The Research On Application Of VFM Model In The Financial Evaluation Of Seawater Desalination PPP Projects

In recent years,China's coastal areas have invested desalination projects to alleviate the water shortage.Seawater desalination supplemented the freshwater resources,but because of its complex technology,large investment and high operating costs,funds shortage restricted the technology improvement and project implementation.With the PPP(Public Private Partnership)mode promoting vigorously in China,professional private partners participate in the seawater desalination project,which not only ease the funds shortage,but also reduce the total life cycle cost.However,there are still many shortcomings in the feasibility of using PPP mode in our desalination projects and how to effectively carry out the financial evaluation of the value of money(VFM).Based on the study of mature VFM theory and practice abroad,combining with the characteristics of seawater desalination PPP projects,this paper is aim to build VFM financial evaluation model through improvement so as to be suitable for the PPP projects in China.First of all,using the literature and comparative research methods,analysis of foreign mature VFM application practice,the PSC(Public Sector Comparator)was applied to the VFM model;Secondly,summarized the lack of VFM practice in China,based on the literature,case and comparative study,then improved and built VFM model from the evaluation process,qualitative evaluation,historical cost of the reference projects,risk identifying and allocating,the choice of discount rate and the water price adjustment mechanism.Finally,through the expert investigation method to calculate risk value,did empirical research on a domestic seawater desalination PPP project,which has proved the improved VFM model can effectively carry on the financial decision for seawater desalination PPP projects in China.The sensitivity analysis of VFM results revealed that water price and energy consumption are the most key factors influencing the cost and investment income of PPP projects in China.Therefore,it is pointed out that timely water fee and technological innovation can reduce operating cost and make projects get the best VFM.