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Balancing Public and Private Stakeholder Interests in BOT Concessions: Minimum Revenue Guarantee and Royalty Scheme Applied to a Water Treatment Project in China.
- Source :
-
Journal of Construction Engineering & Management . Feb2015, Vol. 141 Issue 2, p-1. 1p. - Publication Year :
- 2015
-
Abstract
- Because of demand uncertainties, a build-operate-transfer (BOT) project may lead a concessionaire either to realize an excessive profit or suffer a loss. The object of this paper is to establish an adjustment mechanism to automatically balance the risks and rewards between public and private sectors under the fixed preset concession period. Using a revised net present value (NPV) financial evaluation model and the Monte Carlo simulation technique, the authors construct a model that can determine the optimum solution of the minimum revenue guarantee (MRG) level and the collect rate of royalty for BOT projects. The MRG and royalty collection combination (G&R) is shown, via a reduction in the decision variables, to be a more effective scheme than those in previous studies. The results of a sensitivity analysis based on a wastewater treatment BOT project prove that Scheme M of MRG based on 90% volume combined with a 20% royalty rate is the leading option because it guarantees that the concessionaire will always earn a reasonable anticipated return under the fixed term. The main contribution of this paper is to provide a simple tool for balancing the risks and benefits for the government and investors. [ABSTRACT FROM AUTHOR]
- Subjects :
- *PROJECT management
*MONTE Carlo method
*WATER purification
*BUSINESS revenue
Subjects
Details
- Language :
- English
- ISSN :
- 07339364
- Volume :
- 141
- Issue :
- 2
- Database :
- Academic Search Index
- Journal :
- Journal of Construction Engineering & Management
- Publication Type :
- Academic Journal
- Accession number :
- 100438942
- Full Text :
- https://doi.org/10.1061/(ASCE)CO.1943-7862.0000930