Skip to main content

Advertisement

SpringerLink
Log in

Real Options for Increasing Value in Industrial Water Infrastructure

  • Published:
Water Resources Management Aims and scope Submit manuscript

Abstract

This paper presents a flexible approach that is real options to increase expected value in water infrastructure systems. Real options make an adaptable ability to respond the systems more effective to good opportunity and withdrawn unproductive situations from loss of investments in the future. The result of this approach is compared with traditional net present value in cases of with and without uncertainty to show expected values of investment of industrial water demand and supply schemes. It shows that real options in system can increase expected value of investment by reducing negative risks and increasing opportunities. An example of water infrastructure investment to support increasing industrial water demand demonstrates the use and results of this approach.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Amram M, Kulatilaka N (1999) Real options-managing strategic investment in an uncertain world. Harvard Business School, Boston

    Google Scholar 

  • Anastasios M, Konstadinos M (2007) Using real options theory to irrigation dam investment analysis: an application of binomial option pricing model. Water Resour Manage 21(10):1717–1733

    Article  Google Scholar 

  • Charles C, Jicai L (2006) Valuing governmental support in infrastructure projects as real options using Monte Carlo simulation. J Constr Manag Economics 24(5):545–554

    Article  Google Scholar 

  • Copeland TE, Antilarov V (2001) Real options—a practitioner’s guide. Texere, New York

    Google Scholar 

  • De Neufville R, Scholtes S, Wang T (2006) Valuing real options by spreadsheet: parking garage case example. J Infrastruct Syst 12(2):107–111

    Article  Google Scholar 

  • Dixit AK, Pindyck RS (1994) Investment under uncertainty. Princeton University Press, Princeton

    Google Scholar 

  • Gleick P (2002) The world’s water: the biennial report on freshwater resources 2002–2003. Island, Washington, DC

  • Jack RM, Samuel JM (1995) Project management: a managerial approach. Wiley, New York

    Google Scholar 

  • Ku A (1995) Modeling uncertainty in electricity capacity planning. Doctoral Dissertation, London Business School, London

  • Leviakangas P, Lahesmaa J (2002) Profitability evaluation of intelligent transport system investments. J Transp Eng 128(3):276–286

    Article  Google Scholar 

  • Metropolitan Waterworks Authority (MWA) (2006) The eighth Bangkok water supply improvement project, Thailand. Bangkok, Thailand

  • Michael JG, Charles YJC (2004) Valuation techniques for infrastructure investment decisions. J Constr Manag Economics 22(4):373–383

    Article  Google Scholar 

  • Myers S (1984) Finance theory and financial strategy. Interfaces, pp 71–79

  • Myers S, Turnbull SM (1977) Capital budgeting and the capital asset pricing model: good news and bad news. J Finance 32(2):321–333

    Article  Google Scholar 

  • Office of the National Economic and Social Development Board or NESDB (2008) National income of Thailand, 2008 edn. Bangkok, Thailand

  • Ping SH, Liang YL (2002) An option pricing-based model for evaluating the financial viability of privatized infrastructure projects. Constr Manag Econ 20:143–156

    Article  Google Scholar 

  • Rose S (1998) Valuation of interacting real options in a toll road infrastructure project. Q Rev Econ Finance III, Issues in Application, Special Issue, 1998

  • Sick G (1995) Real options. In: Jarrow RA, Maksimovic V, Ziemba WT (eds) Handbook in operations research and management science-finance, vol 9. Elsevier, Amsterdam, pp 631–691

    Google Scholar 

  • Simpson J, Weiner E (1991) The Oxford English dictionary, reprinted (with corrections), 2nd edn. Clarendon, Oxford

    Google Scholar 

  • Smit HTJ (2003) Infrastructure investment as a real options game: the case of European Airport Expansion. Financ Manag 32(4):27–57

    Article  Google Scholar 

  • Smit HTJ, Trigeorgis L (2004) Strategic investment: real options and games. Princeton University Press, Princeton

    Google Scholar 

  • Suttinon P (2008) Water demand management model in the Lower Chao Phraya River Basin, Thailand. Doctoral Dissertation, Kochi University of Technology, Kochi

  • Tong Z, Chung LT (2003) Valuing flexibility in infrastructure expansion. J Infrastruct Syst 9(3):89–97

    Article  Google Scholar 

  • Trigeorgis L (1996) Real options-managerial flexibility and strategy in resource allocation, 4th edn. MIT, Cambridge

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Research Center for Social Management, Kochi University of Technology, 185 Miyanokuchi, Tosayamada-cho, Kami-city, Kochi, 782-8502, Japan

    Pongsak Suttinon & Seigo Nasu

Authors
  1. Pongsak Suttinon
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Seigo Nasu
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Pongsak Suttinon.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Suttinon, P., Nasu, S. Real Options for Increasing Value in Industrial Water Infrastructure. Water Resour Manage 24, 2881–2892 (2010). https://doi.org/10.1007/s11269-010-9585-0

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11269-010-9585-0

Keywords

Search

Navigation