Assessing Risks in PPP Projects for Water Infrastructure in Ukraine: Challenges and Solutions

Abstract

This paper examines the identification and assessment of risks in Public-Private Partnership (PPP) projects in the water supply and sewerage sector in Ukraine. PPPs have become essential for attracting private investment to modernize and expand critical infrastructure. However, these projects face significant risks that can affect their success and financial sustainability. The study identifies six key categories of risks: financial, technological, legal, political, social, and military. Financial risks include currency fluctuations, interest rate changes, and budget deficits, which may impact project costs and profitability. Technological risks arise from outdated technologies and operational failures. Legal risks involve changes in legislation and contract breaches, while political risks stem from policy shifts and instability. Social risks include public opposition and dissatisfaction, while military risks in Ukraine include infrastructure destruction and service disruptions. The research highlights scenario analysis as an effective tool for assessing and managing risks. This method involves creating optimistic, realistic, and pessimistic scenarios to evaluate potential project outcomes. By analyzing financial, political, and technical variables, scenario analysis helps project managers develop strategies to mitigate adverse impacts and enhance financial stability. The paper evaluates three financing models for PPP projects in the water supply and sewerage sector. The classic model (50% government funding, 50% loan) provides moderate financial stability but depends heavily on budget availability. The combined model (30% government funding, 30% grants, 40% loan) is identified as the most effective due to balanced risk distribution and increased financial flexibility. The fully private model (100% loan) is less effective due to high debt pressure and interest rate sensitivity. Key recommendations include creating reserve funds to cover financial shortfalls, securing fixed-rate loans to reduce financial volatility, and engaging international financial institutions to stabilize funding. Strengthening the legal framework for PPP projects is also suggested to protect private investors and improve regulatory consistency. This study contributes to the understanding of PPP risk management by providing a structured analysis of risk factors and assessment methods in Ukraine’s water infrastructure sector. The findings offer practical guidance for policymakers and project managers to enhance the efficiency and success of PPP projects.