Concession period adjustment model for infrastructure BOT projects based on risk allocation

SONG Jin-bo, SONG Dan-rong, FU Yi-wen, DAI Da-shuang

Systems Engineering - Theory & Practice ›› 2012 ›› Issue (6) : 1270-1277.

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Systems Engineering - Theory & Practice ›› 2012 ›› Issue (6) : 1270-1277. DOI: 10.12011/1000-6788(2012)6-1270
ARTICLE

Concession period adjustment model for infrastructure BOT projects based on risk allocation

  • SONG Jin-bo, SONG Dan-rong, FU Yi-wen, DAI Da-shuang
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Abstract

The criterion of concession period under the four conditions of shortening, extending, unchanged and invalid adjustment is proposed in order to make the government and project company share risk in infrastructural BOT projects. If NPVR (net present value ratio) exceeds the upper limit, the decision model is built for shortening concession period with the target of social welfare maximum. If the NPVR is under the lower limit, the decision model is built for extending concession period with the target of project company benefit maximum. Monte Carlo simulation is applied to a case for solution. Cumulative probability of realization of expected return is calculated and contrasted under different discount rate, so it proves the effectiveness of allocation of risk by the means of concession period adjustment when single price adjustment method is unsuitable.

Key words

build-operate-transfer (BOT) / concession period / adjustment model / risk allocation / Monte Carlo simulation

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SONG Jin-bo , SONG Dan-rong , FU Yi-wen , DAI Da-shuang. Concession period adjustment model for infrastructure BOT projects based on risk allocation. Systems Engineering - Theory & Practice, 2012(6): 1270-1277 https://doi.org/10.12011/1000-6788(2012)6-1270

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