On the development of socially beneficial infrastructure projects

Abstract

Purpose The purpose of this paper is to introduce a project development framework (PDF) aiming to find socially beneficial public infrastructure provision (PIP) projects in the transport sector. From this perspective, the current paper focuses on the framework of finding an optimized PIP organizational model based on which the projects will be both economically and financially viable and will meet the interests of all the stakeholders. From this perspective, the objective of the current paper is to find in the design phase of the projects, a PIP organizational model for the transport sector, that generates the socially required economic internal rate of return (hereinafter EIRR), thus providing the society with the added social values from the relevant infrastructure projects and, at the same time, ensuring relevant level of the financial internal rate of return (hereinafter FIRR) for the private companies interested in investing in relevant assets. This allows finding socially beneficial PIP organizational model according to the adopted PDF. Design/methodology/approach The methodology aiming to develop the PDF focuses on analyzing both the economic and financial effectiveness of the PIP projects by exploring different combinations of available options for business, contractual, and financial models of relevant projects. Based on the example of the Republic of Armenia it is shown how the EIRR can be calculated for the PIP projects using the adopted PDF by taking into consideration the transport sector specifics of the country. Findings The main advantage of the designed framework is that it focuses on the calculation of the EIRR not only based on the different design options, but also explores the influence of the chosen procurement models on the economic output of the projects. The identification and the calculation of the positive and negative externalities (benefits and losses of the projects) in the economic values within the current PDF serve as the main instrument for the development of the PIP optimized socially beneficial/viable organizational models. The main privilege of the paper is that it considers the social aspect of the project together with the financing aspect without extruding any interests of the parties. Originality/value The uniqueness and the novelty of the adopted PDF is that it considers the efficiency of the PIP projects based on the analysis of not only the design options that influence the economic and financial output of the projects, but also compares the impact of the different combinations of the existing privatization, partnership, contractual, financial, and business models on the level of the EIRR and the FIRR. The socially beneficial infrastructure (economically viable) model generates economically and financially viable projects. Thus, the public partner is provided with the highest social value while the private partner is guaranteed a desired financial return.

Project feasibility analysis economic model for private investments in the renewable energy sector

“…Project feasibility analysis economic model A similar model was previously developed when trying to provide a mechanism that calculates the EIRR and FIRR from the possible available combinations of costs and income sources, as well as the economic benefitsas an example can serve the analysis in transport sector (Badasyan and Alfen, 2017). This paper fails to provide mechanisms for economic evaluations and does not describe a methodology that will allow transferring the existing benefits of the renewable energies into the similar model for the transport sector.…”