Residual value and its importance in concession agreements for infrastructure problems

Abstract

Major and less important parameters affecting the efficiency of the Public Private Partnerships (PPPs) in Infrastructure development have been discussed and analyzed thoroughly in International research. Issues related to the Residual Value factor are under consideration recently, mainly from countries and organizations that have implemented PPPs years ago and now they have to manage risks associated with Residual Value. Efficiency in Residual Value is close related with the proper quality of the provided services by the infrastructure, ensures Value for Money and maximizes the returns on investment. The specific risk is more important to the concession projects where the infrastructure returns to the beneficial owner after the expiration of the contractual period. The paper examines the influence, importance and treatment of the Residual Value parameter in leasehold concession agreements, since this type of concessions have been analyzed less that the schemes related to Built Operate Transfer (BOT) contracts. Residual value risk and its management is an issue that should be taken into consideration from the tendering phase of the project during the optimal selection of the preferred bidder.