Financial Risk Identification And Countermeasures For Private Listed Companies Participating In PPP Projects

PPP mode refers to the public-private partnership mode,which is a cooperation model between the government and private enterprises to jointly build and operate public facilities projects,in order to improve efficiency,reduce financial burden,and share project risks.The prototype of PPP has existed in the UK since the 18 th and 19 th centuries.At the end of 2013,China’s Ministry of Finance began to comprehensively promote the implementation of the PPP mode.In May 2014,the Ministry of Finance established a special department to manage the PPP mode.At the same time,the National Development and Reform Commission also released more than 80 demonstrative PPP projects encouraging social capital participation.Since then,PPP projects have quickly emerged in various regions.However,as the PPP mode developed,the Ministry of Finance and the State-owned Assets Supervision and Administration Commission(SASAC)carried out a series of regulations and controls on PPP projects,and the PPP mode began to "brake sharply".At the same time,the advantages and disadvantages of the impact of the PPP mode on enterprise development have emerged as the projects have progressed.In recent years,under the government’s financial tightening brought on by the COVID-19 pandemic,the government’s attention to PPP projects has further increased.However,against the backdrop of China’s financial deleveraging,the impact of participating in PPP projects on enterprises has continued to increase,and participating private enterprises also face more and more risks,which have high uncertainty.As one of the earliest private enterprises to participate in the implementation of PPP projects,Beijing Orient Landscape & Environment Co.,Ltd.was once known as the "first stock of PPP".After participating in PPP projects in 2014,the company expanded rapidly,and its net profit climbed more than three times in three years,with the stock price soaring at one point.However,in the past three years since 2020,it’s total losses have exceeded 3 billion yuan,and its cash flow is under enormous pressure.The fundamental reason for its huge losses is not due to poor recent management,but rather the long-term impact of its participation in PPP projects.As early as 2018,the company hoped to raise funds through bond issuance,but the final amount of funds raised fell far short of the company’s financing target,which further eroded the confidence of the market in the company.The company has already exposed a series of problems after participating in PPP projects.This article chooses Beijing Orient Landscape & Environment Co.,Ltd.as a case study to analyze the reasons for the company’s transformation failure after participating in the PPP mode,study the impact of participating in PPP projects on the operation and development of participating enterprises,and explore risk identification for private enterprises participating in PPP projects.The study found that the PPP mode can bring a broader business market and build brand effects in the short term,which increases the company’s recognition in the market and helps the company’s operation and development.However,the high demand for funds in the PPP mode will lead to high cash flow constraints for the company,which will further lead to a trend of increasing leverage,even covering up the true business situation through accounting treatment to obtain financing,ultimately making it difficult to break the vicious debt cycle.At the same time,the long return cycle of PPP projects will make the company face a series of non-financial risks such as changes in operation,policies,and government defaults.In response to these issues,this article proposes measures such as further optimizing the enterprise’s PPP project decision-making mechanism and risk control mechanism,strengthening enterprise operation and management,strictly controlling project construction,expanding financing channels to promote diversified financing methods,keeping up with PPP policy adjustments,attaching importance to related talent,building a training system,and reasonably using SPV companies.It is hoped that the research conclusions will be helpful for risk response to Beijing Orient Landscape &Environment Co.,Ltd.And hoping research findings can provide some reference for other enterprises participating in PPP projects to adjust their business strategies.