PPP project financing methods and their scope of application
In the domestic PPP model is only developed in recent years, but in foreign countries have been commonly used. So what are the financing methods? What is the scope of application?
PPP mode that Public?Private?Partnership letter abbreviation, usually translated as ? Public***Private Partnership? , is between the government and private organizations, in order to cooperate in the construction of urban infrastructure projects. Or in order to provide some kind of public **** goods and services, based on the concession agreement, to form a partnership between each other, and through the signing of the contract to clarify the rights and obligations of both parties, in order to ensure the successful completion of the cooperation, and ultimately enable the parties to achieve a more favorable outcome than expected to act alone.
(a) Industrial investment funds
Industrial investment funds and similar urban development funds and private equity funds are increasingly becoming the mainstay of PPP financing.
1, classification: there are mainly industry industry fund (such as transportation industry fund) and geographical industry fund (such as Luoyang urban development fund), mother fund and sub-fund, financial capital and local government set up a fund, financial capital and construction enterprises (or listed companies) set up a fund and three-party *** with the establishment of the fund and so on a number of classification;
2, investment and financing modes: there are mainly equity Investment fund and debt (explicit shares and real debt) investment fund, the mother fund through investment sub-fund, indirect investment in the project company, and direct investment in the project company, the stock of debt replacement fund and new project investment fund, investment priority and investment in intermediate and subordinate and other investment modes;
3, features: the general structure of the industrial fund is owned by the government-owned investment companies and financial capital to 10%: 90% of the proportion of limited partnership subscription mode established by the fund, the government investment company as a subordinate, financial capital as a priority. Industrial funds are usually large in size and have obvious leverage effects. For example, the government contributes 10% in the industrial fund as the subordinate, the industrial fund invests 10% of the total investment in the PPP project into the project company (registered capital + shareholder borrowing), and the actual government only contributes 1% in the project (usually, in order to realize the maturity of the repurchase, the government platform company in the project will directly contribute 1-5% as a shareholder), the leverage effect of the government's investment reaches more than 50 times (calculated by the government). The leverage effect of government investment is more than 50 times (calculated based on the government's contribution of another 1%). In addition, the industrial fund, because most of the priority investors are banks, insurance companies, and even policy banks, etc., the cost of capital is lower, which can effectively lower the cost of the industrial fund, the overall reduction of the cost of financing the PPP project is very helpful.
The industrial fund model can also solve the PPP project company's equity structure problems, that is, the government investor and the construction enterprise social capital are not willing to absolute holding in the PPP project company, the industrial fund as a third-party investor can pull down the proportion of their respective equity, so that the government and social capital are not holding. Industry fund holding, can be in the agreement to cede the right to management, only do financial investors, do not interfere with the government and social capital on the project company's management. In addition, the industry fund can solve the problem of a single social capital investment ratio is too large, that is, the industry fund and construction companies as financial investors and engineering investors, respectively, to form a social capital consortium, than the construction companies alone to do social capital has a stronger competitive advantage.
4, the scope of application: industrial funds generally have requirements for the project, the industry requirements in line with national industrial policy, the project requirements included in the provincial and municipal key projects, the government's financial strength requirements of the general financial budget revenue to reach a certain level, there are some requirements for social capital. Industrial funds due to different sources of funding channels, the cost of capital varies greatly, for example, funds from policy banks, industrial funds, the cost is very low, even as low as 1.5%?3%; from local commercial banks, the cost of capital, some as high as 8%.
(ii) bond issuance
The bonds mentioned here are mainly underwritten by securities companies, approved by the Securities and Exchange Commission (or Securities Industry Association), corporate bonds, as well as the approval of the Development and Reform Commission of the corporate bonds. Excluded are short-term financing, medium-term bills and PPNs (non-public directed financing instruments) underwritten by banks and traded in the inter-bank bond market. Bond financing, especially since the beginning of 2015, the relaxation and expansion of corporate bonds, enterprise bonds and special bonds, has become the main tool for government financing.
1, classification: the main NDRC system of corporate bonds, and the Securities and Futures Commission system of corporate bonds; publicly issued public debt, and non-publicly issued private debt; traditional corporate bonds (relying on the municipal investment enterprises themselves to issue bonds), and project revenue bonds and other special bonds (relying on the proceeds of the project to issue bonds), and so on.
2, investment and financing mode: bonds as PPP project financing tools, mainly divided into two categories, one is the government platform companies, that is, the PPP project investors themselves issued corporate bonds, corporate bonds, PPP projects, the government shareholders in terms of equity capital contribution to the funds, may be derived from this bond funds; another category is the PPP project company issued bonds, generally for the project The other type of bond is issued to the PPP project company, generally for the project revenue debt or special debt.
3, features: the biggest benefit of bond issuance, is the low cost of financing: in general, the rating of AA above the main annualized cost of financing between 5% -7% (public offering) or 7% -9% (private offering). With the downward trend of interest rates, the cost is further reduced, and even some enterprises with high ratings and strong strength, the financing cost reaches 3%-4%. But the flip side of the coin, is for the issuer's requirements are very high, the public offering of the general requirements of the rating in the AA or even AA + or more, can reach AA or more enterprises in the local only a handful, and requires sufficient assets to support the issuance of debt (public offering of bonds amounting to no more than 40% of the net assets), the issuance of debt is limited in size; even if you can issue a private placement of debt, but for the local government can easily be tens of billions of the numerous PPP project, obviously far from enough.
4, the scope of application: the same as the investment model, the scope of application of debt issuance on PPP project financing has two categories, one is to the government platform company debt issuance, a class is to the project company issued project revenue debt or special debt. Under the premise that the amount of debt issued by government platform companies is basically saturated nowadays, project revenue bonds and special bonds are good breakthroughs in PPP financing, especially when the Securities and Futures Commission launched in January 2015? New Corporate Bond Measures? In April 2015, the National Development and Reform Commission (NDRC) launched four special bonds for strategic emerging industries, parking lots, underground comprehensive pipeline corridors, and senior care industry, and in July, the NDRC introduced the "New Corporate Bond Measures". Project revenue bonds were introduced in July. The NDRC launched four special bonds in April 2015 for strategic emerging industries, parking lots, underground comprehensive pipeline corridors and the senior care industry. Green Bonds After the special bond management methods, corporate bonds, special corporate bonds have huge space for development. Special bonds have several advantages: First, the main body of the bond can be a project company, does not take up the platform company and other traditional debt issuance body quota; Second, not subject to debt issuance targets, and the scale of debt issuance can be up to 70% of the total investment in the project?80% (non-specialized bond bond issuance scale does not exceed the total investment in the project's '60%); Third, in accordance with the? Accelerate and simplify the audit category? Bond review procedures, improve the efficiency of the review; Fourth, more financial subsidies and financial subsidies, investment and loan linkage and other aspects of support. Due to the general status quo of the lack of PPP project financing credit enhancement body, supported by cash flow, only need to rate the debt of the project revenue bonds, special bonds, can not take up the government's financial credit and social capital credit (some of which need to be guaranteed by the government AA level or above the main body of the issuance of the debt), and this type of financing business has just been launched soon, it is bound to become a new blue ocean of PPP project financing!
(C) Banks
Banks are the main force involved in PPP project financing, mainly through fixed asset loans and other debt financing, and the issuance of off-balance-sheet wealth management products to subscribe to the share of the fund or management plan of the equity financing method, to participate in PPP project financing. Of course, short-term financing, medium-term bills, PPN and other direct financing, is also the scope of the bank's business, but in the PPP project financing accounted for a relatively low, not to expand the discussion.
1, classification and investment and financing mode: banks participate in PPP project financing, mainly divided into two categories: one is through the issuance of wealth management products, to raise financial funds, through the subscription of private equity funds or asset management plan priority share, investment in the PPP project equity or equity + debt, this financing belongs to the off-balance-sheet financing, but also direct financing; the second is that the bank through the fixed asset loans, syndicated loans and other products The second is that the bank through fixed asset loans, syndicated loans and other products, to the project company credit, for the project company is debt financing, belongs to the table financing and indirect financing.
2, features: the characteristics of bank financing, of course, is the low cost of funds, large scale. But there are several shortcomings of bank financing: First, strict risk control, credit conditions are high, requiring the main credit (generally the bank's internal rating) to meet the conditions, credit enhancement and guarantee measures to meet the requirements, etc., off-balance sheet wealth management funds are now usually also included in the bank's unified credit system, with the same conditions as the table of the funds credit: Secondly, the PPP project is a big investment, a single bank based on the concentration of risk control considerations of the customer, unwilling to all of their own The second is that PPP project investment is large, a single bank based on customer concentration risk control considerations, is not willing to fund all by itself, usually with other banks to form a syndicate, which increases the cost of financing to promote the cost of time and communication costs; the third is that on-balance-sheet loan funds are subject to? Three methods and one guideline? Restrictions, can only be? The actual loan actual payment? (need to pay how much, how much loan, loan funds can not stay in the project company account for a long time), the project company is very inconvenient to use; Fourth, the banking business of the geographical division of the problem is serious, the main body of the credit if the cross-regional business, or project cross-provincial operations, the need for two banks to cooperate with the customer or project credit, invariably reduces the efficiency of the financing.
Despite all the inconvenience, but because the size of the bank in China's financial system occupies a pivotal position, but also because of the lower cost of bank funds (although the cost of insurance funds is also low, but the insurance company foreign investment requirements are higher, and has not yet formed a climate), and is therefore the largest source of funds for government financing and PPP project financing.
3, the scope of application: bank financial funds can be applied to industrial funds, private equity funds of the priority (some banks can also agree to subscribe to the intermediate level), can be applied to a single project in the equity investment in the priority, but also can be applied to the project's debt financing part; bank loan funds are only applicable to the project investment in the debt financing part. Banks involved in PPP financing, for the government's financial strength, the strength of the project company's shareholders, the project itself generally have certain conditions required, especially debt funds, will require ? Second source of repayment? , i.e. mortgage or guarantee from the shareholder party or guarantee company. Banks involved in PPP projects generally not high cost of funds, the table loan funds usually in the prime rate down 10% to up 30% (calculated on the basis of the interest rate of more than 5 years, roughly between 4.5% -6.5%), off-balance sheet wealth management funds are usually between 5.5% -7.5%.
(D) management plan
Management plan usually includes brokerage management, fund management, insurance management, trust plan and so on. In fact, the capital management plan is usually a channel for banks and insurance funds to participate in PPP, which belongs to passive management. The real active management type of asset management plan usually does not participate in PPP projects, but participates in the securities primary and half (directed issue) market or secondary market. Here is a brief introduction to insurance asset management and trust plans.
Insurance asset management is the expression of insurance funds investing in PPP projects with the help of asset management plans.Since 2010, the CIRC has gradually liberalized the restrictions on insurance funds investing in real estate, equity, financial products, infrastructure debt, pooled trust plans, asset support plans, and private equity funds, and, in addition to the infrastructure debt investment that can be directly applied to PPP projects, insurance companies can also directly Invest in the equity of enterprises in energy, resources, pension, medical care, automobile service, modern agriculture, new type of commerce and trade circulation, public housing or low-cost housing, etc., in which many industries overlap with PPP projects. And because insurance funds have the characteristics of low cost, large scale and long term, which match the characteristics of PPP projects. Therefore, there is a great prospect for insurance funds to participate in PPP project financing. But on the other hand, insurance funds also have high requirements for projects and investment and financing subjects, and only high-quality projects can enter the insurance funds? The only way to get into the eyes of the insurance funds is to have a quality project.
Trust program since 2009? Four trillion investment? Since then, it has become the main tool of government financing. However, due to the private placement characteristics of trust funds, the cost of collection does not have the banks, insurance and other? Public institutions? s cost advantage, in the current government and PPP financing channels are widely available and the price of funds is low, the trust plan gradually lost its former luster. At present, the trust plan's participation in PPP project financing is mainly passive management, i.e., banks or insurance funds use the trust plan as a channel to participate in PPP projects. However, trust companies are also actively transforming and ? self-depreciation? , launching various kinds of innovative tools to participate in government financing and PPP projects to adapt to the changes in the market, especially in PPP projects? bridge financing? and local governments? Debt Replacement and other areas, continue to play its advantage of flexible approach.
(5) Other financing tools
Mainly including asset securitization, financial leasing, capital market direct financing (IPO or New Third Board listing) and mergers and acquisitions and restructuring (exit by merger and acquisition). Because the capital market direct financing and M&A restructuring is a choice for PPP projects to exit in the later stage (the social capital exit mode of PPP projects is mainly the government buyback), and most of the current PPP projects are in the start-up stage, and it is still too early to exit the stage, therefore, we will not analyze it. The main analysis of asset securitization, financial leasing and so on.
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