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Asao, K, Miyamoto, T, Kato, H and Diaz, C E D (2013) Comparison of revenue guarantee programs in build-operation-transfer projects. Built Environment Project and Asset Management, 3(02), 214-27.
Leviäkangas, P, Wigan, M and Haapasalo, H (2013) Financial anatomy of E4 Helsinki-Lahti shadow toll PPP-project. Built Environment Project and Asset Management, 3(02), 165-80.
Liu, T and Wilkinson, S (2013) Can the pilot public-private partnerships project be applied in future urban rail development?: A case study of Beijing Metro Line 4 project. Built Environment Project and Asset Management, 3(02), 250-63.
Mladenovic, G, Vajdic, N, Wündsch, B and Temeljotov-Salaj, A (2013) Use of key performance indicators for PPP transport projects to meet stakeholders’ performance objectives. Built Environment Project and Asset Management, 3(02), 228-49.
Nikolaidis, N and Roumboutsos, A (2013) A PPP renegotiation framework: a road concession in Greece. Built Environment Project and Asset Management, 3(02), 264-78.
Pellegrino, R, Vajdic, N and Carbonara, N (2013) Real option theory for risk mitigation in transport PPPs. Built Environment Project and Asset Management, 3(02), 199-213.
Roumboutsos, A and Macário, R M R (2013) Public private partnerships in transport: theory and practice. Built Environment Project and Asset Management, 3(02), 160-4.
Sfakianakis, E and Laar, M v d (2013) Fiscal effects and public risk in public-private partnerships. Built Environment Project and Asset Management, 3(02), 181-98.
- Type: Journal Article
- Keywords: CDS valuation; Fiscal measures; Fiscal policy; Guarantees; PPP; Public risk
- ISBN/ISSN: 2044-124X
- URL: https://doi.org/10.1108/BEPAM-04-2012-0022
- Abstract:
Purpose – PPPs can impose important future public costs, while PPP government guarantees create explicit contingent liabilities similar to public debt obligations. The risk that arises from such partnerships must be transparently valued to assess a country's fiscal profile. The purpose of this study is to show that the notion of a PPP as a (set of) contingent claim(s) can also be used to value the PPP public risk. Design/methodology/approach – Taking a finance perspective, the paper refers to more traditional cases of asset valuation, applies them to a PPP and compares more carefully different set-ups of a PPP. The paper introduces and analyzes the different scenarios that were at the government's disposal for executing a transport infrastructure project. Findings – The findings reveal that, for the first years, the burden on the surplus or deficit will be less in the case of the PPP compares to typical public investment. Secondly, the net contingent PPP flows constitute the real effect on the deficit and correspondingly on the public debt and weaken the government's fiscal position. Finally, the paper attributes a specific price to the PPP public risk introducing CDS valuation with and without counterparty (government) default. Originality/value – This study, by proposing a method to evaluate PPP risk, complements previous literature on PPPs, which touches upon issues mainly related to the description of PPP types, the effect of contingent commitments and the accounting classification of PPP assets.