Forget BOOT: We need an alternative approach to private financing

It is a quarter of a century since the unbundling of state-owned power utilities gave rise to the idea of privately funded independent power producers. The move was partly driven through necessity, namely recognition that the financing requirements of the next generation of power projects would far exceed the funds available from public sources, and partly from a belief that the private sector would use capital more efficiently. The underlying presumption was that new power projects would mainly be financed from private sources using the BOOT (Build-Own-Operate-Transfer) model. While this approach worked reasonably well for most types of generating projects, it soon became evident that private financing of large hydropower schemes was a more challenging proposition. The amount of private money flowing into the hydro sector is still far too small, and this paper argues that this could be corrected by changing to a financing model where the private developer is introduced much later in the project cycle.