Build and Transfer (B& T) is a derivative of Build , Own , Operate and Transfer (BOOT) Model commonly used by the Developer SecLink and its consortium of contractors for financing of infrastructure projects, especially in developing countries like Africa. Build and Transfer concept can be applied to any EPC contract for constructing a Real Estate Project.
Build and Transfer EPC contracts are suitable only for EPC Contracts where:
How does a B & T Contract differ from a Traditional EPC Contract.
The only key difference between a traditional EPC contract and B & T Contract is in the Mode of Payment. In a B & T contract SecLink Group does not get any progress payments but only one bullet payment on handover of the project as per the terms of the contract.
In short SecLink Group as the JV Partner in the project arranges to fund the EPC Contractor through its own credit facilities. The lump sum Payment due to SecLink Group on handover needs to be however secured by the local developer/Landowner (Other JV Partner) in form of a payment guarantee from a Bank/Financial institution usually for 100% of the EPC value. EPC B & T Contract usually has 3 components.
APPLICATION OF THE CONCEPT
How Does it work for a Real Estate Development Project in India & Advantages to the Land owner/Local Developer when they do the JV with SecLink Group.
Land Owner/Local Developer does the tie-up of JV with SecLink Group and then creates a development company along with SecLink where they put the fully paid land, Sales Escrow Account and arranges a Conditional Payment Guarantee (Verbiage Attached) from the Local or International Bank in Favour of SecLink Group guaranteeing the payment only of EPC Value subject to completion. Since the payment guarantee can only be invoked on handover of the project lower margins can be negotiated with Banks/Institutions for the following reasons:
Advantages to the Local A Grade Bank who Issues the Payment Guarantee.