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Medium Investment Analysis

Riyadh Airport Metro

#Infrastructure
ProHub Comment

This case tests a candidate's ability to build a bottom-up financial model for infrastructure investment evaluation. The core challenge is estimating ridership through logical breakdowns (airport passengers → transportation modes → metro adoption), then calculating payback period. The critical insight is recognizing that with fixed costs and limited pricing power, the only lever to improve returns is increasing passenger volume through operational design changes.

Estimated Time 15 minutes
Difficulty Medium
Source HKUST
50 / 100
Our client is the Saudi Arabia Ministry of Infrastructure. They are planning the construction of a metro direct link connecting the international airport to the Riyadh city center. They already estimated the upfront investment for the engineering, procurement and construction to be USD 2 billion, of which 60% to be funded by the Saudi Arabia Sovereign Fund and 40% to be funded by the Ministry of Infrastructure. They called us to help them evaluate this potential investment. Goal (to be asked by candidate): The Client wants to base their decision on the payback period of their part of the investment (the 40%), and they aim at a payback lower than 25 years.

Clarifying Information

  1. Number of passengers using the metro
  2. Price of a metro ticket
  3. Salaries
  4. Maintenance
  5. Utilities
  6. Other, like ticketing, train cleaning, stations management
  7. Trains can be leased (operational cost) or bought (upfront investment). In this case they will be bought, so shall be excluded
  8. Based on their experience, the Ministry expects that the metro would have a profitability of 20%
  9. Unit price of a metro ticket is USD 5
  10. Can assume 300 days per year for ease of calculation