Bot Project Finance Franchise Research

As a new project finance method, BOT is used in more and more countries' infrastructure-construction area for its unique attraction. BOT practice in developed countries and areas differs with in developing countries. BOT was introduced into China in 1980s and looked as an effective way to solve the "bottle neck" problem, which limits her economy development.Concession is a special feature of BOT. Xo implement it, concession right and concession duration as necessary requisition must be defined. Government awards the concession right of BOT project to the project company which is founded by the private corporation for its invest activity. Project company gets the right, promise and protection from the government. Concession right can be regarded as an invisible asset whose value is determined by the benefit it will bring to its owner -the project company. Concession duration is the limited period of concession right being valid and is always the hottest question on the negotiation table of BOT project. If the concession duration is too long it'll bring sovereignty risk to the government. If the concession duration is too short it'll affect the private corporation's invest return. Xhere are two kinds of concession duration measurement in this paper. One is measurement of period of invest return plus reasonable benefit period and the other is measurement of proper invest return rate. A parameter to be negotiated by the government and the project company exists in both measurements.Risks involved in the concession of BOT project finance are very complicated. So the concession management is mainly risk management. According to the theory of project management, concession risk management includes risk identification, risk appraisal, risk distribution and risk respondence. Among the four, risk distribution is the key point. Keeping the total risk as constant and to maximize the overall content of the participants, each risk should be distributed to the participant who is the most competent one to assume the risk.