Hydropower Asset Securitization: Theoretical System And Rules

Hydropower resources are not only the sole renewable energy sources that can be developed on a large scale in China,but also important strategic resource s.The rise and development of hydropower asset securitization has brought new ways and opportunities for the development of hydropower resources financing,and has an important role in promoting the development and utilization of hydropower resources in China.Hydropower asset securitization is a complex financing business activity,and each link involves different legal issues.Therefore,it is not only a research topic of economics,but also a subject that legal scholars should pay attention to and study.The hydropower asset securitization is the process that issuing asset-backed securities based on the future electricity fee income generated by the development of hydropower resources as a repayment support,and the credit enhancement through structured design.As far as the nature of law is concerned,the underlying assets of hydropower asset securitization are future receivable based on future claims arising from the power purchase agreement.With the continuous innovation and development of the modern capital market,the legislation of the world's major countries on the effectiveness of assignment of future creditor's right has generally experienced a change from prohibition to autonomy of will.At present,China's legislation has not clearly stipulated the effectiveness of assignment of future creditor's rights.In judicial practice,some courts have proposed “reasonable expectation and certainty” as the criterion for judging the effectiveness of future creditor's right transfer.The transferable underlying assets of hydropower asset securitization shall meet three basic conditions: firstly,the power purchase agreement is valid;secondly,the power purchase agreement claims have no pledge and other rights;and finally,the transfer of unrestricted creditor's rights.From the practice of the transfer of underlying assets of hydropower asset securitization,it can be seen that the rules of the traditional assignment system of creditor's rights,in terms of effective time,publicity and notification,and the effectiveness of the prohibition clause,have severely restricted the innovation and development of the capital market.In the future,China's assignment law system of creditor's right should adapt to the needs of development of the new financing model of capital market represented by hydropower asset securitization.More specifically,the effective time of assignment contract of future creditor's right should retrospect to the establishing time of contract until the creditor's right is determined.Besides,the effectiveness of the notice method of publication in the commercial activities and the effect of the registration of credits should be clarified.In addition,the contract prohibition of the transfer clause should recognize the intrinsic effectiveness,limit the external effect,and must not have confrontation effect to a bona fide third party.The key to the bankruptcy-remote mechanism of hydropower asset securitization is to realize the true sale of the underlying assets and the construction of SPV.The realization of the true sale of the underlying assets needs to prevent the transfer of the underlying assets from being revoked by the originator's creditor or originator's the bankruptcy administrator,and also needs to prevent the transfer of the underlying assets from being recognized as a financing guarantee.At present,the relevant legislation on the true sale of underlying assets is seriously fragmented and the specific criterions are not clear.The relevant legislative experience in the United States is worth learning.Considering the situation of hydropower asset securitization practice in China,the criteria for the true sale of the underlying assets should be improved in terms of the true meaning of the originator,the transfer price,and the recourse to the originator.Hydropower asset securitization uses the specific asset management plan(SAMP)as the SPV.The SAMP manager and the investor form a legal relationship between the principal and the agent rather than the trust legal relationship.The SAMP does not have the legal function of the trust—the independence of the property.As a result,the underlying assets of hydropower asset securitization cannot be separated from the bankruptcy risks of SPV managers and investors.The reason for this dilemma lies in the fact that the trust industry implements license management under the dividing financial supervision system and the securities companies cannot use the trust to construct SPV.At the same time,the use of special purpose company as SPV under the corporate law system in China also faces practical obstacles.Considering the legal system in China,special purpose trust is the best choice as SPV of hydropower asset securitization.The feasible way to resolve the predicament that SPV of the hydropower asset securitization can not reach the bankruptcy-remote is to expand the main scope of the business trust by formulating the "Measures for the Management of Trust Organizations",so that the hydropower asset securitization can use the trust legal system to construct SPV,and realize the standardized operation of the bankruptcy-remote mechanism of hydropower asset securitization.The healthy development of hydropower asset securitization is inseparable from legal supervision.The legal supervision of hydropower asset securitization focuses on the supervision of credit rating and the supervision of information disclosure.In the practice of credit rating of hydropower assets securitization,there exists problems of rating inflation and slow rating adjustment caused by the issuer's payment model.At the same time,the construction of the rating technology system and the accumulation of the database are still far from sufficient,and the rating technology needs to be improved.The rating agencies have a short history in China,the reputation accumulation is far from complete,and the industry self-regulatory mechanism has not even played a role.Information disclosure regulatory system of hydropower asset securitization has the problems of uncoordinated supervision under multi-regulatory system and chaotic regulatory standards.Besides,there are also problems such as unclear legal liability of regulatory entities and low le vel of regulatory legislation.For the credit rating regulatory system,China should learn the experience from developed countries like US and Europe,and improve it from three aspects: first ly,strengthen the market access supervision of credit rating age ncies;secondly,strengthen the supervision of the rating agencies' practice behavior;finally,establish credit rating industry associations to strengthen industry self-discipline.For the information disclosure regulatory system,we should start from the macro-legislative to the specific rules formulation,and gradually establish and improve the multi-level asset securitization information disclosure system.