Number of Global Project Finance Deals Continues to Slide Despite Spike in Total Value of Deals

    LONDON, ENGLAND, July 18, 2013 /24-7PressRelease/ -- The total value of global investment in infrastructural projects saw year-on-year growth of 30% for the first six months of 2013 despite the continued slide in the number of closed deals to just 200, new research by leading trade publication Infrastructure Journal has revealed.

The deal count has reduced by nearly a third since 2010, when 291 deals were closed in the first half of the year. However, two multi-billion dollar transactions representing around 25% of the global project finance market volume pushed the value of deals to US$139billion for the first half of this year.

The INPEX Corporation-led Ichthys LNG project's arrangements for US$20 billion in project finance loans with eight export credit agencies and 24 commercial banks was the largest of the two deals that contributed to vastly increasing the total value of transactions recorded. The venture will see INPEX and French partners Total exploit gas from the Ichthys Field in the Browse Basin off the coast of Western Australia.

Funding of US$17.2 billion for Sadara Petrochemical Complex at Jubail Industrial City in Saudi Arabia's Eastern Province further skewed the figures released by Infrastructure Journal.

The project finance model, which provides long-term, low-cost loans based on projected cash flow from the project concerned, has been increasingly squeezed over the recent years and the drop in the number of deals globally but particularly in Europe could heavily impact British companies and City jobs.

European firms saw the total number of closed project finance deals between them fall to 70 for the first half of this year, less than half of the 148 total deals closed in the first six months of 2011. The fall represents a US$14billion drop in the total value of agreements in that time.

While the Americas have remained stable during the same two-year period, project finance deals for Asia and the Pacific region grew from 41 for the first half of 2011, worth a total of US$32billion, to 51 for the first half of 2013, worth a total of $57 billion.

The total value of transactions in Africa and the Middle East was US$32billion for the first six months of 2013, covering some 28 projects. This is more than double the US$15billion value of the 16 deals closed in Africa and the Middle East in the same period of 2011.

The year-on-year increase in value of oil and gas projects to US$70billion for the first half of 2013, largely influenced by the INPEX deal, was tempered by concerning drops in the number of closed transport and renewable energy deals. Just 21 transport deals were closed, falling from 30 for the first half of 2012, while 86 renewables deals were closed, sliding from 102 in H1 of 2012 and 111 in H1 of 2011. The number of social infrastructure projects deals closed also fell, dropping from 44 (worth US$13billion) in the first half of 2011 to just 21 (worth US$4billion) in the same period this year.

John Kjorstad, Editor of Infrastructure Journal, said: "Social infrastructure has been one of the major casualties of the financial crisis, with the total value of deals closed in the first six months of 2013 just a third of what it was during the same time two years ago. Falls in social infrastructure and renewables  are dragging the overall volume of deals down.

"The huge INPEX and Sadara deals make the bottom line look a lot more positive than it might otherwise look, with companies in the UK and Europe facing difficulties at the moment. Market opportunities in Europe have been cut in half in just two years.

"Infrastructural development is being squeezed. Governmental support for new investment is lacking as austerity programmes dominate, while the problem of bank finance is keeping the handbrake on a lot of activity in the private sector. Nowhere is this more apparent than in the UK, with many working in the City facing clearing their desks if the number of project finance deals being closed does not show signs of turning around.

"The value of these deals to associated legal and financial services parties is significant and falling activity may mean the scaling back of operations."

Debt volume increased to US$117billion for H1 of 2013, up 36% on the US$86billion recorded for the same period in 2013, according to the figures from Infrastructure Journal.

Japanese banking giants Sumitomo Mitsui Banking Corporation were the leading mandated lead arrangers in financing projects, while RBC were top of the bond arrangement table. RBS led as financial advisors, Allen & Overy as legal advisors and Nexant as technical advisors.

2nd Floor, AirW1 Building
20 Air Street
London
United Kingdom
W1B 5AN

Tel: +44 (0) 20 7715 6441 (Calls may be monitored for training and quality control purposes)
Web: http://www.ijonline.com

# # #