Investigation of Regulatory Risk Implications through Cost-Benefit Analysis: A Water Supply Network Case in Poland

ABSTRACT: Regulatory risk is the interaction between regulation and uncertainty that results in change of financing cost of a firm or project. Given capital intensive nature of the infrastructure projects, any factor including regulatory risk that may affect the cost at which this capital is obtained, plays a very important role in successful implementation of infrastructure projects. To assess the role of regulatory risk in success or failure of infrastructure projects, a water supply project in Bydgoszcz Poland has been analyzed. The cost-benefit analysis involving the modeling of project, analysis of different scenarios and risk analysis have been performed in this study. Asst. The financial and risk analysis of the project show that the regulatory risk which in this case is the adoption of a new tariff calculation method, can adversely affect the profitability and financial viability of project. However, such a risk can also decreases the unpredictability and riskiness of the project upon its materialization and it reduces the sensitivity of project outcome to different factors. Keywords: Cost-Benefit analysis, Regulatory risk, Risk analysis, Sensitivity analysis. ……………………………………………………………………………………………………………………………………………………………………………………………………………………