Financing Projects Delivered Through Collaborative Delivery Models Reconciling Collaboration With Bankability

With contributions from Joey Suri, Project and Infrastructure Partner, Gowling WLG

Conclusion

Alliance and IPD will arguably never mirror the step-in and enforcement profile of a fixed-price EPC, and the features that make alliances effective (i.e. shared risk, integrated teams, unanimous governance, "no blame" culture) create specific challenges for lender enforcement. Contributions within integrated teams are difficult to sever; consensus governance may be incompatible with unilateral lender action; enforcement rights may sit uneasily with "no blame" principles; and attribution of default is challenging under shared-risk models. But for each core tension there are structuring responses that can materially narrow the gap. Fixed-price certainty can be achieved by deferring financial close until a firm price is established, as in the Progressive P3. Pooled risk can be buffered through enhanced equity commitments and layered cost overrun facilities. Impaired step-in can be managed by confining lender enforcement to the SPV finance layer, as in the Alliance PPP. The absence of contractual remedies can be offset by government contingent support and bankable operational-phase revenue. No single instrument resolves all four tensions, but a calibrated combination, tailored to project-specific circumstances, can produce a workable result.

As infrastructure investment demands grow in Canada and globally, the value of combining collaborative delivery with private finance will increase. The structures examined here represent practical approaches to that convergence, and their continued development can help address the infrastructure challenges ahead.

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1. Introduction
2. Why does financing remain necessary under collaborative delivery?
3. What is bankability? 
4. What are the collaborative delivery models? 
5. Core principles of collaborative delivery models 
6. Core principles of traditional project finance 
7. The issues between collaborative delivery models and traditional project finance 
8. Available solutions and potential structuring 
9. Conclusion

Read the original article on GowlingWLG.com