Special purpose vehicle (SPV) model for private finance initiatives for large scale infrastructure projects in Sri Lanka

Abstract

Sri Lankan infrastructure development funding take up a good portion from the country annual budget. To cover up the cost of infrastructure projects, Sri Lanka use foreign funds and loans along with domestic earnings. Due to this process continuation for a long time, Sri Lanka has now ended up with dependencies to other countries. This research focus on studying Private Financing Initiatives (PFI) as an alternate solution for loans and insufficient Gross Domestic Product (GDP). Identifying available alternative methods, assessing suitability on private financing and developing a suitable Special Purpose Vehicle (SPV) model to suit Sri Lankan industry is the main objectives of this research. Moreover, what is PFI and how PFI was applied in other countries in their large-scale development projects, characteristics of PFI, how PFI can be attached with SPVs, what is an SPV have also studied using the available literature. In order to identify a suitable SPV in a PFI agreement, different types of SPV models has being compared. Further reasons for failure and rare existence of PFI in Sri Lanka, how PFI can be adopted to Sri Lanka, success factors, suitability of PFI and SPV, if a SPV is adopting to Sri Lanka how its relationships to be formed was identified by carrying out in-depth interviews. As conclusion, factors related to making a trend in PFI for project funding in Sri Lanka, government contribution in such projects and the need of change in government policies to bring up PFI contracts with a SPV, providing solutions for resisting PFI and leads to a successful adoption of PFI has being discussed.