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Australian American Chamber of Commerce Houston Energy Conference Funding Investments in Australia Scott Speedie Global Head of Specialized Finance Commonwealth.

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Presentation on theme: "Australian American Chamber of Commerce Houston Energy Conference Funding Investments in Australia Scott Speedie Global Head of Specialized Finance Commonwealth."— Presentation transcript:

1 Australian American Chamber of Commerce Houston Energy Conference Funding Investments in Australia Scott Speedie Global Head of Specialized Finance Commonwealth Bank of Australia January 2014 Strictly Private and Confidential Institutional Banking & Markets

2 2 The Commonwealth Bank of Australia Australia’s largest bank by market capitalisation Statutory NPAT A$7,677m Cash NPAT A$7,819m Return on equity 18.4% Total assets A$754b Cash earnings per share A$4.86 Dividend per share A$3.64 Basel III CET1 (International) 11.0% $101b June 2011 $135b June 2012 $137b June 2013 14.6m Customers 3,000 Institutional Clients S&PMoody’sFitch CREDIT RATING KEY FINANCIALS GLOBAL COMPARISON LIQUIDITY (AUD) Market Capitalisation (US$bn) Global Market Capitalisation Ranking Senior Debt Rating Moody’sS&P 268.021A2A+ 243.522A3A 232.444Aa3A+ 198.116Baa2A- 183.817Baa2A- 124.0110Aa2AA- 104.2915Aa3AA- 92.9118Baa1A-  Industry specialisation and understanding make the Bank an ideal partner providing balance sheet strength and broad product capability  Oil & Gas industry teams placed in key commercial and financing hubs. CBA is a Bank that actively deploys balance sheet into our client’s businesses  Broad range of debt products spanning project, corporate and acquisition finance  Strong global financial markets capabilities across commodities, foreign currency and interest rates  The only domestic Australian bank with a full in-house equity business, focused on retail and institutional clients Source: Bloomberg. As at 13 January 2014. Credit rating: S&P

3 3 Funding Options for Upstream Companies Project FinanceReserve-Based LendingBalance Sheet LendingEquity Development Finance Small Borrowing Base Large Borrowing Base Corporate Credit Facility Exploration Single Field Development Few Producing Fields Several Producing Fields plus Permitted Development Assets Large Portfolio of Producing Fields Development Assets plus Exploration Acreage refinance Funding Investments In Australia Start-Up Development of an E&P Company Mature E&P

4 4 Australian Equity Market Where does Australia stand? Source: CBA and Bloomberg Funding Investments In Australia Australian Secondary Issuances (A$bn)Market Capitalisation of Global E&P Stocks

5 5 Australian Loan Markets Australian Loan Market Volumes (A$bn)

6 6  7 LNG projects in Australia currently under construction – A$194bn total capex value  Australia benefits from geographic proximity to Asia  Ichthys LNG Project (A$42bn): –Largest project finance globally –Quality sponsors – Inpex (Japan) and Total (France) –A$20bn of debt – funded by export credit agencies and commercial banks –Forecast A$3.5bn p.a. contribution to GDP –Supported by long term take or pay LNG sales contracts into Asia –LNG prices are oil-linked Funding Investments In Australia LNG – Advent of Major Australian Energy Projects

7 7 Project Finance/Development Finance Project finance  Lending to complete a specific project  Repayment of debt from project cash flow  Security over borrower and assets  Lenders’ recourse is often limited to the project itself  Australia – 2nd largest market for project finance (after the United States) with 10% global share of project finance in 2013 Development project finance is common and characterised by  Extensive technical due diligence  P90 production profile  Guarantee from the sponsor  No dividends or asset sales  Restrictions on exploration expenditure Funding Investments In Australia

8 8 Reserve Based Lending Funding Investments In Australia $ time Facility size, with amortisation to zero Declining value of Asset 1 Extension of availability Addition of new assets allows full utilisation of facility  The structure of choice of the independent sector – flexible, revolving credit facility  Reserves based lending for multiple fields –Requires diversification – no single asset must dominate portfolio –P50 reserves can be used for producing assets –Aggregate cash flows considered –Covenants and pricing are lower than for single-asset financing

9 9 Balance Sheet Lending  Debt capacity linked to past performance  Debt covenants linked to balance sheet/ P&L rather than cash flow  Suited to larger independents –Fewer restrictions –Lower maintenance –Increased flexibility –Cheapest source of debt finance for the independent CompanyCorporate Debt (A$’bn)Total Assets (A$’bn)Market Cap (A$’bn) 4.324.831.4 3.717.013.8 2.9*7.111.0 Source: Bloomberg, company annual reports * Wholly comprised of Oil Search’s guarantee of its portion of debt associated with PNG LNG project; guarantee falls away on completion.

10 10 Australian Bond Markets Significance of the A$ MTN market in a global context has grown since 2007 A$ MTN Issuance by Industry Mining & Mining Services issuers raised A$2.3bn in the A$MTN market in 2013, accounting for 24% of total issuance (2012: 15%) A$ MTN Monthly Issuance Volumes The A$ MTN market witnessed strong issuance activity in 2013, with total volume reaching A$97.2bn (2012: A$99.9bn). While SSAs and FIs have dominated issuance, consistent flows of corporate supply has been positively supported by investors. A$ MTN Issuance by Sector Corporate issuance remains under-represented in the A$ MTN market in 2013. The overall contribution to total market supplies has improved in recent years to 10.2% (2012: 9.6% and 2011: 5.6%) as issuers have taken advantage of the very favourable demand conditions Redemptions (A$bn) Monthly Bond Redemptions The A$99bn of maturities over FY14 (FY13 A$72bn) is expected to drive continued support for primary issuance Source: CBA and Bloomberg as at 21 January 2014

11 11 Highlight Transactions

12 12 Grant Willis Managing Director Natural Resources P: +44 20 77106990 E: 85 Queen Victoria St, London EC4V4HA Client Coverage Group Michael Thorpe Managing Director P: +61 (0)2 9118 4337 E: 201 Sussex Street Sydney 2000 Andrew Loadsman Executive Director Natural Resources P: +61 (0)2 9118 4330 E: 201 Sussex Street Sydney 2000 Charles Davis Executive Director P: +61 (0)2 9118 4304 E: 201 Sussex Street Sydney 2000 Jeff Heazlewood Director Natural Resources P: +61 (0)2 9118 4339 E: 201 Sussex Street Sydney 2000 Jon Verlander Executive Director P: +1 713 3419751 E: 811 Main Street, Suite 4675, Houston, TX, USA Project Finance Scott Speedie Managing Director P: +61 (0)2 9118 4333 E: 201 Sussex Street Sydney 2000 Specialized Finance

13 13 This presentation does not constitute an offer to provide finance on any terms. The provision of any such offer is subject to formal review and credit approval, satisfactory due diligence, sign off by legal, tax, accounting and other professional advisers and execution of satisfactory documentation. The Commonwealth Bank shall not be bound unless and until final terms are agreed and formal documentation is signed. That final documentation may not necessarily mirror the contents of this presentation and any actions you may choose to take should not be taken in reliance on this presentation. The information contained herein is confidential and is the proprietary structure of the Commonwealth Bank. It is provided on the basis that you will not disclose its contents to any persons other than directors, employees and advisors without the written consent of the Commonwealth Bank. It is not to be discussed either directly or indirectly with any other financier. This obligation will not apply if the information is available to the public generally (except as a result of a previous breach of this confidentiality obligation) or you are required to disclose it by law. © Copyright Commonwealth Bank Australia

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