Valuing Government Guarantees in Toll Road Projects
نویسندگان
چکیده
The participation of private capital in public infrastructure investment projects has been sought by many governments who perceive this as a way to overcome budgetary constraints and foster economic growth. For some types of projects, this investment may require government participation in the form of project guarantees in order to reduce the risk of the private investor. As a consequence, the government assumes a contingent liability which may have significant future impact. For this reason, the risk analysis and valuation of these guarantees is important for both the private investor and the government. We present a real options model than can be use to assess the value of these guarantees, allows the government to analyze the cost/benefit of each level of support, and propose alternatives to limit the exposure of the government while still maintaining the benefits to the private investor. This model is then applied to the proposed BR163 toll road that will link the Brazilian Midwest to the Amazon River. We conclude that a minimum traffic guarantee combined with a cap on the total government outlays for the project offers the best combination of risk reduction for the private investor and liability limits for the government.
منابع مشابه
The option value of government guarantees in infrastructure projects
The participation of private capital in public infrastructure investment projects has been sought by many governments who perceive this as a way to overcome budgetary constraints and foster economic growth. For some types of projects, this investment may require government participation in the form of project guarantees in order to reduce the risk to the private investor, and as a consequence, ...
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