract, and then in the development of the contract management process to resolve them during construction and operation.
Then, after the risk-matrix formation and the subsequent analysis of factors it is necessary to assess the sensitivity of project performance indicators. To assess the project performance parameters, it is required to use a discount rate (market risk approach). To determine it, the weighted average cost of capital model - WACC (Weight Average Cost of Capital) and CAPM (Capital Asset Pricing Mode) will be applied. The price of equity shows the required return, which is expected by both the creditors of the company and the owners of its shares. To calculate this indicator, it is first necessary to separately determine the expected return on equity and borrowed capital, after which, using the proportions in the capital structure, the value of capital itself is found. WACC is calculated according to the following formula:
WACC = K„ *
+(1-T)*Kd*(-^~),
U +vj
+
(1)
where
Ke - rate of return on equity;
Kd - rate of return on borrowed capital;
Ve u Vd - market price of equity and borrowed capital, respectively;
T - tax rate, [3].
For a more correct calculation of this indicator for Russian specifics, a modified formula for the weighted average cost of capital is provided, which takes into account the adjustment for the limits of interest on loans that relate to taxable profit. The formula for calculating WACC in the Russian market is as follows:
WACC = K„
+
V rj d Ve+V'
we + vj
+
(2)
rdJ - X+F/
where k - tax shield, [4].
This formula is applied if k <rd, otherwise, formula (1) is used. The value of the cost of borrowed capital - is the minimum rate at which the company can raise funds.
The cost of equity is determined using the CAPM. The essence of this model is that it takes into account the correlation of risk and return on equity of the enterprise. Return on equity is the sum of the risk-free rate of return on the market and the risk premium for the market portfolio, which depends on the relationship between the risk of the asset and the risk of the market. The cost of equity is found by the following formula:
re=rf + pl*(rm -rf), (3)
where
re - the expected rate of return; rf - the risk-free rate; pl is beta;
rm - is the market yield, [5].
The difference (rm-rf) is called the market portfolio risk premium or market premium. Beta is found by the formula:
(4)
_ Cov(re; rm) " Var(rm)
One particular feature should be emphasized: the WACC value is the weighted average cost of each unit of
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additional attracted financial resources. In other words, WACC is not the average price of all sources raised by the company in the past or planned to be raised in the current year, but the cost of additional funds raised to finance future projects. Therefore, an enterprise cannot raise capital with a constant weighted average cost indefinitely. The following rule is usually used equitably: the cost of capital increases as the need for it increases, since the increase in the volume of borrowed funds increases the financial risk associated with the project, and banks will provide a new portion of loans at a higher interest rate. Only long-term liabilities are conceptually included in the capital structure. However, many closed companies, especially small ones, use short-term capital (weighted with interest) as their long-term capital. In this case, the company decides whether to qualify such capital as long-term in order to include it in the WACC calculation.
Risk assessment of projects is an extremely important aspect of the investment projects implementation, which helps to identify, analyze possible risks, develop procedures to mitigate and minimize threats. For further development of risk-management system for the PPP project it is necessary to form a plan and range each risk with a high and normal priority. The steps are the following:
1) to analyze the current risk register;
2) to analyze the response actions proposed in the register;
3) to determine the trigger of this risk;
4) to determine the response strategy;
5) to make changes and additions to the risks register
In the process of identifying risks, the list of risk groups
can be updated and supplemented. All changes should be reflected in the hierarchical structure of risks.
PPPs can provide significant public benefit by allowing the public sector to engage the private sector to design, build and operate resources that might otherwise be thought to be in the domain of the public sector. Many risks can be allocated among the parties to a PPP project so that they are borne by the party best able to control them and bear them.
Legal documentation plays a significant role in establishing the nuances of the relationships between the parties to a PPP project and must be carefully negotiated to ensure that legal institutions are appropriate to the endeavor, that risks are borne by the appropriate party, that suitable notices and cure periods are provided to avoid unnecessary defaults but permit adequate performance monitoring, and that dispute resolution mechanisms are appropriate to the circumstances
To sum up, it could be concluded that under the conditions of market relations, the problem of analysis, assessment and risk management becomes important both theoretically and practically.
Risks associated with private sector permeate all their business activities and are reflected, including in the assessment of new investment projects and the value of the enterprise as an element of determining the discount rate.
Risk management in public private partnership projects: application of current approach and its improvement
Adamiya T.T., Tretyakova G.V.
Financial University under the Government of the Russian Federation
Public-private partnership is a form of relationship between government and business, from which both sides of cooperation benefit. There are no effective tools and methods for a comprehensive assessment of the numerous risks that arise when projects are launched as part of public-private partnership models (PPP). Thus, a contradiction arises between the need for further development of the PPP mechanism during the implementation of investment construction projects and the lack of mechanisms for a comprehensive assessment of the risks that arise in such a case. This contradiction caused the research problem - the lack of a mechanism for conducting a qualitative and quantitative assessment of the totality of risks, that does not allow financial consultants to fully determine the effectiveness of the proposed PPP models. The aim of the article is to develop a risk management system for public-private partnership projects: to study the existing approaches to the classification and assessment of risks of public-private partnerships and thus contribute to their further development
Key words: public-private-partnership, risk-management, risk matrix, public sector, private sector, project finance, investment.
References
1. Mr. A. Quium. A guidebook on public-private partnership in infrastructure ESCAP. 2011. 10p.
2. Lee T. Ostrom, Cheryl A. Wilhelmsen. Risk assessment: tools, techniques, and their applications. 2019. 329p.
3. URL: https://www.sapling.com/6498263/calculate-wacc-using-beta
4. URL: https://www.sapling.com/6498263/calculate-wacc-using-beta
5. Halm Levy. The Capital Asset Pricing Model in the 21st century. Analytical, empirical, and behavioral perspectives. Cambridge University Press. 2012. 117p.
6. Albert N. Link. Public/Private Partnerships: Innovation Strategies and Policy Alternatives.2006
7. E.R Yescombe. Public-Private Partnerships: Principles of Policy and Finance. 2011.
8. Halm Levy. The Capital Asset Pricing Model in the 21st century. Analytical, empirical, and behavioral perspectives. Cambridge University Press. 2012.
9. Legislative guide in privately financed infrastructure projects. United Nations Publications.New York. UNIDO. 1996
10. Terje Aven, Enrico Zio. Knowledge in Risk Assessment and Management. 2018.
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