Magazine article Global Finance

Slowdown in Project Finance? Not in Australasia

Magazine article Global Finance

Slowdown in Project Finance? Not in Australasia

Article excerpt

Against a backdrop of global economic uncertainty, the major Australasian economies have managed to record continued growth, while simultaneously sustaining low inflation and increasing employment.This is enabling project finance to remain active in the region, albeit not without challenges.

Enduring low pool prices and regulatory pressures in the power industry led to restructurings and asset sales, such as the well-publicized exit of US-based multinationals. However, the region is attracting investment by the Asian majors, including interest in Australia's largest privately owned generator, the Loy Yang A power station in Victoria. In New Zealand, a large hydropower project and a number of geothermal projects are planned to address growing demand-supply imbalances and declining natural gas reserves. Meanwhile, an estimated 3,000 megawatts of wind farms are currently at various stages of planning in the region. An early success story is the recent completion in western Victoria of Pacific Hydro's 52.5-megawatt Challicum Hills wind farm, jointly financed by ANZ Investment Bank and Westpac.

In contrast to the low pool prices in the power market, commodity prices recently have surged across the board. Although the price recovery in the metals sector has been counteracted to an extent by the rising Australian dollar, the overall profitability and financing activity in the industry has returned.This is leading to the emergence of a number of resources projects that are being financed via successful equity raisings and structured bank debt. Small or 'junior' companies are also quickly filling the void left by the vacated mid-cap sector.

The sale of Sydney Airport in June 2002 marked the start of a slowdown in the number of major privatizations coming to market, with most of the rail, power, utilities and airport asset-sale programs ending. …

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