The Study Of Optimal Capital Structure Of PPP Projects

Public-Private-Partnership(PPP)is a form of providing social public goods through joint government-social capital endeavor.From government perspective,via mobilizing social capital's participation,not only it can reduce current period's financial expenditure stress,smooth inter-annual financial expenditure fluctuation,through leveraging PPP mode's opportunities,it can also deepen financial and tax system reform,accelerate building modern financial system.From social perspective,through wielding the respective advantages of government and social capital,letting professional people doing the professional things as well as constructing encouraging and mutually compatible constraint mechanism,it can further amalgamate government's policy objectives and social public's objectives with social capital's operational efficiency and technologies,for optimizing the provision efficiency of public goods.Developed countries and advanced economies have been developing PPP since 1990s,currently having realized full-blown operational system.Whereas in China,PPP has attracted widespread attention in recent years.In the Thirteenth Five-year Plan's suggestions,it evidently propose that PPP s generalization and promotion are hopefully further escalated,while private capital and private enterprises are hopefully allowed by laws to enter into more fields and domains.PPP has its idiosyncratic advantages(leveraging private capital,improving public goods' quality,diversifying risks,effective allocation of resources etc.),however,it poses a countable number of problems-the heightened project financing cost due to introduction of private capital,laborious initial phase negotiation,projects' exclusion from government's budget table softening projects' financial constraint,inability to adjust projects'structure when facing projects' long-term supply-demand variations,the dispute over whether and when the projects should be privatized etc.The core content of this thesis focuses on researching PPP project companies' capital structure's choice and optimization-based on varied types of PPP projects to construct different micro-economic models(roughly classified into 3 types:technological knacks transfer,continuously linear,continuously nonlinear with marginal decrements and continuously nonlinear marginal increments),analyzing how to choose the pertinent models in different markets and projects while estimating the project's optimized capital structure,rendering the lowest project cost and the most cost-effective and rational of the capital expenditure.PPP projects aim at providing public goods,so under the condition that the public return of public goods is fixed,optimized capital structure shall assume the lowest public risksThis thesis will elucidate topic selection background,research content,research implications,research methodology and research structure in Chapter One.Besides,the major innovation points and weaknesses of thesis will also be described one by one.Chapter Two will be comprehensive literature summary that will summarize literature pertaining PPP capital structure selection and optimization as well as PPP projects' risks.The core components of this thesis lie on Chapter Three and Chapter Four.In the first place,Chapter Three will focus on the five major factors of four categories affecting PPP projects' capital structure,followed by an important conclusion after particularly analyzing PPP projects' risks,namely that the determining factors of PPP projects' capital structure is inevitably connected with PPP projects'risks.If the risks of PPP projects can be effectively controlled,then it will affect the determining factors of PPP projects which will realize and achieve the optimized capital structure.In a nutshell,when the capital structure of PPP projects is optimized,the risks associated with PPP projects shall be minimum.Another core component of this thesis is Chapter Four,which will research PPP projects' optimized capital structure through building micro-economic models.Firstly,this thesis will research how the optimized government-social capital proportion should be under the assumption that the debt-equity proportion is unchanged;followed by loosening the debt-equity proportion“unchangedness”assumption while assuming the capital's mutual linear inter-correlation among debt,government and social capital,analyzing how the expressions should be between debt,government and social capital's optimized capital proportion and various risk coefficients;followed by the application of the models into three representative domestic PPP project cases and one international PPP case,where the application outcomes of the four cases will be analyzed and summarized,prompting the reference value of this thesis' core models regarding reality.Chapter Five will summarize the core research conclusions of the thesis while rendering relevant policy suggestions:one-to advise pertaining government departments paying attentions to optimized capital structure of PPP projects,lowering projects' cost expenditure,elevating success rate;two-to advise pertaining government departments paying attention to the risk factors affecting optimized capital structure,ameliorating risk environment,elevating social capital's investment,eventually realizing that the private sector advances while the state sector retreats.The research of this thesis bears fairly strong theoretical and practical significance.First,through in-depth research and analyses,this paper systematically summarizes and concludes the determining factors of PPP projects' capital structure and their relationship with PPP projects' risks,and then constructs models and frameworks of PPP projects' capital structure selection and optimization,which bear fairly strong theoretical significance.Moreover,the thesis discoveres that PPP project related policy has an important impact on PPP projects'optimized capital structure after applying the model to analyze real-life cases.Based on the discovery,the thesis combs and comes up with proposals for PPP projects,related policy and capital structure adjustment,which has strong practical significance.The innovation of the thesis lies in two main aspects.First,the thesis proves the relationship between the risks and optimized capital structure of a PPP project.So,it is practical to optimize its capital structure further by controlling a project's risks.Second,based on leading-edge theory in this field and innovative further exploration,the thesis constructions of a microeconomic model and test the model by applying it to reallife cases.The comparation and analyzsis of theoratical and reallife outcomes shed light on the rigorousity of new model and comes to corresponding conclusions.In this way,the thesis hopes to provide guidance to the formulation of PPP project related policy and conduct of PPP projects.