The equity and debt financiers in a Partnerships Victoria project will conduct ongoing due diligence of project performance against modelled project returns, both during the construction phase and the service delivery phase. Therefore, risk events and change events are assessed against their impact on project returns. Different members of the consortium may have different appetite for risk or willingness to adopt contractual changes. The contract director should understand this as part of managing the project.
Equity participants may accept a greater level of risk than debt financiers, as their potential returns are higher. While the majority of risks are transferred to subcontractors, some risks remain with equity providers, such as the risk of subcontractor insolvency or non-performance.
Debt financiers will be concerned not to take on risks that may jeopardise the project cash flows. This is particularly so if the project is funded on a limited-recourse basis (most common in PPPs), which means that the debt financier is dependent on the cash flow from the project, and has no call on any other assets of the equity participants or related parties/activities, other than any bonds or guarantees provided to the private party by members of the consortium (usually the builder and the facility management subcontractor).