Research On Refinancing Decision Of Public-Private-Partnership:from The Perspective Of Private Sectors

The increasing demand for infrastructure has promoted the PPP(Public-PrivatePartnership)model to be promoted in China.Various government ministries have also issued a series of policies to encourage local governments to adopt PPP mode for infrastructure construction.When the PPP projects are completed and successfully operated,the project companies will likely refinance,which means that the private sectors will face refinancing decisions.This study establishes PPP private sector refinancing decision model based on real option method and studies the boundary of profitable refinancing and the optimal debt level before and after refinancing.The study found that:(1)The boundary of profitable refinancing is negatively correlated with the refinancing income and positively correlated with the public sector allocation ratio.(2)The default boundary is positively related to the debt level,market interest rate,operating cost and income tax rate.(3)The optimal debt level after refinancing is positively correlated with the cash flow level,and negatively correlated with the operating cost and project transfer loss rate.There is a theoretical loan cost r*(?,?,X,f).When the refinancing rate is less than r*,the higher the refinancing rate,the higher the optimal debt level.When the refinancing rate is greater than r*,The higher the refinancing rate,the lower the optimal debt level.(4)The optimal debt level is negatively correlated with the interest rate when the financing is closed,and is positively related to the refinancing interest rate and refinancing cost.Finally,a example is analyzed by the model.Through the example,the lower the cash flow volatility,the higher the optimal debt level of refinancing.The higher the cash flow growth rate,the higher the optimal debt level and the lower the project matching interest rate.The lower the cash flow volatility,the higher the optimal debt level when the financing is closed.The higher the cash flow growth rate,the higher the optimal debt level when the financing is closed.This study quantifies the flexibility of future refinancing of PPP projects based on a real-option model.It provides theoretical support for private sector to decide when to refinance and how to refinance.