A comprehensive glossary of terms is available to download from www.european-services-strategy.org.uk/global-auction-of-public-assets/global-auction-of-public-assets-glossary/
Book value: the value of an asset according to its balance sheet account balance. For assets, the value is based on the original cost of the asset less any depreciation, amortization or Impairment costs made against the asset.
Due Diligence: An independent and expert assessment to ensure financial, legal, management and operational systems are in order and as stated in the project and contract documents. It is designed to ensure there are no hidden liabilities or risks. In addition, it is a means of identifying, quantifying and making recommendations as to how to mitigate key commercial and financial risks.
Financial close: The date on which the PFI/PPP contract was signed.
Infrastructure fund: Listed infrastructure fund shares are publicly traded on a stock exchange. The fund will have a portfolio of infrastructure assets. Unlisted infrastructure funds depend on companies, pension funds and wealthy individuals investing lump sums which are used to finance projects and acquire assets.
Institutional investors: Banks, pension funds, insurance companies, private equity funds and hedge funds who will often invest via nominee companies to hide their identity.
Joint Venture Company: A company in which public sector organisations and private companies both have a stake, or may a operated by two or more private sector companies or financial institutions.
PPP Equity: The capital contributed by the shareholders of a project company. The value of the equity is the value of a company or project after all liabilities have been allowed for. The equity is owned by the shareholders. Also commonly called a stock, as in the stock market.
Profit: Difference between the cost of investment and the selling price of equity.
Rate of Return: the ratio of money gained or lost on an investment relative to the amount of money invested and the period covered.
Secondary Market: A market in which an investor purchases a security from another investor rather than the issuer, subsequent to the original issuance in the primary market. In the PFI market this tends to take the form of the sale of equity by investors in the project company in many cases to secondary funds that wish to build a portfolio of PFI assets. There is also a secondary market in debt (the syndicated debt market) usually between banks but also to other types of investors.
Secondary market fund: an infrastructure fund that acquires equity stakes in PFI/PPP projects, primarily once they are operational.
Share capital: the portion of a company's equity obtained by selling shares to a shareholder.
Special Purpose Company (SPC) or Vehicle (SPV): A company especially established by the PPP consortia to design, build, finance and operate the project.
Subordinated debt: Debt over which senior debt takes priority. In the event of bankruptcy, subordinated debt lenders receive payment only after senior debt is repaid in full. A form of mezzanine finance is a term used to describe debt that is unsecured or has a lesser priority than other debt claims on the same asset. If the party that issued the debt defaults on repayments, people holding subordinated debt get paid after the holders of the senior debt. A subordinated debt carries more risk than a normal debt, and earns a higher expected rate of return than senior debt due to the greater inherent risk.