Eight advisory firms have been awarded Best Practice Citations for advising clients on significant projects or programmes around the Asia-Pacific region. The citations recognise advisory work on challenging, complex and ultimately successful projects or programmes. There will be full write up on the Citations in the PFI Best Practice Report due out in early October.
Government advisory – KPMG
KPMG has been involved in a range of infrastructure deals in Singapore. The latest is the development of the sixth incineration plant or waste to energy (WtE) facility, the first such PPP project in the country and the largest in Southeast Asia. The financing for the project, awarded to Hyflux and Mitsubishi Heavy Industries, achieved financial close in May this year with lenders DBS, Maybank, Mizuho and BTMU.
KPMG, together with Parson Brinckerhoff and Herbert Smith Freehills, was engaged by the National Environment Agency (NEA) in early 2014 to assist it in the preparation of bid documents and the selection of a concessionaire. NEA acts both as regulator and offtaker. The project is expected to augment the city state’s energy capacity and reduce waste at a rate of around 3,600 tonnes per day.
KPMG is currently adviser to PUB, Singapore’s national water body, in the procurement of the 30mgpd Marina East desalination plant (MEDP), the country’s fourth desalination plant. It is working with Black & Veatch and Squire Patton Boggs, the technical and legal advisers respectively.
Debt capital markets advisory – HSBC
HSBC was the principal adviser and joint lead manager on the largest sukuk issue in 2015, the largest greenfield project bond in the power sector and the largest independent power project (IPP) in Asia-Pacific in 2015. The deal was the US$2.12bn Jimah East project financing in Malaysia for Tenaga Nasional and Mitsui.
Prior to working on the bond, HSBC advised Tenaga on buying a 70% stake in the project and ensuring the scheme had a competitive tariff and good project economics.
The sukuk issue set a new benchmark for a domestically rated Malaysian deal with a 23-year tenor. Despite concerns over foreign exchange movements in late 2015, the financing featured limited support for foreign exchange exposure. This allowed investors to get comfortable with the transaction, while limiting the exposure of the sponsors.
Financial advisory – SMBC
SMBC advised on one of the landmark deals to reach financial close in Asia this year – the US$4.3bn Central Java coal-fired power project for the Bhimasena Power Indonesia (BPI) project company. The financing heralds the start of a new era of Indonesian power project financings.
Land acquisition issues, outside the control of the adviser, delayed the deal for a long time. But an issue introduced late in the day did have important financial consequences, a rupiah payment requirement for transactions made in the country. It was agreed that PLN will make its payments to BPI in rupiah but PLN has an undertaking to meet any shortfall that may be the result of the currency exchange from rupiah to US dollars. BPI is made up of J-Power, Adaro and Itochu. SMBC put together a 20-year financing from JBIC and commercial banks from Japan and Singapore.
Financial advisory - MUFG
MUFG advised on one of the stand-out infrastructure deals in Asia-Pacific this year – the US$600m scheme to build a light-rail system in Canberra, Australia. The financing included a number of innovations to match the profile of the deal.
The client, the Australian Capital Territory (ACT), is taking out half of the project debt on completion of construction. There was a desire to manage interest rate risk efficiently on the ACT contribution but without ACT assuming a floating interest rate profile after the initial debt term, as is the case on most Australian PPPs.
An interest rate cap solution was adopted to provide certainty. In addition a deferred maturity equity bridge facility (EBF) was put in place to bridge the equity proportion of the ACT contribution. The project sponsors on the deal are Pacific Partnerships, John Holland, Mitsubishi and Aberdeen.
Local financial advisory – DBS
DBS Bank, the largest bank in Singapore and Southeast Asia by assets, has successfully expanded its role into advisory services, winning a number of mandates. It is the financial adviser to the sponsors of Kalimantan Selatan (Kalsel) power plant in Indonesia. With the issue on rupiah payment being settled soon, the signing of the debt facility is expected to be concluded shortly. Kalsel’s sponsors are Adaro Energy and Korea East West Power.
The Singapore bank is currently advising one of the bidders to the Java 1 IPP in Indonesia. Bids are due to be submitted in August, the latest deadline announced.
The bank also advises governments. Recently concluded is a financial advisory role to concessionaire authority Sport Singapore (SportSG) in the refinancing of the loan of Sportshub, Asia’s largest sports PPP project. DBS was selected by SportSG to ensure that the Singapore government was able to leverage on improved market conditions. This resulted in the removal of the refinancing guarantee provided by the Singapore’s ministry of finance, securing a full 20-year term refinancing to reduce refinancing risk and also obtaining the realisation of refinancing gains for the authority.
Legal advisory – Milbank Tweed
Milbank Tweed advised the lenders on a truly mega-scale project finance late last year. The deal, like others in the project finance sector, was delayed for some time as the Rio Tinto-led sponsor group and the host government debated the details. But in the end the deal got over the line. The project is the Oyu Tolgoi mine in Mongolia.
The deal is the largest emerging market mining project financing to-date, the largest Central Asian project financing to-date and the largest project in Mongolian history. The deal has a complex mix of financing tranches that needed to be married together and kept whole during the delays. Export credit agencies on the deal include EDC of Canada, EFIC of Australia and US Exim. Multilaterals include MIGA, ERBD, IFC and FMO, and there are a host of commercial banks. Milbank has long experience in managing complex project financings.
Legal advisory - Shearman & Sterling
Shearman & Sterling advised the Light Rail Manila Corporation (LRMC) on its landmark US$1.4bn infrastructure deal in the Philippines, the Light Rail Transit 1 Cavite Extension project (LRT 1). The financing marks one of the largest infrastructure project financings in the country to-date at a time when all eyes are on this growing market.
The deal, which was financed by local banks, had plenty of challenges including taking over the existing ageing network, challenging economics, exposure to fare revenues and rights of way issues. Notwithstanding the issues, the deal represents the first fully non-recourse PPP deal in the country. The financing was split between two tranches to reflect the repair of the existing railway and rights of way approval timings. The concession termination regime was improved to aid the deal. The sponsors are Metro Pacific, Ayala Corporation and Macquarie.
Technical advisory – Black & Veatch
Black & Veatch advised on one of the more technically interesting power projects in the region to have recently been successfully completed. More to the point, however, is the fact the scheme is strategically important with former Philippine president Benigno Aquino III leading the opening ceremony in January.
The scheme is Abolitiz Power’s 300MW circulating fluidised-bed baseload coal-fired plant in Mindanao, Therma South. The scheme was financed by local banks led by BDO. The plant features the Philippines’ first coal dome, an enclosed but well-ventilated facility to minimize surface area on which coal dust can settle while providing safe storage for the plant’s fuel supply. The technically challenging scheme has come on line as Mindanao suffers from power supply problems brought about by El Nino. Black & Veatch was the overall project and commissioning manager for the plant.