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Business
Host country
Technical, Financial and Legal Consultants
Typical structure of a BOT model
Project Agreement
Firms being party to the Contract
Construction Agreement
State Establishment
Private
Agreements
Joint-Venture
Company
Procurement
Suppliers
Contract
Lending
Establishments
Loan
Firm to operate the investment for a certain Period
Agreements
Operational
Contract
Insurance
Companies
Insurance
Policies
Agreement made with Shareholders
Sponsors
are given only a limited recourse against the borrower.
Most project finance structures are complex. The risks in the project are spread between the various parties; each risk is usually assumed by the party which can most efficiently and cost-effectively control or handle it. The major parties to a BOT project will usually include:
The Host Country - a Government department or statutory authority is normally the primary party. The Government’s co-oper- ation is critical in large projects. It may be required to assist in obtaining the necessary approvals, authorisations and consents for the construction and operation of the project. It may also be required to provide comfort that the agency acquiring services from the facili- ty will be in a position to honour its financial obligations.
The Sponsor - The sponsor is usually a consortium of interested groups (typically including a construction group, an operator, a financing institution, and other various groups) which, in response to the invitation by the Government Department, prepares the proposal to construct, operate, and finance, the
particular project. The construction contractor
- the construction company may also be one of the sponsors. It will take construction and completion risks, that is, the risk of completing the project on time, within budget and to specifications.
Operation and Maintenance Contractor: The operator will be expected to sign a long term contract with the sponsor for the operation and maintenance of the facility. The operator may also inject equity into the project.
Financiers: In a large project there is likely to be a syndicate of banks providing the debt funds to the sponsor. The banks will require a first security over the infrastructure created. The same or different banks will often provide a stand-by loan facility for any cost overruns not covered by the construction contract.
Equity Investors: It is always necessary to ensure that proposed investors in an
infrastructure project have sufficient powers to enter into the relevant contracts and per- form their obligations under those contracts.
Other parties: such as insurers, equipment suppliers and engineering and design consultants will also be involved. Most of the parties too will involve their lawyers and financial and tax advisers.
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