As governments across the Asia-Pacific region imposed lockdowns and other control measures to contain the spread of the Covid-19 virus, infrastructure construction and financing was disrupted, interrupting a good run of project financing in 2019 that had been projected to continue into 2020. At the same time, lenders have also turned risk-averse in the face of the unprecedented change in market conditions caused by the virus.
As many sectors are now going through rationalization, instead of expansion, a number of deals are being repriced by about 50bp to reflect current liquidity conditions and increased funding costs for banks. With a recession now in place, the growth outlook in many developing economies has changed dramatically in the short span of a few weeks.
A handful of projects have fared better, in particular those in the renewable space, where financing generally remains available. Among the renewable projects that reached financial close this year were the Changfang and Xidao offshore wind farms in Taiwan, concluded in February 2020; Chenya Energy’s floating solar farm project, also in Taiwan and completed in April; and the Akita offshore wind farm in Japan that closed in February.
Indeed, renewable energy dominated the discussions when the board of editors at The Asset evaluated the submissions for The Triple A Infrastructure Awards 2020. Last year was another standout year for offshore wind, solar, and waste-to-energy project deals across Australia, China, India, Malaysia, Pakistan, the Philippines, Taiwan and Thailand.
Taiwan grabbed the headlines with two market-defining transactions, both of which were offshore wind farm projects. The Yunneng Wind Power Company NT$94 billion (US$3.18 billion) non-recourse term facility wins The Asset Triple A Renewable Energy Deal of the Year. This is the largest-ever non-recourse financing raised for an offshore wind project in the Asia-Pacific region. The 640-megawatt (MW) project, located in Yunlin county, showcases Taiwan’s energy transition strategy, backed up by a government policy that focuses on renewables and aims to develop10 gigawatts of offshore wind capacity by 2025.
The other winning deal from Taiwan is the Formosa 2 Wind Power Company NT$62.4 billion financing of a 376MW offshore wind farm located off the coast of Miaoli county in northwest Taiwan. The project was chosen as the Green Project of the Year. It attracted the first-time participation of a life insurance company, Taiwan Life Insurance, potentially unlocking a new source of financing for upcoming transactions.
In addition to the slew of renewable energy transactions, an interesting feature of this year’s awardees’ fund raising was the proliferation of deals that incorporated environmental, social and governance (ESG) initiatives and the United Nations’ Sustainable Development Goals (SDGs). The Sydney Airport Finance Company A$1.4 billion (US$965.50 million) syndicated sustainability-linked facility took The Asset Triple A Transport Deal of the Year. It is the first of its kind in the country and the largest globally.
Sydney Airport’s financing margin on the sustainability-linked loan facilities is linked to its ESG risk rating (as independently assessed by Sustainalytics). Sydney Airport will be rewarded with a margin discount if its ESG risk rating improves, and penalized via a margin premium if its ESG risk rating deteriorates.
The Housing New Zealand Corporation NZ$600 million (US$387 million) sustainability bond, winner of the Social Infrastructure Deal of the Year in New Zealand, represents the first issuance of a so-called well-being bond. Its proceeds are allocated to both social and green projects that align with the government’s living standards framework and contribute towards meeting the UN SDGs.
The National Housing Finance and Investment Corporation A$315 million social bond, which took the award as Social Infrastructure Deal of the Year in Australia, provides lending to various community housing providers across different Australian states. It includes support for more than 360 new social and affordable dwellings.
The Bangladesh Chemical and Industries Corporation US$1.3 billion-equivalent export credit agency (ECA)-backed financing facility is recognized as the country’s Petrochemical Deal of the Year. It is the largest-ever ECA/multilateral-supported financing undertaken for the Bangladeshi government. The project is in alignment with several of the country’s key SDGs, including ending hunger, achieving food security, improving nutrition, and promoting sustainable agriculture.
In Sri Lanka, the government concluded a US$72 million facility supported by the Chinese ECA China Export & Credit Insurance Corporation (Sinosure) to fund the upgrade of health facilities at various hospitals in the country. Recognized as the country's Health Infrastructure Deal of the Year, this facility represents another Sinosure-backed transaction of a critical infrastructure project in Sri Lanka.
In Laos, the Kasemrad International Hospital 180 billion kip (US$20 million) and 490 million baht (US$15.75 million) term loan facility scores the win as the Social Infrastructure Deal of the Year for Laos. The project is one of the pioneer international-standard hospitals in the capital of Vientiane aiming to provide the Laotian population with access to good quality healthcare.
This year’s other winning deals include the Pengerang Refinery and Petrochemicals facility, which took Petrochemical Deal of the Year. This, the largest limited recourse integrated refinery and petrochemical financing deal in Asia in 2019, achieved very competitive pricing and set benchmarks for a number of ECA facilities.
The US$453 million loan facility for Nepal Water and Energy Development Company wins the Power Deal of the Year. This is one of the largest foreign direct investments in Nepal, with funds earmarked for the construction of a 216MW run-of-the-river hydropower project that will increase the country’s electricity supply by one-third and provide clean, reliable power to millions of people.
For the best regional deals, please click here.
For the best deals in Australia and New Zealand, please click here.
For the best deals in Asean, please click here.
For the best deals in North Asia, please click here.
For the best deals in South Asia, please click here.
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As part of The Asset's ongoing coverage of the exciting opportunities in Asian infrastructure, we will be hosting an important webinar with key decision makers on June 30, 2020. We invite you to take part in this interactive virtual discussion where we will touch on several trends facing infrastructure development in Asia. Please click here for more information about the webinar.