Contact African Trade Group if you need assistance in planning and executing infrastructure projects
African Trade group can help public sector, private sector and a combination of public and private sector principals to develop, finance and build infrastructure projects in every arena including :
- Rail system for passenger and cargo
- Toll ways
- Electrical Power plant and distribution network
- Gas distribution to local businesses and homes
- Water purification and distribution
- Conference Centers
- Hospitality and Tourist attractions
Various contractual means for executing infrastructure projects
A BOOT structure differs from BOT in that the private entity owns the works. During the concession period the private company owns and operates the facility with the prime goal to recover the costs of investment and maintenance while trying to achieve higher margin on project. The specific characteristics of BOOT make it suitable for infrastructure projects like highways, roads mass transit, railway transport and power generation and as such they have political importance for the social welfare but are not attractive for other types of private investments. BOOT & BOT are methods which find very extensive application in countries which desire ownership transfer and operations including. Some advantages of BOOT projects are :
- Encourage private investment
- Inject new foreign capital to the country
- Transfer of technology and know-how
- Completing project within time frame and planned budget
- Providing additional financial source for other priority projects
- Releasing the burden on public budget for infrastructure development
Under BLT a private entity builds a complete project and leases it to the government. On this way the control over the project is transferred from the project owner to a lessee. In other words the ownership remains by the shareholders but operation purposes are leased. After the expiry of the leasing the ownership of the asset and the operational responsibility are transferred to the government at a previously agreed price. For foreign investors taking into account the country risk BLT provides good conditions because the project company maintains the property rights while avoiding operational risk.
Design–build–finance–operate transactions are a project delivery method very similar to BOOT except that there is no actual ownership transfer. Moreover, the contractor assumes the risk of financing till the end of the contract period. The owner then assumes the responsibility for maintenance and operation. Some disadvantages of DBFO are the difficulty with long term relationships and the threat of possible future political changes which may not agree with prior commitments.This model is extensively used in specific infrastructure projects such as toll roads. The private construction company is responsible for the design and construction of a piece of infrastructure for the government, which is the true owner. Moreover the private entity has the responsibility to raise finance during the construction and the exploitation period. The cash flows serve to repay the investment and reward its shareholders. They end up in form of periodical payment to the government for the use of the infrastructure. The government has the advantage that it remains the owner of the facility and at the same time avoids direct payment from the users. Additionally, the government succeeds to avoid getting into debt and to spread out the cost for the road over the years of exploitation.
A type of contract arrangement in which the an entity builds an infrastructure project, operates it and eventually transfers ownership of the project to the government. In many instances, the government becomes the firm’s only customer and promises to purchase at least a predetermined amount of the project’s output. This ensures that the firm recoups its initial investment in a reasonable time span. This type of arrangement is used typically in complicated long-term projects as seen in power plants and water treatment facilities. In some arrangements, the government does not assume ownership of the project. In those cases, the company continues running the facility and the government acts as both the consumer and regulator.
This is a contract in which a private entity is contracted to design, construct, manage, and finance a facility, based on the specifications of the government. Project cash flows result from the government’s payment for the rent of the facility. In the case of the hospitals, the government has the ownership over the facility and has the price and quality control. The same financial model could be applied on other projects such as prisons. Therefore this model could be a way to avoid adding new debtto public finance.