Islamic Finance Report 2009
Welcome to the first Reuters Publishing Islamic special report – produced by journalists from IFR, PFI, Acquisition Monthly and IFR Securitisation Report. This is a truly global effort to capture the up-to-date picture of one of the world's most important capital markets, in detail.
Sukuk issuance in 2009 has been dominated by the ijara format. David French looks into why this is the case and whether this pattern will continue into 2010.
Islamic and project finance would seem to be ideal bedfellows but for a variety of reasons the match has never been perfect. Now, however, with expectations much lower, some genuine progress can be made. By Rod Morrison.
The sukuk market has been gaining headlines, but Sharia-compliant products for equity investors have been around for years. Matthew Attwood asks if they really can be a substitute for investors’ own due diligence.
After much talk about the resilience of the GCC market in these tough economic times, the recession has finally bitten. The increasing number of corporate defaults, real estate devaluation, credit contraction, et cetera has all contributed to market woes. By Furquan Kidwai.
M&A deals in the Islamic World are down almost 50%. With conventional credit still difficult to obtain in the region, there is an expectation that Sharia-compliant acquisition financing will substitute for the shortfall. Adam Durchslag reports
When Thailand and South Korea were planning to test investor appetite for their respective debut offshore Islamic bonds, the first country they included at the top of their destinations was Malaysia. By Boey Kit Yin.
Indonesia has been taking crucial steps towards establishing itself in the Islamic finance space and while it may have a long way to go before it can match neighbouring Malaysia in this area, this progress bodes well for Islamic finance in the region as a whole. By Nachum Kaplan.
Before Islamic finance pops the Saudi champagne on surviving the sub-prime induced credit crisis, the industry, much like conventional Western finance, needs to take a step back and reflect about the pathway forward. By Rushdi Siddiqui, Global Head of Islamic Finance, Reuters.
The global race to capture shares of the US$1trn Islamic market has intensified, with Paris, Singapore and Seoul now catching up with London and Kuala Lumpur. Bakyt Azimkanov continues.
Global Energy Report 2009
The credit crunch has had a significant and negative impact on the global push for more efficient and cleaner forms of energy. Now there are definite signs the crunch is easing, PFI is publishing its annual Global Energy survey to review a market in upswing mode.The survey will case study and profile important landmark deals such as the Rabigh IWPP in Saudi Arabia and Dolphin in Abu Dhabi - which took advantage of the new climate during the summer. These deals showed longer term debt is now available for the right projects. The survey will show how these and other schemes attracted finance over the summer and what lessons can be learned for projects in the pipeline.
Institutional investors are showing renewed interest in project finance deals. Whether through the loan guarantee programme, 144a offerings or other private placements, project sponsors are investigating alternatives to bank financing. By Deirdre Fretz.
The process of selling nearly half of Turkey's generation capacity is due to start. This article looks at the power market's structure. By Nadia Cansun and Volkan Önkibar of Bezen & Partners.
The challenges of structuring and successfully closing mega deals in troubled times. By Rajit Nanda, CFO, Rohit Gokhale, director, Sid Tiku, manager, ACWA Power International.
The Sorgenia power deal is an example of a large project financing that was strongly impacted by the financial crisis, yet successfully completed. By Azadeh Sharafshahi.
On Tuesday September 8 2009, the Indonesian Parliament approved the Electricity Bill. By Brian Scott, partner, on full-time secondment from Herbert Smith LLP to Hiswara Bunjamin & Tandjung.
The New South Wales government called for expressions of interest late last month for its retail electricity assets worth an estimated A$8bn. By John Arbouw.
Balkan states are having mixed fortunes in bringing new power projects to and through the bank market. By Mark Kolmar.
European Report 2009
The project finance market in Europe has returned to life after a slow start to 2009, with renewables and PPP deals leading the way. Activity in the wind and solar sectors has picked up across Western Europe and moved into Eastern Europe too, while there has been a steady increase in the number of road and waste deals signed across the region.
The public-private partnership (PPP) market should have been more at risk from the credit crunch than many others, given its reliance on long-term debt. In fact, it has remained surprisingly resilient over the past 12 months but it now faces significant challenges. By Rod Morrison.
The Brabo 1 tram project in Flanders has reached financial close after a protracted procurement process. The scheme has four levels of guarantee. By Azadeh Sharafshahi.
By Michael Winkler, transaction director at Deutsche Bank project and capital advisory; Federico Forni, vice president at Deutsche Bank project and capital advisory; and Jens Genkel, senior investment director at Meridiam Infrastructure Fund.
The R1 road financing in Slovakia was a true pathfinder for the country and at least two more deals will follow its template. By Richard Abadie and Andrew McClune, PricewaterhouseCoopers.
Greece’s €5.7bn pipeline of PPP projects boasted its first financial close earlier this year. By Mark Kolmar.
On the June 4 2009, the Cumbria Waste Public Private Partnership (PPP) project reached financial close. By Travis Maurer and Theodore Rohou, infrastructure and PPP team, Sumitomo Mitsui Banking Corporation Europe Ltd.
Three UK roads deals have reached financial close in 2009, Birmingham road maintenance has edged forward and at least four new deals are coming to market. Is the sector revving up or spluttering on a near empty tank? Mark Hutchinson, associate director, KPMG Corporate Finance.
Landsbanki hf provided senior debt to the Aberdeen 3Rs schools project. After September 15 2008, this presented a novel predicament. By Keith Patterson, partner, projects team, Brodies LLP.
Asia Pacific and Australia Report 2009
Asia has seen a big swing in the amount of PF activities during the last 12 months. Developers enjoyed low funding costs in early 2008, and then costs of constructions materials surged such that some projects were taking their time. The market situation however got worse as the financial crisis hit the Asian firms by the third quarter of last year, and then everything seems to have gone underground. Well, maybe not really, for Asia managed to successfully record its biggest volume of funded projects in 2008.
The power sector provides one of the most important inputs for the development of a country, and the availability of reliable and inexpensive power, such as an ultra mega power plant, is critical for its sustainable economic development. By Anurag Pandey, deputy manager, SBI Capital Markets in Mumbai.
As one among the emerging economies, the Philippine archipelago is geographically positioned at the centre of Asian commerce and transport. This has conveniently secured the country’s significant role in international affairs, and as a strategic gateway for global business. By First Metro Investment Corp and Global Business Power Corp.
The Manila North Tollways Corp (MNTC) has recently embarked on its first ever expansion project by building the first segment of NLEX Phase 2 - Segment 8.1. By Patricia Tan Openshaw, partner, Paul Hastings Janofsky & Walker and Maria Theresa O Wells, vice president (treasury and comptrollership), Manila North Tollways Corporation.
Indonesia officially opened its longest bridge earlier this summer, one of the few major infrastructure projects to be completed in Southeast Asia's biggest economy since the crisis of the late 1990s. By James Harris and Alex Wong, Lovells Lee & Lee, Singapore, and Irawati Hermawan, Hermawan Prasetyo & Juniarto, Jakarta.
As home to one of the largest pools of coal bed methane (CBM) resources in the world and with growing interest in the CBM industry from the major oil and gas players, it is no surprise that several Asian countries are now actively encouraging the development of their CBM resources. By Anna Howell, David Dawborn and Richard Nelson, partners, Herbert Smith.
The supported debt model being used to build seven new schools in Queensland was in part a response to the financial crisis and the scaling back of project funding from traditional sources. Whether the state will use SDM in other infrastructure projects or other states follow suit, is far from clear. By John Arbouw.
When Plenary Research achieved financial close in May 2009 on the Biosciences Research Centre PPP Project in Melbourne, Australia, it was the conclusion of a procurement process that spanned the worst of the financial crisis. By Paul Crowe, executive director, origination, Plenary Group.
The Australian government’s decision to build and operate a A$43bn national broadband network through a special purpose vehicle that will require private sector financing will test both the government’s and the banking sector’s ability to fund such a project. By John Arbouw.
Global Infrastructure Report 2009
Far reaching changes have occurred to the Global Infrastructure market over the last 12 months, and the scene is now barely recognisable from that last summer before the credit crunch really hit. What has emerged, however, is a new kind of market in which all the players involved now have a bigger shared stake in the success of the projects.
The UK M25 design, build, finance and operate (DBFO) project reached financial close on May 20. By Paul Davies, partner, and John Carr, director, PricewaterhouseCoopers LLP.
The deal team members, Gurjit Orjela, Tola Odukomaiya and David Shepherdson, discuss Bank of Ireland’s role in making the Greater Manchester waste deal happen and some of the issues faced.
The last of the four A-Model pilots has reached financial close in difficult circumstances. By Dennis Ishay, project and capital advisory, Deutsche Bank and Massimo Bruzzo, structured finance department, Vinci Concessions SAS.
The scarcity of long-term financing is forcing some procuring authorities around the world to consider including front-end payments in infrastructure contracts during the construction stage, removing some of the challenges but also benefits of project finance. By Greg Roumeliotis.
The closing of the financing for the I-595 corridor roadway improvements project in Broward County, Florida, represented an important milestone in the development of the public-private partnership model of infrastructure investment in the United States. By George Miller, Simpson Thacher & Bartlett LLP.
The lack of bank lending capacity and the high-profile failure of three public-private partnership deals have led proponents of P3s in the US to focus on smaller projects instead of billion-dollar transactions. By Deirdre Fretz.
The water sector is attracting increasing interest in public-private partnerships on the part of both municipal owners and private investors. By Deirdre Fretz.
Banobras and BNDES, both state-run institutions, are doing something rare these days in Latin America, making project finance loans for infrastructure. By Alan Gersten.
Asia-Pacific countries have pledged more than US$750bn in various stimulus packages with infrastructure projects on top of the agenda. By John Arbouw.
Domestic demand in Asia will be the engine of growth that will lead it out of the current economic slump. To support this, governments have announced a number of stimulus packages, including a significant portion allocated to infrastructure development. By Minerva Lau.
In the two years since our June 2007 article "The Rise of Infra Funds", a lot has been published about the burgeoning infrastructure fund industry. By Ryan J Orr, executive director, and Deval Shah, research assistant, collaboratory for research on global projects, Stanford University1.
The UK M25 design, build, finance and operate (DBFO) project reached financial close on May 20. By Paul Davies, partner, and John Carr, director, PricewaterhouseCoopers LLP.
The hugely successful IFR/PFI Middle East annual report will be in its fourth year in 2009. The report will cover the full range of capital market activities in the Gulf - loans, project finance, infrastructure, private equity, M&A and IPOs. Deal activity slowed down toward the end of last year but into 2009 there are signs of renewed activity.
The financing of Abu Dhabi’s ambitious Formula 1 racing circuit will bring significant benefits to the Emirate’s rapidly growing economy. By Jody Waugh, a senior associate in the banking and finance team at law firm Al Tamimi & Company.
The Abu Dhabi fund’s recent acquisition spree is helping it become a major global player, writes David French.
UAE banks have made varied efforts to strengthen their balance sheets to protect against declines in loan recovery rates and asset prices. By Mark Kolmar.
Dubai’s attempts to refinance a number of debt obligations in a depressed market were always going to be a difficult battle in 2009, write David French and Solomon Teague.
The sukuk market has been hit hard by the credit crisis but the longer-term picture is expected to remain positive. William Thornhill reports.
A significant amount has been written and said about the sukuk, or Islamic bonds, market both globally and particularly in relation to sukuk originating from the Gulf Cooperation Council Countries (GCC). By Rizwan Kanji, senior debt capital markets lawyer, and Wiz Khayat, an associate, Norton Rose (Middle East) LLP Dubai.
April alone saw two sovereigns and a corporate reopening the market for the Gulf borrowers in style. Their success clearly paves the way for more issuance from the region while banks continue competing to capture market share. Bakyt Azimkanovwrites.
At the start of the year, the boom that had turned the Middle East into one of the world's hottest loan markets looked like it was set to end in a spectacular bust. However, government support for some the region's most indebted borrowers has helped to steady sentiment, and there is hope that the market can now recover some of its previous poise. By David Cox.
There has only been one project finance deal transacted this year in the Gulf and that was a corporately backed bridge loan. Yet actual activity in the market has been far from muted and some has set the groundwork for a recovery. By Rod Morrison.
By Michael Bevan, director and head of equity capital markets, MENA, HSBC Bank Middle East; Neil Nicholson, partner and head of corporate finance, Denton Wilde Sapte, Dubai; and Romi Nayef, associate, Denton Wilde Sapte, Doha.
At the start of 2009 expectations were high that Saudi Arabia would sustain the momentum of last year in terms of new equity issuance from the Gulf region. By Chris Vellacott.
Multilaterals Report 2009
Multilaterals will become increasingly important in the project finance world in the coming years. As the credit crunch bites and commercial bank liquidity become more constrained, the multilaterals will need to step up to the plate to allow deals to get done.
Multilateral development banks are in demand once again from the project finance community, given the credit crunch. But while the MDBs are gearing up for more business, they are not a panacea for market ills. By Rod Morrison.
When project financings for developing countries declined by 53% from 1997 through to 1999 and, following a recovery in 2000, declined again by 39% from 2000 though to 2002, it was hoped that multilateral development banks (MDBs) would step in to fill the gap left by the exit of commercial banks. By Bob Sheppard, co-chair, Infradev.
Inside a midtown Manhattan high rise office building, a project finance banker discussed the extreme lack of capital, lack of syndications and overall lack of confidence within the financing market. While most of the usual suspects had no money, one source reigned over all: “The IFC is king,” he said. By Alan Gersten.
The Asian Development Bank (ADB) is a child of post-WW2 efforts to rehabilitate and reconstruct a primarily agricultural Asia-Pacific region. By John Arbouw.
China Export Import Bank has been in the news lately, but Sinosure, the insurance provider, has been less active. Minerva Lau writes.
With the European market comprising development banks and export credit agencies from several counties, there is an abundance of initiatives organised by international development finance institutions (IDFIs) to help projects get off the ground in the credit crisis. By Greg Roumeliotis.
The Rabai IPP in Kenya won PFI's African Power Deal of the Year 2008 award for getting a rare project done in a country that sees little project finance activity. Three months later, the same group of West European DFIs reached financial close on the Olkaria III IPP in the same country. By Mark Kolmar.
India Report 2009
The world has changed so drastically in just a few months. At this time last year, India was enjoying one of its highest growth rates. But that was not to last as it now faces a slowdown. Nonetheless, the country is pressing ahead with its infrastructure plans. Minerva Lau writes.
India is well on course to commercialise its electricity sector. By Abhay Rangnekar, managing director and head of project finance (India) and Sameer Usgaonkar, director of project finance (India), Standard Chartered Bank.
Diversified conglomerate Adani Group has secured US$928m of project finance for its 1,320MW Mundra Phase III project. Vijesh Thota, manager, SBI Capital Markets, describes how this significant deal was transacted.
Reliance Power was not even exactly existing two years ago, but since its listing on the Indian domestic stock exchanges in February 2008, it has become the largest family-owned power house in the country. Minerva Lau writes.
The Indian power market has a history of about 128 years. It has come a long way from one small hydro power plant in Darjeeling in 1880 to the production and distribution of more than 660bn units in 2007/08 and to the establishment of power exchanges in 2008. By Rupa Devi Singh, managing director and CEO, Power Exchange India.
India has one of the largest road networks in the world, aggregating to 3.34m kilometres, consisting of national highways, expressways, state highways, major district roads, other district roads and village roads. By Ankit Patni and Gowri Vaidyanathan of IDFC SSKI.
For a country of India's size, an efficient road network is necessary both for national integration as well as for socio-economic development. By Abhishek Tripathi, Axis Bank.
Mumbai One is the first metro rail project to be implemented under the public-private partnership (PPP) scheme, as a part of the master plan drawn by MMRDA envisaging an MRTS. By Yashpal Gupta, deputy general manager, structuring, syndication and advisory, at IDBI Bank.
The PPP experience with five private airports (two brownfield and three greenfield) under operation, has been encouraging so far. By Arvind Mahajan, Manish Agarwal, Manish Sharma and R Lakshminarainan of KPMG.
The India telecom tower industry is headed for further growth and increased competition despite continuing problems in securing financing on both a debt and equity level. By John Arbouw.
India’s all round economic expansion during the last seven to eight years points towards the fact that the country is on a growth trajectory and becoming a transformational economy. By Manash Mitra, head & CIO, Infrastructure PE Fund of UTI.
Clean Energy & Carbon Report 2009
The renewable energy market is facing a unique set of challenges. The need for clean energy grows as the climate change clock keeps ticking - but the availability of finance is obviously constrained. Unlike other markets which can cut back their capital expenditures in tougher times, the renewable energy market needs to keep investing to limit climate change.
After lengthy discussions and many drafts by both the Senate and the House of Representatives, the US Congress finally agreed on a US$787bn stimulus package that was signed by president Obama on February 17 – the American Recovery and Reinvestment Act of 2009 (Recovery Act). By Greg Lawrence, Stefan Schmitz and Phil Tingle, McDermott Will & Emery.
Both public and private sector initiatives are pushing for the expansion of the national transmission grid to link remote renewable power generation to urban centres, raising hopes that the US can tap wind for 20% of its energy needs by 2024. By Deirdre Fretz.
Mark Kolmar and Greg Roumeliotis survey the all-important tariff supports and subsidies for the renewable industry in Europe, country by country.
In the Dutch Antilles, the trade winds blow through the ABCs – Aruba, Bonaire and Curacao. By Alan Gersten.
At the end of October 2008, Fred Olsen Renewables successfully closed a £304m portfolio financing. By Yusuf Macun, director project finance, HSBC, Nick Emery, managing director, Fred Olsen Renewables and Chris Andrew, partner, Allen & Overy.
John Deacon, partner in the Energy & Project Finance practice of Hunton & Williams in London, reviews the exciting prospects for the biomass and energy crop power market.
Geothermal energy is justifiably being hailed as the potential successor to coal-fired base-load power stations and a competitor to gas. But before hot rocks can occupy the power space, governments will need to provide greenhouse incentives, lenders will need to have a completely new view of project risk, and investors, as always, will need to be patient. By John Arbouw.