PPP model is the solution to local government debt medicine?

Currently China's economy, on the one hand, the real estate investment growth rate is falling month by month, the traditional industry's serious overcapacity, and on the other hand, to ensure that "7%" of the growth rate of the serious task. The serious weakness of the traditional growth pole has been unable to contribute too much power to achieve the goal, the market needs a new channel, a new model to achieve redemption, 2014 breeding breakthroughs and become the center of public opinion this year, "PPP model" is undoubtedly the most attention of the industry star.　　What is the PPP model? What are the opportunities to enter the field? How to play?　　Today we carefully combed through the market several major types of PPP investment, and detailed examples of a project and enterprise operation mode, so as to see the PPP market investment opportunities in the end where?　　First, the "public-private partnership + public **** product" of the two elements constitute the core of the PPP model to enhance the efficiency of the supply of public **** product PPP model: public-private partnership + public **** product PPP for the acronym of Public-Private-Partnership, that is, public-private partnership model, is a public **** ** infrastructure project financing model, the general process for the private sector through cooperation with the government, to participate in and complete the construction of the relevant public *** infrastructure. There are broad and narrow: broad PPP is a partnership between the government and the private sector to provide public **** products or services, 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 the scope of the broad PPP; narrow PPP is similar to franchising class PPP in the narrower sense is similar to franchising, but it emphasizes more on the whole process of cooperation between the corporate sector. Typically, the government and the private sector **** together to form a special purpose vehicle (SPV) to operate the project, which essentially means that the government grants 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. Nowadays, most of the government-social capital cooperation models vigorously pursued in China belong to the category of PPP in the broad sense.　　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 the public-private partnership, and the other is the public **** products.The core purpose of the PPP model is to better provide public **** products or services, and public **** products usually have exclusive characteristics, the government independently provides public **** products, due to the role of both the athlete, and as a referee, it will lead to the problem of inefficiency in the provision of public **** products. **Problems of inefficiency in the provision of public **goods. 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 the responsibility of regulating the quality and price of public *** goods.　　The ideal goal of PPP project operation should be as follows: Private sector: to improve the efficiency of project operation by giving full play to its own professional advantages, so as to obtain long-term, stable and low-risk investment returns; Government: to reduce financial expenditure, lower the debt burden and focus on the management of public **** affairs by transferring all or part of the right to operate and earn revenue; Users: based on the professional operation of the private sector and effective supervision by the government, the users will enjoy the benefits of public **** goods, which can be provided by the private sector. Users: Based on the specialized operation of the private sector and effective supervision by the government, users will enjoy more cost-effective and effective services.　　Second, the triple demand of comprehensively deepening reform, innovative financing model and hedging the risk of macroeconomic downturn opens the wave of PPP in China The need for comprehensively deepening reform The core of the economic system reform is to deal with the relationship between the government and the market, so as to make the market play a decisive role in resource allocation and to better play the role of the government. the PPP model emphasizes the cooperation between the government and social capital, which is in essence a government-purchased service, and has a significant impact on accelerating the transformation of government functions and enhancing the capacity of national governance. It is of great significance in accelerating the transformation of government functions and enhancing national governance capacity.　　Promoting the use of government and social capital cooperation mode is an inevitable requirement to promote economic transformation and upgrading and to support the construction of new urbanization; it is an institutional mechanism change to accelerate the transformation of government functions and to enhance the country's ability to govern; and it is an important element to deepen the reform of the fiscal and taxation system and to build a modern financial system.　　The need to hedge the risk of macroeconomic downturn In 2014, China's GDP grew by 7.4%, 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 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 as well as 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 composition of the three main sectors of investment, real estate development investment growth rate continues to fall indicating that it is difficult to show a significant rebound in the short term, and manufacturing investment due to weak demand caused by 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 Models The huge amount of private wealth introduced under the PPP model can play a huge role in resolving the local debt stock and boosting the financing model of infrastructure construction to enter a new stage, as well as cracking the financing dilemma of urbanization.　　Solving the accumulating local debt problem has been the focus of the government's work in recent years. If the PPP model is introduced into the stock of local financing platform projects, it can not only solve the predicament of transportation and other projects, whose short-term cash flow is difficult to pay off the huge loans due from banks, but also actively promote the investment and construction of the stock of infrastructure projects, which can be said to be a two-for-one solution for the government.　　According to the State Council Research and Development Center estimates, by 2020, the urbanization rate is expected to reach 60%, the related financing needs of nearly 42 trillion yuan, the original reliance on financial, land investment and financing system will be difficult to support such a huge amount of financing. If the PPP model is introduced in 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.　　Policies have been introduced intensively, and the government is determined to promote PPP Since the Ministry of Finance issued the Notice on Issues Related to Promoting the Use of Government and Social Capital Cooperation Models in September 2014, the State Council, the Development and Reform Commission (DRC), the China Development Bank (CDB), the Ministry of Environmental Protection (MEP), the Ministry of Transportation (MOTC), and other ministries and commissions have issued nearly 20 policies and measures in the field of PPP, including those related to water supply, heating, sewage, garbage, comprehensive environmental remediation, transportation, new energy vehicles, underground integrated pipe corridors, and other infrastructure projects. The PPP program covers a wide range of areas, including water supply, heating, sewage treatment, garbage disposal, comprehensive environmental remediation, transportation, new energy vehicles, underground comprehensive pipeline corridors, medical care, and sports.　　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 guidance fund, the development of PPP project financial management law, to prepare for PPP legislation, etc., can be said to be a big action frequently, the government's attitude to promote the PPP can be seen.　　Third, the current PPP model applicable areas in the continuous broadening of different types of projects using different models PPP model applicable areas are constantly broadened PPP model applicable areas from the beginning of the "higher degree of marketization of urban infrastructure and public **** service areas" to the latest "in the energy, Transportation, water conservancy, environmental protection, agriculture, forestry, science and technology, guaranteed housing projects, healthcare, sanitation, pension, education, culture and other public **** service areas", the scope of application of the PPP model has been significantly broadened.　　In the list of the first batch 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 underground comprehensive pipeline corridor, 1 medical care, 1 education, and 1 waste treatment.　　The main operation mode recommended by the government departments: operational, quasi-operational, non-operational projects with different modes The National Development and Reform Commission in the "Guidance Opinions on Carrying out the Government and Social Capital Cooperation", the distinction between operational projects, quasi-operational projects, and non-operational projects are recommended to adopt different operation modes.　　Among them, 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 the modes of build-operate-transfer (BOT), build-own-operate-transfer (BOOT), and so on. It is recommended to adopt BOT (Build-Operate-Transfer), BOOT (Build-Own-Operate-Transfer) and other modes.　　For quasi-operational projects, i.e., projects where the operating fees are not enough to cover the investment cost and the government needs to subsidize part of the funds or resources, it is recommended to adopt BOT, BOOO, and BOOT modes through the government granting a franchise with additional part of the subsidy or directly investing in the equity participation and other measures. Build-Operate-Transfer (BOT), Build-Own-Operate (BOO) and other modes.　　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. Operation (BOO), entrusted operation and other market-oriented modes.　　China's PPP project promotion status: third and fourth-tier cities, transportation field is the hottest By the end of May 2015, the National Development and Reform Commission after the audit of the PPP project totaled 1041, 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 sector, 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 project, the BOT mode is still dominated, with a total of 442 BOT projects, accounting for about 42.46% of the total number of projects.　　Fourth, the PPP model of several typical segments of the application Railway: Railway Development Fund annually added 200-300 billion of private investment in railroads At present, the domestic railroad investment funding sources rely mainly on the total loans and debt issuance, which occupies the main part of all sources of funding. The state also set up a railroad construction fund and arranged the financial budget, the two add up to about 60 billion yuan per year, the role of 800 billion yuan per year of railroad investment is relatively small.　　In 2014, China's railroad development fund company 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 social capital participation, 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 case of metro PPP project, the project B part from financing to the construction of all by the Hong Kong MTR, the capital of entrepreneurship and the Beijing investment company **** set up Beijing-Hong Kong Metro Company is responsible for. The project company is responsible for the operation and maintenance of Line 4 through leasing the facilities of Part A to generate revenue. At the end of the operation period, the project will be transferred to the government without compensation.　　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 to cooperate for Line 16. Metro Line 14 and Line 16 will replicate the Metro Line 4 PPP model, and private investment will rise from 4.6 billion yuan to 15 billion yuan for Line 4, and 30 billion yuan for the two lines***. It can be predicted that the subway PPP project is expected to gradually replicate, from point to point, continue to promote.　　Wastewater treatment: PPP use of space is extremely broad With the trillion-dollar market can be generated "water ten" was officially introduced in April 2015, to improve the prevention and control of water pollution standards will become the focus of wastewater treatment projects related to the amount of investment will be a substantial increase in the corresponding water treatment PPP market space has been opened.　　Fifth, design and consulting companies and equipment supply and engineering construction companies will benefit in the PPP feast PPP field in the first half of 2015 the overall trend 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, the overall progress of the slower than the market expects. Can look forward to the second half of the enterprise level PPP project bidding, signing and landing show an accelerating trend.　　Front-end work is one of the key cores that determines the success or failure of PPP project operation, and it is also the most technical, time-consuming and labor-intensive part of the whole project. Engineering design is at the front end of the engineering construction industry chain, is an important link connecting investment to the realization of the finished project, and has a direct impact on the economic benefits of the project. Design and 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 enterprises can also be the first to participate in the reform 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 flow exceeded one million of the golden line Beijing Metro Line 4 is one of the main lines in the Beijing rail transit network, starting from the south of the South Fourth Ring Road in Fengtai District Public Welfare West Bridge, through the Xicheng District, the north to the north of Anheqiao in the Haidian District, the line is 28.2 kilometers in length, the station a total of 24 seats. Line 4, with a total estimated investment of 15.3 billion yuan, 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.　　Franchise as the core of the public-private partnership model 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 amount of about 10.7 billion yuan, accounting for about 70% of the total investment in the project by the Beijing municipal government wholly owned state-owned enterprises, the Beijing Investment Corporation set up a wholly owned subsidiary of the four line company is responsible for; B part of the vehicle, signaling and other equipment parts, investment amount of about Part B is the vehicle, signaling and other equipment part, with an investment amount of approximately RMB 4.6 billion, accounting for approximately 30% of the total investment of the project, and is the responsibility of the PPP project company, Beijing Jinggang Metro Company Limited ("Jinggang Metro"). ("Beijing-Hong Kong MTR"), the PPP project company. Beijing-Hong Kong MTR was formed by BIC, MTR Corporation of Hong Kong and Capital Group in the ratio of 2:49:49.　　Upon 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 and earns a reasonable return on its investment through the income from subway fares and the income from the commercial operation of the stations.　　At the end of the 30-year concession period, BJM will hand over the facilities of Part B to the designated department of the municipal government in good condition and without compensation, and will return the facilities of Part A to the Line 4 Company.　　Policy guarantee and risk-sharing "double insurance "*** Building a solid foundation for project success Establishing a strong policy guarantee system The successful implementation of the Beijing Metro Line 4 PPP project is largely due to the active coordination of the government, which provides all-round guarantee for the project. In the whole process of project implementation, the government has changed from the previous leader to a full participant and full guarantor. The government has set up an investment promotion leading group led by the deputy secretary-general of the municipal government; the Development and Reform Commission has led the completion of the implementation plan of Line 4 PPP project; the Transportation Commission has led the negotiation; and the Jingtou Investment Company is responsible for the specific operation and research in this process.　　Constructing a Reasonable Revenue Distribution and Risk Sharing Mechanism The smooth cooperation between the government side and the social investors in the Beijing Metro Line 4 PPP project is attributed to the fact that the project has a reasonable revenue distribution mechanism as well as an 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, which has brought reasonable expected returns to the social investors while improving the management and service efficiency of Beijing's rail transportation sector.　　Fare Mechanism Assuming that the operating fare of Line 4 is managed by government pricing, the actual average fare per passenger cannot fully reflect the financial characteristics of the subway 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 stipulates the corresponding fare difference compensation and 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 has 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 Fares 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. Passenger traffic is affected by both the quality of the concessionaire's service and the city government's urban planning, among other factors, and therefore a patronage mechanism is needed that involves risk***sharing and benefit***sharing.　　Line 4 project passenger flow mechanism: when the passenger flow for three consecutive years below the forecast passenger flow of 80%, the concessionaire can apply for compensation, or abandon the project; when the passenger flow exceeds the forecast passenger flow, the government share exceeding the forecast passenger flow within 10% of the ticket revenue of 50%, exceeding the passenger flow of more than 10% of the ticket revenue of 60%.　　2, Longyuan construction: "China's version of Macquarie" the road to the rise of civil construction as the absolute center of gravity of the revenue of the Yangtze River Delta's largest private construction company Longyuan construction in the last year, the layout of 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) Formation of domestic authoritative PPP team Members of the company's PPP team originally served in Pudong Construction and other companies engaged in BOT and other investment projects, the PPP model of knowledge is far more than the industry average, and has a deep understanding of the capital market. They also have a deep understanding of the capital market. At this stage, the company has been transforming the concept of PPP mode from top to bottom comprehensive training and promotion, the future plans to build a domestic PPP project management platform, so as to ensure the undertaking of business, while the private sector's sense of service 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 ability to undertake projects Longyuan construction at the end of 2014, the amount of 1.6 billion yuan, most of the proceeds will be used as PPP project capital, is expected to raise infrastructure investment funds as a subordinate, supporting bank borrowing, with the help of leverage to pry sufficient cash, the company's project investment and business capacity will be like a tiger to add wings. With the issuance of 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.　　Targeted layout of multiple fields PPP project development early, Longyuan construction will be mainly engaged in housing construction business as the basis, to the garden / transportation / municipal and other areas of extension, and is expected to obtain through cooperation and acquisition of urban rail and other areas of construction qualifications and technical strength. 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 of funds to engage in PPP business Longyuan Construction completed the establishment of the company's wholly-owned subsidiary Longyuan Mingcheng registered in December 2014, with a registered capital of 300 million yuan, the first installment of 50 million yuan of capital, the main business scope of the public **** facilities, highways, bridges, rail transportation, water conservancy and port facilities investment, investment in environmental governance, investment in sanitation facilities, culture, sports, recreational 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 PPP project comprehensive management platform enterprise are obvious, and the channels of income can be greatly broadened: project operating income, about 7-9%, can be obtained by cooperating with local governments with large total fiscal revenues, which have a high degree of integrity and a stable cash flow and strong guarantee measures. The stable income and low risk feature allows the company to package the project operation income into standardized products, and also can follow Macquarie's infrastructure investment fund to issue and list.　　Project management revenue, the difference between the contract cost and the actual cost reduced by the company after good planning.　　Gains from construction profits and capital deposits.　　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, respectively, 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 fall harvest market or will soon come.