RECENT TRENDS AND DEVELOPMENT OF OIL & GAS LENDING IN RUSSIA. Hansjoerg Gonser, Oil & Gas, Project & Commodity Finance

Transcription

1 RECENT TRENDS AND DEVELOPMENT OF OIL & GAS LENDING IN RUSSIA 8th Russian Petroleum and Gas Congress Hansjoerg Gonser, Oil & Gas, Project & Commodity Finance Moscow, 22 June 2010

2 UniCredit Group Q1/2010 at a glance Strong local roots in 22 European countries International network in 49 countries Approx. 162,000 1 employees Approx. 9,600 1 branches Operating income EUR 6,806 mn Operating profit EUR 2,928 mn A/Aa3/A long-term ratings 2 (S&P, Moody s, Fitch Ratings) Core tier I stable at 8.45% (-2 bps q/q) Home markets Germany, Italy, Austria, Central and Eastern Europe (CEE) Unrivalled network in CEE with local banks in: Azerbaijan Bosnia-Herzegovina Bulgaria Croatia Czech Republic Estonia Hungary Kazakhstan Kyrgyzstan Latvia Lithuania Poland Romania Russia Serbia Slovakia Slovenia Turkey Ukraine Network with local banks 2 1 Including all employees and branches of subsidiaries consolidated proportionately, such as Koç Financial Services branches. 2 Latest confirmation/update as of 9 October 2009 Source: Investor Relations of UniCredit Group

3 Introduction Oil & Gas UniCredit Oil & Gas Team arranged and raised over USD 6.8 bn in 2009 Our global Finance Experience Oil & Gas at a Glance Globally 10 Sector specialised Team Members Long Term Experience More than 120 Transactions realised New York London Munich Vienna Milan Rome São Paulo Warsaw Istanbul Moscow Hong Kong Singapore More than 35 ongoing Projects Core Strengths Local Presence Unique combination of globally centralised oil & gas expertise, product excellence and local market knowledge. Strong market presence worldwide through our tight network of local banks of UniCredit Group. All debt products will be coordinated through one Structured Finance team. Leading Arranger of EBRD, EIB, IFC and ECA facilities. We still recognise the importance of personalised advise and our clients benefit from our long term partnership with an experienced structured finance team with its commitment to the industry throughout the cycles. 3

4 Leading Oil & Gas financier Product Profile UniCredit has a 20-year track record of oil & gas financings and a reputation as one of the global leaders of structured debt products. Throughout this time we have remained committed to both, the sectors and our clients, through sometimes difficult and challenging political and economic circumstances. Clients trust our considerable experience in optimising their financing strategy through a combination of structured finance products. Project Finance Pre-Export Financing Borrowing Base Financing Financial Advisory Acquisition Finance ECA financing Multilateral Financing Off-balance sheet & tax optimised structures Corporate and high yield bonds Convertible bonds Recent Awards Best Deal of the Year 2009 Best Deal of the Year 2009 Asia Pacific Oil & Gas Deal of the Year 2009 European Oil & Gas Deal of the Year 2009 European Gas Deal of the Year 2009 Deal of the Year 2008 Tatneft TNK-BP PNG LNG Enel Rete Gas Nord Stream Phase 1 Rosneft 4

5 Our track record Structured Transactions in the Oil & Gas Sector TAVIT B.V. USD 1,500,000,000 Pre Export Facility Coordinating MLA, Bookrunner & Facility Agent 2009 Industry: Refinery Region: Russia Role: Coordinating Mandated Lead Arranger, Bookrunner & Facility Agent Purpose: Pre Export Facility Highlights: First loan syndication which attracted senior commitment from domestic lenders in Russia TNK-BP USD 500,000,000 Pre Export Facility Coordinating MLA 2009 Industry: Integrated Oil and Gas Company Region: Russia Role: Coordinating MLA Purpose: Pre Export Facility Highlights: First Pre Export Facility arranged in year 2009 despite challenging market environment Yuzhno Russkoye EUR 1,050,000,000 Bi-Currency Bridge Facility MLA 2009 Industry: Oil and gas field Region: Russia Role: Mandated Lead Arranger Purpose: Upstream Bi-Currency Bridge Facility Highlights: Financial bridge structure with the cooperation of major German and Russian Corporates (Gazprom, BASF and E.ON) 5

6 Our track record Structured Transactions in the Oil & Gas Sector OJSC TANECO USD 2,000,000,000 Senior Secured Facility MLA & Bookrunner 2008 Industry: Refinery Region: Russia Role: MLA, Bookrunner Highlights: Innovative Hybrid Financing Structure; Oversubscription in challenging syndication market environment; One of rare SPV financings in Russia/CIS ACG Phase 1 & BTC Pipeline USD 1,638,000,000 Term Loan Facilities MLA 2004 Industry: Pipeline Region: Caspian Region Role: Mandated Lead Arranger Highlights: Landmark PF transaction for this region for the Caspian Region (here: Azerbaijan, Georgia and Turkey), project size and complexity. Involvement of major sponsors of the oil industry Gazprom Blue Stream Pipeline USD 250,000,000 Term Loan Facility Lead Underwriter, Joint Arranger, Security Account Agent 2001 Industry: Pipeline Region: Russia/Turkey Role: Lead Underwriter, Joint Arranger, Security Account Agent Purpose: Financing of the construction and operation of the gas pipeline under the Black Sea. Highlights: Sophisticated bi-national lending structure 6

7 Agenda I. Russian loan market analysis II. Oil and Gas lending in Russia III. Economic recovery IV. Lessons to be learnt V. Financing alternatives VI. Case Study: Nord Stream pipeline Project Financing VII. Conclusion

8 Russian loan market analysis Hit by the crisis but on the way to recovery Syndicated Loans in Russia Bonds in Russia USD bn Volume Avg. Margin bps USD bn Volume Avg. Margin 1, bps Q Q2010 Excess liquidity in the 2008 financial markets led to increased volumes and lower margins From 2006 to 2008 the volume of Russian syndicated loans grew from USD 51 bn to USD 120 bn with average margins almost unchanged players with normally higher financing cost were able to access the debt markets at historically low margins The increase in volume and decrease in margins was paralleled by a shift from structured and secured financing to unsecured, general corporate loans Pre-Export and Trade Financing accounted for 25% of the volume in 2006 but only for 9% in 2008 Financial and economic crisis had a strong negative effect on credit markets in 2009 Substantial contraction of liquidity led to reduced volumes (-25%) Cost of financing increased sharply with the effect that only prime Russian names were able to access the international debt markets at almost double the pre-crisis margins. 8 Source: Dealogic 2009 numbers excluding USD 25 bn loans received by Rosneft & Transneft from China Development Bank

9 Oil & Gas lending in Russia Superior risk profile is key to success Selected O&G Financing in Russia in Borrower #Banks Signing Date USD mn Maturity Pricing Rosneft ,300 4 yr 65 Lukoil /10 yr 45/65 TNK-BP yr 6 mns 75 Rosneft ,200 5 yr 125 Pre-Export Financing in Russia in 2009* Borrower #Banks Signing Date USD mn Maturity Pricing Rosneft ,350 1 yr 3 mns 180 TNK-BP years 400 Lukoil ,200 3 years 400 Tatneft ,500 3/5 years 585/685 Russian O&G Bonds USD bn Volume Avg. Margin Q2010 1,200 1, bps Continued availability of debt financing but shift from general unsecured corporate lending toward structured finance Financing in the Oil & Gas industry followed the general trend with excess liquidity versus strong decrease in volumes and spike in margins in While other commodity-based sector, such as Metals & Steel, saw several major debt restructuring cases, the Oil & Gas sector wavered the crisis much better, documenting its superior risk profile. Due to the fast recovery of Oil & Gas commodity prices and use of structured finance solutions, Russian Oil & Gas companies were able to access debt markets even during depressed market conditions in 2009, e.g. USD 1.5 bn Tatneft facility, Lukoil USD 1.2 bn, TNK-BP 500 mn etc. Still the new financing was acquired with substantially higher pricing compared to pre-crisis levels. UniCredit continued to play a leading role in the loan markets even at the height of the crisis. 9 Source: Dealogic, Bloomberg * excluding PXF loans received by Rosneft & Transneft from China Development Bank

10 Economic recovery Accompagnied by ongoing high volatility CEE Government CDS Russia Ukraine Kazakhstan Major Commodity Prices Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 bps 250% 200% 150% 100% 50% 0% Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May % Prices Oil Copper Steel HR Emergence of new negative factors, such as Sovereign Default Risk, could damper economic recovery Since the beginning of 2010 overall bank liquidity is increasing as many banks seem to have successfully repaired their balance sheets and are now seeking new opportunities to lend. While the volumes of financing are increasing and margins experience a downward pressure several factors could reduce the rate of economic recovery. Sovereign Default Risk based on high debt levels, fiscal deficits and insufficient economic growth can have a negative impact on global credit markets. Even in the case of the full recovery there is little change to the return of pre-crisis levels of liquidity and low margins as bank are under higher regulatory pressure and have imposed stricter risk management concepts. 10 Source: Bloomberg

11 Lessons to be learnt from the crisis But today s financial markets still leave certain challenges The main lesson of the financial crisis is that every company should diversify its funding sources with a special focus on Long term finance to mitigate refinancing risk Diversification of financing sources to reduce dependency on specific financial market segments Using the benefit of specific advantages of the business model (e.g. Export sales / hard currency revenues) Strong relationships with a limited set of core banks (relationship banking) Although today s financial markets provide an improved access to corporate financing, there remain a number of challenges in the lending market. Corporate and country limits remain tight Reluctance to provide financing for longer tenors Funding of large-scale / landmark transactions In particular the oil and gas sector offers a number of feasible and proven structured debt financing instruments successfully mitigating those challenges and providing a more robust financing structure during potential future adverse periods. 11

12 Financing alternatives... Pure corporate lending versus structured solutions Domestic Bilateral/ International Syndicated Loan Pre-Export Financing Government Schemes Multi-sourced Project Financing Description Lending agreement with domestic and/or foreign financial institutions Corporate lending provided under preagreed long term export contracts with qualified foreign offtaker Lending under pre agreed off-take contracts with the benefit of up to % related risk coverage by governmental guarantees Bank-to-Corporate Buyers Credits and The German Untied Loan Guarantee Program (UFK) can be a feasible financing solution for CEE Oil & Gas companies Ring-fenced asset based financing structure For greenfield projects or isolable brownfield expansion Recourse for sponsor(s) limited to construction period (completion support arrangements) Multi-sourced financing strategy including ECAs, multilateral and commercial tranches Pros Fast execution Typically unsecured Offers longer tenors Swift execution Comparatively lower pricing Government schemes offer even longer tenors Comparatively lowest pricing Access to alternative liquidity pool Limited recourse to sponsors Longest tenors Cons Liquidity available for short to mid-term tenors Volatile pricing Pledge of export contracts Specific export contracts or Tied to procurement/ sourcing of equipment Complex execution Pledge of project assets Examples Tatneft, TNK-BP Nord Stream Nord Stream 12

13 ...and their availability during potential adverse periods as demonstrated in various transactions Type Domestic Bilateral/ International Syndicated Loan Pre-Export Financing Government Schemes Multi-sourced Project Financing Cost High Moderate Low Moderate Availability in crisis Low High High Moderate Tailor-made structures provide continuous access to long term financing solutions, increasing lenders appetite The presented alternatives for structured financing were proven to be robust and successful solutions in 2009 in Russian Oil & Gas sector Pre-Export Financing (PXF) was the financing of choice for Russian Oil & Gas companies as proven by such successful transactions such as Rosneft, TNK-BP, Tatneft and Lukoil Government Schemes such as support by Credit Export Agencies (ECA) (e.g. Hermes, SACE or German Untied Loan Guarantee (UFK) program) enable large scale transactions at all, even when financing volumes exceed lenders appetite/country limits: Most of the risk (up to 100%) is covered by the government Very limited effect on scarce lenders country/customer limits thus allowing for larger final takes Potential funding advantages Successful EUR 3.9 bn Nord Stream Project Finance is an excellent example of a multi-sourced financing combining commercial debt, ECA and government schemes 13

14 Case Study: Nord Stream Pipeline project financing Combining Commercial, ECA and UFK financing Map of Nord Stream gas pipeline Source of funds (EUR mn) Phase I Hermes Facility 1,600 UFK Facility 1,000 SACE Facility 500 Commercial Bank Facility 800 TOTAL DEBT (70%) 3,900 Equity (30%) 1,671 Source: Nord Stream Key features Two 48 inch diameter offshore gas pipelines, running for 1,220 km under the waters of the Baltic Sea from Portovaya Bay in Russia to the coast of Germany near Greifswald, with a total annual capacity of 55 bcm The route passes from Russia through Finland, Sweden and Denmark into Germany The shareholders* of Nord Stream AG are: Gazprom 51% Wintershall 20% E.ON Ruhrgas 20% N.V. Nederlandse Gasunie 9% The transaction achieved financial close in March 2010 UniCredit Added Value Government-supported schemes helped to attract long term finance thus being an essential prerequisite for the successful realisation of the project UniCredit acted as Financial Advisor to Nord Stream with special focus on the German Untied Loan Guarantee program (UFK): UFK provided for 90% comprehensive (i.e. commercial and political) insurance coverage Significant contribution to a successful placement in 2009/2010 Added value due to familiarity with product and application process Close relationship with key government decision-makers UniCredit was a member of the project team advising the German government in amending the guarantee and fee structure for UFK 14 * GDF Suez plans to acquire 9% of shares from E.ON and BASF

15 Conclusion Companies worldwide suffered under liquidity constraints during the financial crisis in 2008 and 2009; maturing short term lending could if at all - only be replaced at significantly higher margins; long term corporate lending became even more difficult to achieve. It has been demonstrated that there is no security in reliance on only unsecured syndicated/bilateral corporate loans. A solid and well-balanced financing strategy with a focus on structured products has been proven the best possible strategy to successfully withstand adverse periods from a financing perspective. Not only based on export revenues, the oil and gas sector provides a variety of structured finance solutions helping to i. attract long term funding ii. increase lenders appetite iii. reduce overall financing costs and thus providing the grounds for the successful realization of new actvities and projects even during adverse periods as seen with Nord Stream As the main proven and reliable instruments, we identified Pre-Export Financing structures, Government Scheme Financing and Multi-sourced Project Financings Understanding of multiple financing alternatives and their combinations is key for successfully accessing debt markets independently of their conditions. 15

16 Your contacts Corporate & Investment Banking UniCredit Bank AG Hansjoerg Gonser Project & Commodity Finance Oil & Gas Tel Imprint Corporate & Investment Banking UniCredit Bank AG Project & Commodity Finance Arabellastrasse Munich Germany 16

17 Disclaimer This publication is presented to you by: Corporate & Investment Banking UniCredit Bank AG Arabellastrasse 12 D Munich The information in this publication is based on carefully selected sources believed to be reliable. However we do not make any representation as to its accuracy or completeness. Any opinions herein reflect our judgement at the date hereof and are subject to change without notice. Any investments presented in this report may be unsuitable for the investor depending on his or her specific investment objectives and financial position. Any reports provided herein are provided for general information purposes only and cannot substitute the obtaining of independent financial advice. Private investors should obtain the advice of their banker/broker about any investments concerned prior to making them. Nothing in this publication is intended to create contractual obligations. Corporate & Investment Banking of UniCredit Group consists of UniCredit Bank AG, Munich, UniCredit Bank Austria AG, Vienna, UniCredit CAIB Securities UK Ltd. London, UniCredit S.p.A., Rome and other members of the UniCredit Group. UniCredit Bank AG is regulated by the German Financial Supervisory Authority (BaFin), UniCredit Bank Austria AG is regulated by the Austrian Financial Market Authority (FMA), UniCredit CAIB Securities UK Ltd. is regulated by the Financial Services Authority (FSA) and UniCredit S.p.A. is regulated by both the Banca d Italia and the Commissione Nazionale per le Società e la Borsa (CONSOB). Note to UK Residents: In the United Kingdom, this publication is being communicated on a confidential basis only to clients of Corporate & Investment Banking of UniCredit Goup (acting through UniCredit Bank AG, London Branch and/or UniCredit CAIB Securities UK Ltd. who (i) have professional experience in matters relating to investments being investment professionals as defined in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 ( FPO ); and/or (ii) are falling within Article 49(2) (a) (d) ( high net worth companies, unincorporated associations etc. ) of the FPO (or, to the extent that this publication relates to an unregulated collective scheme, to professional investors as defined in Article 14(5) of the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001 and/or (iii) to whom it may be lawful to communicate it, other than private investors (all such persons being referred to as Relevant Persons ). This publication is only directed at Relevant Persons and any investment or investment activity to which this publication relates is only available to Relevant Persons or will be engaged in only with Relevant Persons. Solicitations resulting from this publication will only be responded to if the person concerned is a Relevant Person. Other persons should not rely or act upon this publication or any of its contents. The information provided herein (including any report set out herein) does not constitute a solicitation to buy or an offer to sell any securities. The information in this publication is based on carefully selected sources believed to be reliable but we do not make any representation as to its accuracy or completeness. Any opinions herein reflect our judgement at the date hereof and are subject to change without notice. We and/or any other entity of Corporate & Investment Banking of UniCredit Group may from time to time with respect to securities mentioned in this publication (i) take a long or short position and buy or sell such securities; (ii) act as investment bankers and/or commercial bankers for issuers of such securities; (iii) be represented on the board of any issuers of such securities; (iv) engage in market making of such securities; (v) have a consulting relationship with any issuer. Any investments discussed or recommended in any report provided herein may be unsuitable for investors depending on their specific investment objectives and financial position. Any information provided herein is provided for general information purposes only and cannot substitute the obtaining of independent financial advice. UniCredit Bank AG, London Branch is regulated by the Financial Services Authority for the conduct of business in the UK as well as by BaFIN, Germany. UniCredit CAIB Securities UK Ltd., London, a subsidiary of UniCredit Bank Austria AG, is authorised and regulated by the Financial Services Authority. Notwithstanding the above, if this publication relates to securities subject to the Prospectus Directive (2005) it is sent to you on the basis that you are a Qualified Investor for the purposes of the directive or any relevant implementing legislation of a European Economic Area ( EEA ) Member State which has implemented the Prospectus Directive and it must not be given to any person who is not a Qualified Investor. By being in receipt of this publication you undertake that you will only offer or sell the securities described in this publication in circumstances which do not require the production of a prospectus under Article 3 of the Prospectus Directive or any relevant implementing legislation of an EEA Member State which has implemented the Prospectus Directive. Note to US Residents: The information provided herein or contained in any report provided herein is intended solely for institutional clients of Corporate & Investment Banking of UniCredit Group acting through UniCredit Bank AG, New York Branch and UniCredit Capital Markets, Inc. (together UniCredit ) in the United States, and may not be used or relied upon by any other person for any purpose. It does not constitute a solicitation to buy or an offer to sell any securities under the Securities Act of 1933, as amended, or under any other US federal or state securities laws, rules or regulations. Investments in securities discussed herein may be unsuitable for investors, depending on their specific investment objectives, risk tolerance and financial position. In jurisdictions where UniCredit is not registered or licensed to trade in securities, commodities or other financial products, any transaction may be effected only in accordance with applicable laws and legislation, which may vary from jurisdiction to jurisdiction and may require that a transaction be made in accordance with applicable exemptions from registration or licensing requirements. All information contained herein is based on carefully selected sources believed to be reliable, but UniCredit makes no representations as to its accuracy or completeness. Any opinions contained herein reflect UniCredit s judgement as of the original date of publication, without regard to the date on which you may receive such information, and are subject to change without notice. UniCredit may have issued other reports that are inconsistent with, and reach different conclusions from, the information presented in any report provided herein. Those reports reflect the different assumptions, views and analytical methods of the analysts who prepared them. Past performance should not be taken as an indication or guarantee of further performance, and no representation or warranty, express or implied, is made regarding future performance. UniCredit and/or any other entity of Corporate & Investment Banking of UniCredit Group may from time to time, with respect to any securities discussed herein: (i) take a long or short position and buy or sell such securities; (ii) act as investment and/or commercial bankers for issuers of such securities; (iii) be represented on the board of such issuers; (iv) engage in market-making of such securities; and (v) act as a paid consultant or adviser to any issuer. The information contained in any report provided herein may include forward-looking statements within the meaning of US federal securities laws that are subject to risks and uncertainties. Factors that could cause a company s actual results and financial condition to differ from its expectations include, without limitation: Political uncertainty, changes in economic conditions that adversely affect the level of demand for the company s products or services, changes in foreign exchange markets, changes in international and domestic financial markets, competitive environments and other factors relating to the foregoing. All forward-looking statements contained in this report are qualified in their entirety by this cautionary statement. Corporate & Investment Banking UniCredit Bank AG, Munich as of 17 June