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Equipment Financing to Petrobras The Marlim Sul Case

NOT AN OFFICIAL UNCTAD RECORD. Equipment Financing to Petrobras The Marlim Sul Case. Frederico Lohmann June 2004. Main Features of an Export Credit.

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Equipment Financing to Petrobras The Marlim Sul Case

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  1. NOT AN OFFICIAL UNCTAD RECORD Equipment Financing to PetrobrasThe Marlim Sul Case Frederico Lohmann June 2004

  2. Main Features of an Export Credit Purpose: the Export Credit is a medium & long term financing supported by an Export Credit Agency (ECA) for the financing of imports of capital goods/services from OECD countries. ECAs may act as guarantor and/or insurer and/or direct lender Framework: export credits are under the framework of international rules defined as the OECD consensus rules

  3. All Major ECAs are opened to Brazil USA Canada France UK Belgium Norway Finland Sweden Germany Netherlands (US Eximbank) (EDC) (COFACE) (ECGD) (OND) (GIEK) (Finnvera) (EKN) (HERMES) (ATRADIUS) Japan (JBIC) Switzerland (ERG) Korea Spain (KEIC) (CESCE) China Austria (SINOSURE) ( OeKB ) Czech Rep. (EGAP) Italy (SACE) Australia (EFIC) ECAs cover approximately USD 800 Bn of export flows each year

  4. Eligible Amount for ECA Financing Contract Exported part Local part 15% down payments not financed 85% Buyer Credit Not Financed Potentially Financed Total Buyer Credit NB: The financed local part cannot exceed the amount of the downpayment

  5. A Competitive Source of Financing • The cost of the export credit is made of: • Interest: the Borrower may have the choice between: 1) a fixed rate based on the Commercial Interest Reference Rate with some ECAs (COFACE, SACE, CESCE, EXIM...) 2) a floating rate based on the 6-m EURIBOR or LIBOR 3) other fixed market rates (through swaps) • Standard bank fees • Export credit insurance premiums, determined by the supporting ECA, now harmonised under a common country risk rating system

  6. Minimum Premium Benchmarks Charged By The ECAs U.S. Exim Categories(a) (Premium Rates — Flat %) 14.00 11.88% 12.00 Example of U.S. Exim Premium Rates (Excluding Any Discounts) 9.49% 10.00 7.42% 8.00 6.00 5.36% 3.61% 4.00 2.16% 2.00 1.13% 0.00 1 2 3 4 5 6 7 Category 1: Category 2: China/Trinidad & Tobago Category 3: India/Mexico/Oman/Qatar Category 4: Egypt/(Iran)/Romania, Russia Category 5: Peru/Kazakhstan/Vietnam Category 6: Azerbaijan/Brazil/Colombia/Indonesia Category 7: Angola/Argentina/Nigeria/Turkmenistan/Venezuela* (a) Assuming 36 month drawdown/7 years repayment/100% political risks cover, premiums paid up front. * For category 7 countries, as a general rule, ECAs are only able to consider structured transactions with hard currency earnings and long term export contracts.

  7. Proven Oil Reserves vs. OECD Country Classification Angola Argentina Libya Nigeria Turkmenistan Venezuela OECD countries China Kuwait Malaysia UAE Peru Vietnam India Mexico Oman Qatar Saudi Arabia Algeria Egypt Iran Romania Russia Azerbaijan Brazil Columbia Indonesia Kazakhstan World Top 47 Countries by Proven Reserves 2002 (BP Report) classified by US Exim (08/04/04)

  8. Proven Natural Gas Reserves vs. OECD Country Classification Argentina Nigeria Turkmenistan Uzbekistan Venezuela China Kuwait Malaysia Trinidad & Tobago UAE OECD countries India Mexico Oman Saudi Arabia Qatar Thailand Peru Vietnam Azerbaijan Brazil Columbia Indonesia Kazakhstan Algeria Egypt Iran Romania Russia World Top 48 Countries by Proven Reserves 2002 (BP Report) classified by US Exim (08/04/04)

  9. Three Main Types of ECA Finance Structures Classical Structured Project Sovereign risk Corporate risk Corporate risk (enhanced) Special Purpose Company Borrower Lenders look at the borrower ’s credit-worthiness and may require a guarantee from a third party: Ministry, Financial Institution, Parent Company . . . Lenders look at the borrower ’s credit- worthiness and other sources of collateral or security (e.g., existing and future $ exports) Lenders look primarily at cash flows generated by the project with security on the project assets and project revenues Security Full Recourse Limited Recourse

  10. Three Main Types of ECA Finance Structures Classical Structured Project Sovereign risk Corporate risk Corporate risk (enhanced) Special Purpose Company Borrower Advantages

  11. Export Credit Financing in support the Oil & Gas Industry Experienced Users: • Petrobras • NIOC • Sonangol • Sonatrach • Gazprom • Tatneft • TNK - BP • Ecopetrol • PDVSA • Pemex Examples of contracts supported in the past include: • Drilling contracts • Subsea equipment • Platforms/FPSOs • Pipelines • Terminals • Vessels, e.g., LNG tankers • Technology licenses • Refinery equipment • Petrochemical Plants

  12. Campos Basin: the Marlim Sul Oil Field Discovery date: Water depth: November 1987 1119 meters Campos Lagoa Feia NAMORADO POINT A Marlim Sul 100 m 50 m MARLIM SOUTH 1000 m 400 m 2000 m

  13. Marlim Sul Module 1 Module 1 Production Unit P-40 Conversion: by Jurong Shipyard Ltd Performance guarantee: Mitsubishi Oil process capacity: 23,848 m3 / day Gas Process capacity: 6 million Nm3 / day Water injection capacity: 35,000 m3 / day Module 1: expected CAPEX of USD 1.14 billion: 48% for the well construction, 33% for subsea equipment and 19% for others Module 1 Floating, Storage and Offloading Unit P-38 • Conversion: by Jurong Shipyard Ltd • Performance guarantee: Mitsubishi • Oil storage capacity: 287,402 m3 • Oil offloading capacity: 150,000 m3 / day

  14. Marlim Sul Module 1: Concept Scheme SHUTTLE TANKER FSO - P-38 FPU - P-40 MOORING LINES MOORING LINES OIL EXPORT PIPELINE WATER DEPTH FLEXIBLE PIPELINES & UMBILICALS GAS EXPORT PIPELINE WET XTREE WELL RESERVOIR

  15. The Marlim Sul Finance Structure: Key Benefits USD 68 million Structured French Buyer Credit to finance the supplies of flexible lines from Technip-Coflexip to Petrobras Ownership of the asset by the Petrobras Group • PB Netherlands, a 100 % subsidiary of Petrobras, is both owner of the physical asset and borrower of the credit Taking advantage of the « Repetro » regime • Preferential customs regime applying to the import of goods and services connected to oil exploration and production Complex project financing avoided • This structured facility is interpreted by ECAs as a Petrobras credit risk

  16. The Marlim Sul Finance Structure: Basic Scheme TECHNIP-COFLEXIP COFACE PETROBRAS SG 5 1 Sub- Charter Rentals 4 4a Buyer Credit Repayments BRASOIL PB NETHERLANDS 2 6 4 1. Supply Contract 2. Rental Agreement 3. Charter Agreement 4. Sub-Charter Agreement 4a. Sub-Charter Agreement and Amendment 5. Buyer Credit Agreement 6. Security Package 3 Rentals PETRO DIA (Mitsubishi)

  17. Major advantages of the Export Credits • Attractive terms: combination of low costs with long tenors • Support from ECAs when other sources of finance may not be available • Much less volatility than bonds and syndicated loans on emerging markets • Terms of export credits tends to match the cash flow of the project • drawing period: progress payment • repayment period: semi-annual amortizations • Export Credits are "tailor made" solutions, which may be adapted to the particular needs of the project • may be used in conjunction with structured or project finance

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