The Evaluation Of PPP In Road Infrastructure Engineering Case Study

Public infrastructures like road,bridges,rails,schools and hospitals are important for the development of the society.Unfortunately,public infrastructure construction requires a significant financial investment,road infrastructures in particular have high costs and governments are struggling to finance such constructions.In order to tackle the problem,governments and private entities are opting for the Public Private Partnership(PPP)model,which appears to be the most satisfactory financial model used to finance public infrastructure engineering.In this thesis,the author explores various factors affecting PPP financing models in public infrastructures by highlighting the financial parameters to consider when setting up a PPP framework,and the procedures for good decision making when planning a road engineering construction through the PPP framework.Since road infrastructures need large financial investments,providing an accurate financial evaluation prior the investment decision is critical;as a result,the evaluation of financial investments in road infrastructure is subject to multiple parametric analysis.The author then evaluates investment safeness of the China Southern Region Road which is financed through the PPP mode.The thesis focuses on conducting a feasibility financial evaluation of the PPP based road project using the Internal Rate of Return(IRR),the Net Present Value(NPV),the Profitability Index(PI)and the Pay Back Period as economic indexes.This study found the IRR to be equal to 10.21%,this rate is the maximum return rate for the project.The Net Present Value(NPV)is calculated as RMB 18105.3U(U=10000),which is higher than RMB 5000U as requested by the private partners;thus indicating that this project is a good investment with a good margin.The Profitability Index is calculated as 1.27 which satisfies the private partner's financial investment evaluation index,thus the investment in the China Southern Road Project presents low risk.The evaluated Payback Period is 21 years which is lower than the private partner's investment standard of 24 years;the China Southern Road Project is still a safe investment in this evaluation criteria.Based on the evaluation results and indexes,the thesis recommends PPP as a suitable model for this road project development.