Submitted by: Submitted by povo7777
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Category: Business and Industry
Date Submitted: 01/23/2011 08:46 PM
Case study “Petrozuata C.A.”
(49.9% Interest)
(50.1% Interest)
Petrolera Zuata
Agenda
• Petrozuata C.A. • Project financing opAons ‐ Agency debt ‐ Bank debt ‐ Rule 144A bond market • Project risks + Deal structure protecAon
Agenda
• Internal financing opAon • Financing soluAon • Investment grade raAng issue • Pros and cons of invesAng in project bonds • Pros and cons of invesAng in equity capital
Petrozuata C.A.
• Fully integrated producAon, transportaAon and refinery project • The first experience of mutual projects for PDVSA • AmbiAous construcAon schedule • SubstanAal expenditures ($2,425 bln) ‐ $1.450 billion to be financed through debt • 50,1% ‐ 49,9% equity structure ‐ The joint venture is classified as a private company ‐ Not bound by public companies regulaAons ‐ 34% income tax rate • PDVSA retains voAng control!
Project financing opAons
• Project finance ‐ Agency debt ‐ Debt financing ‐ Public bond market ‐ Rule 144A market • Internal debt finance by PDVSA The deal ra>onale: To create win‐win situaAon for both parAes of the
deal which would provide incenAve to follow the contract terms and avoid opportunisAc behavior
Project finance opAon
Advantages Disadvantages Inability to receive resources from external sources Increased influence and accountability to external investors Higher disclosure of financial and strategic informaAon Limited managerial decision making High legal costs Difficult to exit syndicaAons
• Risk management • ‐ ProtecAon of the corporate balance sheet (risk is limited to the amount of 40% of all project costs ‐ $975 mln.) • ‐ Avoidance of potenAal ex‐post conflicts as in case if they were bilateral monopolists ‐ Risk of the project is not influenced by the • risks of other sponsor’s projects • Higher leverage ‐ Reduced agency costs • ‐ ...