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    Question

    What is a special purpose vehicle (SPV) in project

    finance?
    A A type of debt security issued by the borrower Correct Answer Incorrect Answer
    B A company established specifically for the project to isolate risks and liabilities Correct Answer Incorrect Answer
    C A type of equity financing provided by the lender Correct Answer Incorrect Answer
    D A guarantee provided by the borrower to secure the loan Correct Answer Incorrect Answer
    E A type of insurance policy for the project Correct Answer Incorrect Answer

    Solution

    A special purpose vehicle (SPV) is a company that is established specifically for the purpose of carrying out a particular project. The SPV is typically used to isolate the risks and liabilities associated with the project from the sponsor's other business activities. The SPV is usually owned by the project sponsors, but may also include other stakeholders such as lenders, investors, or contractors. The SPV is responsible for entering into contracts, raising financing, and managing the project's operations. By isolating the project's risks and liabilities in a separate legal entity, the project sponsors can limit their exposure to potential losses and reduce the impact of the project's failure on their other business activities.

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