Research On The Motivation And Economic Consequences Of Asset Securitization In Power Industry

China has rich biomass resources,and the development of biomass power generation industry has broad prospects.With the introduction and implementation of a series of policies such as the renewable energy law and the subsidies for renewable energy,the investment of biomass power generation has increased rapidly.However,the power industry,especially the biomass power generation enterprises is a capital-intensive industry with long instruction cycle and large capital scale.Relying on the credit of underlying assets,asset securitization reduces the credit requirements for financing entities and provides a new financing channel for enterprises with weak overall credit but generating stable cash flow.Kaidi Eco transformed to the biomass power industry.It financed 3 billion yuan in short time by asset securitization in 2015,but later Kaidi Eco had financial crisis.The two asset securitization projects‘ credit ratings were downgraded.This paper reviews related literature and theory.Based on Kaidi Eco’s asset securitization projects,this paper analyses the financing motivation,effect and problems in risk isolation,cash flow forecast and credit enhancement to provide suggestions to usufruct abs.At last,this paper makes suggestions based on the research.Through the research,the cash flow of underlying asset relies on the operation of underlying sponsors so it is difficult to realize risk isolation.In the meanwhile,the cost of biomass power plants is higher than other power plants and biomass power plants are more dependent on subsidies.The asset securitization projects of Kaidi Eco helped finance plenty of money but brought operational and financial risks.When Kaidi Eco has financial problems,the operation of underlying sponsors will get into trouble.This paper analyses the causes,effects and problems of asset securitization financing in Kaidi Eco and hopes provide suggestions for it.