Research On The Compensation For Early Termination In Construction Period Of Transportation BOT Project

Most of countries are vigorously promoting the construction of infrastructure and public utilities.Applying the BOT model into it not only can effectively alleviate financial pressure and improve project operation and management efficiency,but also provides private capital with the opportunity to receive reasonable compensation.However,there are large number of BOT projects are being faced with talking to the concession agreement again or early termination,even some projects are confronted with early termination in the construction period.Scientific and reasonable compensation not only can effectively avoid the dispute between the government and project company,but also help the government buy back the project smoothly and make both obtain as much economic benefits as possible or avoid as few losses as possible.At present,the research on the early termination compensation of BOT project is mainly aimed at termination during the operation period,but there is little research on the termination occurred during the construction period.This article focuses on that how to make a decision on compensation to early termination in the construction period.Firstly,the article summarized the domestic and international influencing factors and burden sharing of BOT project early termination,gave an overview of literature of payment methods on compensation and related reviews on the compensatory decision,such as compensation composition and the principle of compensation.Besides,the text analyze whether Market Approach,Cost Approach and Income Approach is applicable to the estimation of compensation for early termination in the construction period.Secondly,as the process of existing cost approach is so complex,this study have built new model on Cost Approach from the angle of the early termination in the construction period.This model is based on the project investment occurred and it's return under the premise of some relevant hypothesis.At the same time,according to percentage of investment occurred in the project budgetary estimate,the article have built the Income Approach model applied to estimate the buy-back compensation for in construction period based on the estimation for the NPV of all the project concession period.In this model,the return on investment and discount rate is decided by the Weighted Average Cost of Capital(abbreviated as WACC)method combined with Capital Asset Pricing Model(abbreviated as CAPM).Finally,the article take a operational BOT highway project as an example,and uses the Cost Approach model and Income Approach model to estimate the compensation of this project.There is difference on the results of both approach: the former's is about 17.6 billion;the latter's is about 19 billion.The gap between them is about 1.5 billion.As study shows,the results of Cost Approach and Income Approach is similar but different.The gap between them is mainly caused by emphasis of them is different: the Cost Approach focus on the time value of the capital invested,and the Income Approach emphasizes the risk premium of the capital.