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Global Bank of the Year
SMBC is certainly consistent. It topped the Thomson Reuters Project Finance International loan league tables in the first three quarters of 2014 by being top in Asia-Pacific and second in the Americas and Europe, Middle East & Africa. It is not quite so high up in the bonds space – but it has been hiring top professionals in both New York and London this year to enhance its presence. In Asia, well, unfortunately, sponsors are not too keen on bonds.
Advisory? A pretty good year, actually. The bank advised the Japanese sponsors on the Freeport LNG financing and it took a big ticket on the other mega US LNG financing, Cameron. In Asia, it advised on one of the few local LNG financings this year, the Donggi Senoro deal, the largest LNG deal in Indonesia since 2006. The project is the first LNG project in Indonesia to adopt a downstream development model, enabling separate development of upstream – natural gas and condensates production – and downstream – LNG and condensates – businesses. It is believed to be only the world’s second non-integrated merchant LNG plant.
In EMEA, it was handed an interesting challenge by being the adviser on the Petrorabigh 2 petrochemical expansion project for Aramco and Sumitomo Chemical. Interesting, as the performance of Petrorabigh 1 has not set the world alight. Still, the deal is a decent mix of local and international banks and the loan pricing has come in cheaper than Aramco’s previous deal, Sadara.
Across all the sectors, SMBC has had a strong year. In infrastructure, the bank advised on the Tisur mineral port expansion project financing in Peru. This was the first project financing undertaken by the second largest company in the country, Grupo Romero. The deal was banked on strong cashflows from the local copper mines. In Europe, the bank took a lead role in both the Mersey Gateway and Budapest Airport refinancings – very different deals with their own sets of unique challenges. And it was involved in IEP2. In Asia-Pacific, it took a lead role in the Westlink M7 Sydney road project, one of the host of Australian infrastructure deals this year.
The bank has been building up some soft power too, not just concentrating on the mega deals. It did the first cross-border structured deal in Myanmar to support the roll-out of telecom towers. It financed a road in Vietnam, the first using MIGA’s non-honouring sovereign obligation product. And it did the first limited recourse satellite deal in SE Asia. In Mexico, it established the first NBFI to expand its local currency financing and in Colombia it seconded an experienced project financier to the local development bank, FDN. In Japan, the bank has set up a debt fund to allow regional banks to finance overseas projects.
The team is led by Isaac Deutsch, Toshitake Funaki, Carl Morales, Adam Sherman and Samuel Sherman in the Americas; Masaaki Sasai, Katsufumi Uchida, Lathi Irani and Tom Waterhouse in EMEA; and Noburu Kato, Rajeev Kannan, David Sidoti and Mark Giblett in Asia-Pacific.
Global Bond House of the Year
Where do bonds end and private placements (PPs) start? In the infrastructure market, the cross-over is almost seamless. The US PP market is deep and infra credits have being tapping it for a few years now, currency mismatches notwithstanding for non-US borrowers. In Europe, the market is now starting to take off and this year saw some interesting new transactions that will set the templates for years to come.
The first was Copenhagen Airport. Credit Agricole was the financial adviser on the €740m deal, which closed in February. It secured a credit rating, developed the financial structure and suite of covenants, and then played off the US PP, European PP and commercial bank markets to get the best terms. Later in the year, the bank used the same model for Dutch waste company AVR, owned by CKI, with a financial presence in the same three markets.
The €430m A7 deal in Germany was a more classic project financing – led by SG and Credit Agricole. The project is an A-Model PPP road deal and was backed by a European Investment Bank project bond credit enhancement (PBCE). Bond buyers included Babson Capital, with which Credit Agricole has a long-standing relationship. Again, the bond issue did not have a listing and was pre-sold akin to a PP.
In Australia, Transurban has been one of the active local infrastructure developers. Until now, local companies have either tapped the domestic market or the US market. But Credit Agricole placed a €600m issue for the company at mid-swaps plus 82bp, showing that the US market is not the be all and end all. And the bank placed a €700m bond offering for Sydney Airport too.
One of Credit Agricole’s largest bond deals this year was the Vinci Park €950m debt refinancing. The bank acted as ratings adviser and active bookrunner on the deal, the largest ever in the car parking industry. Of course, it helped that the sponsor on the deal was partly owned by Credit Agricole Assurances as well as Ardian and Vinci.
In the energy sphere, Credit Agricole took lead roles in both the €1.35bn 2i Rete Gas bond refinancing in Italy and the €650m Redexis refinancing in Spain – both challenging markets even now. It had a more junior role on the Net4Gas bond deal. In the infra space it had junior roles on Mersey Gateway and Porterbrook but took lead roles on Gatwick and the M8 road, which closed at the start of the year.
The bank’s global project finance team headed by Jean-Francois Grandchamp works on all project bond deals with two debt capital markets teams in the global markets client division – debt capital markets managed by Tim Hall and securitisation managed by Vincent Fleury. The bank has a dedicated ratings advisory team of seven working on infra-style deals. The ratings advisers have a wide experience in rating the utility and infrastructure sectors, including TIGF, Copenhagen Airport, ASF, ANA, BAA, L2 and APRR.
Global Adviser of the Year
HSBC had a strong year of financial closings in the financial advisory arena across the globe. In the Middle East, there was Aramco cogen, Safi, Mirfa IWPP Sohar Refinery and Ma’aden phosphate. In the Americas, there was the Abengoa Transmission Sur deal in Peru, the Odebrecht ODN Tay and CSP deals in Brazil and the APM Terminals deal in the US. In Europe, there was the M8 and IEP2 deals and in Asia there was the Trans Thai-Malaysia pipeline financing.
Obviously, each deal is challenging, particularly as the financial adviser is involved early doors and sees a whole host of ups and downs in the deal. The Sohar Refinery financing was one such deal. Project company ORPIC reached financial close on the US$2.9bn refinancing and expansion financing deal in the summer. A key objective for the government-owned sponsor company was taking away the government guarantee on the previous financings and having no completion support on the expansion project. This objective was achieved, although there had to be some other tweaking along the way. This limited the number of international lenders in the deal but the bank/ECA financing still got away with pricing on the commercial loan said to be similar to the Emal 2 deal from last year, which starts at 250bp.
Not having a government guarantee could be a theme for the bank’s deals next year. It has won a host of power advisories for PLN in Indonesia that will be tendered next year and will be using the updated, non-guaranteed, Project Finance 2.0 concept.
The Mirfa IWPP was another challenge. The normally efficient state utility ADWEA, which HSBC has advised in the past, suddenly became a little more inefficient in decision-making terms as the project sought its necessary approvals from the ruling Executive Council. Still, the deal that did finally get away was a pretty efficient project financing – a seven-year soft mini-perm priced at an ultra-competitive 110bp.
Some deals fly out of the door. In Peru, the bank advised on and then sold a US$411m Rule 144A 29-year project bond issue for Abengoa Transmission Sur. The deal set a benchmark for Latin American debt capital market financings back in April, and indeed for emerging market credits generally. The deal is the longest greenfield project bond issue from Latin America. It was priced at Treasuries plus 333.3bp to yield 6.875%, with the books reaching an enthusiastic US$2bn. Sometimes things just go well.
IEP2 in the UK went smoothly too. The Hitachi/Laing rolling stock PPP procurement had already been through the hoops with its £2.1bn IEP deal from 2012. The similar sized second phase financing was therefore more straightforward, albeit a very large deal in its own right. The bank must have done a decent job as it has been recently appointed to refinance IEP and to refinance the other big UK rolling stock PPP deal, Thameslink.
Under the HSBC model, there is not really a distinction between lending and advisory in the project and export finance team. David Gardner is the head in Hong Kong and the regional heads are Mario Salameh, MENA, Virginie Grand, Europe and Sub-Saharan Africa, James Cameron, Asia-Pacific, and last but not least Duncan Caird, Americas.
Global Multilateral of the Year
International Finance Corporation
The International Finance Corporation (IFC) appeared to move up a gear this year with a range of significant deals in which it played a lead role. The World Bank’s private sector financing arm has long been a stalwart of the global project finance arena in the emerging markets, investing debt, mezzanine and equity through its own direct A loans, B loans syndicated to commercial banks and mezzanine C loans. The B loan concept took a little knock following the Asian financial crisis but those problems have subsided. IFC now has a global infrastructure book totalling US$18bn.
In September, IFC was the financial adviser on an innovative petrochemical financing in Indonesia, Panca Amara Utama (PAU). It advised, gave A and B loans and invested equity. The project involves the construction of an ammonia-manufacturing facility with a capacity of 2,000mtpd. It will make use of natural gas from the Senoro-Toili (Donggi-Senoro) gas field in Central Sulawesi.
In October, IFC put together a US$207m portfolio framework financing package for seven Jordanian solar projects developed by five sponsors. It was a simple idea but a complex piece of structuring. The financings were transacted on set standards and terms for all the developers. The lenders therefore had a portfolio approach to the deals but each project was a standalone financing.
In December, IFC closed a US$300m deal for InterEnergy Holdings to back its 215MW Penonome II and III wind deals in Panama. The deal included a new product, a managed co-lending programme that offers institutional investors the ability to passively participate in IFC’s future senior loan portfolio. People’s Bank of China took this US$60m piece. And it was involved in the US$1bn Kirikkale merchant power deal in Turkey, providing A and B loans. It is involved in the Turkish hospital PPP programme too.
The US$890m Azura IPP in Nigeria has been one of the big deals this year, although it has yet to reach financial close. IFC is providing US$50m in debt for its own account, US$30m of subordinated debt, and mobilising US$212.5m.
IFC has been active in Latin America, particularly in the large-scale solar sector in Chile. In Colombia, it has just committed US$320m to purchase an equity stake in oil and gas pipeline company Pacific Midstream. The investment in the Pacific Rubiales subsidiary is IFC’s largest ever foray into the Colombian infrastructure sector. And it recently committed US$70m for a 20% stake in the newly created Colombian infrastructure investment entity, Financiera de Desarrollo Nacional (FDN).
This is just a snapshot of the deals the multilateral has been involved in this year on a global basis. The team is split into sectors, with Bernard Sheahan heading infrastructure, Ian Twinn heading transport, Sumeet Thakur heading power, Elena Bouganskaia heading water and utilities and Alain Ebobisse heading the InfraVentures operation, which develops its own PPP projects. InfraVentures currently has 27 projects around the world including a hydro scheme in Georgia and a thermal power project in Senegal.
Global Institutional Investor of the Year
Aviva Investors has been one of the stalwarts of the project finance market, even before the current fad for involving institutional finance in projects got up a head of steam. At around the turn of the century the Norwich Union PPP fund appeared in order to offer an alternative to long-term bank debt on PPP deals in the UK via its life and pension funds. By the end of the decade it had turned into Aviva Commercial Finance (ACF) and was once again offering competitive financings to UK PPP deals. But since then the insurer has moved into other areas of infrastructure and energy finance via Aviva Investors, part of the Aviva fund management arm.
ACF and Aviva Investors used to sit in different parts of the insurer’s operation. But now they are being merged into one team under Ian Berry, head of infrastructure fund management. His number two is Laurence Monnier, head of infrastructure debt. Joining from the ACF team are Toby Stokes and Zoe Slater.
Aviva Investors has certainly widened its mandate from the innovative NU PPP days. It is now one of the main institutional investment long-term debt players in Europe and, in addition, has a direct investment arm for equity-type 100% investments.
Aviva launched an infrastructure debt fund vehicle in summer 2013, the Aviva Investors European Secondary Infrastructure Credit securitisation vehicle, and then bought €84.5m of senior secured bonds issued by Dutch telecoms infrastructure provider Reggefiber. This year, the fund was involved in the landmark N17/N18 road PPP in Ireland and has made a range of other investments.
Aviva Investors was involved in one of the first bond refinancings in Italy, the Antin Solar Investment deal to refinance a solar PV portfolio. The project bond and the project finance loan are senior secured, unwrapped and unrated for around €165m. The maturity on both is 14 years. Lenders are arranger Natixis and UBI and bond investors are Aviva and the Scor Infrastructure Fund. The insurer is looking at other deals in Italy, too, including Milan’s Metro 5.
In the UK, despite the general lack of deal flow, ACF has had a good year. It was picked by the Scottish Futures Trust to supply debt under a framework agreement to three of the five Hub regions – North, East and West. It closed the Stoke social housing deal, its first PPP social housing deal, and is closing another in Hull. It also closed the Kilmarnock college scheme.
Under Aviva Investors, it is part of the team selected to fund English schools under the Priority School Building Programme (PSBP) and its aggregator model. The Amber/INNP team is leading the deal and the other debt funder involved is the European Investment Bank (EIB). The client, the Education Funding Agency (EFA), has said five batches of schools, 46 schools in total, will be delivered by the aggregator, worth £700m.
The investor has a direct investment arm. Its most recent deal was buying a portfolio of residential solar PV plants on 3,700 properties across the UK totalling 11.3MW from Zouk’s first infrastructure fund in August. The deal followed a similar acquisition by Aviva of an 8.6MW PV portfolio from Zouk in July 2013. Together, the two transactions have a value of about £76m, for a capacity of 20MW over 6,700 properties.
Global Sponsor of the Year
GDF Suez has had another impressive year in the project finance market with stand-out deals such as the gas-fired Mirfa independent power and water project (IWPP) in Abu Dhabi, the Safi ultra-supercritical coal-fired independent power deal (IPP) in Morocco, the Cameron LNG export project in the US and the Los Ramones pipeline scheme in Mexico.
Those deals alone would be notable but on top of them the company sold down its stake in its French wind farm and raised debt to back up the deal, and also arranged a host of refinancings in Europe and North America.
The only jurisdiction missing from that list is Asia-Pacific, where GDF Suez has an active presence. The company is buying into two power deals in India, taking advantage of depressed asset prices and a low rupee, which have already raised project finance – Meenakshi Energy and OPTC.
The impressive aspect of GDF Suez’s activity in the project finance market is its consistency over the years. While deal flow is fairly lumpy in the project finance market, GDF Suez maintains the flow. At the end of last year, the firm closed the first (thus far the only) PPP in Kuwait, the Az Zour IWPP, did the DoE peakers deals in South Africa and refinanced Senoko in Singapore.
In all, GDF Suez has raised €55bn of project finance over the last 10 years. That is one of the highest figures by value and certainly it is the highest figure by number of deals closed – no-one else can come close.
The project finance function is headed from Paris by the acquisitions, investments and financial advisory (AIFA) team headed by Sven De Smet. He is backed up by Frederic Claux, deputy head in charge of Europe, oil and gas and infrastructure, and Philippe Lekane, head of energy international.
The AIFA team has more than 100 professionals worldwide with around 30 in the Paris and Brussels hub. But the network beyond Paris/Brussels is also extensive, with offices in Melbourne, Jakarta, Bangkok, Delhi, Dubaï, Johannesburg, Rome, Berlin, London, Houston, Mexico, Panama, Santiago, Florianopolis (Brazil), Rio and Lima.
The four stand-out deals in 2014 were Mirfa IWPP, Safi IPP, Cameron LNG and Los Ramones.
Mirfa was notable as the first soft mini-perm in the Gulf project finance market. The pricing on the US$1.2bn debt was very competitive at 110bp and the debt equity ratio was wide at 80/20. GDF Suez had to stick though thick and thin with the deal following issues with ADWEA and even lost its joint venture partner along the way.
Safi is a more old fashioned project financing combining export credit agency debt and cover with commercial bank debt and local financing. Again, the debt equity ratio was wide at 80/20 and the tenor was an impressive 18 years. And, once again, GDF Suez has to show patience with the deal.
In both Cameron and Los Ramones, the firm is tapping into the booming US gas market. Cameron backs GDF Suez’s LNG trading business and is financed through a tolling structure. Los Ramones takes the company into the rapidly liberalising Mexican market via a project of national importance.
Global Financial Sponsor of the Year
John Laing has closed an impressive range of large-scale public-private partnership (PPP) deals this year financed on a project finance basis. In addition it has spun off a second, secondary markets listed fund, John Laing Environment Assets (JLEN), to buy its primary renewable developments. Getting JLEN away during the spring was testing, certainly more testing than its first fund, John Laing Infrastructure Fund (JLIF), which buys primary PPP assets. JLIF has grown to such a size, £800m-plus, that by year-end it took a cheeky pop at the £1bn Balfour Beatty PPP portfolio.
Laing, of course, has a long construction heritage. However, it lost its construction independence following some problematic construction contracts including the National Physical Laboratory by selling to O’Rourke for £1 in 2001 and then set off on its own as a PPP developer/investor. It was so successful it was bought for £1bn by funds managed by Henderson. Unfortunately, investors in the Henderson funds were hit by the company’s pension fund liabilities, which took the shine of the purchase in subsequent years. As a developer/investor, however, John Laing carried on – albeit in a market, PPPs, that itself was suffering. And this year it financed a number of major schemes around the world.
In the Americas, the company’s big stand-out deal was the I-4 scheme in Florida, which was financed in September. The total design/build contract for the project is US$2.3bn. Construction will begin in the first quarter of 2015 and is estimated to be completed by 2021. The concession length is 40 years. Financing includes a US$483m senior construction bank loan, US$131m of short-term Tranche A TIFIA loans, and US$818m of long-term Tranche B TIFIA loans. The project was procured under an availability payment-based P3 with a 40-year concession term. Skanska has 50% of the equity and Laing, 50%.
In the UK, it financed the second phase of its Intercity Express Programme (IEP) rolling stock deal, another mega deal, and following on from the similarly sized first phase, which was done in 2012. IEP2 will replace the old 125 trains on the UK network with the trains running up to Scotland. Equipment supplier Hitachi has 70% of the project company Agility Trains, and Laing 30%. Both IEP and IEP2 raised more than £2bn in project finance and work has now started on refinancing the debt packages. MetLife has taken an equity stake in IEP.
IEP2 was not the only rolling stock deal John Laing was involved in this year. In the booming Australian infrastructure market, it took a stake in the A$1bn-plus Queensland rolling stock deal. This time, the equipment supplier was Bombardier, backed by up by Itochu and Uberior, formerly of Lloyds and now Aberdeen Asset Management. Another Australian deal to close this year was the A$1bn Perth Stadium PPP scheme. Debt raised for the project totalled A$500m. The project partners were Brookfield Finance, Brookfield Multiplex, Brookfield Johnson and John Laing. At the year of the year, Laing and its partners reached contractual close on the A$1.6bn Sydney Light Rail scheme.
Back to renewables, Laing put £13m of equity into the Speyside CHP scheme in Scotland, which will serve the Macallan whiskey distillery. The deal was one of the first government-backed bond UKGS schemes and has been developed by Estover Energy.
Laing has a new CEO this year, Olivier Brousse, replacing Adrian Ewer, who has retired. Which way will Laing go now?
Global Law Firm of the Year
Latham & Watkins
Latham & Watkins has been one of the stalwarts of the global project finance market over the decades. Beginning with its representation of developers of independent power projects in the US in the early 1980s, the practice has deep roots in the field and has assembled financial product and industry expertise in major commercial centres throughout the US, Europe, the Middle East and Asia.
About 20 years ago an up and coming lawyer, Bill Voge, use to write articles for Project Finance International on project finance – particularly on his favourite topic, LNG. This year, Latham & Watkins has had a stellar year with a whole range of deals across the globe and across sectors, including LNG. Oh, and Bill Voge was named global chair and managing partner of the firm as a whole.
In the Project Finance International law survey for 2013/14, Latham closed 27 deals in the year worth above US$500m. The US-based firm was helped by the much improved home market, with 18 deals in the Americas. But it did well in Asia too, with six of the region’s landmark deals.
The projects practice is in the project development and finance practice group. It has more than 170 lawyers worldwide and is headed by global chair of the group, Kelley Michael Gale, who is based in San Diego. The practice has been involved in projects vital to the global economy, energy production and environmental protection – ranging from the world’s largest liquefied natural gas (LNG) and mining projects to innovative renewable energy projects.
At home, the firm was involved in two major deals that have benefited from the US shale gas revolution – Cameron LNG and Sasol petrochemicals. Cameron is one of the first US LNG export deals and the US$10bn project naturally follows on from the work the firm did on the Icthhys LNG scheme in Australia the year before, the world’s largest project financing. Sasol is an interesting deal, one of the first downstream mega scale schemes to benefit from cheap local gas.
Two other local landmark energy deals were the CPV St Charles Energy Centre, a good old fashioned US IPP – although actually it was one of the first merchant power deals in the US for more than a decade with complex hedging arrangements linked to gas and power. And the firm was on the TerraForm Power Operating yieldco, one of the first of a new breed of yieldco financing vehicles. In infrastructure, Latham acted for the lenders on the 1-4 road deals in Florida, again one of the stand-out deals of the year in the sector.
The firm had a good year in Asia-Pacific. It represented the sponsors on the leading deal of the year, the Roy Hill iron ore project for Hancock Prospecting, Marubeni, Posco and CSC. The deal set a new standard for limited recourse deals for mega mining projects. Latham acted on one of the major power deals of the year, the Sarulla geothermal project in Indonesia, and acted for the lenders on the Xe Pian Xe Namnoy hydropower deals in Laos.