TOT mode cannot be understood as BOT mode. BOT mode is "build-operate-transfer" and TOT is "transfer-operate-transfer". The difference is that the TOT mode project has been completed, while BOT is a project that has not yet been completed. Because TOT has passed the construction stage, it is less risky for investors, but the investment income is naturally lower than BOT.
Operating procedure of TOT
1. Make a TOT plan and submit it for approval. The transferor shall first prepare a TOT project proposal in accordance with relevant national regulations, seek the consent of the competent department of the industry, and report it to relevant departments for approval in accordance with existing regulations. State-owned enterprises or state-owned infrastructure managers can only implement TOT mode with the approval or authorization of state-owned assets management department.
2. The project sponsor (who is also the owner of the put-into-production project) establishes SPV or SPC (Special Purpose Company), and the sponsor transfers the ownership of the completed project and the ownership of the newly-built project to SPV, so as to ensure that a specialized agency has full authority to manage, transfer and construct the two projects and coordinate the problems that arise. SPV is often a franchise institution established by the government or participated by the government.
3.TOT project bidding. According to national regulations, the transferee of TOT project must be selected through bidding, and its procedures are basically the same as BOT, including tender preparation, prequalification, tender document preparation and bid evaluation.
4.SPV reached an agreement with investors through negotiation to transfer all or part of the operation rights of the projects that have been put into production in a certain period of time in the future, and obtain funds.
5. The transferor uses the obtained funds to build new projects.
6. New projects are put into use.
7. After the expiration of the project, recover the transferred project. Upon the expiration of the transfer, the assets shall be handed over to the original transferor without debt, guarantee or good facilities. Of course, in some cases, the transferred project is recovered first, and then put into use in new projects.
Benefits of TOT model
(1) Revitalize the existing assets of urban infrastructure and open up new ways to operate the city. With the acceleration of urban expansion, a lot of funds are urgently needed for infrastructure construction. Faced with the huge demand for funds, local financial investment can be said to be "a drop in the bucket" and "cash-strapped". On the other hand, through decades of urban construction, the financing function of some operating assets in urban infrastructure has been idle, not fully utilized, and even assets have precipitated. How to revitalize these existing assets and maximize their social and economic benefits is a problem that every city operator must face. TOT project financing model is a business model designed for this phenomenon.
(2) Increase the total social investment, promote the development of related industries with the development of basic industries, and promote the stable growth of the whole social economy. The implementation of TOT project financing method not only revitalizes the existing assets of urban infrastructure, but also guides more social funds to invest in urban infrastructure construction, which promotes the rapid development of the whole related industries and the stable growth of social economy from the perspective of "investment".
(3) Promote the rational allocation of social resources and improve the efficiency of resource use. Under the planned economy mode, the management of public facilities has always followed the monopoly management mode, and it is difficult for other social subjects to enter the basic industry. Due to some "chronic diseases" of monopoly operation itself, the long-term operation level of public facilities is low, and it is difficult to improve efficiency. After the introduction of TOT project financing mode, due to the role of market competition mechanism, it has added invisible pressure to various infrastructure institutions, prompting them to improve management and production efficiency. At the same time, the business units that generally participate in TOT project financing are professional companies. After taking over the project management right, they can give full play to the advantages of professional division of labor and use their successful management experience to quickly improve the efficiency and economic benefits of project resources.
(4) urge the government to change its ideas and functions. After the implementation of TOT project financing, firstly, the government can truly realize that "managing the city" is not just a slogan, but more importantly, it is a rigorous, meticulous and scientific work; Secondly, the government has increased new financing methods and increased investment in urban infrastructure. The thinking mode of government decision-making will not only pay attention to "incremental investment", but also always pay attention to "stock revitalization"; Thirdly, after the infrastructure is introduced into other business entities in society, the government can really perform the role of "referee", focus on strengthening urban construction planning, guide the direction of social capital investment, better serve enterprises and supervise their economic behavior.
Advantages of TOT model
Comparison between (1) and BOT project financing methods. BOT project financing is the abbreviation of "build-operate-transfer" mode. Compared with TOT project, the financing method saves the construction link, so that the project operator can avoid the risks in the construction stage and benefit after the project takes over. On the other hand, because the project income has entered the normal operation stage, it is much easier for the project operator to refinance by providing financial institutions with the pledge guarantee of the right to operating income.
(2) Compared with borrowing from banks and other financial institutions. The essence of loans from banks and other financial institutions to project legal persons is a loan contract relationship. Although there are some safeguards, because financial institutions cannot directly participate in the project operation, they can only supervise the safe use of funds indirectly. At the stage when the social credit system has not been fully established, lenders have to bear relatively large risks. Due to the psychological function of lenders, project operators want to raise funds through financial institutions, and their cumbersome procedures and complicated personnel relations are often prohibitive. TOT project financing, investors directly participate in project management, because of interest-driven, its operational risk will naturally be controlled within its tolerance.
(3) Compared with joint venture and cooperative financing. Joint ventures and cooperation involve more than two stakeholders. Because the two sides stand in the perspective of different stakeholders, the form of joint venture and cooperation generally has a "running-in period" and the decision-making procedure is relatively long. Finally, the profit distribution is also based on the agreement or the actual contribution ratio of each party. When TOT project financing is implemented, there is generally only one business entity, and all business risks and benefits are borne by the operators during the contract period. In this way, it is much easier to make decision-making efficiency and internal command and coordination within the enterprise.
(4) Compared with internal contracting or lease in kind. Although contracting or leasing has also transferred the project management right in a certain period of time, there are still many differences compared with TOT project financing. The general subject of business contracting is a natural person, and the status of the foreign legal person of the project remains unchanged, completely retaining the ownership power of the project. Lease behavior Although the operator has his own independent foreign civil rights, the right of asset ownership is exercised by the lessor, and the lease fee is generally paid in batches or once a year according to the contract. TOT project financing is a contractual behavior between two legal entities. During the contract period, the operator still has independent civil rights and obligations. According to the contract, the operator can also own some of the rights of the property owner. The fee for the operator to obtain the right to operate the property is also a one-time payment.
(5) Compared with financial leasing. Financial leasing refers to the behavior that the lessor buys equipment for the lessee to use, and the lessee pays the rent according to the lessee's choice of suppliers and equipment. Financial leasing involves two different contracts: purchase and lease, and the subject of the contract also involves lessor, supplier and lessee. The essence of its operation is "to achieve the purpose of financing by melting things". TOT project financing method, the contract subject is only the property owner and other social management subjects. The operator is both the investor and the project operator. Owners temporarily transfer ownership and management rights, with the purpose of raising more construction funds for urban infrastructure construction through project financing. The financing mode of TOT project omits the links of equipment procurement, construction and installation, and the risks of equipment debugging and construction and installation have been borne by the project owner. After the delivery of the target agreed in the contract, the operator can enter the normal operation stage and obtain operating income.
(6) Comparing road hatchbacks or other land development rights as compensation methods. Generally speaking, compensation projects with development rights have no revenue management rights, and the projects are purely public welfare. TOT project financing, the project itself must be operating assets, with relatively fixed income. Compared with other financing methods with development rights, it saves the risks of construction links and policy uncertainty, and its operation mode is beneficial to both project owners and operators.
Problems needing attention in implementing TOT model
1. Pay attention to the benefits of new projects. Due to the large scale and high capital cost of the new project, it is necessary to avoid the situation of "greedy for perfection", low efficiency and giving up halfway in the previous construction. First of all, in the current situation of insufficient TOT financing experience, we should do a good job in pilot work and sum up experience in time, from small to large, from single project to comprehensive project. Secondly, comprehensive and detailed evaluation and demonstration must be carried out before construction, and the negative impact of TOT should be fully estimated, and corresponding preventive measures should be put forward. For major projects that have a bearing on the overall situation of national construction, we should be cautious and avoid making hasty decisions and launching hastily. The relevant departments of the central government should proceed from the overall situation of the national economy, strictly examine and approve, prevent rushing headlong into action, blindly introduce foreign capital, and prevent redundant construction.
2. Pay attention to the transfer of infrastructure prices. (1) As the foreign party has accepted the completed infrastructure, a lot of risks during the construction period and trial production period have been avoided, and these risks will be borne by us. Therefore, the transfer price of management rights should be reasonably raised as the "consideration" for taking risks. (2) Because TOT projects are mostly infrastructure projects, their prices will inevitably have a great impact on social economy. However, due to the low risk and cost borne by the foreign party, the price of the project products should be reasonably set according to domestic standards and adapt to the social and economic affordability.
3. Strengthen the evaluation of state-owned assets. When the transferee buys out all or part of the management right of an asset, it must evaluate the asset. If the transferred assets are underestimated, it will lead to the loss of state-owned assets; Overestimation may affect the enthusiasm and investment enthusiasm of the transferee. Therefore, we should correctly handle the relationship between asset transfer and asset evaluation. The appraisal agency hired should have corresponding qualifications, and it is best to communicate with the transferor and its financing consultant in time during the appraisal, and the appraisal results should be reported to the state-owned assets management department for approval.
4. The maintenance and update of the project with the transfer of management rights should be clearly defined. In order to prevent foreign (transferee) resources from being exhausted and taking advantage of others' danger, it is a riddled mess when it is handed over to us, and a transitional method can be adopted. During the transition period, the two parties will jointly manage and jointly operate the project, and the profits will be shared in a certain proportion to facilitate our supervision and management of the project operation. In addition, foreign investors should be encouraged to carry out technical transformation, equipment renewal and other necessary expansion and transformation of the project.
5. Further improve the legal environment for TOT investment. Although TOT involves few links, as a new form of utilizing foreign capital, it still inevitably needs the guarantee of a perfect legal environment. The government should regulate the behavior of TOT-related subjects through legislation, clarify the rights and obligations of all parties, ensure the paid use of transferred projects and the stability of franchise rights, protect the legitimate rights and interests of investors, and minimize the legal risks of investment. Therefore, it is necessary to formulate a set of laws and regulations suitable for TOT mode according to China's national conditions and international practices, so as to create a good legal environment for China to effectively use TOT.