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Appraising PPP Projects

48.3 Assessing Commercial Feasibility in Government-Pays PPPs

When government payments are considered in the revenue regime, the commercial feasibility exercise aims to define the amount of government financial support required to meet investors’ and lenders’ needs.

This produces a direct forecast of revenues to feed the financial model and the basic fiscal commitment structure that will be tested in the affordability exercise (section 11).

In structuring the proposed government payments, the project team should consider the characteristics required to satisfy the indicators of commercial feasibility. For example, it might be necessary to consider different indexation regimes for the payments to improve cover ratio requirements.

Such measures, however, need to be considered with caution so as not to spoil the Value for Money (VfM) assessments (section 16).

 

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