| Since the 20th century,the private sector has been more and more involved in the development and operation of infrastructure projects.The most popular mode is called public private partnerships(PPP).However,with the continuous promotion and application of this mode,the problems exposed by PPP are also increasing.Among them,unreasonable project financing scheme will lead to high financing cost of PPP project,complex transaction structure will lead to low efficiency,and the dilemma between cost and service quality.It is found that the successful implementation of PPP project needs to have a reasonable and effective project financing scheme,and ensure that the project company can effectively implement the scheme in the whole project cycle,which has higher requirements for the management ability of the project company.Therefore,from the perspective of performance risk of PPP project,this paper will study the optimal capital structure of PPP project from the perspective of project performance management,and discuss the capital structure of PPP project in the case according to the performance risk,so as to solve the above problems caused by the unreasonable project financing scheme,It can provide reference for subsequent project companies to develop project financing scheme.Due to the large scale and irreversible investment of PPP project,and the particularity of PPP project financing,effective project management is very important in the project development stage.Project management needs to ensure that the project financing scheme can successfully obtain the funds required for the project,and allocate the project risk reasonably and efficiently.Risk allocation is the key factor affecting the success of the project.Generally speaking,the most critical management of PPP project is project performance risk management,such as project completion time and cost,which has a significant impact on the project value,especially in the project development stage,because the main part of project investment is carried out in this stage.Due to the high uncertainty of project performance risk management,the choice of optimal financial structure is a challenge to the project company’s sponsors and lenders.Traditional project performance evaluation methods can not capture the dynamic changes of risk variables and their impact on project value.Without these dynamic performance information,the decision-making of capital structure may not only be suboptimal,but also lead to wrong results.In view of this,this study intends to use the real option method to determine the optimal capital structure for PPP project companies,and measure the value created by uncertainty through the pricing of options,which is an innovation and extension of the existing evaluation methods,According to the value standard,we can find the decision mechanism of the optimal capital structure.In order to consider the impact of project performance risk,project value and capital structure,this paper introduces a quantitative model to take project performance risk into consideration,and constructs a PPP project optimal capital structure decision model based on project performance risk.Furthermore,in order to further discuss the influencing factors of project capital structure decision-making,this study will also discuss the following two important issues: first,in order to mobilize the enthusiasm of project companies and play the role of various resources,this study will discuss the value of active project management on capital structure decision-making in the model.Secondly,because the government has a high level of credit,and the government,as the main participant in the infrastructure assumption,has an important impact on the financial stability of the project company,the model will consider the government supported option as the risk allocation mechanism to determine the optimal capital structure.In order to complete this study,this paper will be divided into five parts,a total of 8 chapters.The first three chapters explain and sort out the significance of the topic and the existing literature,and comprehensively introduce the various characteristics and problems existing in PPP projects and their financing,so as to provide the basis for the later modeling.In the first part of this study,Chapter 4,in order to find the best capital structure method of PPP project,a stochastic performance model is established.The model is based on the dynamic modeling of the whole project performance risk based on the evolution process of the project.The model will be able to provide the performance measurement of the project in any time period.Compared with the existing performance model,the innovation of this performance model is that it can capture the dynamic changes of project performance risk variables,and determine the impact of these dynamic changes on the project value.Finally,the optimal capital structure of the project is determined according to the influence factors of these values and the change of project value.Specifically,this model is an uncertain evolution model,which can predict and analyze the dynamic evolution of project performance risk variables at any stage of project development stage.Considering that time and cost are the main sources of performance risk of PPP project,the main focus of modeling is to incorporate time and cost parameters into the model.In the dynamic model,this study considers the negative impact of time overrun and cost overrun on project value,which provides the conditions for the discussion of the capital structure of the project in the future.The second part is the key content of this study,including Chapter 5.In Chapter 5,this paper discusses the optimal capital structure of PPP project and its decision-making mechanism.Combined with the content of Chapter 4,this paper constructs a general model of optimal capital structure selection based on project performance risk.This model can provide project performance measurement in any required period of time,and calculate the net present value of the project according to the measurement results.This model is named dynamic capital structure model,which explicitly considers the performance risk and dynamically adjusts the capital structure in combination with the impact of performance risk to avoid risk factors to the maximum extent.Therefore,the new valuation method proposed in this chapter is called dynamic capital structure method based on project performance.This method clearly considers the impact of performance risk on the project value.Through the identification and modeling of this impact,the project company will be able to maximize the project value with the help of the capital structure optimization decision during the project development.The numerical results show that this model can significantly increase the value of PPP projects.The performance-based capital structure model shows higher project value(NPV).From the numerical point of view,the project under the dynamic model is 4.05% higher than the target capital structure model.As discussed in the first half of this paper,the increase or improvement of value can be regarded as adjusting the flexible value of capital structure according to the impact of current project performance risk,that is,the dynamic model captures and utilizes these uncertainties of the project,which is different from the previous models that passively respond to these uncertainties,and the active use of these models by the dynamic model gets a return.In general,the dynamic capital structure model based on project performance provides a quantitative framework to determine the optimal capital structure,and provides effective information for the decision-making of project capital structure,which is of great significance to both the lender and the project company.This is the main contribution of this chapter and even this paper.In addition,another key contribution of this chapter is that the dynamic capital structure model models the potential bankruptcy possibility of the project,and provides the best time to trigger bankruptcy,so that the project company can make the best decision to continue or declare default in each time period.The numerical results of a water company under a PPP Project prove the effectiveness of the model and the value-added ability higher than the target capital structure model.According to the simulation results,it can be found that the dynamic model can enhance the project value by increasing the proportion of project debt.At the same time,the dynamic model is superior to the traditional method in various sensitivity analysis.However,the model also has some defects.The typical problem is that the model does not consider the uncertainty of the cash flow during the operation period.On the one hand,this uncertainty will affect the value of the project,on the other hand,it is also the source of the dynamic model to enhance the value of the project.Limited to the length of this paper,this point will be considered in the future research.In Chapter 6,an active performance risk management method is introduced,that is,dynamic rush,through which project performance risk can be controlled.Crashing is also a concept of project management.In PPP projects,it is also defined as the alternative to provide the maximum time reduction or compression with the minimum incremental cost.Specific operation methods,such as approval of overtime,additional resources or payment of urgent expenses,are used to speed up the activities on the critical path.Combined with the existing research and practice,it can be found that rush work is only applicable to those projects or activities whose duration can be shortened by increasing resources,and these activities need to be in the key position of the whole project or project.In this paper,another problem that needs to be noted is that the project may face other risks or increase costs due to rush,so rush is not omnipotent for project management.In the PPP project studied in this paper,the dynamic rush model provides a quantitative framework that can be used to determine the best capital structure with rush option.The framework can seek the best rush scheme for the project through active management of the project,and provide information for the decision-making of the best capital structure of the project.The numerical simulation results show that the model can improve the project performance and reduce the chance of bankruptcy.The important contribution of the model is that it provides a performance variable based on upstream control,that is,the completion time and cost of the project.Different from other participants,project company has the highest influence on the control of project performance variables during project development.In addition,the project company can also decide whether to make additional investment to finance the cost of the project’s rush activities.In general,this dynamic flexibility is proved to provide additional value for the project,and the numerical results also prove the practical significance of the model by increasing the value of the project.In the follow-up study,the applicability of dynamic rush can also be verified by reviewing the real-world project information.In addition,for the dynamic rush model proposed in this chapter,we need to pay attention to the problems of project resource acquisition and financing in practical application,so as to avoid the negative impact of the limitations of dynamic rush on the improvement of project value.In Chapter 7,in order to discuss the influence of government support on the project performance risk and the value of the project,this paper regards the government equity participation as a risk sharing mechanism of the project,and the government can prevent the bankruptcy of the project by participating in the project equity.Project risk management measures are generally realized by the risk allocation and allocation arrangement shared to each project participant in the project contract.This static contract arrangement has the characteristics of simple and easy operation,and has been the main way of risk management and distribution of project company for a long time.However,it is difficult for fixed contracts to flexibly deal with project risks in the process of project promotion,which makes project risk management survive.In fact,due to the lack of appropriate mechanisms for risk allocation and risk impact on the project,the investment decision of the project company will be highly complex.Around the risk distribution,the project company may arrange a large number of complex but inefficient measures.In most cases,project companies will face the lack of risk bearers when allocating project risks.Project participants lack of understanding of the uncertainty of the project,and also lack of effective mechanisms to promote the project participants to take the initiative to take the responsibility of mitigation of project risk.In PPP mode,in order to avoid this situation,it may require the government to provide economic or financial support,which can share part of project risk.By integrating government support into the dynamic capital structure decision model established in this paper,it is found that the project company can avoid potential bankruptcy by accepting the support of the government for project performance risk.At the same time,by introducing the sharing constraints of project value,the additional project value obtained from government support will also be shared by the government.Specifically,this part considers two kinds of cases with government equity support,one is as the rescue mechanism in bankruptcy,the other is as a choice to prevent potential bankruptcy.Comparing the two kinds of simulation results,we can find that government support can be used as a risk allocation mechanism,which can increase the value of the project for the projects with dynamic performance uncertainty.When dynamic model is used to obtain real-time information of the project,government support is the most obvious equity introduction scheme that can negotiate on quota and price,because the project fully includes the flexibility value brought by government support.In general,the proactive strategy proposed in case 2 can improve the financial feasibility of the project company,because it reduces bankruptcy and avoids the legal problems,bankruptcy costs and other adverse effects of bankruptcy for the project.Moreover,most importantly,avoiding project bankruptcy enables the project to provide uninterrupted project services.In addition,the financial support for the project by government support is not the main problem to be examined in this study.The focus of this paper is to use government support as a risk allocation mechanism to allocate the project risk more reasonably under PPP mode.The government participation focuses on sharing the huge risks caused by performance uncertainty,Although the government supports the project directly by providing funds,this single way supports the project in a very rich way.For example,the addition of the project company reputation can also improve the value of the project and avoid the project bankruptcy.This paper also focuses on two different forms of government equity support.Comparing the two kinds of simulation results,it can be found that government support can be used as a risk allocation mechanism,which can increase the value of the project for the projects with dynamic performance uncertainty.When dynamic model is used to obtain real-time information of the project,government support is the most obvious equity introduction scheme that can negotiate on quota and price,because the project fully includes the flexibility value brought by government support.In a word,this study establishes a stochastic performance model.Compared with the existing performance model,the innovation of this performance model is that it can capture the dynamic changes of project performance risk variables,and determine the impact of these dynamic changes on the project value,and then determine the optimal capital structure of the project according to these value factors and the changes of project value.Determining the dynamic capital structure based on project performance is a significant improvement on the traditional target capital structure model,which is of great benefit to any future PPP project.The model will help subsequent PPP projects to determine a reasonable capital structure quickly and efficiently at the initial stage of project development.In addition,more importantly,this study confirms the importance of project performance risk in determining the cost of capital,and fully considering the project performance risk has a significant effect on reducing the cost of capital.From the perspective of government support,it is beneficial for both the project company and the government to limit and share the performance risk.From the perspective of the project company,this risk sharing support can protect the project from bankruptcy;From the government’s point of view,this mechanism limits the high profit expectation of the project company and guarantees the quality and quantity of products and services provided by the project.In general,due to the flexibility of the model,the model can be used to determine the optimal capital structure of PPP projects in developed or developing countries,regardless of the existence of capital and financial markets or government support.Combined with the research conclusions of this paper,it is easy to find that the project capital structure established according to the traditional way is often difficult to deal with various financial problems in the process of project development,such as the change of project performance risk and bankruptcy.In order to alleviate these problems in the process of PPP project development,this paper puts forward the following suggestions on the capital structure of the project under PPP mode: first,when establishing the capital structure of the project,the dynamic model similar to that proposed in this paper is adopted,and the dynamic change of project performance is considered;Second,make full use of the flexibility value of the project and give full play to the opportunities brought by the uncertainty for the project development,such as avoiding the waste of project funds in the accounts and allocating funds reasonably;Third,government departments should provide necessary resources for project development and operation,such as the introduction of various technologies,materials and financial institutions,and provide corresponding channels for projects in a timely manner when the project needs resource financing;Fourth,fully consider the interest rate,exchange rate,policy changes and other external uncertain factors,the project company should try to avoid the impact of such uncertain factors on the project with the help of government departments;Last but not the least,build the standardization exit mechanism and varify the financing methods of the PPP projects. |
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