project; if their market analysis was correct, these profits could be substantial. Also,
by purchasing the land adjacent to the project, these concessionaires can make the
most of that land’s increased value.
18.6 BOT Partners Interactions
18.6.1 Role of the Sponsor/Project Company
As explained in para. 18.4, the project company’s role and responsibility is to build,
own, operate and ultimately transfer the facility to the host government.
It is therefore essential that the sponsor/s who will form the project company be a
financially strong and technically experienced firm or group of firms. To achieve
financial and technical strength, sponsors usually get together to form a consortium,
comprising basically of one or more international engineering or construction firms
and one or several international equipment suppliers.
The sponsor is also responsible for what is termed as “Development Costs”
i.e. costs associated with the early stages of project preparation such as feasibility
studies, the services and professional advice of financial and legal advisors, travel
expenses, executive management time input etc. These costs are normally high and
therefore, before embarking on the financing of a BOT package, sponsors would
prefer a “sole award” approach.
It is yet another reason why the sponsors should, at an early stage of the project,
agree among themselves about the sharing of the Development Costs.
It may be advantageous that the project company be constituted at an early stage,
so that it can start negotiations with other parties such as the government, the
contractors, the suppliers, lenders, insurers, equity investors and the financial institutions. The sponsors, in some cases, may consider the advisability of including a
local firm as a local partner.
The project company has the important responsibility of choosing the contractor
for the project construction, either by direct negotiation, or through some form of
competitive bidding. It is important that the project company be in a position to look
for companies either locally or overseas who possess the proven expertise, reputation, financial strength, and reliability to build the facility and provide the necessary
equipment. In so doing, the project company should not lose sight of the constant
need to assure the equity holders and the lenders about the project success in terms of
cost and time.
The project company should be able to exercise judgement regarding the advisability of selecting the various members of the construction consortium from different countries. This is not a prerequisite of a BOT scheme, in absolute terms, but it
may bring the following advantages:
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18 Infrastructure Markets and the Private Sector
by purchasing the land adjacent to the project, these concessionaires can make the
most of that land’s increased value.
18.6 BOT Partners Interactions
18.6.1 Role of the Sponsor/Project Company
As explained in para. 18.4, the project company’s role and responsibility is to build,
own, operate and ultimately transfer the facility to the host government.
It is therefore essential that the sponsor/s who will form the project company be a
financially strong and technically experienced firm or group of firms. To achieve
financial and technical strength, sponsors usually get together to form a consortium,
comprising basically of one or more international engineering or construction firms
and one or several international equipment suppliers.
The sponsor is also responsible for what is termed as “Development Costs”
i.e. costs associated with the early stages of project preparation such as feasibility
studies, the services and professional advice of financial and legal advisors, travel
expenses, executive management time input etc. These costs are normally high and
therefore, before embarking on the financing of a BOT package, sponsors would
prefer a “sole award” approach.
It is yet another reason why the sponsors should, at an early stage of the project,
agree among themselves about the sharing of the Development Costs.
It may be advantageous that the project company be constituted at an early stage,
so that it can start negotiations with other parties such as the government, the
contractors, the suppliers, lenders, insurers, equity investors and the financial institutions. The sponsors, in some cases, may consider the advisability of including a
local firm as a local partner.
The project company has the important responsibility of choosing the contractor
for the project construction, either by direct negotiation, or through some form of
competitive bidding. It is important that the project company be in a position to look
for companies either locally or overseas who possess the proven expertise, reputation, financial strength, and reliability to build the facility and provide the necessary
equipment. In so doing, the project company should not lose sight of the constant
need to assure the equity holders and the lenders about the project success in terms of
cost and time.
The project company should be able to exercise judgement regarding the advisability of selecting the various members of the construction consortium from different countries. This is not a prerequisite of a BOT scheme, in absolute terms, but it
may bring the following advantages:
508
18 Infrastructure Markets and the Private Sector