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Thursday, 20 February 2020

PFI 500th Edition

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Welcome to the PFI 500th Issue Report. It is with great pleasure that I introduce this special report to go with the 500th issue of Project Finance International (PFI). A lot has happened since PFI was launched as a newsletter in 1992. PFI, for one, has been changing with the times – keeping its bi-weekly magazine format but adding Daily News, Reuters News, Thomson Reuters data, Yearbooks, supplements, events, etc, etc…!

To view the digital edition of this report please click here.

It is with great pleasure that I introduce this special report to go with the 500th issue of Project Finance International (PFI). A lot has happened since PFI was launched as a newsletter in 1992. PFI, for one, has been changing with the times – keeping its bi-weekly magazine format but adding Daily News, Reuters News, Thomson Reuters data, Yearbooks, supplements, events, etc, etc…!

In a similar vein, the project finance industry has moved with the times, but kept to its roots. Multi-tranched financings to back projects of international significance were the core of deal flow back in 1992 – and guess what, multi-tranched financings to back projects of international significance are the core of deal flow now.

In between, much has happened. We have seen the rise and fall of merchant power projects and the rise and fall, well slowing, of the private finance initiative (PFI). Project finance, as an asset class, has performed very well over the 20 years. But there have been two adverse credit spikes since 1992 – the first due to the fallout from the merchant power sector in the early 2000s and the second, to a lesser extent, the LBO style infrastructure deals of circa 2006–07.

The 1997 Asian crisis provided the first main credit shock. But while the booming Asian IPP market was halted in its tracks, it did not lead to too many defaults. Project finance and project financiers were, however, at the forefront of the Enron debacle. This involved synthetic fancy financial structuring which, remarkably, was then practised on a much wider scale across the globe in the run-up to the Global Financing Crisis (GFC). Project finance had learnt its lesson but a wider financial system took the Enron model on board and applied it on a much broader canvass.

Project finance is about creating assets. Even the merchant power deals from early 2000 recovered from their defaulting lows to become profitable – well, profitable for those which bought the project debt at the low points and saw its value soar.

Infrastructure had another credit run in the run-up to GFC, when banks and bondholders were chasing new assets. Again, the fallout has not been too disastrous, with most deals being refinanced.

What has been created over the past 21 years? Well, one trusts that PFI has been created as a globally significant brand serving a niche, albeit vital, funding market. And plenty of new, modern and efficient assets have been financed and built. In the UK, 50 new hospitals have been built under the PFI. In Qatar, a new gas export industry has been created – as is the case now in Australia. Vital power generation assets have been funded in all parts of the world, emerged or emerging, thermal and renewable. Traffic gridlocks have been eased and petrochemical industries created. It is some legacy and it shows no sign of abating.

My favourite story from the 475 issues I have edited? That would have to go to Mr G Vinter and his A&O sailing days in Brighton. Having to call out the air and sea rescue services to an unnamed individual (David Weekes) after he inadvisably went sailing the day after a heavy session in the Grand Hotel still makes me laugh, a lot.

Rod Morrison, Editor

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