The Financing Problems Of The Pillar Industries In Sichuan Hydropower - The Jinping Financing Program Analysis

The Communist Party Committee and the government of Sichuan Province put forward a development strategy of the province as following and surpassing. The hydroelectric power industry, according to the development strategy, has been determined as one of the six main industries supporting the fast growth of economy in Sichuan, and a condition to the fulfillment of the development strategy of the province. As hydroelectric power industry is capital intensive, it is strongly suggested that a huge amount of funds be needed in the near future. In this report, the author raised and studied the issues on financing the industry. Financing the hydroelectric power industry is not a big issue in the planned system, as the government, rather than investors or banks, controls the price and takes the risk of the investment. In the free market system, as within Sichuan area and transmission of electric from western China to eastern China, however, the price is determined by the "invisible hand", the revenue is highly relative to the markets, and the uncertainty of profit and loss is dramatically increased. Is the hydroelectric power industry attractive in the financing markets, being a capital intensive and a long-term investment industry? The author thanks that the high revenue of the industry refers to a long run one, and therefore the industry is lack of attractiveness in the financing markets because of the extremely high risk in the investment. How to finance the hydroelectric power industry in a free market system? In this thesis, the author studied the reasons of putting the development of hydroelectric power industry in the first priority in other countries. The author has concluded that the hydroelectric power is a semi public goods with a high externality and its development in these countries was implemented by the public goods principle. At present, in China, however, the investment of governments is far more limited. The fund resources would be in the financing markets, given that the hydroelectric power enterprises enforce their competitive power by adjustment of the nation's economic policies up to the public goods principle. The author further gives some recommendations on financing problem dealing with the hydroelectric power industry in Sichuan Province based on the above-mentioned conclusions as follows:1. On a macro level. Understanding the characteristics of the hydroelectric power industry, making and adjusting relative policies enforcing the competitive power of the hydroelectric power enterprises up to the public goods principle;2. On a meso level. Establishing a financing market system to adapt to the needs of financing large scale hydroelectric power projects;3. On a micro level. The hydroelectric power enterprises improve themselves of the ability of dealing with financing markets.The report consists of three parts. In the first part, the author raised the problem. In the second part, the author made a theoretical study of financing hydroelectric power projects in the free market system, and also gave recommendations on three levels to the hydroelectric power industry in Sichuan. In the third part, the author made a case analysis of Jinping hydroelectric station, a key station in Sichuan, showing that how to finance in the free market system.