A CASE STUDY ON INVESTMENT EVALUATION OF A PRIVATE SECTOR PROJECT WITH CONSTRUCTION COST RISKS

This paper focuses on the construction cost volatility for the purpose of private sector investment decision process. In this process, sponsors and lenders normally use IRR and DSCR (Debt Service Coverage Ratio). A case project, a 1, 000 MW pumped storage hydropower plant, has shown that its financial effects by cost volatility of underground works are less measured than interest rates impact on the financial model. Probabilistic analysis of costs under geotechnical conditions has been made by Indicator Kriging method. And in the modeling of interest rates, geometric brown motion has been applied.