Welcome to the Project Finance International (PFI) Japanese project finance roundtable, sponsored by MUFG, Mizuho and SMBC. The event was held in the Thomson Reuters office in Tokyo and attracted an audience of 100 people.
Given the importance of Japan Inc to the global project finance market, it is likely that this transcript will now be read by a far wider audience. Japanese banks, project sponsors and multilateral institutions have a major presence in the project finance market across the world and all their views are represented in this report.
What was clear from the roundtable discussion was the changing nature of the global project finance market and the fact this is well understood in Tokyo. What is more, there is a widening of the traditional Japanese project finance model.
Deal opportunities are emerging in the domestic market – through power, renewables and infrastructure deals. More players are emerging in Japan and overseas to do project finance; the regional and secondary banks plus the institutional investors looking to deploy both debt and equity.
Koichiro Oshima from BTMU pointed out that the Japanese megabanks have had to expand overseas and “project finance was one of the major products we could provide”. At the same time, he said the bank tries to be product-agnostic and offers multiple choices for its energy and infrastructure clients.
Fumio Inagawa from Mizuho said Asia and Africa were a particular focus at present. The bank is looking at new initiatives, such as an infrastructure fund focusing on Asia and is actively talking to Japanese regional banks about getting involved in the sector.
Rajeev Kannan from SMBC said the global project market going forward will be very different. There will be more, smaller deals and banks will have to go to emerging markets such as those in Africa and Myanmar. Access to local currency funding will be key.
Toshi Fukumura from Marubeni said traditional PPA-backed power opportunities have shifted to newer, riskier markets. In the developed world such as the US, there could be more risk.
Masahiro Morimoto from Mitsubishi spelt out some of the changes in the LNG market. The company is looking at more equity-lifting projects where it can have the flexibility to handle its own cargo as an offtaking project. This new type of deal could be a challenge for the sponsors and the lenders.
Takahide Yamamoto from JGC detailed the issues from the contractors’ viewpoint. EPC schemes are getting bigger and the contractors need to deal with a wider array of banks and multilateral agencies.
Kohei Toyoda from JBIC said he understood the market wanted the multilateral to take more risk. “We would like to live up to such market expectations as much as possible,” he said.
Rod Morrison, Editor, PFI