Project Finance and Risk Modeling Using a System Dynamics Approach: A Toll Road Project

Abstract

In a build, operate, and transfer (BOT) scheme, as Project Finance (PF), equity investors are concerned about the adequacy of their returns. On the other hand, the timeliness of the project debt service payments focuses to the lenders. Consequently, an important role is played by PF and risk modeling to ensure that structure of the project management is a prerequisite. Nevertheless, the complexity of future infrastructure project will become more complicated. Not only will the limitations of stakeholders to understand others when evaluating a project will become more prevalent, but also the competition force the bidders to become increasingly innovative in their financing modeling. The aim of this paper is to propose a new technique to calculate project finance and risks using System Dynamics (SD) approach with sysdea modeling. The model builds confidence and its policy implications. This paper results is PF and risk modeling should use an SD approach in toll road projects.

Keywords: Build operate and transfer (BOT), Project finance modeling, Risk analysis, System dynamics, Toll road

JEL Classification: G11; R58