Moody’s Investors Service has announced the creation of a dedicated, cross-disciplinary analytical group focusing on project finance.

Project finance has historically encompassed the three distinct areas of corporate, structured and public finance. Moody’s has so far assessed the creditworthiness of project finance structures by applying both fundamental and structured credit tools. Moody’s Global Project Finance Group will apply a globally consistent and transparent methodological approach to assessing credit risk in this asset class, the company says.

The group will be led by Thomas Keller, group managing director. Reporting to Keller are Bart Oosterveld, senior vice president, who has been appointed as chairman of the Project Finance Credit Committee, the aim of which is to set policies that govern the rating process for project finance. Andrew Davison, vice president and senior credit officer, has been appointed as Team Leader for EMEA Project Finance. Concurrently, Chee Mee Hu, senior vice president, has been named Team Leader for Americas Project Finance, and Terry Fanous, senior vice president, team leader for Australian and Asian Project Finance.

“Project financing volumes have been growing due to the resurgence in traditional power and energy projects as well as the increasing trend amongst governments to turn to the private sector to finance public and social infrastructure,” said Keller. Such financings, typically known as “public-private partnerships” in Australia and the Americas, and “PFI” in the UK, move the finance and operations of public infrastructure away from the purview of government and into the bank and capital market arena on a stand-alone basis.

Keller also remarked that “the need to develop new infrastructure across Asia and EMEA as well as to replace
existing infrastructure across Europe and the Americas suggests that the demand for project financings will continue to grow rapidly over the next several years.”

These financing structures are highly complex and market participants look to ratings to assess credit quality in support of primary bank and bond distribution as well as to supplement the risk models of both financial guarantors and arrangers in the emerging project finance CDO sector, Moody’s says. As Basel II comes into effect, the favourable capital treatment accorded investment-grade rate project financings is also expected to spur additional growth in demand for ratings, it added.