HSBC may surpass its record in 2009 for project finance advisory mandates in the Middle East this year despite tougher conditions due to more selective bank lending, a senior executive said on Tuesday.

HSBC is involved in more than 20 projects in the Middle East, of which 90 per cent are advisory mandates, the highest by any bank, Jonathan Robinson, regional head of project finance, told Reuters at a conference.

'2009 was the best year for HSBC in project finance. In 2010, we may exceed that. We have as strong a pipeline we had last year,' Robinson said in an interview.

Last year, the Middle East saw project finance volumes slump 50 percent compared to 2008 levels and though global volumes have increased 110 percent in the first quarter this year, led by Asia-Pacific, recovery in this region is still slow, he said.

'For the Middle East, we are looking at a flat performance in first quarter 2010 compared to first quarter 2009,' Robinson said.

'The region may be down from the stratospheric levels it reached two years ago but it is still a big market. The Middle East will emerge as the largest project finance market in the world.'

Bank lending in the region has tightened since the financial downturn and project sponsors are looking to other liquidity pools for funds such as commercial banks, bonds, export credit agencies (ECAs), mezzanine financing, private equity and others.

'It is a strategy change in financing projects. Now they have to cast a wider net and project sponsors are starting to do that,' adding a new trend is the emergence of ECAs in the region, for sectors such as power and petrochemicals.

Robinson said that even multilaterals such as International Finance Corporation (IFC), the Islamic Development Bank and others are getting involved in financing projects.

'These agencies have the capacity to bring funding and are not driven by returns or by in-country economics. We will see an ever increasing importance of these in the project funding mix,' he said. – Reuters