The Application Of BOT Investment In City Water Supply

As a special financing way, BOT has been successfully practiced in many developed and developing countries. The government gives the project of infrastructure to the international commercial capital and the private capital to invest, construct and operate. When the promissory limit expires the investor will transfer the project to the local government without any compensation. It is the important meaning of the BOT.The investment mode of BOT has its typical character for the project financing. And the BOT project is the special mode for the project financing. It has the remarkable characters of the limited recourse or without recourse and financing besides the balance sheet. It can avoid the trouble to get the domestic credit and to finance from the international capital market for the capital-intensive project. So it has much attraction for these large-scale projects of infrastructure of power plant, highway, railway, airport, water plant and the long distance transmission pipe, etc. which urgently needs to invest and at the same time be limited by the shortage of the capital.BOT is a multi-function investment mode it combines the financing, constructing, operating and transferring together. That makes it has the systematic, complex and long-term character. For the government BOT has seven advantages: to utilize the capital, to transfer the risk, to diminish the responsibility, to control cost, to satisfy the need, to study the advanced technology and experience of management, to exploit the local capital market and to attract the foreign capital. But at the same time BOT also has the latent negative effects: to lose higher returns of investment, to lose a large number of foreign exchanges and also the government will lose its ownership and the control of operating authority for the project in the concession period.Although there are many ways for different BOT project in different counties and areas generally it will go through the following eight stages of the establishment and the preparation, the competitive bidding (including qualification examination), the negotiation for concession agreement, the signature of financing contract for the project, the construction, the operation and the transferring.Each BOT project has many potential risks and the risk of BOT is much higher than the general investment project. Because the investment scale of BOT is large and it is the project of infrastructure that concerns the economic lifeline of the host country so it will greatly be affected by the environment of laws of the government of the hostcountry. And on the other hand it will face many changeable factors possibly occurs with the long period construction, great the benefits and multitudinous participants and also with the complex relationship of laws.In our country it has the important practical significance to adopt BOT for attracting and utilizing the foreign capitals to invest and operate the infrastructure project. It can accelerate the infrastructure construction as well as the reform in this field. It can extend the channels of using the foreign capitals too. It is advantageous to raise the operating efficiency and to push the demand and increase chance of employee. It is also advantageous for the government to macro-control the important project.As an important infrastructure the city water supply is one of the most important trade to be managed by the government. Since nineties of the 20th century, BOT has been trial and applied in city water supply in our country. The Da Chang Water Plant, Chengdu No.6 Water Plant B and Beijing No.10 Water Plant are all the typical projects of BOT in city water supply. Among them the project of Chengdu No.6 Water Plant B formally signed the and its Appendixes in August 1999. It began to operate on Feb.ll, 2002. with the concession period of 15 years.