Built Operate Transfer

Built Operate Transfer ( B.O.T)

Build-own-operate-transfer (BOOT) or build-operate-transfer (BOT) is a form of project financing, wherein a private entity receives a concession from the private or public sector to finance, design, construct, and operate a facility stated in the concession contract. This enables the project proponent to recover its investment, operating and maintenance expenses in the project. Due to the long-term nature of the arrangement, the fees are usually raised during the concession period. The rate of increase is often tied to a combination of internal and external variables, allowing the proponent to reach a satisfactory internal rate of return for its investment. Examples of countries using BOT are Thailand, Turkey, Taiwan, Saudi Arabia, Israel, India, Iran, Croatia, Japan, China, Vietnam, Malaysia, Philippines, Egypt, and a few U.S. states (California, Florida, Indiana, Texas, and Virginia). However, in some countries, such as Canada, Australia and New Zealand, the term used is build-own-operate-transfer (BOOT).

BOT finds extensively application in the infrastructure projects and in public private partnership. In the BOT framework a third party, for example the public administration, delegates to a private sector entity to design and build infrastructure and to operate and maintain these facilities for a certain period. During this period the private party has the responsibly to raise the finance for the project and is entitled to retain all revenues generated by the project but is not the owner of the regarded facility. The facility will be then transferred to the public administration at the end of the concession agreement, without any remuneration of the private entity involved. Some or even all of the following different parties could be involved in any BOT project:

* The host government: Normally, the government is the initiator of the infrastructure project and decides if the BOT model is appropriate to meet its needs. In...