The sponsors will identify a project and put together a bid in an effort to be awarded the project. This typically means the private sector investors will create a new company (the "project company") - usually a limited liability special purpose vehicle (SPV) - which will contract with the grantor to design, construct, operate, maintain and transfer the project. The use of an SPV is likely to enable the sponsors to finance the project on a limited recourse basis. The grantor may require that the project company includes local investors in order to improve transfer of technology, and provide jobs and training to local personnel. Most shareholders will want to be able to divest their shareholding as early as possible, in particular commercial/construction companies that are not accustomed to long-term shareholding. The grantor, on the other hand, will want the shareholders tied to the fortunes of the project company as long as possible, to align their interests more with those of the grantor (a financially viable project over the long term). Shareholders of the project company will often be both shareholder in the SPV and a contractor to the SPV. This conflict of interest will need to be managed amongst the shareholders, the grantor and the lenders, for example the conflicted shareholder should not be in a position to negotiate or influence the negotiation of their contract or set prices.
The nature of equity investors (public, private or mixed) in the project company will have specific relevance to the decision making within the project company, for example through the allocation of shareholder voting rights, right to elect board members, minority shareholder rights, different classes of shares, control through subcontracts and outsourcing. Rights, shares may be controlled through trusts or other vehicles, possibly to provide lenders with additional security. The shareholding arrangements are often complex, including the use of multiple subsidiaries, cross-shareholding, etc. These structures are often developed to improve accounting and tax efficiency.
The project company may also be subject to public control, for example through a joint stock company. This approach, while not common globally, is found in many developing countries. Key challenges associated with government shareholding in the project company include conflicts of interest between the government as shareholder and the government as grantor, for example difficulties for the government as shareholder to agree for the project company to sue the government as grantor.