Case Study on Quantifying the Impact of Political Risks on Demand and Pricing in a Power Project

Abstract

Political risks may affect the tariff and dispatch in power projects. The objective of this case study is to quantify the impact of governmental actions on the returns and debt service capacity of a project. The risk quantification is conducted with the authors method for quantifying qualitative information on risks (QQIR) in order to quantify expert opinions and perceptions on political risk factors in a power project. In this case study, the perceived impacts of political risks cause a drop in returns but are not critical for honoring the debt-service obligations.

TOPICS: Risk management, legal and regulatory issues for structured finance, legal/regulatory/public policy