| The Liaoyuan Coal Mining Group, was named The Liaoyuan Coal Mining Administration, is the large state-owned coal company. Its record is 57 in top hundred enterprises of national coal industry. The major projects of company include coal mine machinery manufacturing, parts processing, coal producing, coal processing and coal distributing etc. This company's main product is the coal which divides gas coal and long flame coal. In 2005, this company invested and established the Longjiabao Coal-Mine which had already produced in three years later. The Longjiabao Coal-Mine had estimated the 180 million tons of coal-mine production during 50years. After normal producing, it is going to discharge 880 thousand tons of spoil. In order to reduce pollution and save land resources, the Liaoyuan Coal Mining Group plans to combine spoil, sandstone, shale and other existing coal resources by adopting brick hard plastic extrusion molding technology to produce 240 million parts of project. The finance of project including own capital and some parts of banking financial support. According to evaluation of financial indicators, non-financial indicators and comprehensive evaluation of credit risk, we are going to obtain conclusions of the project by the evaluation model and authoritative feasibility study report.1. Choosing the Credit Risk Evaluation ModelWe adopt the discount cash flow method for the evaluation of loan project. At first of all, we calculate the net cash flow of loan project in every year. Next, we must make sure the suitable discount ratio of loan project and discount the net cash flow of loan project in every year. Last, we calculate the net present value (NPV) of loan project. There are three possibilities that separate the positive NPV, negative NPV and null NPV. By the positive NPV of loan project, the earning level is higher than average level, then we should invest loan. By the negative NPV of loan project, the earning level is lower than average level, then we should quit investment loan. By the null NPV of loan project, the earning level is equal to the average level, we might invest loan.2. The Evaluation of the Project Financial IndicatorsIn order to conform the total investment amount and financial source, the major part is the evaluation of project investment and financing estimates. Program income can or cannot debt outstanding by ability to pay. By evaluation of cash flow, the NPV of this project is the 58.06 million RMB from 2008 to 2024. The financial internal rate of return is the 18.69%. The discounted payback period is 9.24 year. The discount rate is 12 %. According to the solution of project evaluation, the NPV is higher than zero while the financial internal rate of return bigger that discount rate. Therefore, this project should support. On the other hand, we decide comprehensive solvency of borrower by the evaluation of the legal person of financial indicators. The financial index for this project's corporation is ideal, its assets and revenue are all keeping a good development, and the debt-to-asset ratio is low to keep a long time debt-paying ability, as well as all the operating indexes are up-and-up. But some indexes are not very good at the same time, such as the risk from the 6.7 hundred million guarantee for its subsidiary company of Long Jiabao coal mine. From the long-time developing view, the investment in the Long Jiabao coal mine company will take a new rising point for the corporation, which to except 10 hundred million revenue annually, so the good profit capability will take a good debt-paying ability that decrease the risk for the parent company. From the above analysis we can see the financial ability for this corporation is good.3. The Evaluation of the Project Non-financial IndicatorsWe analyze the necessity of the project, project construction and production conditions, conditions of the project technology and project product market conditions etc. By the way, the evaluation of the legal person of financial indicators can judge comprehensive abilities. To keep the company developing and expand the operation ability, this exploration of this project will increase the capital expanding, but LiaoYuan Mine Company have good cash liquidity, just depending on recourse and technique of themselves, they can reconcile this risk. To the other hand as the basis economy the mine trade's developing view is very good, so the LiaoYuan Mine Company has a wide development area. To the other hand the company as the one the best mine companies in Jilin Province will has a competition ability and they have a long-time operating experience, whether human resource, technique or safe management they all have a professional advantage.4. The Comprehensive Evaluation of Credit RiskBy the evaluation of risk and guarantee conditions, we analyze the total risk of loan which is to compare the total comprehensive earning. In this situation, we decide whether the project loans. By analysis, there are some major of risks, that following:(1). Raw Material Supply RiskBecause of Longjiabao Coal-Mine have not produced in high level, it might not offer sufficient raw materials that is the competitive advantage of this project.The Risk Evaluation of this project is that the spoil might be adequate supply in 2010. the Risk prevention method is that cash flow repayment is by itself when Longjiabao Coal-Mine cannot offer sufficient raw materials on time.(2). The Loan Misappropriate RiskLongjiabao Coal-Mine Company has 12 branch companies and 6 subsidiary companies. Therefore, there might be the loan misappropriate risk.In order to prevent risk, there are two methods that invest loans and own funds at the same time and same rate. Otherwise, the SPDB sets up an account to monitor the project of Liaoyuan Mining Ltd's Jiutai New-type Walling Materials Branch Company after loan.(3). Project Cost Overdraw RiskThe project might overdraw risk by some of objective factors. There are two Risk prevention methods. Firstly, they should decide the total amount of the project by open bid. Secondly, the head company must increase its own investment when the capital of project is less.According to solution of comprehensive analysis and evaluation, this project is the entry extensions of Longjiapu Coal- Mine while there are better economic benefits and social benefits. By evaluation of this project, the comprehensive earning is fine while risk of loan is in the control. After supporting this project, our bank could work with the Liaoyuan Mining Group to further situation. Therefore, we suggest that offer banking financial support 990 thousand RMB. At the same time, guarantee mode is mortgage. |
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