In an article for Energy Voice – a magazine focusing on the renewable, oil, and gas sectors – Simon Redmond, a commodities specialist at S&P Global Ratings, outlines the ‘top ten’ developments to watch out for in the liquefied natural gas (LNG) market.
Redmond explains that while LNG has historically maintained a relatively stable price, the coming months will likely see increased market volatility as demand declines, production continues at similar rates and the resulting global glut diminishes unit prices.
“In order to reflect the new ‘low-price’ environment, LNG contracts are being re-negotiated to favour utilities and off-takers over the traditionally favoured producers,” according to Redmond.
As a result – and given tighter profit margins – Redmond warns that LNG projects may take longer to repay their debts, meaning an adverse impact on related credit ratings could be on the cards. He also notes that despite the current glut, the need to entice investors to capital intensive LNG projects should continue to drive producers’ strategy, efficiency and, in turn, profits.
To read the full article, please click here.
New research, recently published by S&P Global Ratings, identifies energy storage as “the final piece in the global energy transition puzzle”. Lead analyst of the report, Michael Wilkins, managing director of infrastructure finance and head of environmental and climate research, suggests that energy storage technology is a key component of the global shift to increased renewable power capacity, as it allows for the inevitable peaks and troughs in electricity generation from wind and solar power – which, by nature, are exposed to fluctuations in resource availability.
The recent acquisition of battery production company, Saft, by French energy giant, Total, highlights the growing awareness of the importance of storage. The largest deal of its kind – worth €950 million ($1.1 billion) – Total’s bid represents a sign of greater things to come, according to Wilkins. But as investments in the sector rise, an awareness of the financing and project risks is crucial, he warns.
A targeted campaign by Moorgate ensured news of S&P’s research was picked up across the specialist energy and financial press, including Bloomberg, Business Green (paywall), Renewable Energy Installer, Renewable Energy World, What Power (in Italian) and Expansión (in Spanish).
The S&P Global Ratings Annual Infrastructure Finance Seminar kicked off last week at Haberdasher’s Hall in the City of London. Journalists, investors, bankers, analysts and politicians alike gathered to engage in two of the most important discussions affecting the UK infrastructure sector today: the ongoing energy transition – from carbon intensive processes such as coal-burning, to cleaner energy resources, such as gas and renewables – and more pressingly, the risks of a British exit, or ‘Brexit’, from the EU.
Susan Gray, S&P’s global head of infrastructure, opened proceedings, welcoming a special guest address from Damian Hinds, MP and Exchequer Secretary to the Treasury. Hinds took to the podium to set out the government’s priorities for approaching the twin challenge of fighting climate change and preserving the country’s energy security at the same time.
Conversation quickly turned to the likely impacts of a Brexit on UK infrastructure development. On one side of the debate was Andrew Hilton, director of the think tank Centre for the Study of Financial Innovation, who suggested that fears over the effects of leaving the EU have been exaggerated and that Britain would unlikely see any great impact, at least within the first few years. On the other side was S&P’s chief economist for EMEA, Jean Michel Six, who explained that macroeconomic turbulence, currency depreciation and a possible sovereign rating downgrade were all strong near-term possibilities following a ‘leave’ vote. In addition, S&P’s managing director of infrastructure finance and head of environmental risk research, Michael Wilkins, discussed findings from a recent S&P survey of 51 institutional investors on the topic.
As a result of Moorgate’s media campaign, the event and its key takeaways were covered across the national and specialist press, including Bloomberg (subscription required), IJGlobal, Environmental Finance (here and here) and BusinessGreen.
With just days to go until the UK decides on whether or not to remain in the EU, Michael Wilkins, managing director of infrastructure finance at S&P Global Ratings, writes for leading infrastructure publication, InfraNews, about the likely impact of a ‘Brexit’ on infrastructure investment in the UK. Based on the results of a recent survey of 51 UK and international institutional investors conducted by the ratings company, Wilkins concludes the that the only certainty is uncertainty. According to Wilkins, not only does a potential Brexit threaten the vital flows of EU funding to the UK’s infrastructure market – such as €19.1 billion from the European Investment Bank, and even more from the Juncker Plan’s European Fund for Strategic Investments – it also unnerves investors, with some already curtailing their allocations to the UK.
He goes on to suggest that it is the overseas investors – who currently finance more than two thirds of British infrastructure – that could be hit hardest. This is because a Brexit would likely increase currency volatility. In fact, an overwhelming majority – around 71% – of S&P’s survey respondents said they would be dissuaded from further investment in the UK if the pound was to drop in value.
Wilkins concludes that while most of the UK’s current infrastructure projects and companies could weather the immediate economic turbulence created by an ‘out’ vote, in the long term, indirect effects on creditworthiness could be significant – especially for those tied to the UK’s sovereign rating, which could face a ‘negative outlook’ rating following a Brexit.
For the full article please click here (note: subscription is required).
In an article for leading treasury magazine, GTNews, S&P Global Ratings’ director of mid-market evaluations, Alexandra Krief, explains why alternative lending markets are experiencing promising growth in Europe. With bank lending constrained, Krief shows that the European private placement (PP) markets and German Schuldschein in particular are benefiting as a result. In fact, companies seeking funding alternatives helped drive total debt issuance in 2015 to nearly 80% more than seen the year before, re-directing business from the American USPP market as it went.
However, there is still much room for improvement in Europe – Krief argues that increased standardisation when it comes to transaction documentation, along with greater transparency surrounding legal implications, are necessary if these markets are to build on the progress made so far.
Please read the article in full here.
Writing for specialist finance publication, FTSE Global Markets, Alexandra Krief, director of mid-market evaluations at S&P Global Ratings, explores the reasons behind the increasingly promising performance of Europe’s alternative lending markets. Krief points out that while issuances of debt on the pan-European private placement (PP) markets and the German Schuldschein have reached all-time highs – rising by almost 80% in 2015 on the year before – this growth is eating away at PP markets in the US, as well as more traditional financing options such as bank lending .
Yet, Krief argues that more must be done to support the progress we are seeing in Europe. In her article, she suggests that document and policy standardisation – similar to the institutionalised framework implemented in the US – could help to overcome the hurdles to market entry, such as the recognised lack of transparency. In addition, more consistent insights into company credit risk would allow for more informed decision making when it comes to funding allocations and could thereby see more investors tapping these markets in years to come.
To read the full article please click here.
Cited in the latest edition of The Treasurer – the flagship publication of the UK’s Association of Corporate Treasurers (ACT) – Michael Wilkins, managing director of infrastructure finance at S&P Global Ratings, offers his insights on why we have seen interest for infrastructure assets growing across the capital markets in recent years.
In the article ‘If you build it…’(pp.24-27), Wilkins explains that while commercial, multilateral and export finance banks have traditionally accounted for the lion’s share of project finance – typically around 80% – we are now seeing more institutional investors, such as pension funds and insurers, attracted by the high yields and long-term returns the sector can offer.
Please read the full article online here.
With only weeks to go before the UK decides on the future of its EU membership, S&P Global Ratings has weighed in on the Brexit debate, specifically by looking at the possible impact on the country’s infrastructure. Built on findings from a survey of 51 institutional investors, its new report, ‘Post-Brexit, Long-Term Funding Is UK Infrastructure Investors’ Biggest Concern’, reveals that the greatest concern from investors is, above all, currency volatility.
Additionally, Michael Wilkins, lead author of the report and managing director of infrastructure finance ratings at S&P Global, notes that investors found political instability and macroeconomic turbulence – a likely fallout of a Brexit – as significant hindrances to further infrastructure investment for at least two years after the vote. This is because high-levels of uncertainty mean long-term planning becomes especially difficult. However, opportunities to find higher returns in a riskier financing environment may spur some unexpected investment activity, according to some survey participants.
After Moorgate’s targeted media campaign, news of the report and its findings was covered by the financial and specialist press, including Infrastructure Intelligence, Infrastructure Investor (subscription required), Investment & Pensions Europe, FTSE Global Markets, Funds Europe, Private Equity Wire, Institutional Asset Manager, and the June edition of Global Treasury Insights.