ING Structured Finance UZ-KOR / SURGIL PROJECT FINANCING: A LANDMARK DEAL OF THE YEAR

Transcription

1 ING Structured Finance UZ-KOR / SURGIL PROJECT FINANCING: A LANDMARK DEAL OF THE YEAR

2 1. Overview

3 Surgil Project overview ING acted as Financial Adviser to Uz-Kor Gas Chemical LLC, a 50:50 JV between Uzbekneftegaz and a Korean Consortium led by KOGAS and Lotte Chemical on an integrated upstream / downstream project in Uzbekistan Project Background The Surgil Project is an integrated gas-to-petrochemicals project developed in Uzbekistan by Uz-Kor, an Uzbek Korean joint venture created in May 2008 Uz-Kor is 50/50 owned by Uzbekneftegas and Kor-Uz Gas Chemical Investment Ltd, which in turn is owned by Kogas (45%), Lotte Chemical (49%) and STX Energy (6%) (together the Sponsors ) Uz-Kor will extract natural gas from onshore fields, sell methane gas locally and will process ethane and condensate for petrochemical production; petrochemical products will be sold on local and export markets The US$ 2.54 billion debt financing is structured on a non-recourse basis Uzbekistan 05/12 Uz-Kor Gas Chemical LLC a JV of UNG / Kogas / Lotte Chemical / STX US$2.54bn Project Financing Sole Financial Advisor, MLA Intercreditor Agent, Kexim Facility Agent, Security Agent and Hedge Coordinator Sole Financial Advisor Natural Resources Senior lenders include ADB, CDB, KEXIM, KSURE, Euler Hermes, EKN / SEK and European and South Korean banks; the financing was signed on 19 May 2012 ING Roles Sole Financial Adviser to Uz-Kor since August 2008 Joint Mandated Lead Arranger, Intercreditor Agent, Hedging Co-ordinator, Security Agent and KEXIM Covered Facility Agent; these roles were awarded in 2012

4 2. Surgil Project Financing: A Pioneering Deal and a True Non- Recourse Project Financing

5 Surgil paves a new Silk Road Four years in the making, the Surgil financing features a number of unprecedented achievements in the industry: The first international oil and gas project financing in Uzbekistan; The largest project financing in Central Asia; The largest petrochemical project financing in the Former Soviet Union; The longest tenor (16 years) ever achieved for a petrochemical project financing in the Former Soviet Union; The first Equator Principles-compliant project in Uzbekistan; One of the largest integrated upstream and downstream oil and gas project financings; The largest Korean ECA financing ever raised for an international project; among others. The Surgil project sets the template and opens the door for future project finance deals in resource-rich countries of Central Asia

6 Other key highlights of a landmark deal One of the largest multi-sourced financings ever raised around the world, comprising 8 individual facility agreements and 16 financial institutions and banks from Asia and Europe Longest debt tenor ever achieved by a downstream project in the Former Soviet Union The first time Korean, Chinese, European and Uzbek lenders share the same financing documentation Largest South Korean financing ever assembled for any project (US$ 1.8bn commitment from Korean ECAs) Specific legal framework (Investment Agreement) developed to ensure the bankability from an international perspective and to stabilise certain legal, regulatory and fiscal regimes for the duration of the project No shareholder completion guarantee; lenders rely on lump-sum turnkey EPC contracts for both upstream and downstream construction and contingency funding for cost overruns, thereby reducing the need for completion guarantees; shareholders undertakings limited to capped Very robust financing structure from a credit perspective with attractive elements for Uz-Kor: - Relatively long grace period before the long-stop completion date, allowing for the long ramp-up period of this complex project - Flexibility in repayments to accommodate resulting fluctuations in cashflows associated with volatile petrochemical margins Significant social and economic development impact; more than 5,000 local jobs will be created during construction and over 1,100 jobs during operations

7 3. The Project

8 Introduction to the Surgil Project Uz-Kor and Sponsors Government of Uzbekistan Korea Gas Corporation ( KOGAS ) Lotte Chemical ( Lotte ) STX Energy Co. Ltd ( STX ) 100% 45% 49% 6% Uzbekneftegaz ( UNG ) Kor-Uz Gas Chemical Investment Ltd ( Kor-Uz ) 50% 50% Uz-Kor Gas Chemical Company LLC ( Uz-Kor ) Uzbekneftegaz ( UNG ) State owned holding company of Uzbekistan s oil and gas industry Active in exploration, production, refining, processing, transportation and product sales Successfully developed and currently operates Shurtan Gas Chemical Complex (producing LLDPE/HDPE) Uzbekistan has the fifth largest gas reserves and is the fifth largest gas producer in the European and Eurasian region (Source: BP Statistical Review) Korea Gas Corporation ( KOGAS ) 61% owned by the Government of Republic of Korea Largest LNG import company in the world Successfully expanded the scope of its business to upstream oil and gas Lotte Chemical ( Lotte ) Leading producer and marketer of petrochemical products in South Korea Aims to become a top-tier chemical company in Asia STX Energy Co. ( STX ) Leading Korean energy company with core business in oil & gas resource development and power generation Uz-Kor Gas Chemical Company LLC ( Uz-Kor ) Uz-Kor was established in Uzbekistan on 8 May 2008 as a project company to develop, build, own and operate Surgil-North Aral gas and condensate field ( Surgil Field ) and the Ustyurt Gas Chemical Complex

9 Surgil Project overview The US$ 3.9 billion integrated gas-to-petrochemicals project ( Project ) comprises the development and operation of: - Upstream Facilities: Surgil Field involving drilling of new production wells and construction of upstream infrastructure and facilities (including complex gas treatment unit and gas/condensate pipelines) - UGCC including a gas separation plant ( GSP ), a cracker, a high density polyethylene ( HDPE ) plant, a polypropylene ( PP ) plant and associated utilities and off-sites ( U&O ) including power and water supply infrastructure, roads, railroads and site accommodation Upstream Downstream Surgil Gas Field Ustyurt Gas Chemical Complex (UGCC) Gas / Condensate + UNG Gas Fields Gas Condensate Gas Separation Plant (GSP) Ethane C 3 -C 4 Cracker Ethylene Propylene EL PL HDPE PP HDPE PP Project Assets Condensate Py-gas Gas / Condensate U&O Py-oil To Sales Gas (CH4)

10 Bankable contractual arrangements The project and commercial structure was developed to ensure the bankability of a long-term project financing. The figure below shows a simplified overview of the project documents entered into by Uz-Kor on a long-term basis Other than volumes produced by Uz-Kor at the Surgil field; 2. Lotte Chemical, Samsung C&T and UNG have entered into Polymer Offtake Agreements; 3. Samsung, GS and Hyundai

11 Overview of Consultants Uz-Kor s International and Uzbek Legal Counsels: Vinson & Elkins, Leges Lenders International and Uzbek Legal Counsels: Norton Rose, Grata Uz-Kor s International Environmental Consultant: Mott MacDonald Lenders Environmental Consultant: Aecom Lenders Reserves Consultant: DeGolyer and MacNaughton Lenders Petrochemical Market and Technical Consultant: Nexant Lenders Gas Market Consultant: IHS CERA Uz-Kor s Insurance Consultant: Willis Uz-Kor s Insurance Broker: Marsh Lenders Insurance Consultant: JLT Independent Model Auditor: Ernst & Young

12 4. The Financing

13 Financing structure The US$ 3.9bn project raised US$ 2.54bn of long term project financing The project financing consists of eight separate debt facilities which are indicated below, in addition to the commercial banks commitments under the covered facilities: Facility Amount Facility Commercial Banks Commitments Kexim Direct Facility KEXIM Covered Facility US$ 700m US$ 300m KEXIM Covered Facility ING (Agent) - US$ 75m KDB - US$ 75m Siemens Bank - US$ 75m SEK - US$ 40m KSURE Covered Facility US$ 800m Credit Suisse - US$ 25m BayernLB - US$ 10m CDB Facility US$ 250m ADB Direct Facility US$ 125m Hermes Covered Facility US$ 124m EKN Covered Facility US$ 140m NBU Facility US$ 100m Shareholder Funds US$ 1,400m Total US$ 3.9bn KSURE Covered Facility Hermes Covered Facility EKN Covered Facility Korea Finance Corporation - US$ 500m KDB (Agent) - US$ 225m Credit Suisse - US$ 50m ING - US$ 25m KfW IPEX (Agent) - US$ 64m BayernLB - US$ 60m Nordea (Agent) - US$ 60m ING - US$ 60m SEK - US$ 20m

14 Robust financing structure Given the strong South Korean involvement in the project, KEXIM and KSURE participated in developing the financing from the very early days ING developed a very detailed financing term sheet (FTS) helping to secure the initial commitments of the South Korean Export Credit Agencies and Asian Development Bank (agreed and signed in Seoul in September 2011) Door-to-door tenor of the financing is up to 16 years, inclusive of a 3.5 year construction period, setting a record for the whole Former Soviet Union Financing structure includes a relatively long period before the long stop project completion date, should there be delays in reaching completion Dual repayment structure allows Uz-Kor to sustain adverse petrochemical market conditions Senior debt secured by a pledge of shares in Uz-Kor, mortgages over fixed assets, pledges of bank accounts and assignments of Uz-Kor s rights under the project agreements and rights to receive insurance proceeds

15 5. Key Project and Financing Milestones

16 Key project and financing milestones 29 March 2006 during the State Visit of the President of the Republic of Uzbekistan His Excellency Islam Karimov to the Republic of Korea, a memorandum on integrated development of the Surgil field was signed between UNG and KOGAS 18 February 2008 the first Presidential Decree was issued in order to commence works on the Project 4 August 2009 the second Presidential Decree was issued to further support the development of the Project 11 February 2010 during the official visit of the President of the Republic of Uzbekistan to the Republic of Korea, the Investment Agreement on the Surgil Project was signed between the Government of the Republic of Uzbekistan, Uz-Kor, the Korean Consortium and UNG. This agreement grants the Project rights to conduct business under terms suitable for an international project finance transaction, as well as providing certain protections to the South Korean investors Q initiation of formal discussions with the Korean Agencies and Asian Development Bank March 2011 Bank Roadshow in Tashkent attended by over 60 bankers from Europe and Asia 15 April 2011 the Supplemental Investment Agreement was signed between the above parties 23 August 2011 during the Official Visit of the President of South Korea His Excellency Lee Myung-bak to the Republic of Uzbekistan, key commercial terms of EPC contracts were signed. The UGCC work is divided into three lump-sum EPC contracts: (i) utilities and offsite works (Hyundai Engineering Company), (ii) ethylene cracker (GS Engineering and Construction), and (iii) downstream gas separation plant and polymer plants (Samsung Engineering). The Upstream work will be carried out by UNG 24 August 2011 stone-laying ceremony for the Project in the honorary presence of Presidents of Republic of Korea and Republic of Uzbekistan 16 September 2011 formal launch of project financing to the international commercial bank market 27 September 2011 signing of financing term sheet between Uz-Kor, Korean Export Credit Agencies and Asian Development Bank 19 May 2012 signing of Common Terms Agreement, individual finance agreements and project agreements by Uz-Kor and its lenders in the presence of the Deputy Prime Minister of Uzbekistan and Ambassador of South Korea

17 6. Contact Details

18 Contact Details FINANCIAL ADVISER ING Bank N.V., London Branch Rodolphe Olard Managing Director Head of Natural Resources Advisory Tel: INTERCREDITOR AGENT ING Bank N.V. Chris van der Meer Vice President Structured Finance Natural Resources Tel: PROJECT COUNSEL Vinson & Elkins Nabil Khodadad Partner Tel: LENDERS COUNSEL Norton Rose Charles Whitney Partner charles.whitney@nortonrose.com Tel:

19 Disclaimer This presentation has been prepared by the natural resources advisory team ( ING Natural Resources Advisory ) of ING Bank N.V., London branch ( ING ). All reasonable care has been taken to ensure that the facts stated, assumptions, market data and other information given in this presentation are fair and reasonable as at the date of publication of this presentation however, ING has not independently verified the information given in this presentation. Accordingly, no representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information and assumptions contained in this presentation. The information and assumptions in this document are subject to change without notice. Neither ING nor any of its affiliates, officers or employees accepts any duty of care to the recipient or any liability for any direct or consequential loss arising from any use of this presentation or its contents. Any projections or assumptions contained in this presentation are provisional only and ING reserves the right to amend or change such projections or assumptions to the extent additional or amended material information comes to its knowledge. In addition, any conclusions contained herein are subject to change, depending on the market conditions prevailing at the time. The presentation and the information contained herein are confidential. Copyright and database rights protection exists in this document and it may not be altered, reproduced, disclosed, sold or distributed by any person for any purpose without the prior express consent of ING. All rights are reserved. A reference to ING Natural Resources Advisory is to the natural resources project advisory team of ING Bank N.V. and certain of its subsidiary companies. ING Bank N.V. is incorporated with limited liability in the Netherlands and is authorised by the Dutch Central Bank. ING Bank N.V., London branch is registered in England (Registration number BR000341). 18