Hello everyone. Today, we start discussing the problem of risk analysis and risk allocation in project finance. This is probably one of the things that the advisors that are working on this project, advisors on the sponsor side, lender side, technical advisors, typically perform in order to understand which kind of risks can be affecting the project during the life and how to protect the project against these kind of risks. So, what I would like to do with you is sort of an exercise of brainstorming, just a quick introduction, in order to understand what can be exactly done in order to carry out a successful risk analysis if you want risk mapping and risk allocation. Just to introduce you a possible reference case, if we go back some years ago, one of the most important project finance project carried out in Europe, the construction of the Eurotunnel, so the link between France and the United Kingdom, was one of the largest ever project finance deals financed in Europe. And you probably remember that Eurotunnel was not a successful project. It underwent several round of restructuring because it experienced serious troubles during its life. So, if we make reference to this kind of project and should I ask you to make an effort in order to understand what went wrong in that project, what would you suggest to a possible sponsor wishing to develop a project similar to that one? Well maybe the traffic volume was below expectations and the cash was less than expected. Good. Maybe in the same spirit, regarding the stream of revenues that might have acquired some technical incident which for example has actually made the construction phase longer than expected or has interrupted the operational phase or has made the plant less efficient that it was expected to be. Good, good, good. Maybe it was not the case for Eurotunnel, but I was thinking into the possibility that the plant can go short in terms of the raw materials. So, it starts accumulating delays. This is typical, for example, of industrial products that use raw material in order to carry out the operations. Yes. Yes. Your observations are very, very correct and we could go on and on and on. I'm sure that if I ask you to go in more that you could find other kind of troubles that this kind of project was experiencing. And indeed, what advisors try to do in the very early stage of project analysis is exactly to put out a list of all the possible risks that the project could face throughout its life. As you know, brainstorming is a free-form kind of exercise so there is no standard methodology in order to carry out a brainstorming of risk analysis. However, typically what I could suggest when approaching risk analysis for the very first time is to think about risk analysis from the perspective of a chronological perspective throughout the life, so we could refer to the typical life of a project in order to organize our brainstorming and making it more effective. Let me explain. We can imagine that every project can be imagined as an initiative that goes through a life cycle. During the life, so if we put on a horizontal axis, the time that flows from time zero to time n that marks the end of the life of the project or the end of the concession on which the project is developed, and on the vertical axis, the performance in terms of cumulative cash flows that the project is able to generate, you can understand that the first phase of the project life is represented by a phase where the project is not able to generate any penny because all the money is committed to build the infrastructure. So you can understand that in the first phase, the project absorbs cash and so we are on the bottom part of our graph. At a certain point that typically marks the end of the construction phase, the project stop absorbing cash. If the plant is tested successfully, the project enters into the operational phase. So first, it will recover the deficit of cash, and then, at a certain point, a cash surplus will emerge from the project itself until the end of its life. From the perspective of risk analysis and risk management, this kind of lifecycle approach is particularly important because we could split ideally our analysis into two basic building blocks. The first one is taking into account the risks that we face during construction. So, we could focus our analysis only on the risks that are triggered by the project once the project has not been built yet. Once the project has been completed, instead, we can say, well, all the risks that belong to the construction phase are over and we can now concentrate on the risk of the operational phase post-completion phase, call it as you want, that typically are eating the project only after the project has enter into the operational phase. As a final point, unfortunately for lenders and unfortunately for sponsors, there are some risks that accompany the project throughout its life, so risks that can be found in both the construction and the operational phase. So in terms of mapping, just to wrap up your suggestions, you were very correct. For example, you mentioned the fact that were problems of traffic below expectations, and so it was a typical operational risk. You asked me to address the point of lack of supply, but lack of supply is a typical operational phase risk because you need raw material when the plant is in operation. You instead focused on technical problems that occurred in the construction of the plant, and so you are referring to a breakup of the construction phase because there were technical problems in the tunnel. You also mentioned technical problems that could occur once the tunnel has been completed, and so this kind of problem, in all sense, can be referred to the operational phase. What we will do later on in this course will be exactly to analyze what can really happen during construction, what can happen during the operational phase, the risks that are eating the project in both phases, and above all, how we can insulate the SPV against this risk. Our objective will be identify a risk and try to allocate the risk to the party that is in the best condition to manage and control this kind of risk.