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

Jing Du,Hongyue Wu,Ruoyu Jin

doi:10.3390/su11133505

Jing Du, Hongyue Wu + Show 1 more

Open Access

https://doi.org/10.3390/su11133505

Copy DOI

Journal: Sustainability	Publication Date: Jun 26, 2019
Citations: 13	License type: CC BY 4.0

Affiliation: Southeast University, University of Brighton

Abstract

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.

Highlights

The idea of sustainability came from the Brundtland Report, which indicated that behaviors should not impact future development while meeting current needs [1]
An unreasonable capital structure caused many problems in PPP projects from a sustainability perspective, including a lack of money during the operation stage, huge debt pressure, and an unstable equity structure, which negatively impacted the success of PPP projects
Considering sustainability from the economic, social, and environmental levels, this study focuses on a traditional economic issue under a new perspective by making the capital structure meet the needs of all parties and respond to the current goal of global sustainable development

Summary

Introduction

The idea of sustainability came from the Brundtland Report, which indicated that behaviors should not impact future development while meeting current needs [1] It covers three dimensions—economy, society, and environment—and is closely correlated to public–private partnership (PPP) projects from several sustainable development goals (SDGs), including infrastructure, sustainable cities, and partnerships [2,3]. Yang et al [7] indicated that the overly high rate of return of the private sector as well as the incomplete information disclosure of project debts and investors’ return led to the termination of PF2 in the UK It shows that the operation difficulties of PF2 are strongly linked to project funds. An analysis of capital structure is important for promoting the standardized development and life-cycle healthy operation of PPP projects

Methods

Findings

Discussion

Conclusion