how build operate transfer bot contracts work
under a build operate transfer bot contract an entity usually a government grants a concession to a private company to finance build and operate a project the company operates the project for a period of time typically 20 or 30 years with the goal of recouping its investment then transfers control of the project back to the public entity 1bot projects are normally large scale greenfield infrastructure projects that would otherwise be financed built and operated solely by the government examples include a highway in pakistan a wastewater treatment facility in china and a power plant in the philippines in general bot contractors are special purpose companies formed specifically for a given project during the project period when the contractor is operating the project it has built revenues usually come from a single source an offtake purchaser with a binding agreement this may be a government or state owned enterprise 1power purchase agreements in which a government utility acts as offtaker and purchases electricity from a privately owned plant are an example of this arrangement under a traditional concession the company would sell directly to consumers without a government intermediary bot agreements often stipulate minimum prices the offtaker must pay variations on the build operate transfer bot contracta number of variations on the basic bot model exist under build own operate transfer boot contracts the contractor owns the project during the project period meanwhile under build lease transfer blt contracts the government leases the project from the contractor during the project period and takes charge of the operation other variations have the contractor design as well as build the project one example is a design build operate transfer dbot contract the bot approach was developed in the late 1970s against a backdrop of constrained budgets in developing countries and a downturn in work for international construction firms 2example of a build operate transfer bot contractthe elevated train system in bangkok thailand known as the bangkok mass transit system bts or bts skytrain was created from a 30 year bot concession agreement between the bangkok metropolitan administration the government entity that owns the line and thai transport firm bangkok mass transit system bmts public company limited 3under the terms of the agreement bmts was given the job of designing financing building and operating the transit system out of its own pocket in exchange for collecting all fares and advertising revenue when the train line went live 3based on its projections bmts figured it would recoup its costs within a decade with at least a 16 rate of return however it didn t pan out that way btsc ran into financial trouble after the number of people using the service fell way below its original prediction 3bot contracts are generally more prevalent in developing economies helping cash strapped local governments to finance large complicated infrastructure projects that they might otherwise be unable to manage and afford 