PFI Project Bonds Asia Roundtable 2016

Welcome to the Thomson Reuters Project Finance International Project Bonds Asia roundtable, sponsored by Credit Guarantee & Investment Facility (CGIF) and Sumitomo Mitsui Financial Group (SMFG). The event was held at the Thomson Reuters offices in Singapore.

The transcript of the event is published here in full and makes interesting reading at a key moment in the development of this embryonic market. In comparison to the rest of the global project finance market, Asia has been slow to take up the use of project bonds in its market – apart from in the notable exception of Malaysia.

There have been signs the use of project bonds is coming. In the Philippines earlier this year, CGIF, Asian Development Bank (ADB) and the Bank of Philippine Islands signed a Ps12.5bn (US$216m) peso-denominated credit enhanced project bond for two geothermal power projects owned by AboitizPower. In India, the Indian Infrastructure Finance Company and the ADB are offering a rupee credit enhanced bond product to take out bank debt.

The roundtable discussion went into details about these deals with Kiyoshi Nishimura, chief executive officer, CGIF and Frédéric Thomas, senior investment specialist, Private Sector Operations Dept, ADB, on the panel. Gopal Agarwal, senior vice president for infrastructure, SBI Capital Markets discussed developments in the Indian market. The active Malaysian market was well represented by Lee Ka Sing, head of project finance at Maybank and Seohan Soo, EVP, Capital Markets Group, AmInvestment Bank.

But outside Malaysia there are still plenty of challenges before the market can develop. There were plenty of reasons put forward in the discussion for the lack of issuance thus far. Lack of projects, the regulatory environment, investor appetite, the cost of debt and bank competition were just a few. “There are regional and international banks that are willing to lend long term, cheaply and with very relaxed covenants,” said Lee Ka Sing.

But from the bank perspective Luca Tonello, deputy general manager and head of project finance at SMBC in Asia said; “We remain active in the PF loan market in Asia, but the regulatory environment makes it increasingly difficult for banks to take long-term exposure.”

Terry Fanous, MD, project and infrastructure finance Asia Pacific, Moody’s said: “Governments, policymakers and the private sector want to see a project bond market develop in Asia Pacific. We would like to see a collaborative approach to remove the blockages to the domestic currency project bonds and the offshore currency bonds, to ensure they flourish over time so that the sector attracts a wider range of financing options.”

Kiyoshi Nishimura said; “This subject has been discussed for so many years. But this time I’m quite optimistic. There has been a fundamental change in the nature of the market. Although we still have a very bank centric financial system in Asia, there are more resources accumulating outside of the banking sector.”

Rod Morrison,
Editor, PFI