Appraisal of Combined Agreements in Bot Project Finance: Focused on Minimum Revenue Guarantee and Revenue Cap Agreements

Abstract

ABSTRACT. Limited public funds for infrastructures have the government consider joining the private in a BOT project finance scheme. Generally, the BOT projects entail lots of managerial flexibilities that may induce the radical change of project's cash flows, an asymmetric payoff, when facing on the uncertainties due to the BOT project finance's unique characteristics. Among various managerial flexibilities in the BOT projects, the MRG (Minimum Revenue Guarantee) and the RCP (Revenue Cap) agreements are frequently used to protect the government and the developer from the operational risk. However, the combined effect of the MRG and RCP on the project value is not understood well because the traditional capital budgeting theory, the NPV (Net Present Value) analysis, is limited to assess the contingency of these agreements. So, the purpose of this paper is to develop the numerical model to assess the combined impact of the MRG and RCP agreements on the project value based on the option pricing theory and to suggest a theoretical framework. The approach applied in this paper is justified with the hypothetical BOT toll case and some meaningful conclusions are drawn from. The results by the option pricing concept are analyzed over those by NPV analysis and, finally, the combined value of the MRG and RCP agreements appears significant relative to the project value.

Concession Model for Fair Distribution of Benefits and Risks in Build-Operate-Transfer Road Projects

“…where U i is the investment utility, and i CT is the total investment cost. 2) Traffic volume t Q is a risk variable which is influenced by many factors, such as social economic, population environment, consumption habits, and force majeure (Jun, 2010). Based on existing studies, this study assumes that the traffic volume varies stochastically in time following a geometric Brownian motion (GBM) (Garvin & Cheah, 2004;Iyer & Sagheer, 2011):…”

Viešojo ir privačiojo sektorių partnerystė: miesto teritorijų plėtros perspektyvos

“…Todėl pasitaiko informacijos iškraipymų, nes daugelį viešo-sios ir privačiosios partnerystės apraiškų dažniausiai mėgina-ma sutapatinti su valstybinio turto privatizacija (Zafirovski 1999;Thobani 1999). Iš esmės tai viešojo ir privačiojo sektoriaus bendradarbiavimo būdas, sudarantis sąlygas pritraukti privatų finansavimą viešosioms paslaugoms teikti (Blank et al 2009;De Lemos et al 2000;Hemming et al 2006;Jun 2010;Wibowo 2006;Froud 2003;Gallimore et al 1997;Grimsey, Lewis 2005;Shaoul 2005; Abednego, Ogunlana 2006; Ahmed, Ali 2006; Skietrys et al 2008;Meidutė 2008aMeidutė , 2009. Kaip teigia Edwards ir Shaoul (2003), Leunga ir Hui (2005), Akintoye et al (2003), didžiausia problema ta, kad viešųjų paslaugų teikimo perdavimas privačiajam sektoriui bus susijęs su baime, kad privatusis verslas teiks prastesnės kokybės paslaugas, bus prarasta valdymo kontrolė.…”

“…Daugelis autorių (Chiara, Garvin 2008;Jun 2010;Leunga, Hui 2005;Wang 2000), taip pat oficialios valstybinės institucijos pripažįsta, kad sėkmingiausia ir produktyviausia VPP forma yra vadinamoji privačioji finansinė iniciatyva (angl. Private Finance Initiative, PFI).…”

Comparing Risk Transfers Under Different Procurement Arrangements / Rizikos Perkėlimo, Taikant Skirtingas Pirkimų Tvarkas, Palyginimas

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