Q&A: Andrew Platt, BNP Paribas – Part II
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Q&A: Andrew Platt, BNP Paribas – Part II


Significant opportunities abound in Latin America, as several countries look to cultivate growth and meet demand with improved energy and infrastructure projects, according to Andrew Platt, head of project finance Americas at BNP Paribas. Mexico, Peru and Chile are among the focus points in the region for the bank and other lenders. “
The one challenge I see for lenders is a tremendous amount of competition. In some cases we’re seeing more aggressive terms than in the U.S. market,” Platt says in the second part of this PFR exclusive. Platt sat down with Senior Reporter Olivia Feld to discuss the bank’s take on deal flow in Latin America, as well as trends in liquefied natural gas export facility financing and M&A.

PFR: Is that something you are going to expand further, working with IPPs?

The bank has made a large commitment to overall growth, which includes growing in the U.S. around power and energy.

We have a fully dedicated coverage group for power and energy, focused on large corporates, utilities, IPPs, multinational companies as well as a number of key financial sponsor relationships such as LS Power and Energy Investors Funds. They continue to expand the number of clients as part of our growth plan within the U.S.

PFR: There’s been a number of very large LNG deals in the pipeline. What is the market like for these transactions?

LNG deals in many ways are very traditional project finance deals. While there are a few long-term contracts in power, these big LNG deals are all underpinned by really strong long-term contracts. There are few opportunities to deploy capital for projects with contracts with major investment grade energy companies and big trading houses. It’s a very natural fit for any bank that is in the project finance space to get comfortable with the credit metrics.

The challenging dimension is the sheer size. If you Iook at U.S. opportunities, you’re going back to contracted assets but now you’re being asked to write a big check. What has helped the transactions are the lack of opportunities and in many cases, very prominent sponsorship where banks identify with key sponsors or in some cases really have a global franchise in LNG.

We have a very long-standing global footprint in LNG, whether it’s in the Middle East, Asia, or even some of the re-gas transactions in the Americas over the years. There has been a history of LNG, both at BNP Paribas and other major banks. The comfort with the sector has existed for some time.

Then it comes down to the capital. Following the theme of abundant liquidity, there are a number of institutions that are very well positioned to deploy a lot of capital, especially around the high-quality structures featured in LNG deals .

The natural gas/shale revolution is a true game changer at so many levels for the U.S. market. LNG is one of the resulting developments. The market for these deals is clearly robust.

PFR: You touched upon the M&A advisory work. Where does BNP Paribas see its work going in the M&A space?

The fact that we are active with key sponsors in the space whether it’s financing, hedging or advisory, has created a great opportunity for us in M&A. The strategy is very complementary to all the other things BNP Paribas is doing in the space.

The team has been up and running for a little over a year now. Last year we worked together on two really great M&A opportunities. One was a wind transaction, where they helped structure the transaction for Lincoln Renewable Energy and sell their ownership interest, and the other was Oregon Clean Energy with EIF. I think those are great examples of kind of things the team is trying to do.

I know this year we are looking to further build what I’ll now call an established franchise. The head of the team is a very experienced M&A professional. He came to BNP Paribas with a long track record and now after firmly establishing the team they are in a great position to grow.

PFR: How are you finding the market in Latin America? What areas of interest do you see in terms of geography and resources?

The bank has a very long-standing strength in Latin America project finance. If you go back over 10 or 15 years, the franchise strength has been a combination of lending and advisory. One of the areas where we’ve been really successful has been in developing the project bond business. We’ve done a number of transactions in Peru, which fully leverage our capital markets teams allowing us to sell to local investors as well as U.S. investors through 144A or regulation D private placements.

We’re active as a platform in most of the countries you would expect, whether it’s Mexico, where we closed the Los Ramones deal last year, or Chile, where we have a number of active transactions. In Brazil, we also have a number of very significant transactions both in advisory and lending – in particular a lot of advisory where we are working closely with the BNDES. We’re active in Colombia. We continue to look at countries where we can be meaningful.

We’re focused on trying to bring the balance sheet for the right opportunities, for key clients, around a particular country or sector or certainly in conjunction with advisory or leading to a bond transaction.

PFR: Can you provide a sense of BNP’s appetite for projects in Latin America? What sort of assets are you specifically looking at?

Our franchise in Latin America is equal parts infrastructure, power and energy. We continue to look at opportunities across all those sectors and subsectors such as airports or light rail or other transit in Latin America, or pipelines, transmission lines, power plants. All of those are well within the “sweet spot”.

Mexico is clearly one of those countries where we definitely want to do more business. In Peru we are active and want to continue to remain active. We have a transaction in Peru that we should be closing within the first quarter of this year. In Brazil we are looking to grow in renewables, which is a fairly new dimension for our business in that country.

PFR: Looking at the bigger picture, what are some of the significant trends in the market in terms of power project financing or M&A in North and Latin America?

I think about Latin and North America differently. You will continue to see the same kinds of power transactions in North America over the next year, probably several years, in terms of the development pipeline. We expect to continue seeing a number of opportunities in wind and solar. We certainly anticipate, and are in the middle of, a number of other opportunities around greenfield gas-fired plants in the U.S. I think that trend will continue.

There is an expectation that about 15,000 MW of existing generation is going to be shut down this year, so demand should remain strong for new power generation in the U.S. We’re well into the maturity phase of a lot of private equity ownership around these assets too. A number of funds that are vintage – let’s say ’05 to ’07 – own a number of power assets, both contracted and partly contracted, and I expect to see a number of those assets change hands. Whether that means acquisitions by yieldcos or other infrastructure or private equity owners or any number of other options, I think there will continue to be a lot of activity in this space. That certainly creates opportunity for our colleagues in the M&A team. Whether it’s helping some of those funds divest those assets at the right value or bringing in partners on greenfield deals, there should be a lot of activity.

More broadly in the energy space, I think LNG will continue to be an interesting area to watch, as well as other gas-related opportunities. Whether that means petro-chemical transactions that are utilizing natural gas or other industrial projects such as methanol projects or fertilizer projects or other gas-conversion projects. Even at lower oil prices, there will still be some activity simply because it makes sense for a particular shale play or the economics still warrant the transaction. A lot will depend on people’s longer-terms views as to where gas and oil are headed.

PFR: How do trends in Latin America differ?

What’s interesting about Latin America is that country to country, there are still enormous opportunities to continue grow and improve the infrastructure. Stronger countries will continue to attract capital and they are taking intelligent steps in developing the infrastructure they need for growth. We closely follow the infrastructure development in the more stable countries. Sometimes the opportunities are in smaller countries like the bond deal that we closed last year for a hydro project in Costa Rica.

Chile is another country where we see a number of opportunities. We are a financial advisor for a project that is actually a convergence of some of the things we’re seeing in LNG and power.

The one challenge I see for lenders is a tremendous amount of competition. In some cases we’re seeing more aggressive terms than in the U.S. market. That is an area to watch, and I suspect we will continue to see a push on tenors getting a little longer and pricing getting a little thinner.

PFR: Looking ahead to 2015, what’s on the table for your team over the next 12 months?

We’ve closed our first two deals of the year already. We’re in the midst of a number of other transactions. We will see a continuation in the kinds of opportunities that we worked on last year. We’re bringing another managing director, David Cole, onto the team. He will be specifically focused on oil and gas-related projects in North America. He is a longtime oil and gas and project finance veteran who has been in Europe for a number of years. He’s been involved with a lot of the mega-projects in the Middle East, Africa and Central Asia.

In Latin America, we continue advising and structuring complex transactions. We excel at those deals that are off the fairway and require a lot of structuring expertise. We have a strong pipeline of mandates in Latin America and will continue to pursue advisory and lending opportunities where we can bring a lot of value to our clients.

PFR: Have you hired anyone else recently or do you plan to do so?

We hired a number of people over the last few months, some of those were replacements and some were growth roles. We improved the staffing on all levels in North America to make sure we have a deep enough bench to keep up with the current and anticipated demand. We may look to add another person or two depending on the needs of the team over this coming year. In Latin America, we have made a couple of junior-level additions level to make sure we’re well-staffed to meet the demands of the transactions we’re working on. We also recently added a few people on our portfolio team.

To read the first installment of this Q&A, visit www.powerfinancerisk.com

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