Hamaca: fast, fat and full of firsts
Venezuela is back on the project finance map. Lead arrangers BNP
Paribas and Royal Bank of Scotland (RBS), six further ?lead'
arranging banks, and US Exim have closed $1.1 billion in senior
secured debt toward the $4 billion total funding needed for Hamaca
Phase 1 ? Venezuela's latest private sector oil and gas deal.
The deal features firsts on a number of levels. The first Latin oil and gas project with US Exim pre- and post-completion cover. The first Latin oil and gas project financed under US Exim's new fast-track program. The first Venezuelan oil and gas deal to feature ECA support (Sincor, Cerro Negro and Petrozuata featured bank debt and bonds). And the first Venezuelan project to benefit from new OECP rules under which repayments can be sculpted rather than take the form of set semi-annual repayments.
The project company ? Hamaca Holdings ? is jointly owned by Phillips Petroleum (40%), Petroleos de Venezuela (PDVSA ? 30%) and Texaco (30%). The project is located in the Orinoco Belt ? encompassing 657 sq km of the biggest known hydrocarbon deposit in the world with an estimated 30 billion-plus barrels of oil (independent reserve engineer DeGolyer and MacNaughton estimates 43 billion) of which 2.1 billion will be recovered during the project's 34-year production life. Project operator will be Petrolera Ameriven, an affiliate of the sponsors.
The project is a headline deal for both independent sponsors ? ?a key element in Texaco's portfolio of high-impact upstream projects,? says John O'Connor, senior vice-president of Texaco. Hamaca represents a 12% increase in Texaco's worldwide barrels of oil equivalent (BOE) reserves and will equate to 7% of Texaco's total production when it is completed. Phillips also adds 635 million BOE to its proved hydrocdarbon reserves in 2000.
When fully operational the plant will produce 190,000 barrels per day of extra heavy 8.6-degree API crude which will be upgraded into 180,000 bpd of 26-degree API crude at the Jose oil and petrochemical complex.
The EPC contract was awarded to Fluor Daniel in September 2000 on a lump sum turnkey basis. Construction on the site began in August 2000. Partial completion is met when the project achieves 120,000 bpd. Full completion is projected for 2004.
The speed of the financing was blistering ? intercreditor negotiations took around four months after RBS and BNP Paribas beat off competition from a Citibank-led group for the mandate in February 2001. Strong sponsors and US Exim working within the same negotiating time frame (bankers usually add an extra six months negotiation for multilateral support) added to the arranger's urgency. As Michael Crosland, senior director at RBS structured finance enthuses: ?It's an all time time record. It's a brilliant example of how banks and multilaterals can work together. The message is that US Exim can act like a commercial bank.?
Royal Bank of Scotland (documentation agent) and BNP Paribas (administrative agent) headed up the eight-strong commercial syndicate: Bank of Tokyo Mitsubishi (syndication agent), Barclays Bank, Bayerische Landesbank, Canada's Export Development Corporation, ING Barings and WestLB (technical agent).
Rated investment grade by Fitch and Moody's the deal surpasses Venezuela's sovereign rating currency ceiling. Pricing on the $470 million commercial debt is 85bp pre-construction and 225-425 bp over libor during paydown. Pricing on the $628 million US Exim guaranteed portion has not been released but is said to be ?very competitive given current market conditions.? Tenor on the commercial tranche is 14 years while US Exim has gone to 17 years.
In terms of offtake risk the project sponsors have agreed to offtake any output not sold under a life-of-project agreement. And in the event of a shortfall of funds for debt service due to a drop in oil pricing the sponsors have agreed a margin support mechanism based on selling the syncrude at within $2 of a price formula based on Louisiana Light Sweet (LLS) crude oil.
All project revenues are dollar denominated and paid to a security trustee through offshore accounts. Under Moody's base case scenario minimum, with leverage of 30% and a product pricing assumption of $18/bbl LLS run flat, a minimum debt service cover ratio (DSCR) of 2.25x is achievable, with an average 10-year DSCR of 2.67x.
Supplemental project debt can be raised up to a DSCR of 1.95x coupled with a ratings reaffirmation or majority lender's consent. A 40% equity level must be maintained for the life of the debt. However, equity can take the form of capital contributions (including asset contributions) subordinated loans from the sponsors to their respective project subsidiaries and retained cash from crude sales during the development production period.
A bond issue ? a direct obligation of the borrowers ? is already planned for when conditions in the capital markets pick up and could take total funding to beyond $2 billion.
Legal counsel on the deal comprised Freshfields for US Exim; Davis Polk for the commercial banks; and Latham & Watkins for the sponsors. Original base case assumptions were analyzed by Purvin & Getz.
General syndication is expected in this month.
The deal features firsts on a number of levels. The first Latin oil and gas project with US Exim pre- and post-completion cover. The first Latin oil and gas project financed under US Exim's new fast-track program. The first Venezuelan oil and gas deal to feature ECA support (Sincor, Cerro Negro and Petrozuata featured bank debt and bonds). And the first Venezuelan project to benefit from new OECP rules under which repayments can be sculpted rather than take the form of set semi-annual repayments.
The project company ? Hamaca Holdings ? is jointly owned by Phillips Petroleum (40%), Petroleos de Venezuela (PDVSA ? 30%) and Texaco (30%). The project is located in the Orinoco Belt ? encompassing 657 sq km of the biggest known hydrocarbon deposit in the world with an estimated 30 billion-plus barrels of oil (independent reserve engineer DeGolyer and MacNaughton estimates 43 billion) of which 2.1 billion will be recovered during the project's 34-year production life. Project operator will be Petrolera Ameriven, an affiliate of the sponsors.
The project is a headline deal for both independent sponsors ? ?a key element in Texaco's portfolio of high-impact upstream projects,? says John O'Connor, senior vice-president of Texaco. Hamaca represents a 12% increase in Texaco's worldwide barrels of oil equivalent (BOE) reserves and will equate to 7% of Texaco's total production when it is completed. Phillips also adds 635 million BOE to its proved hydrocdarbon reserves in 2000.
When fully operational the plant will produce 190,000 barrels per day of extra heavy 8.6-degree API crude which will be upgraded into 180,000 bpd of 26-degree API crude at the Jose oil and petrochemical complex.
The EPC contract was awarded to Fluor Daniel in September 2000 on a lump sum turnkey basis. Construction on the site began in August 2000. Partial completion is met when the project achieves 120,000 bpd. Full completion is projected for 2004.
The speed of the financing was blistering ? intercreditor negotiations took around four months after RBS and BNP Paribas beat off competition from a Citibank-led group for the mandate in February 2001. Strong sponsors and US Exim working within the same negotiating time frame (bankers usually add an extra six months negotiation for multilateral support) added to the arranger's urgency. As Michael Crosland, senior director at RBS structured finance enthuses: ?It's an all time time record. It's a brilliant example of how banks and multilaterals can work together. The message is that US Exim can act like a commercial bank.?
Royal Bank of Scotland (documentation agent) and BNP Paribas (administrative agent) headed up the eight-strong commercial syndicate: Bank of Tokyo Mitsubishi (syndication agent), Barclays Bank, Bayerische Landesbank, Canada's Export Development Corporation, ING Barings and WestLB (technical agent).
Rated investment grade by Fitch and Moody's the deal surpasses Venezuela's sovereign rating currency ceiling. Pricing on the $470 million commercial debt is 85bp pre-construction and 225-425 bp over libor during paydown. Pricing on the $628 million US Exim guaranteed portion has not been released but is said to be ?very competitive given current market conditions.? Tenor on the commercial tranche is 14 years while US Exim has gone to 17 years.
In terms of offtake risk the project sponsors have agreed to offtake any output not sold under a life-of-project agreement. And in the event of a shortfall of funds for debt service due to a drop in oil pricing the sponsors have agreed a margin support mechanism based on selling the syncrude at within $2 of a price formula based on Louisiana Light Sweet (LLS) crude oil.
All project revenues are dollar denominated and paid to a security trustee through offshore accounts. Under Moody's base case scenario minimum, with leverage of 30% and a product pricing assumption of $18/bbl LLS run flat, a minimum debt service cover ratio (DSCR) of 2.25x is achievable, with an average 10-year DSCR of 2.67x.
Supplemental project debt can be raised up to a DSCR of 1.95x coupled with a ratings reaffirmation or majority lender's consent. A 40% equity level must be maintained for the life of the debt. However, equity can take the form of capital contributions (including asset contributions) subordinated loans from the sponsors to their respective project subsidiaries and retained cash from crude sales during the development production period.
A bond issue ? a direct obligation of the borrowers ? is already planned for when conditions in the capital markets pick up and could take total funding to beyond $2 billion.
Legal counsel on the deal comprised Freshfields for US Exim; Davis Polk for the commercial banks; and Latham & Watkins for the sponsors. Original base case assumptions were analyzed by Purvin & Getz.
General syndication is expected in this month.
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