Hi all.,
This is sad...for all.
A year ago, I said (effectively) Its a huge exercise for an experienced team of experience deep water project Operators and Finance specialists; a nearly impossible and very daunting one for a cash-strapped minnow with no deep water or $B+ PF experience (in an untested environment).
By mid 2018, the BOD/management would have had their Project Finance strategy action plans pretty well fully drafted with the input of bankers, brokers, specialist advisors, lawyers, major shareholders (CA's signed), resource mezz and hedge fund specialists and ready to kick-off ahead of the then expected FID in mid 19. A team of 8-15 external and 3-6 internal would have been formed to produce Best, Most likely and Worst case scenarios for the BoD and the Risk/mitigation/cost/probability pathways that would/could impact these scenarios.
With little doubt however, the most important aspect of the PF process (100% critical at the beginning) is honestly aligning all the realities and expectations of the owners and finance teams. I have never met an owner's team that did not (at least initially) vehemently argue their project's merits for cheap and/or readily available funding avenues. But its usually the job of the owners independent advisors who should have already pre-conditioned the owners to realities and lowered their expectations ahead of launching any part of a PF Plan.
It now appears pretty obvious that the expectation/reality gap has never been closed for long enough and both teams have had to do multiple pivots, effectively ripping up the initial (and subsequent) BoD approved PF strategies; now seeking/stitching finance more-or-less on the fly.
The finance plan is unravelling.
I have been on both sides in this situation, and it is nothing else but desperate:
- Going back to fragmented syndicate members with extra 150-250-350?!bps, harder milestones, more security and conditions.
- Auctioning off bigger chunks of the PF to many new mezz/hedge intermediaries and trying to get unconditional term sheets within impossible time frames.
- Giving ECM teams carte blanche over equity pricing and quantity.
- Existing shareholders becoming almost 'expendible' in the eyes of banks/mezz
- Losing good teams/people to more executable projects.
- Credit Committee approvals timing-out and/or changing.
- Project JV partners and contractors positioning/getting nervous and often changing agreements/pricing.
- PF team members working 100+hrs/wk and stress/burn-out is a very real issue
- Finance plan changing week to week; sometimes day to day.
...until such time as the Finance Package bears no resemblance to even the Worst Case scenarios.
All it takes it for one external factor: a CC member changing their risk criteria, a blow-out in project timing/cost, etc and the whole, very very delicate package can completely crumble.
I doubt we will ever know excatly how the financing came off the rails, But as I know how difficult small coy project financing is, I will not sponsor or condone any personal blaming.
Sometimes life just...... is.
Cheers
Expand
(20min delay)