Framework Design On Private-Public-Partnership Project Financing For Overseas Power Plant Sponsored By EPC Contractor

In recent years, with the further development of globalization, many regions and countries attract domestic and foreign investors to have project collaboration in a Private-Partner-Partnership (PPP) model for power plant and other public infrastructure projects. After decades of international project experience and profits accumulation gained in the international Engineering-Procurement-Construction (EPC) projects, Chinese EPC contractors try to participate into overseas PPP power plant project as investors, for the purpose of enhancing their market shares and gain more profit against increasingly fierce international EPC market competition. Under the financing policy support of "Going abroad" that raised by China government to encourage China company to participate in oversea investment, it’s no doubt that project financing has become an important lever and weapon for EPC contractor’s developing overseas project as an investor with years of EPC experience in power plant project. As the core of project financing, financing framework will be the key to success of project finance, thus its research is of great significance to Chinese EPC constructors’participation in overseas power plant PPP projects.The main contents of this thesis are as follows:(1) Based on the analysis of main characteristics of PPP projects and reviewing general project financing channels and general practice, the thesis pointed out that optimization of PPP project financing framework on the basis of reasonable risk allocation is the critical success factor to PPP project financing for the investors. Reasonable risk allocation leads to appropriate equity shares proportion for each investment partners; corresponding risk countermeasures are the design basis of financing framework (including the equity share proportion, the contractual structure, credit structure, funding arrangements, etc.). The financing framework has to be optimized to improve the feasibility of project financing for the purpose of meeting financing bank’s requirement.(2) By means of risk analysis of Oversea power plants PPP project financing, the thesis summarized the prominent risk during project financing phase, and figured out risk-responsibility relation and risk allocation for all investment partners for one typical power plant PPP project financing. Taking "Who risks who benefits" as basic principal, expert evaluation methods&Markowitz Mean-Variance Model were applied to do quantities analysis, with the general result of equity share proportion of each partners for one typical PPP project, namely40%,25%and35%respectively for local public sector/government department, Chinese EPC contractor and local investment company.(3) On the condition of reasonable risk allocation&hence the fixed equity share proportion for each partner in a typical project, the basis of framework design for project financing were given out as risk countermeasures. Especially, one of them as an innovation measure was pointed out from EPC contractors’ point of view that anticipated EPC contractual profits can be taken as the part of investment capital against the exact EPC contractor’ equity shares, which can reduce EPC contractor’s investment risk enormously by ways of transferring much of investment risks control in to familiar EPC contractual risk control. In this way, uncertain investment risks can be effectively transformed into the certain risks&management advantage’s expertise of each partner by optimization of project financing framework, which can ensure partners’ profit&benefit from win-win situation for the PPP project.(4) The above conclusions are applied into case study of a Cambodia coal-fired power plant PPP project financing. Considering actual situation of this case, risk-responsibility allocation for each partners was given, equity share proportion for parties were adjusted accordingly, and thus the financing framework was designed in details, including contractual framework structure, credit structure, funding arrangements, and realization of investment capitals against the equity share proportion, etc. By application of this thesis into real operation of this project, the optimized framework design based on risk allocation contributed to a quick established&effective negotiation base among each investment partners involved by local authorities, local investor and EPC contractors, which ensure this project financing can go further in details to achieve from financing agreement were successfully signed and finance closure.Therefore, the case study showed that the project financing framework design on oversea power plant PPP project provides an effective solution for Chinese EPC contractors’ participation in such oversea projects, and pointed out operational devolving guidance to extend value chain of market benefit for project investment in familiar industries by EPC contractor, equipment supplier, operation service company and construction company.