DETERMINING PPP STRUCTURES THAT SATISFY AN INVESTOR’S DECISION CRITERIA WITH RESPECT TO TH.pdfVIP

 
    
    
               
   
 
       
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- . /0 1 2334  ,4   5$   !6 233 The Queensland University of Technology Research Week International Conference 4-8 July 2005 Brisbane, Australia Conference Proceedings Editor: A. C. Sidwell July 2005 Published by: Queensland University of Technology Australia ISBN 1-74107-101-1 POLITICAL RISKS AND INVESTMENT DECISIONS IN PPPS – A PROPOSED FRAMEWORK FOR DETERMINING PPP STRUCTURES THAT SATISFY AN INVESTOR’S DECISION CRITERIA WITH RESPECT TO THE POLITICAL RISKS Tillmann Sachs1, Prof. Dr. Robert L.K. Tiong2 1,2 CACS, School for Civil and Environmental Engineering, Nanyang Technological University, 50 Nanyang Avenue, Blk N1-B1b-09, Singapore 639798 A framework for mapping the effects of political risks on a single investor’s decision criteria is proposed. First, the risk categories inherent in a PPP project and their effect on the cashflow are identified with focus on the political risk. Then three tools, by which these political risks can be priced and captured, are introduced. Stemming from the cashflow modelling, the leveraged return on equity for a single investor is derived by credit rating. Also, an equity beta that is directly emerging from the risk profile is derived. Finally, a hypothetical generalization would allow for designing sustainable PPP structures that Pareto-maximize the utilities of the stakeholders. Keywords: beta, equity investment, leverage effect, political risks, public private partnership, return on equity, sustaina