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Structured Finance – Natural Resources Requirements on the Financing of New Gas Infrastructure Elvira Kruger Vice President ING Wholesale Banking Brussels,

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Presentation on theme: "Structured Finance – Natural Resources Requirements on the Financing of New Gas Infrastructure Elvira Kruger Vice President ING Wholesale Banking Brussels,"— Presentation transcript:

1 Structured Finance – Natural Resources Requirements on the Financing of New Gas Infrastructure Elvira Kruger Vice President ING Wholesale Banking Brussels, 9 November 2006

2 Structured Finance – Natural Resources 1 Content 1.Introduction to ING Group 2.Demand for Gas Infrastructure: Key Drivers & Investment Requirements 3.Project Finance: Key Considerations & Requirements 4.Case Study: Trans Austria Gasleitung GmbH 5.Conclusion 6.Contact Details

3 Structured Finance – Natural Resources 2 1. Introduction to ING Group

4 Structured Finance – Natural Resources 3 ING Group 1H 2006 figures Total assetsEUR1,221bn Shareholders’ equity EUR 33bn Assets under management EUR546bn 1H 2006 net profitEUR4,020m RatingsAa3/AA- As an organisation, we have many strengths. In particular we are recognised for providing our clients with innovative solutions across the globe supported by our powerful capital base Insurance Europe Insurance Americas ING Direct Retail Banking Introduction ING Group Wholesale Banking Insurance Asia/Pacific Source: ING Group 2005 figures, Published February 2006 ING Group 2005 year figures Total assetsEUR1,159bn Shareholders’ equity EUR 37bn Assets under management EUR547bn 2005 net profitEUR7,210m RatingsAa3/AA- Source: ING Group 1H 2006 figures, Published August 2006

5 Structured Finance – Natural Resources 4 ING Group Structured Finance Financial Markets Corporate Finance & Equity Markets Wholesale Banking Network Wholesale Banking Clients Wholesale Banking Structured Finance Oil & Gas Wholesale Banking Products Natural Resources Offshore IndustryMetals & Mining

6 Structured Finance – Natural Resources 5 2. Demand for Gas Infrastructure: Key Drivers & Investment Requirements

7 Structured Finance – Natural Resources 6 Demand for Gas Infrastructure Key Drivers Declining indigenous production combined with growth in gas demand will increase dependency on gas imports. Concerns over the security of supply drive the need for diversification of sources of gas imports. Large seasonal swings in demand for gas require storage infrastructure to manage the physical gas flows. Most existing infrastructure is contracted out on a long term basis. Market liberalization will drive new market entrants to seek infrastructure access.

8 Structured Finance – Natural Resources 7 Demand for Gas Infrastructure Key Drivers Net Gas Imports in OECD Europe are projected to rise to 499 bcm by 2030 Source: IEA & ING Estimates

9 Structured Finance – Natural Resources 8 Demand for Gas Infrastructure Investment Requirements Gas sector investments in OECD Europe are projected to exceed USD 375 bln between now and Source : IEA & ING Estimates

10 Structured Finance – Natural Resources 9 3. Project Finance: Key Considerations & Requirements

11 Structured Finance – Natural Resources 10 Project Finance Key Considerations Source of finance to JV partners: -Risk sharing -Non-Recourse -Financial flexibility Financing tenors reflect the economic life of the project facilities. Debt amount is based on the cash flow generating capacity of the project. Attractive debt/equity ratio. Tailor-made financing solution. Competitive pricing.

12 Structured Finance – Natural Resources 11 Project Finance Requirements Limited pre-completion risk: -Pre-completion guarantees -Turn-key contracts -Contingent equity Reliable operator with strong track record in operating similar projects. Stable cash flow underpinned by long-term utilization contracts with credit- worthy parties: -Contract tenors exceeding or at least equal to the tenor of the financing -Strong use-or pay provisions ensuring compliance with minimum utilization requirements -Transparent and consistent tariff-setting mechanism

13 Structured Finance – Natural Resources 12 Project Finance Requirements Ownership structure: -Strong market position of the sponsors/shareholders -Maintenance of ownership requirements Stable contractual framework underpinning the financing structure.

14 Structured Finance – Natural Resources Case Study: Trans Austria Gasleitung GmbH

15 Structured Finance – Natural Resources 14 Company Background Trans Austria Gasleitung GmbH (“TAG”) is a natural gas transmission company which holds the transportation rights to the TAG pipeline system, a 382-km pipeline stretching across Austria from the border with Slovakia to the border with Italy. Annual capacity: 37 bcm. The TAG pipeline system is a key piece of European gas infrastructure as it transports approximately one-third of all Italian gas imports. Shareholders of TAG are ENI International B.V. and OMV Gas GmbH. TAG’s existing transportation capacity is allocated to ENI and OMV under long-term ship- or-pay agreements. The pipeline system is operated by OMV. Case Study: Trans Austria Gasleitung GmbH Project Financing Details Facility Amount: EUR 450 million Tenor: 12 years Amortisation profile: Fully amortising Security Structure: The financing structure is underpinned by the use-or-pay transportation agreements with Eni and OMV. Advisory Details ING advised TAG on the financing of the expansion of the TAG Pipeline System (“Expansion 04”) project. Expansion 04 will result in an increase in capacity by approximately 6.5 bcm/yr. ING’s Role Sole Mandated Lead Arranger & Underwriter for the EUR 450m Project Financing Financial Advisor for the financing of Expansion04.

16 Structured Finance – Natural Resources 15 Case Study: Trans Austria Gasleitung GmbH Key Considerations: -Strategic piece of European gas infrastructure -Strong use-or-pay agreements with Eni and OMV -Credit quality of the shareholders -Established track record of the operator -Fixed tariff base ensuring stability of cash flows Key Structuring Issues: -Role of TAG as a transmission operator -Integrity of the existing contractual framework in light of the changing regulatory environment -Third-party access requirements -Impact of regulation on tariff levels

17 Structured Finance – Natural Resources Conclusion

18 Structured Finance – Natural Resources 17 Conclusion The need for new gas infrastructure continues to grow. Additional investments in gas infrastructure projects will be required. New infrastructure is required for an attractive gas market. Project Finance is an important source of financing for gas infrastructure projects, particularly for mega projects requiring large initial investments. Banks have identified numerous opportunities for financing of gas infrastructure projects in the coming years and are keen to provide project finance. A robust, stable contractual structure is key in financing large-scale gas infrastructure projects. Uncertainties relating to the changes in the regulatory environment may raise concerns in respect of the integrity of the contractual framework underpinning the financing of mega projects. Such concerns will impact the appetite of banks for project financing.

19 Structured Finance – Natural Resources Contact Details

20 Structured Finance – Natural Resources 19 Contact Details Structured Finance / Natural Resources - Oil & Gas Elvira KrugerTel: Vice President Oil & Gas (Europe / CIS) Michiel de HaanTel: Director Head of Oil & Gas (Europe / CIS) Michael KlemmeTel: Managing Director Global Head of Oil & Gas Jaap Jan Prins Tel: Managing Director Global Head of Natural Resources


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