Project Finance

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.
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Build Own Operate Transfer (BOOT) Model

Build Own Operate Transfer (BOOT)  funding model   of project financing involves a single organization, or consortium (BOOT provider) who designs, builds, funds, owns and operates the project for a defined period of time and then transfers this projects ownership across to a agreed party. BOOT projects are a way for governments to bundle together the design and construction, finance, operations and maintenance and potentially marketing and customer interface aspects of a project and let these as a package to a single private sector service provider. The asset is transferred back to the government after the concession period at little or no cost.… Read the rest

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Build Operate Transfer (BOT) Model

Build Operate Transfer (BOT) is a project financing and operating approach that has found an application in recent years primarily in the area of infrastructure privatization in the developing countries. It enables direct private sector investment in large scale infrastructure projects.

In BOT the private contractor constructs and operates the facility for a specified period. The public agency pays the contractor a fee, which may be a fixed sum, linked to output or, more likely, a combination of the two. The fee will cover the operators fixed and variable costs, including recovery of the capital invested by the contractor. In this case, ownership of the facility rests with the public agency.… Read the rest

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Introduction to Project Finance

Project finance is typically defined as limited or non-recourse financing of a new project through separate incorporation of vehicle or Project Company. Project financing involves non-recourse financing of the development and construction of a particular project in which the lender looks principally to the revenues expected to be generated by the project for the repayment of its loan and to the assets of the project as collateral for its loan rather than to the general credit of the project sponsor.

Project Financing includes understanding the rationale for project financing, how to prepare the financial plan, assess the project risks, design the financing mix, and raise the funds.… Read the rest

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Project Financing – Financing Options For Projects

Project advisory services falls under one of the core branches of corporate advisory services. It deals with the decision of financing a project based on its strength of assuring the future cash inflows. In other words Project financing deals with financing a project, which can in turn generate return for its stakeholders and help in repaying the interest and loan on the proposed project. The assets used for undertaking that project are used as collateral for financing that project.

The following constitute the differences between project financing and the other types.

  • In project financing, the lenders look at the strength of the project to perform and generate sufficient returns to serve the interest and loan on that project.
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