bnamericas project risk analytics - october 2015 state vs private

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Project Risk Analytics: Tracking performance in Latin America’s top projects

US$141bn 38% 47% 790Total increase in cost

estimates for top 200 current projects in Latin America

of projects have experienced increases to

original timing estimates

Number of projects in the tendering stage in the

BNamericas project database

of projects have experienced increases

in cost estimates

TRACKING PERFORMANCE IN LATIN AMERICA´S TOP PROJECTSSTATE vS. PRIvATE – whO wILL COME OuT ON TOP?Project risk AnAlytics - sePtember 2015

PROJECT

RISK ANALYTICS

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BNAMERICAS PROJECT RISK ANALYTICSTracking performance in LaTin america’s Top projecTs

BNamericas Project Risk Analytics tracks changes to estimates of completion dates and overall costs in Latin American projects during their implementation phase.

The information herein is designed to be used by governments, insurers, reinsurers, project financiers, risk officers, asset managers and advisers, to analyze upcoming risk to schedules and financing costs, and track the progress of existing projects.

By providing a top-down analysis of the timeliness and costs of current Latin American projects, BNamericas provides a new tool to the industry allowing it to learn from past events and improve planning for future projects.

SUBSCRIBE TODAYPROJECT RISK ANALYTICS

Natan LevyAuthor and Head of Project Risk [email protected] +56 (2) 2941-0386

Arvinder LudhiarichCommercial [email protected] +56 (2) 2941-0300

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CONTENT

FOREWORD.................................................................................4

SUMMARY...................................................................................5

RESULTS & DISCUSSION...............................................................6

PROJECT MATURITY AS A DETERMINANT OF COST OvERRUNS................................7

PROJECT DURATION AS A DETERMINANT OF COST OvERRUNS................................9

PROJECT SIzE AS A DETERMINANT OF COST OvERRUNS.....................................10

STATE vS. PRIvATE PROJECTS....................................................................11

CONCLUSIONS..........................................................................14

APPENDIX I - ....................................................................................................................16

METHODOLOGY & PROCEDURES.........................................................................................18

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This second report by BNamericas follows on from the inaugural report in June and updates the results for a sample of 200 of the largest projects in Latin America in the electric power, mining, oil & gas (excluding upstream) and petrochemical sectors.

In tracking project data in Latin America - from the start of construction to final completion - the report adds a further 100 projects to the original sample and continues to follow the progress and changes in timing and cost estimates throughout the implementation phase of the region’s largest projects.

Since the launch of BNamericas’ Project Risk Analytics unit at the end of June, the work of the team has focused on providing the data to users in a user friendly way and the work continues to ensure this new product by BNamericas becomes an essential tool for all actors involved in the build-up of the region’s infrastructure.

FOREWORDWith the region’s economies continuing to depend on the movements of foreign investment flows, and the uncertainty surrounding policy moves by central banks in the developing world, the focus around successful project completion looks set to increase,especially so as questions arise as to whether the ambitious plans for infrastructure development – set at a time of economic growth – can be met.

The report aims to set the scene for meaningful comparisons between the performance of private and state-owned projects while delving deeper into the question of the influence of project size and other related parameters.

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FOREWORDThe overall results updated for the 200 largest projects in Latin America show a significant change from June’s report which focused on the largest 100 projects.

The addition of 100 smaller projects with a lower maturity has brought down the incidence and severity of delays and cost overruns.

The 200 projects covered represent an initial investment estimate of US$367bn (compared to US$242bn in the June report).

When updated for current estimates to the end of August (chart 1), the expected investment for the 200 projects rises to US$508bn, an increase of US$141bn, or 38% from original estimates.

Further, the results, with the addition of 100 new projects, continue to challenge the concept of the cone of uncertainty, suggesting clearly that not only is variability in costs limited to increases, but also that the uncertainty increases in a very clear way for more mature projects.

SUMMARYsTaTe versus privaTe secTor

The long standing debate as to the pros and cons of state investment versus private sector investment has for some time lacked real figures for comparison. In considering the track record of investments across Latin America it is necessary to provide information which allows for comparison of the extent of cost overruns between the private and state sectors across Latin America.

In that regard, there is some good news for the public sector with the results illustrating that state-owned projects have fared better than their private sector brethren in percentage terms.

This however, has to be put into context and the reality has to be acknowledged that the largest and most complex projects continue to be undertaken by the public sector and in that regard the current overspend in the region of US$141bn is made up in large part by US$104bn in state-owned projects.

More importantly, by failing to budget correctly, it is also questionable whether continued rounds of investment will achieve their lofty goals or even if the financing will be there for such investment to be considered.

Changes from original estimates

500

600

400

300

200

100

0

US$

bn

70

80

60

50

20

40

10

30

0

Mon

ths

Total Costs US $bnTiming (average, months)

Latest estimates of increase

16

Original project duration

52

Latest estimates of Increase

141

Original project cost 367

Chart 1

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augusT resuLTs – Top 200 projecTs

• On aggregate, current cost estimates for the top 200 projects in the region amounted to US$508bn as of August 2015, representing an increase of US$ 141bn to original estimates.

• 47% of projects registered an increase from their original estimate for completion, with 50% running on time and 2.5% of projects running ahead of schedule. (chart 2)

• 37.5% of projects showed an increase from their original cost estimates, with 57% of projects running in line with their original budget estimates and 5.5% running below initial estimates in US dollars.

severiTY of cHanges To Timing esTimaTes

• The average length of delay for the top 200 projects at the end of August stood at 15.9 months or 35% greater than initially estimated. The median length of delay in con-trast has come down to zero with the addition of the new projects. (chart 3)

• Of the 94 delayed projects, 40 are experiencing major changes of over 60% from the original estimates.

• 33 of the 94 projects are showing medium increases of 20% to 60% from original estimates and 21 projectsare showing minor increases of between 5% and 20% from original estimates.

• Of the remaining 106 projects, 101 are on time (-5% to +5% from original estimates) and 5 are ahead of time.

RESULTSNumber of Projects delayed and over budget

120

100

80

60

20

40

0Delayed On Time Ahead of

ScheduleOver budget To Budget Ahead of

Budget

94

5

101

75

114

11

Average delays and cost overruns for complete sample

50

30

40

20

45

25

35

Average delay Average cost overrun

35.1

37.6

Chart 2

Chart 3

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severiTY of cHanges To cosT esTimaTes

• The average increase in cost estimates for the top 200 is 37.56% above initial estimates while the median increase in cost estimates stands at 0%.

• Of the 75 projects with an increase in cost estimates, 45 projects are experiencing major changes of over 40% from original estimates.

• 17 of the 75 projects are experiencing medium cost increases of 20% to 40% and 13 projects are experiencing minor increases of 5% to 20% from original estimates.

• Of the remaining 125 projects, 114 are running on budget (-5% to +5% from original estimates) and 11 are under budget.

correLaTion

• When considering the relationship between changes in costs and changes in timing estimates the correlation coefficient stands at 0.52, with statistical significance to p<0.001. This represents a drop from the correlation of 0.68 related to the first 100 projects.

over-BuDgeT projecTs

• Given the low medians of the overall sample, following the addition of new projects of a lower maturity, it is useful to split the sample in order to look exclusively at those projects which have experimend cost increases. (Chart 5)

• The average delay for a project which is running over its initial cost estimate is close to 67% while the median stands at close to 35%.

• The average cost overrun for those projects stands at 104% while the median stands close to 55%.

Changes from original estimates - Scatter

750%

350%

550%

150%

-50%

650%

250%

450%

50%

-50%

Chan

ges

to C

ost S

ched

ule

50% 150%

Changes to Timing Schedule

250% 350% 450%

Average delays and cost overruns for projects over budget

Average delay Average costoverrun

Median delay Median costoverrun

120

40

80

0

100

20

60

104

34.8

66.8

54.9

Chart 5

Chart 4

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Effect of project maturity on changes to estimates

Overall project

maturity

On time

Delayed

On budget

Over budget

0 0.5 1 1.5 2

103%

59%

154%

126%

74%

maTuriTY profiLe

When considering the maturity of the sample of 200 projects it is possible to see the decrease resulting from the addition of the 100 projects to the original sample. When measured by the current average advance as a percentage of the average initial expected duration, the overall maturity decreased from 109% for the 100 projects in March 2015, to 103% for the 200 projects.

• Further it is clear to see that the maturity of those projects which have experienced increases to their timing estimates stood at 154% compared to 58.51% for projects which were estimated to finish on time. (chart 6)

• Projects which experienced cost overruns meanwhile exhibited a maturity of over 152% compared to projects which are still on budget that were far less mature at close to 74%.

Further, when looking at chart 7 it is clear once again that those projects which have so far experienced increases to timing and cost estimates are further along in their maturity. The correlation meanwhile, between maturity and cost over-runs is 56% at a significance level of <.0001.

Chart 6

Chart 7

0% 50% 100% 150% 200% 250% 300%

350%

150%

250%

50%

300%

100%

200%

0%

-50%

-100%

Cost

cha

nges

Maturity

Project Maturity to Cost changes - excluding extreme outliers

y=0.407x - 0.1259

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projecT maTuriTY as a DeTerminanT of cosT overruns

As an extension of the analysis and in order to improve the understanding of the sample, it can be split into quartiles by the maturity of the projects. (Table 1)

The table makes it clear that the more mature projects exhibit a greater average cost overrun and are by definition delayed to a greater extent. In addition the table shows a significant increase in the median delay and median cost overrun in the fourth quartile.

The correlation of delays to cost overruns thus rises from the first to the fourth quartile.

projecT DuraTion as a DeTerminanT of cosT overruns

Previous academic research has looked at testing the thesis that projects with longer implementation phases tend to have larger cost escalations, looking at the time period from when the decision to build is taken until construction is completed.

Flyvbjerg et al (2004)1, found a highly significant dependence of cost escalation on the length of the implementation phase for the 101 transportation projects under their research.

Using the 200 projects, for which we have the original estimates for the length of the implementation phase, we have split the data into quartiles by the original estimate for the length of implementation. (Table 2)

The resultant data does not paint a clear picture. While the average cost overrun increases steadily from the second quartile to the fourth, the average cost overrun for first quarter is higher than both the second and third quartiles.

What is clear however, is the rising correlation between delays and cost overruns as the original project implementation period increases.

By % completion (Maturity)

Quartile 1 Quartile 2 Quartile 3 Quartile 4

No. of projects

Average maturity

Quartile info (Maturity)

Average delay (months)

Median (months)

Average delay %

Median delay %

50 51 50 49

25% 71% 109% 211%

44% 91% 134% 591%

0.40 4.75 12.46 46.67

0.00 0.00 3.00 20.00

0.61% 8.81% 25.09% 108.03%

0.00% 0.00% 10.88% 80.77%

Total cost overrun US$mn 311 9,291 71,658 59,956

Average cost overrun % 0.28% 13.59% 38.84% 99.23%

Median cost overrun % 0.00% 0.00% 3.87% 45.49%

Correlation Delay /Cost Ov -1.77% 29.91% 26.75% 44.05%

Table 1

1Bent Flyvbjerg, Mette K. Skamris Holm and Søren L. Buhl, “What Causes Cost Overrun in Transport Infrastructure Projects?” Transport Reviews, vol. 24, no. 1, January 2004, pp. 3-18.)

By initial implementation time


No. of projects 50 57 45 48

Average maturity 133% 116% 81% 79%

Quartile info (months) 35 48 63 144

Average delay (months) 10.70 19.39 13.16 19.58

Median (months) 2.00 10.00 0.00 0.00

Average delay % 40.25% 48.33% 23.12% 25.43%

Median delay % 25.18% 6.67% 0.00% 0.00%

Total cost overrun US$mn 16,941 23,272 15,541 85,462



Correlation Delay /Cost Ov 39.95% 45.64% 71.45% 78.37%

Table 2

Project Maturity as a determinant of cost overruns

Project duration as a determinant of cost overruns

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projecT cosT as a DeTerminanT of cosT overruns

In a similar way, when looking at whether the size of original cost estimates for a project can determine the extent of cost increases, we have tested to see whether cost escalation varies significantly with the size of the project, based on its original cost estimate at the time when the project entered its implementation phase.

Flyvbjerg et al (2004) looked at 131 projects for their sample and while they found no immediate dependence between the two variables, they did conclude that for bridges and tunnels, the available data support the claim that bigger projects have bigger percentage cost escalations.

Our data, for the 200 projects, similarly found no immediate dependence and it remains to be seen if additional data will result in a link being established. (Table 3)

By initial investment estimate


No. of projects 50 50 50 50

Average maturity 115% 117% 89% 93%

Quartile info up to US$mn 432 865 1,810 40,000

Average delay (months) 10.60 20.12 14.18 18.54

Median (months) 0.00 6.00 0.00 0.00

Average delay % 30.43% 41.81% 34.77% 33.56%

Median delay % 0.00% 14.66% 0.00% 4.05%

Total cost overrun US$mn 5,507 14,657 12,443 108,609



Correlation Delay /Cost Ov 34.53% 88.55% 9.87% 48.60%

Table 3

Project cost as a determinant of cost overruns

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Private State Overall

Amount over budget US$mn 36,740 104,476 141,216

Latest investment estimate US$mn 114,156 393,852 508,008

No. of projects 58 142 200

No. of projects ahead of schedule 3 2 5

No. of projects on time 27 74 101

No. of projects delayed 28 66 94

% ahead of schedule 5,17% 1.41% 2.50%

% on time 46,55% 52.11% 50.50%

% delayed 48,28% 46.48% 47.00%

No. of projects ahead of budget 1 10 11

No. of projects on budget 28 86 114

No. of projects over budget 29 46 75

% ahead of budget 1.72% 7.04% 5.50%

% on budget 48.28% 60.56% 57.00%

% over budget 50.00% 32.39% 37.50%

Portfolio % of completion (Materity) 108% 101% 103%

Average delay (Months) 11.07 17.82 15.86%

Median (months) 2.00 0.00 0.00

Average delay % 28.02% 38.05% 35.14%

Median delay % 242% 0.00% 0.00%

Average cost overrun % 43.08% 35.30% 37.56%

Median cost overrun % 2.42% 0.00% 0.00%

Correlation delays / cost overruns 41.10% 53.77% 51.86%

State vs Private - overall comparison

Table 4

a comparison of puBLic vs privaTe projecTs

The long standing debate as to where investment should come from is beyond the scope of the report, but in tracking the progress of projects in the region we have classified projects by ownership, whether state-owned or private.

This implies a consideration of the underlying ownership of a project to be the key determinant, whereby a concession contract implies ownership by the related government agency and does not imply ownership by the contracted firm. A project run by a state-owned company is considered to be owned by the state.

• Of the 58 existing live projects under private ownership in the region, half are running over their original budget with changes to cost estimates averaging 43%. (Table 4)

• In comparison, of the 142 state-owned projects in the sample, less than a third are running over budget, with changes to cost estimates averaging 35%.

However, it is important to remember that the largest most complex projects continue to be undertaken by the public sector and in that regard the current overspend in the region of US$141bn is made up in large part by US$104bn in state-owned projects.

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Table 5

State vs Private - Sector breakdown

State vs Private - Detailed breakdown

Number of Projects

Cost IncreaseUS$mn

Latest estimate for total

InvestmentUS$mn

Average change

in timing estimates

Average change in cost

estimates

Average Maturity

Water & Waste 18 3,689 20,014 34.97% 25.74% 107.22%

Electric Power 55 26,372 97,366 33.54% 31.34% 101.84%

Infrastructure 67 10,729 147,786 30.84% 22.83% 89.18%

Mining 28 30,531 85,133 29.22% 65.78% 111.84%

Oil & Gas and Petchem 32 69,895 157,709 52.18% 61.02% 126.29%

Grand Total 200 141,216 508,008 35.14% 37.56% 103.40%

Number of Projects

Cost IncreaseUS$mn

Latest estimate for total

InvestmentUS$mn

Average change

in timing estimates

Average change in cost

estimates

Average Maturity

Privado

Water & Waste 1 - 3,430 0.00% 0.00% 49.01%

Electric Power 25 3,164 19,125 20.73% 20.11% 84.09%

Infrastructure 4 1,909 6,620 84.21% 51.89% 188.47%

Mining 25 26,576 75,230 28.86% 64.76% 116.86%


Público

Water & Waste 17 3,689 16,584 37.02% 27.25% 110.65%

Electric Power 30 23,208 78,241 44.21% 40.70% 116.63%

Infrastructure 63 8,820 141,166 27.45% 20.99% 82.88%

Mining 3 3,955 9,903 32.26% 74.28% 70.00%


Grand Total 200 141,216 508,008 35.14% 37.56% 103.40%

Table 6

BY secTor

For a more detailed comparison between the private and public sector projects it is useful to break the data down by sector. (Table 5)

When broken down, the data illustrates how the greatest cost overruns are concentrated in the mining and oil & gas sectors.

Private project sectors are concentrated on the whole in the mining and energy sectors while in the public sector, projects are spread more equally, with the exception of the mining sector.

As a result, the most useful direct comparison is available in the electric power sector where the sample includes 25 private sector projects and 30 in the public sector. (Table 6)

Here it is found that the average change in timing and cost estimates for electric power projects in the private sector, both at 20.1% are much lower than for electric power projects in the public sector where the change in timing estimates averages 44.2% and changes in cost estimates average 40.7%.

A closer look reveals some justification for the results in the concentration of hydroelectric projects and nuclear energy projects in the public sector - which carry a much higher investment value and are by their nature more complex than other forms of electric power stations, including wind and solar parks which tend to be built by the private sector in the region.

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QuaLiTaTive anaLYsis

The qualitative analysis follows the methodology introduced by a paper in the Research Journal of Applied Sciences, Engineering and Technology in 2013.

An analysis of the main factors cited by company contacts, public bodies and press reports for increases in timing and cost estimates on the affected projects uncovered the main factors to be as follows:

• Of the 200 projects in the sample, the analysis established sufficient information for 55 of the 75 projects that have exceeded their costs estimates, where one or more factors were cited for their contributions to cost increases. (Table 7)

• Financial management was the most-often-cited factor for cost increases in 27 of the projects and included cases where cost inflation and failures in budgeting were cited as the causes as well as those which experienced difficulties in receiving timely funding.

• Design factors were cited on 22 occasions as having led to an increase in costs and involved cases of changes in scope and redesign throughout the implementation phase.

• Labor factors were the third most common reason cited for cost increases on 15 occasions and included labor disputes resulting in strikes as well as difficulties in finding skilled staff.

• External factors, including changes in commodity prices, in ownership and political decisions which impacted costs, were cited in 13 cases as having contributed to cost increases.

1Ade Asmi Abdul Azis,AftabHameedMemon, Ismail Abdul Rahman and Ahmad TarmiziAbd.Karim. (2013) Controlling Cost Overrun Factors in Construction Projects in Malaysia.Research Journal of Applied Sciences, Engineering and Technology 5(8): 2621-2629.

Table 7

Factors responsible for cost overruns

Financial Management 27

Design 22

Labor 15

External 13

Project Management 11

Environmental 10

Social & Community 4

• Project management failures were cited in 11 cases while environmental and community factors were the least cited reasons for cost increases in the sample during the implementation phase of a project.

• Labor factors were the third most common reason cited for cost increases on 15 occasions and included labor disputes resulting in strikes as well as difficulties in finding skilled staff.

• External factors, including changes in commodity prices, in ownership and political decisions which impacted costs, were cited in 13 cases as having contributed to cost increases.

• Project management failures were cited in 11 cases while environmental and community factors were the least cited reasons for cost increases in the sample during the implementation phase of a project.

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The results for 200 of the largest projects in Latin America, representing over half a trillion dollars of on-going investment in the region attest once more to the conclusion that delays and cost overruns are a significant issue.

Not only are delays and cost overruns extensive, they are closely linked as the evidence shows, with more mature projects exhibiting the greatest delays and cost overruns.

That said, the addition of 100 projects to the original sample from the June report -which are progressively smaller than the original 100 projects - has reduced the overall incidence of projects running over schedule and over original budget estimates as well as the extent of the changes, lending weight to previous academic work which linked project size and complexity to greater delays and cost overruns.

This can be put down to the reduced size, maturity and complexity of the new projects as we continue to ramp up the sample size.

When analyzing by project size, the results proved inconclusive, suggesting that project size was not a reliable determinant of cost overruns.

Additional analysis by expected initial duration also proved inconclusive, suggesting that while those projects which are forecast to take the longest to complete experience the greatest cost overruns, they do not experience the more severe delays.

sTaTe vs privaTe

A comparative analysis of state-owned and privately-owned projects suggests that state-owned projects are performing better overall. Here time is required to see if the scales are evened as more projects are added to the sample and as they move towards completion but as shown for projects in

CONCLUSIONSthe electric power sector, the results are also influenced by sector specific factors which make generalizations less valid.

When considering the maturity profile of on-going projects it is important to revisit the results at completion. If one assumes that the public sector is not under the same scrutiny as the private sector - where accounting recognition of fair value and changes to costs is called for on a regular basis - it can be argued that a substantial chunk of cost overruns in public sector projects remains to be recognized.

If timely recognition of changes in cost estimates are indeed the issue, with time the figures will become clearer, allowing a more accurate comparison between private and state-owned projects.

However, the overall scale of cost increases experienced to date, raises important questions about the reliability of cost estimates and as to whether both the public and the private sectors are crowding out investment in more worthwhile projects.

Further, As Flyvbjerg et al (2004) noted over 10 years ago, “the main problem in relation to cost escalation may not be public versus private ownership but a certain kind of publico wnership, namely state-owned enterprises, which lack both the transparency and public control that placement in the public sector proper would entail and the competitive pressure that placement in the private sector would bring about,” adding that “It is an issue of principal significance for deciding on the institutional set-up and regulatory regime for infrastructure provision.”

Finally, an analysis of the major factors responsible for cost overruns continues to point the finger squarely at financial mismanagement and changes in original designs as being the most significant reasons for increases in cost estimates.

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The inescapable conclusion being, that better designed projects with more accurate estimates are a must if the region is to achieve the aims of the myriad investment programs, launched by governments and supported by the numerous actors which finance, insure and construct projects in Latin America.

upcoming researcH anD ongoing DeveLopmenTs

In continuing to improve and expand our database we have concentrated on improvements to our systems new levels of information, from costs in local currencies to tracking top project metrics such as kilometers for roads and power capacity for power stations.

In so doing we are working towards linking unitary costs at the start of a project to its end, thereby solidifying further, the information and understanding of the evolution of project costs throughout their life cycle.

Following the launch of our tracking service at the end of June, our information was made available to subscribers for individual projects, allowing users to filter the sample for their own use.

Our work in the coming months will concentrate on aggregating the information and creating a series of dashboards to allow users to see the relevant information by sector, by country as well as by relevant themes, with the ability to look at the individual track records of contractors in in our sample.

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APPENDIX I - BNAMERICAS’ PROJECT PIPELINEBNamericas’ entire database of over 2800 projects includes projects from their initial early works through to construction and completion.

By comparing the number of projects in construction and in the tendering stage across sectors, a more accurate picture can be obtained of the project pipeline for the region.

• Of the 2857 projects, 510 are currently in construction, while 434 are in the process of being tendered or awaiting an investment decision to be taken. 320 projects are in the process of undergoing and environmental impact assess-ment (EIA). (Table 8)

• The pipeline which includes those projects under tender, awaiting investment decision and undergoing an EIA, is seen to be concentrated in the energy and infrastructure sectors.

• A breakdown by sector and country is included in Chart 9 and Table 9.

Number of projects by stage

Construction 510

Tender/Awaiting investment decision 434

EIA 320

Total 1,246

EIA320

Tender/inv.decision

434510

PipelineConstruction

800

900

400

600

200

700

300

500

100

0

Number of projects by stage

Energy MiningInfra O&GWater

300

250

0

50

400

350

100

500

450

200

150

63

168 185

39 55

117

319197

75 46

Construction Pipeline

Table 8

Chart 8 Chart 9

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Sector Country Construction Pipeline

Water Argentina 6 11

Brazil 7 27

Chile 6 13

Colombia 5 11

México 12 14

Peru 6 20

Water total - All countries 63 117Energy Argentina 5 12 Brazil 23 18 Chile 49 177 Colombia 9 11 México 20 25 Peru 9 28Energy Total - All countries 168 319

Infra Argentina 11 11

Brazil 49 46

Chile 16 30 Colombia 19 25 México 26 12 Peru 15 16Infra Total - All countries 185 197Mining Argentina 3 4 Brazil 9 2 Chile 8 41 Colombia 2 2 México 9 6 Peru 4 14Mining Total - All countries 39 75Oil & Gas and Petchem Argentina 4 2 Brazil 6 4 Chile 1 4 Colombia 4 4 México 16 7 Peru 3 15Oil & Gas and Petchem Total - All Countries 55 46

510 754Table 9

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DefiniTions

Projects covered include state-owned and private projects in the Infrastructure, Electric Power, Oil & Gas (excluding upstream), Water and Waste, and Mining sectors.

Where applicable, a project is considered as such until the end of construction and ramp-up to full capacity (with the exception of mining projects, where the date of commissioning signifies the end of the project). Projects must have a:

• Start date• Estimate for completion• Initial investment estimate

DaTa

For state-owned projects, initial information about the start date and estimates for completion and investment are taken from original signed con-tracts, along with addendums and annexes.

If original contracts cannot be obtained, information is taken from public documents, presentations, news articles from BNamericas archives, and external sources.

In cases where contracts are subject to approval by legislators, the start date is the date of the law or legislative approval.

In the case of private projects, information is taken from public sources, such as stock exchange filings, annual reports, company presentations, third party research and press releases.

In judging the timing of investment decisions for private projects, great care was taken to differentiate between large projects receiving environmental approval and proceeding directly to construction, and smaller projects where the investment decision hinges on securing financing.

Recorded data is correct at the time of entry and all efforts were made to ensure that each entry is backed with a relevant source.

The greatest care possible was taken to ensure consistency of information in order make a like-for-like comparison in project costs. Insofar as the figures rely on disclosure by the organization or company responsible, the figures can be considered to be conservative in nature.

No attempt was made to adjust figures for inflation during the course of research or for consideration of the time value of money.

vaLiDaTion

In the case of state-owned projects, validation is carried out where possible with either a member of the consortium, EPC contractor, a relevant state agency or advisors to either party.

METHODOLOGY & PROCEDURES

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Timing BuDgeT

Language DefiniTions

Where guidance is non-specific as to dates for completion, the following is used.Project to be completed by 2018 = December 31, 2017Project to be completed in 2018 = December 31, 2018

currencY

Project costs are measured in US dollars.Where project costs are measured in a local currency, amounts are converted to US dollars at the date of the relevant announcement, signature or report.

severiTY of DeviaTion from originaL esTimaTes

The severity of deviation from original estimates is defined according to set criteria.

cHanges in scope

Changes in scope beyond the start date are not accounted for.

Status StatusCondition Condition

Ahead of time

On time

Minor changes

Medium changes

Major changes

Ahead of budget

On budget

Minor changes

Medium changes

Major changes

95% of original estimate or below (measured in months)

95% of original budget estimate or below

95% to 105% of original estimate 95% to 105% of original estimate

105% to 120% of original estimate 105% to 120% of original budget estimate

20% to 160% of original estimate 120% to 140% of original budget estimate

Over 160% of original estimate Over 140% of original budget estimate

DiscLaimers

• Figures and dates correspond to the latest publicly available information, as well as information gathered by BNamericas reporters and analysts, and are subject to change.

• Changes to original budget estimates are shown as the total figure available and may include interest, working capital, inflation adjustments and other contingencies in addition to capital expenditure.

• Amounts and overall results are shown in US dollars unless otherwise stated.

• BNamericas does not guarantee the sequence, accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. There are no express or implied warranties. In no event shall BNamericas, its agents, directors, officers, employees, representatives, successors, and assigns be liable for any damages of any nature in connection with the BNamericas content.

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About BNamericas Project Risk Analytics

BNamericas’ Project Risk Analytics tracks changes to estimates

of project completions dates and overall costs, in Latin

American infrastructure, energy and mining projects.

Governments, insurers, reinsurers, project financiers, risk

officers, asset managers and advisers can use this information

to analyze upcoming risk to schedules and financing costs,

and track the progress of existing projects for risk management

purposes.

By providing a top-down analysis of the timeliness and costs

of current Latin American projects, BNamericas provides a new

tool to the industry, allowing it to learn from past events and

improve planning for future projects.

In collaborating with the Major Projects research group at the

University of Oxford’s Saïd Business School, BNamericas

utilized the expertise of leading practitioners. The research

group is world-leading in its field with the most cited articles

in the field of major projects, programs and megaprojects in a

wide area of industries, such as transport infrastructure, energy,

civil engineering, IT and mega events.

Researchers advised and reviewed the methodology used by

the team and offered advice on structuring the data analysis to

make sense of the results. This collaboration ensured that the

data and the results are highly robust following international best

practice in terms of data collection and analysis.

About BNamericas

BNamericas delivers on-the-ground insight and trusted

business intelligence to companies and investors in Latin

America. BNamericas analyzes macro movements that

affect everyday business and future developments, including

social, political, economic, regulatory, technological, financial

and labor-related coverage. Connecting our clients with

trustworthy and timely insights, focused on 12 industry sectors,

BNamericas has been shaping the development of Latin

America for 19 years.

PROJECT

RISK ANALYTICS

IMPROvEyour planning

INCREASEthe chances of successful delivery

ANALyzEcurrent projects

SubScribe and get acceSS to future reportS and individual project matriceS

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www.BNamericas.comCONTACT US TODAY! Natan Levy

Author and Head of Project Risk [email protected] +56 (2) 2941-0386

Arvinder LudhiarichCommercial [email protected] +56 (2) 2941-0300Los Militares #6191,Las Condes Santiago, Chile

Business Insight in Latin America

buSineSS inSight in latin americaBNamericas delivers on-the-ground insight and trusted business intelligence to companies and investors active in and entering Latin America for over 19 years, identifying opportunities early on and connecting clients with business contacts and decision-makers.

Our subscription gives you access to:

NEWS PROJECT PROFILES

COMPANY PROFILES

INTELLIGENCE REPORTS DATA

bnamericas project risk analytics - october 2015 state vs private

Documents

latin americas

latin americaof projects

head of project risk

current projects

private projects

future projects

project financiers

project maturity