2002 was the year when the power markets took a real bath. In the US the Enron hurricane was so big it swept up many other energy companies. In the rest of the world those same US developers pulled back sharply leaving behind few new project opportunities. The name of the game towards the end of the year was to avoid provisions. Yet other sectors still thrive - oil & gas and infrastructure. By Rod Morrison.
The liquified natural gas (LNG) industry has been steadily growing for nearly 30 years, but recent trends hint of a major expansion in the LNG trade. The Atlantic Basin appears to be the next major growth market for LNG, based upon project announcements of new liquefaction projects in Africa, Latin America and the Middle East and terminals in North America and Western Europe. In the latter two, growing economies, environmental concerns for clean fuels and declining domestic sources of natural gas also seem to suggest a long-term, sustainable growth in LNG. By Peter Rigby, Standard & Poor's.
The Mediterranean gas industry is entering a new growth phase. Spurred by growing European demand and the opportunities presented by market liberalisation, the traditional Mediterranean gas suppliers, Algeria and Libya, are increasing their supply capacity. Egypt will soon also enter the frame as an LNG supplier, and Turkey is pressing forward with plans which would establish it as a transit country for a new gas highway from Iran and other gas-rich countries to the east. By David Drury, Senior Associate, Gas Strategies.
With the government now prioritising gas sector development, the expansion of China's natural gas market necessitates an unprecedented level of capital investment in a number of major infrastructure projects - estimates of full capital expenditure for the sector over the next twenty years range between US$118-150bn. With investment opportunities in both pipeline and LNG projects now emerging, the Chinese gas market is firmly in the sights of virtually all major international energy companies. By Gavin Thompson, senior consultant, Wood Mackenzie.
For investment bankers and lenders, Russia represents one of the most significant potential markets for new lending activity over the next decade. However, this was also true ten years ago. But the history of Russian oil and gas finance in the intervening decade was not entirely happy. By Alexander Janes, Peter O'Driscoll and John Sheedy of Coudert Brothers LLP.
The past year has seen the Gulf of Guinea region increasingly in the foreground as a strategic substitute for the volatile Middle East when it comes to supplying the energy needs of the West, and the US in particular - but to what extent will this hype be reflected in project finance deal flow? By Daniel O'Sullivan.
The profile of the LNG buyer has significantly changed in recent years. For several reasons, prospective buyers are less likely than their predecessors to have the independent creditworthiness to support a long-term take-or-pay contract. With these risks come opportunities for sellers to expand their LNG markets. A re-examination of the structure and terms of LNG Sales and Purchase Agreements (SPAs) offers sellers the ability to pursue these opportunities while mitigating their risks. By Steven Miles and Suhail Partawi of the Washington DC office of Baker Botts LLP.
The players in US power project finance have changed dramatically over the past year. Many banks got rid of their project finance teams entirely. Others tried to help their best power developer clients survive while at the same time looking for something new within the power sector to be their new focus. A look back at the year shows what deals got done, the status of the developers, the outlook for new deals, and the regulatory changes that must be implemented to ensure a brighter future. By Nicole Gelinas and Alison Healey.
It was another unexciting year for the power sector as greenfield projects hardly knocked at the doors of PF bankers, except maybe for Vietnam which has somewhat become the flavour of the month. There were disappointments or heaves of relief as the region concluded the year was uneventful due to the postponement of either construction of new power plants or implementation of privatisation programmes that were anticipated earlier this year, to bring a much needed zest to the market. Minerva Lau reports.
Over the last decade project financiers have been heavily involved in the UK power sector, many of them now left nursing considerable wounds. Various assumptions that underpinned the apparent economics of many projects simply were found not to hold. Given the difficulties certain power companies such as British Energy are now facing, the future of the competitive market is being called into question. Will the current market arrangements provide a suitable basis for the long-term power market? And if not, what are the alternatives for yet another structure? These questions are explored with the aim of helping project financiers to be aware of possible changes to the market and the implications for taking financial positions on power projects in the future. By Graham Weale, Director of European Energy Services, Global Insight*.
The many misconceptions about PPPs (Public-Private Partnerships) that give rise to political objections or result in a lack of public confidence can lead to costly delays.Some are encouraged by the advocates of PPPs. By Tim Wilson, Former Head, Private Finance Policy Team, HM Treasury.
From the humble beginnings in 1986 of a simple bridge project, the Dartford River Crossing, a privately financed infrastructure industry which has in excess of two hundred and fifty operational projects and a further two hundred and fifty in construction has developed. The capital value of these projects exceeds £20bn and the expectation for the next five years is that this number may double. By Chris Elliott, managing director, Barclays Private Equity.
It has been some 18 months since the Victorian government spearheaded the PPP programme in Australia with its Partnership Victoria policy. Sponsors and banks are still getting their head around the risks of developing social infrastructure. But not ABN Amro Bank who continues its sweep of all the privately financed PPP schemes to date writes Sharon Klyne.
Bye bye 2002, now full stream ahead for 2003. A bright new dawn, some hope. The headlines next year? ‘Bradford & Bingley to exit project finance' (not that they were ever in it), ‘Massive Guildford LNG regas terminal gets serious', ‘Shock as RBS wins advisory mandate in Qatar', ‘Auntie Beryl sues Ken Lay' (well why not, everyone else has).