The following is an excerpt from Practice Perspectives: Vault’s Guide to Legal Practice Areas.
Vijaya Palaniswamy—Partner, Project Finance
Vijaya Palaniswamy is a partner in Linklaters’ Global Energy and Infrastructure Practice and leads the team’s work in the Americas. He regularly advises project sponsors, commercial lenders, governmental agencies, multilateral development banks, and regulated entities in the acquisition, development, structuring, and financing of energy and infrastructure assets. Vijaya serves on Linklaters’ Corporate Responsibility Committee with responsibility for offices in the Americas. He graduated with an A.B. (Religion) and B.S. (Genetics/Biochemistry) from the University of Georgia in 1999. In 2003, he earned his Master of Arts in Law and Diplomacy (M.A.L.D.) from the Fletcher School at Tufts University, and his J.D. from Harvard Law School.
Please provide an overview of what, substantively, your practice area entails.
I represent lenders or borrowers in the development and financing of projects that will be financed on a limited recourse basis, also called project finance. This type of financing is typically used to build infrastructure or energy assets that require significant upfront capital and that provide a steady stream of revenue over decades, like a toll road or a power plant.
What types of clients do you represent?
We act for commercial banks, owners of energy and infrastructure projects, and governmental and intergovernmental entities. We have a very diverse client base—we go from working on the expansion and financing of the Santiago, Chile, international airport, to working with a wood pellet fuel manufacturer in Arkansas. We also work with a large range of international clients like ENGIE (formerly GDF Suez), who we advised on LNG related work in the US.
What types of cases/deals do you work on?
We’ve balanced our traditional energy and infrastructure work (e.g. gas power plants, LNG terminals) with an increasing amount of work in the renewables space in recent years. Renewables are becoming an increasingly important source of energy generation from both a practical and environmental perspective in the U.S. We helped shape and grow this sector in Europe and we hope to do the same in the U.S. For example, we’ve acted for Orsted (formerly DONG Energy), a Danish developer of offshore wind farms. We helped them grow in the U.S. market through a joint venture with Eversource Energy, one of New England’s largest energy providers. Highland Pellets in Arkansas, mentioned above, is another good example of a client trying to find more environmentally-friendly solutions: they’re a biofuels developer that’s now using wood pellets as an alternate fuel to reduce coal consumption. In Latin America, we’ve been active with more traditional photovoltaic solar and wind developers.
How did you decide to practice in your area?
When I started law school, I was focused on doing something involving development, technology and human rights. With that in mind, before starting law school, I completed a six-month internship with the Office of the High Commissioner for Human Rights and a three-month internship with the World Intellectual Property Organization, both in Geneva. I realized that project finance brought together creative financial and corporate structures with the applied development perspective I was looking for. Many of the projects we work on provide some service or product to the general public, like power, clean water, or transport services. So, in addition to the intellectual rigor of practicing law, project finance allows us to play a role in bringing power to a city, providing clean water to a region, or expanding an airport that enables a nation to access the world. This ultimate benefit of the work we do is what helped guide me to a career in project finance.
What is a typical day or week like in your practice area?
It depends on how advanced the projects are that we’re working on and where they’re located, as there are several stages to each one. At the beginning, you’re working closely with the sponsors to build a commercial structure that will be lender-friendly or “bankable”. Once you’ve gotten past that point, you engage with the lenders, to work through the commercial structures that will be in place for the next 10 to 30 years and ensure that they meet the bank’s requirements while preserving the sponsor’s objectives and ability to make a competitive return on their investment. Once you’re done with the financing, you enter the construction phase. We’re relatively quiet during that period, unless there are disputes in litigation. Big projects will often have expansions or follow-on work, so you can live with a project for years. For example, one of our projects has been ongoing for 13 years. We had our first meeting in 2004, and we’re still called in from time to time to help with new developments.
What is the best thing about your practice area?
No two projects are the same. Even an expansion of an existing project brings new challenges. You have general principles and market conventions, you start with the same toolkit for every project—but how you apply those tools is different every time. There’s always something unique about each project, which keeps things challenging and fresh.
What is the most challenging aspect of your practice area?
We’re always subject to macro-economic forces beyond our control. We can have a project that’s perfectly structured and ready to go, but if the price of oil fluctuates, or if there’s geopolitical turmoil or a natural disaster, the project could be impacted and delayed, or even cancelled. There have been a number of innovative projects that we’ve started but that never took off due to events beyond the control of anyone at the table.
What training, classes, experience, or skills development would you recommend to someone who wishes to enter your practice area?
You need to know about secured transactions, because everything we do is ultimately secured in favor of the lenders, whether it’s in the U.S. or abroad. An understanding of bankruptcy—creditor rights and protections, and how projects get unwound—is also helpful. Finally, I’d suggest a foundation in contracts and corporations. You’re setting up companies and agreements that are supposed to run independently for 10 to 30 years, so understanding joint venture structures for development and long-term corporate governance will all be helpful. But, ultimately, it’s just about being willing and able to handle something new. There’s no book you can consult for the right answer—each project carries its own challenges.
What misconceptions exist about your practice area? What do you wish you had known before joining your practice area?
One of the early misconceptions about project finance is that it’s driven by oil and gas. The practice grew up in that sector, because historically a lot of big projects were in the Middle East or involved the oil and gas industry. Nowadays, it’s also being used for social infrastructure and renewables. It’s not just about oil and gas anymore. It hasn’t been employed for domestic social infrastructure in the U.S. as much as in certain other countries, but we’re starting to fund and put forward more public-private partnership (PPP) structures here. The U.S. is playing a bit of catch-up with the UK and other countries on the social infrastructure front, but we’re moving in the right direction.
What is unique about your practice area at your firm, and how has it evolved since you have been at the firm?
Our practice is more globally integrated than many of our peer firms. I spent my first four years in our London office with colleagues who have spread throughout our network over their careers. Most of our U.S.-based team has spent at least a year or two in different jurisdictions, developing their skills and gaining experience on an international and diverse team. Many of our deals rely upon us working very closely with our colleagues abroad, including those based in Seoul, Paris, London, Germany, Madrid, and Tokyo. We also have secondees in New York from London, Paris, Hong Kong, and Allens, our alliance firm in Australia. Our practice is often driven more by the knowledge of a particular sector than by black letter law. The physics behind turning natural gas to electricity doesn’t change depending on the law that governs your contracts. A power plant in France is going to be physically constrained and limited in what it can do in the same way a power plant in Chile will be. The difference will be what the law says as to who bears the risk, and what you can negotiate in your contracts to protect your clients to mitigate or manage that risk. There’s been an evolution in the way PPPs have developed and been applied to an increasingly broad range of projects. It used to be that project finance was focused on huge mega-projects. Nowadays, you see the same skillset being routinely deployed to help build schools and hospitals in the UK. The same principles come into play, but the size and scope of where they can be applied is what’s evolving.
What activities do you enjoy when you are not in the office, and how do you make time for them?
I enjoy cooking with my family. For weekend dinners, we gather everyone together and let the kids at it. I have three kids with varying degrees of skill around knives and stoves, which keeps things interesting.
In terms of making time for my personal life, Linklaters has been active in developing policies to promote a healthy work-life balance. We’re using technology to be more connected with our colleagues around the world as well as enabling people to work more efficiently between the office and home. To us, this is key to keeping a degree of flexibility and control in our lives when things get busy.