Research On The Concession Period Decision-making Of The Urban Utility Tunnel On PPP

With the increase of urban population in China,the increasing pressure on municipal pipelines leads to frequent accidents.The urban utility tunnel emerges as the times require.However,the one-time investment in the early stage of the urban utility tunnel has caused enormous financial pressure on the government departments,leading to its slow development.Introducing PPP into the urban utility tunnel can effectively help the government reduce financial pressure.However,the decision of the concession period is related to the interests of investors,the success or failure of the project.At present,the urban utility tunnel often uses the traditional NPV method to decide the concession period.But the traditional NPV method can not meet the characteristics of the urban utility tunnel.So this paper discusses the concession period decision-making for PPP on the urban utility tunnel.This paper analysed the subjects and objectives of the concession period decision-making on the urban utility tunnel.Picked out the option game to solve the concession period decision-making on the urban utility tunnel.By combining the expected cumulative net present value and risk neutral probability of the project,the real option value is quantified.The real option value is introduced into the game between the public and private.The government takes the concession period as the decision variable,analyze the construction investment behavior of the private,and establish the decision model of the concession period.Finally,a practical case is used to verify the practicability of the model.The results show that the option game can effectively shorten the concession period.The private with real options will not reduce their investment simply because of the shortening of the concession period,but take the long-term strategic objectives into seriously.The public also need not simply extend the concession period to promote private to improve the quality of the project.