Caixin
Mar 09, 2017 06:27 PM
FINANCE

Three Public-Private Partnership Programs Seek OK to Issue Asset-Backed Securities

(Beijing) — China’s stock exchanges have started reviewing the first three applications from public-private partnership (PPP) programs that have sought to securitize their assets — an effort to speed up returns to private investors.

Two groups of private investors, one backing a sewage treatment plant and the other a public heating project, separately applied for permission to issue asset-backed securities on the Shanghai Stock Exchange on Wednesday. The Shenzhen bourse also received an application, from a private investor in a water conservation project.

The sewage treatment plant, a partnership between Beijing Capital Co. Ltd. and local governments in Shandong province, aims to issue 530 million yuan ($76.7 million) worth of asset-backed securities. The public heating system, funded by real estate developer China Fortune Land Development Co. Ltd., plans to issue 706 million yuan worth of asset-backed securities, while the water conservation project said it will raise 320 million yuan.

Since late 2013, the Chinese government has started to tap private capital to fund infrastructure projects, wary of worsening the balance sheets of already indebted local governments. But low rates of return and challenges in competing with state firms to get contracts have made private companies reluctant to make such infrastructure investments.

Private investors had agreed to fund more than 1,300 projects with a total of 2.2 trillion yuan by the end of 2016, but only 30% of the projects have started, Finance Minister Xiao Jie said during a news conference on Monday.

To attract more private capital, China’s central planning agency and securities regulator have promised to streamline the process of reviewing and listing the PPP projects through a fast track set up by the stock exchanges.

PPPs that have been in business for at least two years and generated a stable cash flow will be strongly encouraged to raise funds through selling asset-backed securities, the National Development and Reform Commission and the China Securities Regulatory Commission said in December. The planning agency also urged local bureaus to recommend one to three PPP projects for securitization by Feb 17.

Zhang Lu, an assistant analyst at CEBM Group, a subsidiary of Caixin Insight Group, expected that the move will help attract more private capital in 2017 as securitization will effectively bring liquidity to the assets of the PPP projects.

Contact reporter Chen Na (nachen@caixin.com)

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