Operation & Maintenance Contracts
Project financing agreements known as “Operation & Maintenance Contracts” (O&M Agreements) create a legal framework for the project’s operation and maintenance between the project company and a qualified management firm.
Similar to how EPC Contracts function during the construction phase of a project, PTC WaterTech’sOperation & Maintenance Agreements carry out a similar function throughout the operations phase. The project business must choose the project’s operational structure before construction is finished. In essence, there are three choices.
- The project can be managed and operated by the project company or by one of the stakeholders.
- The project company can manage and operate the project with the help of consultants.
- To oversee and maintain the project, the project business may enter into a contract with an experienced operator.
To increase the chances of a project loan being approved, project businesses and sponsors should always use PTC WaterTech’sOperations & Maintenance contract to hire a qualified operator who has the know-how to run the project to the best possible standard. You virtually always achieve better results with third-party operators, even if the project firm or sponsor has the experience to run the project. All project lenders
strongly favor outside, qualified operators. In actuality, without Operation & Maintenance Agreements, many project lenders will not authorize project financings.
Ideally, the operator will be a seasoned operating business with knowledge and experience running and overseeing projects similar to yours in a similar setting. Although it might be acceptable, it is not recommended for the operator to be a project stakeholder due to possible conflicts of interest. The project business may also be able to manage and sustain the project on its own. It is nearly always best to hire outside, qualified operators to complete the task by operation and maintenance agreements.
The best instrument for managing and reducing operating risk in project finance is a well-drafted operation and maintenance agreement.