Project finance recovers

The financial crisis has had a significant impact on project and acquisition finance lending in the past 24 months. Banif group’s revenues are indicative of the turnaround, writes Vasco Pinto Ferreira


Listed on the Euronext Lisbon Stock Exchange, Banif Financial Group is the fourth largest private Portuguese financial institution and one of the most internationally established, being present in 17 countries whilst having a strategic focus on the Iberian and Latin American. BANIF Investment Bank embodies the investment banking and asset management divisions of Banif Financial Group.

The bank’s strategy is embedded in the global reach and local approach concept, built upon a global product-market matrix structure, which is adapted and customised to each local market where the bank operates.

Moreover, it enables the development of opportunities and synergies across the various markets in which it operates.

The success of its clients, shareholders and employees is the driver of the success of BANIF Investment Bank and reflects the values embraced by the Group: confidence, humanism, effectiveness, innovation, ambition.

Structured finance
The structured finance team provides financial advisory services and bank financing to various segments of renewable energy and infrastructure including transport, healthcare, environment and social infrastructures.

Advisory services offered to the public sector (central and regional governments, municipalities, local authorities, etc) include funding strategy definition, analysis of feasibility and structuring long term infrastructure concessions, including public private partnerships and the public sector comparator.

Also, BANIF Investment Bank offers financial advisory services and debt financing to private sector entities (sponsors, bidding consortia, concessionaires or SPVs) including structuring, arranging and underwriting project finance debt associated with infrastructure projects and PPP concessions.

The bank also provides structuring, arranging and underwriting of senior debt facilities in the context of M&A transactions financed through acquisition finance structures, participating either as sole MLA or within a syndicate of banks or club deal in MBO, LBO and MBI transactions.

The structured finance department operates in Lisbon, São Paulo and Barcelona, with local execution teams, which include specialists with vast experience both locally and internationally, and work closely with other areas of the bank such as corporate finance, capital markets and private equity, in order to provide a fully integrated service to the bank’s clients.

BANIF Investment Bank keeps up with the pace of its clients in what comes to being flexible, rapid and innovative in order to successfully “make transactions happen”.

The global financial and banking crisis has had a significant impact on project and acquisition finance lending in the past 24 months. From H1 2008 the market has suffered with restricted access to credit and increased margins resulting in a severe decrease in transactions closed and a thinner pipeline of deals. Project finance deal volumes in 2009, according to Infrastructure Journal, were similar to those in 2005. Transaction volumes in Western Europe have decreased 48 percent in 2009 from 2008, but this region continues to be the most important. Spain led with 89 transactions, Portugal had the largest renewables deal in 2009 and Brazil saw a record year with the largest transactions in the power, oil and gas and transport sectors in Latin America.

Notwithstanding the difficult market conditions, Iberia and Brazil have proved its importance in terms of number and relevance of transactions, as well as presence of internationally renowned sponsors.

In Q1 2010, there was a sense that the crisis had reached its bottom in what concerned limited-recourse lending, with a number of transactions moving through the pipeline or slowly returning to the market. The market was apparently stabilizing after 2009 market disruption. However, the sovereign crisis, starting with Greece being unable to refinance part of its public debt and a number of large European economies posting scaring 2009 budget deficit and public debt numbers, has impacted the market and caused renewed uncertainty in liquidity, availability of credit and cost of funds. Currently, the markets witness a fragile response to severe European-wide political measures to reduce budget deficits and public debt levels in a desperate effort to calm the markets and its investors’ confidence in large European economies credit ratings, namely Greece, Spain, Portugal and Ireland.

With less commercial debt available, and at a higher cost, public sponsors and private sector bidders are finding it difficult to finance infrastructure projects and companies wanting to grow from acquisitions are getting “no” answers from previously active banks in the acquisition finance market. Additionally, a number of high profile international banks withdrew completely from limited-recourse lending and faced critical liquidity situations, which frequently involved government support or “bail-outs”.

In this difficult market context, Banif Investment Bank has benefited from the sound financial solvability and capitalisation of the Banif Financial Group to increase its presence and awareness in the structured finance market, focusing in financial advisory, but also structuring and participating in club deals for  renewable and infrastructure projects.

BANIF Investment Bank holds a relevant track record in advising, arranging and underwriting long term funding for renewable energy production projects, namely solar photovoltaic, wind power, biomass and solar thermal.

In particular, BANIF Investment Bank has lead the Portuguese market in the solar photovoltaic technology in 2009 when the Bank closed three important deals with the main renewable players in Portugal in a total of over 24MW. Indeed, BANIF Investment Bank is now recognized by its expertise and experience in structuring and taking successfully to financial close transactions in this sector. The solar photovoltaic market and technology know-how is an important asset to the Bank as it has constantly been approach by the market’s leading players, both in Portugal and in Spain to structure new transactions.

BANIF Investment Bank is also participating in one of the largest thermal solar projects in Spain, together with a club of leading Iberian banks, and a group of leading Portuguese and Spanish sponsors. This new technology is a major growth area in Iberia in the solar sub-sector of renewables and BANIF Investment Bank is looking forward to enhancing its participation in similar deals.

Furthermore, the bank is analysing a long list of rooftop photovoltaic projects in Iberia with leading financial and strategic sponsors. The number of solar rooftop projects currently being promoted is significant in Iberia, as the market starts moving from a centralized production approach to a mass production and user-producer approach, supported by central and local governments and legislation favoring its feed-in tariff vis-à-vis centralised ground structures which are starting to suffer the pressure of tariff revision given the amount of installed MW, particularly in Spain.

In what comes to wind energy projects, BANIF Investment Bank has participated in the largest renewable transaction in 2009, a Portuguese wind projects portfolio refinancing, and is continuing to invest resources and lend long term to wind energy projects in Iberia and Brazil. The bank has successfully advised a leading Portuguese sponsor in the auction of wind projects promoted by Brazilian regulator ENEEL, achieving a total of over 218 MW of wind power capacity awarded in Brazil.  This experience is to be repeated as new wind power projects are being tendered by the government in Brazil and the bank is advising a number of clients. In 2010 the bank aims to extend its presence in the wind sector and is already analyzing a number of relevant transactions in Portugal, Spain and Brazil with leading sponsors.

Besides renewable, adverse market conditions have not been an obstacle for BANIF Investment Bank in providing financing for infrastructure projects, namely hospital PPPs and road concessions.

BANIF Investment Bank aims at become a reference  player in Iberia and Brazil in structured finance transactions, involving structuring and underwriting debt for renewable energy projects, infrastructure concessions and providing acquisition finance to M&A transactions either cross border or local, in Portugal, Spain and Brazil.

Sectors where Banif operates:
Healthcare: from 2009 the Bank has been involved in three hospital PPP concession projects and in different roles: as adviser to a bidding consortium, as Lead Arranger and as MLA;

Road concessions: BANIF Investment Bank has advised two concessionaires in restructuring the concession and financing agreements, has advised a potential bidding party in a feasibility study of a road concession, has advised a regional Government in the preparation and negotiation of a new road concession and has been a Lead Arranger in the largest road concession transaction recently closed in Portugal;

Other infrastructure: the bank has been active in providing financial advice to a consortium of leading sponsors in a public tender for a new port logistics platform concession, advising a municipal entity in the structuring and preparation of a tender process for a waste management concession, and was an MLA in the most relevant infrastructure asset acquisition in Spain in 2009.

Vasco Pinto Ferreira is an Executive Board Member, BANIF Investment Bank