Earlier this month, Mayer Brown project development and finance partner, Myles Mantle, relocated to the law firm’s Tokyo office from London – where he was initially based upon entering the firm in October last year.
His return to Japan marks his thirteenth year living and working in the market, the majority of which time he had spent previously working alongside current managing partner at the firm, Rupert Burrows, when the pair were colleagues at Ashurst.
With more than 26 years of experience in the infrastructure, energy, trade finance and commodities sectors, as well as a cross-border practice that boasts a nine-year stint in Russia and extended periods in the UAE, France and Singapore, Mantle is well positioned in his view that Tokyo constitutes “a truly global financial hub”.
Currently consisting of four partners, one counsel, one senior associate and three associates, Mantle told FinanceAsia that he and the team plan to grow and develop the Tokyo base further, initially through the expansion of senior and more junior associate level hires.
Having built longstanding relationships with many of the major trading houses (sogo shosha), contractors, asset owners and banks throughout his career, Mantle shared his plans with FA to reconnect with these contacts and to establish new relationships to capitalise on his global experience across multiple markets.
“We generally split project finance space in Japan into two areas: outbound work by entities working out of Japan that operate globally, and domestic work in Japan,” he said, ahead of elaborating on the trends he is witnessing across the space.
“Corporations and banks in Japan are showing considerable interest in, and making concerted effort to carry out and participate in the energy transition, and there are a number of exciting developments in that respect.” He explained that this work includes the creation of a hydrogen energy value chain, and efforts to explore the potential offered by blue and green ammonia.
However, this is no easy feat. “Creating a new energy value chain is a major exercise, involving many interdependent parts,” Mantle underlined.
Hydrogen pioneers
Having formulated the world’s first national hydrogen strategy in 2017, in recent months, Japan’s government – specifically its Ministry of Economy, Trade and Industry (METI) – has encouraged further the exploration of new renewable energy resources, supply chains and associated transportation. This is something that has led to a number of announcements around the signature of memoranda of understanding (MOUs) between large domestic trading houses, international sovereigns, and other major entities investigating energy production support, explained Mantle.
“Once companies determine feasibility and start work in earnest, we expect there to be a lot of activity in this space,” he said.
Meanwhile, in the nuclear space, power plants are undergoing compliance with a new licensing regime, with a view to startup over the next few years, he noted.
In terms of outbound activity, Mantle sees M&A opportunity in existing or partly-developed renewable projects. “In the near future, there will be a lot of work on offshore wind projects, including in the US, UK, Western Europe and then certain places in Southeast Asia.”
To date, Taiwan has led Asia's offshore wind development effort. The market’s activity has drawn involvement from infrastructure powerhouses such as Macquarie and long-term pension investors including CDPQ in its flagship projects, as well as Japanese participation, with a consortium comprising Mitsui OSK Lines (MOL), Toho Gas and Hokuriku Electric Power agreeing to acquire a 25% stake in Formosa 1, just last month.
But Mantle sees additional potential elsewhere in the region: “in particular we believe there will be a good level of activity in Vietnam.”
Although the current emphasis within the project finance sector is focussed on energy transition, he noted that “there remains a huge need to continue development of oil and gas projects (including LNG), especially given very recent events, so we expect to see a good number of oil and gas processing projects (such as Floating Production Storage and Offloading projects - FPSOs), LNG export and import and other oil and gas infrastructure deals.”
He shared that while there is an anticipation that the majority of these projects will be based in Brazil, West Africa and the North Sea, some will likely be located closer to home. “We expect to see two or three offshore Australia and then one or two offshore Malaysia and perhaps Vietnam.”
Electric energy transition
Globally, volatile pricing has exacerbated the supply chain woes suffered throughout the pandemic, which parts of Asia continue to endure. With Japan at the forefront of electric vehicle (EV) production – Nissan became the first car manufacturer to bring to market a mass-produced car run solely on batteries – a number of factors, including supply chain constraints, are preventing the renewable cars from overtaking traditional models in the market.
“There is currently a big increase in demand in electric cars in Japan, although we query if the charging infrastructure can keep up with the level of new purchases of EVs.” Mantle emphasised the need across many developed countries to renew or upgrade aging infrastructure.
He added, “it is well understood by many companies that there is a shortage of certain minerals, especially rare earths that are components of car batteries, and with the continued uptick in EVs, this shortage will become more and more challenging.”
According to published data, in 2021, Japanese cars accounted for less than 5 percent of battery-powered electric vehicles sold worldwide. Mantle expressed that both banks and sogo shosha firms may try to address shortages through increased participation in base metal mining.
Debating deployment
With the Japanese institutional infrastructure investment community renowned for its conservative, risk-averse approach with limited tolerance for J-curve, there might be an expectation that the current environment could add to delays in investment decision-making, but Mantle offered some cautious optimism.
“There is a mixed position; currently teams in the sogo shosha are travelling extensively, looking for opportunities and/or fixing deals. We note though that those countries located near conflict zones (for example certain places in Eastern Europe) or where there is true political instability (such as in Sri Lanka, or even Thailand) may lose out, given [the] perceived political risks, but then more stable locations may expect to see more interest in investments.”
Inflation continues to be a theme affecting project progress, especially impacting those involving fixed price contracts.
In fact, Mantle noted that in some cases, the increase in commodity prices is actually helping make some projects more viable in terms of bankability, such as those oil and gas projects in more challenging and expensive locations, as well as mining projects for base metals as well as rare earths.
“But then conversely this makes imports to Japan more expensive, driving inflation, [and] causing a weaker Yen, making investment into projects more expensive,” he contrasted.
“We seem to be in a bit of a transition process at the moment, given the emergence from Covid-19 of many countries in the region and globally, so in fact it remains a bit uncertain about the actual level of investment coming in the near future.”
“In the short term, we see most opportunities across Asia in renewables (Japan, Taiwan, Vietnam, Philippines in particular), oil and gas opportunity in Malaysia, Indonesia, Vietnam, Bangladesh and the Philippines – (the last three in particular for LNG import projects, and the very last depending on the political situation in the Philippines), Infrastructure in India and Singapore (and maybe Malaysia) and mining potential in Indonesia.”
