Project Finance 2021 A practical cross-border insight into project finance 10th Edition Featuring contributions from: ABNR Counsellors at Law GB2A AVOCATS Pillsbury Winthrop Shaw Pittman LLP Abuka & Partners gbk Legal Partnership Prager Dreifuss Ltd. Allen & Gledhill LLP Global Law Office Rahmat Lim & Partners Allen & Gledhill (Myanmar) Co., Ltd. Kantenwein Raposo Bernardo & Associados BarentsKrans Lee and Li, Attorneys-at-Law Rebaza, Alcázar & De Las Casas Canales Milbank LLP Sardelas Petsa Law Firm Cirio Advokatbyrå AB Mori Hamada & Matsumoto Tadesse Kiros Law Office Dal Pozzo Advogados N. Dowuona & Company Estudios Palacios Lleras S.A.S. Pekin | Bayar | Mizrahi Table of Contents Expert Analysis Chapters Why the World Needs Project Finance (and Project Finance Lawyers…) 1 John Dewar, Milbank LLP Using Project Finance for Hydrogen Applications 8 Mona E. Dajani, Pillsbury Winthrop Shaw Pittman LLP Q&A Chapters Brazil Mexico 15 Dal Pozzo Advogados: Augusto Neves Dal Pozzo & 139 Canales: Emilio Sáenz, Ana C. Decanini & Bernardo Renan Marcondes Facchinatto Canales Fausti China Myanmar 23 Global Law Office: Dr. Xin Zhang & Shuhui Luo 147 Allen & Gledhill (Myanmar) Co., Ltd.: Minn Naing Oo & Lee Jun Yee Colombia 32 Estudios Palacios Lleras S.A.S.: Ángel Castañeda Netherlands Manrique, Sylvia Torres & Diana Sofía Díaz 155 BarentsKrans: Jason van de Pol England & Wales Nigeria 41 Milbank LLP: John Dewar & Munib Hussain 165 Abuka & Partners: Patrick C. Abuka & Sunday Edward, Esq. Ethiopia 60 Tadesse Kiros Law Office: Serkalem Eshetie & Peru Tadesse Kiros 175 Rebaza, Alcázar & De Las Casas: Luis Miguel Elias & Ana María Sánchez Acosta France 69 GB2A AVOCATS: Grégory Berkovicz & Pascal Deniau Portugal 183 Raposo Bernardo & Associados – Sociedade de Germany 78 Advogados, SP, RL: Nelson Raposo Bernardo, Joana Kantenwein: Marcus van Bevern & Sven Ceranowski Andrade Correia & Manuel Esteves de Albuquerque Ghana 86 Singapore N. Dowuona & Company: NanaAma Botchway & 191 Allen & Gledhill LLP: Kok Chee Wai & Kelvin Wong Achiaa Akobour Debrah Sweden Greece 201 95 Cirio Advokatbyrå AB: Jesper Johansson & Fredrik Sardelas Petsa Law Firm: Panagiotis (Notis) Eliasson Sardelas & Konstantina (Nantia) Kalogiannidi Switzerland Hungary 209 Prager Dreifuss Ltd.: Daniel Hayek & Mark Meili 103 gbk Legal Partnership: Gergely Brassnyó & Balázs Kálmán Taiwan 217 Lee and Li, Attorneys-at-Law: Hsin-Lan Hsu & Indonesia Pauline Wang 110 ABNR Counsellors at Law: Emir Nurmansyah, Giffy Pardede & Serafina Muryanti Turkey 227 Pekin | Bayar | Mizrahi: Fatoş Otcuoğlu & Buse Japan Tunçel 118 Mori Hamada & Matsumoto: Yusuke Murakami & Kei Shirakawa USA 239 Milbank LLP: Daniel J. Michalchuk & Richard M. Malaysia Hillman 127 Rahmat Lim & Partners: Dzuhairi bin Jaafar Thani & Syed Rashid bin Rahim Alsree Chapter 6 41 England & Wales England & Wales John Dewar Milbank LLP Munib Hussain 1 Overview 2020; in December 2020, the UK Government provided a last- minute £825 million loan to London’s transportation authority to enable it to continue construction on the Crossrail project in 1.1 What are the main trends/significant developments London, which had been experiencing construction delays due in the project finance market in your jurisdiction? to COVID-19. However, some projects that were still in the consultancy/early stages, such as the Crossrail 2 project, were In March 2020, the World Health Organization declared not spared and work on such projects has been stalled for the COVID-19 to be a pandemic. In an effort to reduce the foreseeable future. spread of the virus, countries around the world implemented Indeed, the construction of pre-operational projects was varying protective measures, ranging from lockdown restric- severely delayed by the UK’s first government-imposed lock- tions to imposing embargoes or limits on the international down, which began on 23 March 2020 and continued through trade of goods and the movement of people. The impact of to July of that year. During that period, construction across the the pandemic on both the international financial market and UK largely came to a standstill, as such work did not qualify markets in situ in the United Kingdom has been severe and as “essential services” that were allowed to continue during continues to be tempestuous. The UK’s gross domestic product the lockdown (construction work was, however, permitted to experienced an unprecedented annual decline of 9.9% in 2020 continue during subsequent lockdowns, provided that certain since the onset of COVID-19 and similar tremors have been health and safety guidelines were met). Construction work was felt by countries around the world. In January 2021, England later impacted by restrictions on cross-border trade and disrup- entered a third national lockdown; with the UK Government tions to supply chains that were a result of lockdowns prac- announcing a gradual plan for easing restrictions in England, tised in other countries. Illustrating the severity of COVID- the UK economy is not due to reopen until late Spring, extenu- 19’s impact on projects in the UK, the completion of the 3.2GW ating economic uncertainty in the near term. Hinkley Point C nuclear power station in southwest England, In the project finance market, the restrictions arising out which is being developed by EDF, is likely to be delayed by six of COVID-19 have resulted in the disruption of operational months to June 2026 due to COVID-19 restrictions, and EDF projects and the construction of pre-operational projects for a has estimated that such a delay will result in an increase in overall myriad of reasons, ranging from outbreaks of the virus on-site, project costs by about £1 billion to a range of £22–23 billion. to the unavailability of formative or spare parts due to a slow As a result of the ongoing economic uncertainty surrounding in production or shutdown of manufacturing plants as a result the maintenance of operational projects and feasibility of of lockdown restrictions in other countries, to the inability to construction of pre-operational projects, government author- charter international flights for specialist engineers. These ities, sponsors, lenders and contractors to projects have been disruptions can have a severe impact on projects as they could keen on enforcing their force majeure rights under the relevant result in completion delay, reduced operations or outages, among agreements while ensuring that their rights are preserved and other consequences. denying other parties’ claims of force majeure. Meanwhile, parties As a result of government spending in order to combat the involved in negotiations for pre-construction projects have pandemic (the Office for National Statistics has estimated that been focused on ensuring that their rights across the chain of borrowing could reach £355 billion by the end of the financial construction, finance and concession agreements remain water- year), the UK has incurred severe budget deficits. This has led tight when it comes to potential force majeure claims. to doubts as to whether government funding would be available In 2020, the UK’s exit from the European Union was to support planned or ongoing public infrastructure projects confirmed by Parliament, following the formation of a deci- and whether such projects were going to be delayed or scrapped sive Conservative majority in the December 2019 general elec- altogether. However, towards the latter part of the year, the UK tion. On 31 December 2020, the transition period in which Government decided to continue with some of these expensive the UK and European Union could negotiate a deal to define projects, as doing otherwise would, in the words of the Minister their future relationship ended as governed by the EU-UK for the HS2 project Andrew Stephenson MP, have a “chilling Withdrawal Agreement. The close of the transition period impact” on the UK construction sector and inward investment marked the start of a new chapter for the UK outside of the and send a “terrible message” in response to the pandemic. European Union. The period of uncertainty that characterised Notably, the UK’s £106 billion HS2 high-speed railway project Brexit, however, has not ended. This uncertainty has affected connecting London to northern UK cities, estimated to cost up the amount of activity in the country’s project finance market. to £106 billion, finally began construction work in September Project Finance 2021 © Published and reproduced with kind permission by Global Legal Group Ltd, London 42 England & Wales The upcoming transition from LIBOR is also worth noting, for Multilateral and bilateral institutions have continued to the issues it raises for the project finance market in the UK more participate in the market, and existing institutions (re-branded generally. with additional products to help fill debt financing gaps) have Nevertheless, the Conservative Government has announced a continued to invest in the UK’s energy and infrastructure boost in energy and infrastructure investment, with new projects sectors (especially in light of the UK’s exit from the European (such as five new hydrogen schemes located near Aberdeen, Union, which has, seemingly, buoyed governmental commit- Mersey, and near Grimsby) and the revival of old ones, such as ment to investing in UK infrastructure, and the availability of the renewed engagement with the HS2 project. funds for UK bilateral and multilateral institutions investing There has also been external investment into the UK energy abroad – this is particularly the case