A slowdown in the project pipeline for Chile’s energy sector over the past year has led to lots of hand-wringing, but not at Japanese banking giant, SMBC.
The bank was involved in major project financings in the country – not just in energy, but also in digital infrastructure, transportation and water.
“We have seen a slowdown in the energy sector, which traditionally is the sector where we saw the most activity in the past, but there are other sectors, like traditional infrastructure, with a great deal of movement and this is going to be another good year,†says David Gonzalez, managing director and head of project and structured finance Latin America at SMBC.
SMBC, which wins the award for Infrastructure Finance Bank of the Year – Southern Cone, is active throughout the region, with past and future projects in Argentina, Chile and Uruguay. It is actively looking at project options in Paraguay, including basic infrastructure.
The energy transition, while changing in Chile with price decoupling in the electricity market, is offering new options for the bank.
“We have an interesting pipeline. We are having an important dialogue with our global clients about hydrogen. We think it is going to provide opportunities across the region,†says Luis Fernando Perdigon, SMBC’s head of Latin America corporate and project finance.
Another area is lithium, a key part of the building blocks for the transition because of its role in batteries for energy storage.
“We are advising clients that are installing batteries, which are a solution to the decoupling issue in Chile,†says Gonzalez.
These new areas work well with SMBC’s long-standing focus on ESG and its pivot going forward to focus toward more on debt financing incorporating more a wider array of financing instruments.
SMBC’s environmental and social policies are core and its carbon reduction ambitions are more rigorous than global targets: the bank is working towards a zero emissions target by 2030 and not 2050.
The bank’s new approach toward project financing is part of its relationship with Jefferies Financial Group. The two institutions announced in April 2023 that they would expand their strategic alliance to expand banking opportunities.
Gonzalez says SMBC is doing more financial advisory work, allowing it to open possibilities for different kinds of financing.
“We have a mentality of investment banking, which helps provide more tailored-made solutions to clients, not only typical banking solutions, but now capital markets, mergers and acquisitions. Our clients are seeing the results and appreciate it. They see us more as a partner to help them resolve their problems,†he says.
