Decision On Concession Period Of Waste Incineration Bot Project Based On Risk Allocation

There is a substantial increase in the proportion of waste incineration with the increase in the amount of Municipal Solid Waste (MSW) production and the constraints of the land resources. It subjects to financial constraints because it is difficult for the government to collect a lot of money to build incineration plants. The introduction of social capital to participate in the waste disposal industry is an effective way to solve the financial difficulties. BOT is a good financing mode to attract social capital to participate in the construction of public infrastructure. Now the BOT mode quickly developed in the MSW disposal industry in China. A lot of waste incineration project chose this model.Because of the risk analysis of waste incineration power generation BOT projects is inadequate and the concession agreement signed by the Government and the project company is unreasonable. Some of the projects in China, which are under construction or operation, have many problems. In the Government's point of view,this paper studied how to allocate the key risks and how to decide the concession period of waste incineration BOT project from its basic function and social property.First, case analysis and investigation were used in this study.13 typical cases were analyzed,18 kinds of risks of waste incineration BOT projects in the construction and operation were identified,such as decision, popular will, technology,MSW supply,pay off,construction and operation.and finance risk, etc; 12 key risks were concluded through a questionnaire,such as technology,MSW supply,pay off,popular will and MSW disposal risk etc. The main cause of these risks is that the MSW is not effectively classified and the equipment does not meet the requirement and waste incineration will produce secondary pollution. Second, in order to attract social capital to participate in the MSW disposal, the government may lower the tender threshold, this can give rise to introducing of some companies with bad reputation, low technical level and management level into the waste incineration industry. Third, during the construction and operation phases, the government's improper regulation and the officer's activities of rent-seeking are also the main reason for these risks.Secondly, it is systematically analyzed that how to allocate the key risks between the government and the project company. A flow chart of risk allocation between the government and the project company is designed in accordance with "four principles" and "three stages" of risk allocation. The risk range that the government should bear or allocate with the company is studied through a questionnaire and an analysis of theoretical literature. The Management Countermeasures on the risks allocated by the government was also proposed. The model which is used to identify the proportion of risk allocation between government and the project company is established according to the cooperative game theory.Third, The impact path of risks allocated by government on the decision-making process in the concession period is revealed that is in a way that ultimately influenced by the factors affecting the decision-making of the concession period. On this basis, the impact of the key risks allocated by the Government on the factors of decision-making of the concession period is analyzed and some suggestions are proposed to help the government to face with these risk factors during the concession period decisions.Fourth, the dynamic game model for the decision-making process in the concession period between government and company is established according to the game theory, which provides a theoretical basis and methods for government's decision-making on waste incineration BOT projects. Then, on the basis of concession bidding provided by the bidder according to the concession reference, the second decision for the concession period is made with the model of the NPV approach. This study, combining with the government's risk allocation, determines the model parameters of the NPV approach, provides the steps of how to determine the concession period using this method and gives a case study of the risks allocated by the government.Finally, the risks allocated and measures adopted by the government are analyzed through a waste incineration power generation BOT project in the MSW disposal depot in southern cluster of Zhongshan. The decision-making process and methods of the concession period proposed in this study are demonstrated in this project.