152. The most important single issue identified in the transport and logistics sector is volume/traffic risk. ISMED consultations indicate that it will be necessary for the public sector to face or otherwise mitigate traffic risk in order for such projects to have a chance of being successful. ISMED Programme experience suggests that this barrier is not unique to the MENA-region and that the private sector is reluctant to take traffic/volume risk in OECD countries with well-established PPP programmes. There are a number of alternatives available that are effective to relieve the private partner of traffic/volume risk. The most obvious is for the public counterparty to compensate the private counterpart on the basis of availability, the facility or infrastructure asset being available for use, with traffic having no impact on the revenue received by the project company from the state. In a concession-type PPP it may be necessary to share the risk between public and private sector with a certain minimum payment from the state being guaranteed to the private party regardless of traffic or volume levels. The minimum payment could be sized to cover the project company's debt service costs in an effort to provide comfort to the project company's creditors. Pure concessions with the private party facing traffic/volume risk are unlikely to attract sufficient investor interest to provide value for money, and if they do manage to get built, they are much more likely to be subject to subsequent renegotiation.
153. Notwithstanding the above, some types of project bear lower revenue risks than others. At one extreme, the risk is relatively low for new capacity in a currently congested network and for which there are no direct alternatives. At the other extreme, traffic can be very uncertain on infrastructure in networks with little congestion and ample alternatives. Alternatives that must be analysed include not only other roadways, bridges etc., but also include other modes of transport. In general projects subject to lower demand risk are more suited to PPP finance (Better Regulation of Public-Private Partnerships for Transport Infrastructure, OECD/International Transport Forum 2013).