Concession period of risk control study in the BOT project financing mode .
|School||Kunming University of Science and Technology|
|Course||Management Science and Engineering|
|Keywords||BOT Project Financing Concession Term Risk Control|
BOT, as a new project financing mechanism, has come to play an increasingly important role in infrastructural development in many countries due to its unique features and the practices in implementing BOT projects vary in various economic systems. BOT project financing was introduced into China in 1980s as a solution to the bottleneck problems in China’s economic development. Concession is the most crucial issue in BOT in which two preconditions are involved:concession rights and concession term. Government awards the BOT concession right to a project company through agreement which implies that the project company has acquired the concession, as well as the policy commitment and protection of the government. Concession term is the validity period of the concession right in which the delineation of concession term remains to be most debatable and problematic. From perspectives of the government’s interests, a long concession term implies growing sovereignty risks for the government, whereas for the business corporations a short concession term will adversely affect the corporation’s invest return.Yunnan is a mega province for developing a highway network which plays a pivotal role in the entire transportation sector in the province. The overall favorable political environment of the West Development Initiatives has mandated the development of the highway network with more strategic significance. Although the government at various levels has developed fully-elaborated plans for the highway network, many issues and challenges remain to be resolved. There are both subjective reasons and objective ones which constraint the highway development in Yunnan, such as complex geography and diverse climate environment, belated economic development, low economic competency, limited financial income and so on. All of these problems contribute to the most difficult problem in highway network development:fund shortage.This paper is extended from the research based on "Yunnan Provincial Intercollegiate Cooperation Project":A Study on Kunming-Wuding Highway Construction Project. Introduced in this paper are two methods for defining the concession term:one is by applying time parameters, that is, by studying the time sequence involved in the entire BOT process, e.g. the procedures of construction, operation and transfer. Another is by applying economic parameters that is NPV and RIO. Both need to take into account the interests of the host government and investors which necessitate a balance in the trade-off dynamics of both parties, in other word, defining of the concession term. Beside concession term, risk control is another important issue to discuss in BOT project financing. This study classifies the risks according from several perspectives, and then introduces several countermeasures. As a separate chapter, OOPP is brought forward for risk analysis. In the end, this paper closes by analyzing the concession term and the risk of Kunming-Wuding Highway Project as a case study.The innovations of this paper are:(1) Combining OOPP and risk study, and defining it as a method for risk study. Analyzing the risk based on the case by this method, and setting the dynamic risk-benefit mode. (2) Bringing forward the two methods of defining concession term:time parameters and economic parameters. This paper considers those two types of parameters comprehensively and provides the theory support for defining the concession term.