The Mode Of Concession Period Of PPP Project Of Wastewater Treatment Based On Real Option Model

As a form of project financing, Public-private partnership (abbreviated as PPP) which can effectively alleviate the shortage of funds of the government department has become more and more popular by both the government and the private investors in recent years. The concession period is the most important parameter of the concession agreement, as it can divide the interests both of the government and investors at time dimension. To some distance, the reasonable of the concession period is directly related to the success of the project.In the background of poor decision-making of concession period of the waste water treatment PPP project, as traditional NPV method is unreasonable.using real optional theory to build the concession period decision-making model.In this paper,do the following researches:First, the PPP financing and the concession period were reviewed. Through collecting and collating the literature of related research at home and abroad, we can summarize the present several types of the decision-making methods of concession period. From this point, it can provide some related reference to research of concession period of wastewater treatment. Second, the basic theories of real option are reviewed. Pointing out that there are some limitations to use the traditional NPV method to evaluate the value of PPP project, but real option can compensate for this defect effectively to get the true value of the project. Third, to design the decision-making model of concession period of wastewater treatment PPP project based on real option.From the analysis of wastewater treatment PPP project has the real option characteristics to build the decision-making model of concession period of wastewater treatment PPP project based on the real option. Finally, case analysis of a wastewater treatment project. Using Monte Carlo simulation method to calculate the length of the concession period of the project considering the guarantee option value. The calculated results show that, considering the option value of the project, the actual value of the project will increase, and thus the private investor can receive the cost of the project in a relatively short span of the concession period.There are less researches of application of real option to wastewater treatment PPP project at present.Through systematic identification and analysis of wastewater treatment PPP project has the real option characteristics, the article build the decision-making model of concession period of wastewater treatment based on real option. This research can provide a theoretical reference for the licensing decisions of the wastewater treatment industry, but also enrich and deepen the application of real options and research areas.