Some thoughts on the assets of city investment company

Assets can generate free cash flow for the company, so the assets of the city investment company are very important. Strengthening the asset management of urban investment companies and maximizing the value of assets will not only help to give full play to the comprehensive functions of urban resource development of urban investment enterprises and promote urban economic construction and development, but also help urban investment enterprises to accelerate their transformation and realize sustainable development.

1. "Implementation Opinions of the State Council on Promoting the Reform of State-owned Capital Investment and Operation Companies" (Guo Fa [2018] No.23) points out that "state-owned capital investment and operation companies can be established by reorganization and new establishment, and relevant state-owned capital can be reorganized and integrated through free transfer or marketization according to specific positioning and development needs";

2. The Notice of the State Council on Printing and Distributing the Reform Plan of the Authorized Management System of State-owned Capital (Guo Fa [2065438+09] No.9) puts forward that "the transformation of state-owned capital forms can be realized by clearing out a batch, reorganizing and integrating a batch and innovating and developing a batch";

3.202 1 year ago, in order to control the growth of implicit debt, it became an important matter for the government to clean up and standardize local financing platform companies. With the publication of documents such as Guo Fa [202 1] No.5 and Yin Bao Jianfa [202 1] 15, especially Guo Fa [2021].

According to whether there is market-oriented cash flow, the business of the city investment platform is divided into three categories: public welfare business, quasi-public welfare business and operational business. The vast majority of urban investment involves public welfare businesses such as urban infrastructure construction and land consolidation, and the direct source of business returns is local governments; Most city investment companies also have quasi-public welfare businesses, such as shed reform, affordable housing, water supply, electricity and hot gas, garbage disposal and sewage treatment. There is a certain cash flow, but it is only a small profit or loss, and government subsidies are needed to balance the gap; Some urban investment projects also involve operational market-oriented businesses, such as trade, product sales, real estate, financial leasing, and secured micro-loans.

The above three types of business of city investment company need to rely on different types of assets to operate. Specifically, public welfare business is mainly based on land assets, while quasi-public welfare business and business business need to rely on business assets, real estate assets and financial assets.

1. Land assets

Land assets are the most valuable assets of the city investment platform, and the public welfare business of the city investment company mainly focuses on land assets. In the process of land assets integration, we should pay attention to the nature of land and the way of acquisition.

From the nature of the land, it should be noted that, according to the provisions of documentsNo. [20 17]50 andNo. [20 18] 194 of the Development and Reform Office, the reserved land can no longer be integrated into the platform company, and the land currently leased and used for commercial, residential, commercial and industrial purposes can be integrated. From the way of acquisition, for non-profit public rental housing, affordable housing and other public welfare land, the land use right can be obtained free of charge through government allocation, but the premise is that the land must be approved by the relevant departments according to law and used strictly according to the specified purposes. For construction land such as business land or industrial land, the city investment platform must participate in the "bidding, auction and hanging", pay the land transfer fee in full and on time, and obtain the land use right.

In addition, urban renewal is also an opportunity to acquire land assets: in 20021year, most provinces and cities in China proposed urban renewal, and many urban investment companies set up urban renewal subsidiaries. Judging from the urban renewal policies all over the country, urban renewal is mostly a market-oriented and operational project, which does not involve the issue of new hidden debts. This is also an effective and legal debt conversion method for the city investment company.

2. Operating assets

(1) high-speed and urban rail transit

This kind of assets benefit from its stable source of cash flow, and can usually become high-quality basic assets for city investment companies to obtain long-term financing. Specifically, expressway business mainly includes the construction and operation of expressway, and urban rail transit business mainly includes the construction and operation of subway and urban rail transit. In the investment and financing mode, because this kind of business needs a large amount of funds, it usually adopts diversified financing modes, such as introducing social capital or adopting integrated management mode.

For example, in the construction of Beijing Metro Line 4, Beijing Infrastructure Investment Co., Ltd. divided the whole project into non-operating part and operating part according to the basic ratio of government investment and social investment of 7:3. Among them, the non-operating parts such as tunnels and tracks, which account for 70% of the total investment, are funded by the government, and the operating parts such as vehicles and automatic fare collection equipment, which account for 30% of the total investment, adopt BOT mode, making it the first rail transit project in China to operate in a joint venture mode of government and social capital.

(2) Other public assets

Other public assets are mainly related to urban public services, such as urban water supply, heating, gas supply, sewage treatment and garbage disposal. And other types of franchise rights such as water resources management rights, parking spaces (roadside parking, parking lots), gas stations, charging piles, driving schools, and operating cemeteries.

City investment has natural advantages in operating public utilities in the region, which is helpful to provide stable cash flow for city investment. Public utilities such as water supply, power supply and heating have obvious scale effect and high entry threshold. Generally, with the issuance of franchise rights, urban investment platforms can obtain franchise rights by integrating government and regional resources, and integrate scattered public utilities in the region to obtain stable cash flow. For example, Bozhou Urban Construction and Development Holding Group Co., Ltd. (hereinafter referred to as "Bozhou Urban Construction") has expanded its public utility business in recent years, integrating urban public utility resources such as parking lots, underground pipe corridors, natural gas, strong electricity and weak electricity pipelines, water supply and sewage, and operating with franchising as the main mode. Dalian Detai Holdings Co., Ltd. (hereinafter referred to as "Dalian Detai") has the franchise rights of major public utilities such as heating, gas, water supply and sewage treatment in Dalian Jinpu New District.

3. Real estate assets

Real estate property rights assets mainly include houses (commercial houses, affordable housing), businesses, industrial parks and so on. Generally speaking, the real estate business of city investment should be combined with the land business. The development of houses by city investment is similar to that of regional small real estate developers, who develop and build their own houses or have joint ventures with large real estate developers, and the city investment provides land resources; City investment, engaged in commercial real estate development, building office buildings, shopping malls and other properties in the core area of the city and selling or renting them to obtain rental income. For example, the real estate project development mode of Bozhou Urban Construction is divided into self-operated real estate development and cooperative real estate development, and the downstream services of the developed industrial chain are expanded based on real estate development business, including property services and commercial management operations.

In addition, most assets related to industrial parks, such as standardized factories, exist in the investment platform of development zones. The rental income and other service income of general factories are obtained through the construction of standard chemical plants and their own operations. In addition, some of them also involve providing water, heat, electricity and even financial services for enterprises in the park. It should be noted that local governments often require industrial parks operated by city investment to provide preferential treatment to enterprises, such as rent reduction, guarantee, small loans and other financial services. In the initial stage of operating the industrial park, the operating income of city investment is often low, and the operating profit is meager or even loss.

4. Financial assets

Most of the financial assets of city investment companies are shares of listed companies, and there are two main purposes for city investment companies to enter listed companies: (a) taking industrial investment as the main purpose of mergers and acquisitions: based on profit considerations, city investment companies enter companies to seek business cooperation when they have business contacts with listed companies; If there is no business connection with listed companies, it is mainly for industrial investment, optimizing its own business structure and realizing diversified development. For example, Xi 'an Qujiang Cultural Industry Investment (Group) Co., Ltd. is the owner of Renren Music; (II) Backdoor listing as the main purpose M&A: City investment companies need listed companies as a platform for equity financing. Through asset replacement, backdoor listing can be realized, financing methods can be broadened and financing costs can be reduced. For example, Pizhou Economic Development Zone Jingfa Construction Co., Ltd. entered China's new technology at a high premium.