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Project finance sponsors, lenders defy Covid-19 amid strong liquidity
The Asset announces the institutional winners of The Asset Triple A Infrastructure Awards 2021
9 Jun 2021 | The Asset

Abundant bank liquidity and strong investor appetite for project bonds were two of the notable aspects of 2020 in project finance, though arrangers had to cope with the challenge of the Covid-19 pandemic, which meant holding meetings with sponsors, banks and law firms online instead of in person.

As The Asset takes a global approach in The Triple A Infrastructure Awards 2021, climate change transition continued to play a big role in the deal pipeline, with a long list of solar and onshore/offshore wind projects reaching financial close. These included DEWA V in Dubai, Al Dhafra solar PV in Abu Dhabi, Changfang and Xidao (CFXD) offshore wind in Taiwan, Huemul solar in Chile, and the Dogger Bank offshore wind project in the United Kingdom. In many jurisdictions, the public-private partnership (PPP) framework is now well-established, and combined with strong sponsors and high quality offtakers, bankers are getting more comfortable – and are often eyeing future bond market refinancings.

Financing structures continue to evolve. In United Arab Emirates (UAE), there are efforts to encourage the development of the local project bond market, with early refinancing of bank debt on major projects. For Al Dhafra solar, Emirates Water and Electricity Company (EWEC) backstopped the hard mini-perm refinancing risk with a tariff adjustment mechanism. And EWEC used a similar mechanism on the soft mini-perm for the Fujairah F3 gas-fired independent power project.

Given the challenging low interest rate environment, money continues to flow into infrastructure in order to generate yield. One of the most high-profile deals in 2020 was the sale by Abu Dhabi National Oil Company of a 49.9% stake in newly-created unit ADNOC Gas Pipelines. The investment consortium was made up of top names, including GPI, Brookfield, GIC and Ontario Teachers‘ Pension Plan.

Middle Eastern countries are working to bring in private capital, and more such transactions are expected. Indeed, already in 2021 Saudi Aramco has sold a stake in its oil pipeline network.

Outside of the energy sector, improved transportation infrastructure remains a key goal of governments – both for better connectivity to promote economic growth, and to improve the quality of life.

In Africa, Chinese contractors are at the forefront of the development of the railway system, given China's need to import raw materials such as copper and cobalt.

Export credit agencies

But many other countries also see opportunities. The Tanzania Standard Gauge Railway connecting with the port of Dar es Salaam is being built by a Turkish contractor. The debt financing featured a long list of export credit agencies (ECAs) and development banks, led by EKN and EKF. Such large and diverse groups are becoming more common globally, and in order to reduce the complexity, one or two ECAs front the deal, with the others providing reinsurance.

Rail transport is likely to continue to feature strongly in other regions, with Brazil currently working on PPP concessions to improve its transport network for soya and grain exports.

Brazil also has a very large programme of highway PPPs, building faster roads for trucks carrying agricultural produce, and reducing traffic jams in its largest cities.

The PiPa in Sao Paulo was the largest road PPP ever awarded in Brazil, and will involve capital expenditure of US$3.4 billion on road upgrades and maintenance over the 30-year life of the concession. The involvement of GIC of Singapore in the winning consortium illustrates how PPP frameworks in Latin America are becoming well-established. Colombia is also busy with its 4G programme of new motorways.

In North America, there is a large pipeline of renewable energy projects coming through, which are attracting interest from global infrastructure investors, including South Korean players that last year acquired a stake in a portfolio of wind assets in Texas, Nebraska and Illinois.

In Europe, the new European Union Commission headed by Ursula von der Leyen is committed to sustainability via the European Green Deal. In addition to power projects, there is a strong focus on transport. The Northvolt lithium ion gigafactory in Sweden put debt finance in place last year, as a strategic EU initiative to supply its own auto batteries. And a growing number of municipalities are looking for structured finance solutions for electric buses, as was the case with the city of Gothenburg in Sweden.

The UK, which left the EU on December 31, also has a big programme of onshore and offshore wind. The Dogger Bank project, located off the east coast, will be the world's largest wind farm, with three phases totalling 3.6GW.

Focus on emerging markets

Amid the continuing deal flow in project finance/infrastructure sector in 2020, the private markets division of GIC continues to invest heavily in private equity, infrastructure and real estate. Voted as Global investor of the year, GIC seeks large, unlisted infrastrucure assets, including mature, low-to-moderate risk assets in developed markets, complemented by investments with higher growth potential in emerging markets. GIC joined the consortium of infrastructure investors that acquired a 49.9% stake in the new ADNOC Gas Pipelines unit created by Abu Dhabi National Oil Company. And in Brazil, GIC teamed up with Patria Investments to win the concession for the Piracicaba-Panorama (PiPa) highway, which runs into Sao Paulo. Other deals included logistics platforms and telecom towers in India.

As Saudi Arabia presses ahead with its ambitious Saudi Vision 2030 programme to reduce its dependence on oil, ACWA Power has emerged as one of the most important sponsors of new projects in the solar power and water sectors. On the way to winning the Global transition energy sponsor of the year, it achieved in 2020 financial close on DEWA V, the fifth phase of the Mohammed Bin Rashid Al Maktoum Solar Park in Dubai. And ACWA is expanding geographically, with projects in South Africa, Egypt, and most recently signing large-scale wind power projects in Uzbekistan. In its domestic market, one of the highlights of the year was the sucessful financing of the Jubail 3A seawater reverse osmosis desalination project.

A member of the World Bank group, the International Finance Corporation (IFC) is the Global multilateral agency of the year. It has been stepping up its programme to bring private capital into global infrastructure, and has been very active in ports, airports and roads, as well as assisting in the setting up of scalable PPP programmes for renewable energy, most recently for solar power in Uzbekistan. One important financial close in 2020 was the US$742 million Almaty Ring Road, which aims to become a benchmark for Central Asian PPP deals. IFC served as the lead adviser to the Kazakhstan Ministry for Investments and Development in structuring and tendering the project.

In Latin America, the state government of Sao Paulo partnered with IFC to structure and tender Brazil's largest-ever road concession, the  Piracicaba-Panorama (PiPa) highway. It was the lead arranger in the Mazar IPP, which involves the development, design, financing, construction and operation of a 50MW greenfield indigenous gas-based power plant in Mazar-e-Sharif in Afghanistan – the first long-term IPP to be developed in the country.

Among banks, the MUFG Bank project finance unit illustrated its strong global presence across the power, oil & gas, telecoms and transport sectors with a series of high-profile transactions during 2020 as it wins the Global Project finance house of the year. The bank was a mandated lead arranger in the 2GW Al Dhafra solar project in Abu Dhabi, provided debt to the 630MW Huemul wind and power project in Chile, and acted as an ECA agent on the Dogger Bank Wind Farm in the UK. It was also active on the 4G toll road programme in Colombia, and in Europe structured a green financing for Transdev electric buses in the Swedish city of Gothenburg. LNG shipping is another strong area, and MUFG worked alongside the Development Bank of Japan on a US$155 million refinancing of two LNG carriers owned by a joint venture of NYK Line, Sovcomflot and Samudera Shipping.

MUFG Bank also flexed the strength of its project finance/infrastructure franchise in Asia-Pacific in 2020 with several market-defining transactions in different sectors as it retains the honours as Project finance house of the year in the region. It is one of the leading banks for renewable energy projects acting as a financial adviser and a mandated lead arranger in the NT$90 billion (US$3.27 billion) project financing for the CFXD offshore wind in Taiwan. It also acted as a financial adviser and a mandated lead arranger and bookrunner for the 95.64 billion yen (US$873.40 million) loan facilities for the Akita offshore wind project in Japan.

In other significant transactions, MUFG was the mandated lead arranger and green structuring adviser in two renewable energy projects – the 342 million ringgit (US$82.80 million) financing for Kerian Solar in Malaysia and the US$333 million project financing for SB Energy Six Private Limited of India. It was also the financial adviser and green structuring adviser in the A$280 million (US$216.86 million) refinancing for Canberra Metro Finance Pty Limited, with the green loan certified by Climate Bonds Initiative.

Decarbonization boost

Credit Agricole CIB is chosen as the Europe Project finance house of the year. It is at the forefront of renewable energy advisory and lending in Europe, supporting projects of all sizes, including the huge Fecamp offshore project in Normandy. The bank has established itself as a global leader in green bonds, which are going to become increasingly important in project financing. In 2020, Credit Agricole signed the Poseidon Principles to incentivize maritime shipping’s decarbonization. It was sole arranger and green structuring bank on the first green loan Japanese Operating Lease with Call Option (Jolco) for shipping assets, for a unit of its long-standing client Siem Industries.

As well as bringing its strong balance sheet and close working relationship with Chinese ECAs and development banks, ICBC has a presence on the ground across the continent via its equity stake in Standard Bank. Voted as Africa Project finance house of the year, ICBC was involved in a wide variety of deals, including a Sinosure-covered US$2.8 billion loan for the Central Business District of the New Administrative Capital in Egypt, and another Sinosure-covered loan which helped South African mobile operator Telkom SA achieve a 10-year tenor loan amounting to 2.3 billion rand (US$170 million). The bank‘s global finance department was also active in arranging debt for the Kamoa-Kakula copper project in the Democratic Republic of Congo.

Standard Chartered is the Middle East Project finance house of the year. With its long-established project finance team based in the region, the bank has built up close relationships with PPP agencies and sponsors, and has featured on many of the major deals in solar, water and natural gas. The bank was a mandated lead arranger for the 2GW Al Dhafra 2GW solar project in Abu Dhabi, which will be one of the largest solar projects in the world, as well as Dewa V, the 900MW phase five of the Mohammed Bin Rashid Al Maktoum Solar Park. Standard Chartered led the banking group on the Ibri II Solar PV independent power plant in Oman, which featured the Asian Infrastructure Investment Bank (AIIB) on its first renewable energy deal in the Gulf Cooperation Council (GCC) region.

Sumitomo Mitsui Banking Corporation (SMBC) is a consistent provider of project debt and advisory services as a core business. Selected as the Project finance house for the Americas, SMBC found 2020 another busy year for its project finance unit in sectors such as power and transmission, natural resources and transportation. The bank was a lender on the 630-MW Huemul second phase of the 1.3 GW Andes Renovables project in Chile, and was one of four banks providing debt for the expansion of Lima Airport in Peru. Through SMBC Nikko Securiries America, it has a strong position in privately placing project bonds, and arranged the placement for investors acquiring the Mankato Energy gas-fired assets in Minnesota.

In addition to its prominent position in Asia, and in countries such as Brazil which has close economic ties with Japan, Nippon Export and Investment Insurance (NEXI), which was chosen as Global ECA of the year, has been expanding its global role via a series of MoUs on cooperation with institutions such as the IFC, EIB, EBRD, MIGA and Afreximbank. Its first major deal alongside the EIB came last year, providing support for the lithium-ion battery gigafactory being built by Northvolt in Sweden, strengthening NEXI's economic cooperation with Europe. It also concluded a hydropower financing in Georgia in support of Tepco, and has signed sizeable loan insurance deals supporting Japanese firms chartering floating production storage and offloadings (FPSOs) for Brazilian offshore oil & gas exploration.

Norton Rose Fulbright got the nod as the Global law firm of the year. It was present on high-profile financings across different regions of the world, many in the renewables space. These included the Al Dhafra 2GW solar project in Abu Dhabi, the Dogger Bank offshore wind farm in the UK, and the Huemul wind and solar project in Chile. The firm has an exceptionally strong shipping practice, and deals last year included the first shipping green loan Jolco for two LNG-powered car carriers operating for Volkswagen. It also advised the lenders on a structured green bus financing for Gothenburg in Sweden.

Rating agencies

Moody’s Investors Service retains the Project finance rating agency of the year award in Asia-Pacific. In 2020, it rated US$18.3 billion worth of project and infrastructure finance deals in 46 tranches across Asia-Pacific. It solely rated the dual-tranche US$1 billion perpetual bond offering in December 2020 by China Huaneng Group Company, one of the five biggest central government-controlled power producers in China. Some of the other significant infrastructure-related deals that Moody’s rated in 2020 included the first brownfield project bond in Asia by a non-state-linked issuer group in Indonesia for Star Energy Geothermal Darajat II, and the first-time rating for Hutama Karya, a government-owned infrastructure company in Indonesia.

Fitch Ratings is the Project finance rating agency of the year for MENA. It has built up a leading position in infrastructure/project finance, as well as public finance, across the region, and has been strong in Islamic finance. The Dubai branch has recently been granted a licence from the UAE's federal credit rating agency regulator, the Securities and Commodities Authority (SCA), allowing it to provide credit ratings to onshore entities listed on exchanges such as in the Dubai Financial Market and Abu Dhabi Securities Exchange. It is well-placed to benefit from growth in regional non-recourse bond issuance. Last year, Fitch rated the Galaxy Pipeline Assets Bidco Limited bonds, which refinanced bank debt for the international consortium that acquired a stake in ADNOC Gas Pipelines.

In Asia-Pacific, renewable energy resonated in the project finance/infrastructure space across the region as the board of editors at The Asset undertook a rigorous evaluation process in reviewing the submissions to The Triple A Infrastructure Awards 2021. Offshore wind and solar power projects dominated the renewable energy landscape with landmark transactions in Australia, Taiwan and Japan. Battery storage projects attracted interest from sponsors such as Vena Energy with the Wandoan South Battery Energy Storage System in Australia and BCPG Public Company Limited with the battery energy storage project for Lomligor Company in Thailand.

The southern Thailand wind power and battery energy storage project is the first private sector initiative in Thailand to integrate utility-scale wind power generation with a battery energy storage system, which will address the intermittency of wind power. The battery system will allow energy to be stored when the wind turbines generate more power than the grid is able to absorb, which will help ensure the stability and reliability of the renewable energy source.

Described as the largest renewable energy independent power producer (IPP) in Asia-Pacific, Vena Energy figured prominently in a number of winning deals in The Triple A Infrastructure Awards 2021 to secure the Renewable energy sponsor of the year honours. It was the sponsor in the Wandoan South Battery Energy Storage System, which secured a A$110 million debt facility in December 2020. The landmark project is the largest battery energy storage system in Queensland, Australia and the transaction represents Australia’s first-ever non-recourse project financing of a utility-scale battery energy storage project.

Vena Energy is the sponsor in the 70MW Mingus ground mounted solar project, which upon completion will be largest utility-scale solar project in Taiwan. The company is also developing a 100MW wind power project in the state of Gujarat, India.

Halo effect

As a major proponent of infrastructure investment in the region, the Manila-headquartered Asian Development Bank (ADB) is selected as the Multilateral agency of the year in Asia-Pacific. The participation of ADB in projects provides a halo effect, offering comfort to commercial banks and other lenders to join the transaction. Such impact can be reflected in the 257MW Phu Yen solar power project in Vietnam, whose financing comprised a US$27.9 million loan funded by ADB, a US$148.8 million syndicated B-loan funded by commercial banks with ADB as lender of record, and a US$9.3 million loan from Leading Asia’s Private Infrastructure Fund. The 15-year B-loan is the first green B-loan in Asia-Pacific certified by Climate Bonds Initiative. The longer-tenor loan improves the debt service coverage ratios for lenders and thereby enhances the project’s financial viability.

Indeed, while there is a lot of focus on the potential opportunities in Vietnam in terms of renewable energy, banks are still looking for comfort to participate in Vietnamese transactions. One senior banker describes Vietnam as a tricky market and it is not for every bank. “It is a market where you have to exercise caution and choose which projects to support,” he points out.

With its huge focus on clean energy projects from Australia to India, Societe Generale is chosen as the ESG infrastructure bank of the year. It prides itself in its participation on all offshore wind farm projects in Taiwan, including the CFXD project. It was also a mandated lead arranger in the first floating solar project in Taiwan for Chenya Energy Company. It was the sole mandated lead arranger and lender for the Quantum and Sambelia solar power projects – the first solar power projects financed by an international commercial bank in Indonesia. Societe Generale was the only non-Japanese bank that funded the Akita offshore wind project in Japan. The bank is also an active player in the renewables space in Australia and was an original mandated lead arranger and bookrunner in the SB Energy Six Private Limited solar project in India.

DBS regains the accolade as the Project finance advisory house of the year, which it previously won in 2019, as it secured several advisory mandates during the review period. Some of its ongoing advisory assignments include a number of renewable energy projects in Indonesia, Vietnam, Hong Kong and Singapore and gas-fired power plants in Bangladesh, Vietnam and Myanmar. The bank was also the financial adviser and mandated lead arranger in the US$77.5 million project financing in 2020 for Vena Energy Taiwan Solar Energy.

In Indonesia, PT Penjaminan & Infrastruktur (PT PII) provides guarantee for government-owned projects, thus improving the certainty of private-sector participation in financing infrastructure development in the country. It assists the government through the establishment of a good transaction structure, increasing the certainty of a successful transaction with the investors and helping ensure the quality of the infrastructure.

Voted as the PPP agency of the year for the third year in a row, PT PII, with 8 trillion rupiah (US$561.60 million) of government investment, had guaranteed up until 2020 a total of 25 PPP projects from five sectors with over 246 trillion rupiah of total project value. Among the projects it signed in 2020 were the Komodo airport, the first airport project to use the PPP scheme, and the East Trans-Sumatra road preservation project, the first PPP project in the non-toll road sector in Indonesia.

Allen & Overy got the nod for Best project finance law firm of the year. It represented clients in a number of winning project finance/infrastructure deals in 2020, including those for China Gas Capital Management and for Shenzhen Water Group Company/Shenzhen Water and Environment Investment Group Company in China. It was also a legal adviser in the TTC Energy Development Investment Joint Stock Company in Vietnam, First Dhaka Elevated Expressway Company in Bangladesh, CFXD offshore wind project in Taiwan and SB Energy Six Private Limited in India.

China Lianhe Credit Rating Company wins the Project finance rating agency of the year award in China. The company demonstrates transparency in its rating methodology as it enhances its rating metrics to adhere to international standards. It refines its analysis and related evaluation standards for infrastructure-related companies. China Lianhe initiated outreach events such as webinars to keep investors fully informed of the developments in the project finance space amid the Covid-19 pandemic.

The Malaysian Rating Corporation (MARC) is a repeat winner as Project finance rating agency of the year in Malaysia. It rated a number of infrastructure-related companies, including those of UiTM Solar Power Dua green SRI sukuk, which was set up to develop and operate a 25MW solar power plant in Pasir Gudang in Johore. It also rated the Asean green sustainable and SRI sukuk for Leader Energy, which owns two solar power projects in Kuala Muda in Kedah, and port operator Pelabuhan Tanjung Pelepas, a key transhipment port.

For the complete list of Institution awards winners, please click here.

To learn more about these awards, please click here.

For more information about receiving the awards, please click here.

The virtual awards ceremony for The Asset Triple A Infrastructure Awards 2021 is schedule to take place on July 26 2021.