Dissertation
Dissertation > Economic > Economic planning and management > Economic calculation, economic and mathematical methods > Economic and mathematical methods

Optimization of the PPP project investment decisions

Author YangChao
Tutor DengChao
School Central South University
Course Finance
Keywords Public-private partnership Concession period Monte Carlo simulation Multi-objective decision
CLC F224
Type Master's thesis
Year 2011
Downloads 88
Quotes 1
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In recent years in order to improve the operational efficiency of public services, our country releases the constraints on private sector investing in public infrastructure gradually and encourages private sector to invest in public services, therefore, more and more projects use PPP to finance, construct and operate. However, because PPP projects are generally of large-scale investment, long period of construction and operation, great future uncertainties and facing various complex risk factors, it is difficult for traditional method of investment decision to make accurate evaluation on future return and risk of PPP. Moreover, PPP projects often involve the interest of public sector, private sector and the public, so how to balance the interest of all participants is also a key point in PPP investment decision-making.During the investment decision-making of PPP projects, it should not only consider the return and risk, but also notice the interests of all participants and find a suitable balance among all demands. Therefore, the combining method of Monte Carlo simulation and multi-objective decision analysis can be applied to make investment decision of PPP projects. Monte Carlo simulation can make better prediction on future investment return of projects through the probability distribution of a variety of risk variables; multi-objective decision analysis can be used to weigh the interests of all participants and select the optimal program meeting all interests from different options.In practice, it first can analyze and evaluate the major risk factors on PPP projects, determine the probability distribution of risk variables in accordance with relevant historical data and find a suitable concession period by the conditions presupposed through Monte Carlo simulation; then it can use the multi-objective fuzzy decision method to further weigh the interest of all participants in PPP projects, select the optimal program meeting all interests from different options and develop a more appropriate license agreement, which makes public sector, private sector and the public in the project obtain mutual benefits and achieve social benefits maximization.

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