As for any business, it is necessary to model "worst case" scenarios-including reduced revenue or increased operational costs-to determine how well the business can withstand adversity before service delivery is affected. The point at which investor returns begin to be materially eroded and there are shortfalls of cash to make debt payments needs to be clearly understood as well. Whether costs (such as debt costs) are largely fixed or can be varied to match or reflect demand will have a considerable impact on the viability of a project.
The use of leverage must be appropriate to the level of risk that sits with the owners/operators. For example, the use of a highly leveraged structure for a new toll road is probably unsuitable given uncertainty around the level of traffic. A toll road operator with very high debt repayments and traffic that falls below expectations will soon be insolvent.
There is a tradeoff between the robustness of the financing and the level of fees or charges for the infrastructure. This tradeoff is particularly pertinent for public authorities letting concession-type contracts and will influence whether the contract is awarded on the lowest overall cost only or looks at the robustness of the financing supporting it.