PFI Yearbook 2015
Welcome to the 2015 Thomson Reuters Project Finance International (PFI) Yearbook. The Yearbook is our annual publication in which we look at the events of 2014, through case studies and the PFI Awards, and look forward into 2015 with articles in the Global section of the book. This year we have interviewed and profiled a host of leading sponsors from the Americas, Asia-Pacific and Europe Middle East & Africa (EMEA) to take the market temperature – to see how the clients are viewing market prospects.
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Long-standing Swedish PPP contractor Skanska, for example, is making a big push into the US P3 market, while Canadian renewables developer Northland Power is coming in the other direction over the pond to the European market. First Gen is staying at home but has plenty to do in the growing Philippine market. GDF Suez is global, it has already raised €55bn in project finance over the last decade. We review some big new markets for 2015 – yieldcos, Canadian LNG, Australian projects and M&A activity, Latin America and Ireland, representing the re-emergence of euro crisis-hit European countries.
The Yearbook contains a range of notable project finance case studies – revealing what a good year it actually was for the asset class. And, of course, the Yearbook contains our list of 2014 Awards and associated write-ups.
2014 was a good year but some dark clouds started to emerge, leaving the outlook for 2015 uncertain. On the bright side, the problem with the availability of long-term debt well and truly disappeared this year. A host of funders are now competing – banks, institutional investors, private placement buyers, etc. Sometimes they are working together and at other times they are working in direct competition.
With some such competition, and the resultant reduction in pricing, etc, there is a need for more deal flow, particularly in the infrastructure space. Europe is struggling in this regard but the Juncker plan might help out. The Americas and Asia-Pacific, Australia specifically, have shown decent flow and this should continue into 2015.
The dark clouds started to emerge on the energy side, first with the Ukrainian crisis. Sanctions on Russia – we said in an article in 2013 that 2014 would be the year of Russian project finance – meant 2014 was most definitely not the Russian year of projects. Yamal LNG and South Stream, among others, were hit. Perhaps for South Stream it was just, as well as the demand in Europe for its gas is not there yet.
In the autumn, the dark clouds expanded over the world as the oil price tanked. The consequences of the shift are far-reaching and will take time to work through. Banks could actually benefit in the very short term if smaller oil companies start to draw down on their under-utilised reserve-based lending (RBL) loans and pay fees. But generally the fall is not positive for many clients served by the project finance market.
That said, ask yourself a number of questions. What will the impact be on LNG prices and the Henry Hub versus Japanese crude cocktail (JCC) pricing models? JCC could come back into favour. What will be the impact on energy importing countries of lower prices? Obviously good and therefore good for projects. What will be the impact on exporting countries? Not good and their infra budgets could be hit. Then again, they might want more investment. What about renewables? Cheaper thermal generation could benefit.