Presentation on theme: "Content Introduction to ING Group"— Presentation transcript:
0 Requirements on the Financing of New Gas Infrastructure Elvira KrugerVice PresidentING Wholesale BankingBrussels, 9 November 2006
1 Content Introduction to ING Group Demand for Gas Infrastructure: Key Drivers & Investment RequirementsProject Finance: Key Considerations & RequirementsCase Study: Trans Austria Gasleitung GmbHConclusionContact Details
3 ING Group Introduction 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 baseInsuranceAmericasInsuranceEuropeInsuranceAsia/PacificWholesaleBankingRetail BankingINGDirectING Group 2005 year figuresTotal assets EUR 1,159bnShareholders’ equity EUR 37bnAssets under management EUR 547bn2005 net profit EUR 7,210mRatings Aa3/AA-ING Group 1H 2006 figuresTotal assets EUR 1,221bnShareholders’ equity EUR 33bnAssets under management EUR 546bn1H 2006 net profit EUR 4,020mRatings Aa3/AA-Source: ING Group 2005 figures, Published February 2006Source: ING Group 1H 2006 figures, Published August 2006
4 ING Group Structured Finance Wholesale BankingWholesale Banking ClientsWholesale Banking NetworkWholesale Banking ProductsCorporate Finance &Equity MarketsFinancial MarketsStructured FinanceNatural ResourcesMetals & MiningOil & GasOffshore Industry
5 2. Demand for Gas Infrastructure: Key Drivers & Investment Requirements
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.
7 Demand for Gas Infrastructure Key Drivers Net Gas Imports in OECD Europe are projected to rise to bcm by 2030Source: IEA & ING Estimates
8 Demand for Gas Infrastructure Investment Requirements Gas sector investments in OECD Europe are projected to exceed USD 375 bln between now and 2030.Source : IEA & ING Estimates
10 Project Finance Key Considerations Source of finance to JV partners:Risk sharingNon-RecourseFinancial flexibilityFinancing 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.
11 Project Finance Requirements Limited pre-completion risk:Pre-completion guaranteesTurn-key contractsContingent equityReliable 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 financingStrong use-or pay provisions ensuring compliance with minimum utilization requirementsTransparent and consistent tariff-setting mechanism
12 Project Finance Requirements Ownership structure:Strong market position of the sponsors/shareholdersMaintenance of ownership requirementsStable contractual framework underpinning the financing structure.
14 Case Study: Trans Austria Gasleitung GmbH Company BackgroundTrans 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.Project Financing DetailsFacility Amount: EUR 450 millionTenor: 12 yearsAmortisation profile: Fully amortisingSecurity Structure: The financing structure is underpinned by the use-or-pay transportation agreements with Eni and OMV.Advisory DetailsING 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 RoleSole Mandated Lead Arranger & Underwriter for the EUR 450m Project FinancingFinancial Advisor for the financing of Expansion04.
15 Case Study: Trans Austria Gasleitung GmbH Key Considerations:Strategic piece of European gas infrastructureStrong use-or-pay agreements with Eni and OMVCredit quality of the shareholdersEstablished track record of the operatorFixed tariff base ensuring stability of cash flowsKey Structuring Issues:Role of TAG as a transmission operatorIntegrity of the existing contractual framework in light of the changing regulatory environmentThird-party access requirementsImpact of regulation on tariff levels
17 ConclusionThe 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.