Management Pattern, Risk And Financial Evaluation Of Concessionary Infrastructure Facility Projects

After the policy of reforming and opening has been implemented in our country, the national economy develops rapidly, people's life improves continuously. Though many infrastructure facilities have been developed and constructed, they still can't meet the country's demands, the lag of infrastructure facilities has been "bottle-neck" to restrain the economy's development. How to speed up the development of infrastructure facilities is a urgent problem of government. In a long period, the pattern of infrastructure facilities' developing is that the projects are constructed by central or local government, managed by state's sector after projected been finished. Along with the demands increasing, if the projects are just invested by government, the infrastructure facilities can't meet the supply demands thoroughly. How to fetch in the non-state funds to invest infrastructure facilities is very important problem to be solved.The infrastructure facility projects has the character of sunk costs, huge money, long payback period, the project's risks are enormous. Our country is a developing country, the system of law and market economy is not perfect, the state policy always regulate. It is very difficult to fetch in investors to invest infrastructure facility projects if government don't innovate the pattern of investment, construction and management.In the late seventies and beginning eighties of 20^th , Because of the economy growth, population booming, city developing in developing countries, Build-operate-transfer (BOT) strategy has been adopted to develop some of infrastructure facilities in some developing countries. BOT is a new pattern for the foreign funds to invest the host country's infrastructure facility. After growth about thirty years, a number of projects have been developed in developed and developing country, BOT has been expanded to be a pattern of concessionary management and it has some derivations, such as (build-operate-own) BOO, (build-own-operate-transfer) BOOT, (transfer-operate-transfer) TOT, etc. In spite of the pattern of concessionary management, the essential of the concession management is that the firm obtain from government the right to develop, construct and operate the infrastructure facility project controlled by government formerly, obtain the revenue and afford the risk from the project.The use of concessionary management in infrastructure facility is under the influence of the condition of economic system, legal system, market, government's government, and the characters of different projects. The effect of concessionary management betweendeveloped country and developing is different. The system of market is better than developing country's, the interest rate and exchange rate are stable relatively, the private sector has the high managerial efficiency. The main intention of government to implement concessionary system is to create competition for the market, in the same time solves the lack of the fund. In developed country, the finance, construction, operation of the project all lead by private sector, except the assistant of policy, government seldom give the assurance to private firm. Such as (Private-Finance-Initiative) PFI and (Public-Private-Partnership) PPP in UK, the gearing ratio reaches 90:10.The use of concessionary management is just twenties years in developing, compared to developed countries, the system of market economy is not perfect, there are more uncertain factors to influent the project. For the sake of diversion the risk, private operator always asks the dost country to make some assurance, if the cost of government's assurance overrun it's capacity, the host government usually refuses to carry out the agreement. This is the main reason that why many concessionary projects have problems in the operational period. Chapter 2 introduces systemically the use of concessionary management in different countries.China has the same problem in the use of concessionary management. In the middle and late eighties of 20th, the private firm has not grown well, and the infrastructure facility had not permitted host private firm to operate, the main source to fetch in is foreign investment. The first BOT project in China is Shajiao B power project in 1985s, this has been transferred successfully in 1999s, There are about one hundred projects are developed in our country now, such as power, toll road, water supply, garbage dispose, subway, bridge, tunnel, gymnasium, etc. Most projects are in the constructive and operational period. BOT is the main pattern of concessionary management in our country, in addition, TOT, (build-transfer) BT,(Build-Own-Operate) BOO are used widely also. The use of concessionary management solves the problem of the infrastructure facilities' fund in some range indeed. Chapter 2 analyzes the proportion of foreign fund in the total investment. 1980s¹998s, the average proportion of foreign fund in the total investment exceeded 10%. The main problem in the use is also analyzed in Chapter 2. The author analyzes the conditions of our countries infrastructure facilities and the source of funds, points out that host private investment will be the main source of funds.Because the complex of project's risk, it is impossible for private operators to loan by using the traditional loan pattern. So concessionary projects usually adopt project financing to obtain loan. Chapter 3 compares the traditional finance pattern with project financing, compares the different types of concessionary management, consider PPP is the suitablepattern in China.Risk management is very important for projects management, concessionary project has different risk characters, it's risk management is still the important and difficulty problem in academe. Chapter 4 analyzes the risk factor, risk management system and puts forward the methods of different risks.Government's supports change the cash flows, traditional evaluate method haven't quantitative analysis this influence. Chapter 5 points out the options character of government's supports, and calculate it's values by using options theory. In addition, analyzes the factors influent cash flows, put forwards the improved method of concessionary projects.Chapter 6 discusses that how to fetch the host private fund in infrastructure facilities, sets forth it's necessary and possibility, generalizes the experiences and points out the shortage, and puts forward the countermeasures.