Calculation of Risk Premium
The table below calculates the estimated risk premium:
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| Systematic Risk type | Weighting (Scale 1 - 5) | Estimated Portion of Project Risk Premium* | Allocation of risk based on Step 1 analysis | Risk Premium Transferred to Private Sector % |
|
| Based on relative importance | Project Risk Premium is 2.7% (per Step 3) | 0<= Number <=1 | |
| Demand | 4.0 | 1.08% | 0.1 | 0.11% |
| Inflation | 3.0 | 0.81% | 0.4 | 0.32% |
| Asset Residual value | 1.0 | 0.27% | 0.0 | 0.00% |
| Financial distress / insolvency | 2.0 | 0.54% | 0.9 | 0.49% |
| TOTAL PREMIUM | 10 .0 | 2.7% |
| 0.92% |
*(Risk weighting/Total Col 1)* Project Risk Premium