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EBRD investment in new gas infrastructure CEER Brussels, 9 November 2006. Agenda. EBRD Environmental issues General Considerations Case studies. 2. EBRD. 3. A network of 32 offices in 27 countries Half of our bankers based in the field. - PowerPoint PPT Presentation
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EBRD investment inEBRD investment innew gas infrastructurenew gas infrastructure
CEER Brussels, 9 November 2006CEER Brussels, 9 November 2006
AgendaAgenda
EBRD
Environmental issues
General Considerations
Case studies
2
EBRD EBRD
3
A network of 32 offices in 27 countriesA network of 32 offices in 27 countriesHalf of our bankers based in the fieldHalf of our bankers based in the field
3 new offices by end 2006: Samara, Rostov, Dnipropetrovsk
Committed and growingCommitted and growing
0
4
8
12
16
20
24
28
32
'98 '99 '00 '01 '02 '03 '04 '05Cumulative commitments
€30.3 billion
Regional focusRegional focus: supporting : supporting investors and local companies investors and local companies in 27 countries of CEE and CISin 27 countries of CEE and CIS
Asset baseAsset base: over 1500 : over 1500 transactions worth €30 billion transactions worth €30 billion signed since 1991 signed since 1991
Capital baseCapital base: €20 billion : €20 billion dedicated exclusively to this dedicated exclusively to this region region
Investment challenges
Reduce transport bottlenecks and ensure competitive market access
Improve regulatory and institutional frameworks in the region
Increase private sector participation and promote direct foreign investment
Ensure high standards of business conduct, transparency, corporate governance and environmental protection
A unique profileA unique profile
Versatile financial instruments:Versatile financial instruments: providing debt, equity providing debt, equity and guaranteesand guarantees
Risk appetite:Risk appetite: extending the financial capabilities of extending the financial capabilities of the private sector by mitigating political risksthe private sector by mitigating political risks
Legal know-how: Legal know-how: in-depth knowledge of the region’s in-depth knowledge of the region’s legal systems and experience in resolving problems.legal systems and experience in resolving problems.
Natural resources expertise:Natural resources expertise: approx. 10% of the approx. 10% of the Bank’s portfolio is in oil, gas and mining projects.Bank’s portfolio is in oil, gas and mining projects.
GENERAL CONSIDERATIONS GENERAL CONSIDERATIONS
What are the classic challenges in financing gas What are the classic challenges in financing gas projects? (1 of 2)projects? (1 of 2)
Construction / Completion Risk
– contractual structure (delays, cost over-runs, etc.)
Operational Risk
– technological integration and experience / viability
Utilisation / Supply Risk
– type of throughput arrangement
– fundamentals (Market/Competition)
What are the classic challenges in financing gas What are the classic challenges in financing gas projects? (2 of 2)projects? (2 of 2)
Competition / Market
– effect of oil price (linked to gas and oil products)
– regional supply / demand
– impact on tariff
Political & Regulatory Risks
– regulatory intervention (tariffs & export volumes)
– political turmoil / disputes / violence / nationalisation
– discriminatory taxation
EBRD facilitiesEBRD facilities
LoansGuarantees Equity
All risk guarantees
Specific risk guarantees(e.g. political)
Commodity-backed instruments
Trade facilitation programme
Non/partial recourse to sponsors
Project specific
Hard/local currency
Medium and long term
Floating/fixed rates
New equity
Privatisation
Quasi-equity
Funding Guidelines (1 of 2)Funding Guidelines (1 of 2)
Project Finance Criteria– 1/3 debt, 1/3 equity, 1/3 project-generated cashflow
– Cashflow Ratios (DSCR, etc.)
EBRD funds up to: – 35% of total project costs for a greenfield project
– 35% of long-term capitalisation of an established corporate
Maximum amounts:– Maximum is currently around € 350 million for A loans. In addition B loans
can be up to twice as much. => € 1 billion
Tenor and maturity: – Project-specific (typically 10-20 year for new gas infrastructure)
Funding Guidelines (2 of 2)Funding Guidelines (2 of 2)
Pre-completion credit-enhancement:– Sponsors’ financial guarantees and other shareholder support;
– Experienced Constructor;
Other risk mitigation requirements:– Experienced Operator;
– Long-term gas contracts (transportation, storage and off-take)
– Tariffs: Stability, Affordability and Fairness (Exemptions usually required for major new infrastructures)
– Extensive EHS and social impact assessment.
ENVIRONMENT ENVIRONMENT
EBRD environmental policy and proceduresEBRD environmental policy and procedures
Ensure environmental soundness of all EBRD operations
Invest in projects with specific environmental and energy efficiency benefits
Disclosure of environmental information
Environmental standards for EBRD projectsEnvironmental standards for EBRD projects
Local, national, EU and World Bank standards and regulations. Similar but not equal to the equator principles, mostly due to EU standards
Where standards cannot be met initially, project will include programme for achieving compliance
Environmental Action Plan
CASE STUDIESCASE STUDIES
Case StudiesCase Studies
BTC
Shah Deniz / South Caucasus Pipeline
Gastransit
BTC Pipeline projectBTC Pipeline project
BTC PBTC Projectroject - Overview - Overview
BTC Pipeline
– the primary export route for crude oil/other liquid hydrocarbons production from Azerbaijan and the Southern Caspian
– 1,743 km long, with ultimate design capacity of 1,000,000 bpd
– provides the additional export capacity required for ACG Field production and serves as an export route for other production from the Caspian Region
BTC Pipeline route has been selected as the optimal route for both commercial and environmental reasons
– Terminal at Ceyhan on the Mediterranean coast will enable volumes to be delivered while bypassing the environmentally sensitive Turkish Straits
BTC Project CostBTC Project Cost
Total BTC Project Cost is in excess of US$3.6 billion:– Capex US$2.90bn
– Oil linefill US$0.17bn
– Finance costs US$0.46bn
– DSRA US$0.10bn
BTC pipeline cost and Azeri Chirag Guneshli oilfield development cost combined are in excess of US$15 billion
EBRD is financing $250 million ($125 million A loan and $125 million B loan)
South Caucasus Pipeline – Route (1 of 4)South Caucasus Pipeline – Route (1 of 4)
Shah Deniz Project – Overview (2 of 4)Shah Deniz Project – Overview (2 of 4)
Reserves: proven and probable gas-in-place of approximately 31 trillion cubic feet (tcf) – world class reserves; likelihood of an additional 22 tcf
Project: 4-stage development of the Shah Deniz gas and condensate field with Stage 1 cost of USD 2.3 billion
Local participation: State Oil Company of Azerbaijan Republic (SOCAR) also holds a 10% interest in this project (through AzSD: EBRD will part-finance their cash calls)
South Caucasus Pipeline – Overview (3 of 4)South Caucasus Pipeline – Overview (3 of 4)
Pipeline route: a 690 km gas pipeline starting at the Sangachal Terminal, traversing Azerbaijan and Georgia and connecting with the BOTAS domestic gas distribution system at the Georgian-Turkish border
Construction & timing: SCP’s Right of Way runs parallel to BTC and construction of SCP will occur concurrently with that of BTC
Capacity & cost: a peak capacity of over 20 billion cubic feet (bcf) per annum and will cost over USD 1 billion
Gastransit Phase I and IIGastransit Phase I and II
Ukraine: Balkan GastransitUkraine: Balkan Gastransit
Project Details: Long term 2 Phase facility to support gas pipeline
upgrade in Ukraine Use of proceeds: construction of compressor station and
parallel pipeline for total project cost of $190 million Strong demonstration effect- only current international
investment in Balkan gas pipeline project.
EBRD Investment: Phase I: $40 million EBRD 9 year senior loan and $ 12
million BSTDB parallel loan Phase II: $51 million 12-year EBRD senior loan, $ 6
million BSTDB facility and $ 40 million commercial Bank co-financing
Financing Structure: Security based on gas export contracts Revenues based on transportation and compression
payments Strong sponsor support (Gazprom, Naftogas Ukraine,
Transbalkan)
ConclusionsConclusions
EBRD is keenly interested in working on new gas infrastructure
Commitment of Governments, Regulators, Suppliers and Off-takers crucial
Benefits of EBRD– EBRD involvement will help other parties on board and set
international corporate and environmental standards
– EBRD experience in similar projects
– EBRD environmental expertise and track record
– Dedication level is high due to our mandate
Contact DetailsContact Details
Enrico G. GrassiPrincipal Banker, Natural Resources Team
Tel. 44 (0)20 7338 6179, Fax 44 (0)20 7338 6101Email: [email protected]