Remuneration models and revenue risk mitigation in road public–private partnership projects – a case study from Serbia

As a consequence of renewed interest in attracting private financing for infrastructure investments, public–private partnership (PPP) arrangements are mostly seen as a suitable mechanism for ensuring sound and quicker delivery of transport infrastructure projects. However, a general concern is that expectations of mobilizing private-sector funds have been overestimated in a number of cases. The purpose of this paper is to contribute to the risk analysis of transport PPP projects with substantial exogenous demand risk which could serve as a rationale for choosing the appropriate PPP model. The objective of this paper is to construct an analytical cash flow-based project model to facilitate the choice of the remuneration mechanism suitable for both private investors and public sector. The model provides an indication whether the project should be implemented as a ‘users pay’, a hybrid or an ‘annuity’ PPP model. The proposed methodology is illustrated using a case study from Serbia.