Project finance whizzes at White & Case talk us through the opportunities on offer to do project finance work at this global firm, especially in Africa.
What is project finance?
Jason Kerr, partner: Project finance is the long-term financing of major industrial and infrastructure projects – for example, power plants, hydrocarbon processing and chemical plants, pipelines and toll roads – on a ‘non-recourse’ or ‘limited recourse’ basis. This means that lenders will rely on the revenues generated by the project itself to repay their debt, rather than on the balance sheets of the sponsors.
Project finance law encompasses all legal aspects of the development, financing (both debt and equity), construction, operation, and maintenance of the project. This includes considering the collateral arrangements, as well as any tax, real estate, energy, construction, environmental, utility and trade regulation implications.
What kind of project finance work is commonly done in Africa?
JK: In the last few years the project finance market in South Africa at least has been defined by the Renewable Energy IPP Procurement Programme (REIPP) which has successfully closed three rounds of projects, with over $10 billion of investment. Elsewhere in Africa we have seen a focus on energy in general (renewables but also gas-fired power, off-grid power and oil and gas infrastructure projects such as pipelines and refineries) and transportation infrastructure projects (including toll roads, railways and ports). Recently, there has also been a rise in acquisition financing involving these sectors.
In African countries such as Nigeria, with large reserves of natural resources, project financing is often use to finance upstream oil and gas projects, i.e. the exploration and production of oil and gas.
Juanita Derex-Briggs, NQ: In Africa, a majority of project financings are extraction-based (e.g. oil and gas in Nigeria and mining in Mozambique) or infrastructure-based (e.g. the construction of roads and ports) because a vast majority of countries in Africa are resource-rich and/or still developing their infrastructure.
What kind of work does the White & Case project finance team do in Africa?
Deji Adegoke, associate: We are fortunate enough to be involved in a broad range of project finance transactions in Africa. In the last year we have advised on the Nacala railway and port financing project in Mozambique and Malawi, the largest project financing in sub-Saharan Africa, and on the Eleme Line II financing in Nigeria, which resulted in the largest single-train urea fertiliser plant in the world.
“A multibillion-dollar rail line developed for the purpose of transporting coal from mines in western Mozambique east to the port of Nacala.”
JK: The work we do in Africa is as diverse and varied as the continent itself. The Nacala Logistics Corridor is a multibillion-dollar rail line developed for the purpose of transporting coal from mines in western Mozambique east to the port of Nacala via Malawi. The project included both construction of new track, the rebuilding of existing lines and a new deep sea coal port. The Indorama Eleme Fertilizer Project was a US$1.2 billion financing of Indorama's nitrogenous fertilizer complex in Rivers State, Nigeria – the largest fertilizer plant in Africa. Some other examples include:
Nigeria's Oil Debt Programme, a US $1 billion financing for development activities in 30 oil fields across 12 oil mining leases under the Nigerian National Petroleum Corporation's oil debt programme.
The Tahrir petrochemical project, a multibillion-dollar development and financing of the Tahrir naphtha cracker and petrochemical project located at the Ain Sokhna industrial zone in Egypt.
Brass Fertilizer, the development and financing of the urea, methanol and gas processing plant on Brass Island, Bayelsa State, Nigeria.
The Chad-Cameroon Petroleum Development and Pipeline Project, which involved the construction of a 1,070-kilometre pipeline to transport crude oil from three fields in southwestern Chad to a floating facility 11 kilometres off the Cameroon coast.
Are there any specialist areas of work or clients that the group is known for? What opportunities in project finance work in Africa are unique to White & Case?
DA: We are generally strong across the board but, particular areas of note with respect to our Africa practice are our infrastructure and oil and gas practice where we have advised clients on a number of market-leading deals.
JK: While these sectors are not unique to White & Case (given that there will generally be a law firm representing the other side of each project), we are one of very few firms working on the largest, most complex, multibillion-dollar projects. We also frequently represent export credit agencies and international finance institutions – these are highly specialised clients, often with much more complex requirements than commercial bank lenders. Without the support of these institutions the majority of large project financings in Africa would not get off the ground, so our specialist knowledge and input in this area is extremely valuable.
“...highly specialised clients, often with much more complex requirements than commercial bank lenders.”
JDB: The kind of work the White & Case project finance team does covers a number of industries: mining and metals; oil and gas; infrastructure; and power, to name a few. White & Case acts for both sponsors (private and sovereigns) and lenders (commercial banks, international financial institutions and development financial institutions).
What do partners do? What kind of work is involved day to day?
JK: The lead partner will take overall responsibility for the project from start to finish. Once White & Case has been mandated on a project, they will attend the initial kick-off meetings, negotiate key commercial points and help to structure the deal. On a day-to-day basis, they will review the documents drafted by the associates and provide specialist input where required, they will address specific issues and challenges as and when they arise and they will maintain regular contact with the clients to manage their expectations and ensure that they are happy with the service being provided.
What do associates do?
DA: The role of the associate will vary depending on the seniority of the particular associate and the complexity of the transaction. Associates are generally responsible for day-to-day execution of the deal, drafting and negotiating documents, and managing the signing and closing process.
JK: Associates are responsible for the day-to-day management of transactions. They attend meetings, prepare drafts of the required contracts (with input from the relevant partner where necessary), liaise directly with the clients and negotiate on their behalf, liaise with the other project participants and supervise the trainees.
What about trainees? How involved can they get?
JDB: Common trainee tasks are managing the conditions precedent process on the financing side (this involves maintaining the checklist and liaising with local counsel and the sponsor company to obtain documents); document management; and sometimes research on the project development side. However, because of my interest, I was usually involved in drafting some of the key project documents and the boilerplates of facility agreements. A key highlight for me was when I was often trusted to have a go at the smaller project/finance documents such as working on the first drafts of a development chapter in relation to an investment agreement, and an assignment agreement. I even got to draft certain clauses in some of the key documents.
“Because of my interest, I was usually involved in drafting some of the key project documents.”
JK: Trainees can get involved in many aspects of a project finance transaction. For example, they are generally responsible for collating and reviewing the conditions precedent required to achieve financial close – these include the constitutional documents of the project company and sponsors, board minutes authorising the transaction, legal opinions from the relevant law firms, certifications and authorisations and reports from the various advisors. This is an important and intensive task, which will require the trainee to liaise directly with the relevant parties to obtain the correct documents, review the documents to identify any issues or problems, and manage the issues effectively, as well as providing them a good overview of the project.
DA: Similar to associates, the role of a trainee will vary depending on the level of experience of that particular trainee and the transaction in question. Trainees are typically tasked with assisting the associates in managing the execution of the deal, drafting documentation, undertaking legal research (including the writing of legal notes) and assisting with due diligence.
What are the highs of the job?
JK: One of the great things about project finance is the variety – every deal is different and you are always learning something new. It is also quite collaborative and collegiate: projects tend to take a while to close (from several months to over a year) so you get to know the other project participants – the clients (lenders or sponsors, depending on who you represent), the lawyers on the other side and the financial advisors – pretty well. While there is always the possibility of conflict (given the high stakes), everyone on both sides fundamentally wants the project to be a success.
“While there is always the possibility of conflict (given the high stakes), everyone on both sides fundamentally wants the project to be a success.”
Another positive aspect is that the projects we work on often make genuine tangible improvements to people’s lives. For example, an infrastructure project in a developing country will not just provide much-needed infrastructure to a deprived area – it also creates jobs, stimulates the local economy and, if successful, provides a blueprint for future investment in the region.
JDB: I enjoy working primarily in emerging markets, which is one of the reasons I chose to train at White & Case. I really enjoyed that every deal was very different from the last and that I could relate to our African clients because of my background growing up in Nigeria, Kenya and Malawi. Most importantly, the project finance team at White & Case is very diverse and because of this, work was mostly fun.
What about the lows?
JK: It can be quite physically demanding, depending on where in the transaction process you are. Work flow on project finance is quite cyclical – periods of intensity while the project ramps up and then quieter periods while macro issues are ironed out. The busiest time is during the weeks leading up to the financing arrangements being finalised – known as ‘financial close’. The hours are long but you get through on coffee and adrenaline, and there’s a real feeling of achievement and celebration once you finally achieve financial close!
“The hours are long but you get through on coffee and adrenaline.”
JDB: The only low for me was that project finance deals usually span over a few months and sometimes even years, so I did not work on any deals from start to finish because of seat rotations. However, I am sure as an associate, this is not a factor.
What factors are currently driving project finance work in Africa?
DA: It is estimated that Africa needs approximately $93 billion investment in infrastructure every year in order to boost GDP, however investment has been at a level of around $45 billion in recent years, signalling a significant funding gap.
“There is currently an apparent development deficit on the African continent, so there are a vast number of opportunities for project financing.”
JDB: There is currently an apparent development deficit on the African continent, so there are a vast number of opportunities for project financing. Students can keep up with these trends by reading project finance journals and magazines – IJGlobal is a good website to get news on different industries and sectors and it is particularly focused on project finance.
JK: Counterparty credit risk continues to remain a key, often threshold concern for private sector sponsors and lenders to the majority of power projects in sub-Saharan Africa. Our clients often note that while every country and project in sub-Saharan Africa is unique, mitigating counterparty credit risk or perceived credit risk is typically the single most challenging aspect of project development and delivery in most sub-Saharan African countries.
There are many industry publications on the various aspects of project finance law, but while useful for practitioners, these tend to be quite detailed and a little dry for students who have had little or no experience of project finance. Instead, consider reading publications like The Economist and the Financial Times, which will often give overviews of industry trends that are more easily digestible. White & Case often publishes articles on trends we have identified – these can be found on our website.
What is your advice to students interested in this area?
JK: There is no substitute for experience. If you are accepted on a vacation placement and are lucky enough to land in the project finance team, take the opportunity to quiz the associates and trainees – they will be happy to share their experiences, both good and bad!
“There is no substitute for experience.”
JDB: If you are interested in project finance and emerging markets work, you should work at keeping your knowledge relevant by reading the news, setting up Google alerts for key companies that operate in the sphere and browsing through project finance and trade websites. Most importantly, you should aim to get some experience at a firm that does this kind of work so you can get some first-hand experience – the vacation scheme at White & Case is a great place to start!
This feature was first published in October 2018.