Bidding Strategy for BOT Port Terminal Projects in India

Abstract

This article focuses on formulating a successful financial bidding strategy for BOT (build-operate-transfer) port terminal projects in India. The article's aim is to arrive at an optimal revenue sharing figure, a yardstick for the government in selecting the developer in PPPs (public-private participations). Although the optimal figure can be derived by considering quantifiable factors such as financial statements, ratios, and their sensitivity under various scenarios, qualitative factors including competitive advantage and core competency also need to be considered for a thorough evaluation. This article develops a model to quantify these qualitative factors to arrive at a Strategy Premium, which is then used to adjust the revenue sharing figure. An optimal revenue sharing figure will ensure proper assessment of the bidder's strategy. The article will be helpful not only to port developers, but it can also be applied to all types of PPP projects such as rail, road and mining projects. It will help bidders in preparing suitable bidding strategies with the help of a financial model from the input data and provide assistance for various sensitivity analyses of the required rate of return and an optimal revenue sharing figure. The proposed strategy premium model provides a basic framework for incorporating qualitative factors to arrive at a final revenue sharing figure for bidding.

TOPICS: Credit risk management, credit default swaps, information providers/credit ratings