Page 24 - Layout 1

Business
Don’t Just Build It, BOT It!
By Eran Shay, Managing Director, Benefit Business Solutions Ltd
transfer onto the private sector many of the risks associated with the implementation of capital intensive projects.
For private sector investors and financiers, BOT projects have opened up a whole new area of opportunities for new busi- ness and relatively high returns. The sharing of risks with other parties to the project and with the public sector entity concerned enhances the appeal of BOT. One aspect of many BOT projects which is attractive to investors and financiers is that they incorporate sovereign credit risk, and this ren- ders them more suitable for financing in the bond markets.
BOT is a type of project financing, with its key attributes being:
(i) The lenders to the project look primarily at the earnings of the project as the source from which loan repayments will be made. Their credit assessment is based on the project, not on the credit worthiness of the borrowing entity.
(ii) The security taken by the lenders is largely confined to the project assets. As such, project financing is often referred to as “limited recourse” financing because lenders
Recent years have seen a dramatic increase worldwide in the involvement of the
private sector in the development
and funding of public facilities and services. Techniques are continuously being developed to draw the public and private sectors together with a view to sharing the risks and rewards associated with such activities. These various techniques are often referred to as “public private partnerships” (PPPs) and range from the simple contracting out of services to the involvement of the private sector in the financing, design, construction, operation, maintenance and, in some cases, ownership of major infrastructure facilities.
Perhaps the most widely used PPP financing technique is the Build Operate Transfer (BOT) method under which the
private sector finances, constructs, operates and maintains the facilities for a given period, with the public sector acquiring operational control at the end of that period.
The Government of Gibraltar continu- ously faces the dilemma of maintaining a manageable level of public debt, while at the same time investing in capital intensive infrastructure projects to promote develop- ment and economic growth in the shortest possible timescale. In fact, in his July 2016 Budget, the Chief Minister announced that capital expenditure projects will be cut by a third in the financial year 2016-2017. There are many factors contributing to the attractive- ness of BOT projects. Through BOT, Government may be able to secure the necessary level of investment in Gibraltar while not burdening public finances. BOT projects also allow the public sector to
winner of the gibraltar’s leading hotel award since 2009
Rock & sea view rooms & suites, ␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣ health & beauty club, excellent conference & banqueting facilities ␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣␣
the other side of gibraltar
T: (+350) 200 76501 E: reservations@caletahotel.gi www.caletahotel.com
caletagibraltarhotel @caletahotelgbz
24
Gibraltar International
www.gibraltarinternational.com