There are many financial risk factors in the process of project financing, including exchange rate risk, liquidity risk, interest rate risk and operational risk. So what are the financing methods?
1, product payment
Product payment is aimed at the repayment method of project loans. Borrowing is a form of financial leasing that directly repays the principal and interest with the project products after the project is put into production, rather than paying off the debts with the sales income of the project products. Before the loan is repaid, the lender owns some or all of the products of the project, and the borrower takes the lender's loan as the discounted net value of the sales income of these products when paying off the debt. Product payment is the most widely used form of financing for oil, gas and mining projects in the United States. Its characteristics are: the only source of repayment of debt principal and interest is the product of the project; The loan repayment period should be shorter than the effective production period of the project; The lender is not directly responsible for the project operating expenses.
2. Financing lease
It is a special way of debt financing, that is, if you need funds to buy some equipment in the project construction, you can apply for financial leasing from financial institutions. The equipment is purchased by the financial institution and leased to the project construction unit, and the construction unit pays the rent for renting the equipment to the financial institution by stages. Financial leasing is widely used in asset-backed financing, especially in the purchase of aircraft and ships, and in the preparation of large-scale power projects.
3.BOT financing
BOT financing is a way for private enterprises to participate in infrastructure construction and provide public services to the society. BOT mode has different names in different countries, and it is generally called "BOT" in China. Franchising? . The advantages of BOT financing mainly include the following aspects: First, reduce the impact of projects on the government budget, so that the government can still launch some infrastructure projects under the condition of insufficient funds. The government can concentrate resources and invest in projects that are not favored by investors but are of great strategic significance to local governments. BOT financing does not constitute the government's foreign debt, but it can improve the government's credit, and the government does not have to worry about repaying the debt. Secondly, introducing the efficiency of private enterprises into public projects can greatly improve the quality of project construction and accelerate the progress of project construction. At the same time, the government has also transferred all project risks to private sponsors. Thirdly, attracting foreign investment and introducing foreign advanced technology and management methods will have a positive impact on local economic development. BOT investment is mainly used to build infrastructure projects such as toll roads, power plants, railways, sewage treatment facilities and urban subways.
BOT is very important In addition to the above general modes, BOT has more than 20 evolution modes. Common ones are: BOO (build-operate-own), BT (build-transfer), TOT (transfer-operate-transfer), BOOT (build-operate-own-transfer), BLT (build-lease-transfer) and so on.
4.TOT financing
TOT (transfer-operation-transfer) is? Hand over? Business? Hand over? Abbreviation means that after signing a franchise agreement with investors, the government will hand over the profitable public facilities that have been put into operation to private investors for operation, and in the next few years, with the proceeds of the facilities, it will get a lump sum of money from investors for the construction of new infrastructure projects; After the franchise expires, investors will hand over the facilities to the government for free.
TOT mode is obviously different from BOT mode. It does not require investors to directly invest in infrastructure construction, so it avoids a lot of risks and contradictions in the process of infrastructure construction and makes it easier for the government and investors to reach an agreement. TOT mode is mainly suitable for the construction of transportation infrastructure.
Recently, a financing mode combining TOT with BOT project financing mode appeared abroad, which is called TBT. In TBT mode, the implementation of TOT is auxiliary, mainly used to promote BOT. There are two ways of TBT: First, public institutions transfer the management right of existing construction facilities with compensation through TOT, and after financing, invest the funds into BOT project companies to participate in the construction and operation of new BOT projects until the management right is finally recovered. The second is free transfer, that is, public institutions will transfer the management right of the constructed facilities to investors in the form of TOT, provided that they share the operating income of the proposed project with the BOT project company in an increasing proportion. Of these two modes, the former is relatively rare.
For a long time, the development of transportation infrastructure in China has lagged behind the development of national economy, and the contradiction between capital shortage and investment demand is very prominent. TOT model can find a realistic way to alleviate the contradiction between supply and demand of transportation infrastructure construction funds in China and accelerate the construction and development of transportation infrastructure.
5.PPP financing model
PFI model and PPP model are two foreign models that have developed rapidly in recent years. Although it is still in the initial stage in China, it has a good reference function and is also a development direction of investment and financing system reform in the field of public investment in China.
PPP(Public Private Partnership) is a cooperative model of public and private enterprises, and it is a project financing model of public infrastructure. Under this model, private enterprises are encouraged to cooperate with the government and participate in the construction of public infrastructure.
Its Chinese meaning is: public * * *, private, partner. The framework of PPP mode is: starting from the needs of public undertakings, using the industrialization advantages of private resources, developing, investing and building through the cooperation between the government and private enterprises, and maintaining the cooperation mode of operating public undertakings, that is, the partnership between the government and private economy in the public sector. Through this form of cooperation, all parties can achieve more favorable results than expected by individual actions. When partners participate in a project, the government does not transfer all the responsibilities of the project to private enterprises, but all parties involved in the cooperation share the responsibilities and financing risks. This is a worldwide topic, which has been officially approved by the tripartite meeting of the State Planning Commission, the Ministry of Science and Technology and the United Nations Development Programme, and has been included in the ongoing China Local Agenda 2 1 century capacity building project.
6.PFI financing mode
The essence of PFI is that the government buys services from private individuals. At present, this method is mostly used in social welfare construction projects. It is not difficult to see that this method is mostly adopted by developed countries with relatively perfect hardware infrastructure. Comparatively speaking, due to the limitation of economic level, developing countries invest more resources in places that can directly or indirectly generate economic benefits, and the importance of these infrastructures in national production makes it difficult for the government to give up the ultimate ownership.
PFI projects always have a certain emphasis in the application fields of developed countries. Take Japan and Britain for example. In terms of quantity, Japan's key areas are social welfare, environmental protection and infrastructure, while Britain's key areas are social welfare, infrastructure and environmental protection. From the perspective of capital investment, Japan only accounts for 7%, 52% and 1% of Britain's infrastructure, social welfare and environmental protection, which shows that its scale is far smaller than that of Britain. At present, there are many PFI projects in Britain, and the biggest one comes from the Ministry of National Defense, such as air-to-air refueling tank program, military flight training program and airport service support. More typical projects are relatively small facilities construction, such as education or civil buildings, police stations, hospital energy management or road lighting, while larger projects include roads, prisons and hospital buildings.
7.ABS financing
That is, asset income securitization financing. It is a kind of project financing method that issues bonds in the capital market to raise funds through a set of plans to improve credit rating with the expected return of project assets as the guarantee. The specific operation process is: (1) set up a special target company. (2) The target company chooses the object that can carry out asset securitization financing. (3) Transfer the rights of future cash income of government projects to the target company by means of contracts and agreements. (4) The target company directly issues bonds in the capital market to raise funds or is guaranteed by the target company's credit and issued by other institutions, and the raised funds are used for project construction. (5) The target company repays the principal and interest of bonds through the cash inflow of project assets.
8. Cases
BOT financing: The first BOT project in China was the Guangdong Shajiao B Power Plant invested by Hehe Group under Hu in 1984, with a total investment of HK$ 4.2 billion. It was completed and put into operation in 1987 and handed over to the local government in 199. At that time, due to the lack of relevant laws and regulations for reference in China, the operation was very irregular, and the two parties had been entangled in many issues for a long time. The first public infrastructure project built in China by applying standardized international BOT financing mode is Beijing Jingtong expressway, 1994, which was signed on August 3rd. The investor is Lin Tongyan China Company of the United States, with an investment of 6,543,803 million yuan and a special operation period of 20 years. May 1996 project was completed and opened to traffic.
Typical BOT financing projects in China include Guangxi Laibin Power Plant B, Sichuan Chengdu No.6 Water Plant B, Shanghai Huangpu River Yan 'an East Road Tunnel Double Track Project, Hainan East Line expressway, etc.
ABS financing: The asset securitization operations in expressway, Zhuhai and Guangzhou, Shenzhen and expressway in 1996 and 1997 are beneficial attempts of infrastructure toll securitization in China, and have accumulated valuable experience for future infrastructure toll securitization financing in China.
Financing lease: In February 2006, ICBC completed the first domestic overseas aircraft operating lease financing project, and jointly introduced 1 Boeing 737 for China International Airlines Co., Ltd. with BNP Paribas, and arranged overseas operating lease financing of 34 million US dollars. This is the first overseas aircraft operating lease financing project arranged and implemented by China Commercial Bank in China. The cooperation between ICBC and BNP Paribas not only broke the monopoly position of foreign banks in the field of overseas aircraft leasing financing projects, but also was an innovation for ICBC to actively adjust the types of aircraft financing business.
Project financing characteristics (1) Project orientation. The source of funds mainly depends on the cash flow of the project rather than the credit of the project investors or sponsors.
(2) Limited recourse. Recourse refers to the right of the lender to demand the borrower to repay the debt with assets other than the mortgaged property when the borrower fails to repay the debt on time. In a sense, the form and degree of the lender's recourse to the project borrower is an important symbol to distinguish narrow project financing from broad project financing. As a kind of project financing with limited recourse, the lender can pursue the project borrower at a certain stage of the loan or within a specified scope. In addition, no matter what happens to the project, the lender cannot recover any form of assets of the project borrower except project assets, cash flow and debts.
(3) Risk sharing. Through financing, the project sponsor will transfer part of the original debt repayment obligation to the project, that is, the part of the risk originally borne by the borrower will be transferred to the lender, and both borrowers and lenders will share the project risk.
(4) Non-corporate debt financing. Also known as off-balance sheet financing, it refers to a form of financing in which the debts of the project are not reflected in the company balance sheet of the project investor (that is, the actual borrower). According to the principle of project financing risk sharing, the lender's right of recourse to the debt of the project is mainly limited to the assets and cash flow of the project company, and the borrower bears limited liability, so financing can be arranged as a loan form that does not need to enter the borrower's balance sheet.
(5) Diversification of credit structure. In project financing, the credit structure arrangement used to support loans is flexible and diverse. The framework structure of project financing consists of four basic modules, namely, the investment structure, financing structure, capital structure and credit guarantee structure of the project.
1) Project investment structure. That is, the asset ownership structure of the project refers to the legal ownership form of the rights and interests of the project investors in the project assets and the legal cooperation relationship between the project investors. With different investment structures, investors' ownership of their assets, the degree of control over project products and cash flow, and the debt liability and tax structure of investors involved in the project will be very different.
2) Financing structure of the project. Financing structure is the core part of project financing. Once the project investors reach an agreement on determining the investment structure, the next important task is to design and choose the appropriate financing structure to achieve the investors' financing goals.
3) Capital structure of the project. The capital structure design of the project is used to determine the form, proportion and corresponding sources of equity funds, quasi-equity funds and creditor's rights funds in the project. Capital structure is determined by investment structure and financing structure, but in turn it will affect the design of financing structure of the whole project.
4) Credit guarantee structure of the project. For banks and other creditors, the security of project financing comes from two aspects. On the one hand, it comes from the economic intensity of the project itself; On the other hand, it comes from various direct or indirect guarantees outside the project. These guarantees can be provided by the investors of the project or by other parties who have direct or indirect interests in the project. These guarantees can be direct financial guarantees, such as completion guarantee, cost overrun guarantee and unforeseen expenses guarantee; It can also be indirect or non-financial guarantee, such as long-term purchase agreement of project products, technical service agreement, long-term supply agreement based on some pricing formula, etc. The combination of all these forms of guarantee constitutes the credit guarantee structure of the project. The economic strength of the project itself and the credit guarantee structure complement each other. The economic intensity of the project is high, the credit guarantee structure is relatively simple, and the conditions are relatively loose; On the contrary, it is relatively complicated and strict.
(6) The financing cost is high. Project financing involves a wide range and complex structure, which requires a lot of technical work such as risk sharing, tax structure and asset mortgage. The required documents are often several times that of traditional fund-raising, and dozens or even hundreds of legal documents are needed to solve the problem. Therefore, compared with traditional financing methods, one of the main problems of project financing is that the financing cost is relatively high and the organization financing takes a long time.
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