Mark Veitch - Senior associate, Herbert Smith Freehills - United Kingdom

1. Mark Veitch, Senior Associate, +44 7809 200 515, mark.veitch@hsf.com
30 MAY 2017
EURASIAN NATURAL GAS INFRASTRUCTURE
CONFERENCE
EMERGING TRENDS IN THE CONTRACTING
MARKET FOR MAJOR GAS
INFRASTRUCTURE TRANSACTIONS AND THEIR
RISK ALLOCATION AND FINANCING

2. 2
INTRODUCTION
• Introduction to Herbert Smith Freehills construction practice
• General trends
• Mostly business as usual
• China’s growing influence
• Changes in risk appetite
• Finance driving procurement decisions
• Regional differences
• Sector distinctions
• Certain factors skewing the market
• Big names having financial difficulties

3. 3
SECTOR TRENDS – SUPPLY CHAIN PROFILES
Pipeline
and storage
• No noticeable new trends
• Established players
• Can be finance driven
Production
• Increasing role of Chinese contractors and investment
• Effect of sanctions
• Traditional players have lost risk appetite
• Chinese / European joint ventures
Offshore
• Stable market
• Depending on sector, limited numbers of players

4. 4
REASONS FOR INCREASE IN CHINESE INVOLVEMENT
Chinese
contractors
Sanctions
Increasing in
competence
JVs with
technology
suppliers
Balance
sheet
support
Easier
finance
Chinese
investment
Greater
“on paper”
risk appetite

5. 5
EFFECT ON SUPPLY CHAIN PROFILES
• Sole contractor or major JV partner
• Performing construction work in difficult jurisdictions
• Chinese contractors now seen as equivalent to more
established players
• Chinese underwriting balance sheets of established players
Larger Chinese role
• Blend of Chinese money and trade finance
• Less concern with project risk profile
• Technology and key equipment still from more established
players
Construct and finance
• Traditional players stepping/staying away from turnkey
contracting in some markets – even if it means losing jobs
• Chinese risk appetite means they are gaining market share and
experience
EPC?

6. 6
RISK APPETITES – SUMMARY
• Riskier markets – major players taking active steps to manage risk
• Low liability and risk back on client
• Chinese JV partner/major subcontractor
• Engineer and supply - no construction risk
• Positive payment profiles and requests for payment security
• ECAs provide differing levels of finance commitments
• The Chinese approach – reflected “on paper”
• Accept hard turnkey contracts
• Higher liability
• Come with finance
• Relationships at government level / State owned

7. 7
SPEAKER PROFILE
Mark Veitch
Global infrastructure and projects
London
Mark is an international construction and engineering lawyer with over 11
years' experience advising on high value and profile international energy,
infrastructure, construction and real estate projects and disputes. His practice
includes advising sponsors, developers and contractors from around the world
on project development, procurement and construction matters, primarily in
emerging markets. Mark is qualified to practice in the UK and South Africa.