Research On The Excess Revenues Of BOT Highway Projects Based On Real Option Theory

In recent years, BOT (Build-Operate-Transfer) arrangements have been widely developed in infrastructure construction and public utility. This mechanism of public-private-partnership has gain attention from the state council to APEC finance conference. During the two sessions (the NPC and CPPCC) in 2015, as a focus topic, it has been seen as a key support to our country’s economy stable growth in a short term. Highway BOT projects as typical applications of BOT arrangements have played a positive role to relieve the government financial pressure.However, many projects have in trouble with benefits deviating from the expected due to the decision-making errors, project requirements and benefits uncertainty problems. In the condition of high benefits, the benefits of BOT project are higher than the expected. Because of the lack of excess benefits allocation mechanism, project companies obtain excess benefits, and thus bring a series of problems for government and enterprises, such as Fight, default and public opposition. The excess benefits allocation of BOT projects is not only a new problems need to be solved in the practical field, but also the frontier science problem in the study of decision theory of BOT project.Based on this, this paper has commenced the study on the most important problem about "excess benefits allocation" of BOT projects. Firstly, this paper collected the domestic and foreign related research about BOT project benefits decision-making through literature reading. The influence factors that influence the benefits of BOT projects are identified, analyzed and summarized. And then found out that the research about excess benefits mainly revolves two aspects about benefits adjustment and benefits allocation. Benefits adjustment includes the study of concession period and toll, and benefits allocation includes two aspects of benefits cap and benefits share. This part laid theoretical basis for the later research. Secondly, this paper used the Black-Scholes (B-S) model to build the excess benefits cap decision-making model based on real option theory. And it analyzed the key influence factors of the model. That presented the influence of single factors on the option value and excess benefits cap. This part laid the foundation of excess benefits allocation decision-making. Then, in consideration of consumer surplus ratio of social welfare, this paper built dynamic decision-making model about excess benefits share. And then the influence of key factors on the model is discussed. Finally, numerical examples of highway BOT projects are employed to demonstrate and validate the proposed models. Additionally, conclusions, shortages and improvements of this research are proposed to give some suggestions of excess benefits allocation in BOT projects for the public and private sectors.