debt and equity funding should be well studied. They will normally vary depending
on the type of the project and the country of implementation.
The possibility of mobilising local capital both in the debt and equity financing,
and that of raising securities within the local resources should be analysed.
The possibility of Debt/Equity swap transactions should also be studied i.e. the
use of local currency, assuming its availability, to alleviate the external commercial
debt. This is an intricate economic issue which is best left to experts in the field.
In any given BOT project, all the above factors influence the value of the foreign
to local currency ratio.
18.8.8 Transfer to Host Government
The mechanism of the “T” of the “BOT” concept will now be discussed. The typical
BOT project implies and requires that ownership title of the facility, which has been
built, and operated by the private company (for X years), be now transferred
(or reassigned) to the host government. Thus, after X years (the agreed concession
or “Franchise” period), the infrastructure facility will now belong to the host
government. Usually, depending on the project, and the government’s intentions,
this period can be anything between 10 and 30 years, and may be more in some
special circumstances.
What the ownership may consist of, and therefore what facility and asset should
be transferred, will differ from project to project and according to their nature.
Sometimes, as has been outlined earlier, the land on which the facility has been
built may either have been “leased” to the concession company or sold to it. In the
latter case, the company will have a 100% ownership of the land, plant and
equipment (and infrastructure) comprising the project.
In the case of a lease, the transfer will imply a reversion of the land to the
government; however, the assets of the facility will still necessitate a transfer.
Depending on the type of Concession Agreement signed by the host government
and the Project Company, the transfer may involve a final compensation by the
government to the equity holders. There are several ways whereby this can be done,
namely:
(a) based on the amount necessary to provide the original equity return to the
investors (assuming satisfactory performance over the concession period).
(b) based on a fair and reasonable value of the project, at the transfer time.
(c) conditions for such a payment could be a regular assessment of the project
property, and endorsement of its maintenance throughout the concession period
and its full soundness at the time of transfer.
(d) The final transfer amount may only be nominal, if it is assumed that the equity
return over the concession period has been sufficient to cover an equitable return
on the initial equity investment. However, all these provisions should have been
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18 Infrastructure Markets and the Private Sector
on the type of the project and the country of implementation.
The possibility of mobilising local capital both in the debt and equity financing,
and that of raising securities within the local resources should be analysed.
The possibility of Debt/Equity swap transactions should also be studied i.e. the
use of local currency, assuming its availability, to alleviate the external commercial
debt. This is an intricate economic issue which is best left to experts in the field.
In any given BOT project, all the above factors influence the value of the foreign
to local currency ratio.
18.8.8 Transfer to Host Government
The mechanism of the “T” of the “BOT” concept will now be discussed. The typical
BOT project implies and requires that ownership title of the facility, which has been
built, and operated by the private company (for X years), be now transferred
(or reassigned) to the host government. Thus, after X years (the agreed concession
or “Franchise” period), the infrastructure facility will now belong to the host
government. Usually, depending on the project, and the government’s intentions,
this period can be anything between 10 and 30 years, and may be more in some
special circumstances.
What the ownership may consist of, and therefore what facility and asset should
be transferred, will differ from project to project and according to their nature.
Sometimes, as has been outlined earlier, the land on which the facility has been
built may either have been “leased” to the concession company or sold to it. In the
latter case, the company will have a 100% ownership of the land, plant and
equipment (and infrastructure) comprising the project.
In the case of a lease, the transfer will imply a reversion of the land to the
government; however, the assets of the facility will still necessitate a transfer.
Depending on the type of Concession Agreement signed by the host government
and the Project Company, the transfer may involve a final compensation by the
government to the equity holders. There are several ways whereby this can be done,
namely:
(a) based on the amount necessary to provide the original equity return to the
investors (assuming satisfactory performance over the concession period).
(b) based on a fair and reasonable value of the project, at the transfer time.
(c) conditions for such a payment could be a regular assessment of the project
property, and endorsement of its maintenance throughout the concession period
and its full soundness at the time of transfer.
(d) The final transfer amount may only be nominal, if it is assumed that the equity
return over the concession period has been sufficient to cover an equitable return
on the initial equity investment. However, all these provisions should have been
516
18 Infrastructure Markets and the Private Sector