The SMBC Interview

SMBC globally worked on a total of 153 project finance (including public-private partnerships) transactions in 2020 with a total value of $153.3 billion, according to IJGlobal data. Of that total, 51 transactions valued at $45.5 billion were in North America and 30 transactions valued at $11 billion were in Latin America.

As a financial adviser, it participated in 7 transactions with a total value of $6 billion. In speaking to 2 SMBC project finance-focused managing directors – Juan (JC) Kreutz, co-head of structured finance for the Americas and David Gonzalez, head of structured finance for Latin America – it becomes clear that they are understandably proud of what they have achieved with their teams.

  • This interview first appeared in IJGlobal Magazine, to access click here...

In North America, SMBC worked on some landmark transactions that included:

  • Whistler Pipeline
  • Calpine Geysers
  • Pasadena Performance Products
  • Mankato Energy
  • Renouveau La Fontaine
  • Pattullo Bridge
  • Boston AFC 2.0
  • Broadway Subway Project
  • Western Vista Solar
  • Capital Dynamics Kamloops
  • Hornbaker Data Centre

Kreutz (pictured) said: “2020 was a banner year for SMBC’s North American project finance team. We went into the year with a lot of uncertainty not knowing what impact COVID-19 would have on the business.

“But all sectors were still very active. Renewables had stellar performance and our volumes were up 30% compared to the previous year in 2019. In addition, digital infrastructure (fibre and data centre) activity was very strong due to that sector benefiting from the work-from-home environment.”

Kreutz added that “we supported clients through the pandemic by closing five datacentre financings in 2020. The amount of new build and M&A opportunities in renewables and data centres was at an all-time high, driven by the wall of cash that’s out there from private equity and infrastructure  funds that are putting money to work.”

For SMBC, the midstream sector had a strong start in 2020 but slowed down in the second half of the year, according to Kreutz. “We worked on a landmark transaction – the Whistler Pipeline transaction – the largest greenfield bank/bond project financing on record, which reopened the private placement project bond market following the onset of the COVID pandemic and Saudi/Russia oil dislocation.

“Elsewhere, the pandemic did hit the social infrastructure team on our existing portfolio, but new transactions were still fairly active. Some deals were postponed so naturally we lost momentum, but we had enough volume to continue with day-to-day business.”

Overall, it was a strong year for SMBC: “We were trying to manage our credit costs at the same time but on the new-business side we were expanding into the newer sectors like data centres and fibre, which carried us through the pandemic. Those are what I would call pandemic resistant. The emerging sectors are where we saw a lot of our growth.”

SMBC also has a dedicated digital infrastructure team that works across several verticals and products of corporate, project finance, middle market, leasing and ABS to focus on the data centres and fibre business. “We are probably the only bank with a dedicated team that can provide multiple solutions to clients,” says Kreutz.

LatAm Capabilities

Looking across at Latin America, SMBC is highly active in subsectors like natural resources (oil & gas and mining), power and renewables and infrastructure (social, water, transport and telecoms).

Gonzalez (pictured) said: “We closed over 30 transactions in LatAm and mobilised one of the largest amounts of capital in the region. We have strong coverage in Mexico, Colombia, Peru, Chile and Brazil and deep local knowledge of those regions. Additionally, we are also active in Uruguay, Paraguay, Panama and some Caribbean countries where we have sector expertise. We always aim to provide tailor-made solutions to our clients, which is something they appreciate.”

SMBC’s activities in Latin America are split across all the main countries, but have greater concentration as follows:

  • Power and Renewables – active portfolio in Chile and Mexico
  • Natural Resources (FPSOs) – active in Brazil and Mexico
  • Infrastructure – active in Chile, Peru and Colombia with the refinancing of some 4G toll roads and financing of the 5G programme

“The pandemic hit us a little, though the projects didn’t really stop, but continued,” says Gonzalez.

 Some of the key projects the bank worked on include:

  • Lima Airport Expansion (pictured below)
  • Buzios 5
  • Huemul
  • Marlim 1
  • Autopista del Norte
  • Transantiago Electric Buses
  • Tastiota

“We are now focusing on energy transition as well as hydrogen transactions. SMBC Group has sustainability initiatives, Green X Globe 2030, to deploy $300 billion globally in green financing by 2030. LatAm and North America teams are committed to helping achieve that goal,” he adds.

SMBC is also looking at digital infrastructure in the region. In 2020, it refinanced Ascenty in Brazil, one of Latin America’s largest data centre providers, with 14 data centres in operation and/ or under construction and it financed the Edgeconnex expansion in Chile.

“The markets most active in the digital infrastructure space are Mexico, Brazil and Chile. It’s a little less so in Colombia and Peru but those could pick up in the near future,” says Gonzalez.

Looking Ahead

For this year and the next, SMBC will continue to focus on growing the business. “We want to make sure that we are leveraging our global relationships that are active in the Americas. We have sector knowledge, but as new clients come to the US for new business and higher returns, we need to continue to provide seamless solutions,” says Kreutz.

SMBC is looking at new infrastructure sectors, like cold storage and street cleaning, but as these sectors have not really taken off, the focus for now is to build on growth areas like infrastructure, fibre, digital and district heating and warehousing facilities around renewables.

“District heating has become the new hot topic both on the M&A and P3 side, so we are looking to grow that business. We also want to work on more deals with an ESG angle,” says Kreutz.

Gonzalez adds that SMBC continues to expand its outreach and capabilities into new markets with innovative financial products and initiatives. “SMBC expanded its local currency lending capabilities through the team in Brazil by closing BRL-denominated deals and utilised its non-bank arm SOFOM in Mexico to lend in Mexican pesos.”

“Latin America has huge digital infrastructure needs so this will continue to be a focus area for us,” adds Gonzalez.

Asset SnapshotNew Pattullo Bridge

Value:
CAD 1,353.14m (USD 975.09m)
Full Details

Asset SnapshotBroadway Subway Phase II (5.7KM)

Value:
USD 2,830.00m
Full Details

Asset SnapshotTastiota Solar PV Plant (100MW)

Est. Value:
USD 93.00m
Full Details

Transaction SnapshotAutopista del Norte (362KM) PPP Refinancing

Financial Close:
13/08/2020
SPV:
Autopista del Norte (Aunor)
Value:
$350.00m USD
Equity:
$0.00m
Debt:
$350.00m
Debt/Equity Ratio:
100:0
Concession Period:
25.00 years
PPP:
Yes
Full Details

Transaction SnapshotLima Jorge Chavez International Airport Expansion PPP

Financial Close:
11/09/2020
SPV:
Lima Airport Partners
Value:
$450.00m USD
Equity:
$0.00m
Debt:
$450.00m
Debt/Equity Ratio:
100:0
Concession Period:
30.02 years
PPP:
Yes
Full Details

Transaction SnapshotWhistler LNG Pipeline

Financial Close:
17/06/2020
SPV:
Whistler Pipeline LLC
Value:
$2,262.00m USD
Equity:
$508.00m
Debt:
$1,754.00m
Debt/Equity Ratio:
78:22
Full Details

Transaction SnapshotFPSO Marlim 1 MV33

Financial Close:
02/10/2020
Value:
$969.00m USD
Equity:
$0.00m
Debt:
$969.00m
Debt/Equity Ratio:
100:0
Full Details