Operational Checks in Asset Selection

The Relevant Authority should check the following from an operational perspective:

The asset should meet the following criteria:

• Historical operations - the asset should already be operational to enable an assessment of its operational and financial track record.

• Remaining life - the asset should have an adequate remaining life to ensure that the private sector can generate sufficient return on its investment. In addition, the remaining life of the asset may also be impacted by climate related risks that may shorten its effective life.

• Scope for operational efficiencies - scope for improvement or innovation by the private sector partner in terms of operational efficiency or effectiveness (including those related to energy consumption).

• Climate risks - The Relevant Authority should assess how climate risks may affect the potential asset recycling transaction. If left unmitigated, the adverse effects of climate change may impact the operational, financial, environmental, and social performance of large, fixed infrastructure assets. The climate risk assessment at this stage can be considered on the basis of a high-level assessment, or ‘screening’ of the risks compared to the preliminary technical, economic, and financial assessments conducted. An asset recycling transaction with high climate risk might be determined as too risky. The following high-level assessment are recommended as an initial assessment of an asset recycling transaction, prior to making further investment in acquiring permits or conducting more in-depth assessments:

  • Screening-level assessment of climate-related risk exposure;

  • Screening-level assessment of project vulnerability; and

  • Screening-level assessment of the overall climate risk profile: assessment of GHG emissions baseline of the asset.