Study Of Power Project Financing 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 asset 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 theworking experience, the author also put forward relevant suggestion tothem, and elaborate the operation of pro j ect financing in detai1s withtwo case study aiming to provide some reference to the effcientutilization of foreign capital under international rules to promote thedevelopment o f fundamental industry.The thesis comprises of four chapters.CHAPTER ONE BRIEF INTRODUCTIONThis chapter illustrates the unique character and common rules inpro j ect financing.Actually project financing is a kind of structural trade financing. Itsunique character lies in the limitation of repayment to loan within theincome and assets of specific pro j ect. The pro j ect asscts and futurecash flow are the main guarantee to the reimbursement of the loaningbank, there is no recourse or limited recourse beyond the assc 's of thepro j ect company in principle.Pro j ect financing involves many participants, inc1uding 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 risksare key points to success. lt is also the nlost concern of all negotiatingparties. The allocation rules is to ensure all significant risks areallocated to the parties best able and most motivated to deal with andab s orb them.To perform project financing, a security package constituted by aseries of agreements, contracts and government commitments with1egaI force should firstly be set up to promote the development. Theresponsibilities of each parties should be defined and the suitablefinancing structure and developing program should be built to reducethe risks as little as possible.Implementation Agreement, namely, Concession Agreement, is thefoundation of liabilities between the sponsor and the authority. It isalso the core and root of all other project agreements.Completion Guarantee can...