In summary, if we look at the different risks in project finance, like construction delays, supply problems, political risks, how can these be avoided or transferred away from the SPV to other stakeholders? Well, insurance can help with things like delays through something like the ALOP insurance, the advance loss of profit, which would cover you against loss of earnings from delays. Construction may also be covered by complicated contracts such as a turnkey construction contract. If the agreement is breached, there could be damages. These could be called liquidated damages, which are damages, which are limited up to the losses of the SPV. Operational problems may also be covered by contracts, which in this case might be called O&M, contract operation and maintenance contracts, and these have minimum expected service levels.

Supply problems may also be covered by other contracts. In this case, put or pay contracts, the supplier has to deliver the supply or has to pay. The SPV efficient demand may be managed through yet more contracts, and these would be called take or pay contracts. If there's a single buyer or a couple of buyers, these tend to be by far, the most effective mechanism. However, if you're selling to the public, it'll be very, very difficult to govern that through a take or pay contract. So the best you could probably do is to arrange another mechanism like a price minimum, for example, with the government, political risks are generally very difficult to manage. They can be mitigated by things like government export credits or guarantees, or by supernational agencies like the IMF. Macroeconomic risks can also be hard to manage. Financial products, such as derivatives can help interest rate swaps, currency swaps, or commodity swaps will all help mitigate the risks. The general idea of all of this is to take risk and bring it away from the SPV and try and place it with other stakeholders if possible. This can be demonstrated in this grid and this grid summarizes project risks. Along the top of the table, you'll see all the different potential risks that the project faces, either on a pre completion basis or a post-completion basis. You'll also see risks that generally affect both. On the left hand side, you can see the stakeholder who is going to be taking on that risk, and ideally what you'd want to see is that the SPV line, there should be very, very few colored boxes. In other words, the SPV is taking less risks because most of them are being transferred to other stakeholders.