(a) It may create added confidence in the host government in observing that the
project is an international one, with accruing benefits being distributed to several
countries. Hence it may make the project more politically acceptable.
(b) Selection of different countries means selection of equipment suppliers from
different countries, which will be supported by individual separate Export Credit
facilities.
(c) The risk allocation is shared among many countries, with all the associated
advantages.
(d) Expertise in a particular field can be put in common and compared to achieve the
best selection for specialised equipment, to be incorporated in the project.
18.6.2 Role of Host Government/Government Utility
The host government requesting the project implementation has specific roles to play
to ensure a successful BOT project. These roles are described below:
(a) As already explained, one of the biggest advantages to the government of the
BOT concept in project development is that the government does not have to
raise the finance required for the project. However, the government is at liberty
to determine whether it would be advisable to have an equity participation in the
project. This may have the following advantages:
(i) It will allow the government to “feel” the project with the required transparency at all stages.
(ii) It creates a confidence build-up by the other equity participants, and also
the debt participants.
(iii) It creates an environment conducive to enhanced interests of international
financial institutions in the project.
(iv) It may enhance the project company’s independence towards any of its
sponsors.
(v) It makes it easier for the government to accept the philosophy of achieving
reasonable returns to equity
(vi) It helps the government to achieve balance between rewards and penalties,
setting up of performance targets for the facility, sharing of risks.
(b) The government or one of its state-owned utilities needs to negotiate the terms
and conditions of the Concession Agreement with the project company. It is
important that the interests of the government and the project company are fairly
balanced in the Agreement.
(c) The host government may participate in the financing of the project in three
ways:
(i) As equity participation
(ii) As debt
(iii) On a stand-by basis.
18.6 BOT Partners Interactions
509
project is an international one, with accruing benefits being distributed to several
countries. Hence it may make the project more politically acceptable.
(b) Selection of different countries means selection of equipment suppliers from
different countries, which will be supported by individual separate Export Credit
facilities.
(c) The risk allocation is shared among many countries, with all the associated
advantages.
(d) Expertise in a particular field can be put in common and compared to achieve the
best selection for specialised equipment, to be incorporated in the project.
18.6.2 Role of Host Government/Government Utility
The host government requesting the project implementation has specific roles to play
to ensure a successful BOT project. These roles are described below:
(a) As already explained, one of the biggest advantages to the government of the
BOT concept in project development is that the government does not have to
raise the finance required for the project. However, the government is at liberty
to determine whether it would be advisable to have an equity participation in the
project. This may have the following advantages:
(i) It will allow the government to “feel” the project with the required transparency at all stages.
(ii) It creates a confidence build-up by the other equity participants, and also
the debt participants.
(iii) It creates an environment conducive to enhanced interests of international
financial institutions in the project.
(iv) It may enhance the project company’s independence towards any of its
sponsors.
(v) It makes it easier for the government to accept the philosophy of achieving
reasonable returns to equity
(vi) It helps the government to achieve balance between rewards and penalties,
setting up of performance targets for the facility, sharing of risks.
(b) The government or one of its state-owned utilities needs to negotiate the terms
and conditions of the Concession Agreement with the project company. It is
important that the interests of the government and the project company are fairly
balanced in the Agreement.
(c) The host government may participate in the financing of the project in three
ways:
(i) As equity participation
(ii) As debt
(iii) On a stand-by basis.
18.6 BOT Partners Interactions
509