Welcome to the Thomson Reuters Project Finance International Investing in Asian infrastructure roundtable, sponsored by DBS, Oliver Wyman and Nabarro.
The discussion was split into five topics – the attractive project finance markets in region; who the main project finance providers in the region are; the role of national infrastructure plans; the role of the multilaterals and; finally, what are the key components of a bankable project in the region?
The discussion around the key topics turned out to be in depth and insightful. A whole range of issues were raised by our panelists.
Here are a very few brief highlights from the discussion.
In terms of attractive markets Nomi Ahmad from Sembcorp said: “The three markets we’ve been very actively pursuing projects in are Myanmar, where we secured the first competitively tendered gas-fired IPP, which is now in financing; Bangladesh, where we have signed the PPA for a 413 MW gas-fired combined cycle project; and Indonesia.”
In terms of debt providers in the region, Subash Narayanan from DBS said: “We can definitely see a trend towards Asian bank funding… As the market develops we are going to see local banks taking more active positions, which is already happening in Malaysia, Thailand, the Philippines and Indonesia.” But he added: “Currently we also see a lot of dollar funding, which is where international banks are most active.”
Eric Pascal of Oliver Wyman said: “The issue is about the burgeoning need for local currency funding in these markets that have the greatest demand for infrastructure. That’s been a vastly growing trend and I don’t expect it to stop.”
Asked about the role of national infrastructure plans, Adrian Wong from Nabarro said: “Governments should adopt the mindset that the development framework is supposed to facilitate, not hinder.
“For whatever reason, sometimes governments try to get away with giving as little as possible. So a government produces a pipeline of projects, but a lot of them get stuck at the regulatory level, or the law is insufficiently robust, and then the government will react by amending the law to try to address the issue. The multilaterals are very active in this space, trying to encourage governments to take the first step to facilitate a conducive environment for investment.”
Taking about multilaterals, Gina Lim from IE Singapore said: “I can’t imagine a world without the multilateral development banks. There would be a lot less development without them.”
And moving on to what makes a bankable scheme, the heart of any project finance discussion, Barnard Wee of the Monetary Authority of Singapore said “Bankability is about commercial viability, about getting the right price for the right risk.
“All the things that have been mentioned by the previous panellists about transparency and rule of law have helped reduce the risk of projects for private investors. But there should be a good and clear understanding between the public and the private sector about the proper division of risks.”
Rod Morrison, Editor, PFI