TollRateModel

Are you professional working on financial models for greenfield or brownfield PPP projects for toll highways? Are you risk analysists working on the risk quantification for these types of investments? What does it take to have financially solid PPP toll highway project? What is the price the end users will need to pay for usage of this highway which can ensure sustainability of the project over time and making it socially acceptable at the same time?





This tool can help you assess the value of the toll rate needed for the project to meet its financial requirements. With this information, calculated toll rate can be compared with the socially acceptable toll rate and user’s willingness-to-pay. Getting results not so promising? Consider different financial structure for the project, for example, including subsidies…
Change input parameters and start again.








Implementation of this tool is for an early assessment of acceptable toll rates for PPP toll highway projects. Two options of the tool are available: deterministic model (TollRate basic) and advanced stochastic model (TollRate advanced).

Parameters used for defining financial feasibility are the annual debt service cover ratio (ADSCR), the internal rate of return (IRR), and the return on equity (ROE). On the other side, volatility of traffic volumes, construction costs variation, and operation and maintenance costs variationare used as the representation of project’s uncertainties in advanced stochastic model. Construction and O&M costs are presented as continuous random variables, while the traffic volume has the additional stochastic component which represents traffic evolution over time as a random walk. Toll rates are expressed as the weighted average toll rate (watr).

Results of the advanced model provide the range of toll rates covering possible risks scenarios. Results of the model can serve as a basis for a comparative analysis of the socially acceptable toll rate, assuming it is known, and the financially required toll rate. Early identification of the possible gap between these two toll ratescan assists in the identification of the need for additional financial instruments, such as guarantees or subsidies, in order to implement a project that is acceptable for private and public partners, equity investors, lenders and users.

Toll Rate Model is foreseen for the use by various stakeholders in PPP toll rate projects which are interested in the financial structuring and financial closure of the project, social acceptance of the project based on the users willingness to pay the tolls, risk management and risk modeling. Among number of possible stakeholders, most significant are Private Concessionaires, Public Entities involved in the delivery of PPP projects, Commercial Banks and International Financial Institutions.


TRY

TollRate basic TollRate advanced


Reference:
World Bank (WB) Toolkit is the basis for the mathematical re-formulation of the toll rate calculation for the given set of selected financial constraints.

World Bank & the Public-Private Infrastructure Advisory Facility (PPIAF) (2009). Toolkit for PPP in roads and highways. World Bank, Washington D.C.