Financial Feasibility Of The Private Exiting PPP Projects And Exiting Time Option Study

Public-Private Partnerships is a project operation model of public infrastructure.The model encourages private sector to capitalize on its strengths in capital and expertise,reduce government financial pressure and improve infrastructure efficiency.PPP project landing difficult and landing time is one of the major problem in the implementation process,the key reason for which is private sector low participation enthusiasm.More and more attention is paid to private sector market admittance by industry and academia.However,the feasibility of exiting PPP project and the choice of exiting time are relatively vague,which partly affect the enthusiasm of private sector participation.Public-Private Partnerships(PPP)long cycle is the main feature,usually 25 to 30 years.Private sector overall process participation results in long occupation of funds,slow return on capital,greater risk.For this reason,the demand of exiting from PPP project has become more obvious.From the perspective of private sector,the study focuses on the financial feasibility of the exiting from PPP project and the choice of exiting time.The research method adopts the classical cash flow discount model and chooses the net present value of the cash flow as evaluation index of the project feasibility evaluation.First of all,the article summarizes the study foundation of private sector exiting from PPP project,including the relevant theory of PPP,the type and characteristics of private sector,the related policies of PPP exit and the financial evaluation model of the project.The approach and essence of private sector exiting is analyzed afterwards.On this basis,the paper analyzes the key variables that affect the exiting of private sector,and makes a brief definition of the range of the key variables.The cash flow discount model evaluates the financial feasibility of the exiting and analyzes the impact of the key variables on the timing of exiting.In the process of project financial evaluation,the long-term declining discount rate of PPP project is considered.By comparing the traditional exponential discount and quasi-hyperbolic discount,it is found that this decreasing trend can't be neglected in the project decisionmaking process.Finally,through the reasonable value of the key variables,the model is used to conclude that there is a feasible space for the private sector to exit from the PPP project during the cycle length,and the space size is affected by the discount rate,the secondary market social capital discount rate,the inflation rate,exiting transaction costs and exiting time and so on.The lower transaction costs,the wider exiting time domain can be chosen.The earlier private sector exits,the sooner capital can be withdrawn,the higher the utilization of funds,the more substantial the financial.It is recommended that the private sector made reasonable planning and decision of exiting time,planned to exits from PPP projects as soon as possible to play their own advantages in the specific stage.During the cycle length of projects,the private sector should fulfill the contract obligations to protect the quality of the project to reduce the secondary market access to the company's expected risk,and the discount rate of the company to increase their own income.In the latter part of projects,the private sector should make full use of transparency secondary market information to reduce transaction cost.