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Best Infrastructure and Project Finance House: Mitsubishi UFJ Financial Group |
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Also nominated: Sumitomo Mitsui Banking Corporation and HSBC |
A crisis can be a terrible thing to waste. While the retreat of some of the world’s biggest banks to their home markets has acutely affected the global project and infrastructure finance markets, the void is being swiftly filled by other eager lenders and, to some extent, the capital markets.
In the past year, this latter development has become increasingly visible, as those banks flush with liquidity and balance sheet capacity have waded in, while some project assets have been financed in the bond markets.
Capital markets financing is perhaps the next growth area in project and infrastructure finance, but it will be dwarfed by bank lending for some time yet.
As loans are the life-blood of this market, this plays perfectly to the world’s third-largest bank by deposits – Mitsubishi UFJ Financial Group.
The Japanese bank has engaged in an aggressive growth strategy in project and infrastructure finance in the past couple of years, and in the past year alone has become the leading non-government-backed lender in the global market. State Bank of India ranks first, according to Dealogic.
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“MUFG has very clear plans to enhance its infrastructure and project finance business globally. We are in a particularly strong position to support this over the long term”
Makoto Kobayashi, global head of structured finance, MUFG |
MUFG has used its formidable balance-sheet strength to become a leading lender of project and infrastructure finance in north America, Latin America, western Europe, and, to a lesser extent, in Asia, the Middle East and north Africa.
MUFG’s critics would say that its balance sheet is its singular strength, but that’s hardly fair criticism in a market that is almost exclusively bank funded, and at a time when such balance-sheet strength is to be applauded.
MUFG would also be the first to admit that it needs to strengthen its financial advisory and capital markets capabilities, which it is doing.
“Outside of Japan, and particularly in Europe, the Middle East and Africa, the Americas and Australia, we have not traditionally been as strong in financial advisory as we have been in lending, but we now have market-leading teams in place to enhance our global capability in this area,” says Makoto Kobayashi, global head of structured finance at MUFG in Tokyo.
He adds: “MUFG has very clear plans to enhance its infrastructure and project finance business globally because of the massive need for infrastructure development throughout the world. We are in a particularly strong position to support this over the long term.”
Together with opening a structured finance office in Australia and establishing an Asian origination team, MUFG’s £3.3 billion ($5.3 billion) acquisition last year of Royal Bank of Scotland’s project finance assets in EMEA, which included 30 of its project finance bankers, has undoubtedly been a boon for the bank.
RBS was formerly one of the leading project and infrastructure finance houses, which means MUFG should benefit from the experience and expertise, particularly in advisory and capital markets, of those that joined.
One of these is Andy Jameson, who formerly ran RBS’s energy business. He joined MUFG in London last year as head of structured finance for EMEA, and is charged with spearheading regional growth.
He is well aware of the challenges the bank faces and is adamant that growth in the business is not a fleeting ambition.
“The core mandate is to use the current market opportunity to build and develop a sustainable, long-term, market-leading business,” says Jameson.
He is joined in London by Phil Roberts and Philip Hall, heads of energy natural resources and infrastructure, respectively, and in New York by Jon Lindenburg, head of project finance for the Americas.
Hall says that in the current difficult environment sponsors are keen to have an adviser who can also “bring their balance sheet into the discussion”.
He adds: “Our main model is advise-to-arrange. Clearly our balance-sheet capacity is one of our strengths, but we are looking to continue to embrace capital markets solutions as well.”
MUFG can boast a string of high-profile financing mandates all over the world in the past year, but its joint advisory and financing mandate on the ground-breaking transaction for Centrica, Dong Energy and Siemens’ 270MW wind farm near Skegness in the UK illustrates what it can do.
The £425 million deal marks the first time banks have provided project finance to a UK offshore wind farm that’s still under construction.
MUFG has substantial potential in the global market, and particularly in two important aspects relating to liquidity. First, Jameson says: “Japan Inc. is a very important source of liquidity globally, and that is an opportunity we are well positioned to continue to take the lead on.”
Second, and of concern to rivals, is that MUFG’s loan-to-deposit ratio is about 70%, meaning it has large reserves of financing firepower left to use.
