Concession and BOT Contracts

Introduction

Concessions and build-operate-transfer arrangements allow governments and public bodies to involve private partners in financing, building and operating infrastructure such as roads, ports, airports, power plants, water facilities and hospitals. These long-term contracts can last decades and involve complex allocation of construction, demand, operational, financial and political risks.

This Concession and BOT Contracts training course explains how these arrangements are structured, procured, financed and managed. Participants learn about the main project structures and variants, the key concession agreement provisions, revenue and payment mechanisms, risk allocation, project finance and lender requirements, performance monitoring, change and renegotiation, termination and handback.

The course is relevant to public authorities, private sponsors, lenders and advisers involved in infrastructure partnerships.

Course Objectives

By the end of this training course, participants will be able to:

• Explain concession, BOT and related project structures
• Describe the parties and contractual framework of a concession
• Understand key provisions of concession agreements
• Compare user-pays and availability payment mechanisms
• Allocate construction, demand, operating and political risks
• Understand project finance structures and lender requirements
• Monitor performance and manage change over long contract terms
• Plan termination, compensation and handback of assets

Target Audience

This training course is suitable for a wide range of professionals, including:

• Public sector infrastructure and partnership officials
• Private sponsors and investors
• Project finance professionals and lenders
• Contract managers of concession projects
• Legal and technical advisers
• Infrastructure project directors

Training Methodology

The course uses case studies of concession and BOT projects from several sectors and countries. Participants map project structures, analyse risk allocation matrices, review payment mechanisms and negotiate elements of a concession agreement in a simulated exercise between public authority, sponsor and lender teams.

Target Competencies

• Project structure understanding
• Concession agreement review
• Payment mechanism design
• Risk allocation
• Project finance awareness
• Long-term contract management

Day One: Concessions and Infrastructure Partnerships

• Why governments use concessions and BOT structures
• BOT, BOOT, DBFO and related variants explained
• Roles of the authority, project company and sponsors
• Value for money and affordability assessments
• Lessons from successful and failed concessions
• Legal and institutional frameworks for partnerships
• Exercise: mapping the structure of a case study project

Day Two: The Concession Agreement

• Scope of the concession and grant of rights
• Design and construction obligations
• Operation and maintenance requirements
• Output specifications and performance standards
• Tariffs, user charges and regulation
• Step-in rights and authority remedies
• Workshop: reviewing key concession provisions

Day Three: Revenue, Risk and Finance

• User-pays compared with availability payments
• Deductions, penalties and performance regimes
• Construction, demand and operating risk allocation
• Political, legal and currency risks
• Project finance, debt and equity structures
• Lender requirements, direct agreements and security
• Exercise: analysing a risk allocation matrix

Day Four: Contract Management over the Long Term

• Establishing a concession contract management team
• Performance monitoring and reporting
• Managing change, variations and relief events
• Refinancing and its implications
• Renegotiation pressures and how to handle them
• Disputes and resolution mechanisms
• Simulation: negotiating a change in a concession

Day Five: Termination and Handback

• Termination for authority default and contractor default
• Force majeure and voluntary termination
• Compensation on termination calculations
• Handback condition requirements and surveys
• Transition to the authority or a new operator
• Lessons for future concession programmes
• Personal action plan for concession contracts