Optimization Application for Financial Viability Evaluation of PPP Toll Road Projects

Abstract

The limited financial capabilities of public owners gave rise to the PublicPrivate Partnership (PPP) approach as an innovative project finance to attract private investment to highway projects. Nonetheless, many privately financed road projects have had difficulties in fulfilling construction debt obligations due to operating deficits. These difficulties are mainly attributed to incomprehensive evaluation of project financial viability and poor selection of key concession items. This research presents a comprehensive framework which provides an optimal set of key concession items for setting up financial viable PPP toll road projects. These key concession items include toll rates, a concession length, an equity level, and a rate of return. The proposed framework utilizes a modified User Equilibrium traffic assignment algorithm to help estimate revenue from toll road traffic volume considering its interaction with levels of service. The framework also takes into consideration the relationships between the deterioration of the pavement serviceability and required maintenance caused by the traffic volume, which facilitates the quantification of the toll road maintenance expenditures. From the estimated cash flow, a Genetic Algorithm (GA) will be applied to search for an optimal combination of the key concession items that would maximize profit from private investment in public highway projects.