BOT BOOT Schemes

Build, Own, Operate, Transfer
BOOT models are recognized throughout the international water sector as acceptable instruments for the financing, construction, operation, repair and maintenance of infrastructure and for the provision of public-sector services for the population. We have gathered valuable experience through our cooperation with public partners and in long-term water-related infrastructure projects and we are currently operating successful BOOT projects. A sound legal basis is a prerequisite for a public-private partnership to thrive: in BOOT models that involves a contract that defines the services to be provided by private industry and takes the legal, financial and regulatory aspects into account.

Role Allocation
Under a BOOT arrangement, BWI AG takes over management responsibility for the planning, construction, and operation of a water supply plant or treatment plant, all in accordance with the technical specifications stipulated by its public-sector partner.

Implementation
A project company is set up to achieve pre-defined goals. From the time the plant goes on-line, the public partner remits a quantity-dependent fee to the project company, while guaranteeing a minimum level of utilisation for water production or wastewater treatment. The minimum utilisation fee must be paid under all circumstances (take-or-pay-principle). The fee scale is also subject to regular reassessment under a price escalation clause that takes various cost factors into account.

In this type of arrangement, the public sector remains the primary service provider to the population and is responsible for rate collection.

Term
BWI AG shoulders the business risk as a private operator during the term of operation, which is generally between twenty and thirty years. That term is sufficiently long to allow BWI to earn back expenses incurred in construction and achieve an appropriate profit. At the end of the operating period, the plant is transferred back to the public-sector partner, either at no cost or for a previously stipulated amount.

Advantages
The advantages of this model lie in the fact that the construction of a new plant (or the takeover and rehabilitation or extension of an existing plant) is entirely financed by the private sector, or, in the case of TOT models, that the arrangement results in freeing up already invested assets. In any case, sophisticated financing structures are required.

Limitations
Optimisation involves only the plant itself; this type of model does not lead to a system-wide increase in efficiency. System-wide improvement requires the involvement of the water distribution network or the sewer system.

Forms
The umbrella term BOOT (Build, Own, Operate, Transfer) includes a range of different models such as BOT (Build, Operate, Transfer), TOT (Transfer, Operate, Transfer), BOO (Build, Own, Operate), DOT (Design, Operate, Transfer) etc. Arrangements like these can be used to acquire private capital to invest in new plants (or with TOT, to purchase existing plants).

Synopsis

• Construction, financing and operation of a plant (water and/or wastewater) by the private partner in accordance with technical requirements specified by the public partner.
• Duration: 10 - 20 years, after which the plant is transferred to the public partner.
• Public partner retains responsibility for serving the population and rate collection.
• A project company is set up to perform certain specified activities.
• Public partner pays a quantity-dependent fee to the project company (which is usually subject to a price escalation clause).
• Entire financing for the construction of a new plant and/or the rehabilitation or extension of an existing plant.
• Highly efficient financing structures.