05-07-2011, 02:49 PM
Over the past decade, there are numerous companies investing in BOT projects around the world as governments encourages the private sector to finance public works in return for rights to operate these assets over a fixed period of time. Currently, such BOT assets are very popular investments among listed companies due to their high moat, stable cash-flow and defensiveness. This assumes that they can secure the financing since the cost of the investment is paid upfront during the construction phase. At the moment, there are numerous SGX companies dealing with BOT projects: Hyflux in BOT water plants, KGT deals with concession based assets in Singapore, MIIF & CM Pacific owns BOT toll roads, HPHT owns port concession rights, United Envirotech & Sound Global has extensive investments in water BOT plants etc. Most of these concession rights will expire in the next 2-3 decades - the earliest would MIIF's HNE toll road which expires in 15 years time.
i) Are there any provisions/precedents of renewal of concession rights ?
ii) Will renewal come with 'forced' capex for the asset ?
iii) If there is no provision, why do business trust (KGT, HPHT, MIIF) pay out all of the cash-flow from these assets ?
i) Are there any provisions/precedents of renewal of concession rights ?
ii) Will renewal come with 'forced' capex for the asset ?
iii) If there is no provision, why do business trust (KGT, HPHT, MIIF) pay out all of the cash-flow from these assets ?
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