Project finance sector view: Wind in the sails
Life is looking up for project finance specialists. After several years in the doldrums, their sector is showing signs of renewed life.
"Post 9/11, Enron and the UK and US electricity crises, the project finance industry went through a relative trough," says Thomas Hardy, global head of project and expert finance at Royal Bank of Scotland (RBS), market leader in the sector. "But over the past 18-24 months that has reversed quite dramatically."
2005 was a good year for Europe's project financiers. According to research firm Dealogic, Western European project finance deals rose 7% in value, to$53.1bn. In Italy alone, the value of project finance deals rose more than 500% last year, boosted by large deals such as the €2.3bn refinancing of ENEL, a power generation company.
The Italian market promises similarly tasty project finance morsels in future, including a €5bn project to build the world's longest road bridge, connecting Sicily to the mainland. Catia Tomasetti, a project finance partner at law firm Allen & Overy in Italy, says leading players in the Italian market, such as RBS, West LB, Calyon, and BNP Paribas, are building their teams, while others such as Société Générale, which withdrew from the Italian market several years ago, are looking to re-enter.
Maurizia Villa, managing partner at search firm Heidrick & Struggles in Milan, says Italian banks such as Banca Intesa are also looking to reinforce local teams.
The phenomenon is not restricted to Italy, however. "There's definitely an upturn in hiring for mid-ranking project financiers with five years-plus experience," says Jean Facon at London-based search firm Christopher Beale Associates. "All the major project finance lenders in Paris, Frankfurt and London are currently short of resources."
Recruiters say hiring is picking up too in North America, where the value of project finance deals dropped 7% last year, to $25.2bn, according to Dealogic. "Project finance is a hot market right now," says Brian Drum, chief executive of New York City-based recruiter Drum Associates. "A lot of banks are looking at hiring in this space."
At RBS, Hardy says the market leader has modest expansion plans, based on organic growth. The bank recently revealed its intention to hire 25 new corporate and investment banking staff in Paris, and said some of the new staff would work on public/private partnership deals.
Jean Turcat, a consultant at recruitment firm Robert Walters in Paris, says other banks are looking to build French public/private partnership teams. In late 2005 French government made a commitment to increase private sector involvement in areas such as defence communications systems, airports, and sports and cultural facilities.
Public/private partnership deals are likely to drive growth elsewhere too. Last year the value of the global PFI market fell, driven by a downturn in the UK. But private financing of public projects is increasingly popular in both the US and Italy.
Moving in
A project finance arm can be an asset. Last year, pre-tax profits at BNP Paribas' financing division, which includes structured and project finance, export finance and commodities, jumped from €1.2bn in 2004 to €1.7bn.
Not surprisingly, other banks want a piece of the action. Drum says companies such as Bank of America, which pulled out of the project market in the 2000-2001 downturn, may be reconsidering their options. "There are some tremendous opportunities in South America and China right now," he says.
Japanese banks are also said to be boosting their project finance capabilities. Sumitomo Mitsui Banking Corporation is looking for project financiers to focus on transport and infrastructure investments in Germany and France, for example.
Skill sets
If you want a job in project finance, it will help if you're familiar with the booming power sector, and particularly with renewable energy sources.
Facon says banks in London are looking for Russian speakers with contacts in the country's energy companies, as well as for people who have experience structuring debt capital market products the back of energy and infrastructure loans.
Jürgen Merkel, managing director of MB Consulting in Frankfurt, says recruitment in the German market is focused on people familiar with Eastern Europe and with wind and solar energy projects. He says familiarity with the Eastern European market is also sought-after.
In Milan, Villa says the emphasis is on structuring specialists. "Banks already have coverage specialists to originate deals. They need technical competencies and familiarity with legal issues," she says.
