Сontract net as a tool of transfer and split of project financing risks
Abstract
Сontract net as a tool of transfer and split of project financing risks
Contract organization of project finance allow to reduce the asymmetric information, limiting the possibility of opportunistic actions of each participant. The back-to-back principle, that is underlying for contractual arrangements, increases total project return and provides transfer and split of highest possible number of risks directly to the contractual counterparty, which is best suited and have the most appropriate instruments to cover this risks. Tripartite deeds of project financing can be considered as a cooperative non-zero sum game, which provides compensation in proportion to covered risk and member's contribution (extent of assumed obligations or provided funds). Multiple contracts of project finance initiatives allow to allocate risks pro rata the ability of participants, without reducing the amount of final win of all parties.
Keywords: project finance, project financing risks, asymmetric information, agency theory, contractual arrangements, back-to-back principle, concession agreement, purchaser contract, tripartite deed, game theory