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Principles of Project Finance, 2nd Edition by E. R. Yescombe

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Chapter 11

Regulatory and Political Risks

All major projects have political aspects (§11.2). The Project Company may therefore be subject to political risks relating to the project’s presence in a particular country and its relationship with the Host Government, rather than to the more general commercial and macro-economic risk aspects of the project covered in Chapter 9 and Chapter 10. These political risks are discussed in detail in this chapter.

There are two main areas of risk relating to government actions: firstly ‘regulatory’ or ‘change in law’ risks (§11.3), which affect all projects to some extent, and secondly ‘investment’ risks (§11.4), which mainly affect cross-border project investments, primarily in developing countries. Linked ...

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