State-backed lenders and Spanish banks drive markets in H1; public deals centre stage as energy deals plummet

Linklaters has edged ahead of magic circle rivals Allen & Overy (A&O) and Clifford Chance (CC) to top the global project finance rankings by market share for the first half of 2009.

New research from Infrastructure Journal (IJ) shows that the firm leads the global rankings by value for the first six months of this year after scoring roles on 15 deals worth $7.623bn (£4.7bn). The tally gives the firm a market share of just over 5% – marginally ahead of CC.

Key deals for Linklaters over the period include roles on the $1.512bn (£933m) refinancing of the Enersis Wind farm in Portugal and the widening of the M25. The $2.399bn (£1.5bn) M25 deal, which closed in May and was the fifth largest deal of the period, generated roles for a raft of City firms including Ashurst.

Commenting on the results, Linklaters projects partner Andrew Jones said at a time when deal activity level was generally down, state-owned international lenders, known as multilaterals, were playing an increasingly important role.

"There are a handful of very good deals where we see ourselves well positioned. [However,] there have been fewer deals closing recently and a general moving around of players in the market in terms of banks and multilaterals. For emerging markets work, the multilaterals are now more important than ever," he observed.

CC, which has traditionally topped IJ's value rankings, sits a fraction behind Linklaters with roles on 15 deals worth $7.530bn (£4.6bn) during the first half of the year.

The magic circle firm's deal tally includes roles on the $2.221bn (£1.4bn) financing of the second phase of a toll road in Poland and the Greater Manchester Waste PFI worth $1.092bn (£675m).

The rest of the top five by value is made up of Ashurst, A&O and White & Case.

Despite its fourth-place ranking by value, A&O has managed to retain its position at the top of the volume rankings – with roles on 20 transactions worth $6.759bn (£4.2bn).

A&O projects partner Andrew Fraiser said: "If you split the market into social infrastructure and energy/oil and gas, it is clear that the drop in oil price has had a material impact on the progress of deals in the energy market, whereas the social infrastructure market should benefit from governments' accelerating spending programmes in an attempt to stimulate economies."

He added: "The withdrawal of most banks from the long-term senior debt market has brought new challenges to the market. The market is not dead, but there is serious competition for scarce capital, so deals need to be well structured, not just well priced."

The IJ research found that the global volume of project finance, including all debt and equity transactions, totalled $80bn (£49.7bn) during H1 2009, 37% down on the second half of 2008. Q1 2008 saw project financing stand at $157bn (£97.4bn).

The market was also impacted by several major UK lenders dramatically scaling back their commitments. In particular, Royal Bank of Scotland, traditionally one of the top projects lenders, plunged down IJ's rankings, as did the combined Lloyds TSB/HBOS.

Deals in the oil and gas sector plummeted by 77% between H1 2009 and H2 2008, with the period seeing just 23 deals worth $9.70bn (£5.99bn). This compares with 56 deals worth $49.50bn (£30.6bn) during the H1 2008.

Likewise, deal volume is significantly down in the renewables sector, where global volumes fell by 34%.

Public-private partnerships and private finance initiatives only saw a 6% drop in deal volumes, with 72 transactions worth $25.96bn (£16bn), compared with 66 deals worth $27.6 (£17.1bn) in H2 2008.

CC projects partner David Bickerton commented: "There have been difficulties in the funding market for PPP and PFI deals. We are seeing more from the multilaterals though, and there is still a good amount of work in the UK."