Professional Documents
Culture Documents
September 2002
Deutsche Securities Inc., a subsidiary of Deutsche Bank AG, conducts investment banking and securities activities in the United States.
Contents
Section 1 2 3 4 5 Introduction Financing Issues Financing Sources Case Studies Conclusion 1 10 15 17 20
Introduction
Section 1
Section 1
Introduction
Introduction
Section 1
Over 150 professionals worldwide focusing exclusively on the oil and gas sector
Project finance advice Syndication and participation g Structured and tax effective finance g Project bonds
g g
Unique partnership of Deutsche Bank and Wood Mackenzie with whom we have an exclusive consulting relationship
Corporate strategy Portfolio management strategies g Competitor analyses g Market analyses g Valuations g Acquisition screening g Benchmarking services
g g
Risk Management
Commodity, foreign exchange and interest rate derivatives g Medium to long term oil, gas and product derivatives g Tailored structured solutions
g
Introduction
Section 1
QATAR QATAR 1995 Financial 1995 Financial advisor and lead advisor and lead arranger /under-writer arranger /under-writer for a consortium for a consortium bidding for US$5 bidding for US$5 billion Ras Laffan billion Res Laffan LNG project LNG project 1995 Deutsche 1995 Deutsche Bank personnel acted Bank personnel acted as advisor to as advisor to consortium of Mobil, consortium of Mobil, QGPC, Total QGPC, Total Marubeni and Mitsui Marubeni and Mitsui on the US$3.8 billion on the US$3.8 billion QatarGas project QatarGas project TRINIDAD and TOBAGO TRINIDAD and TOBAGO Deutsche Bank Deutsche Bank personnel acted as personnel acted as advisor in respect of the advisor in respect of the Atlantic LNG project Atlantic LNG project VENEZUELA VENEZUELA 1992 Advisor to Lagoven 1992 Advisor to Lagoven on the US$2 to $4 billion on the US$2 to $4 billion Cristobal Colon LNG project Cristobal Colon LNG project
OMAN OMAN 1997 Deutsche Bank 1997 Deutsche Bank personnel acted as personnel acted as arranger on the US$12 arranger on the US$12 billion Oman LNG Trains 1 billion Oman LNG Trains 1 and 2 financing and 2 financing
MALAYSIA MALAYSIA 1994 Co-underwriter of 1994 Co-underwriter of US$390 million MLNG2, US$390 million MLNG2, sponsored by Petronas, sponsored by Petronas, Shell and Mitsubishi Shell and Mitsubishi NIGERIA NIGERIA 1999 Arranger and underwriter 1999 Arranger and underwriter in US$160million Bonny Gas in US$160million Bonny Gas Transport financing Transport financing 1994 Co-arranger of multi1994 Co-arranger of multisourced finance for Bonny LNG, sourced finance for Bonny LNG, until projects subsequent equity until projects subsequent equity financing financing WEST AFRICA WEST AFRICA 2001 Financial advisor 2001 Financial advisor to a large integrated to a large integrated energy company in the energy company in the evaluation of a LNG evaluation of a LNG production facility production facility INDONESIA INDONESIA 1991 1991 Underwriter, coUnderwriter, coarranger of the arranger of the US$750 million US$750 million F-train F-train ZOCA ZOCA 1997 Deutsche Bank 1997 Deutsche Bank personnel advised the personnel advised the Bayu-Undan Consortium Bayu-Undan Consortium on the financial feasibility on the financial feasibility of LNG projects worth of LNG projects worth US$2 to 2.5 billion US$2 to 2.5 billion
AUSTRALIA AUSTRALIA 2000 Advisor to North West Shelf LNG on financing options and 2000 Advisor to North West Shelf LNG on financing options and corporate structure corporate structure 1997 1991 Advisor to the Woodside LNG Consortium on the 1997 1991 Advisor to the Woodside LNG Consortium on the first offshore oil and gas financing in which commercial banks took first offshore oil and gas financing in which commercial banks took completion risk. In 1985, co-lead managed the refinancing. completion risk. In 1985, co-lead managed the refinancing.
Introduction
Section 1
Recent representative oil & gas Project and Structured Finance transactions
Fujian Integrated Petrochemicals Project US$3,500 million
Project Finance Advisor to ExxonMobilSaudi, Aramco and Fujian Petrochemical
PetroChina
d e P ER E Z C O MP ANC S .A.
Barracuda/Cartinga
US$42,500,000 Senior Secured Notes due 2015 Private Placement to monetize sponsors equity investment in cogeneration facility in Talcahuano, Chile US$220,000,000 Senior Unsecured Floating Rate Notes (FRN) Contingent Oil Payable Floating Rate Notes Facility for use by PeCom Energia, S.A. of Argentina to meet general corporate needs Structurer, Lead Manager and Sole Hedge Provider August 2001 July 2001
US$15 billion
US$3.3 billion
To advise and provide financing for the development of the Barracuda/Caratinga oil field by Petrobras
Joint Lead Manager and Co-Bookrunner of Notes, Sole Lead Arranger of the Senior Bank Facility June 1999 Texas
Introduction
Section 1
Introduction
LNG is one of the fastest growing sectors of the energy business and the outlook for growth remains strong Continued growth in the sector will lead to increasing amount of financing opportunities, both in number and across the credit spectrum The credit quality of a project depends on all the independent components of the LNG value chain
Introduction
Section 1
LNG (14%) 12% Piped gas (14%) 36% Deep water (25%) 9% Heavy oil (15%) 3%
Introduction
Section 1
Snhvit
Egypt USA Alaska Kenai Algeria Arzew,Skikda Libya Marsa-el-Brega Yemen Nigeria Bonny Angola Iran Venezuela Trinidad Atlantic Abu Dhabi Das Island Oman Arun Indonesia Australia Gorgon Australia North West Shelf
160 140 120 100 Mt 80 60 40 20 0 Atlantic Basin Demand Pacific Basin Demand
Russia Sakhalin
Brunei Lumut Malaysia Bintulu Indonesia Bontang Indonesia Tangguh Australia Darwin
Introduction
Section 1
Alaska Highway route the Alaska Highway route the original gas proposal original gas proposal
Japan Japan
Canadas M ackenzie Delta route opposed by Canadas M ackenzie Delta route opposed by Alaska politicians but soaks up m ore gas Alaska politicians but soaks up m ore gas
LNG into the W est Cost is economically LNG into the W est Cost is economically compelling... but twenty years of pursuit compelling... but twenty years of pursuit have yielded only failure. have yielded only failure.
Russia Russia
Australia Australia
Bolivia/Peru/Argentina Bolivia/Peru/Argentina
Algeria/Trinidad/Nigeria/Qatar/Malaysia/Australia Algeria/Trinidad/Nigeria/Qatar/Malaysia/Australia
Trinidad expansion, Nigerian Trinidad expansion, Nigerian expansion, Nigeria II, Egypt expansion, Nigeria II, Egypt
Introduction
Section 1
RUSSIA
Sakhalin II
CHINA
Alaska
Bering Sea
3,7 Ken 00 aikm Cal / 2 ifor ,30 nia 0m ile
CANADA
Kenai LNG
planned Sakhalin 1 to California 7,300 km / 4,560 mile
JAPAN
U.S.A.
Atlantic Ocean Hawaii
PHILIPPINES
MEXICO
a ni or lif ile Ca 0 m G- 15 LN /5, ia m liv 0 k Bo ,25 8
A SI NE RO IC M
Pacific Ocean
COLOMBIA BRAZIL
RU PE
PO LY NE SI A
NEW ZEALAND
1000 Km
2000
CHIL
Financing Issues
Section 2
Section 2
Financing Issues
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Financing Issues
Section 2
Strong credit
Weaker credit
Nature of Contracts
Firm, long term Tolling & usage Large, diverse, high credit quality Interruptible, short term Separate supply/offtake contracts Small, concentrated, low credit quality
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Financing Issues
Section 2
Strong credit
Weaker credit
Operations/Technology
Good track record Proven technology Low operational complexity Existing complementary infrastructure Operator has little experience Unproven/poor historical performance High operational complexity Lack of existing infrastructure
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Financing Issues
Section 2
Strong credit
Weaker credit
Project Structure
Strong, lender friendly covenants Strong collateral Weak covenants Limited security package
Sponsorship
Represents strategic investment Strong commitment Not integral to sponsors business Little vested interest
Construction
Completion guarantees/overrun support Low complexity Positive IE assessment Experienced contractor EPC w/o fixed price, no completion support Complex construction required IE assessment limited Contractor with little prior LNG experience
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Financing Issues
Section 2
Strong credit
Weaker credit
Regulatory/security/environment
Established, supportive regulator/legal environment Project meets all current/future environmental regulations Facilities in secure area Uncertain regulator/legal environment Project in environmentally sensitive area Facilities in urban or crowded shipping area
Sovereign Risk
Stable political regime and/or PRI Hard currency earnings/offshore account Unstable regime/government opposition Non-hard currency earnings/onshore account
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Financing Sources
Section 3
Section 3
Financing Sources
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Financing Sources
Section 3
Funding alternatives
Funding for Project financings may be obtained via agencies, banks and capital markets; or a combination of these sources
There are many potential sources of funding for projects. The optimal combination will depend on the state of the financial markets and the nature and requirements of the specific project.
Public Public
SEC registered SEC registered
Global Global capital markets capital markets Private Private placements placements
144A //Reg S 144A Reg S Traditional Traditional private placement private placement Local Local securities securities Multinationals Multinationals
Agencies Agencies
Export Export credit agencies credit agencies Sponsors Sponsors
Equity Equity
Private equity Private equity
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Case Studies
Section 4
Section 4
Case Studies
17
Case Studies
Section 4
Oman LNG
Project Sponsors 6.6 mm mtpy 2-train liquefaction plant Sultanate of Oman (51%); Shell (30%); TotalFinaElf (6%); Korea LNG (5%); Partex (2%); Mitsubishi (3%); Mitsui & Co. (3%); and Itochu (1%) Oman A-/A3 Bank November 2001 US$1.3 bn 2018/7.7 Yrs 1-6: L+90 Yrs 7-10: L+ 110 Yrs 11+: L+140 3.57x/2.27x
Location Ratings (at issuance; S&P/Moodys) Issuance type Issuance date Amount Maturity (year)/ Average life (years) Pricing; in bps (at issuance) Pro-forma coverage ratios at issuance (average/minimum) Total debt/equity (at issuance)
Qatar BBB+/A3 Bond December 1996 US$800 mm US$400 mm 2006/7.75 2013/15 UST+126 UST+171 2.63x/1.88x
79:21
70:30
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Case Studies
Section 4
Atlantic LNG 1
Project Sponsors Location Ratings (at issuance; S&P/Moodys) Issuance type Issuance date Amount Maturity (year)/ Average life (years) Pricing; in bps (at issuance) 400,000 mmBtu/d single-train liquefaction plant Amoco (34%); Repsol (20%); BG (26%); Natural Gas Co of Trinidad and Tobago (10%); Cabot LNG (10%) Trinidad and Tobago N/A Bank/Agency PRI July 1997 1: US$120 mm1 2: US$140 mm2 3: US$340 mm3 2012/8 2012/8 2012/8 1: Yrs 1-3: L+262.5; Yrs 4-8: L+312.5; Yrs 9+ L+375 2: Yrs 1-3: L+80; Yrs 4-8: L+162.5; Yrs 9+: 187.5 3: Yrs 1-3: L+80; Yrs 4-8: L+162.5; Yrs 9+: 212.5 1.89x/1.38x
Sines LNG
2.35 bcmpy regasification facility; 200,000 m3 storage capacity Transgas SGPS (51%); Gas de Portugal SGPS (49%) Portugal N/A Bank/EIB PRI June 2001 1: Euro 65 mm 2: Euro 122 mm4 2024
1: L+ 80 during construction, declining over time to L+ 50 2: pricing almost identical to, but slightly inside 1.
1.38x/1.29x
60:40
85:15
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Conclusion
Section 5
Section 5
Conclusion
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Conclusion
Section 5
The value chain combines a number of interdependent components that need to be analyzed both individually and jointly Project developments is characterized by high capital costs, the need for committed offtake and creditworthy partners
Upstream Upstream Gas reserves Gas reserves Terms of supply Terms of supply contract contract
LNG trains LNG trains Train construction/ Train construction/ operation operation Cost of gas Cost of gas Quality of offtake Quality of offtake Storage Storage
Offtake Offtake Power stations or Power stations or Distribution network Distribution network Economic Economic sustainability of sustainability of demand demand Gas price Gas price indexation indexation
The weakest credit in the LNG chain will determine the projects overall credit quality Need for cross completion across the chain
21
Conclusion
Section 5
New templates required for the future Specific Sponsors for specific parts of Value Chain - e.g. fuel suppliers, plant operators, shippers, regas, offtake Wide range of credit ratings not equalized or unitized Will require new risk-sharing and new legal framework Can we do a Project Finance based on a Project Finance for a mega project?
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Conclusion
Section 5
I.
Industry consolidation fewer players Fewer super majors NOCs constrained by government debts / IMF Independents consolidating
Results: All sectors are rationalising capital & allocating to projects that yield highest return on risk adjusted basis (including country risks) II. Banks consoIidating looking for higher return on capital reducing loan book size and maturities reducing emerging market exposures
Results: Consolidations & rationalization is reducing banks commitment to hold long term assets, especially in Emerging Market countries
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Conclusion
Section 5
III.
Capital Markets Increasing supply from US & European institutions for developed country projects available for long tenors 15 25 years usually requires investment grade rating difficult for assets generating local currency revenues blows hot and cold on emerging market risks, regulatory risk, market and commodity price risks
Results: Attractive & growing option, but not always available IV. ECAs & MLAs ready, willing and able (but) restricted markets & projects (private vs. public) limited funds (caps per project) limited staff resource constrained-not opportunity constrained long lead times
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