Valuing an option to abandon a PPP toll road project

Public-Private Partnerships (PPPs) are used worldwide as a well-established and recognised project delivery method. History of PPP transportation projects such as toll roads has seen different success. Feasibility assessment process of PPP projects has evolved over time in an attempt to represent and capture uncertainties that may occur over a longer time horizon in a more realistic way. The theory of real options is often used as tool that provides a mathematical background for the quantification of various forms of flexibilities in PPP contracts. The objective of this paper is to investigate an option to abandon the project as one form of the flexibility in PPP contracts. A case study of a regional motorway in Serbia is presented with an analysis of the benefits that this type of option has on the project's financial feasibility. Results indicate that, with this option, the project’s risk profile becomes more acceptable to potential investors, thus increasing the value of the project. Application of this type of flexibility in PPP contracts in Serbia is also discussed.

Language

  • English

Media Info

  • Pagination: 10p
  • Monograph Title: Transport Research Arena (TRA) 2014 Proceedings

Subject/Index Terms

Filing Info

  • Accession Number: 01534629
  • Record Type: Publication
  • Source Agency: ARRB
  • Files: VTI, TRIS, ATRI
  • Created Date: Aug 14 2014 10:17AM