Economic risk quantification of toll highway projects

The objectives of this thesis are to model economic and financial performance of user-pay highway facilities, to explore the sensitivity of project performance to changes in primary variables, to measure the uncertainty surrounding user-pay highway facilities, and to explore ways of reducing the uncertainty. Special attention is given to the revenue phase. The model consists of three levels: work package/revenue stream level; project performance level; and project decision level. The model calculates work package duration, work package cost, and revenue stream for the work package/revenue stream level; project duration, project cost, and project revenue for the project performance level; and project's net present value (NPV) for the project decision level. They are described by their expected value, standard deviation, skewness, and kurtosis. This model is applied to a numerical example patterned after a Japanese project to carry out a sensitivity and risk analysis, and highly sensitive primary variables are identified. The case study may be viewed as a comparison of current Japanese deterministic feasibility analysis with a probabilistic one, using the same underlying project model. Risk management strategies are presented, and their impacts on overall project risks are measured. Results from applying the model to a sample project show that it is very difficult for a highway operator alone to reduce risks. It is suggested that it is very important that risk sharing be negotiated with the government and some guarantee of support be received.Applied Science, Faculty ofCivil Engineering, Department ofGraduat