Paper Details

TRB 91st Annual Meeting (January 22-26, 2012)

Event Number:	357
Event Title:	Transportation Revenue and Finance Showcase
Event Date:	Jan 23 2012 2:00PM- 3:45PM
Event Location:	Hilton, International Center
Event Description:
Event Agenda:

Payment-based Annual Revenue Guarantee versus Period-extension-based Cumulative Revenue Guarantee in Build-Operation-Transfer Projects (12-0380)

This study proposes a method to compare revenue guarantee programs in a build-operation-transfer project. Two types of revenue guarantee programs are formulated: a payment-based annual revenue guarantee program and a period-extension-based cumulative revenue guarantee program. Monte Carlo simulation is used to model the real option approach. This method is applied to a toll road project in the Philippines wherein the expected payoffs of the government and the concessionaire are simulated over an evaluation period that includes the concession period. The condition under which the expected government return in one program is equal to that in the other program is shown. These programs are then evaluated by incorporating a project risk factor into the project return. The results show that for the analyzed project the cumulative revenue guarantee program is preferred to the annual revenue guarantee program. However, the optimal solution depends on the governmentfs return-risk preference.

Authors
     Asao, Kohei , University of Tokyo, Japan
     Miyamoto, Takashi , University of Tokyo, Japan
     Kato, Hironori , University of Tokyo, Japan
     Diaz, Crispin Emmanuel Damaso, University of the Philippines