4 BOT -TYPE PROJECTS EPC CONTRACTS ARE OFTEN AT THE HEART OF A TYPE...

EPC contracts are often at the heart of a type of project structure called ‘Build-

Operate-Transfer’ (BOT), or similar titles such as ‘Build-Own-Operate-

Transfer’. These kinds of project typically involve the private sector designing

some piece of infrastructure, financing its construction and then operating

and maintaining it over a period of time, perhaps as long as 20 or 30 years.

This period is called the ‘concession period’, because it is the period during

which the private sector promoters will be able to operate the structure at a

profit, before handing it over or legally transferring it to the government or

official agency from whom the concession was obtained.

The essential idea behind a BOT-type project is that the government or an

official agency in a country wishes to have a plant or other structure built

and operating, but does not wish to or cannot finance such a project itself. It

therefore agrees with private sector parties that, in return for being able to

operate the plant, including the right to sell outputs from it (such as power) at

a certain price and volume over a certain period, the private sector will build

and render the plant operational. After the end of the period of operation, the

government will finally obtain ownership or control of the plant. The govern-

ment therefore has its plant at no direct cost to itself, while the private sector

has had the profitable use of the plant for a sufficiently long period to justify

the cost and risk of building and setting it up.