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Article
Publication date: 6 February 2017

Alberto De Marco, Giulio Mangano and Timur Narbaev

The purpose of this paper is to contribute to the understanding of the crucial influence of risks on the capital structure of build-operate-transfer (BOT) projects.

Abstract

Purpose

The purpose of this paper is to contribute to the understanding of the crucial influence of risks on the capital structure of build-operate-transfer (BOT) projects.

Design/methodology/approach

The equity portion of capital injected in a BOT investment is selected as the response variable and its relation with select identified risk factors is examined using a regression analysis on a data set of BOT projects.

Findings

Results have pointed out that the level of equity is significantly influenced by several sources of risk. Country, revenue, project and special purpose vehicle-related risks have been shown to have an impact on the size of the equity share of a BOT investment.

Research limitations/implications

The results could support both investors and lenders to better define the financial leverage of BOT projects. In particular, the study could help to have a better understanding of the main factors that influence the equity apportion of capital in BOT investments.

Originality/value

This paper contributes to fulfilling the lack of works addressing the relationship between risk factors and capital structure in BOT projects. In this way, this research leads to a better understanding of the risk factors that influence the capital structure of BOT project and they have therefore been proposed as a base for the establishment of improved methods to design refined capital structures in BOT projects.

Details

Built Environment Project and Asset Management, vol. 7 no. 1
Type: Research Article
ISSN: 2044-124X

Keywords

Article
Publication date: 30 November 2018

Akintayo Opawole, Kahilu Kajimo-Shakantu, Oluwaseyi Olalekan Alao and Chinanu Patience Ogbaje

The build-operate-transfer (BOT) model is fast becoming a sustainable tool for remedying the deficiencies of public financing of hostel facilities in Nigeria. Being a new…

Abstract

Purpose

The build-operate-transfer (BOT) model is fast becoming a sustainable tool for remedying the deficiencies of public financing of hostel facilities in Nigeria. Being a new concept in Nigeria, this study aims to assess clients’ organizations perspective of risk factors associated with BOT model with a view to providing information for their effective management.

Design/methodology/approach

Quantitative descriptive analysis was used, which was based on primary data obtained through questionnaire survey. The respondents included architects, engineers (structural/civil/mechanical/electrical), builders and quantity surveyors who were officials in the physical planning development and works departments of five sampled universities in the southwestern Nigeria who executed at least one BOT hostel project. A total number of 45 copies of questionnaire were administered, out of which 35 copies representing a response rate of 77.8 per cent were retrieved. Data analysis was undertaken using descriptive statistics: percentages, mean item score and relative importance index.

Findings

Severity of the risk factors specific to BOT model for hostel development was revealed. Besides, conceptual allocations and mitigation measures were suggested against each risk factor.

Practical implications

Private sector investor would find the results of this research useful in preparing robust BOT contract packages through the understanding of the nature of risk factors associated with the procurement model.

Originality/value

With limited evaluation of BOT in hostel facilities procurement, this study developed a simplified approach to management of risk factors associated with BOT model in the education sector.

Details

Journal of Engineering, Design and Technology, vol. 17 no. 1
Type: Research Article
ISSN: 1726-0531

Keywords

Article
Publication date: 6 July 2012

Alberto De Marco, Giulio Mangano and Xin‐Yu Zou

The purpose of this paper is to determine the fundamental factors influencing the equity share in build‐operate‐transfer (BOT) investments in relation to the project risk profile.

Abstract

Purpose

The purpose of this paper is to determine the fundamental factors influencing the equity share in build‐operate‐transfer (BOT) investments in relation to the project risk profile.

Design/methodology/approach

The relationships between risk factors and equity participation into the capital structure of a BOT contract are examined using regression analysis of a dataset of toll road projects.

Findings

Results suggest that the inflation rate, the size of the investment, the construction period, the solidity of the vehicle company, and the organizational structure of the project are significant variables of the equity portion of financing.

Practical implications

The analysis may support project promoters by providing better understanding of the factors that might facilitate high debt leverages and by providing lending institutions with valuable information to integrate the method of determining the appropriate debt resources to be injected into a BOT project.

Originality/value

The paper contributes towards growing the body of knowledge regarding the way public‐private partnership initiatives are carried over and helps refine the capital structures of BOT projects.

Details

Built Environment Project and Asset Management, vol. 2 no. 1
Type: Research Article
ISSN: 2044-124X

Keywords

Article
Publication date: 1 May 2004

Prasanta K. Dey and Stephen O. Ogunlana

Construction projects are risky. However, the characteristics of the risk highly depend on the type of procurement being adopted for managing the project. A…

11842

Abstract

Construction projects are risky. However, the characteristics of the risk highly depend on the type of procurement being adopted for managing the project. A build‐operate‐transfer (BOT) project is recognized as one of the most risky project schemes. There are instances of project failure where a BOT scheme was employed. Ineffective rts are increasingly being managed using various risk management tools and techniques. However, application of those tools depends on the nature of the project, organization's policy, project management strategy, risk attitude of the project team members, and availability of the resources. Understanding of the contents and contexts of BOT projects, together with a thorough understanding of risk management tools and techniques, helps select processes of risk management for effective project implementation in a BOT scheme. This paper studies application of risk management tools and techniques in BOT projects through reviews of relevant literatures and develops a model for selecting risk management process for BOT projects. The application to BOT projects is considered from the viewpoints of the major project participants. Discussion is also made with regard to political risks. This study would contribute to the establishment of a framework for systematic risk management in BOT projects.

Details

Industrial Management & Data Systems, vol. 104 no. 4
Type: Research Article
ISSN: 0263-5577

Keywords

Article
Publication date: 19 August 2022

Peiqi Ding, Weili Xia, Zhiying Zhao and Xiang Li

Build-operate-transfer (BOT) contracts are widely used in the construction and operation of charging piles for new energy vehicles worldwide and stipulate that governments…

Abstract

Purpose

Build-operate-transfer (BOT) contracts are widely used in the construction and operation of charging piles for new energy vehicles worldwide and stipulate that governments grant charging pile operators franchises for a certain period of time to invest in the construction and operation of the charging piles. The charging piles are then transferred to governments when the concession expires. To encourage charging pile operators to build and operate charging piles, governments usually provide two kinds of subsidies, namely construction and operating subsidies.

Design/methodology/approach

The authors establish a typical game model to study the optimal BOT contract between a government and a charging pile operator and their preferences for the two kinds of subsidies.

Findings

First, the authors show that there are substitution and complementarity effects between the concession period and the subsidy level. Second, the operator prefers the construction subsidy (operating subsidy) when the additional operating cost is low (high). The government prefers the operating subsidy (construction subsidy) when consumer sensitivity to the number of charging piles is low (high) and the concession period is short or long (moderate). Finally, the adjusted joint subsidy can not only improve social welfare but also that the charging pile operator can obtain the same profit as under the operating subsidy at a lower subsidy amount.

Originality/value

This work develops the first analytical model to study two subsidies in the construction and operation of charging piles and investigate the optimal BOT contract and subsidy preferences. The insights are compelling not only for the charging pile operator but also for policymakers in practice from a circular economy perspective.

Details

Industrial Management & Data Systems, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0263-5577

Keywords

Article
Publication date: 26 August 2020

Ozan Okudan, Cenk Budayan and Irem Dikmen

The purpose of this paper is to develop a new conceptual life cycle performance measurement system (PMS) based on stage level key performance indicators (KPIs) to measure…

Abstract

Purpose

The purpose of this paper is to develop a new conceptual life cycle performance measurement system (PMS) based on stage level key performance indicators (KPIs) to measure the performance of build–operate–transfer (BOT) projects.

Design/methodology/approach

This study uses a literature review to reveal the deficiencies of existing PMSs for public–private partnership (PPP) projects. Based on these deficiencies, four recommendations were proposed for developing a PMS. The validation of these recommendations was performed via focus group discussion sessions conducted with 12 experts. Then, a conceptual framework was developed based on the validated recommendations and the additional recommendations emerged during focus group discussions. Finally, the recommendations proposed by the focus group were tested by a questionnaire survey, the findings of the Friedman test and descriptive analysis validated these recommendations.

Findings

Findings of the focus group discussion, Friedman test and descriptive analysis indicated that the PMS should have four crucial features to develop an efficient, effective and comprehensible PMS for the BOT project. Firstly, non-financial and financial KPIs should be integrated. Secondly, the PMS should be developed as a process-based system with stage level KPIs. The performance of the BOT projects should be monitored and reviewed continuously, however the most important KPIs should be used for continuous performance measurement to increase the applicability of the system and allocate the resources more efficiently.

Research limitations/implications

This survey was conducted on experts who have experience with BOT projects located in Turkey, therefore, judgments of experts might be affected by external factors specific to Turkey such as geopolitical situations, investment environment. However, due to the nature of BOT projects, the experience of experts can also be utilized at the international level.

Originality/value

This is the first time a PMS has been developed to measure the performance of a BOT project. In addition, this system has unique features when compared with the PMS proposed in the literature. Especially, the stage level KPIs and continuous performance measurement with the most important KPIs throughout each stage has never been used. This research provides both public sector and private entities with an insight into effectively measure, control and manage their BOT infrastructure projects' performances throughout their life cycles.

Details

Engineering, Construction and Architectural Management, vol. 28 no. 6
Type: Research Article
ISSN: 0969-9988

Keywords

Article
Publication date: 1 April 1998

W.R. ZHANG, S.Q. WANG, R.L.K. TIONG, S.K. TING and D. ASHLEY

The build‐operate‐transfer (BOT) arrangement is becoming one of the prevailing ways for infrastructure development in China to meet the needs of China's future economic…

Abstract

The build‐operate‐transfer (BOT) arrangement is becoming one of the prevailing ways for infrastructure development in China to meet the needs of China's future economic growth and development. Despite tremendous opportunities, the undertaking of infrastructure business in China involves many risks and problems which are mainly caused by China's embryonic legal structure and immature economic market. Further strategies in risk allocation and management are especially important for successful investments in China. Choosing the right path for a BOT project investment is crucial since each project involves different legal rights, different obligations and different risk implications. The present paper describes the structuring and risk allocation, as well as the Government guarantees in a China BOT transport project, the Shanghai Yan'an Donglu Second Tunnel (YD2nd Tunnel). It is also the first BOT project implemented in Shanghai. The project features and the guarantees provided by the Government are described in the present paper.

Details

Engineering, Construction and Architectural Management, vol. 5 no. 4
Type: Research Article
ISSN: 0969-9988

Keywords

Article
Publication date: 1 April 2000

S. YE and R.K.L. TIONG

Government support plays an important part in risk‐return trade‐off of participants in privately financed infrastructure projects. Depending on the level of government…

Abstract

Government support plays an important part in risk‐return trade‐off of participants in privately financed infrastructure projects. Depending on the level of government support, risk‐return trade‐off of the private sponsor varies from project to project. Case studies on two of China's build‐operate‐transfer (BOT) power projects that were developed at different time periods illustrate that government support has a significant effect on both risk and return of the private sponsor. It is hoped that such understanding would help the private sponsor strike a desirable risk‐return trade‐off in structuring a BOT deal.

Details

Engineering, Construction and Architectural Management, vol. 7 no. 4
Type: Research Article
ISSN: 0969-9988

Keywords

Article
Publication date: 16 November 2020

Phuong Thi Le, Nicholas Chileshe, Konstantinos Kirytopoulos and Raufdeen Rameezdeen

Despite the fact that extensive studies on public-private partnerships have focused on risk identification and classification, research still lacks concentration on…

Abstract

Purpose

Despite the fact that extensive studies on public-private partnerships have focused on risk identification and classification, research still lacks concentration on studying the latent structure of risks in build operate transfer (BOT) transportation projects, especially in developing countries. The research was carried out in Vietnam and this paper aims to explore the underlying relationships among risks in the context of BOT transportation projects.

Design/methodology/approach

A questionnaire survey was conducted to investigate the perception of stakeholders regarding the probability of occurrence and the severity of the impact of risks related to BOT transportation projects. Factor analysis was performed based on a total of 40 risks.

Findings

Seven risk groups were formed as a result of factor analysis, namely, “projects’ viability and political-regulatory risks”, “macroeconomic risks”, “projects’ feasibility study and market risks”, “financial risks”, “organization/coordination and force majeure risks”, “tolling, contractual, approvals risks” and “media and land expropriation risks”.

Originality/value

The research contributes to the current body of knowledge by providing deep insight into the structure of risks in BOT transportation projects in Vietnam through exploring the underlying relationships among risks, to form a latent risk structure from practical viewpoints. The findings are beneficial for involved stakeholders and policymakers to set up and propose suitable management strategies and related policies.

Details

Journal of Financial Management of Property and Construction , vol. 26 no. 1
Type: Research Article
ISSN: 1366-4387

Keywords

Article
Publication date: 28 November 2019

Morteza Bayat, Mostafa Khanzadi, Farnad Nasirzadeh and Ali Chavoshian

This study aims to determine the optimal value of concession period length in combination with capital structure in build–operate–transfer (BOT) contracts, based on direct…

Abstract

Purpose

This study aims to determine the optimal value of concession period length in combination with capital structure in build–operate–transfer (BOT) contracts, based on direct negotiation procurement and considering the conflicting financial interests of different parties involved in the project.

Design/methodology/approach

The financial model of a BOT project is developed considering all the influencing factors. Then, fuzzy set theory is used to take into account the existing risks and uncertainties. Bilateral bargaining game based on alternating-offers protocol is applied between the government and the sponsor to divide project financial benefit considering the lender’s requirements. Finally, concession period and equity level will be determined simultaneously according to the sponsor’s and government’s share of project financial benefit and the lender’s requirements.

Findings

The proposed model is implemented on a real case study, and a fair and efficient agreement on concession period length and capital structure is achieved between the government and the sponsor considering the lender’s requirements. It is revealed that being the first proposer in the bargaining process will affect the concession period length; however, it will not affect the equity level. Moreover, it is shown that considering income tax as a part of government’s financial benefit increases the length of concession period.

Research limitations/implications

The presented model concentrates on direct negotiation procurement in BOT projects where the sponsor and government bargain on dividing financial benefits of project. It is assumed that the product/service price is determined before according to market analysis or users’ affordability. All the revenue of project during concession period is assumed to belong to the sponsor.

Practical implications

The proposed model provides a practical tool to aid BOT participants to reach a fair and efficient agreement on concession period and capital structure. This could prevent failing or prolonging the negotiation and costly renegotiation.

Originality/value

By investigation of previous studies, it is revealed that none of them can determine the optimal value of concession period length and capital structure simultaneously considering the BOT negotiation process and different financial interests of parties involved in the project. The proposed model presents a new approach to determine the financial variables considering the conflicting interests of involved parties. The other novelty aspects of the presented model are as follows: introducing a new approach for calculating the sponsor and the government’s share of project financial benefit that will affect the determination of the concession period length and considering the effect of existing risks and uncertainties on final agreement between the involved parties using fuzzy set theory.

Details

Construction Innovation , vol. 20 no. 1
Type: Research Article
ISSN: 1471-4175

Keywords

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