Since 2003, SSK Capital has worked with clients to both raise capital for coal projects and find buyers for coal. We have deep backgrounds in the U.S. capital and credit markets, as well as senior executive backgrounds at mining companies such as Rio Tinto and Alliance Resource Partners.
The Russian invasion of Ukraine has roiled European energy markets. On the fuel supply side, cuts in natural gas and coal imports from Russia have sent prices soaring. In terms of generation mix, we are seeing climate change goals being put on hold, with some coal-fired power plants having their lives extended, and other coal plants being brought out of retirement to add resilience to the power grid. These changes have created a temporary short position of some 40 million metric tons of hard coal per year in Europe.
Long term, we expect climate change goals to be achieved, and Europe to move to an energy market free of fossil fuels. To bridge to that state, however, we expect an interim period of some 3-5 years where hard coal imports will be an essential component underpinning grid reliability, as the EU manages its present challenges.
Large, higher risk infrastructure projects
The U.S. Development Finance Corporation was established in 2019 to help provide financing to projects in the developing world that were higher risk and might not otherwise be able to attract finance (e.g. due to an unworkable tenor). SSK works with clients to develop a proposal that addresses DFC requirements and then walks the proposal through the process, including calls with the DFC and personally representing the client at meetings with the DFC in Washington, D.C.
- Size: $100 million to $1 billion
- Uses of funds: Infrastructure: ports, roads, power generation & distribution, water & sewer, large real estate development
- Credit requirements: sovereign guarantee, i.e. full faith and credit of the government
Smaller purchases of equipment and engineering services that can be sourced from U.S. companies
The Export-Import Bank of the United States (“U.S. Exim Bank”) helps the world buy American. Through a range of products including direct loans, loan guarantees, insurance, and working capital guarantees, the U.S. Exim Bank helps U.S. exporters conclude transactions that might otherwise not be possible. SSK contacts the Exim Bank on a client’s behalf and helps develop a proposal that satisfies Exim Bank requirements to have the highest likelihood of success.
- Size: $1 to $25 million
- Uses of funds: Can be from any industry as long as the focus is purchasing equipment or engineering services from a U.S. supplier
- Credit requirements: sovereign guarantee if the purchaser is a government or guarantee from a commercial bank if the purchaser is a private business.
Medium-sized projects where there is a need for an operator
Large U.S. corporations can be attractive partners for projects where there is a need for operational expertise as well as finance. A pharmaceutical manufacturing facility, for example, could benefit from not only U.S. capital, but from the facility being operated by a U.S. firm with expertise in the area. SSK Capital helps clients develop a package of marketing material that outlines the opportunity, while maintaining compliance with relevant U.S. regulations. It then markets the opportunity to a range of potential operator/investors to get our clients the best pricing, terms, and likelihood of close.
- Size: $50 million to $1 billion +
- Uses of funds: To build/acquire/redevelop a facility that this then operated by a U.S. company for a period of at least ten years. Can include working capital, feasibility studies, and other soft costs as well as acquisition, development, and construction costs.
- Credit requirements: Equity co-investment from sponsor. So, if for example there was a $200 million project with 50% of the capital being provided as debt, the sponsor should expect to provide 10-20% of the required equity ($10-20 million) with the balance of the equity provided by the U.S. corporation.
Large, lower risk projects with a solid, long-term offtake agreement
U.S. private equity firms have very large pools of capital available for the right projects, providing that the project risks are adequately managed, there is transparency in financial reporting, and the sponsor has a solid operating track record. SSK Capital has access to a database of 40,000 institutional investors and is able to match projects very accurately to the investment criteria of these investors.
- Size: $200 million to $2 billion +
- Uses of funds: Infrastructure, real estate development
- Credit requirements: These projects are based on a long-term offtake agreement from a creditworthy counterparty, usually a government entity or large corporation. For smaller entities a commercial bank guarantee would be required.
Sponsors should contact SSK with a 2-3 page project summary indicating the project’s location, size, industry, and projected cash flows through the life of the project: both capex and operating. A brief biography of the sponsor along with a few comparable projects successfully completed should be included.
SSK will discuss with the sponsor the kind of initial materials that need to be developed in order to take the project to market. Sometimes a pre-feasibility study needs to be prepared ahead of going to market.
Once materials have been prepared, SSK will prepare a list of prospective investors for approval by the sponsor. This list will be somewhere from 20-200 investors, depending on the type and size of the project. Upon approval, SSK will contact prospective investors and negotiate indications of interest from a number of parties.
Finding investment opportunities
In addition to sourcing capital for Egyptian projects, SSK is also able to bring investment opportunities to Egyptian investors. Interested parties should contact SSK to discuss the kinds of investment opportunities that interest them. Key criteria are:
- Investment size
- Geographic location
- Target investment returns
- Risk tolerance
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