Reporter Shi Jian reports from Beijing
Recently, with the National Development and Reform Commission and relevant departments jointly issued the revised "Infrastructure and Public Utilities Concession Management Measures" (hereinafter referred to as the "New Management Measures"), the "bottleneck problem" on concessions will be effectively resolved. The reporter of "China Business News" noticed that many private enterprises have recently begun to participate in the bidding of franchise projects.
It is worth noting that this is the first large-scale revision of the Administrative Measures for Infrastructure and Public Utilities Concessions (hereinafter referred to as the "Administrative Measures") formulated by the National Development and Reform Commission (NDRC) and five departments in 2015. According to the National Development and Reform Commission, the "New Management Measures" have laid an institutional foundation for the standardized development and sunshine operation of PPP projects, and standardized the implementation of franchising, encouraged private enterprises to participate, and improved the franchise management procedures.
Intended to "rectify deviations"
The head of the Department of Laws and Regulations of the National Development and Reform Commission said that in 2015, the National Development and Reform Commission and other six departments jointly issued the "Management Measures". In line with the requirements of the "Guiding Opinions on Standardizing the Implementation of the New Mechanism for Public-Private Partnership" (hereinafter referred to as the "New PPP Mechanism"), this revision has carried out targeted system design for the outstanding problems in the field of franchising, and further strengthened the implementation effectiveness of the system.
The reporter found that in recent years, there has been no shortage of cases where individual local governments have issued "sky-high franchise transfer fees", resulting in many failed bidding for projects and even "scared away" private enterprises. "In fact, there are many projects in the market with a high degree of marketization but weak public attributes, such as waste solid waste treatment and waste incineration power generation projects, and it is more suitable for us to participate in these projects. Talking about participating in the concession bidding, a person in charge of a private environmental protection company told reporters, "However, sometimes the bidding price is too high, and it is seriously higher than the cost, so we can only consider giving up." ”
In the interview, many local government officials said that the revision of the "New Management Measures" mainly has a strong sense of "correction". First, the "New Management Measures" emphasize the public welfare attributes of franchise projects, clarify the essential difference between franchises and commercial franchises, do not set up new administrative licenses, and put an end to the phenomenon of "sky-high franchise transfer fees". Second, clarify the distribution of rights and responsibilities, clarify the responsibilities of the central and local governments and the division of labor between departments, further rationalize the investment management procedures, improve the price adjustment mechanism, and require special funds to be earmarked. In addition, the new regulations also strengthen regulatory measures, increase penetrating supervision and notification of major events, improve the whole life cycle supervision, establish a complaint handling system and improve the dispute resolution system, and urge the government and enterprises to standardize the performance of their obligations. The National Development and Reform Commission will work with relevant departments to implement the revised "New Administrative Measures", promote the quality and efficiency of franchise projects, and continuously stimulate the vitality of private investment.
For franchise projects, whether state-owned enterprises or private enterprises, project financing has always been a "bottleneck" problem. The "New Administrative Measures" add new financing methods such as encouraging insurance capital support and issuing real estate investment trusts (REITs) in the infrastructure sector. In addition to the traditional expected income pledge loans, the issuance of project revenue notes and asset securitization products for project financing, the establishment of private equity funds in accordance with the market-oriented approach, the introduction of strategic investors, the issuance of corporate bonds, project revenue bonds, corporate bonds, non-financial enterprise debt financing instruments and other financing methods, the new "encourage insurance funds to provide diversified financial support for franchise projects through debt, equity, asset securitization products and other means", issuance of real estate investment trusts (REITs) in the infrastructure sector". It also emphasizes that the financing of franchise projects shall not be guaranteed by various financial funds or used as a source of repayment to prevent the addition of hidden debts of local governments.
It is worth noting that although the "New Administrative Measures" encourage market entities to participate in the transfer of franchises, it is still a red line to prevent the risk of new hidden debts. The Central Financial Work Conference, the 2023 Central Economic Work Conference, and the 2024 Two Sessions all emphasize "coordinating development and security, and effectively preventing and resolving risks in key areas, including local debt risks". In this regard, Gao Huike, a researcher at the Research and Development Department of China Securities Pengyuan, said that since the end of September 2023, the "package of local government debts" has continued to advance and achieved certain results.
Gao Huike believes that for local governments, under the continuous promotion of the "package of debts", it is necessary to strictly prevent the addition of new local government debts through franchise projects and obstruct the process of debt reduction. It is also necessary to strictly grasp the type of project that adopts the franchise model. For private enterprises, special attention should be paid to the reasonable determination and clarification of rights and obligations, charging mechanisms, risk and return sharing mechanisms, etc., and should also fully consider future market changes, project uniqueness and other issues, so as to reduce the uncertainty of future project benefits.
Activate private investment
There has always been a saying in the market that "a PPP without the participation of private enterprises is not a successful PPP". Looking at the international model, PPP is mainly divided into two models, one is based on user-paid franchising, and the other is based on private financing schemes paid by the public sector (government). In this regard, a professional engaged in PPP business said that the introduction of the PPP model by the mainland based on foreign experience is intended to ease the government's financial constraints and improve the efficiency and quality of public services. "However, the PPP projects previously implemented were mainly paid by the government, the franchise model was weakened, and the motivation of social capital to take the initiative to innovate, reduce costs and increase efficiency was insufficient, which increased the pressure on local government fiscal expenditure. ”
For the previous problems of high participation of central enterprises and state-owned enterprises, and low participation of private enterprises, the reporter combed and found that it was mostly related to factors such as the large amount of project investment, high requirements for professional standards, the lack of relevant experience of private enterprises, and the relative lack of risk tolerance. In this regard, the "New Administrative Measures" specifically set up financial support measures to encourage private enterprises to participate in franchise terms, equal treatment of financing of enterprises under different ownership systems, and increase support for private enterprises, in order to reduce the gap.
However, judging from the market reaction, more private enterprises are concerned that the "New Administrative Measures" will extend the franchise period from the previous "no more than 30 years" to "no more than 40 years". This has a positive effect on franchise projects with generally lower revenues, and the extension of the term will further dilute the cost and increase the profitability of the project.
"We are also paying attention to the "new management measures", the previous participation in the franchise project must be "short, flat and fast" and "pocket-in-peace", but the "new management measures" clarify the government's legal responsibility for embezzlement, misappropriation, and arrears of concessionaires on the payables, and clearly stipulate that civil and commercial disputes are resolved through arbitration and civil litigation, which is equivalent to giving private enterprises a 'reassurance', stabilizing the expectations of private enterprises and boosting the confidence of private enterprises. A person in charge of a private enterprise engaged in solid waste projects told reporters, "At the same time, the "new management measures" make it clear that the concessionaire to improve the management and improve the technology of the income belongs to it, which can also effectively stimulate the vitality of private investment, improve the quality and efficiency of public products and public services, protect the legitimate rights and interests of franchisees, and stimulate the vitality of private investment." ”
In fact, since 2023, relevant departments have provided policy support to encourage private enterprises to participate in franchise projects. The "new PPP mechanism" presents three characteristics: first, in terms of the main body of participation, to encourage the participation of private enterprises to the greatest extent, second, in terms of revenue sources, focusing on user-paid projects, and third, in terms of operation mode, all adopt the franchise model. At that time, the National Development and Reform Commission also stated that it would revise the rules for franchise management in accordance with the requirements of the new PPP mechanism, so that it would become a prerequisite for the implementation of the new PPP mechanism.
Subsequently, the National Development and Reform Commission (NDRC) announced that in accordance with the relevant requirements of the "PPP New Mechanism" forwarded by the National Development and Reform Commission and the Ministry of Finance forwarded by the General Office of the State Council, the "Outline for the Preparation of the Franchise Plan for Public-Private Partnership Projects (2024 Trial Version)" (hereinafter referred to as the "Program Outline") was formulated and issued.
Ding Bokang, deputy director of the Urban Renewal Working Committee of the China Urbanization Promotion Association and chairman of the Modern Consulting Group, believes that the "Program Outline" focuses on clarifying the key points of the feasibility demonstration of the franchise model such as project attributes, revenue channels and methods, profitability and comparative advantages, and further demonstrates that the future franchise project will focus on operation and operational sustainability, which is in line with the orientation of the franchise project from "heavy construction" to "heavy operation" and "risk control". The promulgation of the "Program Outline" can, to a certain extent, fully mobilize the enthusiasm of private capital, so as to effectively stimulate the vitality of private investment. "The introduction of the above policies will further clarify the implementation rules and requirements of franchise projects under the new mechanism, and it is believed that a number of PPP projects will emerge in more fields, and the participation and investment of private enterprises in related fields will be further improved in the future. ”
(Editor: He Shasha Review: Zhu Ziyun Proofreader: Zhang Guogang)