Project Finance Update: current activity and appetite for
Angus Foley, Director, Project Finance Bruce Cooper, Partner, Project
Finance David Bushby, Boardroom Radio
David Bushby: We are speaking with Angus Foley
and Bruce Cooper from Clayton Utz to get their perspective on
what's driving project finance activity in Australia and in
Angus, the GFC obviously impacted the level of project finance
activity in Australia with lenders more reluctant to fund projects.
Are we yet seeing a return to pre-GFC levels?
Angus Foley: Well in Australia the project
finance market continued throughout the GFC we are seeing a number
of good deals being done and certainly some strong appetite
especially by the Australian domestic banks who led a lot of the
transactions. Now what we are seeing is a lot of increased
competition from foreign lenders, we are seeing changes to the way
that deals are being put together, and we are seeing smaller groups
of banks that are leading these transactions. We are seeing maybe
some underwrites coming back and the next step is really to see the
market expand to a range of different deals. Are we there yet? No
we're not, but certainly there's an increase in
David Bushby: And Bruce what do you see is
driving project finance activity in Australia?
Bruce Cooper: Well I think it is broadly
divided between two separate sectors, really. There is the PPP
sector; excluding New South Wales, largely it's a story about
water, hospitals and prisons. There's the energy sector, of
course, which is massive given Australia's energy export
nature. It is all about LNG, it's about coal, coal
infrastructure, and it's really then about refinancing of the
power generation assets, particularly in Victoria.
David Bushby: So just looking forward 12 months
what do you see as being the key variables driving activity levels
over that period?
Bruce Cooper Yeah interesting time I think,
lots of variables. I think the key one, of course, is going to be
the carbon debate and the carbon pricing.
I think that will have a flow off and effect on energy deals in
the market now to be financed. I think in addition that will roll
into the alternative energy and renewable energy space as well.
I think there's the availability of equity and
sponsorship, particularly on the electricity generation assets and
who is going to be there to actually develop those deals.
I can see also a significant impact on the bond market - bonds
are coming back. There have been some retail bonds on airports -
we'll see whether that will have an impact. I think flowing
from that is where the super funds might come in and step up to the
equity investment side, developer side, but there's also their
role as debt providers perhaps. I think there's also the impact
of Chinese money and certainly Chinese Government-assisted money
for debt on deals. Yeah as I see it's a real melange of
David Bushby: And Angus, given your recent
background at Crédit Agricole, what is the commercial
appetite for project risk like at the moment?
Angus Foley: Well I think the appetite remains
very strong for well structured deals. I think there is particular
risk which people will be seeking to mitigate and avoid. Risks
around financial markets will be very difficult in the project
context, but generally if it's a strong sponsor and if there is
a good project rationale I think there will be a strong risk
appetite in the market and we'll see the deals being done.
David Bushby: And Bruce just finally of course,
you have spent many years practising in Asia. What comparisons
would you make between the projects are funded in other
jurisdiction versus Australia?
Bruce Cooper: I think there is two things, one
is difference and one is the increasing similarity. Firstly,
Australian deals, unlike Asian deals, are very heavily taxed
structured and therefore from that narrow perspective more
I also see a coalescence of the way in which deals are done.
Asia is very much cross-border multi-source financing, increasingly
Australia, with foreign investment particularly in the energy space
and foreign money. We are seeing a lot more Australian deals
approaching the Asian multi-source financings.
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