Research On The Innovative Application Of Industry Investment Fund In The Environmental PPP Projects

As one of the national strategic emerging industries,energy saving and environmental protection industries have a great potential for development.To reduce the burden of local fiscal expenditure and increase the efficiency of financial fund utilization,Chinese government introduced the PPP(Public-Private-Partnership)model into energy saving and environmental protection sector.Comparing to traditional energy saving and environmental protection projects,environmental PPP projects have a characteristic of larger investment size,lower investment return rate,more complex project composition,more difficult to operation and management,and longer operation term.Financing of environmental PPP Projects includes project loans and capital financing which is much more difficult to achieve in the application.With the methods of literature review,case study and interview,the paper focuses on studying the capital financing of environmental PPP projects,and presents an innovative capital financing model based on industry investment fund.The conclusion of the study may have some referential values to the industry,supervision departments and the policymakers.As the study showing,the main sources of typical environmental PPP project capital financing are from banks and insurance companies,whose funding are mostly invested in PE funds through several channels to finish the capital financing,with exit mechanism of buy-back by the third party or the private sector of the PPP project.A series of policy documents put forward from 2017 have a great influence upon capital financing of environmental PPP projects,by restricting the traditional models and tools of capital financing,and normalizing structured financing,the sources of financing,the term of financing,and the financing model for central SOEs.It is found that the industry investment funds shall be the ideal vehicles and tools of capital financing of environmental PPP projects.The innovative capital financing model based on industry investment fund has several advantages,including increasing the efficiency of financial fund utilization,mitigating the capital pressure and debt load of private sectors,introducing funds of different sources,introducing high-effective management mechanism,balancing the profits and risks of different components of environmental PPP projects,and utilizing the compensation mechanism in environmental PPP projects to increase the investment return.To introduce the industry investment funds into environmental PPP projects,the paper raises several practical suggestions,including promoting the issuance of related policies,laws and regulations,introducing government-raised funds and long-term equity investment capital into the industry investment funds,optimizing the structure and operation model of the industry investment funds,supporting the professional environmental protection enterprises to lead environmental PPP projects,and enhancing the supervision of private sectors of environmental PPP projects.