2018 PFI Yearbook
Welcome to the 2018 Thomson Reuters Project Finance International (PFI) Yearbook. The Yearbook is our annual publication in which we look at the events of 2017, through case studies and the PFI Awards, and look forward into 2018 with interviews and articles in the Global section of the book.
2017 was the year when debt sourcing for projects did finally become interchangeable. Commercial banks do remain the staple providers of debt for energy and infrastructure projects but now a host of other providers and products have joined the mix. Bank loans, private placements, public bonds, direct institutional debt, multilaterals and export credit agencies are all now heavily involved in the sector.
Another feature of 2017 has been the growing reach of the sector across the globe. Projects are now getting financed in most countries around the world – utilising the range of products available for financing. Two mega schemes, for example, were transacted in Mozambique this year despite its sovereign debt issues. The largest PPP hospital scheme in the world was financed in Turkey.
The boom in solar PV power generation has meant a lot more countries are on the map in terms of project finance. Solar is relatively easy to finance, with limited construction risk and fairly predictable patterns of irradiation to analyse. In addition, it can be a boon for underdeveloped, hot countries – particularly when combined with storage solutions – with limited grid capacity.
Looking into 2018 the diversity of debt solutions will grow and grow. And it will throw up some interesting bedfellows. Investors will emerge from seemingly nowhere, like Washington DC-based Avenir did on the Luton Airport refinancing in the UK.
Japanese institutions, among the largest in the world, will become much more active. We profile Nippon Life – one of the world’s largest fund managers – in the Yearbook. The investor is not too keen on domestic bonds at present given their low yield but is now actively seeking involvement in international project finance loans. With Japanese commercial banks playing such an active role in international project financings, finding the deals should not be too much of a problem.
The new breed of investors can now mix and match their own financing solutions, with debt, sub debt, mezzanine finance and equity all on their books. We profile some leaders in the Yearbook from this new breed – CDPG, QIC and AXA.
A global fund can in one deal be the project sponsor, and in another one of the debt funders. The issue for many is simply finding the assets. Whether it is the need to find suitable investment opportunities or to place debt with enough yield, all investors are finding the hunt for assets a pressing concern. Added to this, many of the new investors are staffing up and want direct access to the asset rather than via a fund.
Industrial sponsors are still important but many have been selling assets rather than developing. And in the new solar and battery storage space, a new breed of developer is emerging – small-scale and nimble. In some ways they are akin to developers in the early days of gas-fired power stations in the early 1990s. We profile Sunseap and Access Power in the Yearbook as two examples of this new genre. We also take a look at the two huge new renewables markets – Australia and Turkey.
Predictions for 2018? The renewables market will get hotter; one day they will touch the sun and the market will crash down, but maybe not just yet. Offshore wind could go global, a big boom for project banks. Infrastructure will remain good in parts while the oil and gas market will start to benefit from rising prices.
Rod Morrison, Editor, PFI