Annual report 2006 - Dexia.com

PUBLIC/PROJECT FINANCE
Iberia
In a context of rather subdued demand in Public Finance,
long-term commitments for this segment were up 26.5%, to
EUR 7.1 billion, a rise all the more remarkable since 2005 was
punctuated by large-scale deals (including two bonds issues
by the Generalitat de Catalonia for a total amount of EUR
3.0 billion). Originations reached EUR 2.1 billion, a 22.7%
increase. Among the main deals closed in 2006, two book
runner mandates with the Madrid region and one with the
Aragon Region were won by Dexia.
In Portugal, Dexia financed a EUR 150 million loan for EGREP,
a State-owned entity in charge of building up and managing
the national strategic oil stocks.
Regarding Project Finance, Dexia Sabadell Banco Local (DSBL)
co-led the financing of many landmark transactions in the
infrastructure and energy sectors: the Madrid subway rolling
stock (EUR 1.2 billion), the first hospital PPP project in Spain
(EUR 222 million), the first thermal solar power project financing
outside the US (EUR 497 million) and two of the largest
photovoltaic projects in the world (EUR 367 million). Five years
after its creation, the remarkable achievements of 2005 and
2006 establish DSBL as a prominent actor in the Iberian infrastructure
market.
Central and Eastern Europe
Dexia operates in this region via its subsidiary Dexia Kommunalkredit
Bank (DKB), based in Vienna and held 75% by Dexia
Crédit Local (directly and indirectly).
Long-term commitments were up 67.3% at EUR 5.1 billion
and total originations kept steady at EUR 2.7 billion in a context
of competition mainly with local banks.
In Public Finance, commitments stood at EUR 4.4 billion
(+57.1%) and DKB was particularly active in the two most
populated countries of the area, Poland and Romania. In
Poland, DKB was especially active in the health sector as well
as with local authorities. In Romania, the bank has been the
lender of several major cities, among them Bucharest, and of
the Finance Ministry with a EUR 34 million contract closed in
September. The first developments of structured products in
Slovakia and the Czech Republic were also commenced.
On the Corporate and Project Financing side, commitments
reached EUR 0.7 billion from EUR 0.3 billion one year earlier.
DKB arranged its first deal in the Czech Republic for a wind
farm financing. In the transport segment, several transactions
were closed with the national rail companies in Hungary
(EUR 114 million), Poland (EUR 50 million) and Slovakia (EUR
42 million). DKB also granted a EUR 37 million loan for the
construction of a power plant in Bulgaria.
America (excluding FSA)
America saw a contrasted market in 2006, with a very dynamic
trend in Project Finance and a much less active market in the
municipality bond issues. In this context, long-term commitments
reached EUR 46.1 billion, up 8.6% in one year, but
originations decreased by 4.8% to EUR 10.4 billion.
In the Public Finance sector, the market was weaker than the record
year of 2005. Among numerous deals closed in 2006, the liquidity
guarantees of the State of Mississippi (USD 224 million) and of the
State of Georgia (USD 314 million) are to be noted. In the meantime,
investments in the taxable and tax exempt (through the TOB
program initiated in 2004) markets developed markedly.
In Project Finance, a large number of deals were closed, including
the co-arrangement of the USD 4.1 billion Indiana Toll
Road concession and the USD 320 million Buffalo Gap II wind
farm. The Indiana Toll Road deal confirms Dexia’s prominent
positioning in the nascent but rapidly growing infrastructure
financing market in the US. In the meantime, Dexia affirms its
leading position in the renewable energy sector in the US.
Dexia’s Canadian subsidiary, which only began its activity
at the end of 2005, co-arranged CAD 1 billion financing in
2006 for the Golden Ears Bridge project near Vancouver, the
biggest PPP closed in Canada to date and also the first loan
credit enhanced by monoline insurers in North America. This
appears as a very promising start in this new market.
Other countries and head office
The activity conducted in other countries and carried out from
head office increased at a more than satisfying pace; outstanding
commitments rose by 55.2% in 2006 to EUR 28.5 billion.
In Switzerland, in November 2006, Dexia opened a subsidiary
in Geneva which has allowed the bank further to diversify
transactions with its customers range, for instance with hospitals.
One of the main transactions was a EUR 256 million loan
for the Canton of Geneva.
Also in November 2006, Dexia was granted a banking license
in Japan, allowing the bank to work directly with Japanese
customers and make the best of the largest market in local
public finance worldwide. At the end of December 2006,
commitments in Japan amounted to EUR 704 million, excluding
an amount of EUR 1.8 billion of Japanese bonds booked
at international headquarters before obtaining the banking
license.
In Mexico, Dexia’s most recent subsidiary had a very promising
start: long-term commitments reached EUR 486 million,
compared to EUR 36 million one year ago.
Significant transactions were closed, among them a
MXN 650 million loan to the State of Guerrero and a
MXN 2,200 million loan to the City of Mexico. Also to be
mentioned is the refinancing of the entire debt of the State of
Queretaro, which is AA rated (local rating), for an amount of
MXN 1,340 million on a 20-year term.
The Corporate and Project Finance activities also saw significant
growth, with long-term commitments reaching EUR 11.6 billion.
Important transactions were closed, among them the
EUR 431 million dual wrapped bond/loan refinancing of the
Hungarian M6 motorway and the WISE CBO, a GBP 1.47 billion
securitization of wrapped PFI and utility bonds, the first
transactions of their kind, combining Dexia’s expertise in capital
markets and project/infrastructure finance.
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