Asia-Pacific Bank of the Year SMBC The Asia-Pacific region is Japan’s backyard, and despite the noticeable crouching of the Chinese funds, the Japanese banks and institutions remain active and continue to play a dominant role.
Among them is Sumitomo Mitsui Banking Corp (SMBC), which stood out this year with its involvement in a number of significant PF loans and list of advisory mandates across the region. SMBC is PFI’s Asia-Pacific Bank of the Year.
Indeed, SMBC can be described as truly regional. It is active in a number of Asia-Pacific countries, from Japan and Mongolia in the north; India, Bangladesh, Sri Lanka in the west; Australia in the south, and ASEAN countries - Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam at the centre.
One of the significant deals it has advised on and arranged this year was the 1,200MW Nghi Son 2 power plant (NS2PP) IPP coal-fired power project in Vietnam, one of the few remaining coal projects in the country and region.
NS2PP is the first power plant the Vietnamese government has awarded on a competitive basis, and the first IPP project there with international investors in the last 15 years since 2003. Many would say it was a test of patience as it took more than five years from being awarded before sponsors Marubeni Corp and Korea Electric Power Corp (Kepco) finally secured a financing of about US$1.87bn. Patience is indeed an important virtue that is required from any project finance banker.
The bank also advised on the Long Son petrochemical project in Vietnam, which had sponsor Siam Cement providing a corporate guarantee on the debt. The loan structure, however, was based on a project financing.
Another significant deal was the A$9.3bn debt financing for the acquisition of 51% of the Sydney WestConnex project by Transurban from the New South Wales government. It was one of the original senior financiers and was a hedge provider as well. The project is the biggest road infrastructure facility in Australia to-date.
In Japan, it was a lead arranger to the ¥109bn debt raised for Douhoku, Japan’s largest onshore wind project. Sponsored by Eurus Energy, the project involves seven sites with a combined capacity of 517MW. The sponsor and arrangers successfully mitigated risk of unlimited curtailment and project-on-project risk.
The bank played a senior role in other noteworthy deals that closed this year. They include West Java FSRU, Rantau Dedap, Tujuh Bukit, Route 3, Project Pearl, MGM Macau, OTCS Refinancing and Genting CDX.
On the advisory side, the Japanese bank is going strong. In addition to the completed deals, it has won new mandates and they include the 800MW Sumbagut IPP in Indonesia, 1,230MW Kanbauk gas to power plant in Myanmar, two Taiwanese offshore wind projects of wpd, which are currently in financing phase, Bulacan Airport of San Miguel Corp and many others.
The project and export finance team for Asia-Pacific was recently reorganised and Luca Tonello remains the head. He is supported by his deputy Zia Azeez; power and infra head Jeanne Soh; energy and natural resources head Siddhartha Shrivastava; China and Hong Kong team head Travis Maurer; and advisory head for power and infra Valery Tubbax.
Asia-Pacific Power Deal of the Year
Jawa 1 LNG-to-Power
The development and financing of the US$1.7bn Jawa 1 LNG to power project located in West Java Province is Indonesia’s first integrated LNG-to-power project, and is PFI’s Asia-Pacific Power Deal of the Year.
The scheme, which is part of the 35GW target of the Widodo administration, represents the first LNG-to-power project in the region and includes the integrated financing of a new-build 170,150 cubic metre floating storage regasification unit (FSRU) and a two-unit 1,760MW greenfield gas-fired independent power plant.
Putting it together was a significant achievement. The project is an integrated LNG-to-power project structured on an energy tolling basis, a first for the country and the region. PLN is responsible for procuring the LNG and delivering it to the FSRU, which supplies the LNG to the IPP. PLN offtakes the power from the IPP under a 25-year PPA.
It is the first project in Asia under JBIC’s newly established QI-ESG programme, which encourages infrastructure development that helps preserve the global environment. In addition, it is the first project under a memorandum of understanding between NEXI and Pertamina signed in December 2015, targeting to strengthen cooperation to encourage trade and investment between Japan and Indonesia.
The finance package is structured to support two project companies – Jawa Satu Power for the IPP and Jawa Satu Regas for the FSRU under different ownership structure – as a single project to mitigate project-on-project risks.
The IPP sponsors are Marubeni, Sojitz Corp and Pertamina; and for the FSRU, Mitsui OSK and Humpuss Intermoda Transportasi joined the IPP sponsors to meet Indonesia’s regulatory requirement for projects involving natural resources.
The Jawa 1 consortium signed the 21-year US$1.312bn debt facility on October 18 and achieved financial close on December 5.
The lending group comprises the Asian Development Bank and Japan Bank for International Cooperation (JBIC) as well as commercial lenders with NEXI cover – Mizuho Bank, MUFG Bank, Oversea-Chinese Banking Corporation, Credit Agricole Corporate and Investment Bank, and Societe Generale Tokyo Branch. ING was the financial adviser. Allen & Overy is legal counsel to the lenders while the two SPVs have Shearman & Sterling. EPC contractors are General Electric (GE), Samsung C&T (Samsung) and Meindo Elang Indah (Meindo).
Asia-Pacific Renewable Deal of the Year
Taiwan is the first country in the region that has gone big on offshore wind energy. It is moving into dismantling all of its nuclear energy facilities by 2025, leading to a major shift towards renewable energy and a 5.5GW offshore wind energy programme. Setting the benchmark for future offshore wind projects is the 128MW Formosa 1 offshore wind power project, PFI’s Asia-Pacific Renewable Deal of the Year.
The project is ground-breaking and represents a number of firsts – it is the first of its kind, being the first offshore wind project financing in Asia. It is also Taiwan’s first commercial-scale offshore wind farm that is project financed, on a long-term basis, and with a lender group comprising both domestic and international banks. EKF (Denmark’s export credit agency) is providing comprehensive cover for 60% of the project finance debt. This is EKF’s first participation in project financing in Taiwan.
The project is sponsored by Macquarie Capital (50%), Orsted (35%) and Swancor Renewable Energy (15%). They signed the limited recourse loan of NT$18.7bn (US$627m) on June 8 this year. It has a 16-year door-to-door tenor that is fully amortised, setting a benchmark in terms of fully amortising tenor financing in the country.
The deal sets a market precedent for long-term funding in Taiwanese dollars together with long-term interest rate hedging.
It presents proof of bankability of mitigants, in terms of design, warranties and insurance for Taiwan’s extreme weather conditions that include typhoons and earthquakes. Taiwan is definitely not a paradise island but investors have flocked in to be part of its offshore wind energy party.
Phase 1 of the project comprises two 4MW wind turbines supplied by Siemens Gamesa Renewable Energy (SGRE), while the subsequent larger Phase 2 will see the installation of 20 additional 6MW turbines, also supplied by SGRE. For Phase 2, Jan de Nul will be providing the foundations and cables and Fortune Electric the onshore works.
The proceeds will be used to refinance the first phase of the wind farm, 8MW of which commenced operations in April 2017, and fund the development of the second phase of 120MW, which is due to be completed in late 2019. The offtaker is Taipower.
The local lenders are Cathay United Bank, Taipei Fubon Commercial Bank, EnTie Commercial Bank, and KGI Bank. The international lenders are ANZ Banking Group, BNP Paribas, Crédit Agricole Corporate and Investment Bank, DBS Bank, ING Bank, MUFJ Bank and Société Générale. Legal advisers to the sponsors were Lee & Li and Clifford Chance while the lenders had Linklaters.
Asia-Pacific Acquisition Deal of the Year
The acquisition of Equis Energy by Global Infrastructure Partners (GIP), valued at about US$5bn, is the largest renewable energy acquisition so far, resulting in a new Asian renewable powerhouse. It is PFI’s Asia Pacific-Acquisition Deal of the Year.
GIP, together PSP Investments of Canada and CIC Capital (Chinese sovereign wealth fund), acquired 100% of Equis Energy, now renamed Vena Energy, which remains headquartered in Singapore.
Its portfolio includes 1.9GW of solar and wind assets across Japan, Thailand, the Philippines, Indonesia, India, Taiwan and Australia. It owns a development pipeline of more than 115 renewable projects with a combined capacity of 9.1MW. Once complete, the new owners will have 11GW of renewable energy. They have 20-year PPAs with central and local government-owned utilities or well-rated corporates.
The US$620m acquisition financing was an extremely complex transaction as it involved many countries across Asia-Pacific with projects of varying renewable regimes, technologies and stages of development. It was also split into two currencies – with Japanese yen and US dollar tranches, in order to provide a natural hedge against foreign exchange fluctuations.
In addition, the loan facility was structurally subordinated to some US$1.3bn of project finance debt at the asset level.
It was completed and delivered within a relatively short time-frame to allow the GIP consortium to provide a competitive pre-emptive offer to the seller Equis.
The loan was arranged and fully underwritten by MLAs BNP Paribas, Credit Agricole CIB, and ING Bank. It attracted nine other banks keen to support green projects in the region. They are ABN AMRO Bank, Commonwealth Bank of Australia, DBS Bank, Intesa Sanpaolo, MUFG, Rabobank, Siemens Bank, SG, and SMBC.
Legal advisers were Clifford Chance for the sponsors and Allen & Overy for the lenders.
Other involved advisers were Arup, technical; ERM, environmental and social; Mazars, model audit report; Willis Towers Watson, insurance; and KPMG/Deloitte, tax and accounting.
Asia-Pacific Infrastructure Deal of the Year
The WestConnex project in Sydney is by any measure one of the largest toll road infrastructure projects ever attempted in the Asia-Pacific. The project is now almost 50% complete and when fully completed in 2024 is expected to have cost around US$40bn. It is PFI’s Asia-Pacific Infrastructure Deal of the Year.
WestConnex will provide 33km of motorway to link western and south-western Sydney with the city, Kingsford Smith Airport and Port Botany precincts. Future projects will include a new tunnel under Sydney Harbour, a toll road tunnel connection to Sydney’s northern beaches and a new F6 toll road going south to Wollongong.
The New South Wales government through the Sydney Motorway Corp began the project but decided last year to sell 51% of its ownership to the private sector.
The asset was highly sought after and toll road operator Transurban was the successful bidder and reached financial close on its A$9.3bn (US$6.75m) acquisition funding of 51% of the Sydney WestConnex project from the New South Wales government in October.
The funding included A$4.2m of equity, a A$1.1bn three-month bridge loan and the refinancing of A$4bn of the Stage 1 (M4) and the refinancing of Transurban’s A$600m contribution to Stage 3A (M4-M5 tunnels).
Completed projects of the WestConnex include widening of the M4 between Parramatta and Homebush. Under construction is the extension of the M4 twin underground tunnels from Homebush to Haberfield and doubling road capacity along the M5 East corridor with the New M5 underground tunnels running between St Peters and Kingsgrove.
These two projects will be joined via the M4–M5 Link tunnel to form a seamless motorway without traffic lights and provide a western bypass of the Sydney CBD as well as connections to the future Western Harbour Tunnel, BeachesLink, F6 extension and major international gateways at Sydney Airport and Port Botany.
The 14 banks providing the bridge loan and refinancing included Agricultural Bank of China, ANZ, Bank of China, CBA, Credit Agricole, CIBC, EDC, ICBC, ING, KEB Hana, Mizho, Scotia Bank, Societe Generale and Westpac. The same banks will fund about A$5bn of capex required to complete the M5 West project at a later stage.
The equity was provided by Transurban, AustralianSuper, Canadian Pension Plan Investment Board and Tawreed Investments. The financial advisers are UBS, Macquarie Capital and Morgan Stanley, and KWM is the legal adviser.
Asia-Pacific Solar Deal of the Year
Australia is in the midst of a renewables boom, with recent figures suggesting that renewable energy and storage projects added up to around US$14.1bn worth of investments in 2018, which was a record year with 80 wind and solar projects currently under construction or about to start.
The 255MW Sunraysia solar project in rural New South Wales that reached financial close in October is one of the largest solar projects in the country, and is PFI’s Asia-Pacific Solar Deal of the Year.
The US$260m Sunraysia project was sponsor John Laing’s first solar investment in Australia. It bought 90.1% of the project from Chinese group Maoneng on the project reaching financial close.
The five-year, A$250m debt facility was provided by NordLB, ING, Mizuho, Bank of China and National Australia Bank.
The project was underpinned by two world-class power purchase agreements (PPAs), one with the University of New South Wales (UNSW) for 25% of the project’s generation and the other with “gentailer” AGL for 50%. Both PPAs have a tenor of 15 years.
The UNSW PPA was the first deal of its kind in Australia, with UNSW contracting with the developer, and separately with a retailer to firm its supply, for its total expected energy requirements to ultimately achieve its goal of becoming carbon-neutral in its energy use by 2020.
The PPA with UNSW put to rest any doubt in the Australian market that a corporate PPA can be a bankable revenue stream for a project and has paved the way for other Australian universities, including the University of Melbourne and the University of Technology Sydney, to strike their own PPA deals.
The project’s documentation provides flexibility for the development by the Maoneng group of a battery storage facilities on a site adjacent to the project. Both the UNSW and AGL PPAs incorporate options for offtakers to participate in the battery project. The lenders have already indicated a willingness to provide funding.
KWM advised the lenders, Norton Rose Fulbright advised Maoneng and Rothschild was the financial adviser. Decmil is the EPC contractor.
Asia-Pacfic Clean Energy Deal of the Year
Clean energy as opposed to dirty coal-fired energy has been the hot topic on both a commercial and political level over the past year. The Kwinana waste-to-energy (WtE) project is the harbinger of a new entrant into the discussions with the project the first to be project-financed, and is PFI’s Asia-Pacific Clean Energy Deal of the Year.
While the need to develop clean energy WtE plants has been talked about for the past three years or so, the Kwinana plant near Perth, Western Australia is the first utility-scale WtE facility to achieve financial close in Australia.
The A$700m (US$503m), 400,000-tonnes-per-year 36.5MW scheme was funded through a five-year debt package from SMBC, CEFC, Investec, IFM and Metrics Capital. The Australian Renewable Energy Agency provided a A$23m grant to the project, whose sponsors are Macquarie and DIF.
Legal adviser to the lenders was Allens while Norton Rose Fulbright advised DIF.
The project will use moving-grate technology to treat thermally municipal non-recyclable waste and convert the recovered energy into steam to produce electricity. Acciona is the EPC contractor with Veolia providing O&M services for 25 years following commencement, which is scheduled for mid-2021.
The project is supported by a long-term waste supply agreement (WSA) with the Rivers Regional Council (the RRC), which provides for minimum waste delivery volumes. The RRC is an entity formed by a number of local councils from the wider Perth metropolitan region for the purposes of managing waste in a unified manner.
In addition, the project has entered into a WSA with the City of Kwinana and a five-year commercial WSA with Veolia. WA Limestone has entered into an ash offtake agreement with the project with the intention of developing a market for the re-use of the bottom ash generated by the facility in road materials and the project is planning to enter into an agreement for the offtake of recovered metals.
The main revenue sources for WtE projects are waste gate fees and revenues from the sale of energy generated by the facility (electricity, steam or a combination of both). In the case of Kwinana, it will sell energy in the form of electricity into the South Western Interconnected System (the SWIS).
Compared with other plants, notably in the UK, the Kwinana WtE project takes greater ‘merchant risk’ with respect to waste and power revenues in comparison with WtE facilities in the UK, which generally have been procured under a PFI model.
As a consequence, lenders to the Kwinana WtE project undertook extensive due diligence into the geographical suitability of the site, market analysis into composition and forecast volumes of regional waste supplies (including impact assessment on waste supplies from future competing WtE plants) and pricing of the gate fee to ensure that contracted revenue was sufficient to meet debt service obligations.
Asia-Pacific Bond Deal of the Year
The infrastructure bond market hasn’t been a strong performer over the past year but the notable exception was the now publicly listed Bayfront Infrastructure Capital’s collateralised loan obligation notes on the Singapore Exchange. They are Asia’s first infrastructure project finance securitisation notes and PFI’s Asia-Pacific Bond Deal of the Year.
The notes, issued via Bayfront Infrastructure Capital (BIC), marked the debut of a new asset class to facilitate institutional investor access to infrastructure debt in Asia-Pacific and the Middle East.
BIC, which is sponsored by Clifford Capital, issued four classes of notes comprising Class A notes (US$320.6m), Class B notes (US$72.6m), Class C notes (US$19.0m) and subordinated notes (US$45.80m).
Clifford Capital, which is 40.5% indirectly owned by Temasek Holdings, and quasi-central bank the Monetary Authority of Singapore (MAS) have been working hard for almost two years, since late 2016, to draft this take-out facility to free banks from long-tenor project loans so that new funds can be invested in new infrastructure projects.
In Asia, the public sector remains the key provider of funds for infrastructure investments.
Project and infrastructure loans are largely the domain of commercial banks, ECAs and multilateral financial institutions, with banks’ balance sheets being increasingly constrained by capital limitations. This leads to a significant space for long-term institutional capital to fill the funding gap via alternative financing.
The BIC transaction seeks to create a platform that allows institutional investors to invest in diversified pools of project and infrastructure loans and benefit from Clifford Capital’s project finance and loan portfolio management expertise.
The Bayfront transaction creates a new asset class for investors to assess project and infrastructure loans in a credit-enhanced structure, also in the process mitigating barriers to entry such as specialised resources and capabilities, portfolio concentrations and emerging market risk.
The notes are backed by a US$458m portfolio of bank-syndicated project finance and infrastructure loans spread across 16 countries and eight industry sub-sectors (PFI 630).
The loans came from DBS, HSBC, MUFG, SMBC, Standard Chartered and Clifford Capital, the manager of the collateralised loan obligation offering. Citigroup and Standard Chartered are joint global coordinators, DBS, HSBC and SMBC Nikko are joint bookrunners, and MUFG is co-manager.
Legal advisers were Latham & Watkins for the issuer, Linklaters for the lenders and Allen & Gledhill was Singapore counsel.
Following the successful launch of the CLOs, Clifford Capital has started preparing for the next infrastructure project finance securitisation notes issue. It is looking to raise another US$500m within the next 12 to 18 months.