project finance: from banking “project finance: from ...paris-europlace.net/files/p3-delay.pdf ·...

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11:15 – 12:30 - Panel 3 - Tansa

“Project Finance: from Banking Solutions to Capital Market Solutions”

““Project Finance: from Banking Project Finance: from Banking Solutions to Capital Market SolutionsSolutions to Capital Market Solutions””

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Project Finance: From Banking Project Finance: From Banking Solutions To Capital Market SolutionsSolutions To Capital Market Solutions

Presented ByCalyon Corporate and Investment Banking

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IntroductionIntroduction

Evolution of financing options available to finance single assets

Capital Market Solutions

Case Study

Perspectives

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Project Finance TransactionsProject Finance Transactions

Predominantly a commercial bank market

Applicable to high maintenance transactionsHeavily covenanted

Typically requires close monitoring, especially during construction phase

Requires asset expertise to grasp the stakes

Typically assets with long lives best suited for long term financings

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Evolution towards Capital MarketsEvolution towards Capital Markets

Drivers:Sponsor standpoint:

Bank mini-perm take out refinancings

Decrease in credit spreads for long tenors

Investors standpoint:Overall decrease in corporate yields make this class of assets attractive

Savvy investors have the capability to analyze and assess project finance transactions

Two types of capital market avenues:Project Bonds

Term B Loan

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Capital Markets SolutionsCapital Markets Solutions

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Capital Markets: Term Loan BCapital Markets: Term Loan BSub-Investment Grade Issues:

Includes so-called “Term Loan B” market, high-yield market, both also called the “leveraged loan”market – overlapping investors with a variety of preferred investment currencies.

“Term B”: variable rate fully-funded term loans, usually large liquid issues, short maturities (7 to 10 years), cash sweeps instead of scheduled amortization; limited financial ratio maintenance covenants.

“High Yield”: includes smaller issues requiring less liquidity, longer term, fixed coupon, little or no amortization; limited financial “occurrence covenants.”

Sub-Investment grade transactions in PF world tend to involve acquisitions rather than new builds.

Issuers tend to be privately-owned, with less credit-rating sensitivity, often smaller developers teamed up with private equity.

Increasing leverage is the primary objective of these issues; speed of execution and flexibility are other objectives – pricing is less important.

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Capital Markets : Project Bonds Capital Markets : Project Bonds

“The Project Bond Market”: refers to private placement type of issues (Typically Reg. D or 144A)backed by single assets financed in a project finance way.

Specific features of Project Bonds include:Fixed coupons

Long tenors and deferred amortization

Make whole premium in case of prepayment

Typically limited number of disbursements over a relatively short period of time.

Project Bonds are principally issued in refinancings for new builds or bridge loan takeouts for acquisitions.

Issuer-sponsors tend to be strong “strategics” or public companies protecting high credit ratings and share prices.

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0

20

40

60

80

100

120

140

160

180

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Years

Amou

nts

in $

bill

ions

Volume TotVol Bonds

Global PF Market by funding sources : 1994-2005


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Source: Project Finance International

$0bn

$5bn

$10bn

$15bn

$20bn

$25bn

$30bn

$35bn

1997 1998 1999 2000 2001 2002 2003 2004 20050%

5%

10%

15%

20%

25%

30%

35%

Global Project Finance Bond Debt As % of PF Financing (RH)

World-wide Non-Recourse Project Bonds issuance

The Project Bond market volume declined mildly in 2005: its sharThe Project Bond market volume declined mildly in 2005: its share of e of the overall market dropped from 32% in the overall market dropped from 32% in ’’03 to 16% in 03 to 16% in ‘‘0505


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Robust 54% growth in North America did not offset drastic declines in South America and Australia and zero issuance in Europe

$0bn

$5bn

$10bn

$15bn

$20bn

$25bn

$30bn

$35bn

2004 2005

EuropeAsia

MiddleEast&Africa

Australia&NA

SouthAmerica

UK

NorthAmerica

World-wide Project Bonds issuance, by geography



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Oil & Gas and Power dominates global issuance, jointly accounting for 63% of global volume

World-wide Project Bonds issuance, by sector

Oil and Gas36%

Power27%

Social Infrastructure/P

FI19%

Infrastructure14%

Mining3% Petrochemicals

1%



13Are Capital Markets Products Replacing Bank Loans in Are Capital Markets Products Replacing Bank Loans in Project Finance?Project Finance?

US Experience:Capital demand is concentrated in acquisitions rather than new builds right now

Project Bonds (senior tranche investment grade) continue to take their share of the market, principally as a refinancing solution for project initially bank-financed. Project bonds typically monetize an improving or stabilizing credit story. (e.g. completed power plant; up-rated infrastructure).

Leveraged loans (B loans, high yield) are marginalizing the bank solution in acquisitions and certain refinancing (especially merchant power).

Project Finance banks have credit tolerances that are too narrow

B loans provide faster execution and less structure than Project Finance banks.

Project bank loans still prevail in construction situations, bridges to bond take-outs and smaller projects.

Bond can be combined with Bank Tranches and with Bank providing supporting Letters of Credit and Working Capital facilities.

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Comparative Table Comparative Table

Success in the US, less so in Europe: the Distribution Angle

NA

NA

Floating

Amortizing

Up to 20 years

Bank

NANA0 - 2 yearsMake WholePrepayment Penalty

High IGNANon IGIG and high non IG

Target Rating

FloatingFloatingFloatingFixedInterest Rate

EuropeAmericas

BulletAmortizingCash SweepAmortizingRepayment

Generally 10 years

Up to 30 years

7 to 10 yearsUp to 30 years

Tenor

BondBank B LoanBond

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Case Study: Case Study: TenaskaTenaska Alabama IIAlabama II

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Case Study: Case Study: TenaskaTenaska Alabama IIAlabama IITransaction Description:

$410,500,000 project bond financing secured by a peaking plant in central Alabama.

Challenging Aspect:Maximizing the financing proceeds - up to 95% of the project

costs. Low equity resulted in lower than typical debt service coverage ratios.

Solution:“Monetization” of long-term off-take contract with Coral Power

whose obligations were guaranteed by Coral Energy Holdings whose obligations are in turn guaranteed by Shell Oil Company.

Obtained Baa3/BBB- ratings but marketed deal as derivative Shell risk which resulted in more attractive credit spread.

1st refinancing of a mini-perm in the capital markets.

Calyon Role:Lead Managing Bookrunner. The transaction was recognized

as 2003 “Americas Bond Deal of the Year” by Project Finance International and “Single Asset Deal of the Year” by Euromoney.

Obtained over $1.2 billion in orders.

October 2003

Tenaska Alabama II Partners LP

$410,500,000 Senior Secured Notes due 2023

144a/Reg S Private Placement

Joint Lead Managing Bookrunner

October 2003





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Case Study: Case Study: TenaskaTenaska Alabama IIAlabama II

October 2003





October 2003


$31,600,000

Project Finance

Administrative Agent

Transaction Description:$26,600,000 Letter of Credit facilities to cover DSR and

Project LC needs.$5,000,000 Working Capital facility

Challenging Aspect:Integration with 144A bond offering.

Solution:Cash waterfallPari-passu treatment of all financings.

Calyon Role:Lead Arranger.

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PerspectivesPerspectives

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Will the U.S. Experience be replicated globally? Will the U.S. Experience be replicated globally?

Distinguishing Features of US and Global Markets

Implication

Large investor universe in the US with diversified appetite across asset classes and credit rating

Good outlook for Banks, Term Loan B and US denominated issues placed in the US market

Expanding investor universe in Europe but European project finance banks are much more aggressive lenders in their home markets

Project Bonds are less competitive with the long term low margin project loans prevailing outside of the U.S. Market.Beginning of Term loan B

The universe of project issuers outside of the US market is smaller and has traditionally been dominated by large highly rated strategics

Project bonds applicable to:- Diversify source of funding- Provide access to another source of liquidity.

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CredentialsCredentials

21Calyon Credentials Calyon Credentials –– Project BondsProject Bonds

Rockland Capital Energy Investments

Windsor Financing LLC

$285,500,000Senior Bonds due 2017

$52,000,000Subordinated Notes due 2016

144a/Reg S Private PlacementJoint Lead Manager

Bethpage Energy Center

$108,516,000Series A Certificates due 2025

$14,631,000Series B Certificates due 2020

144a/Reg S Private PlacementSole Arranger / Underwriter

Pinelawn Power LLC

$102,213,000Senior Secured Notes

due 2025

144a/Reg S Private PlacementSole Arranger / Underwriter

Tenaska Alabama Partners LP


due 2021

144a/Reg S Private PlacementCo Arranger

Prime Power Sales I LLC


due 2009

144a/Reg S Private PlacementSole Arranger

Tenaska Virginia Partners


due 2024


Kiowa Power Partners


due 2013/21


Tenaska Alabama II Partners


due 2023


FPL Energy Far Rockaway Peaking, LLC


due 2020

Reg D Private PlacementSole Arranger

Firm Underwritings

2006 2004 20052005

2005 2005 2003 20032005

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A Global Securitisation Network of ExpertiseA Global Securitisation Network of Expertise

America Europe Asia

US CP Conduits :Capital callsResidential Mortgage

Warehousing Auto loansTrade receivables

ABS :Commercial Real EstateTransportation (aircraft, train…)Public FinanceEnergy and InfrastructureAlternative Risk Transfer

Residential Mortgage, leasing, credit card, auto loan, Commercial Real EstatePublic FinanceTrade receivableTransportation (aircraft, car and truck fleet…)Whole business securitisation/leverage FinanceAlternative Risk Transfer

Residential mortgageAuto LoanCommercial MortgageAlternative Risk Transfer

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Calyon has key relationships with leading institutional investors.

– Issuers can leverage our deep knowledge of institutional investors and close working relationships with the leading players in the industry.

– We have an established relationship with each of the top 25 institutional holders of corporate securities.

– Below is a sampling of Tier I (invest from $25 - $100 million per transaction) and Tier II (invest from $5 - $50 million per transaction) investors that have played key roles in virtually all of our recent lead-managed transactions:

Fixed Income Institutional SalesFixed Income Institutional Sales

Tier I Investors Tier II Investors

Rank Top 25 Instituional Holders

1 Prudential Global Asset Management2 AIG Global Investment Management3 Metropolitan Life Insurance Company4 AEGON USA5 Teachers Insurance & Annuity Association6 New York Life Investment Management 7 GE Financial Assurance Holdings, Inc.8 Pacific Investment Management Co.9 Fidelity Management & Research Company10 Northwestern Investment Management Company11 ING Investment Management Inc.12 John Hancock Life Incurance Company13 Alliance Capital Management L.P.14 Hartford Investment Management Company15 Allstate Investments, LLC16 Principal Capital Income Investors, LLC17 State Farm Insurance Companies18 PPM America Inc.19 The Vanguard Group, Inc.20 CIGNA Retirement and Investment Management Inc.21 Nationwide Insurance Companies22 Delaware Lincoln Investment Advisers23 American Family Life Assurance Company (AFLAC)24 David L. Babson & Company, Inc.25 American Express Financial Advisors

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Calyon Calyon –– Credit TradingCredit TradingMarket-Making Investment Grade limits

Banks and finance companiesIndustrials and utilities

Close Cooperation with OriginationStrong involvement with new issues pricingManagement of residual primary positions

Account FocusTake advantage of the existing sales network within CAI/CLA to expand flow activities in Europe, AsiaExpand automated trading capability in Europe and US through Bloomberg and Market Access

CDS TradingMarket making in single name CDS

Segmented customer listServicing of structured portfolioBasis trade proposal to customersBank’s hedging needs

Integration with Calyon global strategy

Coordination with European Desk (24 hour global trading support for positions)

Strong involvement in new issue pricing

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Project FinanceProject Finance

Project finance is one of the core products of the bank globally:Calyon has approximately 125 people specializing in project finance around the globe including Paris, London, New York and Singapore.

Calyon is a leader in the financing of capital intensive infrastructure, natural resources and industrial projects.

Calyon is dedicated to providing project finance services which meet our clients’ financing and ownership objectives. We have demonstrated our leadership in arranging innovative project financing solutions in response to our clients’ needs through multiple products.

The bank has significant underwriting capacities and private placement capabilities, including PFI’s Bond Deal of the Year for 2003 and PFI’s Latin America Deal of the Year 2005.

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Charter Development LLC

$500,000,000

Project Finance

Mandated Lead Arranger

November 2005

Thermal North America, Inc.

$312,000,000

Project finance

Syndication Agent

October 2005

Cerro Verde

$450,000,000

Project Finance

Global CoordinatorBookrunner of the Bank Tranche

September 2005

Energia Concon

$410,000,000

Project Finance

Joint Bookrunner& Syndication Agent

June 2005

Astoria Energy

$103,000,000

Project Finance

Sole Bookrunner& Administrative Agent

April 2005

Steamboat Holdings

$503,000,000

Project Finance

Lead Arranger & Administrative Agent

March 2005

Pemex

$4,250,000,000

Project Finance

Arranger

March 2005

Sabine Pass LNG L.P.

$822,000,000

Project Finance

Arranger

February 2005

Chicago Skyway

$1,190,000,000

Project Finance

Joint Lead Arranger & Syndication Agent

January 2005

Trinity Coal LLC

$90,000,000

Project Finance

Mandated Lead arrangerSole Bookrunner

June 2006

NorthEast BiofuelsLLC

$217,000,000

Project Finance

Co-documentation Agent Construction Agent

June 2006

Top Deer Ventures

$71,576,000

Project Finance

Lead arranger

March 2005

Odessa-Ector Power Partners O.P.

$234,000,000

Project Finance

Syndication Agent

February 2006

Atlantic LNG

$238,613,350

Project Finance

Sole Lead Arranger &Administrative Agent

June 2006

AES New York

$350,000,000

Project Finance

Lead Arranger

August 2006


$500,000,000

Project Finance


November 2005


$500,000,000

Project Finance


November 2005


$312,000,000

Project finance

Syndication Agent

October 2005


$312,000,000

Project finance

Syndication Agent

October 2005

Cerro Verde

$450,000,000

Project Finance


September 2005

Cerro Verde

$450,000,000

Project Finance


September 2005

Energia Concon

$410,000,000

Project Finance

Joint Bookrunner& Syndication Agent

June 2005

Astoria Energy

$103,000,000

Project Finance


April 2005

Astoria Energy

$103,000,000

Project Finance


April 2005

Steamboat Holdings

$503,000,000

Project Finance


March 2005

Steamboat Holdings

$503,000,000

Project Finance


March 2005

Pemex

$4,250,000,000

Project Finance

Arranger

March 2005

Pemex

$4,250,000,000

Project Finance

Arranger

March 2005


$822,000,000

Project Finance

Arranger

February 2005


$822,000,000

Project Finance

Arranger

February 2005

Chicago Skyway

$1,190,000,000

Project Finance


January 2005

Chicago Skyway

$1,190,000,000

Project Finance


January 2005

Trinity Coal LLC

$90,000,000

Project Finance


June 2006

Trinity Coal LLC

$90,000,000

Project Finance


June 2006

NorthEast BiofuelsLLC

$217,000,000

Project Finance

Co-documentation Agent Construction Agent

June 2006

Top Deer Ventures

$71,576,000

Project Finance

Lead arranger

March 2005

Top Deer Ventures

$71,576,000

Project Finance

Lead arranger

March 2005

Odessa-Ector Power Partners O.P.

$234,000,000

Project Finance

Syndication Agent

February 2006

Atlantic LNG

$238,613,350

Project Finance


June 2006

Atlantic LNG

$238,613,350

Project Finance


June 2006

AES New York

$350,000,000

Project Finance

Lead Arranger

August 2006

AES New York

$350,000,000

Project Finance

Lead Arranger

August 2006

Calyon Credentials Calyon Credentials -- Project FinanceProject Finance

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ContactsContacts

Debt Capital Markets

Ron Krolick + 1 212 261 7795Debt Capital MarketsManaging [email protected]

Olivier Delay + 1 212 261 3879Specialized Asset [email protected]

Project Finance

Michel Anastassiades + 33 1 57 87 20 01 Global Head of Project FinanceManaging Director [email protected]

Jim Guidera +1 212 261 7893Head of Project Finance AmericasManaging [email protected]

Calyon Calyon –– Contact ListContact List

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New York, Monday, October 23, 2006

project finance: from banking “project finance: from ...paris-europlace.net/files/p3-delay.pdf ·...

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