Risk Factors for PPP: the Case of HZMB Project in GPRD Metropolitan

Risk Factors for PPP: the Case of HZMB Project in GPRD Metropolitan

Yao Yi, Associate ProfessorGuangzhou Academy of Social Sciences, China

HZMB Background

Hongkong-Zhuhai-Macao Bridge

PPP Development in China

• Shajiao Thermal Plant, Shenzhen, 1988• Labin Power Plant, Guangxi, 1995

• National Olympic Stadium, 2003•Beijing Subway No.4 Line, 2005

First Round

Second Round

• No PPP national law or regulation• No PPP control organization Legal FrameworkLegal Framework

Financing HZMB

Early 2008

End 2008

1990s

Estimated:

$ 2 billion

Funding Scheme by GD, HK, Macao:

Bridge: $6.3 billion

Overall: $9 billion

COST: Keep Rising

Feasibility Report:

Overall: $11 billion

Feasibility Report:

Overall: $11 billion

Funding Model: from BOT to Government Funding

BOT Model

Early 2008:

Private investorGovernment subsidy

Government Funding

End of 2008:

Government capital fund bank loans

Stake Holders:

Government 1

Private sector2

public3

Stake Holders:

Government

Stake Holders:

Private sector: Attitude: active→ less interested

Interests: profit prospect diminished

Public opposition: law case in 2010,

1 year delay & 5% cost rise

Barriers for PPP in HZMB Case

Huge investment vs. Low market return

Legal constraints

Project coordination

Conclusion: Risk Factors for PPP

Market return risk

Public opposition

Lengthy decision-making process

Loss of project uniqueness

RISK