Project finance specialists


December 20, 2013

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December is always a funny month. And yet we never seem to learn the lesson.

We should. After all, packing in four weeks of activity into the first 23 calendar days is asking for trouble.

Especially when there’s the inevitable shake up of budgets, contracts and commercial agreements, as senior executives readjust their focus and begin to look ahead.

It’s also a point in time during which some of the more unexpected of enterprises begin to surface.

Perhaps that’s why we shouldn’t read too much into some of the corporate developments and commercial aspirations that thrown out there, before the festivities begin?

In this respect, one such announcement issued by an ambitious international developer earlier in the month has already turned heads.

Admittedly, many simply don’t expect Mainstream to toe the line. And as we’ve previously acknowledged, sometimes it’s exactly this fighting spirit that has pushed them further into emerging markets than many others would dare.

Irrespective, following the news earlier this month that the firm have launched Mainstream Capital – in a bid to gain access to capital at better rates – eyebrows were raised.

It’s a significant shift. Since what this in effect means that we may well begin to see is the possible evolution of the existing developer model to a point where future capital financing and debt raising gets undertaken – not by a third party – but in-house.

That might not seem like all that significant a shift but really – it is.

For the developers part, the logic in undertaking such a move is – at least publicly anyway – geared around enabling more competitive rates of direct investment opportunities for pension funds and insurance companies.

While for the financiers, Mainstream have positioned this as an opportunity to work direct with the developer to benefit from government-backed, long-term cash flows through taking advantage of a greater level of direct investment.

But here’s the thing. Love them or loathe them, specialist project finance teams exist for a reason. They’ve taken time to understand the markets, the investors and the mechanisms through which they can engage.

In short, their focus is placed exclusively on cajoling, shaping and finalising complex investment packages, often working with multiple investors, in order to get the best deal for all parties and to bring projects to financial close.

Mainstream, for all its strengths as an international developer, is simply not yet geared to work in such a way. They operate in an entirely different area of the market.

Indeed, up until this point they’ve focused all their energy on building an entirely different business.

Moreover, since they only ever can offer up investment opportunities locked away in their own portfolio, some have already argued that there will be a natural limit to the future financial muscle that can be displayed.

A case of sour grapes on the part of other? Perhaps – although ultimately at this stage it’s simply too difficult to call.

What is apparent however, is that there are two sides to this coin. And while Mainstream may well suggest that this is the birth of a new breed of asset manager, others suggest that it’s more indicative of the way in which the firm has so far been able to formalise a truly effective third party partnership.

Either way it’s the start of something new. A birth? Who really knows – but it’s a timely note to sign off on, ahead of Christmas.

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