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Wednesday, 25 April 2018

Global Awards

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SMBC has developed its project finance platform across all products lines and all geographies this year. In particular, its global lending and advisory activities were extremely active, with the advisory units taking off. The bank is using its advisory function to secure lead roles on important transactions. The growth in this side of the business shows the bank will have plenty of deal flow going forward in the coming years. Activity in the bonds area has been picking up, although there is room for growth as the team building grows. The private placement origination function has grown in the US.

Global Bank of the Year – SMBC

SMBC has developed its project finance platform across all products lines and all geographies this year. In particular, its global lending and advisory activities were extremely active, with the advisory units taking off. The bank is using its advisory function to secure lead roles on important transactions. The growth in this side of the business shows the bank will have plenty of deal flow going forward in the coming years. Activity in the bonds area has been picking up, although there is room for growth as the team building grows. The private placement origination function has grown in the US.

One notable feature this year is the bank’s commitment to the emerging markets. It transacted a range of landmark emerging market deals across the Americas, EMEA and Asia-Pacific – as lender, placement agent and as adviser.

SMBC remains one of the stalwarts of the project finance loans market and this year has retained its top three global slot despite new competition from the Chinese banks. Japanese bank lending into the sector is said to be more select these days but SMBC, while being more picky, is still a main player. The bank is more than willing to put its balance sheet behind deals where it has a lead and important role.

In Latin America, SMBC has a strong franchise. It led the Aela Energia wind portfolio financing and the Huatacondo merchant solar financing in Chile. It was lead on the Latin American Power (LAP) bond in the same country, another merchant deal. In Peru, it led the Fenix Power plant bond refinancing. In Brazil, the bank’s local team closed three local currency deals and in Mexico, it was able to use its local non-bank arm to provide local currency project finance.

In North America, it was involved in the Cricket Valley and Hickory Run merchant thermal power deals and it led the White Hydro Green bond issue for Brookfield. It has obtained a licence to offer private activity bonds and guaranteed investment contracts. 

In EMEA, it was heavily involved in some mega emerging market financings. It advised on one of world’s largest public-private partnership (PPP) deals – the US$1.8bn Ikitelli financing in Istanbul. In addition, it advised on the Gaziantep and Bursa hospital deals in Turkey too. In Mozambique, it has a leading role on the Nacala rail and port deal, the largest ever infrastructure financing in Africa. And it was involved in the Coral LNG scheme in the same country.

In Asia-Pacific, it advised on the Tanjong Jati 5&6 power financing and had bank and bond roles on the Paiton bond refinancing, both in Indonesia. It also advised on the Pengerang storage financing in Malaysia.

The team has accelerated its advisory activity into 2017. It has picked up 10 new mandates in the Americas, 14 in EMEA and nine in Asia-Pacific. In all, it has more than 60 ongoing advisory mandates around the world. The breadth of the work is impressive. The countries currently covered by its advisory function include the US, Canada, Brazil, Chile, Colombia, Peru, Uruguay, Turkey, Botswana, Oman, Saudi Arabia, UAE, Kuwait, Bangladesh, Myanmar, Vietnam, Indonesia, Singapore, Malaysia, Mongolia and Japan. The advisory teams are based in New York, London, Singapore and Tokyo.

The global team is led regionally by the heads of the structured finance division – Isaac Deutsche in the Americas, Katsufumi Uchida in EMEA and Yoshihiro Takima in Asia-Pacific. Juan Kruetz, Luis Perdigon, Luca Tonello and David Sidoti head project finance in North America, Latin America, Asia-Pacific and Australia respectively, while Layth Irani and Laughlan Waterston head transport and energy respectively in EMEA.

Global Bond House of the Year – MUFG

MUFG showed a marked increase in lead underwriting mandates for project bonds in 2017, playing a lead role on several deals that led the market in terms of innovation. It is currently top of the PFI project bonds league table, a novelty for a Japanese bank.

The team’s overall bond volume saw a significant contribution from the US. The US team is run by Frederick Echeverria, executive director, project bonds and private placements, and Conrad Owen, managing director, head of private placements and project finance.

MUFG attributes its US success to its ability to leverage on its project finance team globally as well as to a general uptick in project bond volumes. MUFG’s expertise in structuring, ratings advisory and its distribution platform, underpinned by investor relationships, was also noted as a contributing factor, allowing its team to capture project bond market share amid a retreat in long-term lending by commercial banks.

The bank noted that it was able to play active lead roles on some of the larger marquee project bond issuances. One of those transactions was for AES Southland, on which MUFG acted as joint lead placement agent and bookrunner. The US$1.47bn private placement was combined with a bank financing to support four distinct power generation facilities totalling 1,394MW with a unique battery storage component.

The Gridiron Funding deal was also a bank/bond deal, with MUFG acting as joint bookrunner and co-placement agent on the first quasi-merchant hybrid transaction that was rated investment grade. The financing combined a fully amortising bank financing with a back-ended bullet style private placement.

A good deal of work was also done with familiar clients and assets. On the Indiana Toll Road MUFG acted as joint lead bookrunner and placement agent on a US$850m private placement. The deal was upsized on a strong market response during a four-city roadshow. Proceeds from the offering will refinance a portion of the debt backing the US$5.7bn acquisition of Indiana Toll Road, which was completed in 2015.

Cheniere Energy project entities were also back in the market with large offerings, and Freeport LNG came to the capital markets to take out bank debt on its LNG export terminal in Texas.

The bank’s ability to play many roles in very complex transactions was evidenced in deals such as Ohio State Energy Partners, where MUFG served as joint lead arranger, joint bookrunner, lender to the revolving credit facility, letter of credit issuing bank, co-manager for the private placement notes and the collateral agent. This deal was significant as the first university energy management privatisation, with revenues derived from a 50-year concession agreement.

MUFG was able to capitalise on increased interest in Green bond issuance, leading sponsors such as Brookfield Renewable Partners through its first use of such bonds, a US$475m project financing secured against its 380MW White Pine hydroelectric portfolio in Maine. The Green bonds due 2032 were issued in a private placement to investors in the US and Canada.

The bank also acted as a lead for German energy group Innogy’s debut Green bond issue, placing €850m in the capital markets to refinance the company’s investment in five wind farms across Europe. The bonds will also refinance Innogy’s 50% stake in the operational 576MW Gwynt y Môr wind farm and its 25% stake in the 336MW Galloper offshore wind farm under construction in the UK, and will help refinance the operating 90MW Zuidwester onshore wind farm in the Netherlands.

Innovation in Europe was also exemplified by MUFG’s lead role in the debut capital markets issuance for Abu Dhabi National Oil Company in the bond offering for the Abu Dhabi crude oil pipeline. MUFG was also successful in ‎originating project bond opportunities outside the US that included London’s Tideway transaction and Brussels Airport’s most recent transaction.

Global Adviser of the Year – Credit Agricole

Financial advisory on mega international project finance deals is usually a slow burn but when the home runs come in, they can make quite an impact. For Credit Agricole, as 2017 turns into 2018, that is most certainly the case.

Its elephantine deal this year was the Coral LNG financing. Not only was it the world’s first ever project financing of a floating LNG vessel, the project itself was off Mozambique. A few short years ago Mozambique was trailed as an African boom economy but as the oil price collapsed, local sentiment turned. The Coral deal was financed following a sovereign default on a Eurobond issue in January.

The US$4.7bn 17-year deal was signed in May and reached financial close in November. It was a truly international effort with Eni, the Area 4 gas developer, as the sponsor and China Exim involved as one of the export credit agencies (ECA) alongside a host of international banks. Credit Agricole had been working on the deal since 2013 and is now engaged to work on the onshore LNG financing for Eni and its new partner Exxon.

The bank’s advisory team has two more long-standing mega deals in the works, both now having been launched to the bank market and due to close early in the new year. Cobre Panama is one of the world’s largest undeveloped copper deposits. The US$6bn scheme will be financed from a variety of sources, including a US$2.25bn ECA-backed project finance loan. And the U$7bn Duqm refinery scheme in Oman will be another challenge. Oman Oil Company and Kuwait Petroleum are raising up to US$5bn of ECA-backed debt for the scheme. The prep work involved in both schemes has been immense over the last couple of years.

The team has had success in the infrastructure space too. It raised £800m for the latest independent UK rolling stock deal, the Coreline financing for Infracapital and Deutsche on the new West Midlands franchise. And it sold 50% of the equity on the M25 UK PPP on behalf of Skanska and Atkins for £325m. The bank has built up a team of five professionals under Paul Leece to buy and sell infrastructure assets. It has 13 mandates in the infrastructure and power sector currently on the books, such as selling stakes in the IEP PPP deals. The unit started out in 2016.

The new acquisition and divestment team is part of the bank’s structured finance advisory (SFA) team. Brian Lerner stepped down as head this year but remains the chairman. Andy Pheasant is the global head and head of oil and gas. Oliver Jennings is head of infrastructure and Jaya Viswanadha is head of the Americas.

SFA calls on the wider resources in the bank’s energy and infrastructure group (EIG) headed by Jean-Francois Grandchamp. Danielle Baron heads the global power and utilities team in EIG, Nicolas Chapin heads global oil and gas while Matthew Norman heads global infrastructure. All in, the bank has 150 professionals in EIG, which provides plenty of back-up to the specialised SFA team. There must be times when it gets quite busy…

Global Institutional Investor of the Year – Barings

Barings is on track this year to book US$2.5bn of global infrastructure debt across the globe. As part of the MassMutual Financial Group, its focus has been on the North American market but this year has seen expansion into Latin America, Europe and Australia/New Zealand.

The deals transacted certainly vary. They include three PFI award-winning deals this year – AES Southland in the US, Walney in the UK and Endeavour Energy in Australia, plus a wind farm in Uruguay, Campo Palomas, the LF Wade Airport in Bermuda, the IIRSA toll road in Peru and the East Surrey Pipes deal in the UK. It funded another UK trains deal for Rock Rail and was involved in the rapid-fire Leeds Hospital PFI refinancing, a deal transacted in a month on instructions from the UK Treasury.

It took part in the Latin American Power deal in Chile – a transaction with the first investment-grade rating achieved for a wind project with ongoing merchant exposure, and that was the largest ever investment grade renewables project financing in South America and the first renewables capital markets financing in Chile

This year, the investment portfolio was split into the US with US$1bn, UK and Europe US$1bn, Latin America US$300m, and Australia/New Zealand US$100m. More than 40 deals were transacted in 14 countries. Hiring is ongoing in Europe and Australia. The team expects to transact US$3bn next year and take bigger tickets on deals as it signs up more co-investors – both in the US and Asia.

The investor’s infrastructure book now stands at US$10bn. The operation is headed by Emeka Onukwugha, who leads both the US$20bn corporate placement team and the infrastructure team. The North American infra arm is headed from Boston by lawyer Patrick Manseau for credit and project financier Orhan Sarayli for origination. The Europe team is headed from London by project financier Pieter Welman. In all, there are 16 in the unit.

Barings, formerly Babson Capital, is able to offer a full range of debt – fixed and floating and in various currencies. It mainly focuses on investment grade, accounting for 90% of its investments, but has investment buckets available for sub-investment grade. Sixty percent of its deals are in dollars.

Unlike other institutional investors, it provides stapled financing to bidders. This year, it has worked on the mega National Grid UK deal, where it offered a stapled financing to all the bidders, and on the Walney UK offshore wind deal, which started out life as a stapled deal. In the US, it backed Infrared/DOF/Northleaf’s successful bid for North West Parkway.

This range of products means it can act as a quasi-bank style funder as well as fulfil the traditional role as an institutional investor. Barings has US$300bn in investments – with US$213bn in fixed income and US$53.7bn in alternatives – so it has the financial clout to provide a range of options.

The result, thus far, is a portfolio with US$4.7bn in core infrastructure – transport PPP and water and waste, US$4bn in power and energy and US$900m in petrochemicals and stadiums. The ambition, along with most of its peers, is to grow next year. But the team has a solid base on which to grow.

Global Sponsor of the Year – Ørsted

It was a momentous year for Ørsted, until October known as DONG Energy. Over the last quarter of 2017 the Danish energy company shed its legacy oil and gas upstream business to focus on offshore wind, issued its first Green bonds, and rebranded itself – taking up the name of the Danish scientist who discovered electromagnetism.

In the process Ørsted closed two of this year’s most significant deals in the renewables project finance market.

The £1.3bn Walney Extension offshore wind project bond issue backing the sale of a 50% stake in the 659MW offshore wind scheme to Danish pension funds PKA and PFA was the first non-recourse bond offering for a UK offshore wind farm to receive an investment-grade rating from a major rating agency, and one of Europe’s largest project bond issues to-date.

With a complex structure including index-linked, fixed-rate and ECA-covered bonds alongside project finance loans, the deal required careful financial engineering. It was also notable for opening up a new source of funding for construction-phase UK offshore wind.

Soon afterwards, Ørsted closed the €1.17bn sale of a 50% stake in its Borkum Riffgrund 2 German offshore wind farm to Global Infrastructure Partners (GIP) with the backing of a €832m 10-year bond issue arranged by Talanx. The deal repeated a similar transaction closed in 2015 to finance the Gode Wind 1 project, scaling up in size and bringing new international institutional investors into the bond offering.

The two deals were the latest following a tried-and-tested farm-down model developed over more than eight years that allows Ørsted to raise project-level financing from equity and debt institutional investors while retaining operational control of its wind farms.

Besides financial structuring, Ørsted led European offshore wind’s evolution from a feed-in tariff-based market to a competitive auction-led model. After surprising the market with then-record breaking bids for the first Dutch Borssele tender last year, in 2017 the company won three of four projects totalling 590MW in the first German offshore wind auction, including two with zero-subsidy bids. In September, it was the biggest winner in the UK auction, securing a £57.50/MWh contract for difference for the giant 1.4GW Hornsea 2 project.

Crucially, Ørsted is expanding out of its traditional North Sea market, with new ambitious plans to build up its offshore wind expertise in Asia and America to become a global player.

The company has built its first offshore development scheme in Taiwan, the Formosa offshore wind project, and is looking to expand it by 120MW with Macquarie and Swancor Industries in the short term. This is likely to be just the first toe in the water, as the company is considering building the giant Greater Changhua offshore scheme, with up to 2.4GW of capacity, from 2021–2024.

Its plans for expansion in the United States are just as impressive. Ørsted recently acquired the 2GW Bay State Wind development scheme off the Massachusetts coast and the 1GW Ocean Wind lease off Atlantic City, and is looking to build them in the early 2020s.

Last year, Ørsted had DKr22.4bn (€3bn) of revenues and DKr11.9bn (€1.6bn) of Ebitda, employing 2,300 people and producing 6TWh of power.

The company is led by CEO Henrik Poulsen and CFO Marianne Wiinholt. Samuel Leupold is the executive vice-president in charge of wind power. Ex-Barclays project financier Kunal Patel heads structured finance activities, M&A and partnership activities are overseen by head of partnerships Jan Friis Cassøe, while Gabriel Mejía is responsible for partnerships relations.

Global Law Firm of the Year – Norton Rose Fulbright

It’s been a big year for Norton Rose Fulbright. It has completed combinations with Bull Housser in Canada, Henry Davis York in Australia and, of course, Chadbourne & Parke in the US.

The Chadbourne move alone creates a combined entity that can boast around 4,000 lawyers across 59 offices in 33 countries with annual revenues of US$2bn. The new project finance business alone should be around US$300m, larger then some small law firms.

Although there were some departures following the merger, 25 of Chadbourne’s project finance team remained in the US, Mexico, São Paulo, London and Johannesburg, including New York-based lawyer Chaim Wachsberger.

In the US, the combined firm will have more than 1,000 lawyers, including more than 300 lawyers in New York, ranking it among the city’s 25 largest firms. The move also provides Norton Rose Fulbright with top-class teams in Mexico City, Sao Paulo and Istanbul, as well as expanded capabilities in London, Dubai, and Latin America.

Speaking in December, Nick Merritt, the firm’s global head of infrastructure, described the combination as “transformative to the profile and the business”. In the Project Finance International Legal Report 2017, published in November, the combination sent Norton Rose Fulbright up to fifth place in its annual league table with 19 advisory mandates on projects financed in the twelve-month period.

When project finance deals below the US$500m threshold were taken into account, the firm moved up higher still. Key sponsor-side mandates included the Fadhili IPP in Saudi and the I Squared acquisition of Duke Energy’s Latin American assets, both well over US$1bn in value.

The Bull Housser and Henry Davis York combinations will add key government-side clients to the business. For 2018, Norton Rose Fullbright’s overall deal pipeline is already in place and it’s set to be a bumper year, says Merritt.

According to global chief executive Peter Martyr, the US, Australia and Canadian combination deals “coincide with important strategic investments we are making through our 2020 business transformation strategy. The increased scale and depth we now have in Australia and Asia-Pacific in general are helping to bring that strategy to life.”

Pursuing scale is one of a number of strategies followed by project finance law firms in response to an environment offering up fewer deals. The Asia-Pacific angle seems key for Norton Rose Fulbright, and there is clearly room here for it to grow further.

Henry Davis York, with offices in Sydney, Brisbane, Canberra, Melbourne and Perth, is one of Australia’s top five law firms. Combined with Norton Rose Fulbright, a 160-partner team will service the key industry sectors of government and infrastructure.

In November, following several previous appointments, Norton Rose Fulbright expanded its Asia team further in Sydney, part of an Asian pivot into the Australian infrastructure market. In another sign of what’s to come, the firm’s global chair Stephen Parish is also stepping down at the end of 2017 in favour of Australian chair Tricia Hobson.

Rohit Chaudhry is the firm’s global head of projects, working alongside co-head Keith Martin, both in Washington. Simon Currie is the global head of energy, working out of Sydney. Nick Merritt is global head of infrastructure, mining and commodities in Singapore and Martin McCann is global head of business in London.

Global Financial Sponsor Deal of the Year – Green Investment Bank

Buying operating infrastructure assets is all the rage. Buying operating renewables assets is all the rage too. But buying a renewables bank is unique. The acquisition required a good deal of structuring, to say the least. GIB had built up a diverse portfolio of small to mega-sized renewables projects – from biomass to offshore wind farms. In addition, it had built up a variety of financing techniques from funds to direct equity investments, small-scale loans to large project finance loans. 

The UK’s Green Investment Bank (GIB) was set up after the UK 2010 general election when a Conservative/Liberal coalition government was elected. Funds from selling the high-speed rail link where allocated to a new GIB, a pet project of the team. But as the bank grew and the Conservatives took sole power in 2015, the decision was taken to sell the bank.

A range of possible buyers looked at the bank but, given the range of investment and financing types, only two credible bidders emerged. The bid put together by Macquarie Capital was the winner, with the consortium concerned offering to buy the all the assets and for a higher price, £2.3bn, than the rival bid.

The team is made up of Macquarie Group, Macquarie European Infrastructure Fund  5 (MEIF5) and Universities Superannuation Scheme (USS). In addition, the Gravis Capital-run GCP Infrastructure Investments (GCP) fund set up a new debt fund with USS to buy 23 smaller assets from the portfolio. Indeed, this was the strength of the assets/bank. The very diverse range of asset types and financings were all dealt with, even the small bespoke assets. Once the acquisition was signed, a further 20 biomass and anaerobic digestion plants were sold to Bioenergy Infrastructure Group. 

A new £1bn offshore wind investment vehicle was set up, a joint venture between MEIF5 and USS and a new green infrastructure investment platform established with the UK government.

What has emerged now is a new Green Investment Group (GIG) located inside Macquarie’s London offices. The unit is now the focal point for Macquarie’s green activities across the globe and is already been used as the brand behind some large wind deals across Europe.

Maxquarie says it is committed to making £3bn of new investment in green energy projects in the next three years. It will be interesting to see, then, how that shapes out in terms of investment in UK projects. Certainly, offshore wind could swallow a good deal of that figure. But GIB was heavily involved in a range of others deal that Macquarie says it will still back – energy efficiency, bioenergy, energy from waste, solar, tidal and energy storage.

The acquisition was backed by a loan facility from ABN AMRO, BNP Paribas, ING, Lloyds, MUFG, RBS and Whitehelm. Bank of America Merrill Lynch and UBS advised on the sale and RBC advised Macquarie. For the lawyers, Slaughter & May advised GIB, Herbert Smith Freehills advised the government and Allen & Overy advised Macquarie. Clifford Chance is advising the acquisition lenders.

Global Multilateral Deal of the Year – Egyptian solar

The Egyptian solar project programme went from being a significant let-down to being a major success in the matter of months. Of course, the turnaround did not happen overnight. The seeds were being sown as round one of the programme was coming to an undignified end, with round two, this year’s success, moving to centre stage.

The European Bank for Reconstruction & Development (EBRD and the International Finance Corporation (IFC) win the Global Award for Multilateral Deal of the Year jointly for their work on the programme. In all, they financed 29 separate 50MW solar pV projects, with EBRD banking 16 and the IFC, 13. Special mentioned should go French multilateral Proparco, which played an important role in turning round one into round two.

The three, along with the government and its advisers, worked on ensuring a bankable structure for round two while at the same time seeing a big reduction in tariffs from round one to round two. International arbitration was allowed in round two and the work on the Ministry of Finance guarantee had been completed. But at the same time the feed-in tariff (FiT) was reduced by 40% from round one to round two. One scheme has been built under round one, 32 are being built in round two.

The Egyptian team was headed by Eng Lamya Youssef Abdel Hakim, sector head of private projects and head of the Central Unit of FiT projects at the Egyptian Electricity Transmission Company (EETC). The government team was advised by Zulficar Partners. The EBRD was advised by Clifford Chance, Allen & Overy, and Shearman & Sterling, while the IFC was advised by Norton Rose Fulbright, and Shakary & Sarhan.

A host of international developers are taking part in round two – Acciona, Alcazar Energy, SECI, Infinity/ibvogt, Shapoorji, Taqa, Scatec Solar, ACWA Power, EREN Renewables, EDF Energies Nouvelles, and Alfanar Energy.

The EBRD and IFC hold debt on each project and syndicated the rest to a range of lenders – ICBC, Europe Arab Bank, AIIB, African Development Bank, CDC, FIM Green Growth, AB Bahrain, AIIB, OeEB, FiinFund, Green Climate Fund, Islamic Development Bank, and FMO. One project had MIGA cover on the debt and others had MIGA cover on the equity.

The two multilaterals adopted differing approaches to their financings. The EBRD financed its schemes in portfolios linked to their sponsors. The IFC put its whole financing together in one package and then sold down individual tranches. The result was similar, with both adopting the same terms and conditions. The EBRD and IFC arranged the hedging on the debt.

In all, circa US$2bn was raised to invest in the local economy and to provide 1.4GW of carbon free power. This was done just after the Egyptian pound was sharply devalued at a time when domestic economy confidence was just recovering. The round two programme provided a highly structured, heavily negotiated but lower-cost project finance solution to more than 30 small projects in one go.

The collaboration between projects and funders in the programme was on a number of levels – debt finance, legal, technical, solar irradiation studies, and so on. Egypt, having got a taste for solar, is expected to keep offering market opportunities into 2018.

To see the digital version of this review, please click here.

To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com.

Gabriel Mejía takes care of Partnerships Relations

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