Golyshev G.A.Financial Research Institute of Ministry of Finance of Russian Federation, Moscow, Russian Federation g-golyshev@yandex.ru
Importance Concession agreements prove to be one of the main ways of attracting private competences and raising funds to develop public infrastructure. Objectives The research examines a new mechanism for regulating the revenue risk, the probable effect of the mechanism on the financial effectiveness of concession projects. Methods I analyzed NPV indicators and the probable time of project implementation, and how the indicators are formed. The analysis was based on a real option theory and econometric modeling using the Monte-Carlo method. Results The study revealed that the growth in revenue discounting rate reduces the volatility of NPV and extends the potential duration of a concession project. The inverse relationship is revealed between potential duration of the operational stage and expected NPV of the project. Conclusions and Relevance The mechanism for securing gross (accumulated) revenue has a comparable effect on NPV as other mechanisms of the revenue risk regulation, with the concessor reducing its financial interest in projects. In such circumstances, the mechanism for securing gross revenue can become relevant to the Russian practice individually or jointly with other mechanisms. The findings can be used by financial and economic structures of the executive authorities to initiate concession projects, by managing companies and institutional investors.
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