The managing director and co-head of the Americas energy and commodities structured debt team at BNP Paribas tells Kathryn Tully what lies behind the bank’s restructuring to form a new global energy and commodities structured debt team.

Dan Cozine has an issue with the project finance market. Namely, that the market to which people in the industry still refer on a consistent basis scarcely exists any more. “We’ve seen a blurring of the lines for project finance,” he says. “People still talk about it as a product, and there are still some pure project finance deals out there but they are more scarce these days, particularly in North America. There really has been a morphing of project finance and energy and commodities structured finance.”

He cites the example of a deal that BNP Paribas, a long-term player in the North American and global project finance markets, did last October for the Canadian public company Connacher Oil and Gas. The bank was sole lead arranger on a $180m term loan B, which funded both the company’s development in the Athabasca oil sands and also refinanced Connacher’s purchase of a refinery in Montana. Mr Cozine says that this was a good example of the sort of hybrid deal that the bank has been doing lately. “It was a combined deal involving our North American project finance team and our oil and gas team in Houston,” he says.

For that reason, BNP Paribas undertook a major restructuring in its energy and commodities group in June to form a new global energy and commodities structured debt team. Previously, project finance at the bank had been organised on a regional basis. “Project finance has been a very successful franchise for the bank globally but before, we pursued this on a regional basis. We had a Latin project finance team, a North American project finance team, a mining team, and a power and utilities coverage team,” says Mr Cozine.

Team mergers

Now the entire project finance platform will be merged with the oil and gas platform in Houston, along with the dedicated Latin American commodities group. This will pull together 100 people centred in Toronto, Houston and New York, and also people on the ground in eight Latin American countries.

Philippe De Gentile will be global head of the new group, with Mr Cozine in New York and Bart Schouest in Houston both becoming co-heads of the group in the Americas. The new team will be organised into sub-groups along sector lines: oil and gas; metals and mining; power, utilities and energy project finance; and Latin American commodities.

Mr Cozine’s second responsibility will be for a separate, smaller infrastructure project finance team, which the bank has decided should be kept out of the broader energy and commodities structured debt team. There are four people dedicated to infrastructure project finance in North America along with various people in Latin America, and the sector has been generating some extremely large deals. For example, the bank was lead arranger on the $4.1bn loan financing of the Indiana Toll Road project last June.

The aim of the restructuring is to provide better sector coverage for all energy and commodities clients and crucially – because hybrid deals are in vogue with clients already – to increase innovation and collaboration between different product areas. “By bringing the three groups under one management, it will allow us to be more innovative in our product delivery and serve every sector better,” says Mr Cozine.

Continuing to produce a flow of new ideas for clients is particularly crucial in the Americas, where the pace of innovation in project finance exceeds that of Europe in many areas, he says. He cites the evolution of the B loan market in the US, the increasing involvement of monoline insurers in transactions in the Americas, and the fact that the market for high yield energy and structured deals started there. As a consequence, clients expect to be presented with new ideas. “Innovation is key to the Americas markets, so it is absolutely essential to stay on the leading edge of that, so we can present all the options to clients,” says Mr Cozine.

Distinguishing features

BNP Paribas clearly does not have the monopoly on innovation in this market – Credit Suisse has done some original deals of late and Citigroup continues to be a strong contender. Nevertheless, Mr Cozine says that the long-term philosophy of BNP Paribas has always been to focus on structuring and innovation, while keeping an eye on all the different possible distribution channels; something that he thinks distinguishes it from other major North American project finance houses. “We have a strong focus on structured debt and commodity hedging, and that’s a clear strength. We try to provide a broad array of financing options. We go to clients and say ‘here are four or five distribution options’,” he says.

That was the approach taken with the 144A deal that the bank has just closed for June for US power company Tenaska. Mr Cozine believes it was the most aggressively priced project finance issue of its kind. “When we won the deal with Tenaska, we gave them a broad array of options. We presented a 144A deal, a bank deal and a monoline wrap. We thought the 144A was the way to go and the client agreed.”

Mr Cozine’s next job is to implement the integration and to ensure it yields the better client coverage, greater product innovation and, ultimately, the increases in client mandates that everyone hopes it will.

Strong performers

Alternative energy is one area that Mr Cozine thinks should continue to perform strongly. The bank and its lease and tax equity advisory subsidiary, Capstar Partners, placed more than $1bn of equity financing for PPM Wind in three successive transactions in 2006 and 2007. It was the largest equity financing of a wind portfolio in the US. And last September, BNP Paribas was sole lead arranger and financial adviser on a $230m bank loan for BioFuel Energy, a US developer of ethanol projects.

There are more biofuel projects in the pipeline. The bank is currently mandated to arrange a debt financing for Emerald Renewable Energy, a subsidiary of Cargill, on a portfolio of ethanol deals that hopefully will come to the market later this year. “There is also tremendous scope for biofuel deals in Latin America,” says Mr Cozine. “In Brazil, we are investigating a number of opportunities.”

Latin America continues to be another key focus. “From an energy, commodities and structured debt perspective, we’ve been very active in the region. We’ve achieved significant penetration there. We have good local knowledge and presence in country,” says Mr Cozine.

Familiarity with economies and profiles of key Latin American markets has allowed the bank to execute deals in volatile markets where others might have been scared away, he says. For example, in Venezuela, BNP Paribas acted as sole book runner and administrative agent on a $1.1bn unsecured corporate facility for PDVSA that closed in January. “We did the deal in a very difficult political environment. But we had a very good view on the country, the type of deal that would sell through the market and what would be necessary to get that deal through,” says Mr Cozine. The bank is also advising on the high-profile privatisation of Colombia’s Bogota airport, which is expected to reach financial close in the third quarter of this year.

Experience counts

Bringing all these teams under one management is a considerable shift in approach. But, if years of service count for anything, Mr Cozine has the experience to put him on the right track. A veteran of the bank who formerly worked at Paribas, Mr Cozine has been involved in project finance and energy for 18 years. He spent three of those years in Paris; the rest of the time, he has been focused on North and Latin America. In an era when bankers tend to switch jobs and firms every few years, that is an impressive commitment to one firm and one franchise.

Yet Mr Cozine says that he is not the only one in the team who has been there long term. Dominique Remy, global head of energy, commodities, export and project finance at the bank has been there for 20 years, as has his deputy, Lincoln Payton, based in the Americas.

This is partly due to the fact that energy and commodities are one of the sturdiest parts of the bank’s overall platform. The bank does not break down the contribution that energy and commodities make to its financing business in its quarterly or annual reports, but its results for the first quarter suggested that an increase in energy structured deals, in part, meant the overall business was not so sensitive to the falling oil price in the first three months of the year.

“The institution is very comfortable with the energy and commodities area. Energy and commodities are key drivers in the corporate and investing banking business and will continue to be,” says Mr Cozine.

But he says that the institution and its senior management have remained committed to energy and commodities through bull and bear markets and have been consistent in their support through the years, which has also made a big difference to retaining staff for long stretches. “What you want is a platform that will support you, to allow you to go out and pursue business aggressively. And that is what the bank has done consistently,” he says.

CAREER HISTORY

2007: Co-head of BNP Paribas’ Americas energy and commodities structured debt team

2003: Group head of project finance and utilities for the Americas at BNPP

2001: Group head for North American project finance at BNP Paribas

2000: Promoted to managing director at BNP Paribas

1991: MBA, New York University

1987: Joined Paribas as financial analyst

1986: BS in Business Administration Education, University of Delaware

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