Economic valuation of a toll road concession with traffic guarantees and the abandonment option
Autor(a) principal: | |
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Data de Publicação: | 2016 |
Outros Autores: | , , |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Production |
Texto Completo: | http://old.scielo.br/scielo.php?script=sci_arttext&pid=S0103-65132016000100039 |
Resumo: | Abstract Governments worldwide have been encouraging private participation in transportation infrastructure. To increase the feasibility of a project, public-private partnership (PPP) may include guarantees or other support to reduce the risks for private investors. It is necessary to value these opportunities under a real options framework and thereby analyze the project's economic feasibility and risk allocation. However, within this structure, sponsors have an implicit option to abandon the project that should be simultaneously valued. Thus, this article proposes a hypothetical toll road concession in Brazil with a minimum traffic guarantee, a maximum traffic ceiling, and an implicit abandonment option. Different combinations of the minimum and maximum levels are presented, resulting in very high or even negative value added to the net present value (NPV). The abandonment option impacts the level of guarantee to be given. Governments should calibrate an optimal level of guarantees to avoid unnecessarily high costs, protect the returns of the sponsor, and lower the probability of abandonment. |
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Economic valuation of a toll road concession with traffic guarantees and the abandonment optionReal optionsEconomic evaluationPublic-private partnershipToll road concessionGovernment guaranteesAbstract Governments worldwide have been encouraging private participation in transportation infrastructure. To increase the feasibility of a project, public-private partnership (PPP) may include guarantees or other support to reduce the risks for private investors. It is necessary to value these opportunities under a real options framework and thereby analyze the project's economic feasibility and risk allocation. However, within this structure, sponsors have an implicit option to abandon the project that should be simultaneously valued. Thus, this article proposes a hypothetical toll road concession in Brazil with a minimum traffic guarantee, a maximum traffic ceiling, and an implicit abandonment option. Different combinations of the minimum and maximum levels are presented, resulting in very high or even negative value added to the net present value (NPV). The abandonment option impacts the level of guarantee to be given. Governments should calibrate an optimal level of guarantees to avoid unnecessarily high costs, protect the returns of the sponsor, and lower the probability of abandonment.Associação Brasileira de Engenharia de Produção2016-03-01info:eu-repo/semantics/articleinfo:eu-repo/semantics/publishedVersiontext/htmlhttp://old.scielo.br/scielo.php?script=sci_arttext&pid=S0103-65132016000100039Production v.26 n.1 2016reponame:Productioninstname:Associação Brasileira de Engenharia de Produção (ABEPRO)instacron:ABEPRO10.1590/0103-6513.168713info:eu-repo/semantics/openAccessBlank,Frances FischbergSamanez,Carlos PatricioBaidya,Tara Keshar NandaDias,Marco Antonio Guimarãeseng2016-04-08T00:00:00Zoai:scielo:S0103-65132016000100039Revistahttps://www.scielo.br/j/prod/https://old.scielo.br/oai/scielo-oai.php||production@editoracubo.com.br1980-54110103-6513opendoar:2016-04-08T00:00Production - Associação Brasileira de Engenharia de Produção (ABEPRO)false |
dc.title.none.fl_str_mv |
Economic valuation of a toll road concession with traffic guarantees and the abandonment option |
title |
Economic valuation of a toll road concession with traffic guarantees and the abandonment option |
spellingShingle |
Economic valuation of a toll road concession with traffic guarantees and the abandonment option Blank,Frances Fischberg Real options Economic evaluation Public-private partnership Toll road concession Government guarantees |
title_short |
Economic valuation of a toll road concession with traffic guarantees and the abandonment option |
title_full |
Economic valuation of a toll road concession with traffic guarantees and the abandonment option |
title_fullStr |
Economic valuation of a toll road concession with traffic guarantees and the abandonment option |
title_full_unstemmed |
Economic valuation of a toll road concession with traffic guarantees and the abandonment option |
title_sort |
Economic valuation of a toll road concession with traffic guarantees and the abandonment option |
author |
Blank,Frances Fischberg |
author_facet |
Blank,Frances Fischberg Samanez,Carlos Patricio Baidya,Tara Keshar Nanda Dias,Marco Antonio Guimarães |
author_role |
author |
author2 |
Samanez,Carlos Patricio Baidya,Tara Keshar Nanda Dias,Marco Antonio Guimarães |
author2_role |
author author author |
dc.contributor.author.fl_str_mv |
Blank,Frances Fischberg Samanez,Carlos Patricio Baidya,Tara Keshar Nanda Dias,Marco Antonio Guimarães |
dc.subject.por.fl_str_mv |
Real options Economic evaluation Public-private partnership Toll road concession Government guarantees |
topic |
Real options Economic evaluation Public-private partnership Toll road concession Government guarantees |
description |
Abstract Governments worldwide have been encouraging private participation in transportation infrastructure. To increase the feasibility of a project, public-private partnership (PPP) may include guarantees or other support to reduce the risks for private investors. It is necessary to value these opportunities under a real options framework and thereby analyze the project's economic feasibility and risk allocation. However, within this structure, sponsors have an implicit option to abandon the project that should be simultaneously valued. Thus, this article proposes a hypothetical toll road concession in Brazil with a minimum traffic guarantee, a maximum traffic ceiling, and an implicit abandonment option. Different combinations of the minimum and maximum levels are presented, resulting in very high or even negative value added to the net present value (NPV). The abandonment option impacts the level of guarantee to be given. Governments should calibrate an optimal level of guarantees to avoid unnecessarily high costs, protect the returns of the sponsor, and lower the probability of abandonment. |
publishDate |
2016 |
dc.date.none.fl_str_mv |
2016-03-01 |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://old.scielo.br/scielo.php?script=sci_arttext&pid=S0103-65132016000100039 |
url |
http://old.scielo.br/scielo.php?script=sci_arttext&pid=S0103-65132016000100039 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
10.1590/0103-6513.168713 |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
text/html |
dc.publisher.none.fl_str_mv |
Associação Brasileira de Engenharia de Produção |
publisher.none.fl_str_mv |
Associação Brasileira de Engenharia de Produção |
dc.source.none.fl_str_mv |
Production v.26 n.1 2016 reponame:Production instname:Associação Brasileira de Engenharia de Produção (ABEPRO) instacron:ABEPRO |
instname_str |
Associação Brasileira de Engenharia de Produção (ABEPRO) |
instacron_str |
ABEPRO |
institution |
ABEPRO |
reponame_str |
Production |
collection |
Production |
repository.name.fl_str_mv |
Production - Associação Brasileira de Engenharia de Produção (ABEPRO) |
repository.mail.fl_str_mv |
||production@editoracubo.com.br |
_version_ |
1754213153721286656 |