Freight village evaluation under uncertainty with public and private financing

Abstract

The paper presents a method and models for assessing the financial viability of a new Freight village financed by private and public investments. The financial evaluation model constitutes an integrated part of a wider planning methodology, with four distinct phases, namely (a) site selection and traffic forecasts, (b) definition of services offered and corresponding dimensions, (c) estimation of investment and operation costs and (d) evaluation of investments. The paper presents the overall methodology, and presents analytically the evaluation method with the corresponding model. The model is developed specifically for the financial evaluation of investments for a Freight village incorporating uncertainty considerations in the values of the variables considered. The financial evaluation method identifies the various transport and other variables, which determine the cash flow of inputs (revenues) and outputs (investments, expenses) related to the construction and operation of a Freight village. Furthermore, the model produces financing scenarios, based on combinations of public and private funds as well as bank loans. In addition using Monte Carlo simulation the expected values of some key variables (investment costs, forecasted volumes and revenues) are estimated. Finally using linear programming an optimization related to the amount of private funds invested for a specific Freight village can be determined related to a mix of public and private funds (under certain constraints). An application of developed methodology and models is done for the case of a Freight village in Northern Greece, demonstrating its potential to application for similar cases.