Yurchenko A. Economic justification of concessions in road construction

Dissertation solves the current scientific and applied problem of road construction development on the basis of concession by developing scientific and methodological and practical provisions for economic justification of the investment project of road construction for implementation on the basis of concession and determining the structure of possible sources of funding. The solution will allow the authorities to form a program for the development of road construction on projects that will ensure the interests of both investors in acceptable levels of income and risk, and society interests in obtaining quality services. The aim of the dissertation is to develop methodological and practical recommendations for investment support of road construction in Ukraine based on the application of the benefits of the concession. The first section examines the theoretical foundations of concessions in road construction. The applicant explained the essence of public-private partnership is and presented the peculiarities of concession - one of the most developed forms of partnership. Also gave the characteristics of types of concessions according to the distribution of responsibility and risk between public and private partners. The second section analyzes the world practice of road construction on the basis of concession. It is established that there is no concession model that would be guaranteed against failure. It was found that the success of concessions in road construction depends on compliance with the system of basic principles at all stages of preparation and implementation of relevant projects. In the third section the applicant developed a conceptual model of coordination of economic interests of participants of the road construction project on the basis of concession. When considering the concession as a tool for mobilizing private investment in road construction projects, two levels of government are identified. The target function of management of such project is constructed. It provides for the achievement of the minimum cost of financing a concession project (or, in other words, the maximum benefit for consumers of services) under the established system of restrictions on the adequacy of the rate of return for creditors and private investors. A system of comparisons of the model of coordination of economic interests of participants is developed. Methodological approaches to determining the effectiveness of investments in road construction on the basis of concession have been improved, in particular by clarifying the formation of the toll tariff, as well as the calculation of expected cash flows taking into account changes in concession legislation of Ukraine. Based on the model of coordination of economic interests of road construction project participants and taking into account the "principle of sufficient expected cash flows" for the first time developed guidelines for justifying the structure of funding sources and the feasibility of state participation in project financing. Approbation of the proposed methodological and practical recommendations was carried out on the materials of the investment project, the implementation of which is envisaged on the basis of a concession (construction of the Great Ring Road around the city of Kyiv). The following economic indicators taken into account when calculating economic efficiency were: the size of tariffs for one kilometer of toll road in terms of types of rolling stock, the expected distribution of traffic between toll and alternative roads, expected revenues, costs and cash flows (profit plus depreciation deductions) of the concessionaire. Efficiency indicators such as net present value, payback period of investments, internal rate of return were calculated. Based on the requirements for the minimum acceptable rate of return and taking into account the expected cash flows, the applicant justified the formation of sources of funding that can be attracted for the project, namely: loans, private investment and public funding. This approach to substantiating sources of funding reduces the risk of terminating the project due to lack of financial resources or investors leaving the project due to lack of expected profits.