What exactly is the PPP model? What are the opportunities to enter the field? How to play?
Today we carefully combed the market several major types of PPP investment, and detailed examples of a project and enterprise mode of operation, so as to see the PPP market investment opportunities in the end where?
I, "public-private partnership + public **** product" of the two elements of the composition of the PPP model to enhance the core of the efficiency of the supply of public **** products for the purpose of
PPP mode: public-private cooperation + public **** product
PPP for Public-Private- PPP is the abbreviation of Public-Private-Partnership, which is a mode of financing public **** infrastructure projects, and the general process is that private enterprises participate in and complete the construction of relevant public **** infrastructure through cooperation with the government. Among them, there are broad and narrow:
Broad PPP is a partnership between the government and the private sector for the provision of public **** products or services, which can be divided into franchising, outsourcing leasing and privatization of the three categories; we are familiar with the BT (Build, Transfer), BOT (Build, Operate, Transfer), PFI (Private Initiative Financing) are all part of the category of the broad PPP;
Narrow sense PPP is similar to franchising projects, but it emphasizes more on the whole process of cooperation between the corporate sector. Typical practice is that the government and the private sector **** together to form a Special Purpose Vehicle (SPV) to operate the project, which in essence is the government's way of granting the private company a long-term concession and revenue rights in exchange for infrastructure construction. Both the government and the enterprise are involved in the whole process, and both parties cooperate for a longer period of time and with more symmetrical information. Now China is vigorously pursuing the government and social capital cooperation model is mostly in the broad sense of the PPP category.
The core function of the PPP model is to improve the efficiency of the supply of public **** products
There are two core elements in the concept of PPP, one is public-private partnership, and the other is the public **** products.
The core purpose of the PPP model is to better provide the public **** products or services, and the public **** products are usually characterized by the exclusivity, the government independently provides the public **** products, due to the both as a player and as a referee, the government will not be able to provide the public **** products. When the government provides public **** goods independently, it can lead to inefficiency in the provision of public **** goods because it acts as both a player and a referee. With the introduction of the private sector, it is possible to make full use of the private sector's specialized advantages to enhance the efficiency of public **** goods provision. At the same time, the government must also assume responsibility for regulating the quality and price of public **** goods.
The ideal goal of PPP project operation should be:
Private sector: to improve the operational efficiency of the project by giving full play to its own professional advantages, so as to obtain long-term, stable and low-risk investment returns;
Government departments: to reduce financial expenditures, lower the burden of debt, and focus on the management of public **** affairs, through the transfer of the whole or part of the right to operate and income.
Users: Based on the specialized operation of the private sector and the effective supervision of the government, users will enjoy more cost-effective and efficient services.
The triple demand for comprehensively deepening reform, innovative financing models and hedging the risk of macroeconomic downturn opens up a wave of PPP in China
The need for comprehensively deepening reform
The core of the economic reform is to deal with the relationship between the government and the market, so as to enable the market to play a decisive role in resource allocation and to better play the role of the government.
PPP model emphasizes the cooperation between the government and the social capital, in essence, the government's role is to provide a more cost-effective service. The PPP model emphasizes the cooperation between the government and social capital, and is in essence a government-purchased service, which is of great significance in accelerating the transformation of government functions and enhancing the country's governance capacity.
Promoting the use of government and social capital cooperation mode is an inevitable requirement for promoting economic transformation and upgrading and supporting the construction of new urbanization; it is a change in the institutional mechanism for accelerating the transformation of government functions and enhancing the country's ability to govern; and it is an important part of deepening the reform of the fiscal and taxation system and building a modern financial system.
Necessity of hedging against the risk of macroeconomic downturn
China's GDP grew by 7.4% in 2014, a record low in 24 years. The "troika" of economic growth, investment, consumption and export contributed 48.6%, 51.2% and 0.2% respectively to the economic growth in 2014. From the point of view of investment, consumption and export, the growth rate of export is slowing down, consumption is relatively stable, while investment is falling back significantly. Facing the downward pressure on the economy, the government work report has lowered the economic growth target for 2015 to around 7.0%. Constrained by the imbalance between supply and demand and the global economic contraction, it is not realistic to rely on consumption and exports to stabilize growth, therefore, investment is still the main means to stabilize growth in China at this stage.
From the perspective of the three major sectors constituting investment, the real estate development investment growth rate continues to fall, indicating that it is difficult to show a significant rebound in the short term, while the manufacturing sector investment due to weak demand resulting in overcapacity, the probability of investment rebound in the short term is also very small. Therefore, at present to pull fixed asset investment can only rely on the government can drive infrastructure investment. In the case of declining government revenue growth and limited debt flexibility, the PPP model is expected to drive a wide range of social capital to participate in infrastructure investment, thereby hedging against the risk of macroeconomic downturn.
Innovative financing model
The huge amount of private wealth introduced under the PPP model can play a huge role in dissolving the local stock of debt and boosting the financing model of infrastructure construction to enter a new stage, as well as cracking the financing dilemma of urbanization.
Solving the ever-accumulating local debt problem has been a major focus of the government in recent years. If the PPP model is introduced into the local financing platform's stock of projects, it will not only resolve the predicament of short-term cash flow difficulties in repaying huge loans due from banks for projects such as transportation, but also actively promote the investment and construction of the stock of infrastructure projects, which is a win-win situation for the government.
According to calculations by the Research and Development Center of the State Council, the urbanization rate is expected to reach 60 percent by 2020, with a related financing demand of nearly 42 trillion yuan, and the previous investment and financing system that relied on finance and land will be unable to support such a huge amount of financing. If the PPP model is introduced into the financing of supporting infrastructure projects for urbanization, it will be conducive to attracting social capital and forming a diversified and sustainable capital investment mechanism.
Policy intensive introduction of the government to promote PPP attitude
Since September 2014, the Ministry of Finance issued "on the promotion of the use of government and social capital cooperation mode of the relevant issues of the notice", the State Council, the Development and Reform Commission, the State Development Bank, the Ministry of Environmental Protection, the Ministry of Transportation, and other ministries and commissions have issued nearly 20 for the PPP field of policy measures involving water supply, heating, sewage treatment, garbage disposal, comprehensive environmental remediation, transportation, new energy vehicles, underground comprehensive pipeline corridor, medical, sports and other fields.
In the sponge city and underground pipeline corridor pilot city preferential policies, the Ministry of Finance proposed to adopt the PPP model of the pilot city to give 10% financial support. The Ministry of Finance will set up an estimated size of 100 billion level of China's PPP Guiding Fund, the development of PPP project financial management methods, and prepare for PPP legislation, etc., so it can be said that the big action frequently, the government's attitude to promote the PPP can be seen.
Three, the current PPP model is constantly broadening the field of application, different types of projects using different models
PPPP model is constantly broadening the field of application
PPPP model applicable areas from the beginning of the "high degree of marketization of urban infrastructure and public **** service area" to the latest "PPP model", the latest "PPP model" and "PPP model". From "urban infrastructure and public **** service fields with a high degree of marketization" to the latest "public **** service fields such as energy, transportation, water conservancy, environmental protection, agriculture, forestry, science and technology, guaranteed housing projects, medical care, health care, elderly care, education and culture, etc.", the scope of application of the PPP model has been significantly broadened.
In the first list of 30 PPP demonstration projects announced by the Ministry of Finance in December 2014, the distribution of industries is 9 sewage treatment projects, 8 rail transportation, 3 water supply, 3 heating, 2 comprehensive environmental management, 1 new energy vehicle, 1 comprehensive underground pipeline corridor, 1 medical, 1 education, 1 waste treatment.
Government departments recommended the main operating model: operational, quasi-operational, non-operational project models vary
The National Development and Reform Commission in the "guidance on the development of government and social capital cooperation," the distinction between operational projects, quasi-operational projects, non-operational projects were recommended to use different operating models.
Operational projects, which refer to projects with a clear fee basis and operating fees that can fully cover the investment costs, are recommended to adopt build-operate-transfer (BOT), build-own-operate-transfer (BOOT), and build-operate-transfer (BOT) modes. -transfer (BOOT) and other modes.
Quasi-operational projects, i.e., projects in which the operating fees are not enough to cover the investment costs and the government needs to subsidize part of the funds or resources, are recommended to be promoted by adopting BOT, BOOT, and BOOT modes through the government granting a franchise with additional part of the subsidies or directly investing in the equity participation and other measures. Own-Operate (BOO) and other modes to promote.
For non-operational projects that lack a "user pays" basis and rely mainly on "government pays" to recover investment costs, it is recommended to adopt the build-own-operate (BOO) model by purchasing services from the government.
China's market-oriented mode of operation, such as Build-Own-Operate (BOO) and entrusted operation, is recommended through the purchase of services by the government.
China's PPP project promotion status: third and fourth-tier cities to play a leading role, the transportation sector is the hottest
To the end of May 2015, the National Development and Reform Commission after reviewing and approving a total of 1,041 PPP projects, with a total investment of 1.97 trillion yuan. Among the 1,041 projects, Anhui Province ranked first in the number of projects with 127 projects. Among the projects in each province and region, nearly 87% of the projects are from third- and fourth-tier cities, and the other 13% are from first- and second-tier cities. Among them, the largest investment amount is in the transportation field, accounting for 64% of the total amount, and first- and second-tier cities are dominated by rail transportation projects, while third- and fourth-tier cities are dominated by highway transportation projects. In terms of the operation mode of the projects, the BOT mode is still dominant, with a total of 442 BOT projects, accounting for about 42.46% of the total number of projects.
Four, PPP mode of several typical segments of the application
Railway: Railway Development Fund annually added 200-300 billion yuan of private investment in railroads
Currently, the domestic railroad investment capital sources mainly rely on the total loans and debt issuance, which occupies the main part of the total source of funds. The state has also set up a railroad construction fund and arranged the financial budget, the two add up to about 60 billion yuan a year, the role of 800 billion yuan a year of railroad investment is relatively small.
In 2014, China's Railway Development Fund Corporation was officially established. The fund was set up by the General Administration of Railways in conjunction with Industrial and Commercial Bank of China, Agricultural Bank of China, Construction Bank of China and Industrial Bank of China***. Railroad Development Fund aims to respond to the national policy call to attract the participation of social capital, revitalization of railroad land resources, its central idea coincides with the PPP model.
According to the relevant program, in 2014-2015, the fund will attract 400 billion yuan of social capital into the railroad field. The Railway Development Fund adopts the form of a corporate fund with a duration of 15-20 years, with the General Administration of Railways as the main sponsor and social investors as preferred shareholders. The creation of the Railway Development Fund for China's railroad investment in the field of public-private partnership model opened up new growth space, as an opportunity, private capital is expected to enter the railroad field will continue to accelerate the pace of the railroad PPP project will also be promoted.
Metro: PPP projects have begun to replicate successful cases
Beijing Metro Line 4 project is China's first subway PPP project, the project from financing to construction of the B part of the full by the Hong Kong MTR, the capital of entrepreneurship and the Beijing Investment Corporation *** set up by the Beijing-Hong Kong MTR Corporation is responsible for. The project company is responsible for the operation and maintenance of the Line 4 project through leasing the facilities of Part A. The project company is responsible for the operation and maintenance of the Line 4 project. At the end of the operation period, the project will be handed over to the government at no cost.
Since then, the Nanjing Metro Line 1 South Extension project has also adopted the PPP model. at the end of 2014, Jingang Metro signed a concession agreement with the Beijing Municipal Government for Metro Line 14, and will also sign an agreement of intent for cooperation for Metro Line 16. Metro line 14 and 16 will copy the metro line 4 PPP model, private investment will rise from 4.6 billion yuan to 15 billion yuan, two lines *** 30 billion yuan. It can be predicted that the subway PPP project is expected to gradually replicate, from point to point, continue to promote.
Wastewater treatment: PPP utilization of space is extremely broad
With the trillions of dollars of the market can be spawned by the "water ten" officially introduced in April 2015, to improve the prevention and control of water pollution standards will become the focus of the sewage treatment project will be a significant increase in the amount of investment, the corresponding PPP market space has been water treatment. open.
Fifth, design and consulting companies and equipment supply and engineering construction companies will benefit from the PPP feast
The overall trend in the field of PPP in the first half of 2015 is the intensive introduction of various types of national policies, governments at all levels and corporate team formation, project reserves, resulting in more projects in the talks, fewer projects on the ground, and the overall progress is slower than the market expected. Can look forward to the second half of the enterprise level PPP project bidding, signing landing show accelerated trend.
Preliminary work is to determine the success or failure of the PPP project operation of one of the key core, but also the entire project in the most technical, the most time-consuming and labor-intensive aspects. Engineering design is at the front end of the engineering construction industry chain, connecting investment to the realization of the finished project is an important link, the economic benefits of the project has a direct impact. Design consulting companies in the contracting project design business at the same time, the project investment and financing, construction and operation of the project together to give consulting programs, the introduction of the back-end of the various aspects of the partners, so as to dominate the planning and implementation of the PPP project, so that it may become the PPP model of the first to start and benefit from the company. At the same time to benefit from the start of the project, in the field of equipment supply and engineering construction has a significant competitive advantage of the enterprise can also be the first to participate in the reform of the feast with the design and consulting companies.
Six, PPP wind under the typical case and the rise of the company
1, China's first PPP project in the field of urban rail transit: Beijing Metro Line 4
Average daily passenger traffic exceeded one million of the golden line
Beijing Metro Line 4 is one of the main lines of Beijing's rail transit network, starting from the south of the South Fourth Ring Road in Fengtai District Public Welfare West Bridge, via Xicheng District, north to Haidian District Anhe Bridge, the city of Haidian District. The line is 28.2 kilometers long, with 24 stations. 15.3 billion yuan was invested in Line 4, which was officially started in August 2004 and opened for trial operation on September 28, 2009, with an average daily traffic of more than 1 million passengers.
Public-private partnership model with franchising as the core
Line 4 project investment and construction is divided into A, B two relatively independent parts: A part of the cave body, station and other civil engineering, investment of about 10.7 billion yuan, accounting for about 70% of the total investment in the project, by the Beijing Municipal Government's wholly state-owned enterprises, a wholly-owned subsidiary of Beijing Investment Corporation set up by the line company responsible for the four; B part of the vehicle, Part B is the vehicle, signal and other equipment part, with an investment amount of approximately RMB4.6 billion, accounting for approximately 30% of the total investment of the project, which is the responsibility of the PPP project company, Beijing Jinggang Metro Co. ("BJMTR"), the PPP project company. BJMTR was formed by BIC, MTR Corporation and Capital Group in the ratio of 2:49:49.
After the completion and acceptance of the Line 4 project, BMTR acquired the right to use Part A of the assets of the Line 4 Company through a lease. Jinggang Metro is responsible for the operation and management of Line 4, the maintenance of all facilities (including both Part A and Part B) and the renewal of assets other than the cavernous body, as well as the commercial operation of the stations, and recovers its investment through the income from subway tickets and the commercial operation of the stations and earns a reasonable return on its investment.
At the end of the 30-year concession period, KYMTR will hand over the facilities of the Part B project to the designated department of the municipal government in good condition and free of charge, and return the facilities of the Part A project to the Route 4 Corporation.
Policy guarantee and benefit and risk sharing "double insurance "****Build a solid foundation for the success of the project
Establishing a strong policy guarantee system
The successful implementation of the PPP project of Beijing Metro Line 4 is largely attributed to the active coordination by the government, which provides a full range of guarantees for the project's promotion. All-round guarantee. In the whole process of project implementation, the government has changed from a leader to a participant and full guarantor. The government has set up a leading group of investment promotion led by the deputy secretary-general of the municipal government; the Development and Reform Commission has taken the lead in completing the implementation plan of the Line 4 PPP project; the Transportation Commission has taken the lead in the negotiation; and the Beijing Investment Corporation has taken charge of the specific operation and research in this process.
Constructing a reasonable revenue distribution and risk sharing mechanism
The smooth cooperation between the government and the social investors in the Beijing Metro Line 4 PPP project is attributed to the project's reasonable revenue distribution mechanism and effective risk sharing mechanism. Through the clever design of the fare mechanism and passenger flow mechanism, the project has found an effective balance between the economic interests of the social investors and the public**** interests of the government side, and has improved the management and service efficiency of Beijing's rail transportation sector while bringing reasonable expected returns to the social investors.
Fare Mechanism
If government pricing is applied to Line 4's operating fares, the actual average fare per passenger does not fully reflect the financial characteristics of the metro line itself, such as operating costs and reasonable returns. Therefore, the project adopts the "measured fare" as the basis for determining the operating income of the investor, and at the same time establishes an adjustment mechanism for the measured fare.
Based on the measured fares, the franchise agreement provides for compensation for fare differentials and a revenue sharing mechanism, and establishes a fare risk-sharing mechanism. If the actual fare revenue level is lower than the measured fare revenue level, the city government is required to compensate the concessionaire for the difference. If the actual fare revenue level is higher than the measured fare revenue level, the concessionaire shall return 70% of the difference to the city government.
Passenger flow mechanism
Tickets are the main source of revenue for Line 4 to achieve profitability, and due to the use of government pricing, passenger flow is the main factor affecting the project's revenue. Patronage is affected by both the quality of service provided by the concessionaire and factors such as urban planning by the municipal government, and therefore a patronage mechanism is needed to ***share the risk*** and ***share the benefit***.
The patronage mechanism for the Line 4 project is: when patronage is less than 80% of the projected patronage for three consecutive years, the concessionaire can apply for compensation or abandon the project; when patronage exceeds the projected patronage, the government will share 50% of the revenue from fares up to 10% of the projected patronage, and 60% of the revenue from fares that exceed 10% of the projected patronage.
2, Longyuan construction: "China's version of Macquarie" the road to emergence
To civil construction as the absolute center of gravity of revenue of the Yangtze River Delta's largest private construction company Longyuan construction in the last year began to lay out the company's transformation to the PPP model to create a comprehensive management platform for PPP projects. Its actions in the following four areas reveal its ambition to become the "Chinese version of Macquarie". (Macquarie Group is one of the world's largest providers of specialized investment, financial advisory and financial services, including infrastructure and tangible assets investment funds, investment management and professional investment solutions three divisions)
To set up a domestic authoritative PPP team
The company's PPP team members originally served in Pudong Construction and other companies engaged in BOT and other investment projects, and their knowledge of PPP mode is much higher than the average level of the industry, and their knowledge of PPP mode is much higher than the average level of the industry. Their knowledge of the PPP model far exceeds the industry average, and they also have a deep understanding of the capital market. At this stage, the company has already promoted the concept of transforming the PPP model by comprehensive training from top to bottom, and plans to build a domestic PPP project management platform in the future, so as to guarantee the undertaking of business, while the service consciousness of private enterprises is better than that of the central enterprises, which is also conducive to the undertaking of projects and investment cooperation.
Reserve sufficient funds to enhance the project undertaking ability
Longyuan construction at the end of 2014 to carry out a directional issuance of 1.6 billion yuan, most of the proceeds will be used as PPP project capital, is expected to be the subordinate collection of infrastructure investment funds, supporting bank borrowing, with the help of leverage to leverage sufficient cash, the company's project investment and business undertaking ability will be like a tiger with wings. With the additional funds in place and the company's PPP brand strength gradually highlighted, the company is expected to develop the PPP model since the financing to the operation and management of the whole process business system.
Multi-field layout
Early in the development of PPP projects, Longyuan Construction will be mainly engaged in housing construction business as the basis for the extension of landscaping/transportation/municipal areas, and is expected to obtain the construction qualifications and technical strength of urban railways and other areas through cooperation and acquisitions. In addition to the highly specialized and competitive environmental protection business, the company will gradually realize the comprehensive layout of PPP projects.
Establishment of subsidiaries to raise 10 billion yuan fund to engage in PPP business
Longyuan Construction completed the establishment of the company's wholly-owned subsidiary Longyuan Mingcheng registered in December 2014, the registered capital of 300 million yuan, the first installment of 50 million yuan, the main scope of business for the public **** facilities, highways, bridges, rail transit, water conservancy and port facilities investment, investment in environmental governance, health facilities investment, culture, sports, water conservancy and port facilities. Health facilities investment, culture, sports, entertainment facilities and other industrial investment, investment management, consulting. Longyuan Mingcheng intends to cooperate with various types of social capital, *** with the capital to set up infrastructure project industry investment fund, preparing to raise 10 billion yuan to invest in PPP projects.
The benefits of the company's evolution from a construction-type enterprise to a comprehensive management platform enterprise for PPP projects are obvious, and the revenue channels can be greatly broadened:
Project operating income, about 7-9%, can be obtained by cooperating with local governments that have large total fiscal revenues, and have high integrity and stable cash flow and strong guarantee measures. The stable income and low-risk characteristics allow the company to package the project operating income into standardized products, and can also be modeled on Macquarie's infrastructure investment funds issued and listed.
Project management revenue, the difference between the contracted cost and the actual cost reduced by the company's good planning.
Gains from construction profits and capital sinking.
Longyuan Construction has become the first winning candidate for the PPP project of the International Convention and Exhibition Center in Jinjiang City and the winning candidate for the infrastructure construction PPP project of the people's government of Ju County in the past two months, and has signed a 5 billion yuan target size Xiangshan PPP investment fund with the people's government of Xiangshan County. It is not difficult to see that the company in the PPP field of spring plowing and autumn harvest market or will soon come.