Proximo Weekly: What price superb project finance service?

Proximo’s 2023 Project Finance Research Report has been live for about three weeks now and with luck you should have seen some of its top-level conclusions. Sentiment remains strong, though construction costs, and to a lesser extent debt costs, are weighing on developer and sponsor outlooks. The report is available to download if you are a subscriber, or you can contact us using this form if you are interested in reading a copy.

However, in addition to gauging market sentiment, Proximo asked its 150-odd respondents what they thought of the service offered by the largest banks and law firms active in the project finance market. These ratings are the first attempt to measure quantitatively how well lenders and legal advisers perform, at a time when debt markets are unusually volatile. 

The methodology draws a little on what Proximo’s sister publication TXF carries out for the export finance market, though questions have been tailored a little to the needs of the project, energy, and infrastructure finance community. And like TXF, Proximo has chosen not to present its results as a ranking. 

We would rather help our market understand how they can better help developers than spark arguments between institutions. But we plan on providing our scores to the banks and firms that received ratings, so if you are interested in hearing what clients and customers think, please do drop us a line.

But some top-level conclusions are possible. European banks were most commonly cited by respondents, ahead of US and Japanese institutions. UK law firms received more mentions than US firms, perhaps because UK firms have been more acquisitive of late. 

Banks generally received their lowest ratings for creativity, speed of execution, product offering, and value for money. Law firms performed poorest on creativity and value for money. Respondents were generally more generous on market knowledge and the ability to write large tickets for banks, as well as on law firms’ market knowledge and responsiveness.

So clients generally come away impressed with the service offered by banks - keep issuing those big commitment letters - and law firms - keep writing those sector briefings. They are just more concerned about how much they are paying for this service. 

Some of this is probably eternal in financial markets. But at a time when projects’ construction costs are heading upwards sharply, and project viability is a concern, developers and owners are going to start looking more carefully at their transaction costs and see what they can do about them.

Then there are the smaller details. The one US white shoe law firm with an otherwise strong set of ratings, but a far below average value for money rating. The well-rated Latin American local law firms that fell down on market knowledge. With one exception, UK-headquartered firms performed at or below average, while US firms scored highly for creativity and responsiveness.

For banks, the picture was more mixed. There was a sharp divergence between the biggest Japanese banks, with one weighed down particularly by its underwriting capability and market knowledge scores. One French bank marred an otherwise respectable set of scores with a poor value for money showing.

Canadian banks in general performed better on speed of execution and value for money. US institutions performed better on underwriting and value for money than market knowledge and creativity, with one US bank not known for its cut-price service performing strongly on value for money.

There are some obvious absences. UK and Australian lenders did not register. The survey does not yet cover non-bank lenders, even though they are increasing in importance in the market. But we hope to continue with this survey in 2024. So keep an eye out for that survey opening, and if you want to know how you did in 2023, please get in touch.

Selected news articles from Proximo last week 

NORTH AMERICA

Ring draws on revolver to close Founders acquisition

Ring Energy has closed on its $65 million acquisition of the Founders Oil & Gas IV producing assets in the Central Permin Basin in Texas.

 

EUROPE

Baltica III offshore wind to close next year

Sponsors of the 1GW pathfinder Baltica III offshore wind farm in Poland – PGE and Orsted – are expected to reach financial close on the DFI-backed funds backing the scheme next year.

 

ASIA-PACIFIC

CPC closes on Carnarvon Bedout acquisition

Taiwan's national oil company, CPC, has closed on its $146 million acquisition of a 10% stake in Carnarvon Energy's Bedout assets off the coast of Western Australia.

 

MIDDLE EAST & AFRICA

ACWA Power named preferred bidder for Hassyan IWP project

ACWA Power has been declared the preferred bidder for phase 1 of the Hassyan independent water producer (IWP) project in Dubai.

 

SOUTH AMERICA

Brazil unveils $340bn Growth Acceleration Program

Brazil has unveiled a new Growth Acceleration Program (PAC) which will have an estimated BRL 1.7 trillion ($340 billion) in public and private investments.

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