Financing Energy Projects: Oil, Gas & Power
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Description
Course overview Even the most carefully structured energy project finance deals can face difficulties in attracting sufficient funding from investors. Project developers, equipment suppliers, bankers, other creditors and investors must be properly equipped to analyse and explain the risks and prospects for a project’s future performance. This course teaches you to structure upstream and downstream oil and gas projects. It also examines LNG, fertilizer transactions, and power deals. By the end of the course you will have a framework for recognising and analysing qualitative and quantitative project risks in financing. You will understand how excel models are used to assess debt capacity, retu…Frequently asked questions
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Day 1 Oil, gas and power project finance today The changing market Limited recourse projects Corporate balance sheet usage Electricity and BOO, BOT, BOOT, BLT, etc. Private sector providing public services Players and their roles Steps in a project financing Types of projects and their comparative complexity Identifying and allocating risks Risk identification and allocation Financing structures: Limited recourse vs. Balance sheet deals Pipelines Field development and platforms Production facilities Refineries and petrochemical plants Power plants Sources of finance checklist Domestic borrowing Loans from international banks International capital markets Export credit support Specialised agencies Leasing Equity from project sponsors and others Derivatives usage Building a risk matrix Risk allocation Technology and construction/Completion Reservoir/Reserves risks Feedstock risk Sales and off-take, operation and maintenance Abandonment/Decommissioning Environmental/Regulatory issues Country/Political risk Quantitative analysis: Designing pro-forma energy project models Approaches to modelling for oil and gas transactions Debt providers Balancing equity and debt in different types of projects Developing an appropriate base case/ running sensitivities Perspective of the sponsor and measures of investor return Case study: Financing an ammonia plant Delegates break into small groups to evaluate this security package this gas processing plant. A computer simulation quantifies risk assessments. Day 2 Case discussion: Fertilizer Legal issues in energy finance Legal environment Commercial and legal points in various structures Incorporated and unincorporated joint ventures Partnerships and limited partnerships Separate and common financing in natural resources projects Key contractual agreements and structuring considerations Domestic and international bank finance Club loans and bank syndicates Pricing, flexibility and timing What security do banks want? Swap requirements and other derivatives usage Recent structures Sources of risk support: Export Credit Agencies (ECAs) Official guarantees, insurance and funding programmes for energy transactions Incentives in ECA programmes Which are most popular? Costs and availability Upstream oil and gas: O&G exploration, development and production Structure of the industry: Upstream, midstream and downstream Hydrocarbon basics: Geology, reserves Supply and consumption, OPEC, etc. Oil production: Process depletion and enhanced recovery Major systems and types of drilling equipment Offshore oil platforms in shallow and deep water Reserve-based finance Case study: Financing a condensate field development Delegates evaluate the security package and forecasted cash flows for an upstream condensate field development project. Day 3 Case discussion: Oil field development Sources of risk support: Development banks (IFIs) Key IFIs and programmes World Bank Group: World Bank, IFC, MIGA, ICSID Other multilaterals Bilaterals: US OPIC, FMO, Proparco and others Accessing capital markets for projects pre- and postcompletion Capital markets and examples of projects Rule 144A and Eurobond financing Mezzanine Finance Infrastructure investment funds Rating agency criteria Construction finance vs. Operating projects Greenfield vs. Brownfield Crude oil export receivables securitisation Examples: Ras Laffan Qatar, Nigerian LNG, Trinidad O&G transportation/shipping Logistics: Pipelines, shipping, storage Types of tankers Average Freight Weight Assessment classes (AFRA) ULCC to tanker lightering Charters, time and voyage Refineries Refined production Simple or topping refineries; vacuum distillation Complex refineries World profile and current transactions in Asia Leasing equipment Objectives and structures Costs and calculations Applications Case study: Rig finance Delegates assess a proposed bond issuance to refinance a semisubmersible rig conversion. Evaluating operating cash flows. Day 4 Case discussion: Rig finance Islamic financing alternatives for energy projects Structures: Istisna, Ijara, Sukuk Examples: Petro-Rabigh Saudi Arabia, others Managing oil price volatility with derivatives O&G price markets and players Oil and natural gas swaps and options Costs, structures, indices, applications Recent examples of usage Introduction to power project financing Constructing a power risk matrix Understanding different types of thermal plants Peakers vs. Base-load facilities and power dispatch curves Combining water desalination and electricity production Rating agencies’ analytical model Case study: Financing a thermal power plant Delegates will break into small groups to evaluate the security package for this cogeneration plant. A computer simulation is used. Market forces and effect on electrical supply Fragmentation of electricity generation: Gencos, Transcos and Discos Merchant power plants with uncontracted sales Tolling arrangements Renewable energy: Financing wind, solar and bio-fuel plants Comparative costs and “grid parity” Government support schemes Carbon markets Day 5 LNG project modelling workshop: Delegates build a pro-forma cash flow model for an LNG facility. They assess a wide range of scenarios in order to test a limited recourse financing package, the project’s debt capacity, and its suitability for investment. Modelling workshop overview: Objectives and approaches Constructing a model/common myths Variations by project type Structuring the model and organising the data to create a cash flow statement Developing the assumptions page Construction costs and timing Operating cost, plant capacity usage, fixed and variable costs reinvestment, plant expansion, productivity shifts Financing section Equity first or pro rata manually designed equity subscription Draw-down of debt linked to specific contracts or expenditures or in a hierarchy Funding the debt service reserve account Developing profit and loss and balance sheet statements Factoring in reserves Considering currencies Tax calculations Ratios and sensitivity analysis: Objectives and limitations Measuring debt capacity and investor return Using modelling output for initial project vetting Supporting on-going negotiations Summary and conclusion
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