Final Presentation
Transcript of Final Presentation
Financing African Oil & Gas Investments
Nathan A. Mintah
Director, Project Finance, HSBC
November, 2003
Presentation to the Africa Oil & Gas Forum – Houston, TX
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INTRODUCTION– Capital flows into Africa
ATTRACTING FINANCING TO OIL & GAS PROJECTS– Project issues – Country issues
SOURCES OF FINANCING –– Traditional sources– Future sources
CLOSING REMARKS
HSBC’s OIL & GAS CAPABILITIES AND CREDENTIALS
Capital flows into Africa – recent trends
Introduction
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Foreign Direct Investment into Sub-Saharan Africa
Net Inward FDI into Sub-Saharan Africa
US$ billions
6.1
13.8
7
8.1
6.5
8.1
4.34.3
0
2
4
6
8
10
12
14
16
1995 1996 1997 1998 1999 2000 2001 2002
•Recent increases but on a decline•Targeted towards Oil & Gas Sectors – Nigeria, SA, Angola
Source: Global Development Finance 2003
4.9% of FDI into Developing countries
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Net inward debt flows into Sub-Saharan Africa
Net inward debt flows: developing world vs. SSA
US$ billions •Steep declines in debt flows to the developing countires•SSA net position: outward flow for debt servicing
0.2-1-0.9-0.9-1.44.57.6 3.2
-20
0
20
40
60
80
100
120
140
160
1995 1996 1997 1998 1999 2000 2001 2002
Developing Countries Sub-Saharan AfricaSource: Global Development Finance 2003
Attracting financing into African oil & gas projects – Project issues
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Typical contractual and ownership structure
Operating Agreement
Operator
Offtake Arrangements
•Market &/or•Offtake Parties
Concession Agreement, PSA, license etc
Government
Construction Arrangements
EPC Contractor(s)
Debt
• ?
SPVProject Company
Shareholders Agreement
Equity
Sponsors
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Project issues – sponsors and project company
Credit strength and experience of project sponsors
Sponsor support undertakings
Project company: corporate governance structures, information reporting and transparency
Lenders’ concerns
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Project issues – concession agreement, PSA or license
Transparency of process for granting license – Nigeria’s example
Can security be created over concession or license? Is it assignable?
Enforceability of such security
Are direct agreements between lenders and government/concession grantor possible?
Lenders’ concerns
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Project issues – construction arrangements
Experience of contractor
Proven technology
Independent engineer’s review of development & construction plans, CAPEX and technology
Cost overruns (delay and performance LDs)
Completion guarantees and undertakings
Lenders’ concerns
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Project issues – operating agreement
Operator’s technical expertise and credit strength
Extent of performance linked penalties and bonuses
LDs for lack of performance etc.
Lenders’ concerns
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Project issues – offtake arrangements
Product marketing arrangements and credit strength of offtaker(s)
Product price risk and hedging program, if any
Transportation of offtake products and reliability of export infrastructure
Lenders’ concerns
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Project issues: other – reserves
Sufficiency of reserves:
– reserve life at projected production rates vs. loan life
Reserves due diligence: independent engineer’s report and certification (e.g. Ryder Scott)
Lenders lend against proven reserves
Lenders’ concerns
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Project issues: other (cont’d)
Completion risk – who bears completion risk?
– Mechanical completion
– Financial completion
Security package
Environmental standards
Lenders’ concerns
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Project issues: other – project economics
Project’s economics:
– Cashflow projections
– Capital structure
– Debt servicing capacity – cover ratios– DSCR
– Loan life cover ratios,
– Project life cover ratios etc
Important but not sufficient.
Lenders’ concerns
Attracting financing into oil & gas projects – Country issues
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Country issues – legal & regulatory framework
Security available for loans
– Creation, perfection and enforcement of security given local laws
Regulatory framework for natural resources, oil & gas
– Tax regime
Change in laws – uncertainty
Lenders’ concerns
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Country issues – country risks & mitigation
MIGA’s programs
Private PRI insurance market
World Bank ‘Partial Risk Guarantee’ program
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Typical contractual and ownership structure
Operating Agreement
Operator
•Market &/or•Offtake Parties
Government
EPC Contractor(s)
SPVProject Company
Equity
Sponsors
Credit Enhancement
MLAs, ECAs
Debt
•Banks•DFIs•Other
Projects with solid economic fundamentals, that properly address qualitative lender issues have best chance of attracting debt capital.
Offtake Arrangements
Concession Agreement, PSA, license etc
Construction Arrangements
Shareholders Agreement
Sources of financing
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Sources of financing – Africa focused commercial banks and infrastructure funds
Africa Millennium Fund
AIG Africa Infrastructure Fund
Emerging Africa Infrastructure Fund
Infrastructure funds
Various international banks
AFREXIM Bank
Fund size: ~US$ 200 million+
Senior & subordinated loans, equity
Some will not finance extractive industries but will finance related infrastructure.
Commercial Banks
Local banks
International banks with African risk appetite
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Sources of financing – DFIs
DFIs
Proparco, France RSA
UKUSA
Germany
Germany
CDC – interested in equity
Others – equity, senior & subordinated debt
RSA
FMONetherlands
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Sources of financing – export credit agencies
UKUSA
France
Germany
SACE
Australia Japan
SpainItaly
Export Credit Agencies
ECICSouth Africa
Term debt financing
Term: 7 - 10 years+
CIRR Rates, ECA premium
Must meet local content requirements
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Sources of financing – multilateral agencies
Multilateral Agencies
AfDB
IFC – ‘A’ loan & ‘B’ loan program
Equity, senior & subordinated debt
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Sources of financing: local banks & capital markets – recent notes/bond issues, Nigeria
Lagos State
Nigerian Breweries Plc
Cadbury Nigeria Plc
Unipetrol Nigeria plc
Cement Company of Northern Nigeria
N 15 billion
7
2.5
1.2
1.5
Terms
7 years; 1% over CBN - 365 day Treasuries
3 yrs
3 yrs; Zero-coupon
3 yrs; Zero-coupon
3 yrs; 15% p.a.
Naira US$
$120 million
56
20
9.6
12
The local banking and capital markets are deep in certain countries ….
The mobile telephone industry has successfully raised over US$ 0.5 billion from local bankingmarket in Nigeria.
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Future sources of financing – international capital markets
Debt Capital Markets
– Securitization of export receivables
– 144a bond issues
– International syndicated loans
– Eurobond issues
Equity Capital Markets
– Rule 144a ADRs (RADRs)
– SA’s mining companies have successfully tapped ADR/GDR markets
Disclosure and corporate governance standards are higher still for these sources of funding …
Conclusions
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Conclusions
Financing is available for well structured projects in Africa's oil & gas sector
Quality and credit strength of project participants is important
Good corporate governance and disclosure standards is instrumental in accessing financing. Good governance has value.
Project sponsors should seek advisors: legal, technical & financial advisors
HSBC oil & gas credentials
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Mergers and acquisitions/advisory – oil and gas industry
HSBC has been extensively involved in
providing M&A advice to clients both in domestic
and cross-border transactions in the oil
and gas industry
Confidential
Italy
Adviser
Ongoing
Russian Federal
Property Fund
US$225 million
Disposed of 36.8% stake in Eastern Oil
Adviser
2002
Advised Tosaco on purchase of 25% stake in total South Africa
Adviser
2003
Russian Federal
Property Fund
US$440 million
Sale of 9% stake in Lukoil
Adviser
1999
$300 million
Fairness on disposal of interest in Muturi PSC to BP
Indonesia
Adviser
2001
Terminated disposal of Saga Petroleum Mabruk AS
Libya
Adviser
2001
Confidential
Advised on defense against unsolicitied public offer from Sibir Energy
UK
Adviser
2001
US$389 million
Valuation and Advisery services
Adviser
1999
$100 million
Sale of Australian Subsidiary Gulf Australia
Australia
Adviser
1999
Valuation of a large lubricants business 2002
India
Adviser
2002
US$1.3 billion
Acquisition by ENI
UK
Adviser
2000
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Equity offerings in the oil & gas sector
HSBC has an excellent track record in
successfully raising equity finance for major
oil and gas companies around the world,
including equity, equity-linked, IPOs, rights issues, secondary
placements and convertible issues Integrated Oil NT Corp
C$111 million
Issue of aapital shares and preference shares via a public offer
Co-Manager
1999
US$288 million
Initial public offering
Greece
Co-lead Manager
1998
HK$26 billion
Global offering
Hong Kong/China
Co-lead Manager
2000
£15.7 million
Placing and open offer of ordinary shares
UK
Broker
1999
Confidential
IPO
Greece
Lead Manager
2001
US$440 million
Sale of a 9% stake in Lukoil held by the Russian Federal Property Fund Russia
Advisor
1999
£830 million
Secondary share offering
Turkey
Co-Manager
2000
C$18 million
APF energy trust rights issue
Co-manager
2001
€5.7 billion
Primary offering
Spain
Co-Manager
1999
CA$100.7 million
Issue of trust units
Canada
Underwriter
2001
£2.7 billion
Initial public offering
Hong Kong
Co-Lead Manager
2000
Canada Dominion Resources VI
C$27.5 million
Issue of limited partnership units
Agent
2002
US$4.4 billion
Initial public offering
UK
International Co-manager
1998
£36.3 million
AIM flotation
UK
Adviser and broker
1998
US$151,145,000
Equity financing
Canada
Underwriter
2003
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Debt finance and debt capital markets experience in the oil and gas sector
HSBC’s strong presence in all major (and many
smaller) financial markets, and close relationships with international and domestic banks,
provides us with wide and deep access to the
loan distribution market
Selected oil and gas industry transactions
US$700 million
Syndicated facility
USA
Joint Mandated Arranger
2001
$500 million
Six year loan to finance capital expenditure
Singapore (India)
Lead Arranger
2001
US$500 million
Syndicated loan
India
Joint Arranger
1998
CK5000 million
Term loan for general corporate purposes
Bookrunner and Arranger
2000
US$250 million
Revolving credit facility
Singapore
Coordinator and Agent
2000
US$30 million
Subscription of new preference shares and US$70 million new banking facilities, UK
Adviser and Arranger
1999
US$335 million
Syndicated loan
Brazil
Joint Mandated Arranger
$650 million
Syndicated loan
UK
Joint Arranger and Underwriter
1998
US$350 million
Term loan facility
Norway
Joint Arranger
1999
US$250 million
Syndicated loan
USA
Joint Mandated Arranger
2002
250 million
6.625% Dec 2017
UK
Joint Bookrunner
2002
C$200 million
Cumulative redeemable preferred shares
Canada
Co-manager
1999
£200 million
5.875% Nov 2012
UK
Joint Bookruner
2002
£250 million
7.5% Bond 2013
UKJoint Bookrunner and Lead Manager
2003
€750 million
6.375% May 2009
UK
Joint Bookrunner
2002
2003
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Project finance experience in the oil and gas sector
HSBC has acted as advisor on a number of
internationally renowned projects, to the world’s
largest oil and gas companies. Our Project
and Expert Finance practice utilises
considerable industry expertise in the sector,
acquired over a number of years, together with
first-class knowledge of leading edge project
finance techniques
US$600 million
Guangdong LNG Terminal and trunkline project
China
Adviser
2001
US$700 million
Financing for the gas to liquid plant
Qatar
Adviser
2002
US$1.37 billion
Refinancing of 6.6mtpa Oman LNG facility
OmanJoint Mandated Lead Arranger
2002
CSPC Nanhai
US$4 billion
Landmark CNOOC/Shell petrochemical project involving US EXIM, JBIC, NCM, ECGD and SACE ChinaFinancial Adviser
Ongoing
US$3.2 billion
HPEF advised the export credit agencies on the financing for the Blue Stream pipeline
Russia/TurkeyAdviser
2000
Oman Gas
Company
US$410 million
HPEF advised the borrower on the financing for the Sohar and Salalah pipelines Oman
Adviser
2000
US$100 million
ECGD-guaranteed supplier credit finance
Oman
Arranger
2003
US$300 million
Fairness opinion of the sale of Muturi PSC interest
MalaysiaAdviser
2001
US$1 billion
Debt and equity financing for LNG regasification plan, Texas/Louisiana
United States
Adviser and Underwriter
2003
Selected oil and gas transactions
Qatofin
US$800 million (approx)
Development of LLDPE/Ethylene plant
Qatar
Financial Adviser
Ongoing
US$4 billion
Private sector project financing
Quatar
Adviser
2000
US$400 million
Export credit
Arranger
2003
Yanbu Petrochemical Co.
US$2.3 billion
Financing
Saudi ArabiaAdviser/ArrangerAdvisor/Floating rate
Egypt LNG
US$1.1 billion
$ 1,100 million financing of BG/Edison LNG plant
EgyptLead Arranger and Bookrunner
Ongoing
US$129 million
Limited resources financing of LNG Ship
Brunei
Sole Adviser
2002
US$5 billion
Bidding strategy and structure for construction and investment of Guangdong LNG Terminal projectChinaCo-lead Manager
2000
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Nathan A. MintahDirector, Project Finance
HSBC
Tel: +27-11-481-4369
Fax: +27-11-646-8485
E-mail: [email protected]
Thank you