OMV Gas Move & more. Financing the Nabucco Gas Pipeline Project Brussels, November 9th, 2006...

OMV Gas

Move & more.

Financing the Nabucco Gas Pipeline Project

Brussels, November 9th, 2006Reinhard Mitschek

OMV Gas International GmbHHead of International Pipeline Projects

Nabucco Gas Pipeline International Managing Director

2 |OMV Gas International GmbH, Reinhard Mitschek, November 2006

VIENNA

BUCHAREST

SOFIA

ANKARA

ISTANBUL

BUDAPEST

Nabucco Gas Pipeline ProjectNew gas transmission possiblity

Pipeline Diameter: 56“

Distance: 3,300 km Investment: 4.6 bill. € Transport capacity:

max. cap. 31 bcmy


Bankability issues

Shareholder Profile Long Term Transportation Contracts Competitive Pipeline Tariff Level Harmonized legal framework in the region of SEE

Intergovernmental Agreement Stable, long term foreseeable regulatory framework

Energy Community Treaty Foreseeable economics and predictable project business

plan Exemption

High cash flow with a maximum repayment period of 10 years with minimum risk


Project financing structure

Average Debt Service Cover Ratio of 1,5

Secured by

Pre-Completion

Guarantee fee-

70 % Investment-grade

credits

30 % Others

MLAs: 1500

(EIB, EBRD, IFC)

direct (A Loan) 1000

indirect 500

(B loan: from commercial banks with MLA guarantee)

ECAs: 1000

(JBIC, KfW etc.)

OeKB 500

Commerical banks 500

Debt : Equity

70 : 30

Equity

ca. 30 %

≥ 1,5 bn EUR

Shareholder Loans

tbd. expected: 0

Investment

5 bn EUR

Debt

ca 70 %

≤ 3,5 bn EUR


Capex Profile of Variant Upfront Investment Scenario

324

657

1,384

1,091

885

134 194 140200

400

600

800

1,000

1,200

1,400

1,600

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Year

EUR (mlns)

Nabucco Gas Pipeline ProjectFinancial requirements

Up-front investment is most feasible model

Debt:Equity = 60:40 to 70:30

Tenor maximum period 15 y

Total bank financing necessity 3.5 bill. €

Total investment needs:4.6 bill. € (value 2004)

Improved credit mix of sponsor group necessary


Nabucco Gas Pipeline ProjectFinancial Requirements

Request for (very) long term depreciation of investment in tariff model from Regulatory Authorities

versus

Request for mid term pay back periods from Financial Institutions



Request for tariff methodology based on low return from Regulatory Authorities

versus

Request for a average debt service cover ratio

of 1.5 (minDSCR 1.3) needs high cash in



Development and construction of such an infrastructure project needs 8 to 10 years

Request for short term contracts for a considerable part of the transport capacity

from Regulatory Authorities

versus

Alternative for risk mitigation by long term contracts


Gas Infrastructure Projects: Risk Allocation – a balancing exercise

Source: Norton Rose, Presentation at Fourth Asia Gas Partnership Summit on February 20th, 2006

Construction risk

Operational risk

Force majeure risk

Exchange rate risk

Cash flow risk

Default risk

Market risk

Technology risk

Political risk

Environmental risk

Counterparty credit risk



Need for an exemption from certain regulations

Request for interventions in relation to tariffs and tariff methodology from Regulatory Authorities

versus

Request for a stable predictable business plan from sponsors and financial institutions



Legal / Contractual framework

- Within the EU European Law - Within the Energy community EC-Treaty - Outside the EU Intergovernmental / Host Governmental

Agreements

No basis for the time being for a multi cross border infrastructur project Turkey – Bulgaria – Romania – Hungary -

Austria !!!


Concluding remarks

Large Scale projects are in feasibility and/or development phases. The development and construction period of such projects is 6 to 8 years

Involved risk/risk reduction is highly important for the shareholders and for the creditability of the project. Taken risks have to be rewarded.

Risk mitigation and clear commitment is a joint responsibility of companies as well as governments and the European Union.

A stable and predictable legal and regulatory framework is crucial in order to provide a sound investment climate


Contact

Nabucco Gas Pipeline International GmbH

floridotower

Floridsdorfer Haupstraße 1; 1210 Vienna

Austria

Reinhard Mitschek

Tel. +43 1 2700 371 28660

Fax: +43 1 2700 371 28669

e-mail: [email protected]

OMV Gas Move & more. Financing the Nabucco Gas Pipeline Project Brussels, November 9th, 2006...

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