Bearing the brunt

Building contractor bankruptcies of have recently stressed the credit profiles of several power projects in the US. Standard & Poor’s Scott Taylor and Tobias Hsieh look at how sponsors and lenders responded and the effects on the various parties

When Standard & Poor’s (S&P) rates a preconstruction infrastructure project, a key consideration is how the sponsors have shifted construction risk from the lenders to the contractor. Also important is whether the contractor can manage the risk – if it cannot, then the risk will probably remain with the lenders.

Construction contracts that provide sufficient penalty and damage payments to ensure the project’s acceptance within the established schedule and budget are characteristic of investment