Formation of Optimal Capital Structure in Private–public Partnership

Abstract

This paper presents the main guidelines for the formation of optimal capital structure in a publicprivate partnership (P3). The relevance of guidelines determines the growing number of investment projects carried out by various publicprivate hybrids, which, due to unique conditions of every project, usually cope with such problems as the formation of optimal capital structure and sharing of risk between shareholders. Due to this reasons, the purpose of the paper is to form a procedural model enabling to optimize capital structure of P3. The research methodology is based on the review of scientific literature as well as, the analysis and synthesis of analyzed problems and possible solutions. The created model enables to evaluate the requirement for private sector's involvement in the delivery of public services, to select the rational basis of P3 and its form, to determine the optimal structure of public and private investment and by optimizing capital structure of private partner to evaluate financial viability of P3.

Formation of optimal private involvement in urban rail public-private partnership projects in China

“…Sharma et al (2010) presented a structured approach to determine the debt-equity investment between public and private sectors in PPP projects, which took into account financial factors alone. Jasiukevičius and Vasiliauskaitė (2012) formed a procedural model to evaluate the requirements for private sector's involvement in the delivery of public services, which is rather practical and focuses more on 'how' than 'why'. Albalate et al (2013) found that risk associated with cost recovery and relative cost of labour are key factors explaining the extent of private involvement.…”

“…The formation of the private involvement in an urban rail PPP project is important to project success, as it may arise possible problems related with the role of each party and apportionment of risks, liabilities and rewards between partners (Jasiukevičius and Vasiliauskaitė, 2012). However, very few information was disclosed in the PPP literature yet.…”

“…First, it refers to the share of investment (including both debt and equity) by the private sector, following Sharma et al (2010). In China, subnational governments particularly value this meaning, especially the share of initial investment by the private sector; second, it also denotes a more comprehensive concept including responsibilities, obligations and risks undertaken, as well as resources and skills committed to a project by the private sector, following Jasiukevičius and Vasiliauskaitė (2012).…”

Factors Influencing the Private Involvement in Urban Rail Public-Private Partnership Projects in China

“…In China, subnational governments particularly value this meaning, especially the share of initial investment by the private sector. Second, it also denotes a more comprehensive concept including responsibilities, obligations and risks undertaken, as well as resources and skills committed to a project by the private sector, following Jasiukevičius and Vasiliauskaitė (2012).…”

Formation of optimal private involvement in urban rail public-private partnership projects in China

“…by systemising various literature byJasiukevičius and Vasiliauskaitė (2012),Ke et al (2010b),Sharma et al (2010),Zhang (2005),Zhang and Chen (2013).…”