Stochastic Revenue and Cost Model for Determining a BOT Concession Period under Multiple Project Constraints

Xu, Jiang-wei; Moon, Soo Young

doi:10.1061/(asce)me.1943-5479.0000182

Cited by 19 publications

(8 citation statements)

References 13 publications

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“…The second position is the real position, in which the opposite of the artificial position takes place: the public is considered as a real principal stakeholder, with the user of the PPP facility as internal stakeholders and the rest of the public (citizens) as external stakeholders. A reflection on the two positions strongly suggests that the dominant current scenario of PPP environments seem to concur with the artificial position (Hodge and Greve 2007;Holmes et al 2006;Cheung and Chan 2011;Cruz and Marques 2014;Xu and Moon 2014). The four features of the agency theory, as advanced by Lupia and McCubbins (2000) and Brehm and Gates (1997), are important for promoting PPPs to the general public.…”

Section: Emphasizing the Public Partnershipmentioning

confidence: 92%

Addressing the Missing Link in PPP Projects: What Constitutes the Public?

2015

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Public private partnerships (PPPs), as new organizational forms, are intended to respond to societal problems previously held as intractable. In all countries, the originality of PPPs raises new questions of governance, which include the problem of sharing economic, social, and political responsibility among various segments of society in the development of the country; and the adoption of new institutional forms to enhance the efficiency of government action. These concerns are raised in both developed and developing countries, but with greater acuteness in the latter. In all cases, the central question regarding the relation between the public and private sectors is that which constitutes the public side of the partnership. This paper traces historical and contemporary developments in the need for PPPs; and current public protests against PPPs, which are perceived as impositions to the desires of the greater public. Using a principal-agent model as a lens, this paper provides a detailed understanding of what constitutes the first "P" (the public) in a PPP construct and shows how many current approaches in PPP project arrangements have failed to embrace the real public (an inclusive approach) and have instead been dominated by the artificial public agent (an exclusive approach). The paper provides an appropriate definition of the public and recommends the need for a paradigm shift from exclusion to inclusion in PPP arrangements.

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Section: Emphasizing the Public Partnershipmentioning

confidence: 92%

Addressing the Missing Link in PPP Projects: What Constitutes the Public?

2015

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“…Transportation projects Specific time Xu and Moon (2014) Few studies have applied real options in order to optimise concession periods directly. Applying real options theory to concession period determination for PPP projects is conducive to making more scientific investment decisions.…”

Section: State-of-the-art Of Concession Period Determination Methodsmentioning

confidence: 99%

Concession Period Determination for PPP Retirement Village

Liu

Jin

Xie

et al. 2018

International Journal of Strategic Property Management

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Demand for the construction of retirement villages is increasing with the worldwide growth in ageing populations. However, the development of retirement villages can be impeded by many factors, such as limited available land and high investment costs. Public–private partnership (PPP) as an alternative financing mechanism has been widely applied in the construction of public infrastructure projects and may provide new funding sources for building retirement villages. By applying PPP to the construction of retirement villages, the independent living requirements of seniors can be met and the financial difficulty of the construction of retirement villages can be resolved. Similar to other PPP projects, when retirement villages are constructed under a PPP process, the concession period is a key decision variable in relation to the success of the project. The concession period is stated in the project contract between the government and private investors, and stipulates the date when the project ownership and operation are transferred from the private investor back to the government. The government should take detailed information into consideration at the initial project stage when determining the concession period. This paper proposes PPP as a new procurement method to be applied to the construction of rental retirement villages and develops a concession period determination process for PPP retirement village projects with consideration of real options, focusing on the option to defer. An empirical example with alternative scales, which is developed from an existing retirement village in Geelong, Australia, is used to numerically verify the process and the impacts of key variables on the concession period. The determination process provides an alternative tool for governments to design the concession period before the tendering stage and will benefit the development of industries associated with services for the ageing population. This process can also be applied to the construction of other financially non-viable PPP projects such as social housing.

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“…The equilibrium differential equation 19is solved subject to the boundary conditions (20) and (21) to ensure that the government invests at the time when the option value is maximized. Hereon, the value-matching condition (20) states that the government's option is exercised as the net value at this moment, and the smooth-pasting condition (21) ensures that the exercise trigger must be determined to maximize the option value. Mathematically, the formulas are described as follows:…”

Section: Of 23mentioning

confidence: 99%

“…Nevertheless, among the broader literature on the determination of the concession period in the BOT project (e.g., [19,20]), many studies use the net present value (NPV) method. For example, Xu and Moon [21] proposed a stochastic revenue and cost model for determining a BOT concession period. However, the NPV method fails to consider the influences of uncertain factors.…”

Section: Introductionmentioning

confidence: 99%

The Determination of Concession Period for Build-Operate-Transfer Solar Photovoltaic Power Project under Policy Incentives: A Case Study of China

Chen

2019

Energies

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Since the concession period is one of the most crucial variables influencing the success of a photovoltaic (PV) power project under build-operate-transfer (BOT) mode, this paper presents a real option game model—which integrates the real option and cooperative game theory—to determine the optimal concession period of the BOT solar PV power project under policy incentives by considering the value of the option to defer. In the proposed model, an effective interval of concession period for the BOT project was identified by using a real option, and the equilibrium value of the concession period was obtained by applying classical optimization theory. To evaluate our model, we empirically determined the optimal concession period for the BOT solar PV power project in China, and a sensitivity analysis was conducted to demonstrate how relevant influential factors, which are presented in the model, affect the equilibrium value of the concession period and its effective interval. The results indicate that the current investment environment in China could successfully implement the BOT solar PV power project under policy incentives, including initial cost subsidy and the feed-in tariffs mechanism. While the high volatility of electricity demand, investment cost, and land-use rent fee can lead the failure of the BOT solar PV project implementation, promoting the technological development of PV power generation, maintaining the market stability, and increasing the policy incentives can help the BOT power project to be arranged with an optimal concession period. In addition, the feed-in tariffs mechanism is more helpful than the initial cost subsidy for winning the BOT contract.

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Stochastic Revenue and Cost Model for Determining a BOT Concession Period under Multiple Project Constraints

Cited by 19 publications

References 13 publications

Addressing the Missing Link in PPP Projects: What Constitutes the Public?

Addressing the Missing Link in PPP Projects: What Constitutes the Public?

Concession Period Determination for PPP Retirement Village

The Determination of Concession Period for Build-Operate-Transfer Solar Photovoltaic Power Project under Policy Incentives: A Case Study of China

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