The Research On The Application Of Innovative Project Finance Lease Model In The EMC Project Financing

Since the21stcentury, energy shortage has already been a very important issue that hasgreat influence on the development of global economy. It is especially so for China, a countryrelying its fast development of economy on high consumption of energy. in order to realizesustainable development, we must on one hand, make corresponding adjustments to the oldpattern of economic growth, which is characteristic of high consumption of energy; and on theother hand, implement the strategy of “Developing and Saving Energy at the same time, withemphasis put more on energy saving”. As an important measure of this strategy, China hasimported a new mechanism of energy saving on the basis of the market, namely EPC, which isshort for Energy Performance Contracting. Once it was born, it developed fast among thedeveloped western countries and became one of the main means of energy saving. But inChina, it is staggering forward with much hindrance, among which the difficulty of fundraising stands out especially.At present in China, most of the EMCos are immature in the early stage of development.They are small in size, short in registering capital, nonstandard in financial system, and low inbank credit rating. They can hardly get valid guaranty, so it’s hard for them to apply for loansfrom the bank. They can rely only on their own cash flow. So,a Chinese scholar raised the ideaof introducing financing lease model into EMC to ease the difficulty of project fund raising.As the tenantry is asked by the rentor to pay regular rents, this will cause great pressure on theEMCos in the early stage of the project. There may be such situation as, when the benefits cannot pay the rents, the project will be left unfinished half way.In view of the above-mentioned defects of financing lease model in EMC projectsfinancing,another scholars raised project financing lease model and then did some research onthe feasibility of applying such model to EMC project financing. However, this model requiresthe investors to have a thorough analysis on the future benefits of the EMC projects so thatthey could figure out the period benefiting according to the result of the analysis. And more,the risks fall mainly on these financial lease enterprises. However, now in China, financing lease enterprises are generally unfamiliar with EMC, so out of their concern on the safety ofcapital, they will not adopt such model.Therefore, if given no innovation to, the project financial lease model will not be feasibleeither, because of their own difficulties of financing and weak resistance to risks. Followingthis line, the writer makes comparisons between the ESCo financing models at home andabroad, and makes conclusions about the characteristics of financing lease model in this thesis.The writer based on the project financing lease model creatively raises the innovative projectfinancing lease model. Involved in this model are potential investors, EMCos, financing leasemodel, energy saving equipments manufacturer, units that consume energy and banks. Allparties shall play an irreplaceable role in such a model. The new financing model brings insuch an economic body as potential investors on the basis of the original project financinglease model. Such an attempt has made easy and feasible, the complicated process of applyingfor loans from the bank. It has also made the single capital source diversified. Meanwhile, italso makes adjustments to the business of the financing lease enterprises and improvements onthe ways of how the energy service enterprises pay the tents so that the risks are transferredaway from the energy service enterprises and the financing lease companies. Thus all sixparties involved can give full play to their expertise.