Volume List  / Volume 10 (2)

Article

REVENUE RISK EVALUATION FOR PPP ROAD INFRASTRUCTURE

DOI: 10.7708/ijtte.2020.10(2).05


10 / 2 / 187 - 198 Pages

Author(s)

Sukmo Ku - Department of Public Finance and Social Policy, Korea Development Institute, Sejong-si, Korea -

Hong Ki An - Faculty of Transportation Engineering, Huaiyin Institute of Technology, Huai’an, China -


Abstract

Less traffic than expected and low toll revenue from the construction of transportation on infrastructure such as roads and railways are causing business failure. However, it is a reality that the responsibility of this failure is only due to the prediction accuracy of the model analyzing the demand. This is because traffic risk is always present in Public-Private Partnership (PPP) projects and government, concessionaire, and financial investors need to be managed in terms of risk such as reducing the traffic risk through clear forecasting techniques and appropriate project structure selection. In this study, we investigated what traffic risk is, and quantified the risks by measuring the traffic risks and the case analysis with a road PPP project. As a result, the traffic risk of road PPP project was estimated to be 19.3% on the average demand reduction risk compared to predicted traffic volume. In case analysis, it was analyzed as high revenue risk project because of 86.38% risk that refund given to the government by the private sector could be lower than Korean Won (KRW) 62.4 billion (USD 55.5 million), and 88.67% risk that operating period subsidy could be generated. This analysis is meaningful in that it quantifies traffic risk that we know intuitively or qualitatively. Thus, it is expected that the risk analysis based on a clear understanding of the nature of future traffic risks will be the basis of successful PPP projects.


Download Article

Number of downloads: 57


References:

Aldrete, R.; Bujanda, A.; Valdez, G. 2012. Valuing public-sector revenue risk exposure in transportation public-private partnerships, Transportation Research Record: Journal of the Transportation Research Board 2297: 88-96.

 

Aleshin, A. 2001. Risk management of international projects in Russia, International Journal of Project Management 19(4): 207-222.

 

Bae, DS, Jeon, YL. 1999. Reliability Analysis, Arche. Bain, R. 2009. Error and optimism bias in toll road traffic forecasts, Transportation 36(5): 469–482.

 

Bain, R.; Polakovic, L. 2005. Traffic Forecasting Risk Study 2005: Through Ramp-Up and Beyond, Standard & Poors, London. Available from Internet: http://www.robbain.com/Traffic%20Forecasting%20Risk%202005.pdf.

 

Bull, M.; Mauchan, A.; Wilson, L. 2017. Toll-road PPPs Identifying, Mitigating and Managing Traffic Risk. The Public – Private Infrastructure Advisory Facility (PPIAF).

 

Chang, Y.; Lee, C. 2012. A Study on the Risk Assessment of Real Estate Investment: Using Monte Carlo Simulation, The Korea Spatial Planning Review 72: 79-102.

 

Cheah, C. Y.; Liu, J. 2006. Valuing governmental support in infrastructure projects as real options using Monte Carlo simulation, Construction Management and Economics 24(5): 545-554.

 

Flyvbjerg, B.; Holm, M.; Buhl, S. 2005. How (in)accurate are demand forecasts in public works projects?, Journal of the American Planning Association 71(2): 131–146.

 

Huang, Y. L.; Chou, S. P. 2006. Valuation of the minimum revenue guarantee and the option to abandon in BOT infrastructure projects, Construction Management and Economics 24(4): 379-389.

 

Jun, J. B. 2008. Valuation of governmental guarantee in BOT project finance with real option analysis. Texas A&M University.

 

Jung, D.; Kim, H.; Hyun, C.; Kim I. 2011. A Study on the Financial Risk Assessment of SOC Private Investment Projects: focused on Light Rail Transit Projects, Korean Journal of Architectural Engineering 17(5): 109-116.

 

Kang, I.; Kim, C.; Son, C.; Park, H. 2001. A Case Study on Risk Analysis of Large Construction Projects, Korean Journal of Construction Engineering and Management 2(2): 98-108.

 

KTI. 2017. A study on Reforming Supervision System of PPP Toll Road for Public Interest. The Korea Transport Institute, Korea.

 

Ku, S.; Lee, S.; Lee, S. 2017. Real Option Analysis to Value Government Risk Share Liability in BTO-a Projects, Journal of Korean Society of Transportation 35(4): 360-373.

 

Lee, G.; Lee M.; Lee, Y.; Kim, N.; Park, G. 2002. Risk Management of Contingent Liability from Government Guarantee in PPI Project. Korea Research Institute for Human Settlements (KRIHS).

 

Lee, Y.; Nam, D.; Lim, K. 2005. Development of Evaluation Model for ITS Project using the Probabilistic Risk Analysis, Journal of Korean Society of Transportation 23(3): 95-108.

 

Song, B.; Son, C.; Kim, Y. 1999. Efficient Risk Sharing Methods for Private Sector Developers Investing in SOC, Journal of the Architectural Institute of Korea 15(6): 113-120.

 

Walewski, J.; Gibson, G. 2003. International project risk assessment: Methods, procedures, and Critical Factors. Center for Construction Industry Studies, University of Texas at Austin, Report 31.