Minimum revenue guarantees valuation in PPP projects under a mean reverting process

Quimbayo, Carlos Andrés Zapata; Vega, Carlos Armando Mejía; Marques, Naielly Lopes

doi:10.1080/01446193.2018.1500024

Cited by 29 publications

(9 citation statements)

References 34 publications

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“…To countermeasure financial risks, Akomea-Frimpong, Jin and Osei-Kyei [18] modelled a "financial risk maturity" model with the purposed of incorporating financial risks into both project and organisational structures and cultures. Zapata Quimbayo, Mejía Vega and Marques [19] proposed a minimum revenue guarantee as the appropriate financial risk allocation strategy to protect the investments of the private sector. While, Ma, Du and Wang [20] modelled an options tool together with risk sharing models to ensure fair price determination and favourable concession period for PPP projects.…”

Section: Previous Studies On Financial Risks Of Ppp Projectsmentioning

confidence: 99%

Criticality analysis of financial risks of public-private partnership projects in a Sub-Saharan African country

Akomea-Frimpong

Jin

Osei‐Kyei

2022

IOP Conf. Ser.: Earth Environ. Sci.

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Integrating sustainable and complex financial performance models into Public-Private Partnership (PPP) project management is a challenging task due to the sheer number of inherent financial risks. Financial risk is a key impediment in the development of public infrastructure projects in Ghana. Studies on PPP projects in the country have concentrated on critical success factors and stakeholder management with little in-depth assessment of financial risks. This study develops and analyses the key financial risks of PPP infrastructure projects in Ghana. The research methodology is set as follows. First, the identification of twenty-eight financial risks in institutional and project reports, and peer-reviewed articles. Second, collection of primary data via surveys from 126 PPP experts (academics, risk managers and project managers). Third, the development and testing of a novel quantitative model on the criticality of financial risks of PPP projects. The findings show high interest charges, excessive operating expenses, and huge construction material costs as some of the critical financial risks that must be tackled immediately in the country. The outcomes of this study broaden the understanding of financial risks of PPP projects, and it sets the stage for further research.

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Section: Previous Studies On Financial Risks Of Ppp Projectsmentioning

confidence: 99%

Criticality analysis of financial risks of public-private partnership projects in a Sub-Saharan African country

Akomea-Frimpong

Jin

Osei‐Kyei

2022

IOP Conf. Ser.: Earth Environ. Sci.

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“…Many studies have investigated the demand risks, and a corresponding guarantee mechanism has been set up to share the risk [16,19]. e revenue risk depends critically on the uncertainty of the passenger flow volume [17,[28][29][30][31], toll price [32,33], or combinations of the two [24]. On the other hand, cost risk has been the popular choice for the researchers to study, which originates from the uncertainty of the construction costs [34,35] and maintenance and rehabilitation costs [36].…”

Section: Literature Reviewmentioning

confidence: 99%

Alternative Model to Determine the Optimal Government Subsidies in Construction Stage of PPP Rail Transit Projects under Dynamic Uncertainties

Zhang

Zhou

2020

Mathematical Problems in Engineering

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Urban rail transit is a quasioperational project and its net cash inflow can hardly cover the investment expenditure. It is essential to determine an acceptable amount of government subsidy to ensure the financial viability of the PPP projects, so as to encourage the entry of the private partner. The partners involved in PPPs have common interests but conflict regarding the value of government subsidy. Considering the uncertainty characteristic by PPPs and information incompleteness in the decision-making process, this study presents a methodology to calculate the equitable subsidy ratio favored by both participants. This study divides the decision process into two steps. First, this study constructs a financial model and introduces an acceptable range of subsidy ratio by using the Monte Carlo simulation method. Second, this study uses the bargaining game theory to determine a particular subsidy ratio under incomplete information. To verify the applicability of the presented model, the researchers invoke an illustrative example for model validation. This research provides a referential and operational method for the government and private sectors to make government subsidy decisions for quasioperational projects.

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“…In the same way, the determination of the optimal time for the introduction in the market-place of a new product [62] or the identification of the right time to introduce new systems in a company [63] may be assessed with real options methodology. Recent studies such as [64][65][66] focus on the analysis, using real options, of the partnership between government and private investors to invest in public facilities projects or to provide public goods and services.…”

Section: Suitability Of the Real Options Approachmentioning

confidence: 99%

Internet of Things and Their Coming Perspectives: A Real Options Approach

2019

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Internet of things is developing at a dizzying rate, and companies are forced to implement it in order to maintain their operational efficiency. The high flexibility inherent to these technologies makes it necessary to apply an appropriate measure, which properly assesses risks and rewards. Real options methodology is available as a tool which fits the conditions, both economic and strategic, under which investment in internet of things technologies is developed. The contribution of this paper is twofold. On the one hand, it offers an adequate tool to assess the strategic value of investment in internet of things technologies. On the other hand, it tries to raise awareness among managers of internet of things technologies because of their potential to contribute to economic and social progress. The results of the research described in this paper highlight the importance of taking action as quickly as possible if companies want to obtain the best possible performance. In order to enhance the understanding of internet of things technologies investment, this paper provides a methodology to assess the implementation of internet of things technologies by using the real options approach; in particular, the option to expand has been proposed for use in the decision-making process.

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Minimum revenue guarantees valuation in PPP projects under a mean reverting process

Cited by 29 publications

References 34 publications

Criticality analysis of financial risks of public-private partnership projects in a Sub-Saharan African country

Criticality analysis of financial risks of public-private partnership projects in a Sub-Saharan African country

Alternative Model to Determine the Optimal Government Subsidies in Construction Stage of PPP Rail Transit Projects under Dynamic Uncertainties

Internet of Things and Their Coming Perspectives: A Real Options Approach

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