PFI Yearbook 2019
Welcome to the 2019 Thomson Reuters Project Finance International (PFI) Yearbook. The Yearbook is our annual publication in which we look at the events of 2018, through case studies and the PFI Awards, and look forward into 2019 with interviews and articles in the Global section of the book.
2018 was a busy year across most sectors in the global project finance space. If there was a stand-out asset class it was probably the burgeoning offshore wind arena, which truly became global this year. The UK saw £10bn of deals transacted, there were large financings in the rest of northern Europe, the first deals were done in Asia for schemes off Taiwan, and interest picked up in the US.
The solar sector was not too far behind. Solar deals are now commonplace across the globe. The emerging markets have seen a boom in project financings, given solar projects can be downscaled to a manageable size. Utility-sized projects in the developed world continue at a pace. The first utility-sized solar deal was signed this year in Saudi Arabia, the oil capital of the world, a deal that won a PFI award.
The Yearbook reflects the growing interest in the new offshore wind sector. The financing of these types of schemes is now commonplace and the project finance templates have been established - although the terms and conditions have been getting progressively tighter in 2018 as costs are squeezed.
While the sector has been well-established there are still plenty of risks. As said, the market is becoming a lot more competitive, construction prices are coming down, larger untested turbines are coming onto the market and, of course, the fact is the operating environment is hardly benign.
The Yearbook contains a range of articles highlighting the risks from construction to credit risk and onto insurance. We profile the current leader in the sector, Orsted.
For onshore renewables, the growth of corporate PPAs in the market has been a feature this year, with a mix of corporate offtakes and even merchant exposures up for financing. We cover the new innovations in this market being driven by the giant tech companies.
One subsector in the renewables space is waste-to-energy (WtE). The sector has been well-established in places such as the US and Europe but this year has seen new markets open up and projects financed in the Gulf and Australia.
LNG, and the taking of final investment decisions (FIDs) on the mega LNG schemes, came back into fashion this year. The huge LNG Canada scheme went ahead, albeit on an equity basis. LNG is set for a big year in 2019 as China adopts its blue skies policy and seeks more environmentally friendly fuel, ie gas not coal.
In 2019, schemes are due to be project financed in places as diverse as Nigeria, Papua New Guinea and Mozambique. We cover the LNG market prospects and look at why some elements of the market, such as LNG-to-power projects, have been slow to take off. That said, two LNG-to-power schemes actually got financed this year and won PFI awards.
What about the financing for all these capital-intensive sectors and the state of the project finance market itself? Highly liquid at present but towards the end of the year dark clouds starting gathering over the debt capital markets. Whether this is short-lived or not, only time will tell.
Institutional investors have been keen providers of debt in the project finance space up to now but with spreads widening on other paper they invest in, can they remain competitive? Banks, notwithstanding Basel 3, 3.5, 4, whatever, have been highly liquid during the year. Can they keep going?