Research On Public Assistance Model For PFI Project And Analysis Of Its Application

PFI (Private Finance Initiative) is a new mode in public infrastructure project nowadays. It can make the investors of the public infrastructure projet pluralized and iget over some disadvantages of the traditional mode. If we can combine PFI with our national public infrastructure project properly, the development of the national public infrastructure will be speeded up and the financing ways for it will also be widened.This paper first introduces the concept and source of PFI. Then it contrasts public finance with PFI and analyzes whether PFI can provide value for money and also analyzes the current issues of PFI project.This paper analyzes and investigates the identification and assortment of PFI risks.In infrastructural arrangement, free-standing projects are often financially infeasible due to large project risks. Especially, when the public projects is expected to generate large external economies, but less profitable, the public sector needs to support the project company by giving financial aids to realize the projects.If the project company can not pay back the annual repayment in a certain financial year, the company falls into default on the obligation and the project is forced to be terminated. The public financial assistance, which would be provided to the project company by the public sector when the project company runs deficits, can help to forestall social loss caused by the project failure. This paper focuses upon public assistance model by which the public sector bears part of the deficits of the private company gratuitously in order to avoid the company's default risks.By public assistance, the project risks can be shared between the public sector and the project company. When the public project is expected to be less profitable, the public sector needs to enhance the financial feasibility of the project by providing monetary assistance to the project company. By mitigating the project risks through a public assistance, the initial value of the public project would increase to give the project company more incentives to be involved in project.