2001 has been a game of two halves. The first part a gentle decline in the world economy, some nervousness, a general feeling of financial unease after the collapse of the stock market in 2000 and events such as the California power crisis. After the summer holidays, the situation turned ugly with September 11thovershadowing everything. But in addition there were other events such as Enron and Railtrack. We all look foreword to 2002. By Rod Morrison.
The future of the monoline bond insurance industry looks very interesting indeed, based on the widely held view that insured bonds (also called credit enhanced or wrapped bonds) will continue to form an increasing slice of the project finance pie. This is principally for three fundamental reasons. First, the expanding European infrastructure market is characterised by some notably huge transactions of several billion euro. For such transactions, one source of finance is simply not enough and a reliance on the capital markets is inevitable. Given the increasing investor demand for long-dated triple-A project bonds, credit enhancement is virtually mandatory. Second, banks' increased focus on equity returns has increased their interest in refinancing alternatives, secondary liquidity and risk transfer mechanisms - all of which can benefit from credit enhancement. Finally, there is the pure economics. If the capital markets can consistently show that the credit enhanced ...
As with most emerging market economies, Latin American countries are typically affected by economic turmoil that takes place outside of its respective boundaries. Within the last five years, we can point to economic downturns in Asia, Russia and the United States, for example, and measure their toll on the economic development of individual Latin economies. By Carl Adams, managing director, global structured finance group, WestLB, New York.
Over banked, an under-supply of new business, increased competition from the capital markets and insurance funds. Banks operating in the London project finance market are currently facing a number of threats from both within and without. Adrian Olsen, Head of Global Project Finance at Bank of Ireland shares his thoughts on some of the challenges and opportunities for a European bank seeking to make a living in the current London project finance market and the increasingly difficult economic climate.
Historically the electricity and piped gas industries in Singapore have been vertically integrated and Government-owned, with the Public Utilities Board (PUB), which was formed in May 1963, undertaking the functions of supplying water, electricity and piped gas to the whole population of Singapore. By Geraint Hughes, partner, and Caroline Power, an associate, Clifford Chance, Singapore.
As the water tables drop and the rivers run low, Brazilian policymakers are beginning to see the error of their ways. Brazil, which uses hydroelectric plants to generate most of its electricity, is suffering a severe drought and, consequently, is mired in an energy crisis. Odd as it may sound, though, this crisis may have been just what Brazil's energy markets needed; energy shortages and the threat of rolling blackouts are functioning as the catalyst for promising regulatory change. In response to Brazil's energy crisis, Brazilian authorities are frantically attempting to remove regulatory deterrents for electric generation, particularly thermoelectric generation. By Christopher P B Erckert, partner, and Alexander M Evans, associate, Vinson & Elkins, Washington DC.
In 1992, the Mexico's federal government amended the Electricity Public Service Law (Ley del Servicio Publico de Energía Eléctrica) to give private companies a role in independent generation. The amendments allowed private companies to build and operate independent power plants (IPPs), but limited their sale of electricity to the Comisión Federal de Electricidad (CFE) or to particular private companies under long-term contracts. After nine years, where are we today? The programme has proven effective in meeting growing demand with limited resources. But the CFE's off-balance sheet obligations have grown, and continue to grow. By Pablo Garcia Aguilar, senior associate, project finance group, Santander Central Hispano.
The international LNG trade is set to continue its pattern of doubling in size every 10 years, driven by continuing cost reduction and new market developments. Project financing has made an important contribution to this growth. The LNG business is rapidly becoming more complex and more diverse, and some of its classical structures are being transformed in response to a more competitive environment. As these structures evolve, project financing faces challenges in assessing the increased risks in the LNG chain. By David Nissen and Theo Oerlemans, Poten & Partners, Inc*. The LNG industry Since its inception in 1964 the LNG business has been highly successful, with an admirable technical, safety and commercial track record. It has been growing rapidly, doubling in size roughly every 10 years. Originally started around the Atlantic Basin, the emphasis shifted ...
Just about everyone is jumping on the bandwagon of LNG project development in an attempt to cash in on the predictability of revenue streams and high investor returns. Looking at the map, it is difficult to find a region of the world that is not gearing up to be a buyer or a seller. David Gardner and Williams Stevens of Sumitomo Mitsui Banking Corp write about the changes happening to LNG projects in Asia.
When Shell commissioned its Bintulu Gas to Liquids (GTL) plant in 1993, the event was largely ignored by large swathes of the energy industry. Most energy specialists were aware that in Germany and South Africa, in circumstances in which energy supply security rather than economics was the driver, coal and (in the case of South Africa's Mossgas) natural gas had been converted to hydrocarbon liquids, but did not recognize those or Shell's Bintulu project as heralding the start of a major new industry. By Michael J Corke, Purvin & Gertz Inc, London.
States such as Victoria, New South Wales and Queensland have clearly-defined public-private partnerships (PPP) policies, but the development of most of these projects is in the early stages. What is apparent at this juncture is the appetite from investors and financiers for such projects, though the financing will not be without issues. By Sharon Klyne.
As the year began, Chris Beale, Global Head of Citigroup Project and Structured Trade Finance, reminded us that 2001 was the year of the Golden Snake and quoted an ancient Chinese prophesy: ‘Destiny will end in the year of the Golden Snake’. In January 2001 it certainly looked like destiny was ending for those who were involved in raising capital to finance telecommunications projects. By Saadia Khairi, md and Asia Pacific head, Peter YF Ho and Christian Nordstrom, Citigroup.
Four broad, inter-related trends have characterised the world mining industry in the year 2001: first, consolidation, second, prolonged commodity price depression, third, a decline in exploration activity and, fourth, a slowdown in the privatisation of mining assets. These trends are all indicative of a maturing, or fully mature, industry. Unusually, however, all of these trends have occurred simultaneously with the first world wide recession and slowdown in almost two decades. By Thomas C Wexler, partner, Ashurst Morris Crisp, London.