Project Financing And In The Power Industry

Along with the sustained and vigorous development of Chinese national economy, the electric power industry faces crucial challenge. On one hand, the conflict between the demand and the supply of electric power becomes more and more prominent. In 2004, China had a shortage of electric power approximately about 35 million kilowatts and electric quantity approximately 6 million kilowatts. The regions which lack of electric power expanded more and more. Many provinces and cities were limited to the electric power supply. On the other hand, China has tremendous storage of energy resources which have not been fully exploited and used. According to statistics, national water resources theoretically could supply electricity of 678 million kilowatts and generate electricity of 50 billion kilowatts-hour annually, among which 378 million kilowatts could be installed capacity and generate 19.2 billion kilowatts-hour per year. Therefore, to speed up the development of electric project has a significant impact on solving the bottle-neck problem of national economic development and proving the welfare of the whole society. The industry of electric power is capital concentrated one which needs a large amount of investment. It is estimated that the investment on this industry is over RMB 1,750 billion during the period of the 11th five years. In fact, the traditional financing model is no longer suitable to the large amount of investment. Thus we have to introduce a new project financing model. This dissertation reviews the theory of project financing. Comparing with its characteristics and analysing the application of project financing in overseas countries, the author argues the inevitability and feasibility of the combination between the project financing and Chinese electric power industry. In the end, the author makes some suggestions on promoting the project financing in this industry. The dissertation is consisted of three parts: The first part is about theory. First of all, the writer introduces the development process of project financing. After comparing it with corporative financing, the author analyses the features and the advantages of project financing and gives us detailed description about its functions. In the aspects of capital rights and interests and liability capital, the author then explains the money raise of this financing model. The paper emphasizes the application and manifestation of three main financing measures as BOT, PFI and PPP. Finally, the paper analyses the major risks and management measures of the project financing. The second part focuses on the application of project financing in the electric power industry. First of all, it explains the characteristics of electric power industry and comes to a conclusion that the project financing is suitable to this industry. And then by keeping abreast further of the relative policy guideline and the practice process of project financing in Pakistan and at MATILYAN hydroelectric station, the Chinese electric power industry will draw on experience of it. The third part demonstrates the certainty and the operation of project financing application in Chinese electric power industry. First the author sets forth the present condition and development plan of this domestic industry. On the basis of contents of the 10th Five-Year-Plan in electric industry and the 11th Five-Year-Plan of the national economic development, the author analyses the development trend of electric power industry and argues the pressure of future development including the capital pressure. Second the author shows us the inevitability of broad usage of the project financing in Chinese electric power industry from four aspects consisting of the industry development. Taking the case of Three Gorges Development Corporation as an example, the author specifically elaborates the company's capital status and current issues of financing structure, practice to the future development of the company and the detailed thoughts. Studying the said case, we shall reach an agreement on the possibilities and inevitabilities of applying the model in Chinese electric power industry. At last, combing the binding condition in...