market demand risks

Build-operate-transfer (BOT) model is extensively used by many governments throughout the world for the realization of large-scale transportation projects. As a rapidly developing economy, Turkey is also increasingly referring to the use of the project finance model for delivering large-scale transport, energy and healthcare projects. Istanbul, located between Asia and europe, is one of the most important economic centres of the country. Based on this model, rapid urbanization and population growth are taking place in the city. Growing concerns over the insufficiency of the existing two bridges in meeting the traffic demands of cross-continental transport in Istanbul have urged central and local governments to find a solution for the traffic congestion problem. As a result, the government of Turkey has announced plans for building a new bridge to connect the european and Asian sides in early 2011. The construction of the new Bosphorus Strait Crossing Project which has started in 2012 is expected to be completed by 2015. however, since its launch, the project faced many diverse challenges such as delayed tendering, legal disputes, financial problems and social opposition. This study aims at exploring the problems experienced and the solutions developed as a response to these problems in the implementation and management of the third Bosphorus Bridge and the Northern Marmara Motorway Project using a case study approach. To achieve this objective, necessary data regarding the tendering process were collected from various sources. The conclusion provided at the end of this case study is expected to enhance our understanding of the use of BOT model for transport projects and risk allocation between different actors. Both public and private sector participants that are involved in delivering transport projects using the BOT model may benefit from the findings of this study.

Build-operate-transfer (BOT) model is extensively used by many governments throughout the world for the realization of large-scale transportation projects. As a rapidly developing economy, Turkey is also increasingly referring to the use of the project finance model for delivering large-scale transport, energy and healthcare projects. Istanbul, located between Asia and europe, is one of the most important economic centres of the country. Based on this model, rapid urbanization and population growth are taking place in the city. Growing concerns over the insufficiency of the existing two bridges in meeting the traffic demands of cross-continental transport in Istanbul have urged central and local governments to find a solution for the traffic congestion problem. As a result, the government of Turkey has announced plans for building a new bridge to connect the european and Asian sides in early 2011. The construction of the new Bosphorus Strait Crossing Project which has started in 2012 is expected to be completed by 2015. however, since its launch, the project faced many diverse challenges such as delayed tendering, legal disputes, financial problems and social opposition. This study aims at exploring the problems experienced and the solutions developed as a response to these problems in the implementation and management of the third Bosphorus Bridge and the Northern Marmara Motorway Project using a case study approach. To achieve this objective, necessary data regarding the tendering process were collected from various sources. The conclusion provided at the end of this case study is expected to enhance our understanding of the use of BOT model for transport projects and risk allocation between different actors. Both public and private sector participants that are involved in delivering transport projects using the BOT model may benefit from the findings of this study.

The need for modern and reliable transportation infrastructure is continuously increasing throughout the World. As public resources are limited, public-private partnership (PPP) model is frequently used in the realization of highway and bridge projects in Turkey. In PPP highway projects, the private partner assumes all costs associated with construction until the operation phase starts. Once the operational period begins, the revenues generated by the private partner should be sufficient to cover maintenance, repair and operating costs, to repay the debt service, and to provide the private partner an appropriate

Transportation projects require an enormous amount of capital investment resulting from their tremendous size, complexity, and risk. Due to the limitation of public finances, the private sector is invited to participate in transportation project development. The private sector can entirely or partially invest in transportation projects in the form of Public-Private Partnership (PPP) scheme, which has been an attractive option for several developing countries, including Vietnam. There are many factors affecting the success of PPP projects. The accurate prediction of traffic volume is considered one of the key success factors of PPP transportation projects. However, only few research works investigated how to predict traffic volume over a long period of time. Moreover, conventional traffic volume forecasting methods are usually based on deterministic models which predict a single value of traffic volume but do not consider risk and uncertainty. This knowledge gap makes it difficult for concessionaires to estimate PPP transportation project revenues accurately. The objective of this paper is to develop a probabilistic traffic volume prediction model. First, traffic volumes were estimated following the Geometric Brownian Motion (GBM) process. Monte Carlo technique is then applied to simulate different scenarios. The results show that this stochastic approach can systematically analyze variations in the traffic volume and yield more reliable estimates for PPP projects.

Transportation projects require an enormous amount of capital investment resulting from their tremendous size, complexity, and risk. Due to the limitation of public finances, the private sector is invited to participate in transportation project development. The private sector can entirely or partially invest in transportation projects in the form of Public-Private Partnership (PPP) scheme, which has been an attractive option for several developing countries, including Vietnam. There are many factors affecting the success of PPP projects. The accurate prediction of traffic volume is considered one of the key success factors of PPP transportation projects. However, only few research works investigated how to predict traffic volume over a long period of time. Moreover, conventional traffic volume forecasting methods are usually based on deterministic models which predict a single value of traffic volume but do not consider risk and uncertainty. This knowledge gap makes it difficult for concessionaires to estimate PPP transportation project revenues accurately. The objective of this paper is to develop a probabilistic traffic volume prediction model. First, traffic volumes were estimated following the Geometric Brownian Motion (GBM) process. Monte Carlo technique is then applied to simulate different scenarios. The results show that this stochastic approach can systematically analyze variations in the traffic volume and yield more reliable estimates for PPP projects.

To cite: Gundes, S., Buyukyoran, F. (2018) A model to assess government guarantees in BOT toll road projects using optimized real options approach. In Proceedings of the IPCMC International Project and Construction Management Conference, Nicosia, Cyprus, 16–18 November.

Build-Operate-Transfer (BOT) project delivery system has long been recognized as an important tool for realizing toll road projects. However, improper risk allocation structure between public and private parties causes difficulties in obtaining finance and thus leads to unsuccessful bids during the tender process. Future traffic demand is perceived as the main risk factor in BOT toll road investments, which directly affects the financial viability of projects. Thus, public parties usually provide some incentives in the form of minimum traffic or revenue guarantees to overcome uncertainties in the traffic forecasts. Nevertheless, the challenges associated with the valuation of these guarantees may constitute a heavy burden on the public budget. In this paper, a real options based optimization model is presented to identify the upper and lower boundaries of the minimum revenue guarantees (MRG). Moreover, revenue transfer mechanism, in the form of maximum revenue cap (MRC), is adopted to the model to prohibit excess profits of the private party. The results show that the optimum upper and lower boundaries of compound MRG and MRC options identified by using the proposed model not only ensure the financial attractiveness of the projects for private parties but also bring governments contingent liabilities under control. This model can be used by both parties to establish a fair bargaining environment and a proper risk allocation mechanism.

To cite: Buyukyoran, F., Gundes, S. (2018) The Third Bosphorus Bridge and the Northern Marmara Motorway Project, 2 (1), 60-70.

Abstract
Build-operate-transfer (BOT) model is extensively used by many governments throughout the world for the realization of large-scale transportation projects. As a rapidly developing economy, Turkey is also increasingly referring to the use of the project finance model for delivering large-scale transport, energy and healthcare projects. Istanbul, located between Asia and europe, is one of the most important economic centres of the country. Based on this model, rapid urbanization and population growth are taking place in the city. Growing concerns over the insufficiency of the existing two bridges in meeting the traffic demands of cross-continental transport in Istanbul have urged central and local governments to find a solution for the traffic congestion problem. As a result, the government of Turkey has announced plans for building a new bridge to connect the european and Asian sides in early 2011. The construction of the new Bosphorus Strait Crossing Project which has started in 2012 is expected to be completed by 2015. however, since its launch, the project faced many diverse challenges such as delayed tendering, legal disputes, financial problems and social opposition. This study aims at exploring the problems experienced and the solutions developed as a response to these problems in the implementation and management of the third Bosphorus Bridge and the Northern Marmara Motorway Project using a case study approach. To achieve this objective, necessary data regarding the tendering process were collected from various sources. The conclusion provided at the end of this case study is expected to enhance our understanding of the use of BOT model for transport projects and risk allocation between different actors. Both public and private sector participants that are involved in delivering transport projects using the BOT model may benefit from the findings of this study.
Keywords: build–operate–transfer, case study, guarantees, risks, toll roads, transportation projects, Turkey