1.1  The Special Purpose Vehicle

Figure 1 - 2

Unlike traditional private sector concessions, the creation of a separate commercial venture called a Special Project Vehicle (SPV) is a key feature of PPPs.  The SPV is usually set up by the private sponsors(s)2 who, in exchange for shares representing ownership in the SPV, agree to lead the project and contribute the long-term equity capital.  The SPV is a legal entity that enables the coming together (see Figure 1 - 2) of many different parties and facilitates the allocation and diversification of risk and financing requirements to more than one party.  From a legal perspective, it is the SPV that undertakes the project and therefore all contractual agreements between the various parties will be negotiated between themselves and the SPV.  

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2  The government can also act as a sponsor.