GENERALLY

A project company is often owned by more than one entity. This may be due to a need to combine several project participants, each with differing financial, management, operational, and technical resources and skills to develop a successful project. For example, one project participant could have excellent experience and skill in construction of the planned facility but no knowledge about the long-term market risks associated with the facility's output.

The need for large equity contributions in infrastructure projects may require that several companies unite to pool resources. The amount of equity that is required for a project, coupled with the political and other risks involved in the project, could strain the funding abilities of any one participant.

The decision to collaborate may also be based in a need to share equity ownership with local investors in the host country. In some countries, local law requires that a domestic equity partner must be included with foreign investors in a project. Irrespective of local law requirements, a local partner is often important to the success of a project, because if that entity is commercially experienced and well connected, it can help reduce political risks.

Aside from these necessities for multiple partner involvement, the addition of new equity participants increases the complexity of ownership. Each equity participant may have different investment goals for the capital contributed.