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Table: 5 RISK MATRIX FOR PORT PROJECT

Sr. Category Risk Event Effect Allocation Mitigation Methods

No.
1. Pre- Bidding Risk  Loss of Bid Project 
Constructio document fee company
n Related  Risk as to whether
party is genuine or GoTN (•)
not
2. Non fulfillment of  Time & Cost GoTN  Timely approvals / certification by GoTN has been made a
“ conditions precedent overruns condition precedent to the Concession agreement.
by GoTN  Delay in  In the event no solution is reached, SPV has the option to
Like delay in getting implementation of pre-maturely terminate the Concession and Termination
approvals, licences the project. proceeding on GoTN event of default apply.
permits etc.  GoTN has an obligation to consult SPV to decide on
measures to mitigate the effect of any delay.
3. Planning Delay  Time & cost  Timely provision of land for construction of facilities and
“  Site acquisition overruns GoTN systems through execution of lease agreements between
 Site development  “ SPV and GoTN has been made condition precedent to the
Concession Agreement.
4. Risk of financial  Delay in zero date GoTN  No liability to either party if closure is delayed. Target
“ closure dates if extended by mutual agreement. Again
Concession Agreement (CA) can be terminated without
liability to either side.

5. Abandonment of  Wastage of SPV (•)  GoTN terminates the Concession and takes over the
“ project by the SPV resources facility. GoTN meets lender commitments.
 Hold – up of the
project

(•) GOTN: Government of Tamilnadu (•) SPV: Special Purpose Vehicle

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6. Constructio Non-availability of
n Related materials on time
7. Constructio Force Majeure  Cost overrun/delay
n Related - Strikes, lockouts etc.
- Other events
8. Time overrun (delay
“ risk) and cost overrun;
delay in completion
due to default of:
 EPC Contractor
 Government
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 Delay in commissioning
 Time & cost overruns for
both the parties
 Delay in completion
 Difficulty in obtaining
additional funds.
 Idle labour and
machinery.
 Wastage of valuable
resources.
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EPC  In case of delay, contractor should pay:
Contractor  --% of contract price for delay of each week or part
thereof in date of entry into commercial service of each
unit.
 --% of contract price for delay of each week or part
thereof in date of entry into commercial service of the
port.
 Total liquidated damages restricted to --% of contract
price.
In case of insured peril, ALOP policy can be taken out.
This covers debt service and fixed costs (fixed part of the
tariff)
Insurance  Insurance cover for loss or physical damage as well as
Co. for business interruption.
GoTN  Pre-mature Termination of Concession. GoTN shall
pay SPV an amount equal to the sum of : (a) all sums
due and owing to the lenders; (b) total cost of the
project and assured returns thereon net of (a) above;
and all such additional costs as may be incurred in
transferring the facilities to GoTN
 SPV will monitor compliance with construction plan and
activate early warning mechanisms.
 Liquidated damages to account for all time overruns
EPC payable by EPC contractors to SPV. This will first be
Contractor used to cure the event of the default and the balance, if
Government any, would be utilised to reduce the Total Cost of
Project.
 Cost overruns will be absorbed by SPV only when the
event leading to delay is owner induced and other
specific events which are outside the control of the
EPC Contractor.
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9. Technology Changes  Delay in completion.
“  Wastage of resources
already required
 Need for additional
funds.
 Possibility of non-
utilization of existing
manpower.
10. Environmental  Project will not start,
“ Pollution Risk  Objection by residents
of neigh-bouring areas
11. Simulation (model  May be deceptive
“ study) Risk  Likely to lead to wrong
conclusions
 If adds to the project
cost.
12. Design risk  Increased Cost
“  Delay in start-up, as it
will have to be
redesigned
13. Non-Availability of  Delay in start-up/
“ land on time abandonment of the
project itself
14. Equipment Breakdown  Time & Cost overruns
“  Idle labour
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 Provision of authorized extensions to increase in port
charges to compensate for project time and cost
overruns.
SPV/GoTN  Irrespective of any change in technology, the
Contractor shall continue with the project with the same
technology, which prevailed at the time the contract
was entered into.
 In case of non-availability of materials used in the old
technology, penalty to be charged for such default from
supplier.
SPV  If the emissions are due to a change in law, the SPV
shall compensate for any additional capital expenditure
through tariff
SPV  EPC Contractor to provide a remedy and pay liquidated
damages to SPV, which would be utilized to reduce the
Total Cost of project after curing the event of default.
 Performance security of specified amount maintained
in full force.
EPC  EPC Contractor to provide a remedy and pay liquidated
Contractor damages to SPV, which would be utilized to reduce the
total cost of Project after curing the event of default.
 Coverage through insurance.
GoTN  Timely provision of land for construction of facilities and
systems through execution of lease agreements
between SPV and GoTN has been made a condition
precedent to the concession agreement.
EPC  Liquidated damages to account for all time overruns
Contractor payable by EPC Contractors to SPV. This will first be
used to cure the event of the default and the balance, if
any would be utilized to reduce the total Cost of
Project.
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 Coverage through insurance

15. Environmental  Delay in start-up SPV  GoTN shall indemnify SPV from all claims, litigation
“ restrictions that may result from breaking the environmental norms.
╸ GoTN shall undertake to enforce environmental
measures to protect the project from being terminated.
16. Loss or damage to  Work is held up Insurance  Insurance cover for loss or physical damage and for
“ work  Additional Expenditure Co., business interruption.
required.  In case increase is due to external events beyond the
 Extra time spent in control of SPV and the Operator, tariff adjustments
repair work permitted.
17. Financial Contractor’s  Non-availability of funds. Contractor  Liquidated damages to account for all time overruns
“ default  Delay in commissioning payable by Contractor to SPV. This will first be used to
of project. cure the event of the default and the balance, if any
would be utilized to reduce the Total Cost of Project
 SPV should enter into a Financial Agreement with the
agencies providing financial resources.
18. Delays in rectifying  Delay in project EPC  Liquidated damages to account for all time overruns
“ defects completion Contractor payable by Contractor to SPV. This will first be used to
cure the event of the default and the balance, if any,
would be utilized to reduce the Total Cost of project.
 Performance security of specified amount maintained
in full force.
19. Operations Force Majeure  Insurance  Insurance cover for loss or physical damage as well as
Related - Strikes, lockouts etc. Co. for business interruption.
- Other events GoTN  Pre-mature Termination of Concession. GoTN shall
pay SPV an amount equal to the sum of : (a) all sums
due and owing to the lenders; (b) total cost of the
project and assured returns thereon net of (a) above;
and all such additional costs as may be incurred in
transferring the facilities to GoTN
20. Non-availability of  Cost overrun/Delay SPV  SPV will monitor compliance with construction plan and
“ spares.  Time overrun activate early warning mechanisms.

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 Penalty to be paid by
contractor at an agreed
rate.
21. Technical Risks  Leads to inefficiency in
“ operations.
 Additional expenditure
22. Loss/damage to port  Work is held up.
“ facilities  Additional expenditure
required
 Extra time spent in
repair work.
23. Equipment Failures  Cost overrun/delay
“  Time overrun
 Idle labour
24. Power failure /  Increased cost
“ unavailability of power  Zero date extension
 Idle machinery and
Labour
25. Inadequate  Commissioning delayed
“ infrastructure linkages
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 Liquidated damages to account for all time overruns
payable by EPC Contractors to SPV. This will first be
used to cure the event of the default and the balance, if
any, would be utilized to reduce the Total Cost of
Project.
Contractor  The operator shall pay liquidated damages to the SPV.
 Can be covered by the ALOP Policy.
Insurance  Insurance cover for loss or physical damage as well as
Co. for business interruption.
 In case increase is due to external events beyond the
control of SPV & the Operator, tariff adjustments
permitted.
Contractor  Liquidated damages to account for all time overruns
(supplier’s payable by EPC Con-tractors to SPV. This will first be
default) used to cure the event of the default and the balance, if
any, would be utilized to reduce the Total Cost of
Project.
 Coverage through insurance.
GoTN  Provision of uninterrupted power supply is a GoTN
obligation under the concession agreement.
 Regular power failure over a number of days enables
SPV to suspend performance or revise charges or
consult with GoTN as to mitigation measures to be
taken.
 Power shortages leading to inability to meet SPV’s
obligations is deemed a force majeure event.
SPV  SPV will pay monthly period payments excluding part
of O&M expenses and interest on working capital. It
shall also pay minimum take-or-pay payments under
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any agreement that it approves (to be incorporated in

the concession agreement.

26. Termination of Port  Loss of valuable GoTN/SPV  If GoTN terminates the concession due to an SPV
“ Project resources. event of default, GoTN shall pay the lenders all sums
due to them and bear all costs associated with
transferring the facilities to GoTN.
 If it is an GoTN event of default, it shall pay SPV an
amount equal to sum of (a) all sums due and owing to
the lenders; (b) total cost of the project and assured
returns thereon net of (a) above; and all such additional
costs as may be incurred in transferring the facilities to
GoTN.
27. Permanent natural  Lowers efficiency and SPV  Coverage through insurance
“ changes reveneus.  It is deemed to be a force majeure event.
28. Latent defects during  Cost overrun/Delay EPC/O&M  Provision of Performance security of specified amount
“ operations Contractor by the Consortium.
 Time overrun  Payment of liquidated damages by the Consortium to
SPV, which would be first utilised to cure the event of
default and the balance to reduce the Total Cost of
Project.

29. Inappropriate  Delay in start up like O&M  Provision of performance security amo- unt by the
“ environmental Enron Contractor/ Consortium (O&M operator)
clearances SPV  Payment of liquidated damages by the O&M operator
(Consortium) to SPV.
 In the event these are not followed, shall lead to
termination due to default of SPV.
30. Cost escalation risk  Cost overrun/Delay O&M  Drawdown of performance security of specified amount
“ Contractor provided by the consortium.
 Payment of liquidated damages by the Consortium to

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the SPV.
 In case increase is due to external events beyond the
control of SPV and the operator, tariff adjustment
permitted.
 Incentive scheme of sharing savings in budgeted
operating cost with the Consortium.
31. Political Mergers acquisitions  Change in management SPV  The port shall continue to work under the same
Risks and forced takeovers may lead to cost management as before, irrespective of any change
overruns. whatsover.
 GoTN shall indemnify SPV from all claims, litigation
resulting from such events under the CA.
32. Import / Export  Delay in obtaining SPV  CA can be terminated on grounds of default under
“ restrictions necessary resources for Government support Agreement.
the project.
33. Expropriation risk  Cost overrun / delay SPV  Covered through deemed generation (to be
“ incorporated in the CA)
 Full fixed charges including payment for capacity
lowered.
34. Change in law leading  Commissioning may get GoTN/SPV  GoTN shall pay directly or through monthly tariff
“ to adverse effects & delayed and cost may payments additional charge for the additional
change in taxation increase. expenditure required to be made by user and shall also
 May increase / decrease compensate for any losses suffered, if such cumulative
the project costs amounts exceed a certain value. The user will not treat
depending on the govt. this reduction in availability due to such change as
default.
35. Financial Interest rate  Increase in IDC SPV  Judicious mix of fixed and floating rate facilities
fluctuation proposed.
 For floating rate facilities, floor and cap structure
proposed.
36. Inflation  Increase in tariffs SPV  The EPC contract provides for no inflation adjustment
“  Increase in prices Consumer / of costs during construction.
Clients
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charged  Tariffs to be adjusted for inflation during operations as

per formulae given in CA.
 Hyper inflation protection in the CA.
37. “ Devaluation  Affects availability of SPV  Tariff Adjustment Permitted.
funds  FOREX debt to be kept to minimum
 Increase in interest paid  FOREX debt to be swapped for equivalent Rs. Debt.
on loans.
38. “ Recessions, sanctions  Capital Market collapse SPV  GoTN assumes responsibility and indemnifies SPV
etc.,  Foreign exchange risks against all claims and litigation.
affecting foreign debts  Respect of underlying contracts and obligations.
39. Revenue Inefficient operation of  Revenue Loss O&M  Drawdown from performance security for non-
equipment / facilities  Non-optimum utilisation contractor compliance of obligations by the O&M Contractor.
of resources,  Reduction in operator Fee payable by SPV as a
penalty for the period of non-compliance.
40. “ Faculty Billing  Increase in Cost O&M  Regular inspection, monitoring of meter, bulk supply
Procedure Contractor connection facilities.
 Replacement of faulty meters, other connection
facilities.
 Mechanism for verifying deliveries.
 Fiduciary Insurance for embezzlement.
41. “ Inefficient collection of  Revenue loss SPV  Appropriate mechanism for billing and collection to be
service charges followed with incentives for improving collection
efficiency.
 Fiduciary Insurance for embezzlement.
42. “ Closure of Port  Non-recovery of SPV/GoTN  If closure is due to a change in law, policies, directives
investment made. or any other governmental action affecting exports from
 Delay in paying debts the region, then the risk is deemed as a force majeure
 Wastage of resources. event, leading to the extension of CA.

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