PFX is a marketplace where capital-raising projects and private capital fund managers can connect and engage, the Project Finance Exchange (PFX), has grown to over $30bn aggregate capital available within three months of opening in April. Over two decades the project finance structure has evolved from being exclusive to mega-dollar infrastructure and major construction deals, to deal values ranging from $5m to $5bn+ across all market sectors, most of which involve construction and energy. Whilst the market has grown exponentially, the core project finance definition still prevails in that lending is predicated not on forecasts in a business plan or investment prospectus, but on the track record and financial stability of whoever is contracted to buy the output from the built project, the ‘off-taker. From a construction standpoint, this means whoever the Operations and Management Agreement (OMA) or other end-user agreement for the built project is with. For energy, the ‘contracted to buy’ criteria applies to whoever the project has its Power Purchase Agreement (PPA) with. For construction, energy, and all other sectors the Engineering, Procurement, and Construction (EPC) contractor also need to meet the same track record and financial stability criteria as the ‘off-takers.
This unique structure provides the risk-mitigated long-term returns that private investors seek, making private debt the preferred structure for fund managers. It also leaves the project principals be they a team, private company, or government department, free and clear of any financial liability whatsoever. Genuine project finance is ‘non-recourse.
PFX Chairman David Rose said: “As the project finance market evolved and grew over the past two decades it became fragmented and opaque to the point where it was virtually impossible for the buy- and sell-sides to connect and engage. The impetus to build PFX came from fund managers, intermediaries, and project teams across the market frustrated by this progressive fragmentation. Our research showed that nobody wanted yet another ‘investment platform’, but a structured meeting all the confidentiality and non-disclosure criteria that everyone has come to expect. PFX is, therefore, a ‘closed’ market. While PFX Elevator Pitches are available for all to see on our home page, they contain no identifying information, and only registered fund managers can click through to the Executive Summary containing all the information they would expect to see. It’s free for projects to list on PFX which are quality controlled by our Regional Managers, from Elevator Pitch thru Executive Summary to Full Deck. Fund managers can expand their deal origination operations by registering and setting their investment preferences free, with commission terms reflecting prevailing market rates. Their identity is disclosed only to the Regional Manager handling deals they wish to engage with.”
Project financing is provided overwhelmingly by private capital lenders including hedge funds, private equity and debt funds, alternative investment funds, investment banks, family offices, and many other sources. Eurekahedge has almost 27,000 private capital funds on its database. PFX, using asset allocation data from the Cap-Gemini World Wealth Report 2020, calculates $20.35tn of private capital ready to be allocated into real estate and alternative investments (which includes project finance), but publish a more conservative estimate of $2tn.
Applying for project finance is far removed from producing the traditional business plan or investment prospectus. PFX has published a user guide, The Raising Project Finance Handbook, which is available from their site.
In closing, Rose said: “There are no borders with project finance. At PFX we have a UK fund pursuing a $200m social housing project in Brazil, a Dubai fund progressing a $200m coal-to-fuel plant in the USA, and a USA fund in discussion with a $575m urban transit project in S. Korea. We expect to announce our first deal closings by Q3 or Q4 this year.” To submit your projects for initial review click here