Changing with the times – Gauri Kasbekar-Shah

PFI 500
10 min read

Gauri Kasbekar-Shah has a decade’s experience in project finance, working on more than 35 deals, first as a lawyer at Clifford Chance,and then for over seven years as a banker at RBS. In this relatively short time, the industry has changed immensely and RBS has had to change with it. By Robert Smith.

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Going back to her beginnings in law, Gauri Kasbekar-Shah explains that she loved studying history at school, but jokes that “being from an Indian background, there are certain directions your parents encourage you to go!” Law is a natural sister subject to history, and Gauri became sold on the idea after interning at Simmons & Simmons and shadowing a barrister for two weeks. She then went on to study law at the London School of Economics.

“Studying law at LSE really brought out who I was as a person,” says Gauri. “It’s a very international university, with such a medley of different students. In retrospect, this actually made it a very good match with the project finance community.”

Gauri says the key to the LSE’s approach is placing law in its wider social, political and economic context. Her studies were a world away from the narrow focus on “black letter law” at other institutions.

“My first lecture was an introduction to law by Simon Roberts, one of the gods in his field, and he started off by talking about Malinowski and the tribes,” she says. “I thought I must be in the wrong lecture theatre!”

Gauri won a training contract with Clifford Chance, but chose to extend her studies through a Masters of Law at the LSE. She continued to take her studies in more unusual directions, writing her dissertation on the panchayat system, an evolving Indian system of governance and law practised at the village level. For many villagers the Indian courts seem remote and inaccessible, and they prefer settling disputes at community level led by the village leader or headman.

The LSE’s broad approach was invaluable training for project finance. Structuring a project finance deal requires a keen understanding of the project country’s culture, and the letter of the law is not always clear when placed in this cultural context. The way project finance lets you draw upon your background and experience is a key part of its appeal for Gauri.

“Project finance bankers come from all different backgrounds, giving your team many different approaches to a problem,” she says. “You draw things from your background, layer this with your project finance fundamentals and it usually brings you to the right answer.”

The importance of her time at the LSE is clear, and Gauri continues to support her alma mater. As well as being a governor of the university, she is the co-chairperson of the LSE Lawyers Alumni Group.

Gauri qualified into the project and infrastructure finance group at Clifford Chance, but it was a stint working in Sao Paulo that she believes “sealed it for me, in terms of project finance being what I wanted to do”. She said her time in Brazil was incredible, with the country’s distinct culture permeating every meeting and negotiation.

Gauri’s shift into banking began in 2006, with a secondment to RBS’s project and export finance team. At this point a career change was definitely not in mind, and Gauri remembers that she was very nervous before her first day, having been a qualified lawyer for only three years. These nerves soon melted away, she says, adding: “When I started at RBS it was a very much an all-hands-on-deck approach, so I wasn’t treated like a legal secondee, it was very much about get stuck in, write a credit paper.”

Her secondment was originally slated to last six months, but was extended by three months. After this, she explains, it was pretty obvious that she was a natural fit for the RBS team and, given that she was moving to a client, Clifford Chance was happy to sign off on the move and Gauri’s legal training stood her in good stead during her early days at RBS.

“I do not miss going back to my desk after a long day of meetings and drafting until 2am in the morning, but this experience meant that writing credit papers was an easy skill to pick up,” she says. “The big difference is that whereas in law you’re paid by the word, in banking keeping things concise and short is very important. There’s a real art to condensing thousands of pages of documents into a 10-page credit paper, while still capturing the key risks.”

Gauri joined the RBS power team at the tail-end of its halcyon days as an international force in project finance, mainly focusing on renewables deals in Italy and Spain. This included the monster 350MW SER onshore wind project in Italy. The deal took two years to close, and Gauri said this was formative not only because of the asset’s size and complexity, but because of the need to marshal the many different parties involved.

One of her key responsibilities was negotiating with local stakeholders, as the project depended on obtaining government grants. Gauri jokes: “The Italian way of doing things was always breaking for lunch, followed by good coffee, but I think it’s true that if you’ve got a full stomach it’s easier to negotiate than if you’ve been starved all day!”

RBS is a very different animal now. From about 18 members when Gauri joined, the energy team has shrunk to nine under Andrew Buglass. Following on from the government bailout, the project finance team has been rehoused within the corporate and Institutional banking division and now focuses strictly on UK lending. Gauri states firmly: “It’s absolutely right, as a mainly government-owned bank, that the balance sheet is there for UK projects.”

The days of long lunches in Italy might be over, but for Gauri her new UK focus has brought its own unique challenges and rewards. RBS had to start its UK renewables franchise “pretty much from scratch”, but today is arguably the leading bank for UK renewables.

The support of the corporate bank is crucial to this success. “We’re seen as a centre of expertise within the bank, and we always take calls from our various RMs across the country,” she says. “Although sometimes from day one you know that what they’re discussing is not right for project finance, it’s always important to have those conversations. We’ve held the hands of smaller developers at the early stages, and later they’ve come to us with proposals that are bankable on a project finance basis.”

Gauri believes this client focus suits her better. Whereas her job was once about hopping from one deal to the next, it’s now about growing the pipeline through interaction with RBS’s wider customer base. Sometimes a lead develops simply because the developer has a bank account with RBS. Having said that, Gauri has had the benefit of working on a range of projects with larger corporates and funds across a range of technologies – onshore and offshore wind, biomass and solar projects.

“A client might use you as a sounding board, picking up the phone to say ‘What do you think about this structure?’ I really love that, because you really know a deal from inception, and then you follow it through to completion.”

The real world impact of project finance also provides a great story for RBS. Gauri has always enjoyed the tangible nature of project finance, but through site visits in the UK she has seen first-hand the impact renewables projects have on local communities. As RBS is helping the government reach its 2020 targets, it gives the bank “a seat at the table” at energy policy discussions.

The other big change for RBS is one that faces all project finance banks: balance sheet constraints and the regulatory pressure of Basel III. RBS put a seven-year cap on lending, and Gauri says: “Although we were one of the first to do this, we find almost all other banks are there now.”

Gauri does not think these changes are so drastic, however. Debt sizing is still done on a long-term basis and “from a power perspective, people are already relatively comfortable with shorter tenors. We’ve always had the churn of the power book. Typically, once you pass the first few years of operation, when you pass the initial teething period, people want to refinance. They want cheaper debt or they might want to exit debt altogether.”

Although Gauri has seen many changes during her career, the fundamental strength and desirability of a well structured project finance deal will always remain.

“Project finance has evolved, but it remains a product that clients want and that meets the country’s energy and infrastructure needs,” she says. “It may be a niche banking product, but it also shows a bank has a well diversified balance sheet. The deals have traditionally been long-term, but they’re structured so well you have low default rates and they’re constantly refreshed through refinancing.”