The benefits of the BOO project implementation method
January 20, 2022>
InfraTalks – utility infrastructure insight
Do you work on energy and infrastructure projects? Have you heard about our Build, Own, Operate (BOO) project implementation method for industrial energy and infrastructure greenfield projects? In this article I will address the multiple benefits of Nevel’s BOO method as well as our Utilities as a Service concept and sale-leaseback arrangement. I will also cover some aspects of other major project implementation methods: Engineering, Procurement, Construction (EPC) and Engineering, Procurement, Construction Management (EPCM).
The EPC and EPCM project implementation methods are widely used in large industrial projects. In EPC the supplier gives a fixed price for the project and has the ownership of the project and is responsible for managing the costs and schedule. In EPCM the pricing is more open and the customer has the ownership and main responsibilities of the project, supported by the EPCM supplier. EPC is typically the preferred method when the customer does not have sufficient owner´s engineering resources to support an EPCM approach. EPC is also preferred by many financiers due to the more predictable cost structure. An EPC project is often referred to as a turn-key project or a lump-sum price project. Compared to EPC, EPCM provides more flexibility for project development, equipment selection and implementation, but requires more coordination resources for the multiple interphases and exposes the customer to a greater degree of risk.
BOO is an advanced project implementation method that takes EPC one step further. It includes the same basic idea as EPC of the full project ownership by the supplier with the additional benefits of outsourced ownership and operation & maintenance (O&M) of the asset, which allows the customer to focus on their core business and further optimise the economics of their operations. In the BOO method the supplier is responsible for the safety of the asset as well as the financing, project implementation and O&M.
Utilities as a Service is a concept in which Nevel offers utilities as a complete package with a clear pricing structure. Utilities could include heat, steam, hot oil, hot water, heat recovery, cooling or wastewater treatment. Naturally CAPEX and OPEX optimisation, fossil-free fuel basket considerations and CO2 reduction are at the heart of every Nevel concept.
We offer a sale-leaseback arrangement in brownfield projects where the customer wants to outsource their existing energy production facilities or other infra-related assets. In this arrangement Nevel typically agrees a one-time CAPEX payment to the customer for the asset in question and then takes over the responsibility for its operation and maintenance. Further leaseback arrangements are agreed on a case-by-case basis.
Our BOO implementation method, Utilities as a Service concept and sale-leaseback arrangements all have a clear and transparent pricing structure. Typically, the structure is based on two components: a fixed fee covering the investment cost and a variable fee covering the variable costs. As Nevel’s business model is focused on long-term development, we are often able to offer more reasonable pricing for the total investment and CAPEX/OPEX structure than would be possible via the customer’s own financing.
Every project implementation method has its pros and cons, and the same work needs to be done regardless of the chosen method. The customer needs to consider which method best suits them in terms of their willingness and ability to accept risk and provide financing and internal resources. Nevel’s BOO method, Utilities as a Service concept and sale-leaseback arrangements are cost effective and sustainable alternatives for energy and infrastructure projects that free customers to focus on their core business and optimise their financing needs and risk portfolio. If you are interested in discussing a potential cooperation model for your business, I’m happy to provide further information.
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