North America Deals of the Year 2023: Riding the liquidity wave
It might have been the impact of the Inflation Reduction Act, or big cheques from financial sponsors, or simply an ample supply of well-structured projects. But 2023 witnessed a slew of records for deal size and broke new ground for both structures and technologies.
There was a lot of scepticism that 2022’s Inflation Reduction Act would do enough, and quickly enough, to counteract the effects of higher debt costs and construction cost inflation in the US. And indeed, according to Proximo’s data, overall volumes were down a little, from $208 billion to $195 billion, between 2022 and 2023.
Sign up to receive our Weekly Newsletter for the latest project infrastructure finance updates, exclusive insights and benefits tailored for our subscribers.
But that looks a lot like gun-shy sponsors avoiding bringing deals to market while conditions were not completely settled. Because whenever US debt markets - both bank and bond - were asked to rise to a new challenge, they delivered, and then some.
Last year featured two of largest greenfield project financings ever - in onshore wind and LNG - and a step change in the US bank market’s ability to support digital infrastructure deployment. It gave a second chance to, and broke new ground for, a restructured Texas toll road concession, and supported a crucial transport monetisation in Puerto Rico.
The IRA’s key new provision - transferable tax credits - received its first validation from lenders, and merchant structures continued to develop. There is also increasing evidence of convergence between the transport and energy sectors, with a novel portfolio financing for a transit- and aviation-focused microgrid venture.
There were some dogs that didn’t bark in 2023. The Canadian market remains subdued, and there is little evidence for a revival in big-ticket roads financings in the US. Offshore wind in the US would still be politely described as having future rather than immediate promise.
But the depth and creativity of the US project finance market continues to impress, and is likely to respond with gusto once sponsors come back to market in meaningful numbers.
Several of the winners are being recognised at the Proximo Nashville 2024: Financing America's Infrastructure & US Digital Infrastructure Finance event. There was even a chance for home-town hero - a new NFL stadium - to be recognised.
The winning deals were:
North America Transport - SH 130 Refinancing
This Texas toll road concession assembled a hybrid multi-tranche, multi-market refinancing that increased its debt size, improved its rating, and kept interest rate and hedging costs to a minimum. This should cause more US grantors to look again at using private capital to finance toll road assets.
North America PPP - Puerto Rico Toll Roads
Abertis closed a large but conservatively structured $1.56 billion debt financing in support of the second, and the largest, concession of four toll roads in Puerto Rico. The deal closed in the face of market headwinds, and Puerto Rico’s fragile fiscal situation, but has mobilised vital investment in the island’s transport sector, and is teed up for a private placement refinancing.
North America Fiber - Gigapower FTTH
The project finance market has already proved its worth to smaller US fibre operators. But it moved to the next level with this carefully structured financing for the AT&T and BlackRock joint venture Gigapower. The largest US telecoms operator and largest asset manager in the world joined voices to hook up an additional 1.5 million customers.
North America Communications - Transit Wireless
Nothing better illustrates the convergence between PPP structures, and transport and digital infrastructure than Boldyn’s financing for the expansion of the wireless network that it has installed on New York City’s Subway system. The project will vastly improve service to both the grantor, the Metropolitan Transportation Authority, and Subway riders, and the expansion is also producing big savings for the grantor.
North America Emerging Energy - AlphaStruxure Microgrids
The Carlyle Group’s portfolio financing for its Alphastruxure venture - which encompassed microgrids for transit and aviation customers - illustrates the increasing convergence between energy and transport assets in the project finance market. It turned a mix of emerging transition technologies from a credit challenge to a credit strength.
North America Leisure - New Nissan Stadium
The New Nissan Stadium in Nashville, Tennessee, proves the benefits of public financing in supporting best-in-class development of US sports facilities. This financing blends tax and stadium revenues, allows the private partner to manage the construction process, and incorporates a community impact fund. The fully enclosed stadium cements Nashville’s impressive growth story.
North America Solar - Vikings Energy
Arevon’s Vikings is much more than solar-plus-storage, and will operate much like a solar peaker plant, providing reliability services to San Diego Community Power, a community choice aggregator, with a somewhat merchant offtake profile. Its financing featured ITC and PTC transferability, which required lenders to get to grips with a host of new credit issues for the first time. The US renewables market has evolved quickly since the IRA passed, and Vikings was one of the big steps in that evolution.
North America Storage - Aypa Borden and Cald BESS
Aypa leveraged the anchor credit of its contracted Cald battery storage project to support the construction of the merchant Borden storage facility. It used cash sweeps and conservative debt sizing to get lenders comfortable with the blended credit, and points to a useful way for developers to maximise their arbitrage opportunities.
North America LNG - Rio Grande LNG
An up-and-coming LNG developer, and a blue-chip group of financial and strategic sponsors closed one of North America’s largest ever greenfield project financings. Rio Grande’s $12.3 billion phase 1 debt package benefited from a reassuringly familiar set of project agreements - a lump-sum EPC contract and highly-rated offtakes. It combined both bank construction facilities and the first pre-construction private placement ever for an LNG project.
North America Wind - SunZia Wind and Transmission
Pattern Energy’s SunZia onshore wind and transmission financing is the largest renewables project financing, anywhere, ever. It faced down doubts about US debt market liquidity to raise just under $12 billion in construction, holdco and tax equity backstop debt from 18 lenders. Solar might be the busiest US renewables asset, but onshore still has the ability to impress.
