Real Options Valuation of Water Infrastructure the Case of Agadir Desalination Plant

This paper presents a flexible method that is real options to measure the value of the water infrastructure systems. In particular, it analyzes: net present value (NPV), decision analysis (DA) and real options analysis (ROA), and compares these approaches in terms of their handling of uncertainty linked to climate changes, their acknowledgement of flexibility, and their usefulness for strategic investment decision making in the water sector. The study is illustrated by a system design for the expansion of the desalination plant to a capacity of 2m(3)/s in the city of Agadir located in the south of Morocco. This study illustrates the application of each methodology and identifies the policy challenges relevant to desalination investment evaluation and other evolving economies. Real options make a flexible ability to respond the systems more effective to good opportunity and withdrawn unproductive situations from loss of investments in the future. The results of this approach are compared with traditional net present value in cases of with and without uncertainty to show expected values of investment of water demand and supply schemes. It shows that real options in water system design can increase expected value of water infrastructure investment by reducing negative risks and increasing opportunities.