What does it mean for project finance?
At first sight, the shortcomings of an alliance contract on traditional bankability issues such as certainty of time and cost, appear fatal. In fact, the increased risk aversion of head contractors means the EPC or turnkey contract has become an endangered species in many sectors. Contractors are insisting on much lower liability limits (even on a repeat deal) and a greater ability to pass through cost increases and delay risks, and have sometimes refused to bid on these models at all. Allens Arthur Robinson is currently working on at least three projects where the delivery method is an alliance contract and a project financing is planned. Two are at the term-sheet stage and have had preliminary sign-offs from banks.
