18.4 Characteristics of BOO – BOT Projects
18.4.1 Partners
There are essentially three main partners in a BOO - BOT project procurement: They
are:
• the Private Sector
• the Government
• the Multilateral organisations
The BOT approach - sometimes referred to as BOOT (Build, Own, Operate,
Transfer) - involves the assembling of private sponsors, usually a consortium of
private companies, to finance, design, build, operate, and maintain some form of
revenue-producing infrastructure project for a specific period. At the end of this
concessionary period, when it has been estimated that all investment costs have been
recouped from user fees and a profit turned, title to the project passes from the private
consortium to the host government. The BOT theme has several variations:
BOO Build, Own, Operate (without any obligation to transfer ownership)
BTO Build, Transfer, Operate (a method of relieving the consortium of furnishing
high-cost insurance required by the project during the operation of the facility)
BRT Build, Rent, Transfer
BOOST Build, Own, Operate, Subsidize, Transfer
DBFO Design, Build, Finance, Operate (similar to BTO, the government will retain
title to the land and lease it to the private concern over the life of the concessionary agreement)
The BOO and BOT concept inevitably introduces the participation of the private
sector in the infrastructural, and ultimately the economic development of a country,
integrating their members as partners together with Government in global development. This ultimately may result in the gradual elimination of the historical mistrust
between the public and private sectors, creating a more favourable climate for
progress, both on the national and international level.
One important component of the BOO - BOT concept is the risk transfer. Under
the conventional project financing and general procurement, the borrower, in most
cases the Government, was the sole risk bearer, both on the financial and technical
considerations. Under the BOO - BOT project financing, the risk is transferred to
varying extents to the private sector both for the financial and technical aspects of the
project.
In a BOT project, the private-sector sponsors generally provide equity financing
in the amount of 10–30% of the total project cost and seek debt financing for the
balance of the investment. The host government may, on occasion, furnish a portion
or all of the land required for the project or possibly grant partial tax relief in some
form or another. However, many BOT projects are structured without any support or
backing (financial or otherwise) from the host government.
504
18 Infrastructure Markets and the Private Sector
18.4.1 Partners
There are essentially three main partners in a BOO - BOT project procurement: They
are:
• the Private Sector
• the Government
• the Multilateral organisations
The BOT approach - sometimes referred to as BOOT (Build, Own, Operate,
Transfer) - involves the assembling of private sponsors, usually a consortium of
private companies, to finance, design, build, operate, and maintain some form of
revenue-producing infrastructure project for a specific period. At the end of this
concessionary period, when it has been estimated that all investment costs have been
recouped from user fees and a profit turned, title to the project passes from the private
consortium to the host government. The BOT theme has several variations:
BOO Build, Own, Operate (without any obligation to transfer ownership)
BTO Build, Transfer, Operate (a method of relieving the consortium of furnishing
high-cost insurance required by the project during the operation of the facility)
BRT Build, Rent, Transfer
BOOST Build, Own, Operate, Subsidize, Transfer
DBFO Design, Build, Finance, Operate (similar to BTO, the government will retain
title to the land and lease it to the private concern over the life of the concessionary agreement)
The BOO and BOT concept inevitably introduces the participation of the private
sector in the infrastructural, and ultimately the economic development of a country,
integrating their members as partners together with Government in global development. This ultimately may result in the gradual elimination of the historical mistrust
between the public and private sectors, creating a more favourable climate for
progress, both on the national and international level.
One important component of the BOO - BOT concept is the risk transfer. Under
the conventional project financing and general procurement, the borrower, in most
cases the Government, was the sole risk bearer, both on the financial and technical
considerations. Under the BOO - BOT project financing, the risk is transferred to
varying extents to the private sector both for the financial and technical aspects of the
project.
In a BOT project, the private-sector sponsors generally provide equity financing
in the amount of 10–30% of the total project cost and seek debt financing for the
balance of the investment. The host government may, on occasion, furnish a portion
or all of the land required for the project or possibly grant partial tax relief in some
form or another. However, many BOT projects are structured without any support or
backing (financial or otherwise) from the host government.
504
18 Infrastructure Markets and the Private Sector