The Valuation of Special Purpose Vehicles in Project Finance Infrastructural Investments

Project finance (PF) investments have consistently grown in the last years, especially if they concern infrastructural Public–Private Partnerships (PPPs). PF is a long-termed and capital-intensive investment, guaranteed by expected cash flows, rather than the assets of the project sponsor. Private entities, normally created as Special Purpose Vehicles—SPVs, are typically highly leveraged with non-recourse loans. Since the shareholders may be likely to sell off their stake well before the expiring date of the concession, a professional evaluation of the SPV at different stages of the project’s life seems increasingly important. Fair appraisals fuel and keep alive a secondary market where investment funds and private equity intermediaries start having an active role. Being PF a cash fw-based investment, DCF evaluation techniques are generally used; even if the method may seem straightforward, several awkward factors interact—and sensitivity to different parameters, such as inflation or interest rates, greatly matters. To the extent that it can be professionally managed by specialized agents, risk sharing, or transmission is not a zero-sum game, as it positively affects both the equity and the enterprise value.