Geothermal handbook: PlanninG and Financing power Generation t e c h n I c a L r e p o r t 2 / 2

F I g u r E 3 . 5
The Philippine BOT Model: Private Investor Insulated from Exploration Risk and Off-Take Risk
Geothermal Field 
Exploration 
and Development
Source | Authors based on Dolor 2006.
BOT Fee
Private Investor Under 
BOT Contract
Power Plant
Built Under BOT
Contract
National Power 
Utility
Electricity
Steam
$$
Exploration Risk
A PPP in the power generation sector is typically formed to build a certain amount of power capacity 
or an individual project. In a PPP, the costs and risks are carefully considered and allocated to the 
participating public and private entities. Obligations, benefits and risk allocations are set out in the 
power purchase agreement (PPA) and concession agreement. In a typical PPP for power generation, 
private investors build a power generation plant and contract to sell the electricity generated to a 
publicly owned power utility. The public authority assumes the demand risk and makes a minimum 
payment for availability (or capacity) of the power plant, whether or not its output is required. A further 
payment is made for usage, to cover the cost of fuel for the plant. 
To further describe the type of contract involved in a PPP, terms such as BOT (build, operate, and 
transfer) or DBFO (design, build, finance, and operate) are often used (World Bank 2009). When the 
infrastructure asset is not returned to the public sector, it is sometimes referred to as a build, own, and 
operate (BOO) contract.