BOT / BOOT Schemes -
Build–operate–transfer (BOT) or build–own–operate–transfer (BOOT) 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.
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:
1. Encourage private investment
2. Inject new foreign capital to the country
3. Transfer of technology and know-how
4. Completing project within time frame and planned budget
5. Providing additional financial source for other priority projects
6. Releasing the burden on public budget for infrastructure development.
