In late 2022, Brazil's National Land Transport Agency (ANTT) initiated a public hearing on a new risk allocation model for road infrastructure concessions. Using real options methodology, this study demonstrates how the proposed design alters risk-return structures in concessions, impacting investment decisions and the expected value of risk-sharing mechanisms (cap and floor). Our analysis enables the granting authority to assess the trade-off between establishing cap and floor bands, Capex trigger flexibility (early risk-sharing initiation), and potential tariff reductions. We identify an optimal frontier of efficient portfolios (bands x triggers) maintaining consistent risk-return structures and resulting in discounts. This flexibility allows strategic allocation by the granting authority based on concession objectives, aiding in regulatory impact analysis. This research advances real options applications in infrastructure projects, emphasizing the importance of designing contract clauses governing managerial flexibilities to align government and private investor objectives.
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