Europe Bank of the Year – Santander Banco Santander vigorously expanded its project finance lending with an impressive mix of infrastructure and energy deals in Europe during 2018. The Spanish bank stood out thanks to the breadth and type of financing and advisory work.
Santander was particularly active in the UK. It advised on the £2.9bn 950MW Moray East offshore wind farm, one of the year’s largest offshore wind projects, took part in the Triton Knoll and Hornsea offshore wind deals, and won the advisory mandate for the 588MW Beatrice project.
Offshore wind is a key market for the lender, which also funded the 487MW Seamade project in Belgium. “It’s an area where Santander wants to be a leader,” says the bank’s global structured finance head Benoit Felix. “We were one of the first banks to finance offshore wind projects.”
In Spain, Santander pioneered financing for a new breed of low-subsidy or unsubsidised renewable energy projects such as Forestalia’s Goya wind farms, which promise to revolutionise the European energy market. It also took a lead role in the country’s growing project bond scene with renewables and transport deals.
The bank financed a wide range of projects throughout Continental Europe, including several large-scale PV portfolio financings in Italy and the Open Fiber broadband roll-out; road and rail refinancings in France; and infrastructure M&A deals ranging from the Netherlands to Finland.
“We want to be leaders not necessarily in terms of volumes but in terms of type of deals we do,” said Felix, who took over as global head of structured finance this year from Carlos Muniz after he was promoted to global head of finance.
Pablo Trueba heads the structured finance team in Iberia, with Unai Parra leading infrastructure and Daniel Machuca leading energy. Alejandro Ciruelos is head of project finance in the UK and Gonzalo Acha was named head of project finance for Continental Europe this year, replacing Felix. Pierre Nicoli joined this year as global head of infrastructure M&A.
Europe Solar Deal of the Year – RTR
Italian infrastructure investor F2i jumped into the top ranks of Europe’s largest solar power producers this year with the acquisition of Terra Firma’s solar company RTR and its 334MW of operating plants.
The €1.3bn acquisition was one of the largest solar deals in Europe and brought to an end a cut-throat bidding process among domestic and global investors. F2i mustered enough financial firepower to outbid the competition even after losing its bidding partner Enel.
While the seller advisers lined up an €850m bond issue to sweeten the deal for bidders with less clout in the banking market, F2i tapped relationship lenders to back its offer with €995m of 12-year debt at competitive pricing.
Nine banks eventually took part with equal tickets in the acquisition of RTR, nicknamed project Galileo: BNP Paribas, Credit Agricole, ING, Banca IMI, Societe Generale, UBI Banca, BBVA, CDP and Banco BPM.
Only a few months earlier the investor had closed a €1.02bn refinancing of its 400MW EF Solare joint venture with Enel at record-low debt pricing, and could rely on many of the same banks to stand behind its bid. F2i plans to combine all its solar power assets within the EF Solare umbrella and buy out its partner Enel to keep sole control of an 800MW portfolio.
“Thanks to the overall scale of production reached with this acquisition, F2i becomes Europe’s third largest producer of electrical power from solar energy. The noteworthy operating and financial efficiencies of scale achieved will also make it one of the Continent’s most efficient operators”, said F2i’s CEO Renato Ravanelli at the deal’s closing.
Banca IMI, Barclays, and Societe Generale were F2i’s financial advisers, Legance was its legal adviser, and Ashurst advised the lenders. Deloitte was the accounting adviser, Willis Tower Watson was the insurance adviser and EOS was the technical adviser.
Cantor Fitzgerald, JP Morgan and UniCredit worked as Terra Firma’s financial advisers, while Gianni Origoni Grippo Cappelli & Partners was its legal adviser.
Europe Telecoms Deal of the Year – Open Fiber
Open Fiber’s €6.5bn roll-out of a fibre-to-the-home (FTTH) broadband network to reach a majority of Italian households is one of the largest investments in digital infrastructure across Europe.
The company set up by utility Enel and state bank Cassa Depositi e Prestiti (CDP) drew a strong response from the banking market for its ambitious plan to raise €3.5bn of seven-year debt during a very turbulent year in the Italian financial markets.
BNP Paribas, Societe Generale and UniCredit backed the fibre-optic project from early on with a bridge loan and led the long-term financing as underwriters, global coordinators, global bookrunners and initial mandated lead arrangers.
CDP took part as a lender as well as shareholder with a €400m debt ticket and the EIB provided €350m. Another 10 banks joined the deal. Italian banks include Banco BPM, Intesa Sanpaolo, MPS and UBI Banca. Foreign lenders include CaixaBank, Credit Agricole, ING, MUFG, NatWest and Santander. The project drew the attention of banks rarely seen in Italian project finance deals.
“The presence in the pool of lenders of a number of leading foreign financial intermediaries is an implicit sign of confidence in this country, one which is significant at a time when the markets are so edgy,” said Open Fiber chairman Franco Bassanini when the deal was signed.
The government strongly supported the project, which will bring high-speed internet connection to 19m households in a country that is lagging behind in the development of digital infrastructure.
Open Fiber uses Enel and other utilities’ cables and pipes to keep installation costs down and signed long-term contracts with internet service providers to reduce market risk.
Open Fiber was advised by White & Case, the commercial banks by Gianni Origoni Grippo Cappelli & Partners, the EIB by Ashurst, CDP by Lombardi Molinari Segni, and Enel by Chiomenti. Arthur D Little is technical adviser and market adviser.
Europe Wind Deal of the Year – Forestalia Goya
Forestalia single-handedly reopened the Spanish renewables market this year with a 300MW onshore wind financing after a five-year dearth of greenfield projects.
Very few thought this was possible when Forestalia emerged as the largest winner from Spain’s first renewables auction with a bold bid essentially entailing no subsidies. The company, a little-known business of the Samper Rivas family, hired experienced developers and financiers and signed partnerships with established market players to defy all expectations.
In April it funded Spain’s first large-scale market-based renewable power project – a €310m cluster of nine wind farms in Aragon known as the Goya Project.
The developer brought in Mirova (51%), GE Financial Services (25%), and Engie (15%) as co-sponsors, mobilising €140m of equity.
GE will install 82 of its 3MW turbines while a joint venture of Engie, Acciona and Copsa is responsible for the balance of works. Engie will be in charge of the project’s offtake through a 12-year power purchase agreement (PPA), guaranteeing a floor price.
The strong contractual structure and offtake agreement allowed the sponsors to raise €170m of 15-year non-recourse debt from the EIB and commercial banks BBVA, CaixaBank and Santander, certified as a Green loan.
The PPA was the cornerstone of the deal, allowing lenders to take comfort on a guaranteed minimum power price that will stabilise cashflows. The Goya project marked the first use of a long-term private PPA in Spain to back a renewables project financing, opening the path to future projects that do not rely on government support.
Eponyme Partners and Agere Energy & Infrastructure Partners advised Forestalia on equity and debt matters, respectively. Cuatrecasas was Forestalia’s legal adviser, Allen & Overy advised the commercial banks and King & Wood Mallesons advised the EIB.
Following the success of its first financing, the company is now working on raising funding for a much larger wind portfolio, covering 1.2GW of wind farms.
Europe Renewables Deal of the Year – Borssele III/IV
The Blauwwind consortium broke new ground this year proving low-tariff offshore wind farms could be funded with a project finance structure.
The team of Royal Dutch Shell, Mitsubishi/DGE, Eneco and Van Oord made waves at the end of 2016, bidding just €54.50 per MWh in the Dutch tender for the 730MW Borssele III/IV offshore wind farm.
The tariff – a record low at the time – was a far cry from the level of support the European offshore wind market was used to in previous year and less than a third of the previous offshore wind farm to be project-financed in the Netherlands.
The Blauwwind team brought Swiss private equity firm Partners Group into the consortium as financial investor and designed a two-contract structure with MHI Vestas supplying 77 9.5MW turbines and Van Oord covering the balance of plant. The project required €1.3bn of capex, or about €1.8m per MW – testament to significant cost savings achieved by the sponsors.
Taking the deal to the banking market, Blauwwind attracted strong interest for the €1.072bn debt package from a diverse group of European and Asian banks with a structure based on a long 18-year tenor post-construction and pricing competitive with projects based on much higher tariffs.
ABN AMRO, BNG, Bank of China, BNP Paribas, Rabobank, ING, ICBC, Mizuho, Société Générale, SMBC, SMTB, and MUFG took part in the financing.
Green Giraffe and Societe Generale worked as Blauwwind’s financial advisers. The sponsors’ legal adviser was Clifford Chance and the lenders’ adviser was Allen & Overy. The lenders’ advisers also include Mott MacDonald, technical; JLT Group, insurance; PwC, tax; Poyry, market; and DWPF, model auditor.
As most of the Borssele III/IV deal’s cashflows are essentially merchant, due to a high power price floor, the project may pave the way for the project financing of future wind farms based on even lower tariffs, or even without subsidies.
Europe Power Deal of the Year – Moray East
The Moray East £2.9bn project financing backing the UK 950MW offshore wind farm was a complex deal that took time to put together but was eventually closed with a host of different participants.
A key issue with the project was that the strike price on the contract for difference (CfD) backing the project was low for a UK deal – £57.50/MWh. This fact determined a tight financing structure – a feature being seen on more and more offshore wind deals – but nevertheless completed within a project finance envelope.
The deal includes a CPI swap, the first on a UK offshore wind farm bank deal, needed to hedge the revenues. This raised interesting intercreditor issues on the various tranches of debt given the swap ranks as super senior.
The £2.6bn debt financing includes £2.1bn of senior debt, split into a £743m direct loan from Japanese export credit agency JBIC and a £1.517bn commercial bank loan with Danish export credit agency EFK covering £250m. The short-term £500m offshore transmission loan is included in this part of the deal. On top of that, there is a £500m equity bridge loan covering some of the sponsors’ equity.
It was the first time JBIC has worked with Danish export credit agency EKF. JBIC provided a direct loan while EKF provided the traditional OECD consensus guarantees. Given Japan Inc’s interest in the offshore wind sector and the Japanese/Danish MHI Vestas joint venture to form an offshore turbine manufacturer, this is likely to be repeated.
The Moray bank group includes BBVA, Caixa, Credit Agricole, Commerzbank, Helaba, ICBC, ING, Mizuho, MUFG, NAB, Natixis, Norinchukin, financial adviser Santander, SMBC, Sumitomo Mitsui Trust Bank and Societe Generale. Ashurst and Linklaters were the legal advisers.
The Moray East scheme is sponsored by EDP Renewables with 43.3%, Engie 23.3%, and Diamond Green with the remaining 33.3%. It is owned by Mitsubishi with 50%, Kansai Electric Power 30% and Mitsubishi UFJ Leasing & Finance Company 20%.
Europe Transport Deal of the Year – Blankenburg Tunnel
The €1bn Blankenburg Connection project is the Netherlands’ largest and one of the most complex PPPs, combining elaborate technical solutions and financial engineering to complete a missing section of Rotterdam’s road system, promising to improve significantly traffic in the busy port city.
Sponsors Macquarie Capital, Ballast Nedam and DEME tapped various corners of the market to come up with a €900m senior debt package to finance the project.
The deal brought together commercial floating-rate lenders KBC, KDB, Belfius, KfW IPEX, BNG and SMBC, fixed-rate institutional lenders MEAG, Samsung Life Insurance and Natixis, and the EIB, with backing from the European Fund for Strategic Investments (EFSI).
Before reaching financial close on the availability-based 25-year DBFM contract, the BAAK consortium had to overcome various challenges. Unusually for a Dutch PPP, the project was held up by a legal challenge by another bidder, which was ultimately unsuccessful. Later, the sponsors had to navigate a thorny process to develop designs and obtain permits while courts assessed more objections to the project’s route.
DEME and Ballast Nedam will be in charge of construction over more than five years, during which they will build 4km of new highways linking the A15 and A20 roads, a 500m land tunnel and a 900m immersed tunnel – the most challenging element.
The consortium came up with a design based on just two immersed tunnel elements instead of the six elements originally planned, reducing access restriction on the main waterway leading to Rotterdam’s port.
The advisers on the project were Macquarie Capital, consortium financial adviser and debt arranger; Norton Rose, sponsors’ legal adviser; Stibbe, lenders’ legal adviser; Atkins, lenders’ technical adviser; EY, tax and accounting adviser; AON, sponsors’ and lenders’ insurance adviser; and Operis, model auditor.
European Oil & Gas Deal of the Year – TAP
The Trans Adriatic Pipeline (TAP) project financing involves mixing a complex multi-sourced financing with an underlying project of strategic interest and a fairly traditional international cross-border pipeline structure. The 10bcm, 878km scheme is the final link of the project to send gas from the Shah Deniz 2 gas field in Azerbaijan into the heart of Europe to Italy via the sovereign-backed Trans Anatolian Natural Gas Pipeline Project (TANAP) and South Caucasus Pipeline (SCP).
The project sponsors debated whether to finance the scheme via a project financing and in the end the group, a unique mix of downstream and midstream companies, decided to go ahead with the €3.7bn deal.
The scheme involves all aspects of international project finance – development finance institutions (DFIs) via the EIB and EBRD, export credit agencies via Bpifrance, Euler Hermes and Sace, plus a host of commercial banks - Bank of China, BNP Paribas, Caixa, Credit Agricole, Landesbank Hessen-Thuringen, ING, Intesa Sanpaolo, Korea Development Bank, Mizuho, MUFG, Natixis, Siemens Bank, Societe Generale, Standard Chartered, SMBC, UBI Banca and UniCredit.
The tenor on the deal was competitive at 16.5 years. The TAP deal is a fairly standard pipeline project financing backed by the gas transportation tariff. However, there is some shareholder support to the lenders on parts of the contract.
To win the gas transport contract from Azerbaijan over the competing Nabucco project in 2013, the TAP project company offered not to receive payment in circumstances such as during maintenance and force majeure. The lenders are backed by construction guarantees but the scheme is more than 80% complete.
Clifford Chance is the lenders’ counsel on the project. Allen & Overy is advising the sponsors and Societe Generale is the financial adviser. The sponsors are BP with 20%, Southern Gas Corridor and Snam with 20% each, Fluxys 19%, Enagas 16%, and Axpo Trading 5%.