| As an important foundation and prerequisite for economic and social development,transportation infrastructure has been key investment in infrastructure areas designatedby the State. Due to large investment scale, the traditional investment and finance modewhich mainly relied on public funds cannot fully meet the needs for the developmentand construction of transportation infrastructure in China. In recent years, the mostcommonly way of attracting social capital to participate in transportation infrastructureis BOT procurement model. The BOT contract arrangement helps the governmentconcerned alleviate its financial burden while at the same time improve the efficiency ofthe project. Therefore, BOT procurement model has been widely applied to theinvestment and finance field of transportation infrastructure especially on highwayprojects. However, BOT procurement model cannot be directly used for financiallynon-viable transportation infrastructure projects such as urban rail transit projects. Forurban rail transit projects with economic feasible that are financially non-viable,government should provide them with subsidies which are adopted by BOTprocurement model for taking into account they have significant social benefits in noisepollution, accidents, air pollution, and other aspects compared with non-railtransportation projects. At present, in practice, SBOT (Subsidize in Building, Operateand Transfer) model has been adopted, such subway line4in Beijing etc.The core of BOT/SBOT projects is concession contract. Concession period is thekey decision parameter in BOT-type. As the length of the concession period directlyaffects both the interests of the investor and the interests of the government concerned.Projects with a shorter concession period could result in not only the investmentperformance of the investor but also a higher toll/tariff regime transferred to the groupof people who use the infrastructure facility. On the other hand, granting an excessivelylong concession period means a shorter operation period after the concession periodexpiration when the project has a certain economic life which may result ingovernment’s loss. Therefore, the reasonable concession period is crucial to the successof BOT/SBOT project.Because the investment on transportation projects is partially or completelyirreversible and the expected revenue from the investment is uncertain, project valuesshould include the value of option to defer in the project evaluation process. Without considering the uncertainty of the expected cash flow and management flexibility of theproject, the traditional investment decision method─DCF (Discount Cash Flow),ignores the potential value of the option to defer, causes the value of the project isunderestimated, and results in the longer of concession period. On the other hand, theexisting literature on the decision model of concession period is mainly focused onfinancial feasible BOT project but lack of research on SBOT. Therefore, this paper takestransportation BOT/SBOT project as research subject respectively, concentrates on howto decide a reasonable concession period to coordinate the interest conflict betweenpublic sector and private sector by using the method of combination of real options andgame theory. Specifically, this paper carried out the following research work:Firstly, to provide a decision-making model on concession period of transportationBOT project with finically viable, this paper takes highway BOT projects as researchsubject. An alternative model for defining concession period is presented in this paperby using the combination of real options and game theory. The optimal concessionperiod can be identified through two procedures: First, real options theory is employedto construct models of investment threshold of public sector and private sectorrespectively, and an effective interval for concession period is determined; Furthermore,by considering the strategic behavior of the sectors, the paper establishes models ofconcession period by using Stackelberg game, cooperative game, and Nash negotiation,derives three equilibrium solutions. Finally, an actual highway BOT project is referredto demonstrating the effectiveness of the proposed model. This research not onlyexpands the application range of real options theory to flexible BOT-type contractdesign but also enriches concession period decision theory, at the same time provides anew perspective for the public sector and private sector to determine a reasonableconcession period for transportation BOT projects with financially viable.Secondly, to provide a decision-making model on the level of subsidies of BOTwith financially non-viable, this paper takes urban rail transit SBOT projects as researchsubject. This paper establishes the investment benchmark of SBOT project from privatesector’s and public sector’s viewpoints respectively, puts forward to quantitativedecision-making model for government subsidies, and further derives an effectiveinterval for government subsidies in urban rail transit SBOT project. Finally, anexample of urban rail transit SBOT project is applied to demonstrate thedecision-making model.Finally, based on the previous research, this paper takes urban rail transit SBOT projects as research subject, studies the decision-making model on concession period ofSBOT projects given government subsidy by considering the combination of economicbenefits and social benefits. The optimal concession period can be identified throughtwo procedures: First, real options theory is employed to construct models of investmentthreshold of public sector and private sector respectively, and an effective interval forconcession period is determined; Furthermore, by considering the strategic behavior ofthe sectors, the paper establishes models of concession period by using cooperativegame, and Nash negotiation, derives two equilibrium solutions, and discuss thecharacteristics of the equilibrium solutions. Finally, an example of urban rail transitSBOT project is applied to demonstrate the decision-making model of concessionperiod under uncertainty. The exploratory research aims to provide theoretical analyticalframework for determining a reasonable concession period of SBOT projects withinitial subsidy. |
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