Alternate Financing Strategies for Build-Operate-Transfer Projects

This paper contains a study of build-operate-transfer (BOT) project financing strategies from the perspective of project sponsors. The financing strategy for a BOT project includes the selection of the appropriate mix of equity and debt financing, and the identification of appropriate financing sources. Project sponsors typically wish to minimize their financing costs to ensure their tenders are competitive. Thirteen transportation and power-generation BOT projects in North America and Asia were analyzed. Important considerations and financing strategies were identified and examined. The findings suggest that project risks, project conditions, and availability of financing are the major considerations in selecting a financing strategy. The project risks that were determined to be most significant in financing strategy selection were political, financial, and market risks. Based on the study findings, a decision model was developed that can be used by BOT project sponsors in selecting appropriate financing strategies.