Public-Private Partnerships:the Risk And Investment Decision In Sewage Treatment Plant

PPP (Public-Private Partnership) is a new type of project financing model, which has been rapidly developed and widely applied since 1980s. On the one hand, PPP can reduce the government’s financial pressure. On the other hand PPP will open up new areas of investment for social capital. At the same time, PPP meet the public demand for infrastructure and public services. So PPP can achieve the multiple purposes in one time. Now, China’s economy is falling, the government’s financial pressure is huge and the infrastructure gap is obvious. In the above context, Promote the development of PPP will have important significance and great potential.Sewage treatment plant is an important part of the infrastructure. It is an earlier field that use the PPP to introduce foreign capital for development and construction. With the increasing requirements of environmental governance in China, attract social capital to invest in sewage treatment plant is a good means to solve the problem of inadequate construction funds, service quality is poor and the management efficiency is low.The main purpose of social capital investment in sewage treatment plant is to obtain a reasonable return. Because of the PPP project has the characteristics of complexity, long term and risk diversity. So, how to accurately analyze and judge the investment value of sewage treatment plant and against the risk of the project become an important question for social capital.This paper stands in the position of social capital, focuses on the research of risk management and investment decision in PPP project.Firstly, through literature research and case analysis, use the method of combining qualitative and quantitative methods, identify and assess the 45 risk factors that affect the return on investment in the PPP project of a wastewater treatment plant. According to the principle of risk sharing and the actual situation, it puts forward 32 key risk factors that the social capital should focus on.Secondly, construct the investment decision model of PPP project. Through the combination of CAPM and WACC methods, estimates the benchmark interest rate level of sewage treatment industry(Re).Finally, use a township sewage processing plant project for example, by means of Monte Carlo simulation analysis, get the changes of IRR under different risk factors. Compared with Re, the project investment feasible conditions are obtained.The conclusion of this paper can provide basis and suggestion for social capital to make investment decisions, negotiate with the government and guiding risk control points in the process of operation.