PPP project financing failure case review
PPP project financing has success will have failure, then the failure of which, we understand what?
(a) Lanzhou Veolia Water water pollution incident
Not long ago, Lanzhou City Veolia Water Group Company test showed that the benzene content of the factory water, the benzene content of the self-flowing ditch is far more than the national limit of 10 micrograms / liter, resulting in the main urban area of Lanzhou City, Seven Mile River, Anning, four districts of the Xigu residents of the water supply was suspended for four days, and later It was found to be caused by the leakage of the Lanzhou Petrochemical pipeline.
Evaluation: It seems accidental, but it is inevitable. On the one hand, Lanzhou Veolia's annual input budget is very low, almost unable to maintain the normal operation of the water supply system. The lack of maintenance of the technical facilities led to such a serious water pollution incident. On the other hand, when Veolia for 45% of the equity has paid a very high bid price, and Lanzhou water prices have not risen for 4 years, the company is in a loss-making state, unable and unwilling to contribute to the maintenance of updated facilities, these risks were considered by the two sides of the cooperation, reflected in the contract, and agreed to share the solution mechanism, which is not only Veolia's business, but also the need for Lanzhou Municipal Government to reflect on.
(2) Tianjin Shuanggang Garbage Incineration Power Plant
Shuanggang Garbage Incineration Power Plant is a BOT project between the Tianjin government and TEDA, with the latter investing 540 million RMB, with a design capacity of 400,000 tons of garbage per year, which accounts for 25% of the total amount of Tianjin's annual domestic garbage, and with a concession period of 30 years. The concession period is 30 years.
But the current project operation is not optimistic, one is accompanied by the incineration of waste generated by the spread of carcinogenic dioxin gases lead to panic of the surrounding residents, petitions and complaints and even group-type events. Secondly, the contract stipulates that due to the agreed reasons for the project revenue is insufficient, the government provides financial subsidies, but there is no clear definition of the amount of subsidies, resulting in the project company to bear the risk of insufficient revenue. For example, in 2012, the financial subsidy was less than 58 million yuan, accounting for only 1.25% of the company's main business income, and now it is the enterprise complaining, the public does not buy, and the project is in and out of the dilemma.
Evaluation: The case of the Shuanggang waste incineration power generation project reflects the fact that some local governments have changed from the early "overstepping" to the current inaction, and the public dissatisfaction is due to the poor supervision of the local government in the past, which triggered a crisis of confidence, and the lack of the necessary hearing procedures for the project's siting, which triggered a group-type incident.
(3) Hangzhou Bay Bridge
Out of the optimistic assessment of the expected benefits, the Hangzhou Bay Bridge once attracted a lot of private capital, 17 private enterprises in the form of BOT participation in the Hangzhou Bay Bridge Development Company Limited, so that this large-scale infrastructure projects to become a major national transportation project financing template. However, now the investment in the private enterprises and have transferred shares, quit the bridge project, the local government had to buy back through the state-owned enterprises to redeem 80% of the shares of the project.
Five years after the opening of the bridge, the project funding is still tight, in 2013 the annual funding gap reached 850 million yuan. And as the only source of income of the bridge toll revenue for the year was only 643 million yuan. According to the 30-year toll period, it may not be able to recover the principal.
Evaluation: First, the Feasibility Study of Hangzhou Bay Bridge project predicted that the traffic flow of the bridge is expected to reach 18.67 million by 2010, but the actual traffic flow in 2010 was only 11.12 million, which is more than 30% less than expected. Serious miscalculation of the expected revenue led to wrong decision-making by the private enterprises. Second, the bridge project from planning to completion of the 10 years of additional investment, from the planning stage of 6.4 billion yuan to 13.6 billion yuan in 2011, the cumulative increase in investment more than doubled, the private enterprises have been invested in advance, can only continue to add, and ultimately be "trapped". Third, in 2013, the Jiasao Bridge opened to the Hangzhou Bay Bridge is "worse", the next, Hangzhou Bay, the third cross-sea project Qianjiang Channel will be opened to traffic at the end of 2014, in addition to the Ningbo Hangzhou Bay Bridge, Zhoushan-Shanghai cross-sea high-speed, Hangzhou Bay Railway Bridge and other projects have been incorporated into the local or national planning, the future traffic flow will be The future traffic flow will be further diverted, and the serious conflict between the contract and the planning makes the future of the project even more bleak.
(4) Shandong China Power Project
China Power Project, with a total investment of 16.8 billion yuan, the installed capacity of 3 million kilowatts, by Shandong Power, Shandong International Trust, Hong Kong China Light and Power and France Power*** with the initiation of the China Power Company Limited to undertake the cooperation and operation of the period of 20 years, the expiration of the plant assets all belong to the Chinese side. After the expiration of the period, all the assets of the power plant will be owned by the Chinese party. The project is the largest installed capacity and the highest loan amount of BOT power project in China so far, and was also regarded as the best PPP project in China in 1998. To facilitate the cooperation, the project company signed an Operational Power Purchase Agreement (OPPA) with Shandong Power Grid, agreeing on the minimum amount of electricity to be sold each year.
Under the Memorandum of Understanding signed by the former State Planning Commission in 1998, the completed . Shiheng Phase I and Phase II power plants were allowed to 0. 41 yuan / degree of this higher feed-in tariff, basically to protect the project revenue. However, when the new units of the Heze Power Plant were put into operation in October 2002, the price approved by the Shandong Provincial Price Bureau was RMB 0.32/kWh, a tariff that could not satisfy the normal operation of the project, and worse still, from 2003, the Shandong Provincial Development and Reform Commission (NDRC) reduced the minimum amount of power purchased between Zhonghua Power Generation and Shandong Power from 5,500 hours to 5,100 hours. As a result of the contractual constraints, Shandong Power was still required to purchase 5,500 hours of power at the planned tariff, and the price difference was filled by Shandong Power itself, resulting in an unsustainable cooperation and a sharp decline in project revenue.
Evaluation: The case of Zhonghua Power illustrates the lack of long-term thinking on the part of policy makers when introducing a project, and the dilemma of a "fixed return" commitment that has led to a partnership that is now a dilemma for both parties.
In 1998, China's planned economy was much more structured, and the pressure to compete was less intense. However, in recent years, along with the restructuring of state-owned enterprises, the State Power Corporation has been split into five major power generation groups, namely Datang Power, Shandong Guodian, Guodian Power, CLP Power International, and Huaneng Group, and the pressure of competition has forced power producers to "bid for Internet access", and the Operating Power Purchase Agreement (OPPA) between the two parties of the Zhonghua Power Project has lost its institutional basis to continue. The company's newest product, the "Purchase of Power Agreement" (PPA), is the first of its kind in the world, and is the only one of its kind in the United States.
(5) Huijin China (Changchun) Wastewater Treatment Company Limited
As the first joint venture utility project in China, Changchun Drainage Company established Huijin (Changchun) Wastewater Treatment Company Limited (i.e., Huijin Changchun) with Hong Kong Huijin Company in early 2000, with a contract term of 20 years. In July of the same year, the municipal government formulated the "Changchun Huizu Wastewater Treatment Franchise Management Measures", and by the end of 2000, the project was put into operation and functioned normally. However, since 2002, the drainage company has been in arrears with its payments to Huijin Changchun, and since March 2003, it has stopped paying. In order to resolve the dispute, Huijin invited the Jilin Foreign Trade and Economic Cooperation Department to mediate, and at the mediation meeting, Huijin learned that the municipal government had repealed the "Franchise Measures" in February 2003.
Hui Jin believes that the Franchise Law is an administrative license and authorization made by the government to support the project, and that the abolition of the Franchise Law is tantamount to destroying the basis of the project's operation. In the case of repeated mediation without result, Huijin in August 2003 to Changchun Intermediate Court sued Changchun Municipal Government, and the Changchun Municipal Government that Huijin and the city drainage company signed the "Cooperative Operation Contract" is an unequal contract, the abolition of the "Franchise Measures" in order to carry out the "State Council on the proper handling of the existing guaranteed fixed return on foreign investment project notice", belonging to the administration in accordance with the law. After losing the case, Huijin appealed to the Jilin Provincial High Court, during which Huijin Changchun shut down production and millions of tons of sewage were discharged directly into the Songhua River, which was the sensational "Huijin Incident". After nearly two years of legal wrangling, the Changchun municipal government eventually bought back Huijin Changchun.
Evaluation: In the early 1990s, China's urbanization process is very fast, and the financial inability to pay the huge infrastructure funds, have introduced foreign investors and the promise of a fixed return, the original low return to the stability of the water industry in our country has become a profiteering industry. For this reason, the State Council in 1998 issued the "General Office of the State Council on the proper handling of existing guarantees of foreign investment in fixed return projects related to the issue of notice", on such issues to make prohibitive provisions. However, two years after the issuance of the Circular, the Huijin Changchun project was still able to obtain approval for the project, indicating that the local government may have played a "ball" in the approval process, and the relevant departments are suspected of inadequate supervision.
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