Mitigating risks in wastewater treatment plant PPPs using minimum revenue guarantee and real options

Mohamed Marzouk and Mohamed Ali

Utilities Policy, 2018, vol. 53, issue C, 121-133

Abstract: Uncertainties associated with wastewater treatment plants inflows can lead to either undersized or oversized facilities. Such uncertainties are attributed to the deviation of actual development patterns from plans. Accordingly, a minimum-flow guarantee is a suitable risk mitigation strategy. This research proposes a guarantee evaluation algorithm, and a new stochastic model using real-options theory, in order to simulate the wastewater inflow to the wastewater treatment plant. A wastewater treatment plant in Egypt is examined as a case study. The results enable the monetary evaluation of contractual clauses relating to plant expansion and minimum-flow guarantee.

Keywords: Minimum revenue guarantees; Minimum flow guarantees; Wastewater treatment plants; Risk mitigation; Public-private partnerships; Real-options theory; Egypt (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:juipol:v:53:y:2018:i:c:p:121-133

DOI: 10.1016/j.jup.2018.06.012

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