WEC Issues Request for Expressions of Interest for Shuqaiq Phase 3 AND Yanbu Phase 4 Independent Water Projects

APPENDIX

TYPES OF FINANCING CONTRACTS

BETWEEN GOVERNMENT AND PRIVATE SECTOR

 

1
2
3
4
5
LEASE

BUILD

OPERATE

BUILD

TRANSFER

(OPERATE)

BUILD

(OWN)

OPERATE

TRANSFER

BUY

BUILD

OPERATE

BUILD

OWN

OPERATE

LBO

BTO, BT

BOT, BOOT

BBO

BOO

Lease-build-operate (LBO): A long-term contract is signed with the private sector to develop and operate a large government enterprise, through giving the private sector the opportunity to recoup its investments during the period of the contract, in addition to paying a sum that is the amount of the lease contract.

 

1.   Build-Transfer-(Operate) (BT, BTO): The private sector investor finances and builds the enterprise, the ownership of which is transferred to the government upon completion (BT). Sometimes, the private sector investor subsequently leases the enterprise by means of a long-term contract, which gives him the opportunity to recoup the capital invested and realize profit margin.

 

2.   Build-(Own)-Operate-Transfer (BOT, BOOT): The private sector investor is given a concession to finance, build, own, and operate the government enterprise, which is called either a build-operate-transfer (BOT) or a Build-Own-Operate-Transfer (BOOT) sometimes, under which the investor has the right to collect fees for a defined period of time, after which ownership is transferred to the government.

 

3.   Buy-Build-Operate (BBO): Under this type of arrangement, an existing government enterprise is sold to the private sector investor who then updates or expands the enterprise and operates it on a permanent basis. This type of arrangement is similar to liquidation of a government enterprise, as it is operated on the basis of a concession granted by the government, and this concession gives the government the right to control prices and quality of service.

 

4.   Build-Own-Operate (BOO): The private sector investor finances, builds and operates the enterprise on a permanent basis, by virtue of a concession granted by the government, but under rules that determine the prices of the services provided and the method of operation.