The Chicago Skyway transaction has had the US project finance market entranced for several months. The size of the deal makes it worthwhile for banks to diversify into a type of deal they are not usually fond of in the United States. But this deal emerged after years of smaller moves into PPP by the City of Chicago, and other states that may be preparing to follow that lead into larger projects with government incentives. By Alison Healey.
As world oil prices remain above US$50 a barrel and both US presidential candidates tell voters that their competing energy policies are designed to decrease America's dependence on Mideast oil, sponsors and bankers are looking to exploit some of the vast reserves of untapped oil within their own hemisphere for consumption in the US markets. Most of the Western Hemisphere's oil and gas resources are state-owned, and locked beneath Vicente Fox's Mexico and Hugo Chavez' Venezuela, so investors cannot touch the goods without incurring direct sovereign risk. By Nicole Gelinas.
The PPP market in Australia is led by Victoria and to a lesser extent NSW. This is unsurprisingly giving they are the most populous states and leading financial centres. Each though has chosen to go its own way in developing the market, though there are some attempts to achieve some consistency. Sharon Klyne talks to the officials setting the pace.
China's growing demand for energy has set its major oil and gas companies - China National Offshore Oil Corp (CNOOC), Sinopec and Petrochina - on the path for expansion. Indeed, the rapid changes in the Middle Kingdom, including the high growth rates, are pushing its energy sector players into active participation and development both at home and overseas. Minerva Lau reports.
PPPs are taking off in the Benelux countries and the Flanders region of Belgium is one area where the influence of this increasingly popular form of financing is gaining ground. Behind its momentum is the region's PPP unit - Vlaams kenniscentrum PPS and one key members of the team is Steven Ducatteeuw. Michael Dunning speaks to Ducatteeuw who describes the progress of PPPs in Flanders and how the PPP unit is central to the success of this financing technique in the Flemish speaking region of Belgium.
With oil at US$50 a barrel, international oil companies should be living on easy street. Far from easy, however, would be an apt description of the position the IOCs are now finding themselves in two of their key slated future production provinces in Eastern Europe, as both the Russian and Kazakh governments shake off previously-accepted restraints in their dealings with foreign investors and seek firmer control over their most strategic industry. By Daniel O'Sullivan.
European PPP Report 2004
On the 8th of October, my time as Head of PFI Policy and the Private Finance Unit in HM Treasury (HMT) will come to its natural end. To mark the event, I have been asked to reflect on my time at HMT, particularly on how I have seen the public and private sectors relate to each other, how PFI policy has developed over the last few years and provide some pointers for future developments. I have also taken this opportunity to explain how HMT will continue to provide policy support to ministers on PFI issues after my departure. By Geoffrey Spence.
The use of financing is central to Transport for London's ambitious plans for improving London's transport system. As the Capital's transport authority, we control a large portfolio of Public Private Partnership (PPP) projects, have plans for several more and are about to embark on a groundbreaking £3bn financing programme to underpin our capital investment programme. By Stephen Allen, director of corporate finance, Transport for London.
Fancy annoying one's colleagues? Go to the Building Schools for the Future (BSF) website at www.p4s.org.uk and print out all the recently published draft standard BSF contract documents. That should clog up the printer for the afternoon. The fact is BSF has now become a reality. Two schemes are due out to OJEU next month and the government's intention is spend £2.2bn pa on schools over 15 years via BSF. By Rod Morrison.
Northern Ireland has significant infrastructure problems, as great as any part of the European Union (EU). One tool for fixing those problems will by the private finance initiative (PFI). The NI PFI market should therefore be a boon for the emerging PFI industry - a region with a huge infrastructure deficit backed, from a credit perspective, by one of the wealthiest countries in the EU, the UK. By Rod Morrison.
In July this year, Portsmouth City Council and Ensign Highways Ltd signed the first PFI contract for the management of an entire urban highway network. By this £500m project PCC aims to transfer most of its responsibilities as local highway authority to Ensign for 25 years. Senior debt from Lloyds TSB will enable Ensign to deliver significant improvements to Portsmouth's roads. Unlike a DBFO, though, the focus is as much on managing an existing asset base as on new works. Instead of "build it new, keep it pristine," the parties had to settle realistic targets for a network comprising roads of all ages, grades and standards. The result is a contractual model which may now be rolled out in cities across the UK. By John Burke, associate, Clifford Chance LLP.
An Amey/Equion consortium advised by Ashurst has recently signed a deal for the provision of criminal justice facilities in Bristol and Somerset. The transaction began with an OJEC notice issued in February 2000. By Ashurst senior solicitor Joss Dare.
In early September the Portuguese government confirmed publicly the hints and suspicions that have been circling the project finance market for some time - the liabilities the state has incurred under the seven SCUT shadow toll road projects tendered from the late 1990s onwards are unsustainable, and it will now seek to convert the bulk of them into real-tolled schemes. The consequences for SCUT concessionaires and their project lenders are as-yet unclear, but certainly unwelcome. By Daniel O'Sullivan.
Lead arrangers BBVA, Royal Bank of Scotland (RBS) and SCH are currently wrapping up a €522m miniperm project deal for the Ocana-La Roda real toll road project in Spain, the first to reach close of four such schemes awarded at the start of this year by the Spanish government. Structurally, the current deal will probably set the trend for the next three deals to follow - for various reasons, however, margin is a different matter. By Daniel O'Sullivan.
Croatian PPPs are somewhat of a rarity, with only the occasional financing coming to market. But the country is now playing catch up with its neighbours to the west and is now placing itself on the project finance map. Of particular note have been its incursions into toll road PPPs, with its second one having just signed and more on the horizon. Michael Dunning reports on how Croatia is utilising PPPs to upgrade its road infrastructure.
With the UK having pioneered the sector for some years, healthcare PFI/PPP deals are now set to explode across Europe. Italy has long been on the map, but now Spain and Portugal too are rolling out significant programmes. All are to a greater or lesser extent seeking to emulate the UK contractual model, however there remain significant differences in approach between the three states, and Portugal in particular is now blazing a trail which, if it succeeds, may well define the next generation of hospital projects as the UK model defined the first. By Daniel O'Sullivan.
Hungary used to have an appalling reputation when it came to financing the construction of new roads, charging inexplicably high tolls and failing to get the required number of vehicles to use the roads. But then something happened - one new road financing has just closed and another is on the cusp of doing so, each gaining exceptional praise from industry experts. So why the change? Michael Dunning reports.
From 1993 to 1996 the UK PFI/PPP market was much talked about, but few transactions were delivered. False dawns came and went, announcements were repeatedly made - but no health or local authority deals were closed until late 1997. The German PPP market has been suffering from the same teething problems, dominated by public announcements and consultation but offering little in the way of real ongoing business, with a public sector that until recently seemed to lack the necessary skills to develop and deliver financable projects. By Dr Peter Stenz, Partner, and Norbert Wiederholt, Senior Associate, of Allen & Overy LLP, Frankfurt.
North America Report 2004
In this article we look at those states in the United States that have adopted special legislation to facilitate the involvement of the private sector in road development and discuss the results that these states have had in developing new road projects pursuant to such legislation. By Douglas M. Fried, a partner, and Jonathan Finklestone and Jacob S Falk, associates, in the project finance group at Chadbourne & Parke LLP in New York.
While the mammoth Chicago Skyway project is on everyone's mind, a number of smaller one-off infrastructure deals have gotten done and several more are being pursued. The market in stadiums and real estate-related deals is growing. By Alison Healey.
Mexico's infrastructure investment needs are daunting. The nation needs at least US$25 billion in near-term investments in roads, highways, water and wastewater treatment plants to remain competitive over the next decade, according to international estimates. As the two extremes of the traditional infrastructure -investment market - central planning by the federal government at the one pole and full-scale privatisation at the other - grow unpalatable for fiscal and political reasons, one new option is becoming more attractive: sub-sovereign debt to fund public-private partnerships at local and state levels. By Nicole Gelinas.
To say that competitive power in the US was on life support last year would hardly be an exaggeration. Just a few short years ago, there seemed no limit to the sector - new generating plants were being planned everywhere, open access to an upgraded national transmission grid seemed just around the corner, trading desks blossomed, and the financial markets welcomed each new development with open coffers. By Audrey Louison, with Kevin Jones and Ted Murphy, of Hunton & Williams' Energy & Project Finance Group.
Over the past five years, United States wind generating capacity has grown 28% annually to a total of over 6,374MW.i A near-record 1,687MW of new wind capacity was installed in the US in 2003. 2004, however, may not see more than 350MW of new wind power installed in the US due to regulatory uncertainty concerning the renewal of the federal Production Tax Credit. Nevertheless, wind energy has continued to attract the attention of developers and financiers, particularly in those 16 states that have adopted Renewable Portfolio Standards. Complying with these Renewable Portfolio Standards could require over 17,600MW of new renewable electricity capacity in the United States by 2017ii, for which wind is likely to be the technology of choice. By Stuart T Solsky and Aaron C Bielenberg, Baker Botts LLP.
The stalled production tax credit (PTC) has been bad news for wind development and financing, with many projects now long stalled and in limbo. But the struggling niche market in project finance has seen the entry of some interesting new players, most notably Goldman and Mitsui. By Alison Healey.
Australia Report 2004
In Australia, the private sector has been participating in the financing of infrastructure for many years. In general terms, these projects have been successful other than in a few isolated circumstances, for example, each of the rail links to the airports in Sydney and Brisbane have not met their patronage forecasts. But even those highly publicised projects have generally been regarded as successfully delivering on many of their risk issues such as on time and on budget design and construction in difficult circumstances. Mark Upfold, partner and Bridget Kidner, lawyer, Mallesons Stephen Jaques examine the subtleties of PPP contracts in Australia.
There is currently quite a lot of activity in the fledgling public private partnership market in Australia. A number of deals are either in the bid phase or have reached final submission stage. However a lot more deals will have to reach financial close in order to give the market any real depth. By Sharon Klyne.
The renewable industry was dealt a blow recently when the Federal government announced it would not extend the MRET target beyond 2020. This effectively narrows the time gap for sponsors to bring deals to the market to take advantage of the scheme. Andrew Clark, partner and Michael Kee, solicitor, projects group of Freehills discuss the issues in financing wind farms.
ANZ Investment Bank provided a small project financing and hedging facility to Giants Reef Mining. The project is typical of a junior resources company taking advantage of modern exploration techniques to discover new gold and copper opportunities in a previously highly productive region and using the upturn in the commodities market to raise both debt and equity to underpin its growth aspirations. By Chris Tonkin, executive director - and Richard Schroder, associate director, ANZ.
Australia is fast becoming a major partner of China, who is so hungry for energy sources, especially natural gas which is a commodity fortunately in abundant supply in the land of the kangaroos. The urgent and huge demand for such has led to greater cooperation between the two countries. Minerva Lau reports.
In early 2004, Australia's largest pay television operator, Foxtel, reached financial close on one of the country's largest syndicated leveraged lease and debt transactions to finance the digitisation of the company's network and business growth. The A$550m financing which was arranged by ABN AMRO and Commonwealth Bank of Australia, set new benchmarks for combining lease and term debt facilities, providing capped shareholder equity support, asset pooling and other innovations required to manage uncertainty in the fast-moving media and telecoms sector. By Scott Hawker, head of telecoms, media & entertainment, and Joëlle Mekers, loan markets, Commonwealth Bank of Australia
Middle East & Africa Report 2004
Oman Polypropylene LLC is due to make its first drawdown under its new project finance loan facility at the beginning of August 2004, just four months after the launch of the RFP into the bank market. This is an impressive achievement as the complexity of the financing was not lessened by the relatively small size of the financing, US$240m, due largely to the fact that the transaction was structured along very traditional project finance lines. By Darren Davis, manager of GCC Business Group, Project Finance, Arab Petroleum Investments Corporation (Apicorp) which acted as financial advisor to Oman Polypropylene LLC.
The Arab Gas Pipeline took another major step forward in July when financial close was achieved for the latest 393 km section in Jordan. The Arab Gas Pipeline, an ambitious project to establish a regional gas network, has moved rapidly forward from an outline agreement in 2001 to first gas deliveries in southern Jordan in 2003. The latest section, the Jordan Gas Transmission Pipeline, will supply gas to power and industrial customers in Jordan and bring the pipeline close to the Syria border by 2006. By Nic Braley (Charles River Associates), Tim Armsby (Trowers & Hamlins) and Alan Cairns (Mapstone), advisors to the Government of Jordan.
July 20th 2004 was an auspicious date in the development of the Omani power sector for two reasons. First, it marked the signing of the Project Agreements for the Sohar Power and Desalination Project (the project) with a consortium led by Suez-Tractebel. The project marks the latest development in the power sector for the Sultanate of Oman, building on the significant benchmarks of the first development of an IPP in the Middle East (Manah IPP 1994), the introduction of 100% privately owned generating companies (as against the more familiar 40% private ownership within the GCC) and the privatisation of the integrated generation and distribution facilities in the Dhofar Province (Salalah). By Peter Conway at SG CIB who headed the consortium of advisers (namely SG and Bank Muscat, Denton Wilde Sapte and Fichtner) to the Government of the Sultanate of Oman for the Sohar Power and Desalination Project.
The Gulf region could be the next big securitisation market. Could be. Two securitisations which recently reached financial close, Abu Dhabi Power Bond and Emaar Properties, show the potential. In addition the backdrop for the development of the market could not be better. But the market still lacks real depth as a capital markets hub and the development of the securitisation market will be tied to attempts to deepened liquidity. Does this matter to project financiers? Yes. By Rod Morrison*.
Islamic project finance is still in its infancy but it has opened up a substantial new line of liquidity for projects. Given it is in its early days, most Islamic deals are part of larger financings and utilise the structuring work on the rest of the deal. The Islamic funders will then match the cost of funds on the other elements of the deal and ensure the Islamic tranche follows Shaira law.
The security situation in the Middle East has progressively deteriorated since the early 1990s. The invasion and occupation of Iraq have fuelled support for Islamic extremists, while the Israeli-Palestinian conflict has also provoked anti-Western fervour in the region. In this context, coupled with Middle Eastern countries' various internal problems, it is of little surprise that there is a clear trend towards a growth in terrorist activities in the region. There are clear risks for the future, but the manner in which they materialise will depend very much on the effectiveness of states' counter-terrorism strategies; Arab states' willingness and ability to implement political and economic reforms that combat the conditions that give militant Islam its durability; and finally, the tackling of regional issues that foster Islamic extremism. By Steve Wright, associate analyst at international business risk consultancy Control Risks Group.
Between now and the end of the decade LNG production from West Africa is set to quadruple, from the existing 9mtpy currently onstream via Shell-led Nigeria LNG (NLNG), the sub-Saharan's only project to date, to 39.6mtpy anticipated from a spread of new capacity in Nigeria, Equatorial Guinea and Angola - and these are only the most concrete prospects. Project financiers will definitely play a part in some of this development, but despite the previous NLNG-linked deals for both plant and ships proving regional LNG risks are not insurmountable, structuring new transactions going forward will remain challenging. By Daniel O'Sullivan.
Global Energy Report 2004
The international liquefied natural gas (LNG) industry is in a period of significant change. Companies are facing a series of new commercial challenges, a diverse range of new opportunities, and significant potential growth in LNG trade. At the same time, corporate needs, market and technological factors, environmental issues, and the nature of many LNG opportunities are combing to increase the level of competition in the business. By Rodney Schmidt, Managing Director, PFC Energy.
State-owned Mexican oil and gas behemoth Pemex isn't quite ready to marry the private sector, but it's considering a live-in arrangement with the international petroleum industry to accomplish a major goal: the company must invest or attract US$72bn over the next decade to spur development of dry gas fields, develop new oil reserves and begin work on new offshore oil and gas developments. By Nicole Gelinas.
It's no secret that some project finance banks in the North American market have significantly curtailed their activities after a wrenching couple years where they found that tight structures don't necessarily insulate lenders from sponsor risk. As the market shifts toward new investors, project deals increasingly are being shown to hedge funds that have played a pivotal role in utility restructurings. By Chris Donnelly, director, Standard & Poor's LCD.
Edison Mission Energy took advantage of the popularity of Term B power deals earlier this year and moved in quickly to complete the crucial refinancing of its Midwest assets. The recent upgrade of the assets' offtaker - the once-troubled Southern California Edison - also proved a major selling point for the complex deal. By Alison Healey.
The Guangdong Dapeng LNG import terminal and trunkline project was successfully closed on April 30 2004 with the signing of financing documents and commercial contracts witnessed by China's vice premier, Zeng Pei Yan, at the People's Great Hall of China in Beijing. The conclusion of the financing agreements and major commercial contracts evidenced the achievement of a significant milestone of the project. People in Guangdong Province will soon benefit from the use of cleaner air energy when the project completes in 2006. By Bruce Macfarlane, executive director, structured capital markets, ABN Amro Bank.
Competition for the sale of oil and gas is intensifying in the region and Indonesia, the major oil & gas producer in the region, is faced with new challenges. Not only does it have to market its gas aggressively in the region and across the Pacific Ocean, but it needs to put its own house in order. It will need to finalise soon the liberalisation process of the energy sector, so that the much needed foreign investors will return. Minerva Lau writes.
Malaysian oil and gas monopoly Petronas is a leading exporter of LNG in the North Asian market, particularly in Japan, South Korea and Taiwan. However, to develop new sources and markets, it has been expanding further with LNG investments in the Middle East. By Sharon Klyne.
The recently-closed financing for the 1434MW coal-fired BLCP power plant in Rayong, Thailand, marks another milestone in the return of the project finance markets in Asia and the use of innovative financing techniques to deal with the constraints of the debt markets. By Paul S Elliott of Baker & McKenzie, which acted for the project company.
Egyptian LNG, a natural gas liquefaction facility developed by EGPC and EGAS, the Egyptian state oil and gas companies, BG Group, Petronas and Gaz de France, represents Egypt's largest ever project financing to date and its first ever major project financing in the oil and gas sector. As a result of the project (including its second train which is currently under construction), Egypt is set to become the world's seventh-largest exporter of liquefied natural gas (LNG) by 2006. By Kenneth MacRitchie, Adam Cooper and Tim Pick of Shearman & Sterling LLP, legal advisers to the sponsors.
The UK independent oil & gas sector has seen a flurry of activity over the last year or so, with both established names and start-ups attracting a mix of funding through listings, private equity deals and debt. There is very little real project financing out there, however with the size of the companies involved and borrowing base-type deals very much the norm as far as debt goes, a lot of this activity has a project-type feel. By Daniel O'Sullivan.
The Mozambique-South Africa natural gas pipeline project is an entirely indigenous African initiative, conceived and led in Africa, by Africans. Sponsored by Sasol, the South African based petrochemical company, the transaction also saw the Standard Bank of South Africa lead arrange the commercial bank tranche and the Development Bank of Southern Africa the multilateral/developmental tranche. By Greg Fyfe, head of structured political risk, project finance, Standard Bank.
If there is one picture that symbolises the current boom in the global liquefied natural gas (LNG) market, it is the LNG ship with the camel shaped spherical LNG containers. This is not withstanding the fact there are two types of LNG ships, the camel and a square container ship which is now proving more popular in the marketplace. Nevertheless the camel always comes out to illustrate LNG. And it needs financing, in fact of a lot financing. By Rod Morrison.
Global Infrastructure Report 2004
The UK secondary market private finance initiative (PFI) equity space is set for a little boom in the coming months. Since the first portfolio sale deal was transacted by Barclays and Abbey National/Babcock & Brown in late 2001, the sector has not taken off as expected. But there are now signs its time has come with plenty of sellers and more cash having been raised by the buyers. By Rod Morrison.
The financial close and commencement of construction have both been achieved for the SDWPS (Supply of Desalinated Water by the Private Sector) project, the first public procurement project of its kind in Singapore in which the private sector will build, own and operate (BOO) a drinking water production facility. The facility also marks the first large scale use of reverse osmosis desalination technology in Singapore. This landmark project, brought to success by Singapore-based sponsor Hyflux Ltd, is regarded as a template for future deals of this type in Singapore. By Henry Cort of Hunton & Williams LLP, Singapore, project company and financing counsel.
Deteriorating infrastructure in Latin America and the Caribbean (LAC) is constraining the competitiveness of the region's national economies. Hindered by severe fiscal constraints, governments are seeking to respond with new private infrastructure initiatives at a time when investors and traditional project lenders are taking a cautious approach toward new commitments in LAC. The Private Sector Department of the AAA-rated Inter-American Development Bank (IDB) has entered the ring with a host of guaranty products seeking to tap local institutional markets for infrastructure deals, and there is an increasing effort on the part of the bank to use its guaranty product to generate more local-currency financing options. The IDB is seeking to build on two recent success stories in the Chilean bond market. By Philippe Birebent and John Graham, team leaders for the Costanera Norte toll road project for the Inter-American Development Bank in Washington DC.
Australian infrastructure developers have been enjoying good support from both retail and institutional investors. Starting out as domestic players, the Macquarie stable of infrastructure funds have now emerged as global players. Others have aspirations in the domestic and overseas markets too. By Sharon Klyne.
Winning proponents will soon be announced on a series of school projects in Calgary. The legacy of mixed successes for P3 schools to date in Canada remains the projects' biggest obstacle however. By Alison Healey.
The central government of Mexico laid out a new plan last year to attract nearly US$2bn in investment to an ambitious toll road construction programme modelled on the European private-public partnership (PPP) scheme. While the pilot concession has yet to be tendered, bankers and ratings analysts believe that the willingness of the Mexican government to adopt suggestions from the market and to try new ideas bodes well for the programme. By Nicole Gelinas.
The private finance initiative in Japan continues to enjoy growth and popularity. While projects in the scheme fall mainly under the building and accommodation sector which offer the safe government risk, the latest projects achieving financial close include not only government risk but also market risk. Minerva Lau writes.
The private participation in infrastructure (PPI) scheme of the South Korean government has been successfully implemented since the PPI Act was enacted in 1998. However, its success has led to some problems and new challenges, and the government is now about to introduce some changes to make the scheme more efficient. By Minerva Lau.
Writing about PPPs in France is a daring enterprise these days, when hardly a week passes without a conference or an article on the subject. One of my standard jokes to warm the audience in these conferences is that if we could only have one PPP actually delivered for each conference or round table organised, we would probably be the world leader. By Pierre Coindreau, partner, PricewaterhouseCoopers, Paris.
Mandated lead arrangers ABN AMRO, IntesaBCI and Banca Antonveneta subsidiary Interbanca could close before the summer break roughly E180m of senior debt for the E230m Mestre hospital project, the first such major healthcare deal in Italy to fully emulate the UK PFI model with the private sector taking performance risk on non-clinical services through a long-term operating concession. It should mark the beginning of large-scale Italian hospital schemes as a new business line for project bankers, as similar ventures with similar risks are set to follow it to market. By Daniel O'Sullivan.
The rescue refinancing of the East Lothian grouped schools PPP project reached financial close on 11 March 2004. It is notable because it is the first PFI project in the UK where the building contractor and service provider became insolvent and required to be replaced at an early stage of construction. By Amanda Methven, Dundas & Wilson, legal adviser to the project company.
This article concerns an arbitration decision about a toll road in Venezuela. Despite being subject to Venezuelan law, there are plenty of points in the case this article discusses that are relevant to those involved in privately financed infrastructure projects in the UK and elsewhere. The case is Autopista Concesionada de Venezuela (Aucoven) v Bolivarian Republic of Venezuela (September 2003). By Jeremy Winter, partner and Carole Ditty, senior associate, in the projects group at Baker & McKenzie, London.
Asia Pacific Report 2004
Over the past 20 years, China has experienced a colossal rise in demand for electricity, with growth averaging 8.2% annually over that time. A large part of the demand was required to meet the needs of China's burgeoning economy which, in recent times, has grown at staggering rates. This has made China the world's second largest producer of electricity in the world (after the United States), with the power industry accounting for around 5% of its gross domestic product. According to some projections, China's electricity demand will continue to increase at an average annual rate of 4.3%, reaching 3,596GWh by 2025. By Mitchell Silk , partner (Hong Kong) and Matthias Voss, senior associate (Shanghai) of Allen & Overy.
Prospects in the Indian power sector are looking up due to the passage of the Electricity Bill last June. The legislation is expected to provide much-needed investment for the sector and may be the antidote to India's perpetual power shortage. By Sharon Klyne.
The purchase of two state of the art CCGT plants in Bangladesh in December 2003 marked the transformation of Globeleq from a passive minority investor into an operating power company with significant market presence - and the implementation of the first stage of the company's strategic vision. Formed in 2002, Globeleq inherited from its parent, CDC Group plc (CDC), a portfolio of minority investments in power generation assets in the emerging markets. By Stephen Cake, head of business development for Asia, CDC Globeleq.
The demand for LNG in China is growing rapidly along with the high economic growth experienced in the last few years. In addition, the Chinese government has been encouraging the use of more environment-friendly gas, instead of coal, in new power generation plants. Discussing the latest developments in the LNG industry in China are Anzhong Gu, Yumei Shi and Rongshun Wang of the School of Mechanical Engineering, Shanghai Jiaotong University in China*.
It is said that about 70% of all LNG is consumed in Asia. The demand will continue to grow as it serves a new alternative to oil. Also, the market is seeing the emergence of new buyers as well as new sellers to the region Indeed, the LNG market in Asia is changing. The new LNG buyers include China, India and even the Philippines, while Russia and Australia are the new kids on the block of gas suppliers, competing with Indonesia and Malaysia. By Minerva Lau.
Regular readers of this journal will know that LNG is now grabbing the headlines - the statistics all point to growing demand for gas in Asia, giant new markets in China are openingup and new sources of supply in Indonesia, Russia and Australia are jostling with the traditional players for market space. By Ashley Wright, managing associate at Linklaters Allen & Gledhill, Singapore.
Islamic finance in Malaysia has enjoyed encouraging progress, with market participants showing greater interest in adopting Islamic financing methods to meet their investment and funding requirements. The popularity of Islamic debt project financing has been one of the major contributors to this promising growth. Mohd Izazee Ismail of Rating Agency Malaysia looks at the development and future direction of Islamic finance in Malaysia.
For decades, one of the biggest problems in cross border investments has been the exchange risk. This is particularly true in emerging countries, where many have sunk millions of dollars in hard currencies into various projects only to watch their investment eroded by currency depreciations. By Robert Bestani, director general private sector department, and Ajay Sagar, senior structured finance specialist, Asian Development Bank.
It has always been a role for the Japan Bank for International Cooperation (JBIC) to assist its corporate citizens - either in the export or import of equipments, or investments in overseas opportunities, and the bank has never stopped looking at new ways to help. Minerva Lau reports.
The deal setting the standard for international and domestic cooperation in large scale financings is in Taiwan. Eastern Multimedia Co Ltd (EMC), established in June 1995, is one of the largest cable TV and broadband service providers in Taiwan. EMC, through its 13 majority-owned system operators in Taiwan (the SOs), have a 54% market share in affluent Taipei and a 24% market share in Taiwan as a whole. As of the end of 2003, EMC and the 13 SOs (the EMC Group) served more than one million cable television subscribers. By Nic Johnston, partner, Freshfield Bruckhaus Deringer.
Americas Energy Report 2004
In contrast with the international trade flows in crude oil and petroleum products, the natural gas market remains primarily a regional market, particularly in North America, where some 98% of US consumption in 2003 was supplied from US and Canadian sources. With the jump in US natural gas prices to what looks like a new, higher plateau over the past four years though, and forecasts suggesting LNG could account for 10% of US supplies by 2020, interest in an expanded LNG import capability has been widespread to say the least. By Tim Evans, senior energy analyst, IFR Energy Services*.
The race to bring additional volumes of liquefied natural gas, or LNG, to the US markets has been accelerating rapidly. Volumes of LNG received at the four existing LNG receiving terminals in the continental US jumped significantly in 2003 and there are reports that volumes look likely to continue increasing in 2004. The attention of many companies, both large and small, has turned to the development of additional LNG receiving terminals to serve the US markets. By Stephen D Davis, partner, project finance and development, and Barry R Miller and Charles L Almond, partners, tax, Vinson & Elkins LLP.
It is often said that risks create opportunities, but what about the risks created by opportunities? Much has been written about the tremendous opportunities in the U.S. liquefied natural gas (LNG) market, but less about the associated risks. By Troy Alexander and Hendrik Gordenker, White & Case LLP.
After decades of waiting, a surprise proposal at a much more competitive price seems to have been the catalyst for real movement on the Alaska pipeline. But state and federal leaders are finding it necessary to choose between supporting the pipeline or supporting LNG. By Alison Healey.
The volumetric production payment (VPP) method of raising capital to purchase oil & gas producing assets may have a place in project finance deals, and a number of the larger banks in US project finance have been working over the past few months to fine tune that idea. By Alison Healey.
The tiny Caribbean islands nation of Trinidad & Tobago has ambitious plans. Trinidad's government is putting the nation's vast offshore natural gas reserves to work for the country. Officials hope that natural-gas and energy-related investments can propel the poor nation to developed-country status by 2020. To build the physical infrastructure for public- and private-sector growth in the energy field, the state-controlled National Gas Co of Trinidad & Tobago (NGC) will need hundreds of millions of dollars in project finance funding in the near term. By Nicole Gelinas.
One year after the end of a nationwide workers' strike and two years after a failed coup, Venezuelan president Hugo Chavez remains in office. He continues to beat back opposition leaders' attempts to legally recall him from the presidency via public referendum, and his rhetoric against the US grows daily as opposition-led protests mount. To what extent do Chavez's politics and policies imperil the national oil company PDVSA, and PDVSA's private-sector partners and creditors? By Nicole Gelinas.
A few years ago, the prospects looked favourable for major reform of the electric power transmission sector in the United States. Merchant generation had run through a boom and bust cycle, as had the fibre-optic cable and internet businesses. Wall Street was looking for the next big thing, and power transmission was poised to assume the mantle. By James C Liles, regulatory advisor, Milbank Tweed Hadley & McCloy LLP, Washington DC.
In February 2004, The AES Corp, majority owner of Brazilian hydroelectric generator AES Tietê SA, completed the restructuring of the US$300m Tietê Certificates Grantor Trust transaction. The certificates1 were issued in 2001 to refinance debt incurred from Brazil's development bank, Banco Nacional de Desenvolvimento Econômico e Social (BNDES) by an AES subsidiary to acquire Tietê in a privatisation auction in 1999. Lessons from the Tiete deal can be applied to future emerging-markets projects. By Robert Sheppard, emerging-markets project finance consultant and attorney, www.infradev.org.
The attempt to create a global greenhouse gas emissions reduction program through implementation of the Kyoto Protocol appears to be in jeopardy given the US' repudiation of and Russia's recent waning support for the regime. However, the Protocol has inspired national market-based greenhouse gas emissions reduction programs in Europe and North America that will constrain greenhouse gas emissions from some energy producers. By Mohammed Alam, president and founder of Alyra Renewable Energy Finance Advisors and Andrew D Otis, senior associate at Curtis Mallet-Prevost Colt & Mosle.