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Winds of change filter in

TXF: The Week That Was

The recent UN climate change conference COP24 gave us all a stark reality check on where we are in terms of trying to do something to save this planet. It’s a massive uphill struggle. Slowly, in some areas the message is filtering through. Here, Jonathan Bell looks at some renewable energy developments which are helping to make a difference.

Happy holidays from all at TXF

As many of you wind down, or maybe I should say wind up, to the Christmas period and the end of 2018, on behalf of the entire TXF team, I would like to say a massive thank you to all our readers, customers, sponsors, contributors etc for your continued support.

It has been a very busy year of growth at TXF, and I am delighted to tell you that on the editorial front we have delivered some 283 feature length articles as well as 7,073 premium in-briefs and tracker articles. On the data side the data team has produced regular sector reports, half and full year analyses, as well as uploading 1,388 new deals through the course of the year – so a huge thanks to all those institutions who have helped contribute to TXF Data. While on the events front, we have hosted 4,937 delegates at TXF conferences, roundtables and other events through 2018. Thank you all!

We very much value your involvement with us and we sincerely look forward to working with you all through 2019. Have a fabulous Christmas and a wonderful New Year!


When Bob Dylan wrote the song Blowin’ in the wind in 1962 he of course was not referring to renewable energy, but with this anti-war number he thankfully did help to influence many people socially and politically for the better. Next year Dylan returns to the UK to do a concert for the first time in 50+ years! Hoorah! What took you so long Bob?

And, on the subject of wind energy – what on earth has taken the US so long in getting to grips with the development of offshore wind? This is not President Trump’s fault – even though he is an ostrich with his head in the sand on the subject of climate change. In fact, just recently Trump has come out in support of offshore wind. But that doesn’t mean he has openly changed his stance on climate change.

If you look around the world, there is currently 17GW of global offshore wind capacity, and of this 12GW is in Europe, with the bulk of the remainder in Asia. Renewables energy in the US has largely concentrated on solar, but one might have expected a much more mixed offering from the world’s largest economy. Now, this could be about to change as the US appears to be seriously starting to develop its offshore wind sector (see below).

Before I go into more detail on that development, I have to say that over the past year or two, I have been particularly heartened by the advance over the discussion on sustainability, environmental goals and climate change.

At most TXF conferences, and particularly ones which have included commodity, export and project finance there has been increasing debate around the subject of sustainability and environmental goals as more financiers, sponsors and stakeholders respond to feedback from consumers/end users and ultimately plain common sense. This trend will continue strongly over the coming years – and it needs to. Recognising and addressing our problems is only the first step.

So what has taken place in the US? To date, amazingly the only offshore wind farm in the US is Deepwater Wind’s Block Island Wind Farm off Rhode Island which opened in 2016. Now, the cost of offshore wind installation and the cost per unit of wind power has dropped dramatically. In addition to this, the Trump administration is streamlining permitting and carving out new areas off the coast for leasing as part of its ‘America First’ policy to boost domestic energy production and jobs. All this has intensified interest from European developers with years of success building offshore wind farms in the North Sea.

Hence last week, companies competing in an auction for the opportunity to install wind turbines in Atlantic waters off Massachusetts pledged $285 million toward the three offshore wind leases that are up for grabs. As I write, this has yet to play out, but research reports suggest that the extent of US offshore wind power is expected to surge over the next decade — reaching 10,000 megawatts (MW) by 2030, compared to just 30 MW installed offshore today. How much of this will involve European firms, and how much equipment will be imported and how this will be financed also remains to be seen.

To read about US offshore wind in more detail, please see two excellent articles recently written by TXF journalists:
What price non-recourse debt for US offshore wind?
and US offshore wind: On track to join the major markets

 

The bigger picture

Listening to naturalist Sir David Attenborough at the recent COP24 summit on climate change, his speech on the increasing destruction of our planet rams home the dangers we now face as we continue to destroy the planet. Attenborough said: “Right now we are facing a manmade disaster of global scale, our greatest threat in thousands of years: climate change. If we don’t take action, the collapse of our civilisations and the extinction of much of the natural world is on the horizon.”

Anyone who thinks this is scaremongering is simply denying the reality. We are now in the proposed geological epoch (age) known as the Anthropocene - viewed as the period during which human activity has been the dominant influence on climate and the environment.

The rate of change and destruction since the agricultural and industrial revolutions has been dramatic. The human race has also accomplished a huge amount during this relatively short period – but at what cost? Is the damage we are doing now to the planet reversible? This is the really tough question. Many think it is not, but perhaps we can claw something back and also help developing countries from making some of the same mistakes that the industrialised countries have done.

At COP 24 in Katowice, Attenborough also said: “The world’s people have spoken. Time is running out. They want you, the decision-makers, to act now. Leaders of the world, you must lead. The continuation of civilisations and the natural world upon which we depend is in your hands.”

But of course we can’t really trust the politicians – just look at the stance from Trump and the overtures of others such as the new Brazilian leader Jair Bolsonaro. People need to push the agenda, and in turn companies will be part of this. In Katowice, Attenborough urged everyone to use the UN’s new ActNow chatbot, designed to give people the power and knowledge to take personal action against climate change.

In a highly informative Viewpoint paper written by Thanos Papasavvas, founder and CIO of London headquartered ABP Invest, he asks: Is ESG Sustainable? Environment, social and government issues (ESGs) has become a buzzword term, and we can expect to see increasing debate on this whole issue over the next few years, so this paper from Thanos raises that bar of discussion and asks: “How sustainable is ESG and from an investor perspective is it a process, a product or a fad?”.

Looking at emerging nations and the expected impact of greenhouse gasses on climate change, Thanos states: “As India shifts gears to become the next industrialized powerhouse and the most populous country in the World, overtaking China by 2022, the expected impact to Greenhouse gasses will be another significant shift higher. What’s even more worrying than India is the next and third wave of industrialisation which is not even on the graph yet – Africa! By some estimates Africa will approach 5bn people by the end of the century and its industrialization coming after China and India will have a devastating impact if measures are not taken well ahead of time.”

On a positive note, he points out that some corporations are beginning to make a real difference. He states: “Companies are increasingly making bold public statements and commitments: Maersk, the largest sea container company representing 20% of the industry, has just set a zero-carbon target for 2050; Shell is looking to cut its carbon emission by 20% by 2035 and link them to executive pay; VW is investing Eur 44bn on technologies for electric cars, autonomous driving and new mobility services over the next 5 years, of which Eur 30bn to be spent on EVs.”

And of particular note, he mentions: “More importantly in my view, international Investors have also joined forces under the Climate Action 100+ to promote awareness and cooperation; the $32 trillion assets under management they represent could have a meaningful impact on corporates and governments.” http://www.climateaction100.org/

And looking at the whole subject of ESG as an investment product, Thanos says: “Whether ESG and impact investing enhances returns and adds value to the portfolio is missing the point. It’s about the higher aspirations and expectations of a generation.”

He adds: “In our view ESG is not another ‘risk factor’ or premium to diversify investments. It’s a way of engaging with corporates and governments to help promote the underlying attributes of governance, social fairness and environmental awareness. We are experiencing a generational change in attitudes yet at the same time we are facing scepticism and resistance to change from significant parts of the population.” But he also adds: “Let’s not lose faith.”

 

Opportunity lost for Antarctica

A couple of weeks ago, the opportunity to create the world’s largest marine sanctuary in Antarctic waters was lost when certain countries -Russia, Norway and  China – voted against it. Shame on you! The proposed sanctuary - some five times the size of Germany - would have bannned fishing in a vast area in the Weddell sea, protecting key species including seals, penguins and whales. Consensus is needed from all 24 members of the Commission for the Conservation of Antarctic Marine Living Resources and the European Union.

"This was an historic opportunity to create the largest protected area on Earth in the Antarctic: safeguarding wildlife, tackling climate change and improving the health of our global oceans," commented Greenpeace's Frida Bengtsson. "22 delegations came here to negotiate in good faith but, instead, serious scientific proposals for urgent marine protection were derailed by interventions which barely engaged with the science and made a mockery of any pretence of real deliberation."

Why did Russia, Norway and China vote against this? Largely because they want to plunder the seas on a commercial scale. Hoovering up of krill, in particular by modern Norwegian vessels, is destroying a very fragile ecosystem. The fight to try and stop this will go on.

 

Now time to get up to speed on the markets.
Here's
 our exclusive TXF Essentials subscriber content

Right problem – wrong solution: The threat to the multilateral official finance system
Often priced at well below accepted market rates, Chinese official finance is a major hurdle to fair competition in the global export market. A growing number of governments are attempting to compete by circumventing OECD rules and blurring trade with aid. But adding more unfair trade practices risks the global official finance system self-combusting and ending any real chance of a lasting and fair resolution to the problem.

Shop talk: Hermes reflects on Russia and 'click and cover' for SMEs
While the ripple effect of sanctions is still creating uncertainty around new Russian business, German exporter and lender confidence is returning to the region. TXF spoke with Thomas Baum, head of underwriting at Euler Hermes, to discuss the German ECA’s busy petchem project pipeline in Russia, its increased risk appetite in Africa, and how its new digitalised ‘click and cover’ platform is streamlining access to export finance for SMEs.

Nachtigal: Development finance as it should be
As more governments look to mimic Chinese-style development finance offerings, the recently signed Nachtigal hydro project financing is a perfect example of why they shouldn't.

What price non-recourse debt for US offshore wind?
Balance sheet capacity and strong banking relationships are the best chance the US has of making progress in offshore wind development. While both developers and lenders are accepting compressed returns, there’s still little concrete evidence of the emergence of a creditworthy US supply chain.

What’s moved the dial in trade and treasury tech in 2018?
Recorded webinar - We reflected on 2018 and asked what actually made a difference in trade technology in the past year and picked out the highlights amid the hype.

Shop talk: How far away is mandatory ESG reporting in Asia?
TXF spoke with Juliette Macresy, head of Greater China and South-East Asia for ESG research and ratings firm Vigeo Eiris, to discuss tracking green loan proceeds against green projects as regulators try to move the market towards mandatory ESG reporting.

BAML's Brady looks at trade with fresh eyes
A wave of new trade hires has provided Bank of America Merrill Lynch with an opportunity to focus on its strengths and leverage inherent advantages over competitors. TXF spoke with Geoffrey Brady, recently appointed as head of global trade and supply chain finance, about the direction in which the bank is moving.

 

Plus, to top things off... the news you thought you had but didn't 

Carbon Holdings signs AFC tranche for Tahrir Petchem project
Carbon Holdings will provide an equity update to prospective ECAs and lenders on the $10.9 billion Tahrir Petrochemicals Corp (TPC) project at a meeting in…

Bank mandates for Amur GPP expected Q1 2019
Bank mandates for the €13 billion ($15.6 billion) financing of the Amur gas processing plant (GPP) are expected in Q1 2019, with ECAs and lenders due to…

Bina-Istra highway refi and expansion financing closed
The refinancing/expansion financing of the Bina-Istra highway concession in Croatia has closed. Lead sponsored by Bouygues, the concession has been lengthened…

Slovenia's first green bond oversubscribed
Slovenia’s state-owned development and export bank, SID Bank, sold a €75 million ($85 million) five-year private placement last week to finance green mortgages and…

Dianchi Water sounds out banks for debut offshore loan
China’s state-owned company Kunming Dianchi Water Treatment is sounding out bank appetite for its debut offshore loan of $150 million with Bank of Communications…

Details on Thor offshore wind farm emerge
Aquila Capital reached financial close in September on the 147.6MW Thor offshore wind farm in Sweden. The €200 million ($226 million) project is structured on a debt-to-equity…

Newly formed Var Enerji signs $3bn RBL
Var Enerji – a new company created via the merger of Eni Norge and Point Resources – signed a $3 billion six-year reserve-base lending (RBL) facility on 10 December…

Petit to join Investec project finance team
Frederic Petit is to join Investec’s project finance department on January 3 as the company looks to build its presence in the Americas. Petit has spent over 12 years at…

Formosa 2 offshore wind RFP doing the rounds
An updated request for proposals (RFP) for financing for the 376MW Formosa 2 offshore wind project in Taiwan is doing the bank rounds…

Latvia launches Kekava Bypass RFQ
Latvijas Valsts celi (Latvian State Roads) has launched a request for qualification (RFQ) for the Kekava Bypass PPP project. The 23-year DBFM concession is for…

GIA closes on debt for Geriatric hospital project in Chile
Mexican construction company GIA has closed a $370 million seven-year-plus-four-year- construction loan to back development of the $400 million-plus…

Shinhan Capital to reduce trade finance fund exposure
Shinhan Capital is rumoured to be redeeming its investment in several trade finance funds. Although unconfirmed by Shinhan, the redemptions are said to stem from some funds…

Banks mandated for Orsted's offshore Taiwan wind project
Three banks have been mandated by Orsted to raise corporate financing for the partial funding of its 2.4GWs of offshore wind capacity being developed at four sites…

EXCLUSIVE: BAF Capital pulls plug on trade finance fund
BAF Capital has closed down one of its trade financing funds after a number of redemptions. The collective investment scheme provides short-term secured trade financing…

New trade roles for Jameson and Kalay at Bank of America Merrill Lynch
Bank of America Merrill Lynch has rounded out its new look trade team with two internal moves in Asia and EMEA…

TAP secures project financing
Sponsors of the €4.5 billion ($5.2 billion) Trans Adriatic Pipeline (TAP) project - BP (20%), SOCAR (20%), Snam (20%), Fluxys (19%), Enagas (16%) and Axpo (5%) - have secured…

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