Build-Operate-Transfer Contract
A type of arrangement in which the private sector builds an infrastructure project, operates it and eventually transfers ownership of the project to the government. In many instances, the government becomes the firm's only customer and promises to purchase at least a predetermined amount of the project's output. This ensures that the firm recoups its initial investment in a reasonable time span. Investopedia Says:
This type of arrangement is used typically in complicated long-term projects as seen in power plants and water treatment facilities. In some arrangements, the government does not assume ownership of the project. In those cases, the company continues running the facility and the government acts as both the consumer and regulator. Related Terms:
Capital Budgeting
Capital Expenditure - CAPEX
Infrastructure
Investment
Project Finance
Total Cost Of Ownership |