As previously noted, the financial involvement of a sponsor in the special purpose vehicle may be relatively short-lived. A sponsor's equity capital is likely to require a higher rate of return than an investment in a typically lower-risk public private partnership project will yield (particularly post-commissioning). It is thus highly likely that a sponsor will convert at least a part of its equity capital once the higher-risk development phase is completed.
A sponsor seeks to avoid any restriction on the parties to whom it may be able to sell its interests in the special purpose vehicle, because such restrictions mean a fall in the value of its asset. It also attempts to preserve flexibility for its equity-holders to transfer their investments and create capital for other projects.
Notwithstanding the sponsors' position, government needs to ensure that it retains an appropriate level of control over any changes to the ownership of the private party, in order to mitigate sponsor risk.
A change in ownership is of particular concern to government if:
• the transferee (new owner) does not meet probity requirements
• the transferee is inappropriate or unsuitable in the Pcontext of the particular project for public interest or security reasons
• the transferee is not of strong financial capacity
• the transferor (previous owner) has unique qualities and was approved by government because of these qualities.