Equipment Financing to Petrobras The Marlim Sul Case

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

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All Major ECAs are opened to Brazil
ECAs cover approximately USD 800 Bn of export
flows each year
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Eligible Amount for ECA Financing
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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

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Minimum Premium Benchmarks Charged By The ECAs
U.S. Exim Categories(a)
14.00
(Premium Rates Flat )
11.88
12.00
Example of U.S. Exim Premium Rates (Excluding Any
Discounts)
9.49
10.00
7.42
8.00
5.36
6.00
3.61
4.00
2.16
2.00
1.13
0.00
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2
3
4
5
6
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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.
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Proven Oil Reserves vs. OECD Country
Classification
World Top 47 Countries by Proven Reserves 2002
(BP Report) classified by US Exim (08/04/04)
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Proven Natural Gas Reserves vs. OECD Country
Classification
World Top 48 Countries by Proven Reserves 2002
(BP Report) classified by US Exim (08/04/04)
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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
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Three Main Types of ECA Finance Structures
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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

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Campos Basin the Marlim Sul Oil Field
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Marlim Sul Module 1
Module 1 expected CAPEX of USD 1.14 billion 48
for the well construction, 33 for subsea
equipment and 19 for others

• 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 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

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Marlim Sul Module 1 Concept Scheme
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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

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The Marlim Sul Finance Structure Basic Scheme
COFACE
TECHNIP-COFLEXIP
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)
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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