Steve Greenwald was introduced to the world of project finance in 1979. With a desire to move from the world of computers into the world of finance, he came to First Boston after a lead from a headhunter to do financial modelling for the project finance group. By Alison Healey.
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With an uncommon background but a genuine love for the work, Steve Greenwald became one of the most respected, most influential and most knowledgeable figures in the Americas project finance world as it is known today.
At First Boston, Greenwald was interviewed for the financial modelling position by Chris Beale, founder and managing partner at Alinda Capital Partners, who hired him immediately. Initially, his duties were limited to doing financial models for projects on computer time-sharing terminals, but he got attention for his modelling prowess and the speed at which he could come back with financial models for projects as well as changes to those models.
Learning the business as he crafted the models, Greenwald gradually took on more responsibility as an unofficial member of the deal team. His first project financing was a deal to back the Madison Paper project in Massachusetts. Greenwald moved on to producing models for a railroad in the Western US and mining and coal-fired power projects in Australia.
Greenwald’s educational background was unusual for the world of finance. Armed with an undergraduate degree in computer science, he went to school at night to get his MBA from Baruch College. Despite lacking the credentials of an Ivy League MBA, Greenwald had a skill set not typical at the time and one that was highly valued. At the time, his modelling skills were considered exceptional though they would now be considered standard due to technological advances.
Greenwald was eventually made an associate. He was tasked with writing his first descriptive info memo after working on advanced models had given him the opportunity to learn project finance from the bottom up, from the numbers. His memory of specific deals is extensive and spans the decades, giving a view of the evolution of the market, a priceless resource for those working around him.
His first sizeable deal in which he led the charge as a senior associate was for the Newlands-Collinsville-Abbot Point project in Queensland, Australia. The deal brought in 26 banks to represent the largest Australian coal financing at the time. Also around that time came the Argyle Diamond Mine in Australia, developed by CRA Ltd, which later became Rio Tinto. In 1983, a decision was taken to establish a mine and the Argyle Diamond Mine was commissioned in December 1985, backed by a project loan.
Antaibo, China was also the site of a memorable deal – the first project financing in the country. Greenwald advised Occidental Petroleum. The work required many trips back and forth to China, and in 1987 the coal mine opened as the largest joint US-Chinese project at the time. Occidental invested US$200m in the US$650m project to develop the biggest and most modern open-pit coal mine in China.
Other US companies, cautious about making such large investments in China, watched the venture closely. The US$475m project financing was put together in 1986, led by Bank of America, Bank of China, Credit Lyonnais, Industrial Bank of Japan, and Royal Bank of Canada at Libor plus 50bp pre-completion and Libor plus 100bp to 137.5bp post-completion, non-recourse.
Things became very busy with the IPP boom in the late 1980s after the Public Utilities Regulatory Policy Act (PURPA) legislation in 1978. The intent of PURPA was to encourage conservation and promote the development of renewable sources of electricity. It was to do this by establishing a special favoured class of power generators, known as qualifying facilities, and it required utilities to buy all electricity that these qualifying facilities wished to sell.
Emerging markets transactions meant extensive travelling in the 1990s. Notable deals that stand out for Greenwald include Venezuela’s US$2.43bn Petrozuata deal. The pioneering transaction, sponsored by ConocoPhillips and PDVSA, was the first of Venezuela’s large-scale crude projects to be project-financed. Petrozuata paved the way for similar project financings in recent years for the Sincor, Cerro Negro and Hamaca crude upgrade deals. The four projects have contributed significantly to technical learning about heavy crude methodology.
Ras Laffan was pivotal. CSFB and Goldman Sachs were involved in the original bond financing for the joint venture between Qatar Petroleum and ExxonMobil in 1996. It was financed through a US$1.2bn bond and a US$1.25bn bank loan split between commercial and export credit agency-backed loans. The bank loans were taken out and replaced by a medium-term six to seven-year bond issue with very tight pricing for the client.
Domestically, standout deals included Selkirk and Kern River. Selkirk Cogen Funding was a US$394m private placement of Rule 144a qualified first mortgage bonds co-managed by CSFB, Chase Securities and Morgan Stanley for a project company sponsored by J Makowski Co and Cogen Technologies Inc. Proceeds refinanced US$384m of bank debt used to fund a 265MW phase of the Selkirk cogeneration project in New York.
Years later Greenwald’s career was affected by the Enron collapse and the market’s struggle to recover. MidAmerican’s Kern River transaction stood out as a positive development in US project finance for 2002 not only because it brought the market back to life after Enron but also because the US$885m deal was a huge blowout, with no need for retail syndication. Lead arrangers Credit Suisse First Boston, Union Bank of California, and Commerzbank had unprecedented success with a transaction that financed the expansion of MidAmerican’s Kern River pipeline.
Greenwald was active in the growth of the institutional market in project finance with CSFB’s FPL Energy American Wind deal, a US$380m transaction that financed a total of 685 wind turbines spread out over the Midwest, Northern California, west Texas and New Mexico in four independent wind regions. In December 2003, holding company subsidiary FPL Energy Wind Funding issued an additional US$125m in senior secured bonds due June 27 2017. Over 63% of the investors were either new to project finance or infrequent project buyers.
After working his way up to managing director and head of the project finance group at CSFB and serving there for several years, in 2010 Greenwald transitioned to a senior adviser role. He is still actively involved in both the leveraged finance and energy and project finance teams, and last year played a key role in Cheniere’s landmark Sabine Pass liquefaction financing.
The US$3.6bn pure uncovered bank debt financing was the largest US project financing to be executed on the basis of a fixed-price turnkey contract only. It was also the only LNG liquefaction financing in the world to be executed without support from export credit agencies, multi-laterals or a completion guarantee. It marked one of the largest investments in the LNG sector by a private equity firm.
The project changed the international dynamics of LNG and put the US on the map as an exporter of LNG. Sabine Pass will be the first bi-directional LNG facility in the world capable of both gasifying imported LNG and liquefying domestic natural gas supplies for export. Following the success of the Sabine Pass deal, Credit Suisse is in negotiations with a handful of other LNG project sponsors about providing financing.
Today, Greenwald works closely with Credit Suisse’s Jean-Pierre Boudrias, a director in leveraged finance covering power, renewables, and project finance, and Elena Savostianova, a director in energy and project finance. Savostianova remembers hearing Greenwald lecture at Yale when she was in business school. Her decision to join his group at Credit Suisse was based largely on his enthusiasm for the business. Greenwald’s encyclopedic knowledge of project finance has impressed both Savostianova and Boudrias, who feel they have benefited greatly from Greenwald’s mentoring, historical knowledge of projects, and true passion for delving into the complexities of projects and solving problems.
It is the challenge of the diversity of project-specific issues that has kept Greenwald satisfied in project finance and within the group at Credit Suisse, where he has remained throughout his career. He enjoys helping clients solve problems, and he often returns to his background in statistics to look at the probability of certain scenarios in project development and financing.
Looking forward, Greenwald expects an eventual move to more capital markets transactions, though he suspects that banks will long continue to find a way to get a great deal of the business in project finance.