A methodological framework for probabilistic evaluation of financial viability of transportation infrastructure under public private partnerships
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This research proposes a methodological framework for the probabilistic evaluation of the financial viability of transportation infrastructure projects procured as Public Private Partnerships (PPPs). In doing so a methodological approach is undertaken. First, this research investigates the various risks of PPP projects, in particular the investment risk in terms of both the depth and its corresponding methods of evaluation, yielding a new method for more accurate estimation. Second, it examines the multiple facets of financial viability, stemming from the different meaning that it has for the various project stakeholders, i.e., the public authority, the lenders and the equity investors. From this study a connection between the financial viability and the investment risk is established for the purpose of using the latter for the assessment of the former. Based on this established connection, this research proposes a general methodological framework that can be used for the probabilistic evaluation of the financial viability of other types of revenue-generating transportation infrastructure projects, procured as PPPs. This framework proposes the evaluation of the financial viability through the estimation of the project's investment risk, using available numerical and/or analytical approximation techniques such as the Method of Moments. The general methodological framework is then utilized for the specific case of highway toll-road concession projects, where detailed and specific quantitative models are devised for the determination of the costs and revenues of these projects. Additionally, and by capitalizing on similar models found elsewhere in the literature, this dissertation also proposes a process to increase the accuracy of the Maintenance and Rehabilitation cost estimates, borrowing concepts stemming from reliability and stochastic processes. The findings of this research are expected to help all project stakeholders with their evaluation of whether or not a project under consideration is capable of achieving their respective financial targets. The proposed methodology can be used as a quantitative tool for project evaluation and investment appraisal by all project stakeholders. However, as in any decision support methodology, the purpose of the proposed framework is not to replace decision makers but to help them make better and informed decisions.