Funding Transport Infrastructure Projects - SPV Company - Case Study Example

The paper "Funding Transport Infrastructure Projects - SPV Company " is a perfect example of a finance and accounting case study. A special-purpose vehicle company (SPV) established for various projects that require intensive capital is usually determined by its level of capability to spread risk and borrowing capacity for emerging investment opportunities. There is always a detailed analysis of infrastructure development as an asset class and the reasons leading to infrastructure debt funds currently evolving in different regions including the European Union.

The financing of infrastructure projects at times requires private sponsors to create SPV companies for the purposes of financing, building and operating infrastructure services (Pejovich, 1998). This is always done due to existing requirements from statutory boards for particular infrastructural services like private power projects where project companies are established under the Built-Operate-Own or Built-Operate-transfer (BOO/BOT) arrangements. The process of project development involves some risks due to the size and range of requirements for the project.

Secondary contracts in the transport construction project are associated with the construction process, operations as well as finance sourced from a number of organizations. The constructor should have specialist knowledge of the required infrastructure and a specialist in operations management. There is also the part of a lender with experience in financing infrastructure projects capable of providing debt through a syndicated loan arrangement. Bondholders, where bonds are required to offer a more detailed solution as compared to debts and denominated in a preferred currency that would help, raise the bulk of capital required (Rebitzer, 2004).

In some instances, firms choose to finance infrastructure as a separate investment supported by a separate balance sheet from that of the company (UBS, 2011). This is always applicable due to constraints arising from the corporate balance sheet, this call for the application of project finance (PF) principles. Such cases require the formation of an SPV Company for the purposes of financing, building as well as operating infrastructural services. Project finance (PF) is always preferred in the process of financing capital intensive projects that require high operational costs (Estache and Strong, 2000).