Payment-Based Annual Revenue Guarantee versus Period-Extension-Based Cumulative Revenue Guarantee in Build-Operation-Transfer Projects

This study proposes a method to compare revenue guarantee programs in a build-operation-transfer project. Two types of revenue guarantee programs are formulated: a payment-based annual revenue guarantee program and a period-extension-based cumulative revenue guarantee program. Monte Carlo simulation is used to model the real option approach. This method is applied to a toll road project in the Philippines wherein the expected payoffs of the government and the concessionaire are simulated over an evaluation period that includes the concession period. The condition under which the expected government return in one program is equal to that in the other program is shown. These programs are then evaluated by incorporating a project risk factor into the project return. The results show that for the analyzed project the cumulative revenue guarantee program is preferred to the annual revenue guarantee program. However, the optimal solution depends on the government's return-risk preference.

• Corporate Authors:

  Transportation Research Board

  500 Fifth Street, NW
  Washington, DC  United States  20001
• Authors:
  • Asao, Kohei
  • Miyamoto, Takashi
  • Kato, Hironori
  • Diaz, Crispin Emmanuel D
• Conference:
  • Transportation Research Board 91st Annual Meeting
  • Location: Washington DC, United States
  • Date: 2012-1-22 to 2012-1-26
• Date: 2012

Language

• English

Media Info

• Media Type: Digital/other
• Features: Figures; References; Tables;
• Pagination: 12p
• Monograph Title: TRB 91st Annual Meeting Compendium of Papers DVD

Subject/Index Terms

• TRT Terms: Build operate transfer; Contracts; Monte Carlo method; Public private partnerships; Toll roads
• Uncontrolled Terms: Revenue guarantee agreements
• Geographic Terms: Philippines
• Subject Areas: Administration and Management; Finance; Highways; I10: Economics and Administration;

Filing Info

• Accession Number: 01367662
• Record Type: Publication
• Report/Paper Numbers: 12-0380
• Files: TRIS, TRB
• Created Date: Apr 11 2012 11:10AM