Financial system dynamics model for multidimensional flexibility in toll road PPPs: a life-cycle analysis

Although scholars have developed simulation models and analyzed bankability criteria in numerous papers to enhance the financial outcomes of Public-Private Partnerships (PPPs), the intersection between both fields considering alternatives to assess the financial impact of flexibility in both scope and financing, remains underdeveloped. To address this gap, this paper introduces a financial model that assesses the financial impact of suitable life-cycle flexibility alternatives while coexisting with revenue performance alterations in each project phase within toll road PPPs. This model serves as a tool to gain insight into the planning of strategic actions to implement flexibility in both scope and financing. Based on system dynamics and validated using financial data from two toll road PPPs in India and East Europe, simulation results suggest that two key drivers (capital expenditures and debt repayment period) have the greatest influence on financial performance. Findings support the implementation of flexible scopes to effectively address the most influential exogenous factor impacting the financial performance of PPPs, namely traffic shortfalls. This model provides a suitable tool for assessing the life-cycle economic sustainability of PPPs in uncertain and complex environments.