An infrastructure fund manager has three problems.

First, raise the capital.

Not easy.

Second, deploy the capital.

Also not easy.

Because after telling LPs you have access to a wonderful infrastructure pipeline, eventually you need to buy something.

Small detail.

And third…

Invest the capital in something that does not behave like what the fund promised to invest in.

That is where careers become interesting.

It’s not only about losing money.

It’s walking into the Investment Committee and explaining why the “low-risk availability-based infrastructure asset” suddenly behaves like something else.

Let’s imagine the project.

A road PPP. Availability-based. No demand risk.

Beautiful.

Government pays the SPV as long as the road is available and performance standards are met.

Traffic revenue stays with government.

The IC paper says all the right words.

Stable cash flows.

No traffic risk.

Everyone relaxes.

Then the trucks arrive.

Lots of trucks.

More trucks than forecast.

Heavier trucks than expected.

More pavement wear.

More maintenance.

More rehabilitation.

The revenue line is fine.

The availability payment is fine.

There is no classic demand-risk disaster.

But… the traffic risk did not enter through revenue.

It entered through cost.

I repeat…

Your traffic risk was not in the revenue… but in the costs.

So, the SPV does not receive more money because more heavy vehicles are using the road.

But the maintainer needs to spend more to keep the asset available.

The O&M contractor starts sending notices.

The notices start accumulating like wishes to God.

And the fund manager starts rereading the papers.

With a very specific facial expression.

Because the asset was sold internally as availability risk.

Now it has traffic-linked cost risk.

The type that hides in the O&M schedule, the pavement assumptions, the lifecycle model, the handback obligations and the maintenance back-to-back.

Very exciting stuff.

I love it! These surprises make my day…

So… an availability payment does not automatically mean an availability-risk asset.

So… please read the contract.

Not the summary.

Investment Committees are boring… and they do not enjoy surprises as I do.

This is why due diligence must go beyond the payment mechanism.

Experience and common-sense kick in.

Then, they call you.

Does the SPV have a claim, or just a problem?

That difference matters.

A claim is a route to recovery.

A problem is a Board agenda item.

Fund managers do not need more problems.

They already have enough.

They need someone to remove problems from the table before they become explanations.

That is the value of good commercial and SPV diligence.

And I’m not talking about a 200-page report nobody reads… except for the summary.

I was told…

“We assumed that was covered.”

Ah… assumptions… I enjoy them so much!

Use this information at your own risk.

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