It has been an extremely difficult year for the project finance market, and Abu Dhabi sovereign wealth fund Mubadala Development Company is finding that banks remain cautious about selecting which projects they will support.

Mubadala is currently seeking financial advisers for two of its projects: a hospital development and a manufacturing site for the aircraft industry. Despite the strength of the Mubadala name, many of the biggest advisers in the region have decided not to tender for the advisory work on these projects.

This is a surprise given that Mubadala is an arm of the Abu Dhabi government. Infrastructure projects, such as power and water deals, have dominated project finance in the past 12 months. Banks like these deals as they are vital projects for their government sponsors.

Upfront agreements to buy the output from these plants helps give banks comfort that the cash flow from these projects will be reliable. With ‘soft infrastructure’, such as hospitals, however, it is more difficult to arrange purchase agreements. Given the write-offs that most banks have taken as a result of the financial crisis, only the projects with secure returns are currently managing to attract finance.

The difficulty in finding an adviser for the latest schemes contrasts sharply with Mubadala’s last soft infrastructure projects: two university developments that secured financing at the end of 2008 and in mid 2009.

Both developments managed to attract a lot of bank interest despite the strains on the financing market.

Despite its initial problems with the two new projects, Mubadala must be hoping that once an adviser is appointed, the strength of its name will encourage lenders to support the projects. However, it may find that in today’s environment, cash flow is more attractive than its own good name.