The Application of Government Supports for Real Options Approach in Second Stage Expressway Project

Abstract

The research was aimed to study the application of government supports for infrastructure projectsby real options approach. In this study, two types of supports are Minimum traffic guarantee and Shadowtolls system. The study included analysis and selection of the appropriate valuation of the financialsupports in Second Stage Expressway Project.

The results of Second Stage Expressway Agreement studies showed that the project’s return withoutthe government supports was lower than the government supports for the land use payment 10,000 millionbaht. For Minimum traffic guarantee study, it showed that the level of guarantee traffic volume (K) thatgave Option (Support) value of 10,000 million baht was 120%. For Shadow tolls system study, it showedthat value of support depended on eight factors namely Toll rate X1, X2, X3, X4 and Band traffic R0, R1,R2, R3 that gave Option (Support) value of 10,000 million baht was X1=185%, X2=30%, X3=10%, X4=0%,R0=0%, R1=80%, R2=100% and R3=150%. In addition, from selection of the appropriate valuation of thegovernment supports in Second Stage Expressway Project study, it concluded that the government shouldselect Minimum traffic guarantee because it was the least support value with 23,602 million baht. On theother hand, the private company should select land use payment because the final valuation of the financialsupports for the land use payment provided the best project’s return with 18,325 million Baht of NPV.