Optimizing an Equity Capital Structure Model for Public–Private Partnership Projects Involved with Public Funds

Feng, Ke; Xiong, Wei; Wang, Shouqing; Wu, Chunlin; Xue, Yusheng

doi:10.1061/(asce)co.1943-7862.0001349

Cited by 42 publications

(34 citation statements)

References 46 publications

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“…It has been indicated that the three objective functions are contradictory, which means the maximization of public interests and economic interests cannot be achieved at the same time [48,49,71]. Therefore, the introduction of sustainability by combining the economic, social, and environmental levels is essential to obtain a more scientific capital structure rather than just caring about economic factors.…”

Section: Analysis Of the Quantitative Calculation Resultsmentioning

confidence: 99%

“…A low opportunity cost coefficient can ensure public interests and achieve long-term scientific plans and usages of local financial funds. Sharma et al [48] set γ as 2% in an Alabama highway PPP project, while γ was 6% in an equity optimization model of an urban rail transit PPP project [71]. 4.…”

Section: Opportunity Cost Coefficient Of Equity Invested By the Publimentioning

confidence: 99%

“…If the PPP project relies on user payment, the sum of the above two is the sum of the user payments of the PPP project (if the public sector pays for the PPP project, the sum of the above two is the sum of the government payment; if it is a project with a feasibility gap subsidy, the sum is the user payment plus the feasibility gap subsidy). The minimization of the above three parts shows the minimum social costs of the PPP project [48,71].…”

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confidence: 99%

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Capital Structure of Public–Private Partnership Projects: A Sustainability Perspective

Jing

Jin

2019

Sustainability

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Capital is key to achieve the standardized operation of public–private partnership (PPP) projects. The capital structure of PPP projects stresses the structure of equity and debt funds, which are important for securing life-cycle ample funds and achieving the expected outcomes of projects. By incorporating sustainability into PPP projects, the capital structure not only secures current needs of funds, it also focuses on life-cycle stable operations and achieves economic, social, and environmental benefits. This study first set the equity–debt ratio and equity investment ratio of the private sector as the dependent variables and built a selection model of the capital structure of PPP projects from a sustainability perspective using the benefit, cost, and project conditions as core factors based on multi-objective programming and a discounted cash-flow model. Then, the qualitative analysis could be achieved according to the analysis of critical factors that had not been calculated. Afterwards, a selection process which combined the multi-objective programming model with qualitative analysis was proposed to achieve a comprehensive selection of the capital structure of PPP projects from the sustainability perspective. Finally, the process was applied to a real project to verify its rationality and usability. This study not only enriches the theoretical research of PPP projects and provides a new idea on which to build the capital structure selection model, it also proposes a selection process that can provide scientific references for the selection and optimization of the capital structure of PPP projects in practice.

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Section: Analysis Of the Quantitative Calculation Resultsmentioning

confidence: 99%

Section: Opportunity Cost Coefficient Of Equity Invested By the Publimentioning

confidence: 99%

mentioning

confidence: 99%

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Capital Structure of Public–Private Partnership Projects: A Sustainability Perspective

Jing

Jin

2019

Sustainability

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“…This study has used the minimization of costs of public funds as an approximate quantitative indicator for public interests in order to make this abstract concept more quantifiable. In other words, the efficient use of public funds is ensured when the potential costs of public investments, including public equity and government subsidy, are minimized (Feng et al 2017). …”

Section: Objective Functionmentioning

confidence: 99%

“…These models didn't consider the influence of public investments, which limits their use in PPP projects involved with public capital. Secondly, Sharma et al (2010) and Feng et al (2017) tried to propose a model that incorporates the costs and benefits of using public finance. However, in these models, only one optimal solution can be provided at a time, which poses limitation on the flexibility of management.…”

Section: Comparisons With Previous Researchmentioning

confidence: 99%

Balancing Public and Private Interests Through Optimization of Concession Agreement Design for User-Pay PPP Projects

Feng

Wang

et al. 2018

Journal of Civil Engineering and Management

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Abstract. In user-pay public private partnership (PPP) projects, private sectors collect user fees to cover cost and reap revenue. For projects that cannot be self-financed, public sectors usually invest public funds to make them financially feasible. The concession agreement allocates revenues and risks, and lies in the center of balancing public and private interests. However, stakeholders may have contrary opinions regarding the optimization of concession agreement. While private sectors are concerned about earning money, public sectors pay more attention to the efficient use of public funds. To address this challenge, this paper firstly identifies several key concessionary items, including concession period, concession price, capital structure and government subsidy. Then, a multi-objective optimization model is presented using discounted cash flow method, in which key concessionary items act as decision variables and public and private interests are represented by two sub-objectives. Subsequently, the model is solved using non-dominated sorting genetic algorithm-II (NSGA-II). Furthermore, a numerical case based on Beijing No. 4 Metro Line is provided to demonstrate the application of the model. Results show that the proposed model can produce a series of viable combinations of concessionary items that balance public and private interests, which provides practical references for relative decision making activities.

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Public–private partnership as a tool for sustainable development – What literatures say?

Wang

2020

Sustainable Development

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Public–private partnership (PPP) has been proposed by the United Nations as a tool for Sustainable Development Goals. The perceptions and tendencies of literatures on this concept have, however, not yet been fully investigated. This research fills the perceived gap, by reviewing sustainability‐oriented PPP studies, to better understand the relationship between PPP and sustainable development. A bottom‐up approach is adopted, with the help of a purposely designed database. The concept and development stages of sustainability‐oriented PPP are examined. The research status of sustainability‐oriented PPP is analysed. The increasing popularity of sustainability‐oriented PPP studies is, to a degree, associated with policies of the key global players in PPP. Research gaps and future research trends are suggested. This research contributes to the body of knowledge of sustainability‐oriented PPP and can help researchers and practitioners in better understanding the status, gaps and direction of future efforts regarding sustainability‐oriented PPP.

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Optimizing an Equity Capital Structure Model for Public–Private Partnership Projects Involved with Public Funds

Cited by 42 publications

References 46 publications

Capital Structure of Public–Private Partnership Projects: A Sustainability Perspective

Capital Structure of Public–Private Partnership Projects: A Sustainability Perspective

Balancing Public and Private Interests Through Optimization of Concession Agreement Design for User-Pay PPP Projects

Public–private partnership as a tool for sustainable development – What literatures say?

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