Presented by

Ahmed Ali Al-Hasawi

INTRODUCTIONINTRODUCTION ADVANTAGES OF BOT PROJECTSADVANTAGES OF BOT PROJECTS BOT PROJECTS RISKSBOT PROJECTS RISKS BOT PROJECTS FINANCING STRATEGIESBOT PROJECTS FINANCING STRATEGIES CRITICAL SUCCESS FACTORS FOR BOT CRITICAL SUCCESS FACTORS FOR BOT PROJECTSPROJECTS CONCLUSIONCONCLUSION Q & AQ & A

What does BOT mean?

Main participants in BOT projects

Why do we need BOT projects?

Build-Own-Operate (BOO)

Build-Transfer-Operate (BTO)

Build-Operate and Renewal of the concession (BOR)

Build-Lease-Own (BLO)

Build-Lease-Transfer (BLT)

Public projects will be built faster

Private sector is more efficient than public agencies

BOT projects assist in transferring new technology

The high experience of the private sponsor and his team lead to an excellent project feasibility.

Political RisksIt is related to the stability situation in the host country and any action of the government that might endanger the project.

Example: tax code revisions, export restrictions

Financial RisksThis risk is related to the inflation, interest rates and exchange rates.

Construction RisksTime and cost.Technical difficulties & poor management.

Operation RisksThe cost of operation & maintenance for the completed facility

Market RisksIt is needed to evaluate the demand and price risk.

Force Majeure RisksThis risk is related to the phenomena beyond the host government or private sponsor control.

Concession Period Risk

Long concession period indicates more benefit for private sponsor.

Short concession period consequences.

AVAILABILITY OF FINANCING SOURCES & FINANCING STRATEGIES The possibility of using local market or international sources.

PROJECT CONDITIONS & FINANCING STRATEGIESThere are several conditions for BOT projects such as government involvement, concession periods, technical requirements and others.The long concession period has advantages and disadvantages

PROJECT RISKS & FINANCING STRATEGIESThe overall project risks were calculated for each project in the case studies PR, FR and MR = 8 or less, the project was evaluated as low risk project.

Table 2. Risk Level of BOT Transportation Projects in North AmericaProject Political Risk Financial Risk Market Risk

Highway 407 Express Toll Route 1 1 2Dulles Greenway 2 2 3State Route 125 South Tollway 2 1 3

Table 3. Risk Level of BOT Transportation Projects in AsiaProject Political Risk Financial Risk Market Risk

Cross Harbour Tunnel 3 3 2Western Harbour Crossing 3 2 4North-South Highway 5 4 3Second Stage Expressway System 5 4 4Bangkok Mass Transit System 4 4 4Guangzhou-Shenzhen-Zhuhai Superhighway 5 4 5

Table 4. Risk Level of BOT Power Generation Projects in AsiaProject Political Risk Financial Risk Market Risk

Subic Power Plant 3 4 1Paiton I Power Plant 5 4 2Shajiao B Power Station 4 3 2Rizhao Power Plant 4 3 1

HIGH POLITICAL RISK There were several political risks such as changed policies, delays and instability of the government. To avoid breaking the agreement, involving international investors or lenders.

HIGH FINANCIAL RISKIn three projects in South East Asia, projects sponsors obtained the required loan from international lending institutions as these sources offer low interest rates. Currency exchange fluctuations is another risk which impacting BOT projects. To mitigate this risk, private sponsors approached local lenders for financing their projects.

HIGH MARKET RISKTransportation projects & traffic volume.The consequences will be less revenue compared to what is expected. In power plants, the host government pay a fixed capacity fee during the concession period.

Highlight the practices or actions taken which normally assist in the success of BOT projects.

The quality of the service during & after the concession period.

To provide adequate training to the owner's personnel to maintain the same level of quality.

Short period of construction allow private investor in getting early revenues.

Sharing the largest revenue of profit with government.

Safest method for construction and most innovative solution.

Advantages of BOT projects were highlighted.

There are different types of risks associated with BOT projects. The most critical ones are PR, FR & MR.

Risks mitigations have been proposed based on an analysis of different case studies There are some risks which might happen in the project with no control on them (force majeure risks).

Finally, the selection of the right concession period is essential.

Q & A