Page 62 - Industrial plants

projects the promoter finances, designs, constructs, as far as possible on the contractors. The contractor
and operates a facility over a given period but it does undertakes responsibility for constructing the asset
not revert to the government as it would using the and is expected to build the project on time, within
BOOT strategy. budget and according to a clear specification and to
Further extensions of the concept are BRT or BLT warrant that the asset will perform its design function.
(build, rent/lease and transfer) or simply BT (build and Typically this is done by way of a lump-sum turnkey
transfer immediately, but possibly subject to instalment contract.
payments of the purchase price).
O for own
Another approach, BTO (build, transfer and operate), The concession from the state provides for the
has become increasingly popular in the Far East and concessionaire to own, or at least possess, the assets
is particularly preferred by power and that are to be built and to operate them for a period of
telecommunications authorities. It is a simpler time: the life of the concession. The concession
transaction or concept than BOT and BOOT that can agreement between the state and the concessionaire
be implemented in a shorter time without the need for will define the extent to which ownership, and its
the formation of a project company and with the associated attributes of possession and control, of the
project assets being owned by the public sector. assets lies with the concessionaire.

O for Operate
An operator is to assume responsibility for maintaining
The Components of BOOT the facility’s assets and operating them on a basis that
B for build maximises profit or minimises cost on behalf of the
This is probably the easiest part of the acronym to concessionaire and, like the contractor undertaking
understand. The concession will grant the promoter construction of the project, the operator may provide
the right to design construct and finance the project. A funds to finance construction and be a shareholder in
construction contract will be required between the the project company. The operator is often an
promoter and a contractor. The contract is often independent company appointed under an arm’s-
among the most difficult to negotiate in a BOOT project length agreement. However, in some cases the
because of the conflict that increasingly arises between promoter operates the facility directly through the
the promoter, the contractor responsible for building promoter company.
the facility and those financing its construction.
Banks and other providers of funds will want to be sure T for Transfers
that the commercial terms of the construction contract This relates to a change in ownership of the assets
are reasonable and that the construction risk is placed which occurs at the end of the concession period,

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