Slide3:
A standard project We consider a standard project for which there is
an annual investment cost c,
for a duration d,
a is the net profit made by the project once it has come into service,
It is assumed that this will increase by an annual amount b.
Slide4:
The fundamental relatioship is the discount rate which cancels out the NPV (ie the IRR) is the amount by which the subsidy increases the IRR is the the percentage of c which is financed by subsidies
Slide5:
IRR and need of subsidies Nomogram based on c=100, b=1, d=5 years and a variable 4 % 80 %
Slide6:
17 highway projects : what is the best ranking to maximize the total socio-economical Net Present Value ? How to optimize public subsidies ? Project ERR IRR Cost (ME)
Arles - Salon 74% 7,5% 283
Isle Adam - Amiens 45% 6,1% 488
Toulouse Pamiers 30% 4,1% 450
Tours - Alençon 28% 3,6% 698
Dôle - Bourg 20% 7,1% 737
Saintes - Rochefort 20% 2,3% 290
Tours - Vierzon 19% 4,1% 800
Annemasse-Thonon 18% 7,9% 378
Grenoble - Sisteron 17% 2,5% 1880
Sens - Courtenay 15% 10,1% 197
Orléans - Courtenay 13% 3,0% 470
Dijon - Dôle 12% 9,5% 213
Lyon - Balbigny 11% 1,2% 770
Ambérieu - Bourgoin 11% 1,2% 500
Rouen - Alençon 9% 1,4% 580
A88 Caen - Argentan 9% 1,2% 250
Troyes - Auxerre 4% 0,9% 1350
Slide7:
Socio-economic IRR ranking vs financial IRR ranking
Slide8:
The paradox Nomogram based on c=100, b=1, d=5 years and a variable 4 % 80 % 93 % From 0 to 45 %
Slide9:
If the private operator is more efficient Target IRR of 8% for the public operator, and 12% for the private operator
Initial IRR with the private operator = Initial IRR with the public operator +2 %