Let me show you BOT first, because TOT is a derivative of BOT. Meaning: 1 Infrastructure franchise BOT is the abbreviation of English build-operate-transfer, which is usually translated literally as "build-operate-transfer". This translation is straightforward, but it can't reflect the essence of BOT. BOT is essentially a way of infrastructure investment, construction and operation. On the premise of reaching an agreement between the government and private institutions, the government grants concessions to private institutions, allowing them to raise funds to build infrastructure, and manage and operate the facility and its corresponding products and services for a certain period of time. The government can limit the quantity and price of public goods or services provided by this institution, but it must ensure that private capital has the opportunity to make profits. The risks in the whole process are shared by the government and private institutions. After the concession period is over, the private institution will hand over the facilities to the government department as agreed, and the government will designate the operation and management of the department. Therefore, it is more appropriate to translate the word BOT into "infrastructure concession". The above is the narrow concept of BOT. BOT has experienced hundreds of years of development, and in order to adapt to different conditions, many variants have been derived, such as boot (Build-Own-Operate-Transfer), boo (Build-Own-Operate), BLT (Build-Lease-Operate) and tot (Transfer-Operate-Transfer). The broad concept of BOT includes these derivative varieties. What people usually say about BOT should be a broad concept of BOT. The term "build-operate-transfer" can't summarize the development of BOT mode. 2. The history of 2.BOT, an investment and construction method, has been used by some developing countries to build infrastructure and achieved certain success, which has attracted worldwide attention and been publicized as a new investment method. However, BOT is far from a new thing, and it has a history of at least 300 years from its appearance to now. On the one hand, BOT can keep the market mechanism running. The economic activities of BOT projects are mostly carried out in the market, and the government's practice of determining the project company through bidding itself also includes the competition mechanism. As a reliable market subject, private institutions are actors of BOT mode, and they have complete property rights for construction projects within the concession period. In this way, the behavior of private institutions undertaking BOT projects in the process of implementing BOT projects fully conforms to the assumption of economic interests. On the other hand, BOT provides an effective way for government intervention, that is, BOT agreement with private institutions. Although the implementation of BOT agreement is entirely the responsibility of the project company, the government has control over the project from beginning to end. Government will plays a decisive role in the three stages of project establishment, bidding and negotiation. In the performance stage, the government has the power of supervision and inspection, and the price setting in project operation is also bound by the government. The government can also restrain the behavior of BOT project companies through the general BOT law. BOT Operation Mode and Risk Sharing A typical BOT project involves the government, BOT project companies, investors, banks or consortia, and related companies undertaking design, construction and operation. The government is the controlling subject of BOT project. The government decides whether to establish the project and adopt BOT method. The government also occupies a favorable position when negotiating and determining the BOT project agreement contract. It also has the right to supervise the necessary links during the project. When the project concession expires, it also has the right to recover the project free of charge. The owner is the executive subject of BOT project and is in the central position. The owner shall be responsible for all financing, subcontracting, construction, acceptance, management system, debt repayment and interest repayment related to the BOT project. Large-scale infrastructure projects usually set up a project company as the owner, dealing with design companies, construction companies, manufacturers and operating companies. Banks or groups are usually the main funders of BOT projects. For small and medium-sized BOT projects, a single bank is generally enough to provide all the funds needed, while large-scale BOT projects often make a single bank overwhelmed, thus forming a syndicate to provide loans. Because the debt ratio of BOT projects is generally as high as 70-90%, loans are often the biggest source of funds for BOT projects. Investors are the risk-taking subjects of BOT projects. They bear limited liability with the invested capital. Although in principle, the government and non-governmental organizations share the risks, in fact, there are great differences in operation among countries. Developed market economy countries share little risk in BOT projects, while developing countries often bear a large proportion of risks in transnational BOT projects. 2.BOT project implementation process BOT mode is mostly used for projects with large investment and long term. It usually takes more than ten years or decades for a BOT project to be established and its franchise expires. At this stage, according to the medium-and long-term social and economic development plan, the government has formulated a new list of construction and reconstruction projects and announced it to the public. According to the items on the list, private organizations can make reasonable plans according to their own business development direction, and then put forward suggestions to the government to build a project by BOT, and apply for bidding or indicate their intention to undertake the project. On the other hand, the government relies on consulting institutions to conduct feasibility studies on various schemes and decide which method to adopt according to the technical and economic indicators of each scheme. Bidding stage. If the project is determined to adopt BOT mode, the government or its entrusted agency will first publish the tender advertisement, then pre-qualify the registered private institutions, select several private institutions as bidders, and sell the tender documents to them. For projects that are determined to be built by BOT, they can also negotiate directly with private institutions that have the intention to undertake the project without bidding. However, the success rate of negotiations is not high. Even if the negotiation is successful, the project cost will often increase due to the lack of competition and excessive government commitments. Bidding stage. The tender preparation time of BOT project is very long, often more than six months. During this period, the agency entrusted by the government should always answer the questions raised by the bidder on the project requirements and consider the reasonable suggestions put forward by the tenderer. The bidder must submit the bidding documents to the tenderer before the specified date. After bid opening, bid evaluation and ranking, the tenderee will select the first 2-3 companies for negotiation. The negotiation stage. Franchise contract is the core of BOT project, which has legal effect and is valid during the whole franchise period. It stipulates the rights and obligations of the government and the BOT project company, and determines the risks and benefits of both parties. Therefore, the negotiation of concession contract is the key link of BOT project. The tenderee entrusted by the government negotiates with several selected bidders in turn. If successful, sign the contract; If not, move on to the next bidder. Sometimes negotiations need to be carried out. Performance stage. This stage covers the whole concession period and can be divided into construction stage, operation stage and handover stage. The owner is the protagonist at this stage and undertakes a lot of work to fulfill the contract. In particular, a good franchise contract can urge the owners to supervise the construction and operation participants seriously and responsibly, and strive to reduce costs and improve efficiency. Risk in BOT projects BOT projects are characterized by large investment, long cycle and great differences in conditions, and there is often no precedent to follow, so BOT projects are risky. Risk avoidance and sharing have become an important part of BOT projects. There may be five risks in the whole process of BOT project: political risk, market risk, technical risk, financing risk and irresistible external force risk. Political risk. Political instability and social instability will bring political risks to BOT projects, which is especially considered by multinational BOT project companies. The political risk borne by investors increases with the extension of the project period, but for domestic investors, this risk factor is seldom considered. Market risk. During the long concession period of BOT project, the relationship between supply and demand and price changes occur from time to time. Before the BOT project recovers all its investment, there may be cheaper competitive products or more popular substitute products in the market, which greatly reduces people's demand for the output of BOT projects, which is called market risk. Usually BOT projects are monopolistic because of their long investment cycle and need government assistance and concession, but the market risks brought by technological progress cannot be ruled out. In addition, in the raw material market, rising raw material prices may lead to project cost overruns, which is another market risk. Technical risk. In the process of BOT project, the risk caused by improper arrangement of system details is called technical risk. One manifestation of this risk is delay, which will directly shorten the project operation period and reduce the project return, and may seriously lead to the abandonment of the project. Another situation is engineering defects, which refer to the problems left over from the construction process. This risk can be reduced by technical treatment in institutional arrangements. Financing risk. The risk brought by unexpected changes in exchange rate, interest rate and inflation rate is financing risk. If inflation is higher than expected, the predetermined price of BOT project (if the expected price is agreed) will be low; If the interest rate rises, the financing cost of BOT projects will increase greatly due to the high debt ratio. Because BOT is often used for transnational investment, the change of exchange rate or the difficulty of cashing will also bring risks to the project. 4. There are two mechanisms to avoid BOT risks and share risks. One mechanism is evasion, that is, taking certain measures to reduce the probability of adverse situations; Another mechanism is sharing, that is, agreeing in advance the loss allocation scheme under unfavorable circumstances. This is an important content in the BOT project contract. The international practice of risk sharing among participants is that whoever can control the risk best will bear the risk. Avoid political risks. The first thing that BOT project companies with transnational investment should consider is political risk. This kind of risk is difficult to assess only by the experience of economists and economic workers. The project company can get some concessions from the government in the negotiations to partially offset the political risks. For example, opening a project fund account outside the project country. In addition, the Overseas Private Investment Corporation (OPIC) in the United States and the Export Credit Guarantee Department (ECGD) in the United Kingdom provide guarantees for the political risks of transnational investment by domestic enterprises. Sharing of market risks. Under the market economy system, the market risks brought by the emergence of new technologies should be borne by the project sponsors and decision makers. If the project is initiated by a private organization, this part of the market risk will be borne by the project company; The government is mainly responsible for the projects determined by the government's development plan. The project company should anticipate the risk of project cost overrun and be prepared when signing the BOT project contract. Avoid technical risks. Technical risks are caused by lax constraints or poor supervision when subcontracting between the project company and the contractor, and the project company should bear all the responsibilities. The delay and defects of the project shall be stipulated in the subcontract and linked to the economic interests of the contractor. In addition to the project cost, the project company should also leave a part of maintenance deposit or post-construction quality deposit in order to solve the problem of project defects smoothly. For the control projects that affect the relationship between the whole project schedule and the overall quality, the project company should also conduct more frequent periodic supervision. Avoid financing risks. Project financing is an important content running through BOT projects. This process is all operated by the project company as the main body, and the risks are entirely borne by the project company. Financing skills have a great influence on the project cost. First of all, the funds invested step by step in the project process should be integrated step by step, otherwise the financing cost will increase greatly. Secondly, when the product price is agreed, the impact of interest rate and inflation fluctuation on the cost should be expected. If it is a BOT project that introduces foreign capital from abroad, we should consider the issue of currency exchange and the expectation of exchange rate. Share the risk of irresistible external forces. This kind of risk is unpredictable, and the amount of loss is uncertain, which may be a devastating loss. Neither the government nor the private sector can do anything about it. We can rely on the insurance company to bear some of the risks. This will inevitably increase the project cost, and large BOT projects often require many insurance companies to reinsurance. In the project contract, the government and the project company should also agree on the method of sharing risks. Let's talk about TOT again. I won't elaborate on this. TOT is the abbreviation of English Transfer-Operate- Transfer, namely transfer-operation-transfer. TOT is a new development of BOT financing mode. TOT is a popular project financing method in the world in recent years. It means that government departments or state-owned enterprises transfer the property rights and management rights of built projects to investors for management; A financing method in which investors recover all their investment through operation within the agreed time and get a reasonable return, and return it to the government department or the original unit after the contract expires. TOT is also a special form of enterprise merger and acquisition.