Project Finance Activity Holds Its Own

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New players and service bundling characterize a fluid market. Global Finance publisher Joseph Giarraputo moderates.

* GLOBAL FINANCE: What's happening in the project finance sectors-power, oil gas, and telecom? Are there opportunities for project finance bankers in the post -3G hangover?

Francois Artignan, head of media/telecom fi nance (Europe), BNP Panlbas: We shouldn't put all the blame on 3G, even if it indirectly caused some consolidation, which has itself been another factor for the concern about the global exposure of banks in the telecom sector. Still, there is a continuing demand for financing in general and for telecom. Richard Burrett, managing director, global head of project finance, ABN-AMRO: The actual financial burden of carrying 3G is limited to a rely tively small number of major players in Britain and Germany It will be a short-term depressant. But the lack of transparency in some of the markets may make it more difficult for limited or long recourse financing packages to be put together.

Tony Pointer, global head of project finance & privatization, PricewaterhouseCoopers: We've seen that. The first thought for a number of corpora lions isn't classic nonrecourse financing, given their balance sheet positions. Advisers and fenders need to be responsive to this.

Jim Barry, managing director, transport & infrastructure, global debt origination, Dresdner Kleinwort Wasserstein: Project finance used to focus on new build. Now there's a focus on buying existing assets with the view to upgrading.

Kevin Wall, managing director, Barclays Capital There are still some "pure" project finance opportunities. Oil and gas is one such sector.We've seen a number of greenfield opportunities, some in the Middle East.

Constantin J. Koutzaroff, director, global proj- ect finance, Credit Agricole Indosuez: More companies are now involved in oil, gas, and power indiscriminately, from the emerging markets of the Middle East,Asia or LatinAmerica,to Western Europe and North America.The boundary between sectors used to be well defined, and and has progressively disappeared, with a number of major international companies combining activities in both oil and gas, and power.

GF: How do you expect the project finance loan and bond markets to develop in Britain and on the Continent? What's your view of current pricing in these markets?

Dominic Nathan, director and co-head, European municipal and project finance group, Financial Security Assurance (UK): The British and the Continental bond markets are in different stages of evolution. Britain is reasonably mature. We are seeing a reduction in pricing which will drive the increased use of UK sterling market for project finance. On the Continent we've yet to see a substantial project finance long-term bond issue, although several are in the offing.

BURRETT: If you look at the way Continental banks price project finance assets, there is little economic rationale for getting into the bond markets. As long as banks aren't looking on a strict revenue basis when project finance assets are priced, it will be very difficult for the capital markets to provide a competitive offering.

NATHAN: Change is already happening. There is more focus on return on equity. The size of the financing required is so large that the banks are beginning to feel overexposed. There is a tendency to find another source of finance for it.

WALL: As a market we continue to push our bond syndicate functions because the attraction of 25, 30 years loan assets is declining.There's still some degree of resistance in pushing the boundaries as it relates to the long-term euro-denominated infrastructure capital market, but it will happen.

Richard Simon-Lewis, head of infrastructure & PFI, Credit Lyonnais: The appetite for these very long-dated loan assets partly derives from new entrants in the market wanting to aggressively build PF loan books. …