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12. Glossary
Credit rating
An indication by a Credit rating Agency of an entity's long-term or short-term credit worthiness. A long-term rating of Aaa/ AAA is the most creditworthy (eg the UK Government). BBB represents the minimum investment grade rating.
Due diligence
The process of investigation performed by investors into the details of a potential investment. Due diligence is likely to be carried out on the legal, technical, insurance and financial aspects of a project
Equity
Ordinary share capital invested in the project company by the sponsors and any third party investor. Typically equity has the last claim upon the project's income, hence the highest risk and is therefore the most expensive source of finance.
NPD
The Non-Profit Distributing ( NPD) model is a form of public private partnership but unlike PFI it is 100% debt financed. This means that there are no uncapped equity returns and that any surpluses in the delivery vehicle flow into a charitable body for community use. The model also provides for stakeholder representation on the Board of the delivery vehicle.
PFI
The Private Finance initiative was launched in 1992. PFI projects are one type of PPP project. The principle of PFI is a public sector body obtains a service rather than an asset. A private sector contractor funds any asset required and is then paid for the services provided. Usually payments will be made by the commissioning authority, but in some projects, payment, either in part or in whole, will be made by the users eg toll bridges, etc
PPP
Any contractual arrangement involving a partnership between the public and private sectors ranging from joint ventures to PFIs.
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