EnglishConcession Buyout Option
Sometimes the public partner would like to redeem a concession from the private partner before the end of the concession period. The main question of course is how valuable the concession buyout option is or how much the public partner will have to pay the private partner in order to get back the concession and ownership over the built infrastructure. It is a question that has to be solved before signing the concession agreement as respective clauses regarding the concession buyout value and the cancelation procedure have to be included in the concession agreement.
Such case that refers to a planned Pedemontana Lombarda toll road in Italy, connecting Milan-Bergamo and Milan-Varese highways, was presented by Caselli, Gatti and Marciante from Bocconi University. Their calculation procedure can be further substantially improved, like presented by Podhraski at the Real options conference 2014 in Medellin, Colombia, but nevertheless, the approach they presented is a good overview of how real options analysis can be used for calculation of the concession buyout option in PPP infrastructure project.
