Project Financing for the Energy Markets: M3 - Downstream Oil Refineries & Petrochemical Plants

Module 3: Downstream Oil Refineries & Petrochemical Plants (3 days) 14-16 October 2014, Hong Kong By attending this highly interactive and practical course you will: Gain a better understanding of oil and gas markets and how oil and gas projects are financed Gain a better understanding of the current trends in energy project finance Review the technical evaluations of upstream and downstream projects Understand how the technical issues of energy projects are translated into financial and credit risks Understand the finer aspects of financial modelling by identifying and quantifying the major risks that impact a project's cash flow generation capabilities Gain a better understanding of credit structuring techniques, so as to effectively mitigate the credit risks of an energy project Review the finer aspects of legal documentation, with legal documentation techniques and tips to help you properly reflect a credit structure in the legal contract Project Financing for the Energy Markets course background & methodology The course will enable participants with skills to identify and analyse prospective borrowers, structure credit facilities, and prepare credit applications for formal presentation and approval by bank credit committees. These skills can be used by the origination teams and credit teams of lenders and to support organisations which run or sponsor projects. Each section will be covered briefly as a module in a traditional class style, and the real learning experience will be found in the exercises within each module. Suggested solutions to each exercise will be provided and discussed. Supporting materials will be available for further in-depth learning. Who will benefit from attending Project Financing for the Energy Markets This course is designed for a multidisciplined audience suited to those involved in financing oil and gas projects and will be highly valuable to: Investment banking directors, associates and analysts in the energy industry Finance directors and managers of energy companies Accountants of energy companies Business development directors and managers of energy companies Equity analysts Credit analysts Corporate planners, and strategists of energy firms (such as oil refineries, LNG producers and shippers, oil and gas pipeline companies and oil and gas production companies) Financial managers and executives of energy companies Government civil servants, policy makers and bureaucrats for energy projects Institutional investors Private equity investors Lawyers and financial due diligence staff for energy project financings Institutional investors in energy projects, such as pension funds, hedge funds and investment funds Credit directors, managers and analysts, business origination directors, managers and analysts of energy and project finance banks Very good course materials combined with case studies, work through examples and shared experiences from participants from varied but very relevant backgrounds - Keystone Bank Limited (Nigeria) You can attend the 8-day intensive and practical programme'Project Financing for the Energy Markets' which runs from 7-16 October 2014 or pick from the following 3 individually bookable modules*: Project Financing for the Energy Markets 7-16 October 2014, Hong Kong Module 1: Upstream Development & Production (4 days) 7-10 October 2014, Hong Kong Module 2: Mid-stream Pipelines & LNG Projects (1 day) 13 October 2014, Hong Kong Module 3: Downstream Oil Refineries & Petrochemical Plants (3 days) 14-16 October 2014, Hong Kong Including: 17 key industry case studies to improve your understanding. *please email to book a separate module: energy@euromoneyasia.com
Day 1 Overview of the downstream sector; the bank lending markets, including project finance and working capital facilities; overview of a downstream oil and gas project financing, including a review of recent trends. Overview of the downstream sector Oil and gas demand fundamentals: who buys the oil and gas? Review of regional demand for oil and gas Global concentrations of oil refineries and petrochemical production The economic cycle and the boom, bust nature of the downstream sector; the trend is the lender’s friend Overview of the working capital and capital expenditure requirements of a refinery and a petrochemical producer: how is debt used to manage cash flow? Case study: Team exercise in identifying the working capital and capital expenditure financing needs of a petrochemical producer. Expert feed back provided. The bank lending markets Project finance vs. balance sheet lending Working capital facilities and asset based lending Credit risk vs. equity risk Recent developments in lending Country risk credit considerations Assessing the legal environment and political risks, plus risk mitigation strategies Syndication strategies in the current credit climate Case study: Selecting a country/region: mitigating country risk and lender’s ability to perfect security over collateral; syndication considerations. Each team will present a credit analysis that will address country risk/political risk and outline a syndication strategy. Expert feedback provided. Overview of a downstream oil and gas project financing Typical project finance structures When is a project finance structure the preferred choice? Understanding the objectives of parties involved in the project financing: Sponsor / borrower EPC contractors Government agencies Lender Institutional investors Review of recent down-stream oil and gas project financings Credit risk mitigation strategies in project financing Day 2 Overview of the credit process; overview of the oil refining process; new refinery and expansion projects: technical and commercial considerations technical reviews: identifying credit risks and risk mitigation strategies; credit analysis, including qualitative factors; financial modelling, including developing assumptions and stress testing. Overview of the credit process Initial deal review Drafting a proposal Due diligence Credit application Credit approval Term sheet Legal documentation Deal closing Deal monitoring Overview of oil refining processes The basic technical layout of an oil refinery Crude distillation process Vacuum distillation process Coking process Fluidic catalytic cracking (FCC) process Hydrofluoric acid (HF) alkylation process Hydrotreating process Hydrocracking process Catalytic reforming process Isomerisation process The cyclical nature of the refining industry and strategic management considerations The economic cycle and the boom, bust nature of the downstream sector; the trend is the lender’s friend The crack spread and the refining margin Calculating the crack spread: the 2-2-1 and 3-2-1 methods Managing cash flow and the use of credit to purchase feedstock Financing the working capital needs of a refinery The three main types of hydrocarbon reservoirs Case study: Each team will calculate the refining margin for 2 oil refinery projects and determine the commercial viability of each project. New refinery and expansion projects: technical and commercial considerations What is the Nelson complexity index and how is it calculated? Global top 20 oil refineries by crude distillation unit ("CDU") capacity: Nelson complexity index comparison Oil refineries: key risk considerations Estimating the cost of a refinery project: cost accuracy to completion risk Refinery competitiveness analysis Competitive analysis: oil refinery size Competitive analysis: the Nelson complexity rating Competitive analysis: residue conversion capacity Competitive analysis: the FCC equivalent ratio Competitive analysis: location, location, location Treasury management considerations for oil refineries and financial modelling Creating a financial model for an oil refinery expansion project Earnings vs. cash flow Debt amortisation schedule Oil refinery model assumption: capital expenditure (CAPEX) profile Oil refinery model assumption: product handling charges & wharfage Oil refinery model assumption: power charges Oil refinery model assumption: capacity ramp up Oil refinery model assumption: working capital assumptions Oil refinery model assumption: identifying project risks and mitigation strategies Ratio analysis Case study: Each team will develop a financial model for a working capital financing and assess the strengths and weaknesses of the project. Each team will present findings and propose whether to proceed or decline the transaction. Expert feedback will be provided. Day 3 Legally documenting the credit facility; the finer aspects of legal documentation and ensuring the bank approved term sheet is reflected in the legal contract; Equity valuation of an oil refinery – where is the value for investors? Overview of valuation methodologies for oil refinery investments; oil refinery company comparables table Legally documenting the credit facility Overview of a legal contract Legal jurisdiction Perfecting senior security positions over assets; fixed and floating charges Subordination and inter-creditor agreements Project agreements Typical credit documentation issues and risk mitigation strategies. Case study: Each team will review excerpts of a draft credit agreement and identity any credit documentation issues and propose risk mitigation strategies. Expert feedback will be provided. The finer aspects of legally documenting the credit facility: ensuring the bank approved term sheet is reflected in the legal contract Covenants, including cover ratios Post-closing credit facility monitoring considerations Lending to an operating company vs. SPV Syndication considerations Case study: Each team will review excerpts of a draft credit agreement and compare it with the bank approved facility term sheet. Any differences between the draft credit agreement and the term sheet will be identified and solutions proposed. Expert feedback will be provided. Equity valuation of an oil refinery – where the value is for investors? Review of an oil refinery’s assets and where is the value for investors How are oil refinery assets valued? Qualitative analysis of an oil refinery and how it impacts a valuation decision Overview of oil refinery valuation methodologies Comparison to recent comparable transactions: implied transaction value per equivalent distillation capacity Replacement cost EV/EBIT The merits of a DCF valuation Oil refineries comparables table Comparable valuation table: a good way to assess the value of your prospective investment Equity valuation of an oil refinery – where the value is for investors? Review of an oil refinery’s assets and where is the value for investors Case study: Initial investment review: Each team will review a group of international oil refineries and based on their respective investment merits rank them. Course summary and close *please email to book a separate module: energy@euromoneyasia.com