Tuesday 29th October 2019, 12:30 – 16:15, King & Spalding (Singapore)
The roundtable discussion commenced with a brief welcome and introduction to the FutureDAMS project by Judith Plummer Braeckman. Judith then delivered presentations providing an overview of our ongoing work on the anatomy of risk in hydropower finance and various risk mitigation mechanisms that are currently available. The ‘risk circle’ presented by Judith divides various risk into four quadrants: technical, financial, environmental and social, and government. The degree and extent to which each risk (or category of risks) is perceived mitigatable or as a barrier to involvement in a given hydropower project varies between the groups of actors who may be involved in hydropower project development and finance. Past experience and familiarity with a country context also play an important role in the decision making and perception of risk. For private sector investors as well as multinational development banks, risky decisions generate a reputational risk which can present a barrier to involvement in an economically and financially viable project.
The second presentation by Sanna Markkanen provided a set of examples to illustrate the complexity of structuring finance agreements for large hydropower projects, including an overview of the advantages and disadvantages associated with three most widely used financing models: fully public financed project, public-private-partnerships (PPPs) and project financed through new forms of bilateral arrangements. The availability of each of the financing approaches varies between countries and projects, and some disadvantages of PPPs can be mitigated by innovative solutions to project development or better understanding of risk and the reasons behind investors’ and financiers’ reluctance to engage in a given project, or to engage only in a very limited capacity.
The discussion focused primarily on the relative attractiveness of hydropower as an investment and ‘competition’ from other renewable energy projects, new risks caused by extreme climate events, and the risks associated with political change.