Europe Awards

PFI Yearbook 2023
21 min read

Bank of the Year – Societe Generale

Societe Generale combined advisory and underwriting this year to maintain its position as one of the leading project banks. Its advisory effort was led by two power interconnectors deals – a coming sector that SG got into early – for Greenlink and NeuConnect. This is combined with the Champlain Hudson Power Express transmission line into New York and three transmission deals in one year. In the past, getting one down in any year was a struggle despite the ever-growing need for new transmission. SG closed two more advisories in the US, a new LNG deal for Cheniere and the QatarEnergy/Chevron petrochemical financing brought over from JP Morgan.

Greenlink was the first deal to close this year. SG was the financial adviser, lender and hedge bank for the 500MW, 190km, €600m project between Ireland and the UK sponsored by Partners Group. The scheme was financed 100% by commercial banks. NeuConnect was the larger deal but SG provided the same services. The €2.5bn-plus, 1.4GW project will run for 725km from Germany to the UK and was funded by commercial banks plus JBIC and EIB. The sponsor group is led by Meridiam, Allianz and Kansai Electric, In both deals SG was from an early stage in the complex cross-boundary projects.

The bank's other big advisory mandate on the power side is the monster €5.3bn 496MW Dieppe Le Treport and 496MW Iles d’Yeu Noirmoutier offshore wind projects for Ocean Winds in France. This is expected to close in the new year. On the active fibre side, SG was adviser to TDF and Banque des Territoires on the €735m financing backing 700,000 fibre plugs in France.

SG combined its advisory and underwriting activities on many of the important deals globally and regionally in Europe. In the year to-date it is currently third in the global loans league table and second in the Europe, Middle East & Africa table. Weight of numbers in the league tables does not mean everything but SG is not a bank known for piling up loans for the sake of it and has lead-arranging roles in most of the deals it is involved in. The team is led by Olivier Musset, global head of energy in Paris.

PPP Deal of the Year – Sotra

In March, the NKr19.8bn (€1.93bn) Rv555 Sotra Connection project reached financial close. Designed to strengthen the links between the city of Bergen and surrounding areas, the 9.4km long Sotra Connection is the largest and most complex road infrastructure development in Norwegian history, the largest single contract ever awarded by the Norwegian Public Roads Administration (NPRA), and the largest infrastructure PPP contract signed in the European Economic Area (EEA) since 2017.

In September 2021, the Sotra Link consortium was selected by the NPRA as the preferred bidder and the concession agreement was subsequently signed in March 2022. The successful consortium was led by Macquarie Group, in partnership with South Korean civil engineering company SK ecoplant and Italian industrial group Webuild, formerly known as Salini Impregilo.

Structuring the deal to make the risk more acceptable to lenders was a problem given Norway’s limited history of PPPs in Norway, the variety of different partners involved in the project and the technical challenges faced by the consortium. Covid-19 lockdown restrictions only compounded concerns.

The project was 100% financed in Norwegian kroner, thereby eliminating the foreign exchange risk as equity and debt would all be funded and repaid in local currency. The construction and operations partners would also be paid in Norwegian kroner. However, Norwegian kroner have not typically been used to back larger, complex PPP projects in Europe.

Lenders on the NKr8bn debt facility were Bank of China, Credit Agricole, CaixaBank, DZ Bank, KDB, Kexim, KfW, and Santander.

The weighted-average life of the debt is about 15 years – broadly in line with the availability-based concession, a 15-year O&M contract followed by a further five-plus-five-year option. The package was split into several tranches including a long-term 20-year door-to-door facility that involves five years for construction and 15 for operation, over which it is fully amortised. A debt reserve facility supports the long-term debt. Korean Trade Insurance Corporation (K-Sure) is covering 35% of the long-term debt.

Legal advisers were Clifford Chance as international adviser to the lender consortium, Herbert Smith Freehills as international adviser to Sotra Link, Advokatfirmaet Schjodt as Norwegian lenders' counsel, and Wiersholm as Norwegian counsel to Sotra Link.

Fibre Deal of the Year – Deutsche Glasfaser

German broadband group Deutsche Glasfaser’s €5.75bn debt financing package, the largest fibre-to-the-home (FTTH) financing in Germany, closed at the start of the year. The new financing, which refinances and simplifies DGF’s debt stack of three existing financings, provides the capital required to support its plan to cover 4m German homes with FTTH by year-end 2025 (10% of German households), before expanding its network to meet the longer-term ambition of reaching a six million FTTH footprint.

DGF is the largest independent FTTH operator in Germany focusing on under-served rural and suburban areas with a network covering 1.1m homes. The company is controlled by EQT Infrastructure (51%) and OMERS (49%).

Ten underwriters and five cornerstone lenders provided liquidity. The seven-year debt package has a bullet repayment and is split between a €3.0bn term loan to refinance debt, a €2.5bn capex facility and a €0.25bn revolving credit facility (RCF), complemented by a €1.5bn uncommitted accordion facility, taking the package to a potential €7.25bn.

More than €1bn of the total package was syndicated, with tranches of the term loan and capex facility on offer. The RCF is held by the underwriters. Pricing on the floating debt “starts just above 200bp and finishes just above 300bp” over Euribor, according to PFI. The new financing includes sustainability-linked elements with margin adjustments moving up or down by 7.5bp depending on achievement of certain goals: DGF´s success in reducing carbon emissions; the firm’s speed in connecting under-served areas; and the company’s performance in annual employee surveys.

Crédit Agricole (CACIB) and ING acted as financial and sustainability advisers while Clifford Chance acted as legal adviser. Underwriters were ABN AMRO, BNP Paribas, CACIB, ING, KfW IPEX-Bank, Santander, SEB, Societé Générale, SMBC, and UniCredit Cornerstone lenders are AXA IM Alts, Generali Global Infrastructure, Kommunalkredit, LBBW, and NAB.

Banks joining in syndication included Allied Irish Bank, Bank of China, BNP Paribas Asset Management, CIC, Erste Bank, Euler Hermes Kreditversicherungs, Intesa Sanpaolo, KEB Hana Bank, La Banque Postale, Landesbank Hessen-Thuringen, MetLife, MUFG, Natixis, NIBC Bank, NordLB, Raiffeisen Bank, Scor, and Triodos Bank. CACIB acted as bookrunner, MLA and hedge coordinator. Legal advisers on the deal were Freshfield Bruckhaus Deringer and Clifford Chance.

Power Deal of the year – NeuConnect

NeuConnect, the largest privately financed interconnector, is due to be operational by 2028 and will link the power grids of Germany and the UK via 725km of land and subsea cables. It will support the energy transition by enabling carbon emission reductions of 13m tonnes over 25 years, increase competition among generators, and strengthen security of supply across the two countries. The 25-year project financing for the 1.4GW Germany-UK power interconnector was signed in July. The debt package is split between tranches totalling £1.3bn and €1bn.

The lead developer is Meridiam with a 53.5% stake, alongside Allianz Capital Partners (26.2%), Kansai Electric Power (18.3%) and Fi1 (2%). The deal was supported by a complex multi-currency and multi-borrower financial structure designed by sole financial adviser, MLA, sole hedge execution bank, hedge provider and account bank Societe Generale.

JBIC is committing a total of US$500m equivalent, with the European Investment Bank (EIB) providing €400m. Commercial lenders provide £775m and €330m. They are AIB, Ampega, Bank of China, BayernLB, CaixaBank, CIC, DZ, Lloyds, Mizuho, Nippon Life, Nochu, NordLB, Rabobank, Shinsei, Siemens, SMBC, SMTB, Société Générale and UK Infrastructure Bank (UKIB). UK Treasury-owned UKIB is lending £150m on the British side of the project.

Pricing in sterling starts at 180bp during 5-1/2 years of construction, dropping to 160bp when the link is operational. Five-year step-ups see margins rise after 10, 15, and 20 years to reach 190bp over the 24 years of operation and as debt amortises. There is no cash sweep or bullet repayment. Margins start at 140bp on the euro loan with step-ups following the same schedule as in sterling, eventually rising to 170bp.

Ampega is lending fixed rate for 30 years at a flat 170bp and 150bp for the sterling and euro tranches. All the other lenders, apart from the EIB, are lending in floating rates with swaps and a 29-year tenor. There are standby facilities of £70m and €80m, and debt service facilities of £50m and €40m, plus a VAT facility of £30m and €30m priced at 130bp and 110bp, LC facilities of £36m and €30m, and liquidity facilities of £100m and €10m. Legal advisers on the deal were CMS, Linklaters for the sponsor and Herbert Smith Freehills for the lenders.

Renewables Deal of the Year – Finerge

Portuguese renewables developer Finerge’s €2.3bn syndicated green loan featured an innovative structure for renewable energy sector financing: variable amortisation repayment mechanics.

Finerge, backed by financial sponsor, Igneo Infrastructure Partners, has one of the largest onshore wind and solar PV portfolios in Iberia with an operational and regulated platform of around 1,575MW across both technologies.

The €2.3bn seven to 14-1/2-year financing package has a mixture of amortising and revolving facilities and consists of long-term variable amortising refinancing and construction term facilities, revolving capex, a working capital facility, a guarantee facility, and a debt service reserve facility.

Refinancing the Finerge portfolio helped reorganise and simplify a complex financing structure under a single comprehensive debt platform; optimise the existing financing, including the variable amortisation mechanism, with more competitive terms; and support the construction of its 1,251MW advanced pipeline of renewable energy assets on the Iberian peninsula, confirming itself as a key player for Portugal’s green energy transition. The developer's pipeline includes 1GW of wind and solar to be implemented in the next two years.

The transaction resulted in a future-proofed financing platform, enabling the borrower to raise further indebtedness.

Variable amortisation benefits the sponsors as, thanks to the constantly updated leverage control, it allows for higher leverage. It also offers stabilised dividend yields, as debt repayment matches the actual cash generation, mirroring the typical volatility of renewable energy sources.

The structure also offers lenders lower probability of default, due to variable repayments and downside protection, as leverage is ultimately policed by a project life coverage ratio (PLCR) floor mandated repayment, computed on, among other projections, "live" long-term price curves.

The mechanism provides an efficient structure that self-corrects around the long-term average forecasts and is governed by the PLCR floor and cap, thereby protecting debt and equity from material deviations from the base case.

Santander acted as sole debt adviser, underwriter and bookrunner, arranger, hedging counterparty and issuing bank. Lenders were MUFG, ING, Natixis and BNP Paribas. Joining Santander as financial adviser were Latham & Watkins, Vieira de Almeida, EY and G-Advisory. Allen & Overy was legal adviser to the lenders.

Portfolio Deal of the Year – Tages Capital

Tages Helios II closed its €1.1bn project financing funding the acquisition, refinancing, operations and maintenance of a 341MW wind and solar photovoltaic (PV) portfolio of assets located across Italy.

The financing was raised by Ortigia Power 61, which Rome-based asset manager Tages Capital takes part in via its Tages Helios II fund. Tages Helios II is entirely focused on the Italian renewable energy sector. It has already invested in PV plants and wind operating assets for a total power capacity of 336MW. It is the second largest PV operator in Italy in terms of installed capacity.

First drawdown of around €720m from the non-recourse financing, the first green financing for Tages Capital, took place in July. It financed the acquisition and refinancing of a 205MW solar PV and onshore wind portfolio in Lombardy, Tuscany, Sardinia, Calabria and other regions, including 149MW of solar PV acquired in January from NextEnergy Capital’s fund NextPower II. It also finances ongoing M&A activities for an additional 100MW–140MW of capacity. Several other FiT-backed assets have been identified for acquisitions.

The long-term facilities are fully amortising and will be drawn at the time of each acquisition. Term loans include a €36.8m acquisition facility with a maturity of December 31 2028, a €784m refinancing facility for solar/wind, and a €64.3m capex facility, both maturing on December 31 2033. There is a €145m revolving credit facility maturing on June 30 2034, and a €70m debt service reserve facility maturing on December 31 2033.

Tages envisages performing a revamping plan of some of the plants, which will be funded via the capex facility. Revamping works will be supervised by in-house operating company Delos Service, which manages all the plants owned by the two Tages Helios funds.

MLAs were BNP Paribas, Intesa Sanpaolo, Societe Generale, BBVA, BayernLB, Banco BPM, BPER Banca and CaixaBank. Tages Capital and Delos Services were advised by Gianni & Origoni. The lenders received legal advice from Clifford Chance and technical and environmental advice from Fichtner Italia.

Aon Italia was insurance adviser and EY provided support for the financial model review. Chiomenti, Legance, Clifford Chance and Bonelli Erede also supported lenders of the companies which, thanks to this transaction, exited their pre-existing bank loans and leases.

Offshore Deal of the Year – Hollandse Kust Zuid

An innovative transaction structure, allowing the sharing of construction and operating risk between Vattenfall and BASF, enabled non-recourse project financing at the holding entity level for the German chemical giant’s acquisition of a 49.5% stake in Vattenfall’s 1.5GW offshore wind farm project Hollandse Kust Zuid 1-4 (HKZ). Once commissioned, HKZ, currently under construction some 18km off the Dutch coast, will be the largest offshore wind farm worldwide, and the first large-scale wind farm project implemented on a subsidy-free basis.

The transaction represents a novel collaboration between a power producer, an industrial company with significant long-term power requirements, and a long-term financial investor.

BASF’s stake was acquired through holding entity HKZ Investor Holding. Subsequent to the acquisition, BASF sold a 51% stake in the holding entity to Allianz Capital Partners.

The €1.2bn project financing package represents the first European corporate power purchase agreement-backed offshore wind deal – BASF agreed a long-term fixed-price corporate PPA (C-PPA) whereby it will receive most of the power from the holding entity’s share in HKZ. The tenor of the debt, at more than 20 years, benefits from the long-term BASF C-PPA cashflows.

The structure is an example of how M&A and project financing techniques can be used to support the transition of an industrial company. Holdco non-recourse project financing allows sharing of offshore wind construction risk. The front-end and back-end equity true-up mechanism optimises equity capital calls and returns, and the interest rate hedge embedded mandatory termination clauses – used for the first time in long-term project finance in Europe – to optimise refinancing opportunities. Such collaborations could help drive the European energy transition.

The transaction represents BASF’s first major investment in renewable energy as it transitions towards climate neutrality by 2050. BASF will acquire and produce green electricity, which will enable it to implement low-emission technologies at several chemical production sites in Europe.

Deutsche Bank was financial adviser, DLA Piper was borrower’s legal adviser, and Watson Farley & Williams was legal adviser to the lenders: Bank of China, DZ Bank, Landesbank Hessen-Thüringen, ING Bank, Landesbank Baden-Württemberg, NatWest, SEB as MLA and documentation agent, SMBC Bank, Societe Generale, and Standard Chartered.

Environmental Deal of the Year – Riverside 2

Cory's Riverside waste-to-energy (WtE) facility on the River Thames at Belvedere near London has emerged as a trophy asset. With WtE capacity limited in the south-east of England by planning issues, the scheme processes more than 700,000tpa of the capital’s waste. The expansion project, Riverside 2, will add a further 655,000tpa of much needed capacity and will produce 96MW of power.

Cory had a patchy history a decade ago but in 2018 its main asset Riverside was bought by a consortium of investors – Dalmore, Fiera, Semperian and Swiss Life – for £1.5bn. They put in place a £550m debt financing on the existing plant and started work on an expansion financing that has now closed. The expansion financing is separate from the existing loan but the shareholders are the same and obviously the site will share facilities.

The £500m construction loan is priced at 200bp in the first five years then 225bp in year six and 250bp in year seven. Fees are 150bp with a commitment fee of 35% of the margin. There is a cash sweep running from year six on half of the revenues. The deal is backed by £40m of cashflow during the commissioning phase, a £25m debt service reserve facility (DSRF) and £350m of new equity from the existing sponsors.

The scheme was due to fund in the autumn but was hit by long-term swap rates leaping 1.5% of the back of the mini budget. Rates are now back down to around 3%. DC Advisory, Linklaters and Herbert Smith Freehills advised on the deal. The banks in the club syndicate are ABN AMRO, AIB, Credit Agricole, HSBC, Lloyds, MUFG, NatWest, Sabadell and Rabobank. No sell-down is expected.

HZI is the contractor. Ancillary parts of the scheme, including battery storage and solar PV, 40,000tpa of anaerobic digestion (AD) plus combined heat and power (CHP) facilities in a joint venture with Vattenfall, are not part of the project financing. Cory recently announced it is to explore a project to ship carbon from its Riverside scheme to the Northern Lights subsea carbon capture and storage (CCS) project being developed by Equinor, Shell and Total.

Cory has also won a 100,000tpa waste contract with Hertfordshire to back the expansion scheme but not all the waste on the plant will be contracted in order to benefit from potential upside. Cory has signed up some other waste suppliers for the expansion plant and bought east London supplier McGrath Group to add to its options

To see the digital version of this report, please click here

To purchase printed copies or a PDF of this report, please email