(b) Provision of escrow accounts. (This will be further explained under foreign
currency particulars).
(c) All the security devices such as performance bonds, suppliers, warranties,
insurance proceeds, should be consigned to a trustee who would provide first
call to the lenders.
(d) Possibility for the lenders to “take over” the project if technical or financial
default occurs, and call in new operators, contractors and suppliers. This can
only be achieved if all the equity is pledged as a security for the loans.
(e) Provision of government support in terms of financial and sovereign guarantees.
18.8.4 Host Government Support
As mentioned earlier, the host government’s backing is an essential prerequisite to
the success of a BOT package.
Areas where support, in different forms, would be required are given below:
(i) The host government must be willing to offer administrative support to the
project, assisting to resolve regulatory and other issues as they arise.
(ii) The government should nominate a representative, called “mentor” with
powerful ability to override administrative constraints, and fight opposition
to the project if ever it arises.
(iii) The government should appoint trained and experienced staff for the negotiation of the BOT project.
(iv) The seconded personnel should be of adequate hierarchical status to commit
government in decision making. Lack of decision or wrong decisions jeopardise any project.
(v) Provision of outside legal and financial advisors to the project.
(vi) The government may provide land required for the project, electricity power
to the site, water supply, over the duration of the project.
(vii) Provision of new legislation, if required, needed to produce the legal framework required for implementing the BOT project.
(viii) In the case that the government is the sole purchaser of the commodity
e.g. power or water, the government or the utility concerned will normally
be required to give an undertaking for the guaranteed purchase of the commodity. This may take any of the following forms:
(a) Signature of a long-term binding contract for purchase between government and the project company.
(b) Payment through an agreed and reasonable tariff structure.
(c) “Take or pay” basis, which will be determined by the debt service and
equity return requirements of the project.
(d) “Pay for Capacity” basis i.e. an agreed sum based on the capacity of
production of the facility. However, such provisions are also accompanied
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currency particulars).
(c) All the security devices such as performance bonds, suppliers, warranties,
insurance proceeds, should be consigned to a trustee who would provide first
call to the lenders.
(d) Possibility for the lenders to “take over” the project if technical or financial
default occurs, and call in new operators, contractors and suppliers. This can
only be achieved if all the equity is pledged as a security for the loans.
(e) Provision of government support in terms of financial and sovereign guarantees.
18.8.4 Host Government Support
As mentioned earlier, the host government’s backing is an essential prerequisite to
the success of a BOT package.
Areas where support, in different forms, would be required are given below:
(i) The host government must be willing to offer administrative support to the
project, assisting to resolve regulatory and other issues as they arise.
(ii) The government should nominate a representative, called “mentor” with
powerful ability to override administrative constraints, and fight opposition
to the project if ever it arises.
(iii) The government should appoint trained and experienced staff for the negotiation of the BOT project.
(iv) The seconded personnel should be of adequate hierarchical status to commit
government in decision making. Lack of decision or wrong decisions jeopardise any project.
(v) Provision of outside legal and financial advisors to the project.
(vi) The government may provide land required for the project, electricity power
to the site, water supply, over the duration of the project.
(vii) Provision of new legislation, if required, needed to produce the legal framework required for implementing the BOT project.
(viii) In the case that the government is the sole purchaser of the commodity
e.g. power or water, the government or the utility concerned will normally
be required to give an undertaking for the guaranteed purchase of the commodity. This may take any of the following forms:
(a) Signature of a long-term binding contract for purchase between government and the project company.
(b) Payment through an agreed and reasonable tariff structure.
(c) “Take or pay” basis, which will be determined by the debt service and
equity return requirements of the project.
(d) “Pay for Capacity” basis i.e. an agreed sum based on the capacity of
production of the facility. However, such provisions are also accompanied
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18 Infrastructure Markets and the Private Sector