Out-Law News 1 min. read
29 Sep 2016, 1:49 pm
Deals often carry too much investment risk due to a lack of detail or to inadequate revenue guarantees, Trade Arabia said, citing research by Middle East intelligence company MEED.
23% of the 80 projects brought to market since 1996 have failed to reach a deal, the news site said.
Just under half (49%) of deals have reached financial close, while the remainder are at different stages of development. This includes deals that are still looking for prospective developers as well as those that have signed a contract but are finalising financial agreements, Trade Arabia said.
Investors told MEED that they have pulled out of projects due to poor deal structures that add high levels of risk with unclear revenue expectations, Trade Arabia said. These structures can raise the overall price of the project and make it economically unviable, they said.
MEED gave the example of a planned wastewater treatment plant in Egypt. Launched in 2009, it was cancelled after three years when it became clear that more wastewater needed to be treated than had been understood at the outset, requiring more advanced technology than planned. This made the project too expensive for the investors, MEED said, according to Trade Arabia.
Build-operate-transfer port projects have seen a high failure rate, while port concessions without construction work have been more successful, Trade Arabia said.
The water sector, including wastewater treatment and utility concessions, has the highest success rate at 74%, it said.
Ratings agency Standard & Poors predicted earlier this year that low oil prices will lead to increased private investment in Gulf Cooperation Council countries.