Study Of Issues Related To Financing Of Power Projects In China

In recent years China's economy is keeping increase rapidly and soundly. Although we have already put more investment into infrastructure and fundamental industries and alleviated the restrict of economy neck, the requirements of sustainable development has not been met yet. Only in electric power department, with an annual growth rate of 8% there is a continuing need for 12-15 giga-watts of new installation capacity each year. To maintain the growth speed and meet the investment demand local resource is far from enough. It is still necessary to utilize foreign capital actively, deepen the reform and explore other financing channels. Project financing is a new-type more flexible international fund-raising method, namely "non-recourse or limited-recourse loan". The assets of the project is taken as the only mortgage, not including the credit of the project developer or their relative tangible assets. The repayment is ensured by capital flow of income, and the risk of it will be restricted to the assets and rights within the project. This fund-raising method guaranteed by income with little capital has an important practical meaning to the developing countries having a lot of projects with significant perspective but suffering from the lack of money.With brief introduction to the operation principle of the project financing and discussion of the development of China's electric power industry and the agreement framework of power station project, the author tries to analyses some existing problems during the operation of China's power project financing. And combination with the working experience, the author also put forward relevant suggestion to them, and elaborate the operation of project financing in details with two case study aiming to provide some reference to the efficient utilization of foreign capital under international rules to promote the development of fundamental industry.The thesis comprises of five chapters.CHAPTER ONE BRIEF INTRODUCTIONThis chapter illustrates the unique character and common rules in project financing.Actually project financing is a kind of structural trade financing. Its unique character lies in the limitation of repayment to loan within the income and assets of specific project. The project assets and future cash flow are the main guarantee to the reimbursement of the loaning bank, there is no recourse or limited recourse beyond the assets of the project company in principle. Project financing involves many participants, including sponsor, design firm and contractor, creditor, fuel supplier, product purchaser, guarantor, insurance company, local government, experts and lawyers, etc. The form of project financing includes product disbursement, forward purchase, capital leasing and BOT, etc.In project financing the suitable allocation and strict control of risks are key points to success. It is also the most concern of all negotiating parties. Systematic risks include political risk, legal risk and financial risk, while the non-systematic refers to commercial risk, technical risk and environmental risk. The allocation rules is to ensure all significant risks are allocated to the parties best able and most motivated to deal with and absorb them.Guarantee is the pillar to most project financing and is the solution of risk allocation. The borrower pay more attention to the possibility of success of project, not the existing asset valve. What they require is the completion of the qualified project on time, good operation, and enough cash flow for repayment. It includes credit guarantee such as completion guarantee, take-or-pay contract, comfort letter and property rights of effects and estate.CHAPTER TWO THE DEVELOPMENT OF PROJECT FINACING IN CHINA POWER INDUSTRYThis chapter illustrates the expanding and reform of China power industry, the necessity of introducing foreign capital, and review the development of project financing in this field.After twenty years development China power industry...