Compensation Approaches for Early Termination of PPP Projects

Wei Xiong () and Xueqing Zhang ()
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Wei Xiong: The Hong Kong University of Science and Technology
Xueqing Zhang: The Hong Kong University of Science and Technology

Chapter Chapter 75 in Proceedings of the 17th International Symposium on Advancement of Construction Management and Real Estate, 2014, pp 721-729 from Springer

Abstract: Abstract Even though a lot of successes had been achieved since the PPP model was applied to deliver public works, many projects were terminated earlier before the expiry date due to the complexity of the nonrecourse financing method and a variety of risks and uncertainties related to project finance. In early termination, fair, effective and operational compensation approaches were required to relieve both parties from the rights and obligations within the concession agreement. This paper introduced two popularly applied compensation approaches including Compensation based on Financial Statement (FS) and Compensation based on Discounted Value of Future Cash Flow (DVFCF). Those approaches were analyzed through four simple cases and their characteristics were various by different allocation strategies of long-term risks. Finally, this paper provided implications for how to choose the most suitable compensation approach in different scenarios.

Keywords: Public-private partnerships; Early termination; Compensation (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-642-35548-6_75

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DOI: 10.1007/978-3-642-35548-6_75

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