INSIGHT PROJECT FINANCE 2012 ISSUE 2 TRANSport OpportUNITIES CREATING INNOVATIVE LONG-TERM FUNDING stRUCTURES LANDMARK DEAL Facilitating Australia’s largest hospital project PROJECT FINANCE SHOWS THE WAY PFI-funded schemes for London boroughs ENERGY DEALS Renewable offshore energy sectors in Europe and North America WHOLESALE BANKinG & MARKETS 2 CONTENTS WHAT’S INSIDE 4 03 PERSPECTIVE Lloyds Bank’s role in today’s global economy 04 LANDMARK DEAL Financing Australia’s largest hospital project 14 06 SUPPORTING UK INFRAstRUCTURE Major transport infrastructure 8 projects throughout Europe 08 PLENTY IN THE PIPELINE Opportunities to finance deals across North America look set to increase in 2012 10 CROYDON & LEWISHAM LIGHTING PFI A £83.4m funding package to protect 6 and maintain vital services in two London boroughs elcome to the second edition 12 INVESTING IN YORKSHIre’S of Insight – a collection of LONG-TERM FUTURE W news, opinions and case The importance of studies from the Project Finance team at infrastructure investment Lloyds Bank Wholesale Banking & Markets to the region (“Lloyds Bank”). The sustainable and durable nature 13 ASSOCIATED of capital infrastructure and energy sector BRITISH PORTS projects offers investors a degree of First UK operator stability in today’s volatile markets. And to tap the bond market with governments across the globe seeking 14 OFTO MARKET to rein in public spending, the need for Lloyds Bank is playing private investment has never been greater. a major role in propelling Today’s uncertain markets have forced £10-£15bn of investment investors to adopt a broader, more global in the offshore approach to their portfolio. This edition renewables market of Insight highlights a number of global infrastructure and energy projects we are 16 BANKING ON THE working on, including transport infrastructure RENEWABLES MARKETS in North America (p8), offshore renewable Involvement with innovative projects in the UK (p14) and the building of schemes on both sides Australia’s largest hospital in Adelaide (p4). of the Atlantic consolidates These examples illustrate our strength in Lloyds Bank’s position these sectors and the expertise of our Project in the sector Finance team means we are increasingly 18 RUSSELL CITY chosen as Mandated Lead Arranger (p19-20). ENERGY CENTER We feel that a strong relationship between A $844.5m credit facility for a business and its banking partner is essential a Californian gas-powered to prosper in today’s uncertain markets. electricity generator That’s why we’re committed to through- the-cycle support because with long-term thinking comes long-term success. www.lloydsbankwholesale.com PERSPECTIVE 3 A GLOBAL IMperatiVE Lloyds Bank has made its most significant contribution over recent years. Our Project Finance team has been at the heart Andrew W. Géczy, of a number of groundbreaking ‘pathfinder’ deals CEO, Wholesale which, through pioneering new approaches and Banking & Markets developing optimal investment models, have helped In the ongoing effort to secure global economic stability, to create the templates that will unlock further investment governments around the world are rightly focusing on in the sector. capital investment in infrastructure which can create and It’s most encouraging to see that sponsors, governments support sustainable growth. and other funders have been able to draw on the strength However, with constraints on public spending, the of the wider Lloyds Bank platform to create the innovative imperative is to create an environment which stimulates structures needed to progress deals to financial close. significant and sustained private investment in new projects By harnessing our collective experience and expertise across energy, transport, utilities and other key services. we have acted as a trusted advisor to the industry and, Central to the success of this approach is for the pool of by committing significant capital, demonstrated our private funders who commit debt and equity finance to the steadfast commitment to supporting this vital area sector to be broadened and deepened, and this is where of the global economy. AT THE Heart OF THE MARKET As one of the most active and mitigation skills within our participants in the Project Wholesale Banking & Markets Finance market, Lloyds Bank division to help put in place is playing a key role in finding the models which persuade solutions to current and future bond and other investors funding requirements. to participate in the financing We have built a team which is of individual projects. Gershon Cohen, dedicated to thinking creatively We are sharing the intellectual but acting pragmatically to capital and best practice we Managing Director and Global develop bankable solutions develop on these transactions Head of Project Finance that provide certainty of funding with those governments, sponsors [email protected] throughout the whole life of and funders who will be central an asset. to facilitating the essential To progress projects of the developments of the future. scale and nature required in This edition of Insight looks As we move forward into the current economic climate at some of the key dynamics 2012, we have a strong pipeline requires an appropriate and of the sector and highlights of projects which, with the sustainable structure to be put the innovative deals where our combined efforts of the Project in place at the outset, especially multi-discipline approach has Finance community, will make if they are to successfully unlock seen us pioneer innovative new a valuable contribution to the potential of the markets. funding structures for complex generating new long-term We harness the collective and high-profile deals in the growth opportunities within evaluation, risk-assessment UK and internationally. the global economy. Insight 2012 4 NEW ROYAL ADELAIDE HOSPITAL L andMARK DEAL financinG AUSTRALIA’s larGEST HOSpital project When the state of South Australia looked to replace the existing Royal Adelaide Hospital, which has served the region since 1840, it chose to do so through a Public Private Partnership (PPP). With the new development costing $1.85bn (£1.18bn), it decided to work with the private sector to secure debt financing of A$2.5bn (£1.6bn). The project is the single largest infrastructure project in South Australia’s history and the largest hospital project ever undertaken on the continent. loyds Bank, through its wholly owned subsidiaries BOS International and Uberior Infrastructure, was central to this landmark project, using our £ 1.6 bn significant experience of structuring international Total funding package Lhealthcare PPP deals to develop a competitive funding required to fund the package which was delivered within a tight timeframe hospital project to achieve financial close. Unparalleled scope and scale The New Royal Adelaide Hospital (NRAH), scheduled for completion in 2016, will be South Australia’s flagship public hospital. Mark Redmond, Senior Director, Project Finance, It is expected to see more than 80,000 admissions per Lloyds Bank, Australia, said: “Lloyds Bank has extensive year across 800 beds (700 multi-day beds and 100 same- international experience in delivering on large-scale day beds) and will boast increased numbers of operating healthcare PPP/PFI projects. Over the past two years, theatres, intensive care beds and emergency care facilities. our funding has been integral to the completion of major It will also use advanced technologies and state-of-the- deals such as the £600m contract to build and operate art equipment to deliver the highest quality of innovative the Southmead Hospital in Bristol and Europe’s largest treatment and care to the people of South Australia. PPP hospital procurement to date, the SEK14,594m It will remain a major teaching hospital and will also be (£1.326bn) New Karolinska Solna Hospital in Sweden.” co-located with the newly-formed South Australian Health To fund the NRAH, Lloyds Bank partnered with the South and Medical Research Institute, making the health precinct Australia Health Partnership, a consortium of five equity the hub of medical research in the state. partners made up of InfraRed (the former equity arm of HSBC), Leighton Infrastructure Investments, John Laing A key enabler investments, Uberior Infrastructure (Lloyds Bank’s equity To deliver such an ambitious undertaking it was investment division) and the Macquarie Group. clear from the outset that the project would require Acting as Mandated Lead Arranger and Interest Rate a strong PPP consortium selected via a rigorous and Hedge Provider, our Project Finance team provided competitive process. A$164m (£105.8m) of the A$2.5bn debt funding www.lloydsbankwholesale.com NEW ROYAL ADELAIDE HOSPITAL 5 Continent-SIZED DEMandS Australian authorities at a local, state and federal level face a significant challenge to finance and deliver the infrastructure that will underpin continued economic growth and social development. The consequences of the extreme flooding experienced by parts of Australia during 2010, and the need to rebuild basic infrastructure destroyed as a result, have led to unprecedented demands being made on limited government funds. Estimates for the level of investment required to meet Australia’s current and emerging infrastructure needs range from A$360bn to A$770bn over the next decade. Further adding to the demand for capital is the resources boom in Australia, which is driven by growth in South East Asia. To take full advantage of this opportunity,