Risks and Guarantees in BOT Tender

Abstract

The build-operate-transfer (BOT) concept is being used increasingly by governments across a number of infrastructural sectors in their drive to privatize major public projects. Governments see BOT schemes as a method of financing the construction of urgently needed infrastructure projects without direct sovereign guarantee of the loans and with all the technical and financial risks being borne by the private promoter. This paper is concerned with the issues of risks to be retained by the promoter and the guarantees to be offered to the government in the selection process of a BOT tender. It is critical for the promoter to understand that the ability to retain risks and offer guarantees does provide the competitive advantage in being awarded the concession.