Real option model for valuing public-private infrastructure projects with minimum income guarantees

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Public-private agreements for the development of infrastructure projects constitute a strategic alliance between the public sector, developers, and private financiers. Contracts contain clauses for early termination, deadline extensions, and revenue guarantees, granting strategic flexibility. This m...

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Detalles Bibliográficos
Autores principales: Milanesi, Gastón Silverio, Ferreira, Carlos Alberto
Formato: Artículo revista
Lenguaje:Español
Publicado: Facultad de Ciencias Económicas de la Universidad Nacional del Nordeste - UNNE 2025
Materias:
public-private agreements
real options
minimum income guarantee
contingent liabilities
equilibrium tariffs
acuerdos público-privado
opciones reales
garantía ingresos mínimos
pasivos contingentes
tarifas equilibrio
Acceso en línea:https://revistas.unne.edu.ar/index.php/rfce/article/view/8338
Aporte de:
Revistas UNNE - Universidad Nacional del Noroeste (UNNE) de Universidad Nacional del Nordeste
Descripción
Sumario:Public-private agreements for the development of infrastructure projects constitute a strategic alliance between the public sector, developers, and private financiers. Contracts contain clauses for early termination, deadline extensions, and revenue guarantees, granting strategic flexibility. This makes traditional valuation methods ineffective for estimating resources committed by governments and the value of the concession for the private sector. Numerical alternatives based on real options theory are needed to incorporate the value of flexibility and its economic and financial impact. This paper proposes a binomial numerical model to quantify the contingent value of minimum revenue guarantees, impact on future budgets, economic value of the investment, and break-even rates. To this end, a case study in administration is applied to a road infrastructure development and toll concession. The anatomy of project risk is analyzed through simulation of the stochastic revenue process and VAR estimation. The binomial model is then applied to estimate: contingent value of the minimum revenue guarantee, present value of the government's contingent liabilities, value of the project with strategic flexibility from the private sector's perspective, and equilibrium rates for zero strategic present value.

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