This paper focuses on construction cost volatility for the purpose of private sector investment by use of a financial model with key indices of IRR and DSCR (Debt Service Coverage Ratio). A case project, 1,000 MW pumped storage hydropower plant, has shown that its financial impacts by cost volatility of underground works are less measured than interest rates impacts by interest rate of loans. Probabilistic analysis of costs under geotechnical conditions has been made by Indicator Kriging method. And, in the modeling of interest rates, geometric Brownian motion has been applied. Both of these impacts are measured on the same financial model.
Authors would like to thank for discussions and assistance for this study to Mr. Jun Adachi (ex. post graduate student of Kyoto University), Mr. Seiji Hongou (J-Power, Electric Power Development Co., Ltd.) and participants in "Construction Management Seminar" monthly held at Kyoto University.