Water Pollution Prevention Coexists Opportunities and Challenges in Innovative PPP Models

From the newly added environmental protection PPP project, the scale of comprehensive watershed management projects is relatively large. For example, the first phase of the comprehensive management of water environment in the Poyang Lake Basin will reach RMB 12.5 billion. The picture shows Poyang Lake. This year, the PPP model has entered the practical year. In practice, the industry has confidence in the prospects of the PPP model, but there are also doubts. What are the opportunities in the future? Can you solve the problem through practice? This publication sets up a series of reports on PPP practice and will provide references for the perfection of this model through interviews with specific cases of PPP.

As soon as the "Water Ten Article" landed, the Ministry of Environmental Protection and the Ministry of Finance jointly issued the "Implementation Opinions on Promoting Government and Social Capital Cooperation (PPP) in Water Pollution Prevention and Control Areas (hereinafter referred to as "Opinions") to encourage the promotion of PPP work in the area of ​​water pollution prevention and control. Implementation of urban and rural integration of water supply and drainage, integration of factory networks, and industry “packaging” to achieve combined development, attracting social capital to participate, and specifying the mechanisms and models for the large amount of capital investment required for water pollution control.

On the one hand, the comprehensive management of water environment proposed by the “Water Ten Article” is mostly a long-term, complex, and capital-intensive system project. The local government needs urgent leveraging; on the other hand, it is currently the most mature in the degree of marketization and profitability. The water industry is also looking for new investment opportunities.

From monolithic projects to comprehensive governance, dominant companies step into new competition fields

Monomer facility inventory in the field of environmental governance has been quite limited

Enterprises should focus on developing comprehensive projects for the purpose of governance effectiveness

Since last year, the water industry can be described as mergers and acquisitions and PPP fly, both become the starting point for a new round of industry restructuring and restructuring. In particular, the latter is becoming a new competitive field for competitive companies.

According to industry analysts, with the advancement of PPP model practice, the financing difficulties in the field of pollution control are expected to be alleviated, and environmental protection companies with the advantages of capital, technology, resource integration capabilities, etc. will gain more opportunities and will have obvious opportunities in obtaining orders. Competitiveness.

Last year, Beijing Urban Drainage Group Co., Ltd. took the lead to win the Guangxi Nakao River Comprehensive Improvement Project. Although the investment of 1 billion yuan is not large, the industry is more concerned about its pioneering exploration in basin management; medium-sized enterprises are not to be outdone. Tian Environmental Group recently signed two PPP projects in Shanxi and Ningxia, and has conducted in-depth cooperation with local governments in the park's recycling economy and water resources management; Beijing Wanbangda Environmental Protection Technology Co., Ltd. has used the PPP model to rapidly increase its future revenue. Its total projects in Wuhu, Anhui Province and Wulanchabu, Inner Mongolia, totaled 8.6 billion yuan, more than 8 times the company's operating revenue in 2014.

Such market news is still accumulating. After two five-year intensive construction period, a simple fact is that the stock of construction and operation of individual facilities in the field of environmental governance has been quite limited. In this regard, Xue Tao, executive director of the E20 Environmental Industry Research Institute, said that there are few BOT projects in the environmental protection industry. Among them, the sewage treatment plant is basically divided up, and the waste incineration plant will also be in the next two or three years.

In his view, on the one hand, companies are looking for new investment opportunities. On the other hand, the “Water Ten Articles” put forward such tasks as reducing black and odor bodies, carrying out comprehensive management, and restoring ecosystems. Local governments will definitely find ways to attract social investment participation. solve.

The comprehensive management of the water environment, represented by black and odor management, is a complex and huge investment project. Taking river governance as an example, according to the survey of relevant parties in Jiangsu, Zhejiang, and the Pearl River Delta, it is expected that the average length of rivers in each black and odor city will be approximately 2 km to 4 km, and the remediation funds per km will be approximately 20 million to 45 million. Yuan, including the control of pollution sources, sewage interception, sewage treatment plant construction, dredging, diversion of living water and so on. “This requires a huge investment. How to formulate supporting policies and measures to protect the capital of the city’s black and odor-laden waters is also one of the difficulties.” Xue Tao said.

The forthcoming introduction of the “Opinions” shows that the policy level clearly draws in the idea of ​​attracting private capital. This also gives companies the opportunity to develop integrated projects from the construction and operation of individual projects to the use of governance effects. The latter has both mass and competitive levels. Have a qualitative improvement.

How to assess the effectiveness of governance and pay?

Local governments no longer take environmental governance; decentralized payment pressure

Improve investment efficiency, regional PPP project is the development direction

The National Development and Reform Commission’s PPP project library is constantly being updated and environmental protection has become a highlight. From the newly added projects, although the number of integrated basin management projects is small, the investment scale is relatively large. For example, the first phase of the comprehensive management of the water environment of the Poyang Lake Basin reached 12.5 billion yuan, while the Jilin Yitong River Comprehensive Treatment Project and the Dali Yunnan Bohai Lake sewage interception project also reached 5.6 billion and nearly 3.5 billion yuan respectively.

In the recent surveys, the reporter learned that local governments that used to be involved in the comprehensive management of the environment and acted as the role of the first-tier developer have deeply felt their own dismantling and governance tasks. Many grass-roots local government officials stated that the government’s overall environmental governance is first and foremost a one-time investment. Second, the time and sequence of specific project arrangements are unreasonable. Third, investment and governance effects are not linked. Therefore, some local governments began to choose to cooperate with powerful companies, not only to relieve payment pressure through longer project periods, but also to increase investment efficiency by using governance performance as a basis for payment.

It is reported that the Naka River project in Guangxi includes watershed management and sponge cities, including river regulation, sewage interception, ecology, coastal landscapes, sewage treatment, sponge city construction, and information monitoring projects. The total investment is estimated to be 1 billion yuan. The contract period is 10 years. Relevant person in charge of local governments told the media that the project will bear most of the risks from social capital. The government pays service fees annually through performance appraisal through performance appraisal to reduce government risks and liabilities.

According to Xu Xiangdong, a partner of Beijing Capital Law Firm, the comprehensive governance project is certainly a future development direction, not a single entity, a combination of two or more projects, and these can be collectively referred to as regional PPP projects. For example, a sewage treatment plant plus a river, may also add a wetland park. "In addition to the recent examination of the Naka River Project in Guangxi, Dongying, Shandong Province is also exploring the treatment of sewage treatment plants and the packaging of wetlands."

However, such projects are large in scale and have great challenges. Xue Tao said that, for example, black-and-odour water bodies, on the one hand, the technology is not mature, the business model is still not clear; on the other hand, these governance projects must have visible and sustainable results.

“In the past, the output of government-enterprise cooperation was often a single project. Even if the quality is not high and the operation is not good, it is not so obvious. However, in the current comprehensive control project, the final output is quality improvement. In this regard, the government must pay attention to it. In particular, environmental protection has become a consensus from top to bottom. Projects that do not have the effect of governance will bring great risks to both parties, including investment and administration.” Xue Tao said.

How to evaluate, evaluate, and pay for governance effects is a brand-new field for both government and enterprises and is still under exploration. Xu Xiangdong stated that performance service is not a project in the traditional sense. There must be assessment, payment, and rewards and punishments. This involves a very complex set of index systems. The formulation must involve the participation of relevant professionals and requires a lot of practice to accumulate. . "It's only just getting started now," he said.

Business project income subsidies for public welfare projects, how to implement?

After rivers and wetlands are rehabilitated as ecological resources, how to develop and manage them?

Gaining income is relatively unfamiliar to environmental protection companies and their experience needs to be accumulated

With the gradual improvement of the sewage treatment fee collection mechanism, companies can charge different amounts, and many of the above-mentioned projects for comprehensive water environment management are less or even impossible to realize operating income. Xue Tao called it a pure public or semi-public good project, such as river governance, wetland parks and so on. "The sewage treatment plant already has a payment mechanism. What is the government's subsidy ability for public welfare and semi-public welfare projects?" he proposed.

"Packaging, Bundling" is becoming a possible solution. "Provide some operational resources to supplement projects that cannot be clearly defined to attract investors, such as land or other operating assets. The Opinions also explicitly encourage the use of operational projects to subsidize governance projects with strong public welfare." Xue Tao said that some places have begun to “bring” tourism into the water environment. "The future PPP project for the environmental industry is certainly complex and will include some purely market-oriented projects as a supplement."

After rivers and wetlands are rehabilitated as ecological resources, how to carry out development, management, and gains are relatively unfamiliar to environmental protection companies and their experience needs to be accumulated. Zhang Hengli, vice president of Jinzhou Environmental Group and general manager of Beijing Anling Water Technology Co., Ltd. is concerned about the more "realistic" problem: the idea of ​​subsidizing this kind of operating project must be implemented, and local governments must not use the mentality of circling money Attracted over the matter.

"For example, when assessing tourism revenue, the number of false reports and returns, but in fact it is difficult to do, which will lead to major problems in the implementation of the project, bringing a greater risk to the company." Zhang Hengli said.

Related reports

Watershed management requires high PPP volume

Test the resources, capital and technical strength of environmental protection companies

According to a comprehensive report by China Environment News, the National Development and Reform Commission recently launched the PPP project bank, which has a total of 1,043 projects and a total investment of 1.97 trillion yuan. Among them, there are 365 environmental protection PPP projects, accounting for 35% of the total. However, the total investment of environmental protection PPP projects is 168 billion yuan, accounting for only 8.5% of the total project library investment.

According to statistics, the above 365 environmental protection projects have been incorporated into the municipal, public service and ecological environment fields. The comprehensive project or infrastructure construction project of the park includes water supply, pollution control, and garbage disposal.

It is understood that investment in individual projects such as water and garbage disposal in the environmental protection field is relatively small. The average investment of the project is about 300 million yuan, and there are a large number of small projects with a size of 10 million yuan. The investment volume of projects such as river basin management and ecological park construction is relatively large, but the number of projects launched is small.

Industry sources pointed out that water projects are capital-intensive projects and are areas where China has accumulated more practical experience in PPP. The government and social capital are both more skilled, but they also face many challenges and urgently need to innovate in models.

Taking the comprehensive environmental management or ecological park project as an example, the BT model was used in many cases. The essence is to provide financing to the government. The government will repay within three to five years, but now the local government is under heavy financial pressure and has a shorter period of three to five years. Debt pressure is greater and it needs to be transformed into a longer-term PPP project.

Professionals pointed out that it is necessary to select specific PPP models according to different projects. PPP projects in environmental protection areas are mostly new projects and are expected to be operated mainly in BOT or BOO mode. There are also a small number of stock projects that need to be converted or transferred, and ROT or TOT methods are used; individual local governments may have financial resources that are tight and can also be leased back through financial leasing. In this way, the financing income is used for the construction of new pipeline networks.

At the same time, the PPP model also imposes higher requirements on the integration of technologies, funds, management, and resources of environmental protection companies. It can truly integrate resources, find long-term capital that matches the project cycle, and has strong technical capabilities (engineering capabilities or operational capabilities). It is expected to win big orders.