Port capacity expansion under real options approach: a case study in Brazil
Autor(a) principal: | |
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Data de Publicação: | 2022 |
Outros Autores: | , , |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Independent Journal of Management & Production |
Texto Completo: | http://www.ijmp.jor.br/index.php/ijmp/article/view/1476 |
Resumo: | Investments in port container terminals are sensitive to uncertainties. Public investments in infrastructure have been significantly reduced in the last decade in developing countries. The Brazilian government infrastructure investment was only 1.85 % of GDP in 2019, representing the lowest level in the last fifty years. Nonetheless, the regulatory framework of the port sector in Brazil has undergone significant changes over time, increasing the number of private port container terminal leases. The expansion capacity of the private port facilities is strongly linked to the demand uncertainty, which impacts the financial return to the long run. In this scenario, the uncertainty of global cargo transportation can discourage infrastructure investments in this class of project in Brazil. To overcome these issues, the financial modelling applying real options approach is better suited than the traditional valuation methods based on Discounted Cash Flow (DCF) analysis. The present study aims to value flexibilities of anticipating, or postponing, or interrupting investments of an existing operational port terminal in Brazil with expansion capacity under the demand uncertainty. The financial decision to invest in a port expansion is modeled by an American option. The results demonstrate that the investor adds significant value to the project by having the possibility to postpone investments. The proposed model presents the contribution of optimizing the decision of sequential expansions of capacity in port terminals, at any time and according to scenarios' revelation. In addition, the model allows the government authorities to review lease contracts, considering the relevance of timing to invest in project expansion decisions. The proposed model can also be extended to other infrastructure projects in emerging economies. |
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Independent Journal of Management & Production |
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Port capacity expansion under real options approach: a case study in Brazilinfrastructuremanagerial flexibilityport expansionreal optionsuncertaintyInvestments in port container terminals are sensitive to uncertainties. Public investments in infrastructure have been significantly reduced in the last decade in developing countries. The Brazilian government infrastructure investment was only 1.85 % of GDP in 2019, representing the lowest level in the last fifty years. Nonetheless, the regulatory framework of the port sector in Brazil has undergone significant changes over time, increasing the number of private port container terminal leases. The expansion capacity of the private port facilities is strongly linked to the demand uncertainty, which impacts the financial return to the long run. In this scenario, the uncertainty of global cargo transportation can discourage infrastructure investments in this class of project in Brazil. To overcome these issues, the financial modelling applying real options approach is better suited than the traditional valuation methods based on Discounted Cash Flow (DCF) analysis. The present study aims to value flexibilities of anticipating, or postponing, or interrupting investments of an existing operational port terminal in Brazil with expansion capacity under the demand uncertainty. The financial decision to invest in a port expansion is modeled by an American option. The results demonstrate that the investor adds significant value to the project by having the possibility to postpone investments. The proposed model presents the contribution of optimizing the decision of sequential expansions of capacity in port terminals, at any time and according to scenarios' revelation. In addition, the model allows the government authorities to review lease contracts, considering the relevance of timing to invest in project expansion decisions. The proposed model can also be extended to other infrastructure projects in emerging economies.Independent2022-03-01info:eu-repo/semantics/articleinfo:eu-repo/semantics/publishedVersionapplication/pdftext/htmlhttp://www.ijmp.jor.br/index.php/ijmp/article/view/147610.14807/ijmp.v13i1.1476Independent Journal of Management & Production; Vol. 13 No. 1 (2022): Independent Journal of Management & Production; 234-2572236-269X2236-269Xreponame:Independent Journal of Management & Productioninstname:Instituto Federal de Educação, Ciência e Tecnologia de São Paulo (IFSP)instacron:IJM&Penghttp://www.ijmp.jor.br/index.php/ijmp/article/view/1476/2104http://www.ijmp.jor.br/index.php/ijmp/article/view/1476/2105Copyright (c) 2021 Ana Carolina Velloso Assis, Rafael Igrejas Silva, Luiz Flavio Autran Monteiro Gomes, Edson Daniel Lopes Gonçalveshttp://creativecommons.org/licenses/by-nc-sa/4.0info:eu-repo/semantics/openAccessAssis, Ana Carolina VellosoSilva, Rafael IgrejasGomes, Luiz Flavio Autran MonteiroGonçalves, Edson Daniel Lopes2022-03-01T10:34:36Zoai:www.ijmp.jor.br:article/1476Revistahttp://www.ijmp.jor.br/PUBhttp://www.ijmp.jor.br/index.php/ijmp/oaiijmp@ijmp.jor.br||paulo@paulorodrigues.pro.br||2236-269X2236-269Xopendoar:2022-03-01T10:34:36Independent Journal of Management & Production - Instituto Federal de Educação, Ciência e Tecnologia de São Paulo (IFSP)false |
dc.title.none.fl_str_mv |
Port capacity expansion under real options approach: a case study in Brazil |
title |
Port capacity expansion under real options approach: a case study in Brazil |
spellingShingle |
Port capacity expansion under real options approach: a case study in Brazil Assis, Ana Carolina Velloso infrastructure managerial flexibility port expansion real options uncertainty |
title_short |
Port capacity expansion under real options approach: a case study in Brazil |
title_full |
Port capacity expansion under real options approach: a case study in Brazil |
title_fullStr |
Port capacity expansion under real options approach: a case study in Brazil |
title_full_unstemmed |
Port capacity expansion under real options approach: a case study in Brazil |
title_sort |
Port capacity expansion under real options approach: a case study in Brazil |
author |
Assis, Ana Carolina Velloso |
author_facet |
Assis, Ana Carolina Velloso Silva, Rafael Igrejas Gomes, Luiz Flavio Autran Monteiro Gonçalves, Edson Daniel Lopes |
author_role |
author |
author2 |
Silva, Rafael Igrejas Gomes, Luiz Flavio Autran Monteiro Gonçalves, Edson Daniel Lopes |
author2_role |
author author author |
dc.contributor.author.fl_str_mv |
Assis, Ana Carolina Velloso Silva, Rafael Igrejas Gomes, Luiz Flavio Autran Monteiro Gonçalves, Edson Daniel Lopes |
dc.subject.por.fl_str_mv |
infrastructure managerial flexibility port expansion real options uncertainty |
topic |
infrastructure managerial flexibility port expansion real options uncertainty |
description |
Investments in port container terminals are sensitive to uncertainties. Public investments in infrastructure have been significantly reduced in the last decade in developing countries. The Brazilian government infrastructure investment was only 1.85 % of GDP in 2019, representing the lowest level in the last fifty years. Nonetheless, the regulatory framework of the port sector in Brazil has undergone significant changes over time, increasing the number of private port container terminal leases. The expansion capacity of the private port facilities is strongly linked to the demand uncertainty, which impacts the financial return to the long run. In this scenario, the uncertainty of global cargo transportation can discourage infrastructure investments in this class of project in Brazil. To overcome these issues, the financial modelling applying real options approach is better suited than the traditional valuation methods based on Discounted Cash Flow (DCF) analysis. The present study aims to value flexibilities of anticipating, or postponing, or interrupting investments of an existing operational port terminal in Brazil with expansion capacity under the demand uncertainty. The financial decision to invest in a port expansion is modeled by an American option. The results demonstrate that the investor adds significant value to the project by having the possibility to postpone investments. The proposed model presents the contribution of optimizing the decision of sequential expansions of capacity in port terminals, at any time and according to scenarios' revelation. In addition, the model allows the government authorities to review lease contracts, considering the relevance of timing to invest in project expansion decisions. The proposed model can also be extended to other infrastructure projects in emerging economies. |
publishDate |
2022 |
dc.date.none.fl_str_mv |
2022-03-01 |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article info:eu-repo/semantics/publishedVersion |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://www.ijmp.jor.br/index.php/ijmp/article/view/1476 10.14807/ijmp.v13i1.1476 |
url |
http://www.ijmp.jor.br/index.php/ijmp/article/view/1476 |
identifier_str_mv |
10.14807/ijmp.v13i1.1476 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
http://www.ijmp.jor.br/index.php/ijmp/article/view/1476/2104 http://www.ijmp.jor.br/index.php/ijmp/article/view/1476/2105 |
dc.rights.driver.fl_str_mv |
http://creativecommons.org/licenses/by-nc-sa/4.0 info:eu-repo/semantics/openAccess |
rights_invalid_str_mv |
http://creativecommons.org/licenses/by-nc-sa/4.0 |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf text/html |
dc.publisher.none.fl_str_mv |
Independent |
publisher.none.fl_str_mv |
Independent |
dc.source.none.fl_str_mv |
Independent Journal of Management & Production; Vol. 13 No. 1 (2022): Independent Journal of Management & Production; 234-257 2236-269X 2236-269X reponame:Independent Journal of Management & Production instname:Instituto Federal de Educação, Ciência e Tecnologia de São Paulo (IFSP) instacron:IJM&P |
instname_str |
Instituto Federal de Educação, Ciência e Tecnologia de São Paulo (IFSP) |
instacron_str |
IJM&P |
institution |
IJM&P |
reponame_str |
Independent Journal of Management & Production |
collection |
Independent Journal of Management & Production |
repository.name.fl_str_mv |
Independent Journal of Management & Production - Instituto Federal de Educação, Ciência e Tecnologia de São Paulo (IFSP) |
repository.mail.fl_str_mv |
ijmp@ijmp.jor.br||paulo@paulorodrigues.pro.br|| |
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1797220493895401472 |