In last year's Yearbook we ended the publication with "Writedowns of the Year," putting a line under a difficult 2023, particularly for the offshore wind sector. Little did we realise 2024 would spawn some even more challenging projects. Still day always follows night and the light at the end of the tunnel is not always a train coming towards you. The shakedown from the post-Covid era is presumably coming to an end as the world moves lock, stock and barrel into a data centre-driven existence.
The Moody's project finance loan default tables will take a knock this year when the Ambatovy mine restructuring is taken into account. As the "Restructuring Deal of the Year circa 2023", Yunlin involved the lenders and sponsors putting more cash into the project, albeit a lot more cash, to keep it whole and on the track, the "Restructuring Deal of the Year circa 2024", Ambatovy, saw a different result.
The lenders and the sponsors lost nearly everything but are hoping for an equity-sharing upside in the future. Nevertheless, the project is still whole so the restructuring was successful. Operations continue at the nickel mine – important given the fact it employs 10,000 people. And who knows, the global nickel market could/should improve as demand for the metal in transition industries such as electric vehicles and batteries increases. But the US$2.1bn of debt has gone along with nearly US$1bn of equity.
Ambatovy was a deal from 2007 so it is not a post-Covid or even post global financial crisis deal. At the time it was seen as a breakthrough for financing cooperation between the Japanese and South Korean export credit agencies JBIC and Kexim. But now the light to be seen is not that of a train but hopefully that at the end of the tunnel.
The jury is still out on the write-off expected from the Northvolt gigafactory scheme restructuring in northern Sweden. It is still in its Chapter 11 process. But given, like Ambatovy but unlike Yunlin, it does not look like the debt will remain whole and the equity write-off, well . . . unlike Ambatovy, this was not a slow burn. Early in 2024 project finance lenders signed a US$5bn expansion financing to take the scheme into its expansion phase. Northvolt had already raised US$1.6bn in project debt in 2020 and US$10bn in equity over the past few years.
Then as 2024 progressed, the new debt drawdown was delayed and stories started to emerge of vehicle manufacturers cancelling offtake contracts due to delays in supplying batteries. The crunch apparently came when leading Northvolt shareholder Volkswagen issued some gloomy corporate announcements in early September and the light at the end of the tunnel became a torch focusing squarely on the project.
Autumn 2024 has seen another saga unfold – Thames Water and its smaller cousin Southern Water. The fact that Thames debt now has junk status is remarkable for the water supplier for one of the world's leading cities. Sir Adrian Montague must have wondered a few times why he accepted the chalice, since he took up the role of Thames Water chair in summer 2023. Still, the final regulatory price settlement for Thames, Southern and Tom Cobley and all is now out and so presumably the London cake can be divided between equity and debt.
Creditor clampdown, a phrase used in the Ambatovy restructuring, is expected to reemerge on Thames. The regulated asset base model, so beloved by all including infra god Dieter Helm, has been well and truly tested. Whatever 'appens, the provision of new debt to the UK water sector will no longer be a no-brainer.
Teesside, the project finance capital of the world. The first two project-financed carbon capture and storage projects got over the line at the end of 2024. Guess what? One is based on the regulated asset-based contract model. Hopefully the diplomatic skills of Sir Adrian will not be required in a few years' time. Come 2028, the projects will be commissioned and operational. Wey aye the lads and lasses. It will be fine, an £8bn project finance bobby dazzler, fingers crossed.
All being well it won't be auf wiedersehen pet for the MGT Teesside 299MW biomass project in 2025. While the debt remains whole, new money has been inserted into the delayed project in two restructurings – one in summer 2023 and one in November 2024. Like Ambatovy, this is a slow burn and this is not a reference to the project's boilers. The scheme was financed with £650m of senior debt in 2016 and won one of our awards for the trouble: PFI's European Power Deal of the Year. It was due online in March 2018 but has suffered construction delays and ongoing technical issues.
Teesside, the project finance capital of the world indeed. Apparently PD Ports is up for sale again. Remember what happened last time? Still the legal case over access to the site, rather important for a port when the boat comes in, has been settled and Brookfield is on the case again. Dance to thy daddy, sing to thy mammy, etc etc.
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