Royal Bank of Scotland
Few global project finance players successfully weathered the storm in the US project finance market. Perennial winners SG and Citigroup, for instance, have both been forced to take over US assets that they lent against. Both of their project groups are now under new management ? SG?s Jay Worenklein runs his own power investment firm and Citi?s Chris Beale has moved to a new position covering equity products and environmental risk.
But Royal Bank of Scotland has recently been bulking up its New York team, and when Dealogic completed its 2003 project finance figures it had emerged at the top of the mandated lead arranger tables. With $3.46 billion arranged for 24 projects, it edged slightly ahead of the combined Crédit Lyonnais/Crédit Agricole haul, and $1 billion ahead of Citigroup, in third.
RBS?s team, led by Thomas Hardy, is also one of the few that could plausibly claim to be a full-service infrastructure finance shop. Bar Citi, few investment banks show great interest in the product unless a bond underwriting mandate is up for grabs. Bank consolidation has left the infrastructure developer with ever fewer debt providers.
RBS?s project finance capabilities essentially come out of a marriage of two teams. The old RBS project finance group, based in Edinburgh, was one of the early funders of the UK?s private finance initiative projects. With the takeover of NatWest, RBS acquired Greenwich NatWest, a very sharp operation that shone in the US and Middle East in particular.
RBS, for instance, is still the first choice as an adviser for hydrocarbons projects in Qatar, which sends several billion dollars in projects the way of international and regional lenders each year.
Last year it opened an office in Paris ? a bold move considering the dominant presence of the big three French banks in project finance. Although a French project finance market has yet to develop, RBS is betting that it will have at least a few features in common with the UK experience.
In Italy RBS was an adviser, bookrunner, mandated lead arranger and financial investor in Edipower, at e2.3 billion the third-largest project finance deal to close in 2003. That last role is important ? RBS has the ability to make principal investments in the most tempting infrastructure acquisition targets, or lucrative projects. It is believed to have done this on around 18 PFI deals up to the end of 2003.
But RBS?s most impressive close has been in the US, where it was one of four lead arrangers, and two mandated leads, for FPL Energy?s $400 million construction facility. RBS picked up the mandate in April 2002 after Citi pulled out, and closed the financing in June 2003 in the depths of the slump in US project finance. Clients like FPL, one of the largest developers, remember this.
It followed this up with the Cameron Highway Oil Pipeline financing, where it was one of the arrangers of a $225 million bank facility for GulfTerra and Valero Energy?s offshore oil pipeline system.
In the UK, RBS continues to dominate. It was the only bank that participated in both the bond and bank tranches of Metronet, the $2.65 billion financing for two-thirds of the London Underground as a public-private partnership (PPP). It has followed this up with one-of-a-kind deals in the education and housing sectors.
If there is one geographical weak spot for RBS, it is in Asia. The bank?s Australian operations rival those of established domestic players but it has yet to make an impression further north. China, in particular, has the potential to overtake the Middle East as a source of oil and gas advisory work.
RBS will also need to look at increasing its dollar bond capabilities. While it underwrote $929 million in 2003, it trails the market leader, Credit Suisse First Boston, on $3.6 billion.
But this should be set alongside a strong performance in markets as varied as Italy, Spain, Canada and Iceland. A country?s infrastructure market has traditionally been the preserve of its domestic banks but RBS has frequently been the first foreigner in. And in a project finance market as parochial as that of 2003, and as difficult as that in the US was, RBS stands out as a clear winner.
