Typical Project Financing Models

Besides Build Operate Transfer (BOT) and Build Own Operate Transfer (BOOT) models, some typical project financing models are there. They are:

  1. Build Own Operate (BOO) Model: In BOO, the concessionaire constructs the facility and then operates it on behalf of the public agency. The initial operating period {over which the capital cost will be recovered} is defined. Legal title to the facility remains in the private sector, and there is no obligation for the public sector to purchase the facility or take title. The private sector partner owns the project outright and retains the operating revenue risk and all of the surplus operating revenue in perpetuity. As an alternative to transfer, a further operating contract {at a lower cost} may be negotiated.
  2. Design Build Finance Operate (DBFO) Model: Under this approach, the responsibilities fro designing, building, financing and operating are bundled together and transferred to private sector partners. They are also often supplemented by public sector grants in the from of money or contributions in kind, such as right of way. In certain cases, private partners may be required to make equity investments as well. DBFO shifts a great deal of the responsibility for developing and operating to private sector partners, the public agency sponsoring a project would retain full ownership over the project.
  3. Build Transfer Operate (BTO) Model: The BTO model is similar to BOT model except that the transfer to the public owner takes place at the time that construction is completed, rather than at the end of the franchise period. The concessionary builds and transfers a facility to the owner but exclusively operates the facility on behalf of the owner by means of management contract.
  4. Buy Build Operate (BBO) Model: A BBO is a form of asset sale that includes a rehabilitation or expansion of an existing facility. The government sells the asset to the private sector entity, which then makes the improvements necessary to operate the facility in a profitable manner.
  5. Lease Own Operate (LOO) Model: This approach is similar to a BOO project but an existing asset is leased from the government for a specified time. The asset may require refurbishment or expansion.
  6. Build Lease Transfer (BLT) Model: The concessionaire builds a facility, lease out the operating portion of the contract, and on completion of the contract, returns the facility to the owner.
  7. Build Own Lease Transfer (BOLT) Model: BOLT is a financing scheme in which the asset is owned by the asset provider and is then leased to the public agency, during which the owner receives lease rentals. On completion of the contract the asset is transferred to the public agency.
  8. Build Lease Operate Transfer (BLOT) Model: The private sector designs finance and construct a new facility on public land under a long term lease and operate the facility during the term of the lease. The private owner transfers the new facility to the public sector at the end of the lease term.
  9. Design Build (DB) Model: A DB is when the private partner provides both design and construction of a project to the public agency. This type of partnership can reduce time, save money, provide stronger guarantees and allocate additional project risk to the private sector. It also reduces conflict by having a single entity responsible to the public owner for the design and construction. The public sector partner owns the assets and has the responsibility for the operation and maintenance.
  10. Design Bid Build (DBB) Model: Design bid build is the traditional project delivery approach, which segregates design and construction responsibilities by awarding them to an independent private engineer and a separate private contractor. By doing so, design bid build separates the delivery process in to the three liner phases: Design, Bid and Construction. The public sector retains responsibility for financing, operating and maintaining infrastructure procured using the traditional design bid build approach.
  11. Design Build Maintain (DBM) Model: A DBM is similar to a DB except the maintenance of the facility for the some period of time becomes the responsibility of the private sector partner. The benefits are similar to the DB with maintenance risk being allocated to the private sector partner and the guarantee expanded to include maintenance. The public sector partner owns and operates the assets.
  12. Design Build Operate (DBO) Model: A single contract is awarded for the design, construction and operation of a capital improvement. Title to the facility remains with the public sector unless the project is a design\build\operate\transfer or design\build\own\operate project. The DBO method of contracting is contrary to the separated and sequential approach ordinarily used in the United States by both the public and private sectors. This method involves one contract for design with an architect or engineer, followed by a different contract with a builder for project construction, followed by the owner’s taking over the project and operating it. A simple design build approach credits a single point of responsibility for design and construction and can speed project completion by facilitating the overlap of the design and construction phases of the project. On a public project, the operations phase is normally handled by the public sector under a separate operations and maintenance agreement. Combining all three phases in to a DBO approach maintains the continuity of private sector involvement and can facilitate private sector financing of public projects supported by user fees generated during the operations phase.
  13. Lease Develop Operate (LDO) or Build Develop Operate (BDO) Model: Under these partnerships arrangements, the private party leases or buys an existing facility from a public agency invests its own capital to renovate modernize, and expand the facility, and then operates it under a contract with the public agency. A number of different types of municipal transit facilities have been leased and developed under LDO and BDO arrangements.