Chapter 1 about the study Introduction In recent years countries around the world have met the challenge of developing and maintaining critical infrastructure by restructuring public utilities and expanding private sector participation in the infrastructure sectors. Recognizing the importance of adequate infrastructure services, such as power, telecommunications, transport, water supply, and sanitation, for the development of industry and the quality of life, and given the constraints on public budgets to finance these growing infrastructure needs, governments have sought to shift part of the burden of new infrastructure investment to the private sector.
In addition, private sector involvement can bring increased efficiency in investment, management, and operation. It can take many forms but the Build-Operate-Transfer (BOT) structure for projects has gained considerable popularity as a form that enables private sectors participation in the development of public infrastructure. BOT projects are by nature long-term investments involving complex organizational structures. Over the lifespan of these projects the legislative, political, social, market and economic environment could all change significantly.
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This is especially the case in developing countries, where the social, political and economic conditions are unstable. Thus a high degree of risk and uncertainty surround BOT investment opportunities in these countries and it is critical that adequate identification, assessment, and evaluation of these risks take place at the feasibility stage. These risks have a high degree of impact on the financial feasibility of the project, which is a key parameter in the successful implementation of the project. In this thesis it has been attempted to study the various risks and its impact on the financial feasibility of the BOT project. Scope of Study The viability of long-term capital investments, particularly in the core infrastructure sectors of power, transport, and telecommunications etc. depends on the criticality of risks associated with such investments. Considering this riskiness, this thesis will highlight the following Concept of Public Private Partnership Various risks inherent in BOT project Methodology of identifying, assessing and mitigating the risk Application of software package for the risk analysis and the financial feasibility Objective of Study The objective of this thesis is to Identify and classify the risks involved in BOT project Analyze and to mitigate those risks Determine the impact of those risks on its financial feasibility through a case study 1.
4 Methodology of Study The Methodology of this study is as follows Detailed literature survey Prepared rough draft on various risks, its assessment and mitigation methods Interview with BOT Promoters Pursued a course on Infrastructure Project Financing Obtained Case Study materials. Studied Cash flow and Concession Agreement of the Case. Observations and Recommendations.
Preparation of pre-final drafts. Final Report Writing. Chapter 1 About the study PAGE 1
