Build-Transfer-Operate with risk sharing approach for railway public-private-partnership project in Korea

Abstract

To attract the private sector to railway public-private partnership (PPP) projects, the public sector is required to share risks resulted from a failure in demand forecasting. The Korean government introduced BTO-risk sharing (BTO-rs) as a new PPP arrangement to promote investments in railway projects. BTO-rs is to share operating costs and revenues by both the public and private sectors. This study explains the methodology of BTO-rs. Based on BTO-rs, this study conducted the sensitivity analysis for the real railway project. The result of the sensitivity analysis suggests that sharing ratio of the excess operating profit and loss of the government and demand are the most influential factors affecting the concessionaire’s rate of return.