Enayam Port

Tamil Research Institute
RAPID TECHNO-ECONOMIC FEASIBILITY REPORT FOR
DEVELOPMENT OF COLACHEL PORT AT TAMILNADU
FINAL REPORT
17. RISK ANALYSIS
17.1. LEGAL AND CONTRACTUAL RISKS
Types of risk
Risk description and mitigation
Risk of disputes
With private sector participation in project development and operation, conflicts
may arise between private players and government. The concession agreement
should be balanced and a robust dispute resolution mechanism should be
incorporated
Change in law
An unexpected change in current legal / regulatory / policy regime in port sector
can have a material adverse impact on the project. Any policy formulation should
keep this in mind and the contractual arrangement should suitably address this
possibility.
Delays in project development
• The Project contracts should provide for significant penalties for such delay
• Public authority may assist the developer in obtaining consents and
clearances from governmental agencies.
Funding risk
• The port development is dependent of availability of funds. It is vital that the
project and contractual arrangement be structured to make the project
attractive to banks and equity investors.
• Depending on the project development option, funding risk has to be borne
by the private player.
• Concession Agreement should address the issues related to Concessionaire’s
default in this case.
Project completion risk
• Strict project monitoring by the Authority/Independent Consultant is required.
• EPC contracts for mandatory works may be structured as a fixed-price and
fixed-schedule contract, with stiff liquidated damages for non-compliance.
Performance guarantees may also be stipulated.
• Insurance package involving Contractors All Risk, Third Party Liability, and
Advance Loss of Profit may be taken during the construction period
Delay in land acquisition
As this is a green field project, land acquisition would be required for connectivity
and other surrounding industries. Public authority being the owner should take
responsibility for acquiring land for project development.
Interest rate risk
These are factors affecting the availability and cost of funds. To mitigate this risk,
hedging instruments or fixed rate loans to be used.
CP1832-FR-CP-FinalReportRevised-Report-Ed1.docx 207
www.tamilri.com