The most popular answers to three questions in this year's surveys neatly summarise the sweeping change to the project market – the rise of infrastructure funds led by the sponsor/ banker (fondly known as spankers in some banking circles).

As in last year's survey, most sophisticated borrower is Macquarie, but this year – and for the first time – it is closely followed by Babcock & Brown, then more traditional sponsors – Reliance, AES, Qatar Petroleum, International Power, Tata, Hochtief and Suez.
Most demanding borrower in terms of volume and frequency to market is also Macquarie, followed by Reliance and Qatar Petroleum. And most popular dinner date for bankers is Babcock & Brown followed by Reliance, AES, International Power and Carlyle with equal standing.

While Babcock & Brown did not figure as sponsor in last year's survey (nor did Carlyle), it has replaced Macquarie in the dinner date list and only missed out on most sophisticated borrower by 2 responses.

The responses demonstrate the meteoric rise of Babcock & Brown to 'spanker' status. But also that while Macquarie is still number one in terms of sophistication and demand, the fact that it has dropped completely from the dinner date list is, perhaps, symptomatic of banks not wanting to actively court the highly aggressive leverage deals that have been the backbone of Macquarie's success.

On the same lines, the sponsor market is split on asset pricing in developed markets – 51% feel assets are overpriced and 49% do not. And from a list of deals that banks put forward themselves, the most overpriced sponsor acquisitions by bank opinion were BAA, Indiana Toll Road, London City Airport, Chicago Loop Parking and Mirant Phillippines.

Similarly, the following deals were proposed by banks as being too aggressively priced in terms of debt: Bina Refinery (BPCL), Brussels Airport, Chicago Loop Parking, Chicago Ports, London City Airport, Enersis wind portfolio refinancing, FARAC Stage I, Fujeirah IWPP, Indiana Toll Road, Marafiq IWPP (Al Jubail Power and Water Company), Marchwood, Qatalum, RasGas II and III, Red Funnel Reliance Petroleum Limited, Walsum 10, Wightlink.

The average ROI range for sponsors was 10-20% across all sectors and tenors – with the lowest being 6% for PFI deals and the highest 40% for oil and gas. And the preferred sponsor infrastructure acquisition instrument was an even split between bank debt and corporate bonds – with the majority of sponsors employing both. That split was mirrored by banks where 44% thought the cheapness of monoline wraps would spawn more bonds and 56% did not.

The bank opinion results from the survey also indicate no slowdown in acquisition financing in the coming year with 61% of respondents believing it will be in high demand.

Furthermore, with 79% of respondents stating securitisation will have a major role in the project market in the coming year – either motivated by risk offsetting to comply with Basel 2 or freeing more cash for further lending – the impact of the credit crunch played out in the US on the project market looks set to be minimal, as does its impact on leveraged acquisitions where the project economic fundamentals are strong and long-term.

More generic lending trends are outlined in the following tables:

For the following lending products – what will be the rate of demand in the coming year?
                                         High        Medium         Low
Project debt                      19%         63%             19%
All non recourse debt       70%         28%              2%
Corporate debt                  38%         50%            12%
Hybrid corporate/project   42%        47%             12%
Acquisition facilities           61%        30%               9%
Islamic debt                        22%        38%              40%

From the following sectors – what will be the rate of demand for project lending from your bank in the coming year?
                                         High          Medium          Low
Power                                70%          23%              7%
Utilities                              42%         35%             23%
Renewables                       48%          43%             10%
Oil & Gas                          50%          40%             10%
Petrochemicals                  38%          40%              22%
PFI/PPP                              56%          33%             12%
Transport                           52%          31%             17%
Mining/metals                    24%          40%             36%
Telecoms                            19%           43%             38%

Banks that were rated overall most highly by sponsors as project finance lead arrangers were HSBC followed by BNP Paribas, SMBC and CSFB. By sector – and by order of preference – the breakdown was...

Infrastructure: CSFB, Macquarie, HSBC, BNP
Telecoms: RBS, HSBC, ABN Amro, Citigroup, BNP Paribas
Mining/metals: BNP Paribas
PFI/PPP: RBS, SMBC, HSBC, DEPFA and Santander
Oil and gas: RBS, BNP, SG
Petrochemicals: BNP Paribas, HSBC, SG, SMBC
Renewables: Dexia, WestLB, BNP, RBS
Power: BNP, RBS, HSBC, Standard Chartered
Transport: RBS, Citigroup, DEPFA, Citigroup, BNP
Waste/water/utilities: BNP, Mizuho, CSFB and RBS

Institutions rated overall most highly as project finance advisors were SG, followed by Macquarie and BNP Paribas; and then Lehmans and HSBC. By sector – and by order of preference – the breakdown was...

Infrastructure: Macquarie, PWC, SG
Telecoms: Citigroup, BNP Paribas
Mining/metals: BNP Paribas, RBS
PFI/PPP: Grant Thornton, BNP Paribas,SMBC
Oil and gas: Credit Suisse,
Petrochemicals: RBS, BNP Paribas, Citigroup
Renewables: BNP Paribas
Power: Lehman
Transport: RBS, DEPFA, Macquarie, Citigroup
Waste/water/utilities: BNP Paribas

In the consultancy sector there were no overall ratings but by industry sector the results were:

Oil and Gas: Ernst & Young
Petrochemicals: Nexant
Transport: Mott McDonald, KPMG
Power: PB Power
Renewables: Ernst & Young
PFI/PPP: KPMG

Even for those banks that are well-rated by their clients it is clear from the sponsor opinions below that service could be better, with no lender rating above 50% in terms of high competitiveness in innovation, speed of service, negotiation skills or fees.

How do you rate your best arranging bank in the following areas?
                                               Highly                                                                               Below
                                               Competitive              Competitive            Average              Average
Financial innovation                  40%                        44%                        12%                   4%
Speed of service                        44%                        44%                        10%                   2%
Negotiation skills                      27%                        48%                         23%                  2%
Fees                                           23%                         46%                         23%                  8%

Furthermore, fees across the industry are generally still not seen as highly competitive – despite the lowest margin debt pricing ever. That said, all sectors scored well as being competitive with only the legal sector excelling in its longstanding reputation for being very expensive.

Please indicate from the following how competitive you think fees are generally:
                               Highly                                                                                 Very
                               Competitive            Competitive               Expensive            Expensive
Monoline wraps            8%                         53%                          32%                  8%
Ratings                          8%                         38%                          50%                  5%
Legal                             7%                         21%                          35%                 37%
Lending                        20%                        47%                          18%                  16%
Arranging                      16%                        42%                          27%                  16%
Advisory                        11%                       36%                          33%                  20%
Consultancy                   13%                        33%                          36%                  18%

In a number of other project finance market sectors results were predictable. From the multilaterals and ECAs JBIC was most highly rated as most supportive in terms of pricing and fees, and most efficient in terms of decision-making. Given the multilateral's vast lending to the Middle East and South America in the last two years the 'most supportive' accolade is not surprising – but the fact that the same multilateral is also best rated at decision-making hints at JBIC having streamlined itself into a well-organised lending machine.

Results from the ratings agency section were also predictable with only S&P, Moody's and Fitch making a showing and in that order of preference – with S&P taking 70% of the market.

In the legal sector best individual lawyers in their given sectors of project finance as rated by sponsors and bankers were...

Infrastructure: Greg Harris at Fulbright
PFI/PPP: Mark Bain at Bennett Jones
General project finance: James Harris at Lovells
Infrastructure and power: Catherine McCarthy at Clifford Chance

And by industry sectors the following legal firms rated highest by both sponsors and bankers...

Oil and Gas: Clifford Chance, Vinson & Elkins, Allen & Overy, Latham and Watkins, Fulbright, Bennett Jones, Herzog Fox
Petrochemicals: Clifford Chance, Linklaters, White and Case, Bennett Jones, Linklaters, Fulbright
Transport: Allen & Overy, Lovells
Power: Clifford Chance, Allen & Overy, Herbert Smith, Latham, Baker, MacKenzie, Fulbright
Renewables: Vinson & Elkins, Milbank Tweed
Utilities/waste/water: Allen & Overy, Clifford Chance
PFI/PPP: Clifford Chance, Allen & Overy, Lovells
Mining/metals: White & Case, Allen & Overy, Clifford Chance
Telecoms: White & Case, Clifford Chance