The use of the Capital Market to fund the Ras Gas Project.

Group 3
Ajay Bhagat Aritra Mandal Ashish Thakur Sudeshna Goswami 26NMP07 26NMP16 26NMP19 13EM02

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FACTS AND FIGURES

Stakeholders and Participants
State of Qatar: Qatar General Petroleum Corporation (70% stack in Ras Gas) Mobil Corp : Mobil QM Gas. Inc. (30% stack in Ras Gas) Republic of Korea (S&PA 50% for 25 years) Korea Electric Power Corporation (S&PA 34.7% 25 years) Korean Regional Govt. (S&PA 15.3% 25 years) Goldman Sachs was the financial advisor Onshore EPC contractor: JGC corporation ( M.W.Kellogg company) Platforms EPC Contractor: McDermott-EPTM East, Inc. Pipelines EPC Contractor: Saipem S.p.A Commercial Bank: Industrial Bank of Japan and Credit Suisse. Guarantors: USEXIM,ECGD,SACE.(Export Credits Agencies) your name

FACTS AND FIGURES CONT.

Right to Develop capacity: 10 million tons per year (LNG). Presently Constructing : 5.2 million ton per annum. Project cost : $3.4 billion (including interest during construction) Debt: Equity ratio : 75: 25

Sources of Cash Flow

1. Agreement to sell 4.8 mmta of LNG. 2. 20%-25% from sale of condensate. 3. Sale of liquid hydrocarbon on spot basis.

Sources of Financing (DEBT)

1. Bond : $1.2 billion. (including 10 yrs & 17 yrs bonds) 2. Banks: $1.35 billions ( including Commercial banks & ECAs)

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Risk of Achieving Debt Financing in Qatar

Markets Unfamiliarity with Qatar Perceived Risk of the Middle East. Large no of project being development. Uncertainty of Cash Flow and repayment. Uncertainty of Production. No Sovereign Rating till then.

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Contractor Arranged Financing.

Make financing part of competitive bidding process. Make use of Companys leverage with the contractors, which in turn put pressure on Banks to be aggressive. To encourage the contractor to source the equipments from countries with active and supportive export credit program. Contractors would be very helpful in explaining and marketing the project to the banks and ECAs. The competitive joint construction and financing bid brought the estimated cost of the project from $5 billion to $3.4billion

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Advantage of Capital Market Debt Financing

Longer Maturity Cost Saving due cheaper than other sources Funding construction of the first train with no conditions precedent tied to further LNG sales. Adding discipline to the documentation process by forcing the conclusion of negotiation with the lenders.

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Bond Marketing Strategy

Ras Gas was expected to appeal to broader group of investors based on its strong credit rating, strategic

importance to sponsors and growth potentials.

Good credit rating from both agencies, Moodys (A3) and S&P (BBB+)

Offering was structured in two tranches

Shorter Tranche ( 10 Yr maturity and 7 Yr Average Life)- 33% Longer Tranche (17 Yr Maturity and 15 Yr Average Life)-67%
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Market Perceptions
It is a important component of Qatars national strategy. It is a key part of Mobils development of LNG as a cornerstone of companys growth strategy. Koreas national objective to increase the growth of LPG consumption in all the areas. Sponsors would be increasing their equity investment over time and building a company with greater resource and diversified group of buyers.
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Investor Distribution by Type

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Conclusion
Capital market proved to be a valuable component of the Ras Gas financing.
Capital market can provide an effective counterbalance to the role of the banks and ECAs. The $2.5 billion of demand generated for the Ras Gas offering clearly demonstrates that the capital markets are available in significant size for well structured project financings with strong sponsorships.
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Discussion Question

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Thank you

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