Hello, today we discuss the first phase of the project development, namely the construction. We must be clear in terms of what the project can experience doing construction, because the project is still at the very beginning and the facilities have not been built yet. >>Well, Professor, construction contract is very important for investors willing to provide equity and Bond Finance to the SPV as during the construction phase, many unexpected circumstances can occur. How can investors be protected from these risks? >>It is a good question. You say, many things can happen during construction that can trigger some concern or problems to investors in project finance. Let me just mention a couple of them. The first one is Planning Risk and Technology Risk. So, from this point of view, you have not planned correctly the advancement of works, or the technology that you are using is not completely functioning as you expect it to be. So, at the end of the day, you can discover only at the end of the construction, that the project is not performing as originally expected. These are two relevant risks. The second thing that can happen is that, even if we can assume that Technology Risk is not a concern, at the end of the day, what can happen is that the contractor, the key counter-party of the construction phase, is delivering the plant in delay. So, a little bit later than expected, or the project is delivered but the plant is not performing as originally expected so, below the standards that can be agreed between the SPV and the contractor. The third possible circumstance can be that at the end of the day you end up with the total cost of construction, which is completely far away from the original budget, and you have problems because you don't have all the money to finance this kind of thing. >>I understand that all these contractual risk that falls on the part of the contractor. What kind of contract can be agreed in order to protect the SPV financiers? >>Well, you touched a good point. Most of this kind of risks are falling under the responsibility of the contractor because at the end of the day, the contractor is the key counterpart responsible for the execution of works in the very early phase of project development. Using a basic principle according to which risks should be allocated to the party, that is in the best condition to control the risks and to manage risk, the contract that the SPV enters with the contractor should include specific penalties on the contractor side if the contractor is responsible for that particular damage. Let's make some examples. If we typically use a standard that TKCC, which is the technical term of Turnkey Construction Contract. This construction contract is bankable so it can be accepted by debt creditors, only if first of all, it includes a specific provision for a maximum cap on costs. Every extra costs will be bought by the contractor and not by the SPV, if this extra cost has been determined by the responsibility the contractor. Second, a contract is bankable only when the Turnkey Construction Contract includes specific provision for payment of the so-called delay in construction damages. So, every day of delay that determines the damage to the SPV, will be refunded under the terms of the Turnkey Construction Contract by the contractor itself. It is proportionate to the damage created to the Special Purpose Vehicle. The third element that is typically included in Turnkey Construction Contractor is the request to the contractor to pay damages to the SPV in case the project is not in line with a minimum performance standard that is tested by an independent technical engineer once the construction is complete. The plant is not able to perform as originally agreed between the SPV and the contractor so you can appreciate that this contractor is very binding on the side of the contractor because the contractor takes over most of the responsibilities arising during the construction phase. I want also to add an additional point, always, the Turnkey Construction Contract is backed up by a Bank Warranty, so that in case the contractor is not able to pay, the banker that is guaranteeing the contractor will pay on behalf of the contractor. The second element, just to address your concern in terms of, you know, concerns that investors have during construction, is typically the fact that some risks do not fall under the control of the contractor. Take for example, the case you are waiting for spare parts for the plant and the boat that is shipping the parts sunk in open sea. You can't consider responsible the contractor for this kind of risk. Typically, what the contractor is backed up with, is an insurance policy that the SPV enters with an insurance company against this kind of a occurrences during the construction phase. Typically, these policies are called ALOP, Advance Loss of Profit, whereby the insurance policy covers the SPV against any damage due to the fact that for whatever reason not attributable to the contractor, the project is not able to perform. From this point of view, I would say just to conclude in terms of what was your question, at the end of the day, if you have put in place a good Turnkey Construction Contract with a good contractor, a good insurance policy in terms of ALOP policy, you are pretty protected against constructional risks. And so, I would say investors could be considered pretty happy, in terms of this kind of coverage of risks.