Computational model of Stakeholders’ financial risk analysis in PPP Availability-based O&M Contracts for Inter-City Motorway Projects

Abstract

Public agencies around the world are increasingly welcoming the private sector to participate in infrastructure project delivery, commonly known as Public Private Partnership (PPP). One of the PPP arrangements that is being employed in the highway sector in Thailand is called Gross Cost PPP O&M in which the private operator is responsible for operation and maintenance of the project to meet performance specification and will be paid for a fixed sum of money over the contract period and the public agency is
responsible for land acquisition, construction cost, and still bears the market risks such as tolled revenue risk. Examples of PPP O&M being employed by the Division of Inter-City Motorway #6 (Bang Pa-in - Nakhon Ratchasima). In PPP O&M contracts, payments made to the private operator is called “performance-based availability payment (AP),” where the future compensation for the operation will be based on actual performance. In addition, under this payment mechanism, the actual compensation will be adjusted by
performance deduction to be calculated in each period (e.g., quarter) if the private operator fails to meet performance specifications of the contract. This article is to present a computational model of key stakeholders’ risk analysis, namely, the public agency, theprivate operator, and lenders. The proposed computational model can be used to evaluate the risk profile of each stakeholder so as to help promote the employment of PPP O&M contracts in the future