Developing a financially resilient public-private partnership framework Proposal and Analysis of Crowdfunding in Public-Private Partnership Projects

Framework of a Typical PPP Project Public Sector Authority Public Agent’s Consultants Advice PPP Contract Public Sector Private Sector Advice SPV’s Consultants Debt Provider Construction Contractor Payment Construction Agreement Consortium (Special Purpose Vehicle) Debt Finance Construction Investor Equity Finance Facilities Management Contract Investment Residents/Users Service Facilities Management Operator Facilities Management Investor Investment Payback Service Payment 3rd Party Equity Investor Demand Operation Finance

A Major Financial Risk in PPP Projects Unhealthy VfM (Value of Money) in project operating phase Overestimate of demand evaluation Over 50% of road projects have forecast error larger than 20% 90% rail projects are overestimated by 106% Estimations do not become more accurate over time Risk and loss allocation analysis and research

PPP Risk Sharing Principle Each risk should be allocated to the party best able to manage it and at the least cost. Risk of lack of demand? Available Payment (Government bear risk) Minimum Revenue Guarantee (Joined risk bearing) Demand could be best managed by the service users and at the least cost. So, how about using crowdfunding to transfer the demand risk?

Features of Crowdfunding Pros Fast Low/Zero Interest Individual Participations Accurate & Low-Cost Market Forecast Cons Lack of Confidence in project delivery

Framework of a Crowdfunded PPP Project Public Sector Authority Public Agent’s Consultants Advice PPP Contract Public Sector Private Sector SPV’s Consultants & Public Hearing Advice Debt Provider Construction Contractor Crowdfunding Payment Construction Agreement Consortium (Special Purpose Vehicle) Debt Finance Construction Investor Equity Finance Facilities Management Contract Investment Residents/Users Service Facilities Management Operator Facilities Management Investor Investment Payback Service Payment 3rd Party Equity Investor Demand Operation Finance

Advantages of Crowdfunded PPP Project Healthier cash flow and less debt burden from capital markets Practical and accurate demand evaluation before the project started Less burden on risk sharing for all parties in case of insufficient demand Fostering consumption habits before the project started Government support for investor’s confidence on the project Better guaranteed project delivery and operation than average crowdfunded projects

Framework of Crowdfunded PPP Projects Project Planning & Financing Gathering Crowdfund Refine Project Details Market Estimation Analysis for Crowdfunding Proportion in all Funding Options Project Construction Publishing Project Progress Project Operation Payback for Crowdfunding investment Payback Option Analysis

Analyzing Parameters and Methodology Crowdfunding payback model Stock based or Pre-payment based Influence on project VfM Analysis on proper proportion of crowdfunding Influence on project risk resilience Risk allocation based on proposed framework Stochastic simulation modeling Game theory modeling

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