The Study Of EPC Financing Modes In China

Currently, China is facing enormous environmental pollution and energy waste. Inthe next few years, china will change the mode of economic growth, and vigorouslydevelop the energy-saving services industry. In December1998, EPC was introducedthrough the “WB/GEF China Energy Conservation Promotion Project”. EPC is a newtype of energy-saving mechanism, and its essence is to pay for the energy-saving costof projects by the reduced energy costs, and gain benefits.Under the promotion of the Chinese Government, EPC has achieved rapiddevelopment. Meanwhile，in its development process, EPC is facing a lot of problems,and the financing difficulty has become the biggest bottle-neck in the developmentprocess of EPC in China. At present, the funds of EPC projects in china mainly comesfrom ESCos’ own money or bank loans, and financing channels are insufficient. Inaddition, the EPC project’s payback period is longer, the recent profitability is poor.Liquidity shortage is bound to occur when simultaneously carry out multiple EPCprojects.70%of Chinese ESCos are small and medium-sized enterprise, and their ownfunds are limited, and it’s not easy to get bank loads because of the lack of fixed assetsmortgage. Drawing lessons from the EPC financing model of United States, Germanyand Brazil, and combining with the characteristics of Chinese ESCo, this paper putsforward some new types of financing model, including financial leasing, factoring,future benefits pledging and transaction. Among them, financial leasing has beenapplied in a number of energy-saving projects.Risk analysis and control is the premise to operate any financing mode. OnlySuch EPC projects, which have sufficient profitability, are worth investing in., andthese projects are easy to obtain the support of investors. This paper illustrates how to assess the profitability and risk of an EPC project by an energy-saving case about themotor system of an aluminum company. Finally, this paper proposed somecorresponding preventive measures for the risks faced by the EPC projects.