Financing channel mode of PPP project: financial leasing

Financing channel mode of PPP project: financial leasing

What are the characteristics of financial leasing in PPP project financing? What are the channel methods? How much information do you know?

Financial leasing is one of the important financing methods of PPP projects.

Although PPP projects are popular at present, the financing problem may become a roadblock. The financing methods of PPP projects can be divided into equity financing and debt financing, involving 19 financing channels and 36 specific financing methods, which are complex and diverse. Because most PPP projects are long-term contracts, they need to match stable medium and long-term funds to avoid the management risk of cash flow in project construction and operation, and the financial leasing model is very suitable for this demand, especially for PPP projects with both cash flow and fixed assets such as gas supply, water supply, power supply, toll roads and tourist attractions. Therefore, financial leasing will be one of the important financing methods for PPP projects.

Financial leasing is a combination of financing and material finance, trade and technological innovation, which is essentially to achieve the purpose of financing by material finance, and is suitable for large-scale and long-term PPP projects such as infrastructure. The main ways of financing lease are direct financing lease, equipment financing lease and after-sale lease-back.

In direct financing lease (or equipment financing lease), the leasing company invests to buy equipment or real estate and rents it to the project company for use. During the lease period, the ownership of the equipment belongs to the leasing company, and the project company enjoys the right to use and benefit from the equipment, and pays the rent to the leasing company by stages. This model can solve the financing problem of large-scale equipment or real estate with high acquisition cost and alleviate the financial pressure of infrastructure in the initial stage of the project.

In the sale and leaseback, the project company sells its own equipment or real estate to the leasing company and then rents it back for use, which has the function of revitalizing a large number of existing assets and improving the financial situation.

Compared with other financing methods such as bank credit, the above-mentioned mode obviously has the advantages of less restrictions, simple procedures, flexible methods, ability to adjust taxes, improve financial situation, long service life of funds, less debt repayment pressure of leasing enterprises, and reduction of intermediate links and costs of direct purchase of equipment by leasing enterprises. And pass? Financial leasing? Not only can it be melted into valuable funds, but its more important role is to realize the expansion of enterprise assets, the adjustment of business structure, the revitalization of existing assets, the transformation of operating mechanism and the upgrading of management, thus achieving the goal of maximizing capital appreciation. Therefore, it is very suitable for PPP projects with both cash flow and fixed assets, including gas supply, water supply, power supply, toll roads, tourist attractions, etc., to solve the funding problem through financial leasing.

According to statistics, there are currently 15966 projects in the PPP project library, with a total investment of 15.9 trillion yuan, involving energy, transportation, water conservancy, environmental protection, agriculture, forestry, major municipal projects and other fields. So what? It is timely for financial leasing business to intervene in PPP development. Financial leasing companies should also play an important role in the tide of PPP, actively and better participate in the field of public services, and seize the business opportunities of infrastructure PPP model. ? Dr. Zhu said in the lecture.

In fact, as a new choice of PPP project financing, the business model of financial leasing also conforms to the policy call of the central government to vigorously promote PPP model, which is conducive to local governments to revitalize existing assets and reduce the debt burden of local governments. General Office of the State Council's Guiding Opinions on Accelerating the Development of Financial Leasing Industry (Guo Ban Fa [2015] No.68) puts forward the overall development opinions of financial leasing industry, and clearly puts forward? Increase people's governments at all levels to purchase financial leasing services in public services, infrastructure construction and operation? It provides policy support for financial leasing business to intervene in PPP projects.

Make good use of financial leasing in PPP projects.

Objectively speaking, there is not much practice of applying financial leasing to PPP projects in China at present, and this model is still in the exploratory stage. Therefore, on the one hand, PPP projects need to actively introduce financial leasing mode and make good use of financial leasing methods; On the other hand, financial leasing companies should also innovate and actively participate in PPP projects.

1PPP projects should grasp the introduction mode.

In other words, PPP projects should choose direct financing lease, equipment financing lease or after-sales lease mode according to the requirements of project financing.

2. Make good use of intervention forms

Can financial leasing companies get involved in PPP projects? Traditional intervention? , ok? Deep involvement? .

? Traditional intervention? , refers to the financial leasing company as a fund provider to participate in PPP project financing. This method is mainly in the construction stage of PPP project. What is the business model? Direct lease? , the term is 3? Five years. Can you think of it as well? Sale and leaseback.

? Deep involvement? It refers to the way that financial leasing companies directly invest in PPP projects as social capital, which is essentially an investment behavior, that is, financial leasing companies as social capital or one of them invest in SPV companies to participate in the whole construction and operation of PPP projects in order to obtain long-term stable income.

3 master the operation method.

For example, when the government adopts the financial leasing model, it should first set up SPV company. Before the PPP project started, SPV company signed relevant contracts with social capital (such as financial leasing companies). At this point, SPV company is equivalent to the lessee and social capital is equivalent to the lessor. According to the constraint characteristics of PPP mode, the project can be divided into two stages: construction and use. After signing the contract, we will enter the construction stage and use social capital for infrastructure construction. In the use stage of infrastructure, SPV company provides supporting services and is responsible for maintaining infrastructure, while the public sector gives appropriate subsidies to SPV company and regularly pays a unified financial lease rent to social capital. When the lease stipulated in the contract expires, the infrastructure will be owned by the government department.

4 Financial leasing companies should guard against risks

PPP projects involve many departments, complicated approval procedures and high degree of specialization; And most of them are long-term contracts, and the demand for funds is large. The payment period is as long as 20-30 years or even longer. Problems in any link will lead to the extension of the construction period or even the termination of the project, and there are a lot of risks in the operation process at any time. So financial leasing companies participate in PPP projects, right? Traditional intervention? Or? Deep involvement? In the process of operation, you need to guard against risks.

Difference between PPP project financing and enterprise financing

When adopting the project financing mode, the project sponsor (usually the project investor or the project sponsor) will usually act as the shareholder of the project company and set up a special project company to carry out the investment, financing, development, construction and operation management of the project, with the project company as the main body, the cash flow and all the income from the project operation as the source of debt repayment, and all the assets of the project company as the main measures to increase credit (guarantee). According to the characteristics of the basic assets of project financing and the division of recourse, project financing can be divided into two categories: project financing with recourse or without recourse and limited recourse. Usually, the difference between project financing and corporate financing is shown in the following aspects:

(1) Different financing entities. The financing subject of PPP project financing is the project company, and the lender or fund provider takes the asset status of the project company and the profitability of the project after its completion and operation as the conditions for providing financing. In conventional enterprise financing, the financing subject is the project sponsor, and the fund provider or lender pays more attention to the subject's own reputation, asset status, finance and guarantee.

(2) Different funding channels. Project financing is mainly used for infrastructure projects, usually with large scale, long cycle and low income, and needs diversified funds with cost advantages and scale advantages. Internationally, the main channels are policy banks, commercial banks, government funds or subsidies, insurance companies, pension funds and investment funds. Conventional corporate financing is more flexible according to the needs of the project, the company's financial situation and the reality of the capital market, so corporate financing can better reflect the advantages of the whole market financing.

(3) The characteristics of recourse are different. The most basic feature of project financing is that the financing subject usually has limited recourse, or even no recourse. Except for the project assets and related guarantee assets or credit enhancement arrangements, the lender cannot recover other assets of the project sponsor. In traditional corporate financing, full recourse is usually required. Once the financing entity cannot repay the debt, the creditor can make up for it by disposing of the assets of the financing entity (company).

(4) The repayment sources are different. The fund repayment of project financing is mainly based on the project's own income, and the project's own income and assets are the repayment sources. In conventional corporate financing, the source of capital repayment is all the assets and operating income of the financing subject.

(5) The guarantee structure is different. Project financing generally has a complex legal guarantee structure system to coordinate and balance the complex interests of all participants and stakeholders, share risks reasonably and achieve their respective optimal goals. In traditional enterprise financing, the guarantee structure is relatively simple, and the participants are also relatively simple, such as equity pledge, asset mortgage and credit guarantee.

(6) Perfect quality and safety management system. There have been no major production safety and quality accidents in the past three years, and investors have a strong sense of proactive prevention, effective measures and good compliance. Have the qualification of an independent legal person, be able to operate legally and abide by the contract.

What are the characteristics of equity financing in PPP project financing?

(1) Long-term: The funds obtained by the company through equity financing have no maturity date, so they are long-term. As long as the company exists, there is no need to pay back the money;

(2) Irreversibility: the funds obtained from the company's equity financing do not need to be returned to investors, and investors can only obtain the principal by selling the company's equity;

(3) No burden: Equity financing does not require dividends for each period, and the time and amount of dividends can be determined according to the actual situation of the company.

What are the characteristics of bond financing in PPP project financing?

The first feature of debt financing is that there is a time limit. Different from equity financing, debt financing is divided into short-term, medium-term and long-term, and there is a time limit. Even the longest-term debt financing needs to be repaid according to the agreement. The second feature of debt financing is that it has higher priority than equity financing in liquidation. Therefore, the funds obtained from debt financing can only be used as a supplement to the company's working capital, and lenders will also control the amount of funds lent in consideration of risks. Companies can't rely entirely on it to complete the investment in new projects. The third feature of debt financing is that it brings leverage benefits to the company without affecting the company's control rights, which is reflected in liabilities on the balance sheet, but it will inhibit the company's investment impulse and increase the possibility of bankruptcy. The types of debt financing include bank credit, private lending, winning the bid, corporate bonds, trust financing, project financing, leasing and so on.

How to understand the concept of off-balance-sheet financing of PPP projects

Off-balance sheet financing is called off-balance sheet financing, which is often called off-balance sheet financing or off-balance sheet financing in reality. Some PPP projects (especially when some disposable assets are used for transportation projects) will adopt this financing method.

Operating lease in PPP off-balance sheet financing

Operating lease is the most widely used off-balance sheet financing method, but it should be noted that financial lease belongs to lease, not off-balance sheet financing. The difference between operating lease and financial lease is that when a company needs to use an asset temporarily, operating lease is a kind of external leasing behavior only for the purpose of using the asset. The company doesn't want to own the asset, but financial leasing is often the behavior of a professional leasing company to buy the asset and rent it to the company, which is actually equivalent to selling the asset to the company by installment.

How to understand the joint venture in PPP off-balance sheet financing

Because the structure of PPP projects is usually a single project company, there are few cases involving joint ventures. A joint venture refers to the behavior of a company holding shares in other companies, but not holding shares or actually controlling the company. At this time, the investment is shown as foreign investment on the balance sheet, and the operating income is not shown on the income statement. However, some PPP projects may apply special purpose companies (SPV) at the structural level. A special purpose company refers to a company that initiates the establishment of a new company for its own interests, and the company only meets part of the interests of the initiating company. Such companies are usually registered in some offshore areas, such as Bermuda and the British Virgin Islands, and adopt a very high asset-liability ratio. Sponsors hide behind, but bear all the risks.

How to understand asset securitization in PPP off-balance sheet financing

Asset securitization reflects the process of putting assets into financial market circulation. Usually, the asset needs valuable or stable cash flow, and then it is sold publicly in the financial market through issuance, so that the asset can obtain liquidity. PPP projects can not only securitize their own equity or project income rights, but also securitize some receivables or some products (such as carbon emission rights of wind power projects), so as to obtain liquidity quickly. However, in the process of implementation, it is necessary to pay attention to whether this behavior conforms to local accounting standards and needs to be included in the balance sheet. This method is more common in the United States, where the financial market is developed, and it has gradually become popular internationally. In recent years, the PPP project financing case related to China is the asset securitization of Hong Kong Disneyland, which sells government accounts receivable in the financial market.

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