PT INDOGAS: BUILT-OPERATE-TRANSFER (BOT) PROJECT FINANCING

This case study was provided for business school students for illustration and discussion on project finance topic. The term “Project finance” can simply be define as a financing arrangement for an economically and independent project that uses everything that the project can offer as its collateral for assessing the risk and the basis of its return of investment.  This assessment can also be called as “limited recourse” financing because the capital provider are given only a limited recourse against the project borrower assets.

Furthermore, this financing assessment for a project differs with the traditional corporate finance concepts, whereby typically the lender will look to the strength of a company’s historical balance sheet to retrieve their funds back, as in a project loan the creditor will look almost solely toward the expected cash flows from the project for its repayment of the loan.

Project finance itself can be arranged in different structures/schemes in which one of these schemes is called as a Built-Operate-Transfer (“BOT”) arrangement.  This case of “PT. Indogas: BOT Project Financing” is an example of a BOT project financing arrangement that had been carried out for a gas infrastructure production facility in East Java, Indonesia.