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Abstract(s)
This dissertation has five main purposes. First, to gather literature on the discount rates
used by public entities and governments to assess PPP projects. Second, to typify
descriptively the models used to calculate these discount rates. The most used models
are: the Social Time Preference rate (STPR), the Social Opportunity Cost of Capital
(SOCC), a weighted average between STPR and SOCC, and the long-term government
bond. Third, to compare the usage in different countries and to analyze implications of
different usage in Portugal. In order to analyze these implications in Portugal, several
discount rates are calculated using these previous methods. Then, these are used to
discount the future payments regarding the 36 PPP projects operating in Portugal. The
differences in the NPVs are analyzed. Amongst the major results, if one used the SOCC
method there would have been a lighter burden to the State. Fifth, the Portuguese case
in PPPs is carefully discussed. The debate on payments to PPPs and the discount rate
issue is addressed. The fact that PPPs allow shifting financial responsibilities to the
future, linked with the lack of a risk assessment to the contracts led to the enormous
burden to the State. Since 2003, the Portuguese legal rate is fixed at 6.08%, based on the
10-year government bond, and by today there is no update. Therefore, this dissertation
suggests a new rate. When discounting PPP payments, the risk-free rate adjusted for
systematic risk should be used, whereas if the project is done entirely by the public
sector we recommend the risk-free only.
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Keywords
Public-Private Partnership Discount rate Portuguese case