IdentifyingCriticalBankabilityCriteriaforPPPProjects:The...

Research ArticleIdentifying Critical Bankability Criteria for PPP Projects TheCase of China

Lei Zhu 1 and David Kim Huat Chua2

1Lecturer Department of Construction and Real Estate Southeast University Nanjing 211189 China2Professor Department of Civil and Environmental Engineering National University of Singapore Singapore 117576

Correspondence should be addressed to Lei Zhu seuzhuleiseueducn

Received 19 April 2018 Accepted 24 September 2018 Published 17 October 2018

Guest Editor Dujuan Yang

Copyright copy 2018 Lei Zhu and David Kim Huat Chua -is is an open access article distributed under the Creative CommonsAttribution License which permits unrestricted use distribution and reproduction in anymedium provided the original work isproperly cited

Public-private partnership (PPP) projects employ a high leverage in terms of debt finance needed by the private consortium Debtfinance providers need to know the bankability-related issues of PPP projects to make the timely arrangement of debt financingand avoid funding problems However there is still a lack of a systematic research on the bankability of PPP projects despite theworsening debt arrangement situation for PPP projects after the credit crisis and economic recession from 2008 To bridge thisknowledge gap and enhance the practical debt arrangement of PPP projects this study aims to identify and prioritize the criticalbankability criteria of PPP projects To achieve the objectives 41 bankability-related criteria were first identified from a com-prehensive literature A structured questionnaire survey was then conducted with 31 industry experts in China who worked infinancial institutes and had experienced PPP projects to investigate the relative importance of each criterion To handle theuncertainty and vagueness of the subjective evaluation from surveys this study analyzed the relative importance weight of eachcriterion using a proposed fuzzy analytical hierarchy process-based approach -e results showed that political environmenteconomic environment shareholdersrsquo credibility financial market legal system public sectorrsquos reliability financial structure andregulatory framework were ranked as the top eight critical bankability criteria -e findings of this study first contributed to theproject finance body of knowledge for the bankability of PPP projects Moreover the outputs of this study would provide valuableinformation to the private and public sectors for formulating strategies on improving the bankability of PPP projects

1 Introduction

As an efficient procurement method of the public in-frastructure projects or services the public-private partner-ship (PPP) approach has been widely adopted in manycountries [1] For instance China has initiated 13554 PPPprojects costing 2612 billion dollars until the end of June 2017[2ndash4] -rough the PPP approach the public sector can al-leviate the shortage of the infrastructure investment andincrease the efficiency of infrastructure provision [5] As forthe private sector they can broaden their investment channelwithout severely endangering their corporate assets because ofthe off-balance sheet finance arrangement [6] -e main orsole source to meet financial obligations is the cash flows ofa PPP project In addition the banks have no recourse orlimited recourse to the private sectorrsquos corporate assets [6 7]

Projects developed using PPP approach (PPP projects)are well known for the high leverage ranging from 50 to90 relying extensively on the debt capital provided by thedebt holders such as banks and other financial institutions[8] -erefore raising sufficient funds via the debt channel isa key task for PPP sponsors and project companies [9]However international capital markets have experiencedhigh levels of instability and adversely affected the fundingarrangements for social and economic infrastructure pro-jects since 2008 leading to limited availability of equity anddebt capital and a higher cost of capital [10 11] Moreoverthe market access has been difficult for both the public sectorand the private sector leading to banks becoming the mainsource of funds for PPP projects [10 12] Furthermorebanks were unwilling to commit to lending terms foranything other than a short period in some countries [12]

HindawiAdvances in Civil EngineeringVolume 2018 Article ID 7860717 11 pageshttpsdoiorg10115520187860717

Because of the adverse situation of the financial marketseveral projects failed to be procured through the PPPapproach because of unsuccessful debt arrangements[13ndash15] Moreover many researchers identified that thedebt arrangements of PPP projects greatly hindered theeventual progress to the construction stage -omas [16]identified that delays in debt arrangements constitutea critical risk in the development phase of BOT projects inIndia Cheng et al [17] indicated that prolonged negoti-ations between borrowers and financiers abort the com-mencement of PPP projects Moreover Merna and Khu[18] pointed out that PPP promoters were sometimesunable to raise funds even if they had obtained the fran-chise from the government because of their lack of projectfinancing techniques and the understanding of associatedrisks In addition funding is a major problem for PFIprojects especially launched by small- or medium-sizedcompanies [17] -e difficulty in raising the finance thehigh cost of financing and even being unable to close fi-nancing within the time frame stipulated in the concessionagreement all could lead to the failure of financial close[7 19]

Considering the significance of the debt for PPP pro-jects and the difficulties in securing loans for a successfulfinancial close it is an important requisite for projectstakeholders especially project sponsors and the relevantpublic sector to consider the bankability-related issuesfrom the outset of a PPP project A PPP project is con-sidered bankable if lenders are willing to finance it [20]Moreover establishing enhanced bankability for a PPPproject is because ultimately the financial market will judgethe project on its own merits without the traditionalgovernment repayment guarantees [19] Readily bankablePPP projects are prioritized over more-needed in-frastructure projects by banks [10] Bankable generatingenough cash flow and reflecting project and financing termwere identified as the top three most important expecta-tions from stakeholders of PPP projects [7] Furthermorethe lessons from the subprime mortgage led to banksenhancing their own internal credit rating systems insteadof completely relying on the credit risk assessment ofexternal credit rating agencies -erefore the research onthe bankability assessment of PPP projects is important forpaving the way towards the successful and sustainabledevelopment of PPP projects [21]

Up until now the research on the bankability assess-ment of PPP projects is still lacking Considering that thebankability implies a set of criteria that investors considerin approving project finance this study aimed to identifyand prioritize the critical bankability evaluation criteria(hereafter referred to as bankability criteria) for PPPprojects from the bankrsquos perspective -e findings of thisstudy can enrich the project finance body of knowledge inthe bankability assessment of PPP projects Moreoveroutcomes of this study can help PPP project stakeholdersespecially the public and private sectors make rationaldecisions to form bankable PPP projects paving the way tothe successful and sustainable development of PPPprojects

2 Background

21 Rational of Bankability Evaluation Up until now thereis no uniform definition of the bankability of a projectCommonly a PPP project is bankable if lenders are willingto finance it or the sponsor can convince the lenders tosupport it [9 20] From the assessment perspectivea bankable project involves a solid financial economic andtechnical plan with a risk allocation scheme appropriate forthe nature of the project the risks involved and the interestsof the lenders implying an acceptable credit risk [8 22]Moreover the bankability of PPP projects consists of the keycommon bankability dimensions in general and a commonset of bankability criteria against which the key dimensionsare evaluated [8 23] Considering the quantitative loananalysis the lenders believe that a project is bankable if theproject company has the ability to service the principal andinterest payment In addition the exposure of the lenders todefault by the borrowers is acceptable [9 22]

-e lessons from the subprimemortgage led to banks notcompletely relying on the credit risk assessment of externalcredit rating agencies [24] Each bank has or starts to en-hance its internal credit rating system to evaluate the creditof a PPP project [22] Generally the banksrsquo internal creditrating systems are not revealed to outsiders as they arecarried out by the banksrsquo personnel Only the banksrsquo staffswho work with these bankability evaluation models such asthe bank directors and debt evaluators know the ratingsystem Moreover there is no common internal credit ratingsystem for all banks Comparing with statistical modelsdeveloped by external credit rating agencies the banksgenerally believe that a properly managed judgmental ratingsystem delivers more accurate estimates of risk [24]

22 Identified Bankability Criteria To identify the criticalbankability criteria this study adopted the analytic hierarchyprocess (AHP) approach As a well-known structuredtechnique for dealing with the complex decision the de-cision problem is first decomposed into a hierarchy of moreeasily and independently analyzed subproblems Expertsrsquoopinions and evaluation scores are then integrated into thesimple elementary hierarchy system [25] AHP approach hasbeen widely used to deal with PPP-related issues [26 27]

-rough a comprehensive literature review and casestudies this study identified 41 bankability criteria thatdetermine the bankability of a project or are of primaryimportance to the lenders in assessing a loan application-is study further classified them into six dimensions (1)economic and political environment (2) legal and regulatoryenvironment (3) project specificity (4) project financialstructure (5) third party risk allocation and (6) contractarrangement -e bankability dimensions and criteria undereach dimension are summarized in Table 1

221 Economic and Political Environment Laishram andKalidindi [29] identified that social-economic characteristicsand economic strength were two extremely important cri-teria in assessing the desirability of a PPP project from a debt

2 Advances in Civil Engineering

financing perspective Moreover considering the practicalrequirements of the lenders when reviewing a projectDelmon [8] found that the economic and political viabilityand currency issues were important bankability issuesFurthermore the tax regime applicable to PPP projects mustbe sufficiently stable because the lenders need to forecast theexposure to tax liability and plug into the financial model [8]In addition Gatti [30] and Zhang [33] emphasized the

importance of the competition condition in the economicenvironment to the bankability of a PPP project -roughmany real case studies Davis [31] revealed the importance ofpublic opinion to the success of PPP projects

222 Legal and Regulatory Environment Contract en-forceability depends on a series of factors such as a countryrsquos

Table 1 Identified bankability criteria for PPP projects

SN Bankability criterionReferences

1 2 3 4 5 6 7 8 9 10D1 Economic and political environmentD11 Economic environment radic radic radicD12 Competition condition radic radicD13 Financial market radicD14 Political environment radicD15 Public opinion radicD16 Tax policies radicD17 Currency issues radic radicD2 Legal and regulatory environmentD21 Legal system radic radic radicD22 Regulatory framework radicD23 Enforceability radic radicD24 Nationalization and expropriation radic radicD25 Procurement process radicD26 Intervention right radicD3 Project specificityD31 Project definition radic radic radicD32 Feasibility studies radic radicD33 Capacity of the technology radic radicD34 Site acquisition and access radicD35 License permits and authorizations radic radic radicD36 Infrastructure issues radicD37 Environmental standards radic radic radicD38 Labor force radicD39 Size of the project radic radic radicD4 Project financial structureD41 Shareholdersrsquo credibility radic radic radic radic radic radicD42 Public sectorrsquos reliability radic radicD43 EPC contractorrsquos credibility radicD44 Financial structure radic radic radic radic radicD45 Financial flexibility radic radic radic radicD5 -ird party risk allocationD51 Insurance arrangement radic radic radic radicD52 Environmental and other legalregulatory issues radicD6 Contract arrangementD61 Concession agreement radic radic radicD62 Concession period radic radicD63 Support agreementguarantee radic radic radicD64 Termination provisions radicD65 Construction contract radic radic radicD66 Operation and maintenance agreement radic radic radicD67 Offtake purchase agreement radic radicD68 Input supplier agreement radic radicD69 Guarantee from multilateral investment agency radic radic radicD610 Direct agreement radicD611 Catastrophic risk radic radicD612 Arbitration radicReferences (1) Lopes and Teixeira Caetano [28] (2) Laishram and Kalidindi [29] (3) Delmon [8] (4) Gatti [30] (5) Zhang [23] (6) Davis [31] (7)Wang et al[32] (8) Wang et al [19] (9) Regan et al [11] (10) Zhang [33]

Advances in Civil Engineering 3

judicial tradition as well as the degree of economic devel-opment in a country Gatti [30] indicated that lenders feltless protection in nations where civil law is in force than innations where the common law is in force MoreoverDelmon [8] explained that lenders would want to considerthe legal system applicable to a project in view of a long-termcommercial agreement -e availability of justice enforce-ability and nationalization and expropriation were im-portant criteria from the lendersrsquo perspective Change in lawand expropriation were identified two of the six most criticalrisks affecting the finance of Chinarsquos BOT projects [32] Inaddition among the procurement procedure seeking a re-alistic target date for financial close is highly critical [19]

223 Project Specificity After assessing the desirability ofa PPP road project from a debt financing perspectiveLaishram and Kalidindi [29] found that (1) the feasibilitystudy was one of the extremely important criteria to a debtfinancing and (2) the permits and site clearances were two ofthe fairly important criteria to a debt financing Practicallylenders prefer to ensure that protections are provided to theproject company to avoid any cost increase and time delaybecause of the changes in the required permits and licenses[8 32] Moreover in terms of the practical requirements ofthe lenders when reviewing a project Delmon [8] explainedthat lenders usually attach great importance to the capacityof the technology to be used and its appropriateness for thesite and the region International financing organizationsconventionally prefer to have a separate review of the ca-pacity of the technology performed by an independentexpert [8 30] Furthermore the sufficient local in-frastructures including transportation systems roadwayselectricity water and other utilities and local services weregreatly important to the bankability of a PPP project [8]

224 Project Financial Structure Lenders believe that thespecial purpose vehicle (SPV) shareholders which have thehigh creditworthiness and reliability would make a strongcommitment to a project [8 30] Based on an empirical studyto identify the determining characteristics of a firm to beengaged in a PPP project Lopes and Teixeira Caetano [28]disclosed that larger and more leveraged firms had a higherprobability of being engaged in a PPP project -e strongfinancial capability sufficient commercial experience andtechnical expertise of the concessionaire were an importantprerequisite to the successful development of a PPP project[8 23] Compared with the private sector the public sectorrsquosreliability and creditworthiness are often viewed as thecritical risk for PPP projects [30 32] Factors such ascorruption and rent-seeking behavior often turn a decisionof a PPP project against lenders [30] As one of the mainshareholders the EPC contractorrsquos credibility which is oftenexamined through a due diligence investigation directlydetermines the completion risk of a PPP project and affectsthe lendersrsquo interest [30]

Moreover the results of Laishram and Kalidindi [29]rsquosempirical study showed that some elements of a financialstructure such as debt service cover ratio debt-equity ratio

and debt service reserve and the financial flexibility of a PPPproject was extremely important to a debt financing Es-sentially the health of the project structure the commercialplan and the forecast revenue stream convince the lenders toprovide financing to a PPP project [8] Furthermore thefindings from a survey on 35 identified financial criteriashowed that the price and adjustment mechanism the at-tractiveness of main loan agreement sound financial anal-ysis and minimal financial risks to the clients were the topfour most significant financial criteria [23 33]

225 0ird Party Risk Allocation -e sufficient insurancecoverage of a PPP project would further protect the lendersfrom risks and is viewed as the critical financial criteriameasuring the financial capability of a PPP project[11 23 33] A PPP project must have in place a compre-hensive insurance scheme avoiding gaps or overlappingcoverage [8] Moreover lenders would prefer that the projectcompany is isolated from sanctions for the breach of en-vironmental regulations and compensation for environ-mental damage [8]

226 Contract Agreement To ascertain that all risks areappropriately allocated to various players lenders wouldclosely look at the network of contracts with the SPV [30]-e relevant contracts include the concession agreementEPC contract or construction contract operation andmaintenance (OampM) agreement offtake purchase agree-ment input supply agreement termination provisions anddirect agreement [8 29 30 33] Moreover the governmentrsquosguaranteessupportcomfort letters would enhance thebankability of a PPP project and to some extent reduce therelevant political risks [19 33] Furthermore in terms ofinternational financing obtaining the guarantee frommultilateral investment agency is regarded as the most ef-fective measure in mitigating expropriation risk andobtaining the support of the project developerrsquos homegovernment [32] In addition the force majeure and relevantarbitration when a dispute occurs were also identified ascritical risks in PPP development [31 32]

3 Methodology and Data Presentation

31 Data Collection and Presentation As a systematicmethod of collecting data the questionnaire survey tech-nique has been widely used to collect professional views[7 34 35] -is study conducted a questionnaire survey toinvestigate the relative importance weights of the bankabilitycriteria To develop the questionnaire a comprehensiveliterature review of the bankability criteria was first carriedout Afterward a two-step process was adopted to test thevalidity and relevance of the questionnaire -e question-naire was first reviewed by an expert on question con-struction ensuring that the survey did not contain commonerrors such as leading confusing or double-barreledquestions -en a presurvey was conducted with threePPP industry professionals from the bank who had several


yearsrsquo experience in PPP projects -eir feedback was takeninto consideration to finalize the questionnaire

-e finalized questionnaire first included the questionsmeant to profile the respondents Furthermore the 41bankability criteria were presented in the questionnaireMoreover the brief description of each bankability criterionwas provided to ensure consistency throughout the surveySubsequently the respondents were asked to conduct thepair-wise comparison of the importance of these bankabilitycriteria using the five linguistic terms equal importanceweak importance moderate importance strong importanceand extreme importance -e questionnaire was designed ina bottom-up manner -e questions relating to the criteriaunder different dimensions were presented in front whilethose relating to dimensions were presented at behind -isbottom-up approach can enhance the respondentsrsquo un-derstanding of the criteria and their contribution to eachcorresponding dimension In addition postsurvey in-terviews were conducted with three industry experts whopossess the relevant experience in PPP financing-eir viewshelped us to validate the findings of the survey questionnaireand to provide a better understanding of the findings

-e population of this study consisted of all PPP pro-fessionals who had PPP financial experience in China es-pecially experts from banks A total of 130 sets of surveyquestionnaires were randomly sent out through email togather responses from the banks or financial institutionsFinally 31 complete sets were received representing a re-sponse rate of 238 Although the sample size was not largestatistically analysis could still be performed because thecentral limit theorem holds true even when the sample size isno less than 30 according to the generally accepted rule[36 37]

Among the 31 respondents 30 respondents were fromthe banks and one respondent from a trust company thatacted as a debt finance provider Moreover the respondentsfrom the banks were from eight different commercial banksthat provided a large portion of the loan for PPP projects inChina such as China Construction Bank and Bank ofCommunications Considering the business confidentialitythis study did not disclose the names of the involved banksIn addition the respondents from the banks were holdingthe positions of bank director loan evaluator and marketingmanager -e relatively small sample size was mainly causedby two reasons First only those with good PPP finance-related experiences and were willing to perform the surveywould be approached to send the survey form -is hassignificantly reduced the pool size of the potential re-spondents Second some of the experienced practitionerscontacted were reluctant to share their opinions because ofbusiness confidentiality Although the size of the sample wasrelatively small the knowledge and judgments of the re-spondents were reasonable considering the experience of therespondents Considering the area of the respondents thisstudy was a location-based study

32 Fuzzy AHP for Ranking of Bankability Criteria -isstudy adopted the fuzzy set theory to handle the uncertaintyand vagueness of the subjective evaluation of the importance

of the identified bankability criteria Zadeh [38] developedthe fuzzy set theory to handle such kind of impreciseness ofhuman subjective judgment Buckley [39] later extended thehierarchical analysis to the case where experts were allowedto use fuzzy ratios in place of exact ratios Fuzzy analytichierarchy process (Fuzzy AHP) methodology has been usedin research on various issues of PPP projects [26 40]

Instead of using a precise number to assess the priorityof a criterion a triangle fuzzy number 1113957r (a m b) wasused to express fuzzy ratios -e geometric mean tech-nique was adopted to determine the fuzzy weights ofcriteria [39]

321 Comparing the Dimensions and Criteria via LinguisticTerms As stated above the pairwise comparisons of boththe dimensions and criteria were performed using a set oflinguistic terms which were adapted from Saaty [41] andSaaty [42] namely ldquoequal importancerdquo ldquoweak importancerdquoldquomoderate importancerdquo ldquostrong importancerdquo and ldquoextremeimportancerdquo -e triangular fuzzy number was employed inthis study first because it expresses most closely the meaningof ldquoabout xrdquo which is a common fuzzy thinking pattern ofhuman beings [26] Second the triangular fuzzy number canbe utilized in the situations when the comparisons in pairand judgments are uncertain or fuzzy [43]

-e linguistic terms were then transformed into tri-angular fuzzy numbers in order to facilitate subsequentfuzzy arithmetic operations -e linguistic values and tri-angular membership functions are shown in Table 2 with themiddle value denoting the most likely or typical value andthe lower and upper bounds denoting the lower and uppermembership values respectively In addition the spreadreflects the fuzziness of the term

If a fuzzy number 1113957r (a m b) represents the impor-tance of comparison of criterion C1 to criterion C2 then1113957rminus1 ((1b) (1m) (1a)) represents the inverse compari-son of criterion C2 to criterion C1 -e pair-wise criteriacomparison matrix 1113957A

k

j was given by the following equationwhere 1113957rk

jil denotes the kth expertrsquos preference of criterion i

over criterion l under dimensionj via fuzzy triangularnumbers

1113957Ak

j

1113957rk

j11 1113957rkj12 middot middot middot 1113957rk

j1l

1113957rkj21 1113957rk

j22 middot middot middot 1113957rk

j2l

middot middot middot middot middot middot middot middot middot middot middot middot

1113957rkji1 1113957rk

ji2 middot middot middot 1113957rk

jil

⎡⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎣

⎤⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎦

(1)

-e evaluation of the importance of the criteria wasbased on the survey results Each expert gave hisherjudgment of the importance of the criteria using linguisticterms

322 Computing Average Preference -e average fuzzypreference was given by the geometric mean of the pref-erences of all experts as shown in Equation (2) -e revisedpairwise comparisonmatrix was depicted in Equation (3) In


the following equations rjil denotes the average preferenceof criterion i over criterion l under dimension j

rjil 1113945K

k11113957r

kjil1113872 1113873⎤⎦

1K

⎡⎢⎢⎣ (2)

1113957Ak

j

1113957rkj11 1113957rk

j12 middot middot middot 1113957rkj1l


1113957rk

ji1 1113957rk


jil

⎡⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎣

⎤⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎦ (3)

323 Computing Weight of the Fuzzy Matrices -e fol-lowing basic fuzzy operations shown from Equations (4)ndash(7)are required for computing the importance weights of thecriteria Given fuzzy number 1113957X (a1 m1 b1) and1113957Y (a2 m2 b2) then

1113957Xoplus 1113957Y a1 + a2 m1 + m2 b1 + b2( 1113857 (4)

1113957Xoplus 1113957Y a1 middot a2 m1 middot m2 b1 middot b2( 1113857 (5)

1113957Yminus1

1b2

1

m21a2

1113888 1113889 (6)

1113957X

1113957Y

a1

b2m1

m2b1

a21113888 1113889 (7)

-e weightings of criterion 1113957Wji are geometric mean asfollows

1113957Wji 1113945n

l1rjil

⎛⎝ ⎞⎠

1n

otimes 1113944n

i11113945

n

l1rjil

⎛⎝ ⎞⎠

1n⎡⎢⎢⎢⎢⎣ ⎤⎥⎥⎥⎥⎦

minus1

i l 1 2 3 n j 1 6

aji mji bji1113872 1113873

(8)

324 Defuzzification of the Fuzzy Weights Since the tri-angular fuzzy number was adopted in this research the levelrank method using the concept of α-cut was employed todefuzzify the fuzzy weights 1113957Wji [44] An α-cut of a fuzzy setembraces all elements of the fuzzy set whose degrees ofmembership to this fuzzy set are at least equal to α [45] -emembership scale of the fuzzy variable 1113957Wji is cut with the aidof r randomly chosen α levels For example the defuzzifi-cation value Mt

ji of the fuzzy variable 1113957Wji at the tth α-cutlevel is determined as the arithmetic mean of the lower and

upper bounds of the membership interval at the tth α-cutlevel -is concept was presented by Equation (9) anddepicted in Figure 1-e advantage of this method is that theshape of the membership function is considered

Mji 1r

middot 1113944

r

t1M

tji

1r

middot 1113944

r

t1

atji + bt

ji

2 (9)

325 Normalization Finally to conform with traditionalAHP the importance weights of the criteria and the di-mensions were normalized by ensuring that they sum to 1 asgiven by the following equation

wji Mji

1113936ni1 Mji

(10)

-e importance weights of bankability dimensions weresimilarly derived using Equations (1)ndash(10) Using wj torepresent the normalized importance weight of dimension jthe overall importance weight of criterion i is the product ofthe importance weight of criterion i under dimension j andthe importance weight of dimension j as computed byEquation (11) -e calculation of overall importance weightensures that each bankability criterion is ranked at the samelevel Because the fuzzy AHP calculation is very complexthis study developed a program written in Microsoft C toprocess the survey data

wi wj middot wji (11)

4 Results and Discussion

41 Consistency of Evaluation Results Before analyzing thepertinent finding of this study this study carried out thePearson chi-square test (χ2) to reveal the evaluation con-sistency of the samples within each set [36] -e hypothesisof this test was that each respondentrsquos evaluation was thesame or consistent with the geometric mean evaluation -ecalculated χ2 value for the sample sets of the bank was 4570Because the relevant critical value for χ2 at 95 confidentlevel is 5576 the hypothesis cannot be rejected -erefore itis legitimate to use the geometric mean of the evaluationsfrom the respondents to reflect the relative importanceweights of the bankability criteria

42 Importance Weights of Bankability DimensionsBecause the banksrsquo perception is crucial to the establishmentof a loan this study first analyzed the importance weights ofthe bankability dimensions from the banksrsquo perspective

Table 2 -e linguistic terms and the corresponding triangular fuzzy numbers

Scale of importance Linguistic term Triangular fuzzy numbers1 Equal importance (EqI) (1 1 1)3 Weak importance (WI) (1 3 5)5 Moderate importance (MI) (3 5 7)7 Strong importance (SI) (5 7 9)9 Extreme importance (ExI) (7 9 9)


using the fuzzy AHP-based method explained above -erelative importance weights of the bankability dimensionsfrom the banksrsquo perspective are presented in Table 3 -eresults showed that project specificity (D3) project financialstructure (D4) and economic and political environment(D1) were ranked as the top three important dimensionsfrom the banksrsquo point of view making up 6481 of the totalweight

Because the revenue cash flows of a PPP project are themain or sole source to meet the financial obligation thebanks must first ensure that the project is financially wellstructured and profitable [6] -e bankable considerationwas of great importance to the stakeholders of PPP projects[7] Moreover the project specificity and project financialstructure represent the competitiveness of a PPP project inthe market indicating that the above results werereasonablebelievable [3 33] Furthermore PPP projects areusually mega projects or infrastructure projects with a vastamount of capital investment -e economic and politicalenvironment will easily affect the investment decision ofa PPP project from the banksrsquo point of view [31] In additionthe findings revealed that the banks do have an emphasis onsome of the bankability dimensions

43 Importance Weights of Bankability Criteria Using theabove-explained fuzzy AHP method this study analyzed therelative importance weights of the bankability criteria inChina from the banksrsquo perspective For the sake of succinctpresentation this study listed the top twenty criteria whoseimportance weights were above the average as shown inTable 4 Moreover the importance weights of the top twentycriteria made up 7133 of the total weight indicating thatthe top twenty criteria generally covering the major bank-ability concerns from the bankrsquos perspective

Among the identified 41 criteria the top ten criteriawhich were within the first quartile of all criteria that affectthe bankability of a PPP project were political environment(D14) economic environment (D11) shareholdersrsquo cred-ibility (D41) financial market (D13) legal system (D21)public sectorrsquos reliability (D42) financial structure (D44)regulatory framework (D22) EPC contractorrsquos credibility

(D43) and financial flexibility (D45) -is study brieflydiscussed these criteria as follows

Political environment (D14) (importance weight

694) legal system (D21) (importance weight 495)and regulatory framework (D22) (importance weight

374) were ranked first fifth and eighth respectively It iswell known that PPP projects are mostly infrastructureprojects or public-related projects involving a vast amountof investment From the bankrsquos perspective the desirabilityof a PPP project is easily affected by the macroenvironmentof a country [29 46] Moreover the success of PPP projectswould be greatly affected by the cooperation relationshipbetween the public and private sectors Once there is anydivergence between the two parties the legal system de-termines the contract enforceability and is the baseline forsetting the dispute [8] Any change in law would be criticalrisks for PPP projects especially in countries using the civillaw [32]

Economic environment (D11) (importance weight

649) and financial market (D41) (importance weight

542) received the second position and fourth positionrespectively In a sound and stable economic environmentthe willingness of the consumer to pay for the use of in-frastructure is high ensuring the cash flow of a proposedproject [8] Furthermore the condition of the financialmarket greatly affects the availability of the lending for PPPprojects -e difficulties in the debt arrangements for PPPprojects after the credit crisis and economic recession wellprove this [12 47] In a nutshell the ecosystem that consistsof the political environment and economic environmentshould be sound enough [48]

Shareholdersrsquo credibility (D41) was ranked third (im-portance weight 560) -e shareholder is the party whocommit to developing and operating a PPP project in a longconcession period-e experts in the postinterviews pointedout that the strong financial capability of the shareholderswas an important prerequisite for a successful debt approval-e bank usually assumes that a PPP project developed byshareholders with a high credibility is more bankable even ifthe bank has limited recourse or nonrecourse to theshareholdersrsquo assets outside the project [23] -e bank wantsto ensure that the shareholders have sufficient commercialexperience financial standing technical capability andoperation ability to implement the project thereby pro-tecting the lendersrsquo interests [3 8 23 49] -is may be thereason that larger and more leveraged firms had a higherprobability of being engaged in a PPP service concessionagreement and receiving the loan from the banks [28]Moreover the operation ability of the shareholder drawsgreat attention recently because many projects step into theoperation stage -e operation stage is usually less capitalintensive but determines the fulfillment of the revenue ofa PPP project [3 49] Furthermore the credible shareholderimplies credible equity financing which is critical to thesuccess of a PPP project and often influences the ability ofa company to secure the further debt financing from thebanksrsquo perspective [8 19]

Public sectorrsquos reliability (D42) was ranked sixth (im-portance weight 459) Even if there is a concession

10

x

μ(x) α = αt

α = α3

α = α2

α = α1a0ji b0jiatji Mt

ji btji

Figure 1 -e level rank method of defuzzification


agreement between the public and private sectors the publicsector who has a low reliability has a high probability tobreak the contract relationship when difficulties attendduring the project development [32] Moreover the off-takers most of whom have a public or government back-ground will easily default if the public sectorrsquos reliability islow -is is clearly reflected in many real projects such asChangchun Huijin waste water BOT project in ChinaDabhol power project in India and Samalayuca II in Mexico[1 31]

Financial structure (D44) (importance weight 377)and financial flexibility (D45) (importance weight 334)were ranked seventh and tenth respectively For a PPP projectthe main or sole source to meet financial obligations is theproject cash flow [6 47] An optimal and operational financialstructure that reflects the characteristics of project financing isextremely important for both the private sector and the bankbecause it synchronizes both profitability and repayment ca-pacity [50 51] From the bankrsquos perspective only truly goodprojects with real tangible service provision and well struc-tured should be considered to be implemented as PPP projectsand be financed [48] Financial terms calculated based on thefinancial structure such as the debt service coverage ratiosensitivity debt service reserve and debt-equity ratio were

extremely important to a debt financing greatly influencingthe desirability of a PPP project from a debt financing per-spective [29] Moreover reasonable and flexible financial ar-rangements are also needed to deal with unforeseen risks orproblems [47] For instance many transportation PPP projectsexposed to the financial risk of low profitability due to theinaccurate forecast of traffic volume [52 53] In this conditionflexible financial arrangements should be considered toovercome the uncertainties

EPC contractorrsquos credibility (D43) (importance weight 352) was ranked ninth -e related experience financialstrength and technical capability of the EPC contractorensure the completion of a PPP project on time and withinbudget partially securing the banksrsquo interest in PPP projectsMoreover many engineering contractors participate in PPPprojects and become amajor constituent of the private sectorin PPP projects [3 54] Engineering contractors with a highcredibility bring the added value to PPP projects becausethey have a strong construction and financing capabilitiesand can improve the development efficiency [3] -roughthe due diligence reporting a closer examination of thecontractorrsquos construction and financing capability couldreduce EPC contractor-related risks [30]

Table 3 Relative importance weights of bankability dimensions from the banksrsquo perspective

Bankability dimension Importance weight of bankability dimension ()Economic and political environment (D1) 1734Legal and regulatory environment (D2) 1268Project specificity (D3) 2508Project financial structure (D4) 2239-ird party risk allocation (D5) 982Contract arrangement (D6) 1268

Table 4 Relative importance weights of the twenty criteria from the banksrsquo perspective

Bankability criterion Ranking Importance weight () Subtotal ()Political environment (D14) 1 694

1885Economic environment (D11) 2 649Financial market (D13) 4 542Legal system (D21) 5 495

1684

Regulatory framework (D22) 8 374Enforceability (D23) 11 292Intervention right (D26) 13 263Nationalization and expropriation (D24) 14 260License permits and authorizations (D35) 18 236Shareholdersrsquo credibility (D41) 3 560

2082Public sectorrsquos reliability (D42) 6 459Financial structure (D44) 7 377EPC contractorrsquos credibility (D43) 9 352Financial flexibility (D45) 10 334Insurance arrangement (D51) 12 281 540Environmental and legal issues (D52) 15 259Concession agreement (D61) 16 256

942Support agreementguarantee (D63) 17 246Termination provisions (D64) 19 225Concession period (D62) 20 215

Total weight 7133


5 Conclusion and Recommendations

For PPP projects raising sufficient funds via the debtchannel is a key task for all project stakeholders Consideringthe lack of a systematic research on the bankability of PPPprojects this study proposed the fuzzy AHP-based approachto identify the critical bankability criteria of PPP projectsfrom a debt financing perspective A total of 41 bankability-related criteria were first identified from a comprehensiveliterature review and further classified into six dimensionsAfterward a structured questionnaire survey was conductedwith 31 industry experts from the bank in China to in-vestigate the relative importance of each criterion Finallythis study analyzed the relative importance weight of eachcriterion using the proposed fuzzy AHP-based approach thatcan handle the uncertainty and vagueness of the subjectiveevaluation from surveys -e results of this study firstshowed that project specificity project financial structureand economic and political environment were ranked as thetop three important dimensions from the bankrsquos point ofview Moreover the top twenty criteria the importanceweights of which made up 7133 of the total weightrepresented the major bankability concerns from the bankrsquosperspective Furthermore political environment economicenvironment shareholdersrsquo credibility financial marketlegal system public sectorrsquos reliability financial structureregulatory framework EPC contractorrsquos credibility and fi-nancial flexibility were identified as the top ten most criticalbankability criteria of PPP projects In addition the im-portance weights of the top twenty criteria made up 7133of the total weight representing the major bankabilityconcerns from the bankrsquos perspective

With the aim of identifying the critical bankabilitycriteria for successful PPP project finance the empiricalresults of this study fill a gap in the project finance body ofknowledge for the bankability of PPP projects Moreover thefindings of this study would provide valuable information tothe private and public sectors for formulating strategies onimproving the bankability of PPP projects Furthermore theresearch methodology proposed in this study could be ex-tended and customized to suit for different stakeholders ofPPP projects and different countries implementing PPPprojects

Although the objectives have been achieved this studystill suffers from several limitations First the importanceweights proposed in this study may be biased by the re-spondentsrsquo judgments and experience because they weresubjective Besides the findings from this study were wellinterpreted in the context of China which may be differentfrom the context of other countries Nonetheless this studystill provides an operational method to identify the bank-ability criteria for PPP projects which can be modified andcustomized to suit for the context of other countriesMoreover this study provides an in-depth understanding ofthe critical bankability criteria because it is widely ac-knowledged that China government has been promotingPPP to facilitate the infrastructure development

Future studies would use the developed fuzzy AHP-based method to investigate whether the private and

public sectors have the same perception on the importanceweights of bankability criteria with the bank If differentparties have different perceptions on bankability criteriathere will be information asymmetry hindering the financialclose of PPP projects Moreover future studies wouldidentify best practices to improve the bankability of PPPprojects and increase the efficiency and success rate of fi-nancial arrangement for PPP projects

Data Availability

-e data used to support the findings of this study areavailable from the corresponding author upon request

Conflicts of Interest

-e authors declare that there are no conflicts of interestregarding the publication of this paper

Acknowledgments

-is work was cosupported by ldquothe Fundamental ResearchFunds for the Central Universitiesrdquo of China the NationalKey Research and Development Program of China and theNational Natural Science Foundation of China (NSFC-71801038)

Supplementary Materials

Table A1 qualitative bankability criteria and remarks whichbriefly describe each bankability criterion to ensure con-sistency throughout the study (Supplementary Materials)

References

[1] L Zhu X Zhao and D K H Chua ldquoAgent-based debt termsrsquobargaining model to improve negotiation inefficiency in PPPprojectsrdquo Journal of Computing in Civil Engineering vol 30no 6 article 04016014 2016

[2] China Public Private Partnership Center National PPP In-tegrated Information Platform Project Management DatabaseChina PPP Center Hong Kong China 2018 httpwwwcpppcorg8086pppcentralmaptoPPPMapdo

[3] J Du H Wu and L Zhu ldquoInfluencing factors on profitdistribution of public-private partnership projects privatesectorrsquos perspectiverdquo Advances in Civil Engineering vol 2018Article ID 2143173 10 pages 2018

[4] J Du H Wu and L Zhu ldquoResearch on the participationmode selection of construction enterprises in PPP projectsrdquoin Proceedings of Construction Research Congress 2018 NewOrleans LA USA April 2018

[5] J Song Y Hu and Z Feng ldquoFactors influencing early ter-mination of PPP projects in Chinardquo Journal ofManagement inEngineering vol 34 no 1 article 05017008 2018

[6] W Tan Principles of project and infrastructure financeRoutledge 2007

[7] F Kurniawan S Ogunlana and I Motawa ldquoStakeholdersrsquoexpectations in utilising financial models for public-privatepartnership projectsrdquo Built Environment Project and AssetManagement vol 4 no 1 pp 4ndash21 2014

[8] J Delmon Project Finance BOT Projects and Risk KluwerLaw International -e Hague -e Netherlands 2005


[9] D Kong R L K Tiong C Y J Cheah A Permana andM Ehrlich ldquoAssessment of credit risk in project financerdquoJournal of Construction Engineering and Managementvol 134 no 11 pp 876ndash884 2008

[10] R Bain Review of Lessons from Completed PPP Projects Fi-nanced by the EIB European Investment Bank KirchbergLuxembourg 2009

[11] M Regan J Smith and P E D Love ldquoImpact of the capitalmarket collapse on public-private partnership infrastructureprojectsrdquo Journal of Construction Engineering and Manage-ment vol 137 no 1 pp 6ndash16 2011

[12] KPMG Financing Australian PPP Projects in the Global Fi-nancial Crisis KPMG Australia 2009

[13] A Gunawansa ldquoIs there a need for public private partnershipprojects in Singaporerdquo in Proceedings of the ConstructionBuilding and Real Estate Research Conference of the RoyalInstitution of Chartered Surveyors Paris France 2010

[14] D Hall A crisis for Public-Private Partnerships (PPPs) PublicServices International Research Unit (PSIRU) London UK2009

[15] National Audit Office Improving the PFI Tendering ProcessNational Audit Office London UK 2007

[16] A-omas Identification assessment and allocation of criticalrisks in Indian BOTroad projects PhD thesis Indian Instituteof Technology Chennai India 2003

[17] E W L Cheng Y H Chiang and B S Tang ldquoAlternativeapproach to credit scoring by DEA evaluating borrowers withrespect to PFI projectsrdquo Building and Environment vol 42no 4 pp 1752ndash1760 2007

[18] T Merna and F L S Khu ldquo-e allocation of financial in-struments to project activity risksrdquo Journal of StructuredFinance vol 8 no 4 pp 21ndash33 2003

[19] S Q Wang R L K Tiong S K Ting and D AshleyldquoEvaluation and management of foreign exchange and rev-enue risks in Chinarsquos BOT projectsrdquo Construction Manage-ment and Economics vol 18 no 2 pp 197ndash207 2000

[20] European Investment Bank Assessment of the PPP OptionEIB Kirchberg Luxembourg 2015 httpwwweiborgepecg2gi-project-identification12123indexhtm

[21] J Leloux E Lorenzo B Garcıa-Domingo J Aguilera andC A Gueymard ldquoA bankable method of assessing the per-formance of a CPV plantrdquo Applied Energy vol 118 pp 1ndash112014

[22] N Hampl F Ludeke-Freund C Flink S Olbert and V Ade0e Myth of Bankability-Definition and Management in theContext of Photovoltaic Project Financing in Germany Geo-tzpartners Consulting Company Munich German 2011

[23] X Zhang ldquoConcessionairersquos financial capability in developingbuild-operate-transfer type infrastructure projectsrdquo Journal ofConstruction Engineering and Management vol 131 no 10pp 1054ndash1064 2005

[24] W F Treacy andM Carey ldquoCredit risk rating systems at largeUS banksrdquo Journal of Banking and Finance vol 24 no 1-2pp 167ndash201 2000

[25] D K H Chua Y C Kog and P K Loh ldquoCritical successfactors for different project objectivesrdquo Journal of Construc-tion Engineering and Management vol 125 no 3 pp 142ndash150 1999

[26] J Li and P X W Zou ldquoFuzzy AHP-based risk assessmentmethodology for PPP projectsrdquo Journal of Construction En-gineering and Management-Asce vol 137 no 12 pp 1205ndash1209 2011

[27] P Raisbeck and L C M Tang ldquoIdentifying design devel-opment factors in Australian PPP projects using an AHP

frameworkrdquo Construction Management and Economicsvol 31 no 1 pp 20ndash39 2013

[28] A I Lopes and T Teixeira Caetano ldquoFirm-level conditions toengage in public-private partnerships what can we learnrdquoJournal of Economics and Business vol 79 pp 82ndash99 2015

[29] B S Laishram and S N Kalidindi ldquoDesirability ratinganalysis for debt financing of public-private partnership roadprojectsrdquo Construction Management and Economics vol 27no 9 pp 823ndash837 2009

[30] S Gatti Project Finance in 0eory and Practice Elsevier IncNew York NY USA 2008

[31] H A Davis Project Finance Practical Case Studies Euro-money Books London UK 2003

[32] S Q Wang R L K Tiong S K Ting and D AshleyldquoEvaluation andmanagement of political risks in Chinarsquos BOTprojectsrdquo Journal of Construction Engineering and Manage-ment vol 126 no 3 pp 242ndash250 2000

[33] X Zhang ldquoCritical success factors for public-private part-nerships in infrastructure developmentrdquo Journal of Con-struction Engineering and Management vol 131 no 1pp 3ndash14 2005

[34] B Hwang X Zhao and M J S Gay ldquoPublic private part-nership projects in Singapore factors critical risks andpreferred risk allocation from the perspective of contractorsrdquoInternational Journal of Project Management vol 31 no 3pp 424ndash433 2013

[35] M Shan B G Hwang and K S N Wong ldquoA preliminaryinvestigation of underground residential buildings advan-tages disadvantages and critical risksrdquo Tunnelling and Un-derground Space Technology vol 70 pp 19ndash29 2017

[36] R L Ott and M Longnecker An Introduction to StatisticalMethods and Data AnalysisCengage Learning Brooks ColeBelmont CA USA 2010

[37] X Zhao B G Hwang and H N Lee ldquoIdentifying criticalleadership styles of project managers for green buildingprojectsrdquo International Journal of Construction Managementvol 16 no 2 pp 150ndash160 2016

[38] L A Zadeh ldquoFuzzy setsrdquo Information and Control vol 8no 3 pp 338ndash353 1965

[39] J J Buckley ldquoFuzzy hierarchical analysisrdquo Fuzzy Sets andSystems vol 17 no 3 pp 233ndash247 1985

[40] Q Wu and Y Gao ldquoSelection model of concessionaire in PPPprojectsrdquo Applied Mechanics and Materials vol 174ndash177pp 2906ndash2910 2012

[41] T L Saaty 0e Analytic Hierarchy Process Planing PrioritySetting Resource Allocation University of CaliforniaMxGraw-Hill New York NY USA 1980

[42] T L Saaty ldquo-e modern science of multicriteria decisionmaking and its practical applications the AHPANP ap-proachrdquo Operations Research vol 61 no 5 pp 1101ndash11182013

[43] L P J M Van and W Pedrycz ldquoA fuzzy extension of Saatyrsquospriority theoryrdquo Fuzzy Sets and Systems vol 11 no 1ndash3pp 199ndash227 1983

[44] B Moller and M Beer Fuzzy Randomness Uncertainty inCivil Engineering and Computational Mechanics SpringerScience and Business Media Berlin Germany 2013

[45] W Pedrycz P Ekel and R Parreiras Fuzzy MulticriteriaDecision-Making Models Methods and Applications JohnWiley and Sons Hoboken NJ USA 2011

[46] T Chang X Deng J Zuo and J Yuan ldquoPolitical risks incentral asian countries factors and strategiesrdquo Journal ofManagement in Engineering vol 34 no 2 article 040170592017


[47] V Khmel and S Zhao ldquoArrangement of financing forhighway infrastructure projects under the conditions ofPublicndashPrivate Partnershiprdquo IATSS Research vol 39 no 2pp 138ndash145 2016

[48] P Leviakangas T Kinnunen and A Aapaoja ldquoInfrastructurepublicndashprivate partnership project ecosystemndashfinancial andeconomic positioning of stakeholdersrdquo European Journal ofFinance vol 22 no 3 pp 221ndash236 2016

[49] J Yuan W Li X Zheng and M J Skibniewski ldquoImprovingoperation performance of public rental housing delivery byPPPs in Chinardquo Journal of Management in Engineeringvol 34 no 4 article 04018015 2018

[50] B Chen and F M Liou ldquoOptimal capital structure of powerplant projects with various bargaining powers in projectnegotiationsrdquo Journal of Energy Engineering vol 143 no 2article 04016051 2017

[51] X Zhang ldquoFinancial viability analysis and capital structureoptimization in privatized public infrastructure projectsrdquoJournal of Construction Engineering and Managementvol 131 no 6 pp 656ndash668 2005

[52] B Flyvbjerg M S Holm and S Buhl ldquoUnderestimating costsin public works projects error or lierdquo Journal of theAmerican Planning Association vol 68 no 3 pp 279ndash2952002

[53] S Yun S H Han H Kim and J H Ock ldquoCapital structureoptimization for buildndashoperatendashtransfer (BOT) projects usinga stochastic and multi-objective approachrdquo Canadian Journalof Civil Engineering vol 36 no 5 pp 777ndash790 2009

[54] C O Cruz and R C Marques ldquoRisk-sharing in highwayconcessions contractual diversity in Portugalrdquo Journal ofProfessional Issues in Engineering Education and Practicevol 139 no 2 pp 99ndash108 2012


International Journal of

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Chemical EngineeringInternational Journal of Antennas and

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wwwhindawicom Volume 2018

Advances in

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Submit your manuscripts atwwwhindawicom

Because of the adverse situation of the financial marketseveral projects failed to be procured through the PPPapproach because of unsuccessful debt arrangements[13ndash15] Moreover many researchers identified that thedebt arrangements of PPP projects greatly hindered theeventual progress to the construction stage -omas [16]identified that delays in debt arrangements constitutea critical risk in the development phase of BOT projects inIndia Cheng et al [17] indicated that prolonged negoti-ations between borrowers and financiers abort the com-mencement of PPP projects Moreover Merna and Khu[18] pointed out that PPP promoters were sometimesunable to raise funds even if they had obtained the fran-chise from the government because of their lack of projectfinancing techniques and the understanding of associatedrisks In addition funding is a major problem for PFIprojects especially launched by small- or medium-sizedcompanies [17] -e difficulty in raising the finance thehigh cost of financing and even being unable to close fi-nancing within the time frame stipulated in the concessionagreement all could lead to the failure of financial close[7 19]

Considering the significance of the debt for PPP pro-jects and the difficulties in securing loans for a successfulfinancial close it is an important requisite for projectstakeholders especially project sponsors and the relevantpublic sector to consider the bankability-related issuesfrom the outset of a PPP project A PPP project is con-sidered bankable if lenders are willing to finance it [20]Moreover establishing enhanced bankability for a PPPproject is because ultimately the financial market will judgethe project on its own merits without the traditionalgovernment repayment guarantees [19] Readily bankablePPP projects are prioritized over more-needed in-frastructure projects by banks [10] Bankable generatingenough cash flow and reflecting project and financing termwere identified as the top three most important expecta-tions from stakeholders of PPP projects [7] Furthermorethe lessons from the subprime mortgage led to banksenhancing their own internal credit rating systems insteadof completely relying on the credit risk assessment ofexternal credit rating agencies -erefore the research onthe bankability assessment of PPP projects is important forpaving the way towards the successful and sustainabledevelopment of PPP projects [21]

Up until now the research on the bankability assess-ment of PPP projects is still lacking Considering that thebankability implies a set of criteria that investors considerin approving project finance this study aimed to identifyand prioritize the critical bankability evaluation criteria(hereafter referred to as bankability criteria) for PPPprojects from the bankrsquos perspective -e findings of thisstudy can enrich the project finance body of knowledge inthe bankability assessment of PPP projects Moreoveroutcomes of this study can help PPP project stakeholdersespecially the public and private sectors make rationaldecisions to form bankable PPP projects paving the way tothe successful and sustainable development of PPPprojects

2 Background

21 Rational of Bankability Evaluation Up until now thereis no uniform definition of the bankability of a projectCommonly a PPP project is bankable if lenders are willingto finance it or the sponsor can convince the lenders tosupport it [9 20] From the assessment perspectivea bankable project involves a solid financial economic andtechnical plan with a risk allocation scheme appropriate forthe nature of the project the risks involved and the interestsof the lenders implying an acceptable credit risk [8 22]Moreover the bankability of PPP projects consists of the keycommon bankability dimensions in general and a commonset of bankability criteria against which the key dimensionsare evaluated [8 23] Considering the quantitative loananalysis the lenders believe that a project is bankable if theproject company has the ability to service the principal andinterest payment In addition the exposure of the lenders todefault by the borrowers is acceptable [9 22]

-e lessons from the subprimemortgage led to banks notcompletely relying on the credit risk assessment of externalcredit rating agencies [24] Each bank has or starts to en-hance its internal credit rating system to evaluate the creditof a PPP project [22] Generally the banksrsquo internal creditrating systems are not revealed to outsiders as they arecarried out by the banksrsquo personnel Only the banksrsquo staffswho work with these bankability evaluation models such asthe bank directors and debt evaluators know the ratingsystem Moreover there is no common internal credit ratingsystem for all banks Comparing with statistical modelsdeveloped by external credit rating agencies the banksgenerally believe that a properly managed judgmental ratingsystem delivers more accurate estimates of risk [24]

22 Identified Bankability Criteria To identify the criticalbankability criteria this study adopted the analytic hierarchyprocess (AHP) approach As a well-known structuredtechnique for dealing with the complex decision the de-cision problem is first decomposed into a hierarchy of moreeasily and independently analyzed subproblems Expertsrsquoopinions and evaluation scores are then integrated into thesimple elementary hierarchy system [25] AHP approach hasbeen widely used to deal with PPP-related issues [26 27]

-rough a comprehensive literature review and casestudies this study identified 41 bankability criteria thatdetermine the bankability of a project or are of primaryimportance to the lenders in assessing a loan application-is study further classified them into six dimensions (1)economic and political environment (2) legal and regulatoryenvironment (3) project specificity (4) project financialstructure (5) third party risk allocation and (6) contractarrangement -e bankability dimensions and criteria undereach dimension are summarized in Table 1

221 Economic and Political Environment Laishram andKalidindi [29] identified that social-economic characteristicsand economic strength were two extremely important cri-teria in assessing the desirability of a PPP project from a debt





























k




1113957Ak

j

1113957rk


j1l

1113957rkj21 1113957rk


j2l


1113957rkji1 1113957rk


jil

⎡⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎣

⎤⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎦

(1)





rjil 1113945K

k11113957r

kjil1113872 1113873⎤⎦

1K

⎡⎢⎢⎣ (2)

1113957Ak

j

1113957rkj11 1113957rk



1113957rk

ji1 1113957rk


jil

⎡⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎣

⎤⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎦ (3)


1113957Xoplus 1113957Y a1 + a2 m1 + m2 b1 + b2( 1113857 (4)


1113957Yminus1

1b2

1

m21a2

1113888 1113889 (6)

1113957X

1113957Y

a1

b2m1

m2b1

a21113888 1113889 (7)


1113957Wji 1113945n

l1rjil

⎛⎝ ⎞⎠

1n

otimes 1113944n

i11113945

n

l1rjil

⎛⎝ ⎞⎠

1n⎡⎢⎢⎢⎢⎣ ⎤⎥⎥⎥⎥⎦

minus1

i l 1 2 3 n j 1 6

aji mji bji1113872 1113873

(8)




Mji 1r

middot 1113944

r

t1M

tji

1r

middot 1113944

r

t1

atji + bt

ji

2 (9)


wji Mji

1113936ni1 Mji

(10)






















10

x

μ(x) α = αt

α = α3

α = α2


ji btji












1684




Total weight 7133








Data Availability




Acknowledgments




References





























































RoboticsJournal of




VLSI Design



Shock and Vibration







Journal of



Volume 2018



Volume 2018


Journal of




SensorsJournal of



RotatingMachinery





Propagation






Hindawi


Advances in

Multimedia





























k




1113957Ak

j

1113957rk


j1l

1113957rkj21 1113957rk


j2l


1113957rkji1 1113957rk


jil

⎡⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎣

⎤⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎦

(1)





rjil 1113945K

k11113957r

kjil1113872 1113873⎤⎦

1K

⎡⎢⎢⎣ (2)

1113957Ak

j

1113957rkj11 1113957rk



1113957rk

ji1 1113957rk


jil

⎡⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎣

⎤⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎦ (3)


1113957Xoplus 1113957Y a1 + a2 m1 + m2 b1 + b2( 1113857 (4)


1113957Yminus1

1b2

1

m21a2

1113888 1113889 (6)

1113957X

1113957Y

a1

b2m1

m2b1

a21113888 1113889 (7)


1113957Wji 1113945n

l1rjil

⎛⎝ ⎞⎠

1n

otimes 1113944n

i11113945

n

l1rjil

⎛⎝ ⎞⎠

1n⎡⎢⎢⎢⎢⎣ ⎤⎥⎥⎥⎥⎦

minus1

i l 1 2 3 n j 1 6

aji mji bji1113872 1113873

(8)




Mji 1r

middot 1113944

r

t1M

tji

1r

middot 1113944

r

t1

atji + bt

ji

2 (9)


wji Mji

1113936ni1 Mji

(10)






















10

x

μ(x) α = αt

α = α3

α = α2


ji btji












1684




Total weight 7133








Data Availability




Acknowledgments




References





























































RoboticsJournal of




VLSI Design



Shock and Vibration







Journal of



Volume 2018



Volume 2018


Journal of




SensorsJournal of



RotatingMachinery





Propagation






Hindawi


Advances in

Multimedia



rjil 1113945K

k11113957r

kjil1113872 1113873⎤⎦

1K

⎡⎢⎢⎣ (2)

1113957Ak

j

1113957rkj11 1113957rk



1113957rk

ji1 1113957rk


jil

⎡⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎢⎣

⎤⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎥⎦ (3)


1113957Xoplus 1113957Y a1 + a2 m1 + m2 b1 + b2( 1113857 (4)


1113957Yminus1

1b2

1

m21a2

1113888 1113889 (6)

1113957X

1113957Y

a1

b2m1

m2b1

a21113888 1113889 (7)


1113957Wji 1113945n

l1rjil

⎛⎝ ⎞⎠

1n

otimes 1113944n

i11113945

n

l1rjil

⎛⎝ ⎞⎠

1n⎡⎢⎢⎢⎢⎣ ⎤⎥⎥⎥⎥⎦

minus1

i l 1 2 3 n j 1 6

aji mji bji1113872 1113873

(8)




Mji 1r

middot 1113944

r

t1M

tji

1r

middot 1113944

r

t1

atji + bt

ji

2 (9)


wji Mji

1113936ni1 Mji

(10)






















10

x

μ(x) α = αt

α = α3

α = α2


ji btji












1684




Total weight 7133








Data Availability




Acknowledgments




References





























































RoboticsJournal of




VLSI Design



Shock and Vibration







Journal of



Volume 2018



Volume 2018


Journal of




SensorsJournal of



RotatingMachinery





Propagation






Hindawi


Advances in

Multimedia















10

x

μ(x) α = αt

α = α3

α = α2


ji btji












1684




Total weight 7133








Data Availability




Acknowledgments




References





























































RoboticsJournal of




VLSI Design



Shock and Vibration







Journal of



Volume 2018



Volume 2018


Journal of




SensorsJournal of



RotatingMachinery





Propagation






Hindawi


Advances in

Multimedia











1684




Total weight 7133








Data Availability




Acknowledgments




References





























































RoboticsJournal of




VLSI Design



Shock and Vibration







Journal of



Volume 2018



Volume 2018


Journal of




SensorsJournal of



RotatingMachinery





Propagation






Hindawi


Advances in

Multimedia








Data Availability




Acknowledgments




References





























































RoboticsJournal of




VLSI Design



Shock and Vibration







Journal of



Volume 2018



Volume 2018


Journal of




SensorsJournal of



RotatingMachinery





Propagation






Hindawi


Advances in

Multimedia





















































RoboticsJournal of




VLSI Design



Shock and Vibration







Journal of



Volume 2018



Volume 2018


Journal of




SensorsJournal of



RotatingMachinery





Propagation






Hindawi


Advances in

Multimedia


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