Australian Infrastructure Report 2001
There is an emerging enthusiasm for PFI (private financing initiatives) at both Federal and State Government levels in Australia. As well as ensuring more infrastructure projects are developed with private sector involvement, this new enthusiasm for PFI will impact on the financing structures of infrastructure projects. This will result, in part, from the shift in focus to payment for service delivery rather than for assets and the apparent change in attitude of Government to risk allocation. A trend in recent infrastructure projects has been the increasing use of capital markets and in particular the use of credit wrapped bonds, which may need to be further developed for use in PFI projects.
Over the last two years, public private partnerships (PPPs) have attracted a renewed focus from Australian governments. For the first time, governments are considering a coherent and consistent policy driven approach to delivering PPPs with a strict accountability structure. However there are still several issues to overcome, writes Dr Raphael Arndt, director – policy, the Australian Council for Infrastructure Development.
The Beattie government released its policy framework for integrating private sector investment into public infrastructure in September 2001 as announced in its Public Private Partnerships Policy – achieving value for money in public infrastructure and service delivery.
North America Report 2001
The year has been extremely active, with billions of dollars in project financing raised. US project finance syndication has enjoyed a true buyers' market, with banks setting their own pace for working on deals and demanding pricing that incorporates the changing face of the power markets and increased risks. The market has seen the close of both so-so deals and great deals, most notably, American National Power, NRG, Teco Panda, and InterGen Cottonwood. The next three months will exemplify some emerging trends, as many of the crucial smaller US banking players are at, close to, or more than likely over budget as they select one of the following to commit to prior to holiday break. By Alison Healey. Deal - PG&E NEG non-recourse Non recourse jumbo One of the biggest financings looming on the horizon is the US$1.71bn non-recourse loan to fund a portfolio of projects for PG&E's National Energy Group (NEG). The deal is now being considered by co-arranger candidates at ...
Through tumultuous markets, TECO Power Services (TECO) and Panda Energy (Panda) along with lead arrangers Citibank and Soci?t? G?n?rale were able to successfully syndicate the two largest independent power projects in the nation. Strong project fundamentals, a flexible distribution strategy and intense sponsor marketing overcame market conditions and paved the way for an oversubscribed syndication. By Howard Moseson, Managing Director, Loan Syndications, Soci?t? G?n?rale. The US$2.2bn transaction, which included US$1.7bn in non- recourse debt and a US$500m equity bridge loan, covered construction costs for the Union Power Station (also known as El Dorado) and the Gila River Power Station (Gila River). The two power stations together will generate in excess of 4,500MW, with El Dorado selling power through-out the states of Arkansas, Louisiana, Mississippi and Texas and Gila River selling power throughout the states of Arizona, California, Nevada and New Mexico. Forty-four ...
Over the past summer, the Federal Energy Regulatory Commission has capped electricity prices in an 11-state region in the West, including California, and instituted refund investigations for California and the Pacific Northwest. The result seems to have been a settling down of the electric market, particularly in California where none of the predicted rolling blackouts or high prices in the order of last year occurred. However, the California market is possibly at more risk than ever. By John Tormey, Chadbourne and Parke, Washington. Price caps The order imposing price caps on June 19 modified a price cap order that had already been in effect for California power sales since April and extended it to the 11-state Western Systems Coordinating Council. In its April order, FERC set a `soft' price cap for California power sales during reserve deficiency hours. Reserve deficiency hours are periods when the California Independent System Operator declares a "stage 1 emergency", ...
Global Utilities - New Technologies Report 2001
Much has been written and discussed about the impacts and benefit, as well as problems with Distributed Generation (DG) systems. Much of the information covers the subject in a way that leads one to believe that DG fits most markets in all parts of the world. In fact the market potential for DG is greatest in areas where a local utility doesn’t exist or is unreliable, such as in rural areas or developing countries, or where the grid price of electricity is very high. The purpose of this article is to help clarify the different DG options and identify their most likely markets. By John L Del Monaco, PE manager - Emerging technology and transfer, Public Service Electric & Gas Co.
The last few months have seen an astonishing turnaround in the prospects for nuclear power. This time a year ago, the industry seemed destined for terminal contraction, with no European countries bar France considering further nuclear construction and only the Far East offering a glimmer of hope elsewhere. But a combination of sharply rising gas prices, emerging difficulties in meeting commitments to reduce greenhouse gas emissions, and the Californian power crisis have suddenly brought the industry back into the frame in both the US and the UK. Andrew Cavenagh reports.
According to global management consultant AT Kearney, while e-commerce1 has opened up huge opportunities to fulfil customers’ needs and serve as a powerful, yet cost efficient, sales channel, making it work requires significant changes in both strategy, market approach and business processes. Dr Klaus-Dieter Maier and Dr Volker Flegel outline the pitfalls and prizes for combining e-commerce with utilities.
Throughout history, technological change and innovation have been major driving forces for economic growth and development. The Internet is one recent technological invention, which has had a major impact on how markets interact and fundamentally changes the economics of transactions between buyers and sellers. The growth of the Internet has been remarkable and it is clear that many facets of the traditional power business have been altered beyond recognition. By Franz Gerner, energy consultant, NERA and Douglas Jaffe, internet consultant, International Data Corporation.
Mylene Cayabyab, a domestic helper in Singapore, hails from Bayanbyung a village in the province of Pangasinan, the Philippines. There, her family’s home has no electricity supplies or a basic fixed telephone line because her family is too poor to afford either. Telephone communications is confined to a relative’s home, across the street, in the form of a cellular phone. By a strange quirk, mobile phones have become cheaper and more easily available than a fixed line telephone in the rural areas. Technology has developed so fast while prices have dropped so much that it has changed the profile of telecommunications as a basic utility in the world. By Boey Kit Yin.
Global Utilities - America Report 2001
It's been described as the perfect storm. Whatever could go wrong in California did: gas prices went up, hydro reserves went down, and an innovative legislative scheme, intended to deregulate the state's electric industry while protecting consumers, finally caused one of America's largest and oldest utility companies to make a voluntary Chapter 11 filing, and even now keeps another on the brink of bankruptcy.1 By Enid L Veron, Bingham Dana LLP. This national nightmare continues to preoccupy not only California legislators, but regulators and politicians across the country. In Washington, it is the subject of investigations and conflicting initiatives by Congress, reports by the General Accounting Office, actions and reactions by the Federal Energy Regulatory Commission (FERC), and promises and proposals by the President and Vice President of the United States. And the ripples have reached Wall Street. Not surprisingly, soaring electricity prices and rolling blackouts ...
The electricity production and delivery business in the United States is undergoing its greatest transformation since the passage of the Public Utilities Holding Company Act of 1935. This change has been ascribed to various statutes passed by Congress and regulations promulgated by regulators but the simple fact is that these are reactions to inevitable changes in the marketplace. By HBW Schroeder, President and Chief Operating Officer, Trans-Elect, Inc. Come Senators, Congressmen, please heed the call Don't stand in the doorway, don't block up the hall
Consultants have long predicted massive consolidation of the US power industry. In the past few years however, factors ranging from executive ego problems to languishing low share price to cumbersome PUHCA regulations have significantly slowed the process. Meanwhile, the big players get only marginally bigger one plant at a time. By Alison Healey. FPL/Entergy emerges as latest casualty Two of the mightiest southern US power companies announced their plans to merge in July 2000. Florida's FPL Group called off its US$6.5bn merger deal with New Orleans' Entergy in early April claiming the company had come to recognize "very large discrepancies" in Entergy's earnings forecasts. Had the transaction closed the combined company would have had a total enterprise value of more than US$27bn. Based on size, the new company would have been ranked as the biggest electric utility, the number one power producer with a generating capacity of more than 48,000MW, and the number two ...
A steady stream of payments, something you won't find in the dot.com world, makes public utilities attractive investments today. Such financial behemoths as Kohlberg Kravis Roberts & Co and Warren Buffett have already put a few billion dollars into public utilities. Also, deregulation in the power industry and possible changes in the Public Utility Holding Act could make public utilities even more attractive investments to both US and European companies. By Alan Gersten. "Deregulation of the utility industry opened up the profitability potential. The utilities look a lot more attractive," said Phillip C Gildan, chairman of the public infrastructure practice with Greenberg Traurig, a major Miami law firm. For the last five years, the utility industry has undergone deregulation, state by state. Now around 40 of the 50 states are deregulated or about to be deregulated. "You used to get a nice steady return (on utilities) of 10 to 12%, an investment for widows and orphans," ...
Latin America is arguably the world leader in utility privatisation in the electricity sector. It is also the region where the largest number of countries have embarked on the reform of the electricity sector. Chile has the claim of being the first country in the world, in the mid-1980s, to introduce far-reaching electricity reforms with a view to attracting private investment in the industry.1 After Chile, came Argentina, then Colombia and soon after all countries in the region. Even the smallest like El Salvador, the Dominican Republic and Panama, followed suit. Fernando Barrera, Senior Consultant, Europe Economics, firstname.lastname@example.org Latin American electricity reforms are under attack as in many other countries in the world following the crisis in California and the inability of most reforms to deliver lower prices and system expansion. A sense of crisis is pervasive across the continent and concern has been expressed by the multilateral institutions ...
Brazil restructured its electricity sector at the end of 1994 for reasons not very different from those advanced in the other emerging economies of Latin America and elsewhere. During the 1980's and at the beginning of the 1990's there was increased awareness that government resources, even including credits from multilateral agencies, would be insufficient to satisfy the needs of a growing economy. Alternative funding for investment in infrastructure in general, and in the electricity sector in particular, had to be found, and private participation in monopolistic activities historically owned by the government became recognised as the only feasible resource. By Michael B. Rosenzweig, Senior Vice President, Carlos Pabon-Agudelo Senior, Consultant, Sarah P. Voll, Vice President and Jose Simoes Neto, Consultant, NERA. In developed countries like the United Kingdom, rationales for restructuring included objectives like competition, efficiency, expansion of the capital ...
In the brief but intense history of privatizations in Latin America, the case of drinking water and sewage services seems to have turned out to be the symbol of a strange mismatch. Measured in terms of more and better services, the universe of privatizations in the region can be seen as successful. Largely unmet demands in electricity, telecommunications, natural gas, highways, tourism and many others, were rapidly covered at pace with a massive flow of investments and a revolutionary modernization in the management. In spite of the existence of unfortunate cases -and let's not forget that there have been some - privatizations of utilities have given in the last decade of the 20th century enough proof of their capability of offering a better service to the population. By Fernando E Abadie, a principal consultant in the Washington Consulting Practice of PricewaterhouseCoopers LLP. Based in such evidences, the recourse of privatizing should not only be widely accepted, ...
Asia Pacific Report 2001
Financial markets until recently, were widely believed to have weathered the storm of the Asian crisis following the last two years of economic recovery. However, the last eight months has given rise to concern of another financial crisis. By Alix Burrell, Director, BNP Paribas, Project Finance – Utilities Asia.
The energy crisis in California has jolted the governments here is Asia on the possibility that deregulation and liberalisation may be not a very good idea after all. Nonetheless, many are continuing the preparation of the opening of their markets. David Renton, a partner at Herbert Smith, based in Hong Kong, discusses issues which could be help avoid a California repeat.
On paper, the country of India has a total capacity of 100,000 MW - a large amount of capacity but in reality, most of the existing generators are old, inefficient and operating at very low plant loading factors. India needs another 100,000 MW over the next decade to cope with frequent blackouts, unreliable supplies, deteriorating power generators and future demand - in that order. To do that, it will require an estimated US$250bn to build new and more efficient generators, and it needs private capital to undertake the bulk of that amount. By Boey Kit Yin.
China has ushered in dramatic shifts in its energy and general infrastructure goals during the wake of the Asian financial crisis. In particular, the role of petroleum and gas products have risen to the top of the energy and economic development policy platform under the banner of sustainable development – attempting to simultaneously meeting economic development, environmental protection and societal demand goals. These changes have had a significant impact on virtually all infrastructure sectors and pose considerable challenges to foreign developers and financiers alike. Yet, along with these challenges comes a wealth of opportunity. Report by Mitchell A. Silk, Partner and Simon Black, Partner Allen & Overy Asia Projects Group, Hong Kong.
The gas sector has suddenly become a very hot topic in Asia. Several announcements on gas pipelines proposed to be constructed within Asia have been made such that it is beginning to look that the big and diversified Asian region may finally get connected after all. Minerva Lau takes a look at this latest development.
Bankers are brushing up their knowledge of the telecoms, media and technology (TMT) industry in anticipation of a handful of potential project financing transactions involving submarine cable projects. With project names such as Tiger, Oxygen, Flag, I2I, C2C, SAFE and SEA-ME-WE, the submarine cable industry can present a somewhat perplexing picture of fibre optic systems criss-crossing the Asia-Pacific seas. But assessing these projects - to put it very simply - boils down to two major issues - the level of pre-sales and the credit of the sponsors. By Kimberley Hogan.
Over the past decade or so, it has become technically feasible for the private sector to produce large volumes of potable water through desalination of seawater at competitive costs. This development, combined with the benefit of the operational and management expertise of the private sector, has led governments in many parts of the world where water is scarce to look to the private sector to fund and implement desalination projects. By Dirk von Felbert, Senior Economist of Fichtner Consulting Engineers, London.
The privatisation of the water supply in Thailand is showing signs of progress with the recent financial closing of the facility for Thai Tap Water Co Ltd. Minerva Lau takes a look at the project.
The Daegu-Busan Expressway project will be the first facility that is to achieve financial closing in the international market under the under the government’s Private Participation in Infrastructure (PPI) scheme since the Private Infrastructure Investment Center of Korea (PICKO) was established in April 1999. The offshore financing has been syndicated and documentation is almost complete. With this, more will now be expected to follow although financing for other projects may still take long gestation period. Makoto Inoue, vice president at the project finance group, international finance division of Dai-ichi Kangyo Bank, discusses the expressway project.
Infrastructure projects took a back seat during the Asian financial crisis in 1997/1998. Projects mooted during the pre-crisis days were either scrapped or postponed. To this day, virtually all the postponed projects in countries such as Korea, Thailand, Indonesia and the Philippines remain in limbo. Malaysia, however, remains the exception – projects postponed from the crisis of 1997/1998 were successfully closed after a brief hiatus, and even some projects that were scrapped (Bakun being the most high profile example) are now being revived. Willy Lim, managing director of Babcock & Brown Asia Pacific, writes.
The emergence of Asian investors in the Australian utilities sector over the last two years has been conspicuous, exacerbated by the exit of American and European investors back to their home markets. And judging from their recent actions, the likes of CLP Power International, Cheung Kong International and Hong Kong Electric are here to stay. By Sharon Klyne.
The AustralAsia Railway Project is a project of massive national significance to Australia. It will be the largest new build infrastructure project on the continent that reaches financial close this year. It has been nicknamed the ‘Steel Snowy’, in reference to that other great nation-building project, the Snowy Mountains Hydro-Electric Scheme started in 1949, and one of the world’s great engineering achievements. Jason Jacques, associate director at RBS Australia, discusses the project.
In June 2000, the Victorian government launched Partnerships Victoria, its public-private partnerships (PPP) policy. Twelve months later in June 2001, the Partnerships Victoria guidance material was released, providing some of the most detailed and comprehensive guidance material available in relation to PPP. In developing the Partnerships Victoria policy and guidance material, the Victorian Government is both leading the way for PPP in Australia and learning from the experiences and criticisms of the Private Finance Initiative (PFI) in the UK. The Victorian government is very proud of its efforts in establishing a favourable climate for the growth of PPP projects in Australia. John Fitzgerald, director and Tess Spring, senior policy manager at the Commercial Division, Department of Treasury and Finance of Victoria, Australia discusses the policy.
There is fresh interest in the Australian market in the use of domestic and offshore debt capital markets instruments as a funding source for infrastructure assets. Whilst in the past there has been recourse to the US capital markets in the context of greenfields mining projects in Australia (through several Regulation 144A issues), recent issues have been in the context of mature assets with secure cash flows. In a number of these recent issues, project risk has been passed through to a monoline insurer. Peter Doyle and David Olsson, Partners at Mallesons Stephen Jaques look at the increasing use in Australia of credit wrapped capital markets instruments in the context of infrastructure assets and some of the relevant legal issues.
Despite the promise of 12-18 month construction periods followed by a 2 year ramp up to full production and operating costs in the lowest quartile, reality for the three Australian laterite nickel projects has been much more humble. In 1997, all three raised debt (eventually) from the US 144a bond market, began construction and raced to become the first commissioned to produce nickel metal. Brad Potter, Director, Resources and Infrastructure of Westpac Corporate Finance, talks about them.
Global Power Report 2001
Initially fate was not kind to American National Power's first US financing effort, plaguing it with hysteria over technology problems, general market skittishness and tough timing. But the deal's sponsor and arrangers were able to focus on education efforts and make their lenders happy - exemplifying the difference between this financing and the other one with the three-letter name. By Alison Healey. In the United States, International Power has 1,500MW of generating capacity in commercial operation, and an additional 2,5000MW in start-up and advanced construction in the New England and Texas regional power markets. Formerly National Power, the company spun off its UK operations as Innogy in 2000 and took the International Power name. International Power was created from the demerger of National Power, and its shares began trading independently on the London Stock Exchange and the New York Stock Exchange in October 2000. The ticker symbol on both stock exchanges ...
It is impossible to put a dollar amount on the massive amount of structure financings being done because of their increasingly secretive nature, as sponsors strive to come up with the most innovative way to increase generating capacity without degrading the balance sheet. But it is clear that this behind-closed-doors activity has become the backbone of non-recourse financing, and players like PPL can't seem to get enough. A look at some of the different types of leasing as a component of project finance deals. By Alison Healey. At the Center for Business Intelligence's Synthetic & Leveraged Lease Financing for US Power Projects conference in New York, sponsors, bankers, and attorneys spoke about their recent deals and the pros and cons of leveraged and synthetic leases in the face of the ever- changing US power landscape.
The United States' Overseas Private Investment Corp (OPIC) debuted its much-anticipated foreign currency devaluation protection product in May with its coverage of AES Corp's US$300m AES Tiete Certificates Grantor Trust deal. The credit enhancement, which covered AES's purchase last year of the Tiete generation assets in Sao Paulo state, was the culmination of nearly two years' effort on the parts of OPIC, AES, lead manager Banc of America Securities and OPIC advisers Taylor-Dejongh and the Wharton Economic Forecasting Associates (WEFA). The new product may spur investment in other projects in Latin America, observers say, including Petrobras's yet-to-be- financed independent power projects. By Nicole Gelinas. The OPIC devaluation protection product is a "step forward in Brazil," said Banc of America's Bob Sheppard, managing director in the capital markets arena. With the coverage, AES and BofA were able to garner an investment-grade Baa3/BBB- rating for the Tiete ...
The California's energy crisis is well documented and offers lessons to the rest of the world, especially to those countries which are in the process of deregulating their power sector and similarly to those which have recently deregulated their markets. Jeremy Hasnip, associate director for power & telecommunications at Westpac Institutional Bank, provides an analysis on whether the American state crisis could happen in Australia. California has experienced a 10-fold increase in electricity generation prices, and its two largest electricity utilities have been unable to recover the full cost of purchased energy from their customers. Pacific Gas & Electric Company has filed for bankruptcy protection and Southern California Edison is dependent on the satisfactory implementation of a rescue package agreed in an MOU with Government. The principal factors behind the Californian Electricity Crisis were:
In a country where less than 20% of the population has access to a consistent supply of electricity, power reforms have attained an all- important aspect. The lack of a reliable source of electricity has been a major bottleneck to the economic development of Bangladesh and a problem that multilateral agencies like the World Bank and the Asian Development Bank have been trying for years to help the government overcome. Against this background, the achievement of two power projects, sponsored by AES Corp, to reach financing deals is significant but the progress of power reforms in Bangladesh has still a long way to go. By Boey Kit Yin. Both the WB and ADB have been at the forefront of funding programmes that have sought to push the Dhaka government to undertake and accelerate reforms in the power sector. The major impediments are the weak financial positions of utility firms Bangladesh Power Development Board (BPDB) and Dhaka Electricity Supply Authority. Both organisations ...
Power liberalisation in Asia has been slow by the best of accounts. Countries such as Thailand and South Korea, that had committed to the privatisation of their state- owned utilities in return for bail-outs by the International Monetary Fund in 1997, have plodded along now that they have graduated from the IMF programme. Still, Singapore, South Korea and further down the line, the Philippines may provide investment opportunities for investors next year. By Sharon Klyne. Singapore - Divestment next year The privatisation of Singapore's electricity generation assets are likely to take place either at the end of this year or early next year. Temasek Holdings, the Singapore government's investment holding company, will be selling three generation plants - PowerSeraya (3,100MW), PowerSenoko (3,300MW) and Tuas Power (2,670MW). The government's financial adviser is Morgan Stanley and legal adviser is local law firm Allen & Gledhill.
The Italian power exchange is set to begin operating on April 1 2002. Despite uncertainties regarding the practical operation of the new power bourse, some IPP developers have already embarked on serious bids to be first movers in this potentially lucrative market, and most should be project-financed. By Daniel O'Sullivan. The main event in the Italian power sector thus far this year has undoubtedly been the ENEL capacity selloff. The sale of three gencos, which together total 15000MW or some 20% of Italian generation capacity, has begun with the 5438MW Elettrogen asset, for which final and binding offers have just gone in from five competing groups:
The Middle East independent power project (IPP) market is now developing at quite a pace. Only a very few schemes are actually generating power but quite a few are in construction and the project pipeline going forward is filling up. The competition among a select band of developers, and an even selecter band of turnkey contractors, is fierce and they in turn are putting pressure on their project finance banks. By Rod Morrison. The power market in the Middle East is a build own and transfer (BOT) market. The growing list of projects are aimed simply at expanding generating capacity with international expertise and finance. This is a classic, almost old fashioned model, for project financiers to follow. The next stage, the development of power trading markets, is still someway off.
As part of the commitments of the Republic of Turkey under the recent protocol with the International Monetary Fund, the Ministry of Energy and Natural Resources (the Ministry), working with the World Bank and several related Turkish government entities including the Undersecretariat of Treasury (Treasury), Turkish Electricity Generation, Transmission Joint Stock Corporation (Türkiye Elektrik Üretim, Iletim Anonim Sirketi) (TEAS) and Turkish Electricity Distribution Joint Stock Corporation (Türkiye Elektrik Dag_t_m Anonim Sirketi) (TEDAS), has prepared a new law re-structuring the Turkish electricity market under the name of "Electricity Market Law". By Mesut Çakmak and Mehtap Y_ld_r_m-Öztürk of Çakmak Ortak Avukat Bürosu. As a result of lengthy discussions within the Turkish Parliament, the Electricity Market Law No 4628 (Law No. 4628)1 was accepted by the Turkish Parliament on 20 February 2001. Law No 4628 was further amended by Natural Gas Market Law No 46462 ...
Middle East Report 2001
Four large Qatari project financings are set for the bank debt market this year to raise nearly US$2.5bn of debt for the country. It is unlikely the new debt will overwhelm the country or the markets. Qatar is well set for the time being. Its two mega LNG schemes are on line, producing in a higher price environment. Various industrial schemes have been completed too. Dividends are starting to flow, which will support more gearing. By Rod Morrison. The four deals are the Ras Abu Fontas B power station extension, the Ras Laffan independent water and power project (IWPP) and then the two export schemes, Qafco 1V and Ras Laffan LNG (RasGas) expansion scheme. Both Ras Abu Fontas B and Qafco will be financed as expansion financings, with some access to cash flow from existing plants, while the IWPP and RasGas will be financed as greenfield developments, even though the LNG scheme is actually an expansion. Many of the Qatari schemes in the 1990s that were export based project ...
The Sultanate of Oman looks set to become the first Arab state to complete wholesale privatisation of its electricity and related water supply industries. It is currently restructuring its industry, has let three IPPs and is looking to privatise the existing industry assets. This article explains the process so far, looks at the latest developments and the forthcoming privatisation. By Bert Schoen of ABN AMRO Bank and Christopher McGee- Osborne of Denton Wilde Sapte. Background Oman was the first country in the Middle East to complete an IPP when the Manah Power Project (90 MW) was awarded in 1994 The process gained momentum in June 1999 when the Sultanate's Government appointed a consortium comprising of ABN AMRO, Denton Wilde Sapte and Mott MacDonald to advise it on a radical programme of restructuring and privatisation.
Saudi Arabia has over the past twenty years undertaken a massive investment programme to establish a world class petrochemical industry which now ranks as the largest, by some margin, in the Middle East. The current phase of this development, however, is quite different to the previous waves in that, for the first time, the private sector in Saudi Arabia is taking a leading role. By Michael Hamilton, head of project finance, Arab Petroleum Investments Corporation, Apicorp, Darren Davis, head of Apicorp project finance for the GCC and Terry Newendorp, chairman and CEO of Taylor DeJongh. The development of the industry has been achieved for the most part by Saudi Basic Industries Corporation (SABIC), 70% of which is owned by the Saudi government, and by the foreign partners with which it has established many of its project companies. SABIC now ranks as one of the world's largest petrochemical producers, with a production capacity of 35m tonnes of product in 2000. SABIC's ...
Iran is set to attract many billions of dollars of investment into its hydrocarbons sector. With the multi-billion dollar deals for South Pars phases 9-12 set to be awarded imminently, all eyes are on the upstream production. However ongoing wrangles over the buyback schemes governing concessions mean that it could be the downstream petrochemicals sector that provides the bulk of any emerging project financings. By Daniel O’Sullivan.
The global LNG market, particularly the Asian and European markets comprising some 93% of total sales in 1999, is characterised by a small number of sellers paired with individual fragmented markets. Buyers and sellers possess nearly symmetrical political and economic interests. This symmetry of interests, combined with high capital costs amortised over long time periods, provides a strong rationale for vertically integrated deal structures and operations. Once in place, the greatest economic opportunity under these circumstances may be found in internal optimisation. The greatest economic (and political) threat lies in disruption of this smoothly operating system. By Robert S Linden, managing consultant, energy strategy and risk management, PA Consulting Services. The past two years have witnessed a rapid sequence of new liquefaction projects, new and recommissioned terminals and tankers, new production sources and destination markets and new market entrants. Capital ...
The Middle East, and more specifically the member states of the Gulf Cooperation Council, or GCC (Saudi Arabia, Kuwait, Bahrain, Qatar, the United Arab Emirates, and Oman), have become arguably the most active and competitive project finance market in the world, especially by the measure of pricing of this financing product. What is the role of local banks in this market, how has it developed, and how will it progress? By Jack Seifert, WestLB. Most local banks have limited their involvement in project financing to participations in prestigious, state- sponsored projects in their national home markets, with certain notable exceptions. Arab Petroleum Investments Corp (APICORP), an Arab multilateral financial institution established for this purpose and based in Saudi Arabia, has been effective in cross-border arranging roles in project financings in the region, as have a very few others such as Arab Banking Corp. and Gulf International Bank, based in Bahrain, the pioneer ...
Americas Power Report 2001
For someone to predict which companies will succeed in the United States’ restructured wholesale electric and gas markets of tomorrow, three variables will have to be considered: What will the impact of electricity restructuring be in the states, and how will the regional formation of transmission networks affect those markets? What are the implications of the federal energy policies now being debated? And finally, how will competitive strategies among wholesale energy marketers change in response to these dynamics? By Jack Cashin, Alliance of Energy Suppliers, Edison Electric Institute.
Is California a trendsetter in electric rate deregulation problems, as it is in many other areas? To answer this question, one has to ask another: which California deregulation problem are we talking about? Almost everything that could go wrong did go wrong in California, so it is important to identify specific deregulation problems when analyzing whether they can spread to other states. By Lynn N Hargis, Chadbourne & Parke LP.
Over the last eighteen months, many of the smartest corporate players in the US power industry have executed a new and specialized type of financing. These debt-like transactions are done solely to finance progress payments on turbine contracts, and are highly structured to achieve a single purpose – to avoid triggering a narrow but draconian US GAAP accounting provision that was originally aimed at real estate leasing. But to achieve that purpose, the deals themselves must comply with another set of accounting rules that seem to have been drafted by the Oracle of Delphi. Do these turbine warehouse transactions make sense? By John Ryan, WestLB.
InterGen’s non-recourse power debut has been long anticipated. And by applying a tried and true oil & gas structure to US power with a deal that can be easily replicated, the developer is confident its solid international reputation and reward system for relationship banks will mean interest can be drummed up again and again. By Alison Healey.
For the time being it seems like a company doesn’t have to have a 70,000MW growth target to be a player in project finance. As terms get worked out for Black Hills’ Fountain Valley project and syndication preps on the loan for the TECO/Panda joint venture’s projects, two of the US’s smaller players manage to get some attention. A look at TECO Power and Black Hills Generation. By Alison Healey.
A new phenomenon is sweeping the ranks of US power companies: merger mania. Yes, the near-bankruptcies of Southern California Edison and Pacific Gas & Electric Co are frightening events. So far there is no signs of the California virus spreading to other conventional utilities with retail distribution as their core business.
An escalating energy crisis in California, which relies heavily on natural gas, put the focus on the country’s energy supply. The US natural gas supplies are nearing historic lows, and a few more cold snaps could drive supplies to new depths. But higher prices, increased drilling, advancements in technology and increased imports are expected to supply enough natural gas through 2020. By Alan Gersten.
AES Corp’s roster of operations reads like it was written by Jules Verne: Italy, Germany, the Czech Republic, Nigeria, Russia, Argentina, Brazil, Chile, Colombia, China and Australia – just to name a few. The US-based company has 20,000 employees running 139 different businesses in 32 countries. AES’ capacity has increased from 4,332 gross MW generated in 1995 to 64,418MW reported at the company’s annual presentation, while its market cap has grown from US$1.5bn to US$25bn over the same six-year period. By Nicole Gelinas.
When Coca-Cola veteran and PAN party member Vicente Fox was sworn in as the president of Mexico in December, he ended 71 years of PRI majority rule. Fox has pledged to wade through the decades of bureaucracy that have plagued financial reform in Mexico. Armed with ideas from the private sector, he will attempt reform across several key areas of the government this year, including electricity and energy. To accomplish his goals, Fox has filled his cabinet with colleagues from the private sector and from the international finance community. His energy minister, Ernesto Martens, hails from transport conglomerate Cintra (once Aeromexico’s parent), while his economic development minister, Luis Ernesto Derbez, has held several top-level posts at the World Bank. Will Fox’s cowboys spur the much-needed and long-planned reform of Mexico’s federally run electricity sector? By Nicole Gelinas.
Since the early 50s, Brazil has heavily relied on public investment to expand its power infrastructure. Most generation, transmission, and distribution assets have been concentrated in the hands of federal, state and (to a lesser extent) municipal governments. As the government lost investment capacity throughout the 80s and 90s despite the increasing demand in the same period, the Cardoso Administration unleashed a bold privatisation program for the industry in 1995. By Hercules Celescuekci and J Roberto Martins, Baker & McKenzie, São Paulo.
Latin America’s largest power market is poised for ambitious growth in new generating capacity. A confluence of three factors is driving the rapid pace of development of new and expanded power plants in Brazil: (1) a growing demand for power coupled with severe shortfalls in hydroelectric generating resources; (2) government policies encouraging private and foreign investment in the Brazilian power sector, particularly in thermal power plants; and (3) an increasing surplus in domestic natural gas supplies, which has triggered the entry of Petrobras (which dominates Brazil’s oil and gas industry) into the wholesale power generation business. Yet, significant challenges remain for international financing of new projects. By Allan T Marks, partner, Global Project Finance Group; Milbank, Tweed, Hadley & McCloy LLP.