With the vigorous development of Taiwan economics in recent years, to fully utilize private sector''s flexibility, capability, capital and efficiency, Taiwan Government has encouraged private participation in the public construction, development and operation. Concept and theory of BOT and project finance originate from abroad and cover a wide range of spectrums, including finance, legal, engineering, etc. To facilitate smooth and successful completion of construction and operation, the most important key to success of development lies on the viability of project finance.
This essay starts with detailed analysis on theory for Public-private partnership and the practical operation of BOT scheme, including origin and meaning of public construction, definition of public-private partnership, BOT theory of scheme and legal sources, categories, and contractual structure as well as topics regarding preparatory stage, request for proposal, contract negotiation and contract signing process, etc. Secondly, this essay has further analyzed on the origin, structure, definition, and different categories of project finance, the core element of BOT, and its difference from traditional finance. It is also focusing on trust theory, governmental financing assistance and a trust mechanism, risk assessment, and protection of credit bank. Thirdly, this essay will use the actual T-9 BOT project as a successful example to further elaborate the theory and practicality of project finance.
The feasibility of project finance and the risk diversification are the key factors to success of public construction and development. With reference to trust mechanism, compensated transfer mechanism, and the creation of mortgage, the related rights and obligations should be defined clearly through the contract, and the cash flow should be estimated by a robust method, using installment payment as the repayment plan for loans, to facilitate smooth execution of BOT plan and protect creditors’ rights.
Finally, this essay sums up all the analysis to yield a concrete and practical recommendation for government, financial institutions, academic circles, and practice field to foster the development of future public construction strategy and as further reference for preparatory planning and execution for relevant government agency to launch similar project to enhance the smoothness for private sectors to receive project finance and to facilitate government for major public contractions.