Fertiliser deals galore � Sabine Pass closes, again

Hancock mines hit the market � Vietnam refinery signed

Dairut IPP to market � Stunning price on Open Grid bonds

FEATURES The new Equator Principles � Shale gas up-and-comers

EMEA

ASIA PACIFIC

AMERICAS

INSIDE THIS ISSUE…

JUNE 5 2013 ISSUE 506 www.pfie.com

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THE PFI PROJECT BONDS ROUNDTABLEThomson Reuters, 30 South Colonnade, LondonJuly 4 2013

The PFI Project Bonds Roundtable will review and forecast issuance of bondsfor infrastructure and energy project financing. Chaired by PFI Editor RodMorrison, the Roundtable will examine deals to date and the development ofthe investor base for this growing asset class. Topics to be discussed include:

• Review of project bond issuance to date and issuance forecast includinglikely issuers and the tenors, yields, spreads, volumes and ratings of projectbonds

• Risk and ratings analysis – how might projects be rated in different sectorsand regions?

• Analysis of the growing investor base for project bonds, how project bonds fitinto competitive fixed income portfolios, and prospects for secondary markets

• Legal and contractual considerations for project bond issuers and investors • Project bonds vs. bank finance and the role of banks in bond origination,

structuring and syndication of project bonds• Outlook for 2013/14 and beyond – will the project bonds market see

exponential growth as some analysts predict?

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Project Finance International June 5 2013 1

PROJECT FINANCE INTERNATIONAL JUNE 5 2013 ISSUE 506

PEOPLE & MARKETS

3 Intergen goes for refiThe global IPP developer is seeking to raiseUS$1.8bn in a series of refinancing deals

3 Falck gets a new planFalck Renewables is set to sell half of its UK portfolioto invest in new areas such as waste biomass

NEWS

AMERICAS

8 Fertiliser deals aboundCheap domestic shale gas is leading to a boomin US fertiliser deals, led by Egypt’s Orascom

18 Cheniere closes financing for Trains 3 & 4Cheniere’s Sabine Pass Liqufaction has closedthe US$5.9bn deal with 17 lead arrangers

ASIA PACIFIC

21 Hancock digs in for financeGina Rhinehart’s Hancock Prospecting is in the marketto finance two huge mining projects in Australia

30 Nghi Son Refinery signedVietnam’s second refinery project has been financedby a group of 20 banks with a US$5bn loan package

EUROPE, MIDDLE EAST AND AFRICA

32 Dairut IPP outA challenging deal but Egypt desperatelyneeds the 2250MW of power it could provide

34 Open Grid bonds price lowThe bonds on the Open Grid refinancing have been priced well below 100bp

FEATURES

45 EP into a new era with Mark III The third set of Equator Principles is increasing thescope of the environmental and social risk guidelinesand enhancing transparency and reporting

49 Up-and-comers in the shale gas revolutionAfter the shale gas boom shook up the US market, emerging producers in Europe and Asia-Pacificcould follow and leverage their strategic position

ContentsEDITORRod Morrison (London) +44 (0)20 7369 7570rod.morrison@thomsonreuters.com

ASIA PACIFIC EDITOR

Minerva Lau (Singapore)+65 6417 4554minerva.lau@thomsonreuters.com

AMERICAS SENIOR REPORTERAlison Healey (New York) +1 (570) 270 4774alison.healey1@thomsonreuters.com

LATIN AMERICAS REPORTERAlan Gersten (New York) +1 646 822 3107alan.gersten@thomsonreuters.com

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SENIOR REPORTERColin Leopold (London)+44 (0)20 7369 7507colin.leopold@thomsonreuters.com

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Project Finance International June 5 20132

The current cove-light Term Loan B boom,detailed in the last issue of PFI, is attractinga lot of attention. Many power and energydeals – some formerly project-financed –are being refinanced in this high-yieldmarket. Spreads on the financings havecome down markedly and the dividenddistributions to sponsors can be huge.Proceeds from the La Frontera financingfunded a US$865m distribution to sponsorNextera. This activity is certainly eye-opening but it is a function of a boomingcapital market, nothing else.

The range of new deals beyond thisactivity is just as impressive in its own way.The boom in new deals is, of course, beingpushed forward by the shale gas surge. Thesurge first manifested itself in LNG export

projects but it has quickly moved to otherforms of economic activity – notably, newgas-fired power plants and petrochemicalschemes. Indeed, such is the scale ofactivity in the petrochemical sector thatthere is a mini re-industrialisation boomtaking place in the country.

The liquidity is there to finance thesedevelopments. The Sabine LNG deal,coming in at nearly US$10bn last week, wasin the end placed fairly comfortably, aremarkable fact in a way. And Orascommanaged to get a US$1.8bn fertiliser plantaway last month too, in a deal that made alot fewer headlines. The LNG export boomis well known about and attracts a lot ofattention. The new power project andpetchem boom story is starting to emergeand will attract more attention as dealsseek finance.

One bank has added up the number ofthese shale gas-inspired deals and come to atotal of 95. Clearly, many of these schemesare in their early stages and a good numberwill not see the light of day. But theirtiming could not be better, given theappetite at the moment for new financingsin the American markets.

One experienced sponsor in the petchemsector, Canada’s Agrium , has already calledfor a pause in the project boom. This week,

it stepped back from two projects thatwould have expanded its fertiliser capacity,partly because numerous competitors arepursuing similar plans. Agrium, the world’sthird-largest producer, will suspendengineering work on its US$3bn plant inthe Midwest. Instead, it will focus onfinding a partner to share the capital costand securing a long-term natural gascontract for the project.

A race could therefore develop to getnew projects up and running, particularlyin the petchem sector. Sponsors will needto get to market first.

The shale gas boom raises a whole series of questions. How much demand isthere in the US for domestic petchemproduct? How much demand is there for new power capacity? Can othercountries produce shale as cheaply or even cheaper (see feature article in thisissue)? Up to now, much of the debate has been about the positive impact on the US. But shale gas is starting to emergeas an energy source in many othercountries too. Could the US be undercut in the same way traditional gas supplies are being undercut? Gazprom, for example, said this week that it expects itsprices to drop 10%. Everyone could betaking a bath.

PEOPLE & MARKETS

Deals galore

� ROD MORRISON

A common refrain at present isthat there is a lack of dealsaround to finance, particularlygiven the uptick in liquidity inthe debt capital markets. Thereis one place where there is noshortage of deals, however, theUS, and sponsors are takingfull advantage.

BANKS & ADVISERS

ADAMS TO SMBC

SMBC has hired Carl Adams to head its LatAmproject, corporate and FI teams as theJapanese bank continues to expand itslending capabilities in the region. Adamswill be in charge of overall LatAm,including corporates and FIs, and projectfinance, while Sam Sherman remains in hisposition as head of LatAm project finance.

Adams comes to SMBC from EspiritoSanto Investment, where he was head of theAmericas – structured finance andorigination. Within the bank’s projectfinance team, Felipe Diaz will move fromNew York to Santiago to be chiefrepresentative of the newly openedoffice, while Alfredo Santillan has beenappointed chief representative of theMexico office. Isaac Deutsch , former head ofLatin America, will continue to act as co-

head of specialised finance Americas,together with Hirofumi Otsuka .

Over the last few years, the Japanesebank has opened a series of representativeoffices throughout the region, includingMexico (2009), Colombia (2010), Peru (2012)and Chile (2013).

NAB APPOINTS NEW PF HEAD

NATIONAL AUSTRALIA BANK , Australia’s largestbusiness bank, has promoted Richard Cooper torun the project and infrastructure financebusiness for energy, resources andinfrastructure, covering the Asia-Pacific region.

Cooper assumed his new role last weekafter having run the infrastructure projectfinance team for the past five years. Hereports to Swati Dave , head of globalspecialised finance.

PFC KEEN ON BANK STAKE

POWER FINANCE CORP (PFC) is mulling the idea ofacquiring a stake in a public sector unit

(PSU) bank or state-run bank. It is not clearwhich bank this will be but PFC has alreadysent a letter to the relevant ministries – thepower ministry and finance ministry –about its intention to have a stake in abank, including representation on theboard.

“We are looking to buy a substantialstake in a PSU bank that will allow us to have representation at the boardlevel,” PFC chairman Satnam Singh toldreporters.

PFC is looking at setting up a a privateequity fund jointly with Tata Capital . Indian power utilities have been strugglingto build new plants – for a number ofreasons such as red tape, acute supplyshortages of coal or gas, higher costs anddiscom issues. So it is looking to set up thefund to offer another option for equityfunding.

“To begin with, it [the private equity fund] will be of US$300m, andeventually, it will be a US$1bn fund,” Singhsaid.

ICICI LOANS FOR CLEAN ENERGY ONLY

ICICI BANK is mulling a new loan product thatwill be exclusive to clean energy facilities.“We are always on the lookout for goodprojects that seek to develop and/or deployclean energy technologies,” ICICI managingdirector and CEO Chanda Kochhar told thelocal media. “We have the resources tosupport a large number of such projectsand we would want to expand our activitiesin this area,” she said.

Kochhar’s comments come ahead of theWorld Environment Day, which falls onJune 5 this year. The bank, India’s largestprivate sector bank, is already providingconcessional finance facilities to projects inthe clean energy sector, and the concessionvaries according to a number of criteria.

LLOYDS INTO ANNUITIES

The insurance arm of LLOYDS BANK , ScottishWidows, is launching a new annuityproduct next month, into which will be putlong-term debt assets, including projectfinance. The bank has been downsizing itsproject finance loans team (PFI issue 504)and looking more towards a capitalmarkets platform approach.

Scottish Widows has an annuity booktotalling more than £10bn and with thenew enhanced product it will be seeking tocapture more market share. As new clientscome in, it will need new assets – fromearly next year onwards. Lloyds has alreadytransfered £700m in housing associationloans and £100m in university loans toScottish Widows.

The idea, going forward, is to source newdeals with the commercial bank teamsworking with the Scottish Widows team inoriginating deals.

“The plan for future investments in loanassets includes social housing associations,higher and further education institutions,infrastructure and project finance, all ofwhich represent appropriate alternativeasset classes for backing long-term annuityliabilities,” said a company spokesman.

The annuity business is in a differentdepartment to Scottish Widows’Investment Partnership, the arm that runsthe infrastructure equity fund businessheaded by ex-project finance head GershonCohen.

GIB APPOINTS MDS

The UK’s GREEN INVESTMENT BANK (GIB) hasappointed its managing directors foroffshore wind and non-domestic energyefficiency (NDEE). Christine Brockwell replaces Stephen Crane as offshore wind MD and Gregor Paterson-Jones has joined as NDEE MD.

Brockwell is joining from Global CapitalFinance in Germany, where she was adirector responsible for Europeanrenewable energy and global equitysyndications. She led various M&A deals,including in the offshore sector.

Paterson-Jones was chief executive officer(CEO) at South African asset managementand advisory firm Sterling WaterfordSecurities and will move to the Edinburghoffice of GIB along with newly appointeddirector Iain Watson .

Brockwell and Paterson-Jones will reportto the new head of investment banking atGIB, Edward Northam , along with waste MD Adrian Judge (PFI issue 505).

DEVELOPERS

INTERGEN GOES FOR REFI

Global independent power project (IPP)developer INTERGEN is refinancing itscorporate style financing from 2007 (PFIissue 366) with a new US$500m revolvingcredit, US$500m secured term loan andUS$800m bond deal. The company is ratedB1, down from Ba3 in 2007.

It has launched the US$500m term loantranche of the deal with price talk at Liborplus 375bp–400bp with a 1% Libor floor and99 offer price. Deutsche Bank is lead leftwith Barclays, Bank of America MerrillLynch, Credit Suisse, Mitsubishi UFJ, RBCand Citi.

The company is now owned by OntarioTeachers Pension Plan and Huaneng Group.Moody’s said the refinancing and therating, moved away from negative, issupported by the fact that the sponsors areputting in US$700m of equity as part of thedeal and that “since 2007 the sponsors haverecommitted more than US$400m in equitythat could otherwise have beendistributed”.

It says “upon transaction close,InterGen’s holding company debt will bereduced by US$537m, enabling the holdingcapital structure to stabilise atapproximately 60% debt to totalcapitalisation”. However, it suffered in 2012from the financial performance of its UKplants, with distributions dropping by 40%over the year.

In the the first three-quarters, revenuesfrom the UK dropped from US$127m toUS$61m. And this year things could getworse. The power purchase agreements(PPAs) on Rocksavage come to an end,which will expose InterGen to 704MW ofmerchant capacity from now. Spark spreadsin the UK, and Europe, are not set toimprove for at least two years.

The new refinancing will, however,remove a large refi risk from the company,said Moody’s, and the holding companydebt will now run for at least seven yearswith 60% maturing beyond seven years.InterGen has a net capacity of 6,100MW in11 schemes across the UK, the Netherlands,Mexico and Australia.

FALCK GETS A NEW PLAN

FALCK RENEWABLES has approved a newbusiness plan for 2013–17 that involvesselling 49% of existing schemes, includingits UK wind portfolio, and investing in areassuch as waste to energy, anaerobicdigestion and waste biomass.

“We have developed a robust investmentplan with total cumulative capex ofapproximately €250m for the period; thisplan also envisages the possibility ofacquiring existing assets/facilities with thegoal to achieve approximately 81MWinstalled capacity by 2017” of waste deals,the company said.

In the UK, Rothschild has been appointedto advise and value the wind assets. Thecompany will complete schemes currentlyin construction, Nutberry and WestBrowncastle, and two new schemes,Spaldington and Kingsbury. The UK windportfolio currently totals 273MW.

Falck tried to IPO its UK wind assets inearly 2008 but pulled the issue. It has raisedproject finance on a number of its UK deals.

Falck has released its 2012 resultsshowing revenues were up on 2011 by 10%to €275m but debt was €757m. It took animpairment loss on its long-runningSicilian project, dating back to the 2002tender, of €70.9m. Without this and otherimpairments, which totalled €111.6m in all,Falck said it would have recorded a €90.2moperating profit. The portfolio is expectedto total 770MW by the end of 2017.

ABERTIS RESTRUCTURES AMERICAS

Spanish infrastructure company ABERTIS isset to appoint David Díaz , currentlymanaging director of its American tollroads unit, as new chief executive officerof Arteris , the company’s Brazilian tollroads subsidiary. The current CEO ofArteris, José Carlos F de Oliveira , will becomethe non-executive president of the board ofthe company. Díaz will be based in SaoPaulo and report to Abertis’ CEO FranciscoReynés .

Abertis bought Arteris, formerly OHLBrazil , from Spanish builder OHL in 2012.The deal, which was signed in partnershipwith Canadian fund Brookfield , expandedAbertis’ toll road concession portfolio andwas part of the company’s strategy to move

Project Finance International June 5 2013 3

Banks & Advisers 2 Developers 3 Funds 5 Governments 6 Lawyers 6 Multilaterals 7 Rating Agencies 7

away from the airport sector and to focuson motorway projects.

Abertis says Díaz’s appointment as CEOof Arteris is aimed at “adapting theorganisation to the challenges posed by thegroup’s international expansion andensuring the efficient integration of itsbusinesses”.

As part of the managementreorganisation, Abertis created a dedicatedunit, called Toll Roads Chile, to overseeChile’s 700km road network and thecountry’s projects. It also appointed LuisMiguel de Pablo as managing director of thenew unit. Abertis’ only other dedicatednational road units oversee the company’shighway networks in Spain and France.

Finally, Abertis created a rest of theworld concessions department to managetoll roads in the US, Argentina, Puerto Rico,Colombia and the UK. The department willalso oversee Abertis’ airports portfolio,which the company is seeking to divest. Carlos del Río , previously head of the airportsunit, has been appointed managing directorof the rest of the world concessionsdepartment.

OHL MEXICO TO IPO

OHL MEXICO , the Mexican subsidiary ofSpanish construction company ObrasconHuarte Lain, is planning to raise aboutUS$800m in a follow-on share sale. OHLMexico carried out an IPO of 26.1% of itscapital in November 2010, valued atUS$910m at the time. This time round, thefirm is looking at selling about 15% of itscapital. The Spanish parent plans to use themoney to pay off debts and invest in freshprojects.

OHL Mexico’s share price fell by 6.86% toPs34.22 a share following the news, becauseof fears that the sale would dilute existingshareholders’ equity. This new sale – whichcould happen as soon as the week startingJune 17 – would mean OHL retaining a 59%stake in its Mexican subsidiary. OHL Mexicosays the actual date of the follow on salewill depend on market conditions at thetime.

Credit Suisse and Santander, Spain’sbiggest bank, acted as joint global co-ordinators on the offering. UBS and BBVAacted as joint bookrunners. For the latestshare sale, Santander and BBVA will beadvising on the deal.

In 2002, OHL Mexico started operationsin the country and it has expanded rapidlysince, making it now one of the country’stop transport infrastructure operators. Ithas been one of the main concessionairesin the metropolitan area of Mexico City, inparticular in terms of the number of milesof highways under its management.

Currently, the company builds, manages,operates and maintains six toll roads andone airport.

The highway concessions are located inthe urban areas with highest vehiculartraffic in Mexico City, the state of Mexicoand the state of Puebla. In the airportsector, the company participates in theintegral management of the second largestairport, Toluca International, serving themetropolitan area of Mexico City.

OHL Mexico’s net income increased by97% in the first three months of the year toPs1.8bn (US$147m), mainly on the back ofthe company’s efforts to cut costs. OHLshares have risen 28% this year while thebenchmark index has dropped 1.5%.

BANKS MANDATED FOR MERIDIAN IPO

The N$Z3bn (A$2.519bn) listing of NewZealand’s biggest power generator,Meridian Energy, will be managed by Goldman Sachs , Deutsche Bank/CraigsInvestment Partners and Macquarie Capital .As joint lead managers, the banks will runthe next stage of New Zealand’s energyprivatisation in listing Meridian Energy thisyear.

Meridian is the second of fourgovernment-owned power assets set forlisting by the end of 2014, following thelisting earlier this month of Mighty RiverPower . UBS is understood to have beappointed to a third float, the NZ$900mGenesis.

DOWNER COMPLETES NOTES ISSUE

DOWNER EDI LTD has successfully completed anew issue of fixed-rate senior unsecuredmedium-term notes (MTNs). The issue wasoversubscribed but capped at A$150m andcompleted at a pricing margin of Australiandollar swaps + 260bp, which translates to afixed-rate yield to maturity of 5.96% pa overthe 5.5-year term of the transaction.

The scheduled maturity date isNovember 29 2018. The proceeds will beused to refinance an existing A$150m noteissue maturing in October 2013. Theexisting notes had an original term of fouryears and a margin over Australian dollarswaps + 375bp and a fixed-rate yield tomaturity of 9.77% pa. HSBC and Westpac were joint MLAs.

Fitch Ratings has assigned Australia-based Downer Group Finance Pty Ltd ’s seniorunsecured notes due May 2018 a BBB–rating. The notes are to be issued underDowner Group Finance’s A$750m medium-term note (MTN) programme, which israted BBB–. Last month, Downer syndicateda four-year A$400m debt facility that willrefinance a previous A$420m facility.

LANCO ASSETS FOR SALE

Lanco Infratech is planning to raise someRs10bn (about US$177m) from the sale ofnon-core assets as part of its plan to reduceits debt burden. The group’s net debt wasestimated at Rs335.935bn at the end ofMarch 2013.

It reported a loss of Rs10.733bn for theyear to end-March 2013, largely due tounpaid dues or fees from powerdistribution companies and the under-performance of assets. In the previous yearthe loss was at Rs1.12bn. At end-March thisyear, the company had receivables ofalmost Rs30bn due from various statediscoms.

The non-core assets will be across thewind, solar and road segments. It alreadyhas started the move, recently selling itswind energy assets in Tamil Nadu andraising some Rs420m.

The company will, however, continue tofocus on developing power projects andgrowing its EPC business. It currently haspower generation capacity of nearly4,000MW and some 4,000MW of newcapacity is under construction.

Lanco has been talking about bringing ina strategic investor but has not beensuccessful yet in attracting a new partnerdue to issues in the power sector. “A slew ofissues, including fuel shortages andfinancial problems of discoms, are makingthe sector less attractive,” a Lanco officialsaid.

VESTAS EX-CFO UNDER INVESTIGATION

Denmark’s fraud squad is investigating VESTAS ’ former chief financial officer HenrikNørremark over two alleged agreements hemade with two Indian companies thatcould cost the wind turbine maker up to€18.9m.

The company referred the case to thefraud squad, formally called the StateProsecutor for Serious Economic andInternational Crime, after it closed its owninvestigation “without being able toconclude what the money had been spenton”. Vestas dismissed Nørremark, whodenies wrongdoing, in October 2012.

Vestas alleges that Nørremark releasedthe unnamed Indian co-operation partnerfrom two debt agreements worth €4.4m intotal, and invested €14.5m in a potentialproject in India run by the same groupcompany. According to Vestas, Nørremarkexceeded his powers by signing theseagreements, and the company did notreceive any assets in the transactions.

Bert Nordberg , chairman of Vestas’ boardof directors, said the previous investigation,led by the company’s external lawyers and

Project Finance International June 5 20134

auditors, proved that neither the board northe president and CEO were involved in thealleged deals.

“However, the investigations werecompleted without the lawyers or theauditors being able to find any furtherclarification of what the money was spenton,” added Nordberg. “On this background,the board requested the fraud squad toinitiate an investigation and at the sametime, we informed the former CFO that theboard intends to hold him responsible forthe losses that the company may suffer dueto his transactions.”

GDF BUYS INTO NABUCCO

GDF SUEZ has bought a 9% stake in theproposed Nabucco West gas pipeline fromthe project’s shareholder OMV . Austria-based OMV recently bought its stake inNabucco from Germany’s RWE .

OMV will remain a shareholder of theproject. Other equity investors areHungary’s FGSZ , Romania’s Transgaz ,Bulgaria’s BEH and Turkey’s BOTAS . Theproject is one of two proposed pipelinesthat are competing to take natural gas fromAzerbaijan’s production fields to Europe,reducing the EU’s reliance on Russian gasimports. The Shah Deniz II consortium,which controls the gas fields, and the Azerigovernment are due to pick a winnerbetween Nabucco and the rival TransAdriatic Pipeline (TAP).

GDF and OMV did not disclose thefinancial terms of the acquisition.Compared with the TAP project, Nabuccowill supply Romania and Hungary, twocountries in which GDF Suez says it has“strong downstream positions”.

Reinhard Mitschek , CEO of the Nabuccoproject, said: “The entry of GDF Suezstrengthens the shareholder structure ofNabucco significantly and paves the way tothe French market. The industry expertise

of GDF Suez as the operator of the largestgas transport network in Europe and itsstatus as the second-largest buyer of naturalgas in Europe are of immense advantage tothe project.”

OMV said the deal was subject to “certainconditions” and was expected to close inthe second quarter of the year.

VIRIDOR TAKES ACTION

UK waste company VIRIDOR has seen itswaste profits drop by £21.1m to £36.5m dueto a fall in its recycling business. Shankshas been hit too, with the companyreporting a £35.3m loss before taxcompared with a £29.9m profit in 2012 (PFIissue 505).

However, both say their private financeinitiative (PFI) development projects arebright spots in their portfolios. “These andsimilar projects are expected to drive thecompany’s long-term profit growth,” saidViridor.

Pennon owns Viridor alongside its SouthWest Water business. It is one of the threeremaining listed UK water companies.However, the sector has been shaken uprecently with the prospect of a bid forSevern Trent by Borealis, KIO and USS.

Viridor has closed six facilities in the UKdue to the downturn and made 152redundancies, generating savings of £13m.It plans to reduce its landfill network from21 sites to three by 2020.

BILFINGER TO SELL PPPS

BILFINGER BERGER has announced the sale of itsconcessions business “due to the decliningstrategic role of the concessions businesssegment”. The unit has been successfulacross the globe. It closed the Ohio RiverBridges East End Crossing project in Marchand is believed to have won the MerseyGateway scheme. However, last year it

booked a €13m provision against the Araratprison scheme in Australia. NM Rothschildwill handle the sale.

Bilfinger is shifting its focus fromconstruction to industrial services andmaintenance work.

“The sale is a consequence of the factthat we abandoned our constructionactivities in so many countries,” aspokesman said. “If you no longer have thesynergies between the building businessand concessions, why would you need suchas solitary unit that’s got little to do withthe rest of the company?”

The concessions unit currently has 16projects into which €254m of equity hasbeen committed. Last year Ebitda from theunit increased to €41m from €23m in 2011,mainly due to a €52m gain from the sale of19 assets to the Bilfinger Berger GlobalInfrastructure fund in late 2011 (PFI issue465). The fund raised £212m and the gainwas booked in 2012. Bilfinger kept 19.9% ofthe listed fund. Other contractors have usedtheir listed fund vehicles to buy assetspiecemeal but given that Bilfinger is sellingthe lot, presumably it wants a wider salesprocess.

FUNDS

INFRAMED INVESTORS NAME NEW PRESIDENT

Jean-Pierre Jouyet , the chief executive officerof France’s Caisse des Dépôts (CDC), hasbeen appointed president of the investors’board of infrastructure fund INFRAMED on athree-year term. He replaces Franco Bassanini ,the chairman of Italy’s Cassa Depositi ePrestiti (CDP).

The InfraMed fund was created by CDCand CDP in 2010 and is supported by theEIB. Morocco’s Caisse de Dépôts et de

Project Finance International June 5 2013 5

PEOPLE & MARKETS

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PLEASE CONTACT US IF YOU HAVEINFORMATION ABOUT JOB MOVESAT YOUR FIRM OR WITHIN THE MARKET

Gestion and Egypt’s EFG Hermes are alsoinvestors. The fund has so far raised €385mand placed investments in projects inTurkey, Egypt and Jordan.

InfraMed aims to invest up to €1bn inurban, energy and infrastructure projects inthe Middle East and North Africa. Thefund’s main targets are greenfield projects,in which it invests with equity,shareholder’s loans, or mezzanine finance.The fund will seek annual return ratesbetween 12% and 16% and its life will be 14years.

HICL REPORTS

Infrastructure fund HICL has reported annualresults showing the value of its fund is now£1.2bn, up from £902m last year. Thecompany had raised £272.6m during theyear to fund new investments and paid feestotalling £13m to fund manager InfraRedCapital.

The return from the portfolio was£97.5m. The discount rate on the fundvaluation was down slightly, to 8.4% from8.6% in 2012. The fund bid for 15 assets in2012/13 but only won three, saying it was acareful bidder.

Profit was £49.9m, up from £33.2m theyear before. However, on a consolidatedIFRS basis, profit dropped from £84.8m to£67.5m due to a fall in gains from financereceivables from £177.8m to £149m“arising from lower reductions in UK long-term Gilt rates in the year compared withthe prior year”.

3I LOOKS AT BARCLAYS INFRA

3i Group has made an irrevocable offer tobuy Barclays Infrastructure FundsManagement (BIFM). 3i is already investedin the infra sector with its own 3iInfrastructure listed fund, which reportedits results last month (PFI issue 505).However, the fund is now almost fullyinvested.

BIFM, headed by Chris Elliot and NigelMiddleton , has £780m under managementand two active unlisted funds in the UK and European PPP and energy sectors. Since 1996, it has invested £1.7bn in six funds. 3i and BIFM werepartners in the Infrastructure Investors (II 2 ) secondary market fund, with SG andRobert Fleming, which was sold to BIFM in2009.

3i says the new agreement will not affectits existing advisory agreement with 3iInfrastructure. It expects the assetmanagement fees from BIFM will coverincremental operating costs. Cressida Hogg ,head of infra at 3i, said “we know the BIFMteam well”. Before II 2 was sold, both BIFM

and 3i were said to be vying for the fund(PFI issue 383).

VILLEN TO IFM

INDUSTRY FUNDS MANAGEMENT (IFM) has appointedex-Ferrovial chief executive officer (CEO) Nicolas Villen as an external senior adviser toits US$7.1bn global infrastructure fund.Villen will provide advice and support toIFM, particularly in enhancing strategicindustry relationships in Spain and LatinAmerica.

He joins IFM following a 20-year career atFerrovial, where he was CEO of FerrovialAeropuertos from 2009 to 2012 and CFO ofFerrovial from 1993 to 2009.

IFM has 11 senior infrastructure advisers,four of whom have been appointed in thepast 12 months. It has appointed AlecDreyer, the former CEO of the Port ofHouston Authority in Houston, Texas; KeithForman, former CFO of CrestwoodMidstream Partners; and Dr Uwe Franke,the former chairman of BP Europe. In theairport sector it has taken a 35% stake inManchester Airport to support itsacquisition of Stansted Airport.

GOVERNMENTS

INFRASTRUCTURE NSW ROCKED BY RESIGNATIONS

Former Liberal premier Nick Greiner isstepping down as the chairman of INFRASTRUCTURE NSW (INSW) in July, with thestate’s premier proposing Graham Bradley ashis successor. Chief executive Paul Broadwill resign to head up Snowy Hydro .

The resignations are widely viewed as aconsequence of the rivalry between iNSWand other bureaucracies such as theDepartment of Transport on who shouldlead the push for new infrastructure.

Bradley has been chairman of HSBCAustralia and a member of its Hong Kong board, and is a former managingdirector of Perpetual. Jim Betts , the formerVictorian Secretary of Transport, has beenappointed as interim chief executive ofiNSW. iNSW will change its focus fromdeveloping strategy to simply advisinggovernment.

LAWYERS

MILBANK POACHES DAVIES

MILBANK TWEED has poached Aled Davies to thefirm from the Allen & Overy Tokyo office,

where he was the managing partner. Daviesis a projects lawyer and last year worked onthe Ichthys LNG scheme. He is said to beclose to JBIC and has worked on a variety ofproject deals around the world.

Davies will start at Milbank onSeptember 1 and will work alongside theTokyo office head Alec Borisoff , anotherproject finance specialist and fourassociates. Last year, Tokyo partner MarkPlenderleith left the firm to join Freshfields.A&O has already appointed a new head inTokyo, Simon Black . He is a corporate andenergy finance specialist.

ENERGY ATTORNEY BACK TO ANDREWS KURTH

J Todd Culwell has returned to ANDREWS KURTH

as a partner, focusing on transactions in theenergy industry. Culwell previously servedas a partner in Andrews Kurth’s Houstonoffice, and most recently was a partner inthe business and finance and energytransactions groups at Morgan Lewis &Bockius.

Culwell represents energy clients infinance and transactional matters,including the development, financing andacquisition of energy infrastructureprojects around the world, as well as in oiland gas acquisitions, divestitures andfinancings. He also represents financialinstitutions and borrowers in corporatefinancing activities.

INFRA SPECIALIST TO MCKENNA LONG & ALDRIDGE

Jonathan Ballan has joined MCKENNA LONG &

ALDRIDGE as a partner in the New York office.Ballan will head the New York publicfinance group and will co-chair the firm’sglobal infrastructure and public-privatepartnerships practice. Ballan was formerly apartner at Mintz Levin, where he led anddeveloped the New York public financegroup.

Ballan’s experience includes municipaland infrastructure finance, public authorityfinance, stadium finance, economicdevelopment, housing finance, projectfinance, government relations, andprivatisation and securitisation of publicassets. He serves on the board of theMetropolitan Transportation Authority ofNew York and is a member of the audit,finance, commuter rails, and bridge andtunnel committees. Joining him as counselin the New York office is Rob Senzer .

The addition of Ballan and Senzer alignswith the firm’s plan for increasing anddiversifying services on the local and statelevel in New York, as well as throughoutthe northeast.

Project Finance International June 5 20136

NORTON ROSE APPOINTS THREE

NORTON ROSE has promoted energy andproject finance specialists Kate Kortenboutand Steven Towell to of counsel in its Londonoffice. The firm also promoted energyspecialist Katrin Stieß in Munich.

Towell focuses on the constructionaspects of large-scale renewable and cleanenergy projects. He recently advised theUK’s Green Investment Bank (GIB) andother lenders on the £224m PGGM/AmpereWalney offshore wind farm deal. Thefinancing was the first offshore wind dealfor the GIB. The other lenders were LloydsBanking Group, Royal Bank of Scotland,Santander and Siemens Bank.

Kortenbout focuses on the constructionand operational phases of projects.Recently, she worked for the MoroccanAgency for Solar Energy on the Ouarzazatesolar power programme.

Stieß is a corporate lawyer, and mostlyworks on private and public M&Atransactions. She has worked on severalacquisitions in the solar, offshore wind andonshore wind power sectors. She hasadvised Blackrock on the acquisition of aFrench photovoltaic portfolio, and MunichRe’s global asset management unit MEAGon an investment in wind power plants inGermany.

BURGES SALMON PROMOTES ENERGY SPECIALIST

BURGES SALMON has promoted energy projectspecialist Nick Churchward to partner in thelaw firm’s London practice. Churchward,previously an associate at the firm,specialises in resource and wastemanagement and renewable energy.

Churchward advises on waste PFI/PPP projects, energy supply and power purchase agreements. He hasexperience advising lenders, developers andlocal authorities on a range of projects. Inthe past, he has worked on more than 20waste recycling, waste treatment and wasteto energy PPPs and PFIs for localauthorities, sponsors, and funders. Thesewaste projects include the Scottish BordersPPP, Exeter City EfW PPP, GreaterManchester PFI, Cornwall PFI,and Wakefield PFI.

MULTILATERALS

AFDB THINKS BIG

The AFRICAN DEVELOPMENT BANK (AFDB) isnegotiating with its members to create ahuge fund to finance infrastructure in

Africa. The bank estimates the need of theAfrican continent at US$100bn every yearfor the current decade and the fund that ithopes to create to finance infrastructureinvestment on the continent could be asbig as US$50bn.

The bank’s annual assembly was held inMarrakesh last week. The AfDB is financingabout US$8bn, including US$5bn forinfrastructure projects in Africa, the adviserto the president of the AfDB, YoussefOuedraogo , said on the margin of the bank’sannual assembly.

“There are many wealthy sovereignfunds in Africa and among our members, sowe will try to negotiate some interestingloans,” he said. The bank would get fundsfrom Libya, which will become an activemember, Algeria, Equatorial Guinea andBotswana.

“The governors have been keen and areconsidering how to accelerate the process,but there is no calendar for the project,”said chief economist and vice-president ofthe bank Mthuli Ncube .

Africa’s economy is projected to grow by4.8% in 2013 and accelerate further to 5.3%in 2014, the AfDB said. It hopes to draw ininvestment to its fund from sovereignwealth funds, pension funds and theAfrican diaspora.

RATING AGENCIES

MOODY’S OPINES ON SSA

MOODY’S has issued a 24-page document on closing the infrastructure gap in

Sub-Saharan Africa (SSA). The rating agency said the sub-continent needed at least US$90bn in funding every year but actual infrastructure financings only totalled US$45bn,“perpetuating the growth-inhibitingconsequences of underinvestment ininfrastructure”.

The report discusses the various sectors –energy, transport, ICT and water – and thenlooks at the health, and bond issuanceprospects, of sovereigns in the region. Thelocal bond markets remainunderdeveloped.

The report looks at the prospects for private investment in infrastructure,which have been limited up to now. SSA attracts US$10bn pa in privateparticipation in infrastructure, well below the US$70bn into South-East Asia.There is a low institutional capacity forPPPs and a lack of adequate regulation, saysMoody’s.

Moody’s says the region benefits from an increase in infrastructureinvestment from the emerging markets –China, India and the Arab countries. Inaddition, it says “spear-headed by theAfrican Development Bank, there is anincreasing effort under way to promoteregional structuring projects, furthersupporting regional co-operation andintegration”.

The agency says: “SSA sovereigns havekey roles in establishing a positivedynamic, primarily through the promotionof macroeconomic stability. Indeed, long-term financing requires a stable interestrate environment and particularly lowinflation.”

Project Finance International June 5 2013 7

PEOPLE & MARKETS

A sharp intake of breath all around, then, when the Open Grid bond refinancing pricing was revealed, 68bp and 95bp. Oh blast!

All that stuff about high margins, liquiditypremiums, Basel III, etc, etc, needs now to be putin the shredder. As for IUK’s 180bp guaranteefee, please!

Presumably most, well all, sponsors of infra projects in the EMEA region spentMonday afternoon in conference calls entitled: “Refinance the entire book, right now, tomorrow, OK?” In the Americas, similarcalls have already been made, six months ago,and now we have the cov-light Term B boom.

It is all a little spooky. Nothing has changed economically. The debt overhang

in the world remains huge. Growth has notpicked up, much. The stimulus programmes, QEand the like, are still in place. This, takentogether with a more relaxed air in the world’sfinancial institutions, is pushing the boomonwards.

No doubt about it, you might as well make hay while the sun shines. When thestimulus programmes are run down, presumably interest rates will rise and the debt capital markets frenzy will come to an end, hopefully in an orderly fashion. Will assetprices drop?

No one wants another crash! But we have allgot used to very low interest rates. Central bankswill be very worried about how to ween us offthem.

A sharp intake of breath� NOT PEOPLE & MARKETS

Project Finance International June 5 201388

Brazil 9 Canada 12 Chile 13 Colombia 13 Mexico 14 United States 17

There are at least 17 US-based fertiliserprojects now on banks’ radar as possiblecandidates for project financing, and theseare among the nearly 100 projects thatcapitalise on cheap domestic gas or convertgas to something. Fertiliser projects are hotnow because they can take advantage oflow gas prices very quickly, with a leadtime of only about three years fromcontract award to the start of the plant.

Nitrogen fertiliser production projectsare now particularly important, as it is seenas being in a period of transition andresurgence after years of decline. Cheapshale gas has led to producers of ammoniaand urea eyeing new opportunities in theUS for the first time since the 1990s, andEgypt’s Orascom ’s willingness to commit awhopping US$600m in equity to a recently-closed deal is indicative of the newenthusiasm.

In mid-May, Citigroup and Bank ofAmerica Merrill Lynch closed a fertiliserdeal done in a couple of steps. TheUS$1.2bn tax-exempt bond deal backedIowa Fertilizer Company’s new US$1.bngreenfield nitrogen-based fertiliser complexin Wever, Iowa. The project is sponsored by OCI, a subsidiary of Orascom.

The major challenge in getting the dealdone was timing. Midwestern Disaster AreaBonds (MDABs) supporting the project hadto be issued by December 2012. The short-term financing was to mature this month,and proceeds were held in escrow untiltake-out by the more permanent financing.

The deal saw great demand, bringing inUS$3.5bn of orders from more than 75institutional investors. Investors were veryinterested in this deal based on itsrelatively high yield, short maturity andhigh coverage by projected revenues. In thebase case, debt service coverage is at 2.58xin 2016 and increases to 5.84x in 2025. In astress scenario, coverage is 1.48x in 2016and 3.91x in 2025.

The pricing on the bonds was reduced byup to 10bp based on demand, resulting inan average interest rate of 5.12%. The finaldeal included US$390m of term bondsmaturing in 2019 yielding 4.8%, US$366m

of term bonds maturing in 2022 yielding5.1%, and US$429m in term bondsmaturing in 2025 yielding 5.3%.

The OCI project is the first world-scalenitrogen fertiliser facility to be built in theUS in more than 20 years and will produceup to 2.0m metric tons of urea ammoniumnitrate (UAN), urea, ammonia and dieselexhaust fluid (DEF) annually uponcompletion. The plant is expected to beginproduction in the fourth quarter of 2015.The project will sell its nitrogen products atmarket prices and has entered into naturalgas call swaptions for the first seven years.

The bonds were rated BB– by bothStandard & Poor’s and Fitch and the dealrepresented the largest non-investmentgrade transaction ever sold in the US tax-exempt market. Orascom is looking to doadditional projects in the US in the nearfuture.

A similar project under development wason track to use the same financing strategyuntil the developer was forced to changecourse in recent weeks. Midwest Fertilizeris pursuing a new financing plan that couldinvolve project finance from commercialbanks after losing state backing.

Indiana has cancelled subsidies for theplanned US$1.8bn fertiliser plant in thestate because of concerns that a Pakistanicompany involved in the project makesproducts used in improvised explosivesused against US troops in Afghanistan.Midwest Fertilizer is 48% owned by FatimaGroup , which produces a calciumammonium nitrate fertiliser in Pakistanknown to have been used in improvisedexplosives in Afghanistan.

Indiana Governor Mike Pence had put aUS$1.3bn incentive package for thefertiliser manufacturing plant on hold inJanuary pending a review but ultimatelydecided the incentives would bewithdrawn. The Indiana Finance Authorityhas already issued US$1.3bn of bonds inDecember and the funds have been held inescrow and will be used to repay thebondholders.

Fatima Group has since reformulated thefertiliser to make it less explosive and theproduct is to be tested with the USgovernment in June, Midwest Fertilizer said

in a statement. Fatima Group also hasstopped selling the fertiliser in areas ofPakistan that border Afghanistan.

In terms of other possible financings, ThyssenKrupp Uhde has three majorprojects under way as part of this new waveof development in the US. Late last year,the company received a major order for thedesign and construction of fertiliser plantsin Port Neal, Iowa and Donaldsonville,Louisiana via its US business partner UhdeCorporation of America . The projects havebeen ordered by CF Industries Holdings .

An ammonia plant with a daily capacityof 2,200 metric tons, a urea plant and aurea granulation plant with capacity of3,500 tons per day will be constructed inPort Neal. An ammonia plant with a dailycapacity of 3,300 metric tons, a urea plantand a urea granulation plant with the samecapacity as in Port Neal will be constructedin Donaldsonville, Louisiana.

In the same state, Mosaic is movingforward with plans for a potential new800,000 tonnes/year ammonia plant thatwould involve investment of aboutUS$700m. In Minnesota, CHS plans tospend more than US$1bn on a 800,000tonnes/year ammonia plant in the samestate.

Canada’s Agrium earlier this weekstepped back from two projects that wouldhave expanded its capacity to makenitrogen-based fertiliser, in part because somany competitors are pursuing similarplans. The company has suspendedengineering work on a proposed US$3bnplant in the Midwest, saying it will focus onfinding a partner to share the capital costand securing a long-term natural gascontract for the project.

Agrium investor relations director ToddCoakwell said the many similar projects inthe works and the uncertainty of long-termnatural gas costs caused the company topull back from plans for the new plant,which would have produced up to 1.8mtonnes annually. He said Agrium wassuspending expansion plans for itsRedwater, Alberta, nitrogen plant, and thecompany continues to aim for a finaldecision on the expansion of its Borger,Texas, plant in the second half of 2013.

NEWS AMERICAS

Fertiliser deals abound � FRONT STORY USA - PETROCHEMICALS

The first US fertiliser transaction for many years has reached financial close

Banks are looking beyond LNG to projects poised to take advantage of the shale gas boom

BY ALISON HEALEY