SWOT Analysis: Projects, ECA and Structured Finance in MENA
In advance of our Project, ECA and Structured Finance Middle East & Africa 2018 conference and forthcoming special report on the subject, Bonds & Loans visited the region to meet with a broad range of finance leaders in order to gain a sense of the risks and opportunities on the horizon.
The below is a look at the strengths, weaknesses, opportunities and threats present in the Middle East and Africa’s structured and project finance environment this year.
To learn more about our Project, ECA and Structured Finance Middle East & Africa 2018 conference (24-25 October, Intercontinental Festival City, Dubai), click here.
Governments and regulators are updating their frameworks to facilitate greater (and freer) flow of private capital
There is big project pipeline of infrastructure and real estate projects waiting to come online across the GCC
Regional banking markets are liquid
Strong appetite amongst global asset managers and institutional investors for GCC credit (including project bonds)
Governments have indicated their preferred method of financing projects is via a soft-mini perm structure through construction, followed by a capital markets (project bond) take-out
ECAs, DFIs and IFIs are looking to increase their exposure to the Middle East and Africa across projects, real estate and corporate sectors
Successful IPOs in UAE and Saudi Arabia hint at the prospect of more IPOs to finance corporates and projects in the region
Launch of REITS in UAE and Saudi Arabia has opened up access to a new source of liquidity for real estate; and opening potential for more structured instruments to finance regional projects
Strong project pipeline has not been backed-up by a timeline of when projects will come online
Limited local market expertise and understanding of how to work with (and maximise the liquidity of) ECAs, and perceived to be time-consuming and admin heavy
Uncertainty around risk allocation when using PPPs to finance infrastructure projects
Swaps and hedges incorporated into existing Greenfield projects limit the ability to refinance in the bond markets
IPOs, REITS, PPPs, Project Bonds: Governments across the region recognise the need to access private sector capital
Governments are scaling back their financial support to GREs (and looking for a return of their equity); meaning companies need to work with banks to maximise their access to loans, bonds/sukuk, ECAs to successfully finance themselves
ECAs are looking to take part in the growing real estate pipeline across the region and are willing to relax their requirements and criteria in order to secure participation
A wall of refinancing in 2018/19 and historically low interest rates will lead to increase activity in the project bond market
Rising (and potential of further rises) of interest rates could mean higher financing and refinancing costs for corporates and project companies
Corruption in Africa is impacting access to capital for companies and developers
High-profile restructuring cases in GCC could threaten or strengthen the region’s capital markets depending on how they are resolved
Is there a threat of structural reforms not being followed-through on should oil price rebound?
Geo-politics globally continue to weigh on investors’ minds
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