Research On Dynamic Capital Structure Optimization Of PPP Transport Projects In Operation Stage

With the rapid development of the Chinese Public-Private Partnership(PPP),a large number of PPP transportation projects,as a basic industry supporting the national economy,have played an important role in the past 30 years.However,these PPP transportation projects that are in the long-term operation stage often have a huge difference between the actual cash flow and the predicted cash flow during project operation.Some projects not only fail to complete the established financial goals but also fall into a financial crisis.In order to solve the above-mentioned common problems in the operation stage of PPP transportation projects,this research first explores the factors affecting the revenue of PPP transportation projects in the operation stage.The motivations(internal and external)and specific performance of the PPP transportation project in the operation stage were made a systematic connection.And a "Two-Three" panoramic theoretical model was constructed,that is,the mechanism of the PPP transportation project in the operation phase was analyzed from the three dimensions of cash flow,operating environment,and stakeholders.Therefore,it is found that Chinese transportation PPP projects are in a complex environment with revenue uncertainty during the operation stage.The government and operation managers of projects need to deal with the dynamics and uncertainties of the operating environment in order to improve the financial viability of the project.At the same time,combined with the actual situation of the case,the capital structure adjustment strategy in the case of insufficient project income was discussed.Then,this study constructed a dynamic capital structure optimization model based on Monte Carlo simulation.Using this model can improve the adaptability of the capital structure of Chinese transportation PPP projects to revenue uncertainty during the operation stage,thereby improving the project’s financial viability.This research solves the key quantitative problem of capital structure adjustment costs caused by changes in equity and debt.In particular,the before-and-after effects and effectiveness derived from the use of government subsidies,capital market financing,and debt financing in adjusting capital structures of a PPP project,respectively,can be compared and evaluated.Finally,based on historic data of the Hangzhou Bay Bridge(HBB)case,this study solves the model results of different strategies using genetic algorithms,that is,the government subsidy strategy is more effective than the other two strategies and enhances the financial feasibility and sustainability of the project.Further analysis results show that the government subsidy strategy has a greater effect on the optimization of dynamic capital structure than the other two strategies.And the capital market financing strategy with the main goal of reducing the level of equity is the excessive pursuit of return on equity,which may seriously infringe the value of the project.Although the realistic strategy can alleviate the short-term operating pressure of the project through debt financing,it will lay down financial risks for subsequent operations.In contrast,the strategy of government subsidies is more conducive to the long-term operation and sustainable development of the project.These analysis results reveal the important role of dynamic capital structure in balancing financial feasibility and debt risk.This research puts forward an effective method to respond to changes by adjusting the dynamic capital structure of PPP projects.And this study provides some policy recommendations for PPP transportation projects that are in operational difficulties,with the purpose of improving the survivability and development capabilities of the project during the operation period when revenue is uncertain.