PPP Business Model

Public Private Partnership (PPP) refers to a way of establishing a partnership between government departments and social investors to provide infrastructure, construction of social public facilities and related services. The PPP model refers to a business model in which government departments absorb social capital, jointly invest funds or resources into the project, and social investors build and operate the project, and jointly obtain benefits in proportion to the contract, but its operation time is limited. This type of business model is suitable for large-scale infrastructure construction and social public facilities construction and related services.

For comprehensive energy service projects involving public infrastructure, the government selects capital investors through bidding, especially for projects with large capital requirements, it can focus on giving play to the supportive role of bank loans and policy banks to attract bank capital and Social capital participates together to establish a good investment and financing environment; government departments and selected capital investors sign joint venture agreements and company articles of association to form a project company; a project company is responsible for carrying out a series of follow-up development and construction of the project according to the contract. Work, including design, investment and financing, construction, operation, etc.; in the process of project operation, as the government department responsible for supervision and other responsibilities, supervise the whole process of operation, including price supervision and quality supervision, and set corresponding implementation system. In addition to the direct benefits of project operation, government investors can also obtain benefits transformed through government support. Broad PPP can be divided into three categories: outsourcing, franchising and privatization.

1. Outsourcing:

PPP projects are generally invested by the government, and the private sector contracts one or several functions in the entire project, such as being responsible for engineering construction, or entrusted by the government to manage and maintain facilities or provide some public services, and realize benefits through government payments.

2. Franchise:

Projects require private participation in part or all of the investment, and share project risks and project benefits with the public sector through a certain cooperation mechanism. According to the actual income of the project, the public sector may charge a certain franchise fee or give a certain compensation to the franchise company, which requires the public sector to coordinate the balance between the profit of the private sector and the public welfare of the project. Therefore, the success of franchise projects depends to a large extent on the management level of relevant government departments. By establishing an effective supervision mechanism, franchising projects can give full play to the respective advantages of both parties, save the construction and operation costs of the entire project, and at the same time improve the quality of public services. The assets of the project are ultimately retained by the public sector, so there is generally a process of handover of the right to use and ownership, that is, after the contract ends, the right to use or ownership of the private project is required to be handed over to the public sector.

3. Privatization

PPP projects require the private sector to be responsible for all the investment in the project, and under the supervision of the government, the investment is recovered by charging users to realize profits. Since the ownership of privatized PPP projects is permanently private and does not have the characteristics of limited recourse, the private sector bears the greatest risk in such PPP projects.

The PPP project implemented by Shenzhen Taiwa Energy Technology Co., Ltd. has many advantages.

(1) Elimination of overvalued fees. In the initial stage, our company and the government participated in the project identification, feasibility study, facilities and financing and other project construction processes, which ensured the technical and economic feasibility of the project, shortened the preliminary work cycle, and reduced the project cost. The PPP model can only start to benefit from the private sector when the project has been completed and approved by the government, so it is conducive to improving efficiency and reducing engineering costs, and can eliminate project completion risks and capital risks. Compared with traditional financing models and other companies, our PPP projects save an average of 17% of the cost of government departments, and the construction period can be completed on time.

(2) Help transform government functions and reduce financial burden. It has helped the government department to get out of the heavy business, from the provider of infrastructure public services in the past to a regulatory role, thereby ensuring quality and reducing the pressure on the financial budget.

(3) It promotes the diversification of investment subjects. The assets and services provided by our company can provide more funds and skills for government departments and promote the transformation of investment and financing methods. At the same time, our company's participation in projects can also promote innovation in project design, construction, facility management processes, etc., improve work efficiency, disseminate best management concepts, and use the most advanced technology and experience.

(4) Reasonable risk allocation. Different from BOT and other models, our company can realize risk distribution at the beginning of the project. At the same time, because the government shares part of the risk, the risk distribution is more reasonable, which reduces the risk of contractors and investors, reduces the difficulty of financing, and improves the success of project financing. possibility. The government has a certain degree of control while sharing the risk.