Public : private partnerships in Portuguese highways : a real options approach to the SCUTs case

The purpose of this paper is to propose an innovative model to evaluate the portfolio of “shadow toll” highways in Portugal, through the use of the Real Options model, at the time of the concession. During the valuation, some Monte Carlo simulations will be performed in order to analyze the impact of changes on the fundamentals to the value of the projects. Amongst the major results, this article concludes that the valuation of the Net Present Value of the projects of the SCUTs with Discounted Cash-Flows model underestimates, systematically, the true value of the ventures by ignoring the price of the flexibility of the fundamentals. Under the model proposed, it became clear that the value of the elasticity of the exogenous risky variables (cost of debt and demand) is significant, increasing substantially the worth of the projects