§8.9 INPUT SUPPLY RISKS
In a process plant project, a reliable supply of fuel or other raw materials, on an
appropriate pricing basis, is essential. Lenders are unlikely to accept the Project
Company taking an open risk on the availability of its main fuel or raw material
supplies. Unless it can be clearly shown that the fuel or raw material concerned is
a widely available commodity, a long-term Input Supply Contract is required,
even if the project has not got an Offtake Contract (e.g., in the case of a merchant
power plant project).
Similarly, some form of hedging or other protection is needed against the risk
that the price of the fuel or raw material increases so much that the project be-
comes unable to operate. This can be achieved by:
• Passing ...