The common denominator of all project financing is there is a narrowly-based cash flow generated by SPV, and the key determination is the volatility characteristics of that single cash flow. For power generation and distribution projects the process is:
1. The identification of the risks in that sector-some are the same as in other sectors, other are unique.
2. The quantification of those risks (which involves the modelling of the project);
3. The structural options for managing those risks, and
4. The effect of this risk structuring on the financing, which in turn will heavily influence the sponsor IRR.