Project finance has become increasingly sophisticated and institutions such as public sector organisations, monoline insurers, and investment funds are recruiting quality professionals from the banks, so remuneration levels in project finance remain competitive.

However, because a number of investment banks have pulled out of project finance in recent years, remuneration at the top end of the market has balanced out – particularly with regard to bonuses.

Set out below is our 2005 survey of salaries and bonuses paid to professionals working in the City's project finance market. The survey is based on figures provided to us by our clients and by the numerous individuals interviewed by us on search assignments over the past 12 months.

Market certainty

Our 2002 article (search 'De Luca' on www.projectfinancemagazine.com) talked of uncertainty in the project finance market due to the number of redundancy programmes implemented by the investment banks. Over the past three years things have settled down and many of those made redundant have moved into new roles at other banks, monolines, funds, contractors and public sector bodies. The number of institutions genuinely pursuing project finance within an investment banking context has shrunk considerably since 2002, but those that do remain seem committed to building and expanding their businesses internationally and across all sectors.

Energy and the Middle East

The energy sector is busy, particularly in the Middle East, so project financiers with strong transaction experience and good client development skills will remain in demand for the foreseeable future. HSBC's energy team under Jeremy Thirsk has recruited in the Middle East this year and in London recruited a number of power and oil & gas specialists, such as Stephen Bedwood from ABN Amro, Mario Salameh from Bank of Tokyo Mitsubishi, Elvira Roazajac from ANZ, and Yusuf Macun from Standard Bank. Calyon hired Dolan Hinch from WestLB and Andy Pheasant from Dresdner Kleinwort Wasserstein. Investec recruited Peter Sivasothy from Mizuho and Robin Baker at SG recruited Andrei Kiselev from Scotia Capital.

The last two to three years have seen little recruitment activity at the mid and junior levels in the power and oil & gas sectors. Accordingly there is now a shortage of quality personnel at senior manager to AD levels to challenge for more senior roles. Those that are suitably qualified for investment banking roles will command a premium and banks will increasingly look overseas and to the developers to source appropriately qualified professionals.

The level of business activity in the Middle East is also leading to opportunities in the infrastructure sector and several banks are considering recruiting project financiers in the region to launch an infrastructure capability.

Infrastructure and PPP

The infrastructure/PPP sector seems set to expand considerably on the international stage. A number of banks are looking to hire language speakers with strong technical and client development skills to cover Europe from London or to relocate to offices on the continent.

There is increased interest in Canadian PPP and latterly US PPP, and some European banks are considering establishing teams in Toronto, Vancouver or on the US East Coast. Banks are increasingly looking at the US transport market which looks set to embrace PPP post the Chicago Skyway transaction. As Giles Tucker, Managing Director, Infrastructure Finance, at Royal Bank of Canada in London, says: "after many a false dawn, the Canadian P3 market seems to be gathering momentum with British Columbia leading the way. A steady stream of opportunities is anticipated in British Columbia, Ontario and further out Quebec".

In the UK, lender consensus is that pricing on some PFI transactions has dropped to such an extent that if one or two PFI transactions were to go wrong, PFI bankers would come under stringent scrutiny over future deals. According to Tucker "whilst PFI is a particularly attractive asset class, there has been a considerable tightening in debt terms and structure over the last six months thereby undermining the underlying credit quality of some transactions". This, coupled with the increased levels of standardisation in PFI, potentially means that PFI bankers will need to look further afield for good career development opportunities. Such opportunities are likely to come from the funds, monoline insurers and public sector institutions, where there are good opportunities to be found at all levels.

Funds, monolines and public sector

Phil White left WestLB to join Macquarie's infrastructure funds group. Neil King has joined 3i's new team from Innisfree, having moved from WestLB just over a year ago. We are aware of several Australian and Canadian funds management companies establishing teams in London. King comments: "the rapid growth of the global private infrastructure market over the next few years will create a high demand for private sector equity capital. This investment opportunity will be highly attractive to those investors able to offer their partners the necessary combination of industry knowledge, private equity expertise and the support of an international network".

At the monolines, new entrant Radian Representatives recruited Iain MacDonald from Bank of Scotland and Ashley Blows left Dexia to join Assured Guaranty. Others such as Ambac, MBIA, FSA and FGIC have all recruited good people over the last year and provide interesting opportunities for those looking to develop their product knowledge and increase their earning potential.

The public sector continues to recruit from the project finance market and provides real career enhancement opportunities to many with a strong track record in the PFI/PPP arena. Andy Rose joined the board at Partnerships UK earlier in 2005 after a long tenure at CIBC. There is no doubt that a spell in the public sector enables bankers to enhance their visibility in the market both in banking and government circles and accordingly career development options in the longer term will be broad and varied. For example, Chris Heathcote joined BNP Paribas from PUK to lead the bank's UK infrastructure/PFI business. Geoffrey Spence joined HSBC as Head of Global Infrastructure following his secondment to HM Treasury. Nick Prior, previously of PwC and Sumitomo, joined PUK four years ago and has been seconded to the Ministry of Defence to lead the private finance unit there.

Quality project financiers in the Infrastructure/PPP market, with UK and/or international experience, will continue to be recruited by the major lending and investment banks. Stuart Lea joined HSBC in London from Commonwealth Bank in Sydney and HSBC continues to enhance its London based capabilities with a number of new hires imminent. Phil Ashbrook left Bank of Scotland to join Allied Irish Bank as head of PFI with a mission to move the bank "up the tombstones" to become a recognised lead arranger of transactions. Matt Toolan left Bank of Scotland to join the newly established PFI lending team at Alliance & Leicester.

Australasia

In Australia the PPP market continues to evolve, albeit at a different pace between the various states.
The significant development in the job market recently has been the attempt by Babcock & Brown (B&B) to re-establish itself as a force in project finance and PPPs, following its IPO, by taking the PPP and infrastructure team from ABN Amro – only 18 months after the previous wave of departures from ABN to establish the boutique, Plenary.

B&B has also recently had senior joiners from Multiplex's Asset Management business. "The local PPP and infrastructure market now has a viable scale, which wasn't really true two years ago, but it's still very concentrated. In each sector – banks, contractors, financial investors and bond underwriters – you can point to two or at most three serious players. In FM and ratings it's even fewer", says Tony Poulter at PwC. "This makes the job market even more intimate than London".

It appears there is a shortage of suitably qualified project directors within various public sector bodies which will, in due course, provide interesting career opportunities for professionals from the financial markets in Australasia or indeed for professionals in Europe looking to relocate. Alan Wilson, Head of Executive Search at Springbank Group, Melbourne, says: "There is no doubt that PPP is accepted as a valid mechanism for both social and economic infrastructure in Victoria and New South Wales is not far behind. Queensland has yet to commit to the same degree, although it has major infrastructure needs over the next five to ten years as a result of rapid population increase. Interestingly, the first sizeable PPP in Queensland has been a social infrastructure project – the Southbank TAFE. One of the issues for Governments is the need to pay realistically for decent project directors, in a market where these skills are in very short supply due to the resources boom. Victoria is the most flexible in this regard, Queensland the least. Nevertheless, the opportunity to run a project through to completion makes these roles attractive to finance professionals."

Conclusion

The project finance market remains buoyant in most sectors and 2006 will bring new opportunities for project financiers in Europe, Australasia and North America, in all sectors. Project finance recruitment has always been highly selective and it is only recently that we have begun to see sign-on or guaranteed bonuses offered. In Europe there remains demand for good PFI/PPP talent and there will be a real premium on truly European experts with language skills and links with the big continental developers.

Contact: Marcus De Luca, Managing Director, Leonard Michael Consulting, a member of the Springbank Group. DDL: +44 (0)207 653 1944. Mobile: +44 (0)7970 972622. Email: mdeluca@leonardmichael.com