Description
Finance is the science of funds management, or the allocation of assets and liabilities over time under conditions of certainty and uncertainty.
Project Finance: Past, Present &Economic Future Saudi Saudi Economy – Vital
Outlook Mansoor Durrani
Vice President & Head - Project Finance The National Commercial Bank, Saudi Arabia
28 April 2009
Statistics Outlook
Zurich
Table of Contents
Global PF Market: Unprecedented Growth Global PF Market Breakup GCC region: Strong Fundamentals Recent PF Deals in GCC Impact of Global Crisis on GCC Global PF Market at Present GCC Market Future Outlook Increased Japanese Clout Project Bond Market Challenges Ahead
2
Global PF Market: Unprecedented Growth
Source: Thomson PFI
3
Global PF Market : By Geography
Source: Thomson PFI
4
Global PF Market : By Sector
Source: Thomson PFI
5
GCC Region: Impressive Growth; Strong fundamentals
GCC as a whole is 7th largest economy in the world 40% of world proven oil reserves and 23% of gas reserves Combined GDP touching USD 1000 billion in 2008 Cumulative current account surplus of USD 2500 billion, representing 30% of world deficit Favourable rating of A or above for all 6 countries by S&P Middle East becoming an industrial force
15% of world petrochemicals 20% of world fertilizers and 6% of world Aluminium are produced in GCC
Equity infused into MEA countries stands at USD 11 billion against USD 30 billion of equity invested globally in infrastructure projects during first half of 2008 Over USD 2000 billion worth of projects underway or announced in GCC Increasing level of foreign investments to finance massive projects
6
Recent Achievements: Major PF Deals in GCC
Signing Date Mar 2006 Mar 2006 Jun 2006 Jul 2007 Jul 2007 Dec 2007 May 2008 May 2008 Jun 2008 Nov 2008 Project Greater Equate Rabigh Petrochemical Yansab Qatar Aluminium Qatargas IV EMAL National Chevron Philips Saudi Kayan Maaden Phosphate La Sorbonne Sponsors Dow Chemicals/PIC Aramco/Sumitomo Sabic QP/Hydro QP/Shell Mubadala/Dubal SIIC/CP Chem SABIC Maaden/SABIC Mubadala Country Kuwait Saudi Arabia Saudi Arabia Qatar Qatar UAE Saudi Arabia Saudi Arabia Saudi Arabia UAE Commercial Debt (USD MM) 2500 2300 1700 2970 2800 4875 1880 1750 2000 350
7
Impact of Global Crisis on GCC
Source: Loan Connector, October 2008
¾ ¾ ¾
Volumes grew rapidly between 2003 and 2007 But in 2008, it declined by 50% due to global financial crisis Very few deals achieved closure in the region during the last quarter of 2008
? ? ?
Shuweihat S2: USD 900 million bridge facility for the S2 IWPP in Abu Dhabi Yahsat: USD 1.45 billion long term satellite financing in Abu Dhabi Sorbonne University: USD 383 million long term financing in Abu Dhabi 8
Impact on GCC: Bond Issuance
Source: Loan Connector, October 2008
¾ FI bond issuance ceased ¾ Only highest grade corporates could issue bonds ¾ Government guarantee programs initiated ¾ GCC volumes dropped significantly 9
Global Pricing Trend
Source: Dealogic Loan Analytics, Barclays
¾ Loan pricing shifted up across the credit curve for following reasons
? ? ?
Higher funding cost and disconnect between LIBOR and real borrowing rates Diminished capital base and Increased regulatory capital requirement Increased perceived corporate credit risk
10
Impact on GCC: Pricing Trend
¾ Margins on the rise since last 2 years ¾ Have crossed the peak level of early 2006
11
Global PF Market at Present (Q1:2009)
Source: Dealogic Global PF Review, Q1 2009
12
GCC Market: Future Outlook
Source: Barclays Capital, Dealogic
¾ GCC expected to hold lending levels flat ¾ Refinancing requirement is expected to constitute 65% of these loans
13
Increased Japanese Clout
Signing Country Project Japanese Company
JGC Marubeni Mitsui Sumitomo Chemical Sumitomo Mitsubishi Marubeni Mitsui etc Toyota Tsusho
JBIC Amount (USD MM)
262 1243 1000 2500 593 1170 1336 2100 1500 270
Dec 2003 Apr 2005 Dec 2005 Mar 2006 Apr 2006 May 2006 Dec 2007 Dec 2007 Aug 2008 Sep 2008
Oman UAE Qatar KSA Bahrain KSA UAE UAE Qatar Egypt
Sohar Refinery Taweelah B IWPP Qatar Gas 3 LNG Project Petro Rabigh Al Hidd IWPP Sharq Expansion Fujairah F2 IWPP ADNOC Ras Raffan IWPP Offshore Gas Development
14
JBIC Exposure (In USD MM)
15
Development of Project Bond Market
¾ Substantial pools of capital have been accumulated in the region ¾ However capital pool are not domiciled in the region: located in Europe, US and other countries ¾ As the regional debt capital markets have not developed meaningfully ? Limited fixed income investor base in the region primarily because ? No long tenor local currency market ? Typical bond distribution list for the Gulf is 95% banks ? Banks forced DCM out of market ? Willing to do 15-25 years tenors at aggressive pricing ? Combine ancillary business from borrower and sponsors to meet return hurdles ? DCM investor make non-relationship trades: No opportunity for ancillary income, so pricing needs to be higher ¾ A strong fixed income bid from public and private pools of capital would enhance the continued economic stability of the region ¾ Project Bond Market has an important role to play ? Strong indication that its time has come ? Very Important for Project Finance Market ? Will help offset retrenchment of banks
16
Challenges – Financing Costs & Capacity
The primary driver of financing strategy today is Capacity Larger investments mean all debt sources now important Commercial banks are insufficient for many mega projects Islamic tranches, Govt funds & ECAs increasingly critical Continued reliance on international debt capital Limited Underwriting
However
Capital costs are dropping rapidly Government stimulus packages will drive investments and provide opportunities for Project Finance Security/ covenants package will tighten Look for flexibility in structures Project Finance will continue to see a flight to quality and will remain an attractive asset class
17
Thank You ! Outlook
Saudi Economic Saudi Economy – Vital Statistics Outlook
doc_635544967.pdf
Finance is the science of funds management, or the allocation of assets and liabilities over time under conditions of certainty and uncertainty.
Project Finance: Past, Present &Economic Future Saudi Saudi Economy – Vital
Outlook Mansoor Durrani
Vice President & Head - Project Finance The National Commercial Bank, Saudi Arabia
28 April 2009
Statistics Outlook
Zurich
Table of Contents
Global PF Market: Unprecedented Growth Global PF Market Breakup GCC region: Strong Fundamentals Recent PF Deals in GCC Impact of Global Crisis on GCC Global PF Market at Present GCC Market Future Outlook Increased Japanese Clout Project Bond Market Challenges Ahead
2
Global PF Market: Unprecedented Growth
Source: Thomson PFI
3
Global PF Market : By Geography
Source: Thomson PFI
4
Global PF Market : By Sector
Source: Thomson PFI
5
GCC Region: Impressive Growth; Strong fundamentals
GCC as a whole is 7th largest economy in the world 40% of world proven oil reserves and 23% of gas reserves Combined GDP touching USD 1000 billion in 2008 Cumulative current account surplus of USD 2500 billion, representing 30% of world deficit Favourable rating of A or above for all 6 countries by S&P Middle East becoming an industrial force
15% of world petrochemicals 20% of world fertilizers and 6% of world Aluminium are produced in GCC
Equity infused into MEA countries stands at USD 11 billion against USD 30 billion of equity invested globally in infrastructure projects during first half of 2008 Over USD 2000 billion worth of projects underway or announced in GCC Increasing level of foreign investments to finance massive projects
6
Recent Achievements: Major PF Deals in GCC
Signing Date Mar 2006 Mar 2006 Jun 2006 Jul 2007 Jul 2007 Dec 2007 May 2008 May 2008 Jun 2008 Nov 2008 Project Greater Equate Rabigh Petrochemical Yansab Qatar Aluminium Qatargas IV EMAL National Chevron Philips Saudi Kayan Maaden Phosphate La Sorbonne Sponsors Dow Chemicals/PIC Aramco/Sumitomo Sabic QP/Hydro QP/Shell Mubadala/Dubal SIIC/CP Chem SABIC Maaden/SABIC Mubadala Country Kuwait Saudi Arabia Saudi Arabia Qatar Qatar UAE Saudi Arabia Saudi Arabia Saudi Arabia UAE Commercial Debt (USD MM) 2500 2300 1700 2970 2800 4875 1880 1750 2000 350
7
Impact of Global Crisis on GCC
Source: Loan Connector, October 2008
¾ ¾ ¾
Volumes grew rapidly between 2003 and 2007 But in 2008, it declined by 50% due to global financial crisis Very few deals achieved closure in the region during the last quarter of 2008
? ? ?
Shuweihat S2: USD 900 million bridge facility for the S2 IWPP in Abu Dhabi Yahsat: USD 1.45 billion long term satellite financing in Abu Dhabi Sorbonne University: USD 383 million long term financing in Abu Dhabi 8
Impact on GCC: Bond Issuance
Source: Loan Connector, October 2008
¾ FI bond issuance ceased ¾ Only highest grade corporates could issue bonds ¾ Government guarantee programs initiated ¾ GCC volumes dropped significantly 9
Global Pricing Trend
Source: Dealogic Loan Analytics, Barclays
¾ Loan pricing shifted up across the credit curve for following reasons
? ? ?
Higher funding cost and disconnect between LIBOR and real borrowing rates Diminished capital base and Increased regulatory capital requirement Increased perceived corporate credit risk
10
Impact on GCC: Pricing Trend
¾ Margins on the rise since last 2 years ¾ Have crossed the peak level of early 2006
11
Global PF Market at Present (Q1:2009)
Source: Dealogic Global PF Review, Q1 2009
12
GCC Market: Future Outlook
Source: Barclays Capital, Dealogic
¾ GCC expected to hold lending levels flat ¾ Refinancing requirement is expected to constitute 65% of these loans
13
Increased Japanese Clout
Signing Country Project Japanese Company
JGC Marubeni Mitsui Sumitomo Chemical Sumitomo Mitsubishi Marubeni Mitsui etc Toyota Tsusho
JBIC Amount (USD MM)
262 1243 1000 2500 593 1170 1336 2100 1500 270
Dec 2003 Apr 2005 Dec 2005 Mar 2006 Apr 2006 May 2006 Dec 2007 Dec 2007 Aug 2008 Sep 2008
Oman UAE Qatar KSA Bahrain KSA UAE UAE Qatar Egypt
Sohar Refinery Taweelah B IWPP Qatar Gas 3 LNG Project Petro Rabigh Al Hidd IWPP Sharq Expansion Fujairah F2 IWPP ADNOC Ras Raffan IWPP Offshore Gas Development
14
JBIC Exposure (In USD MM)
15
Development of Project Bond Market
¾ Substantial pools of capital have been accumulated in the region ¾ However capital pool are not domiciled in the region: located in Europe, US and other countries ¾ As the regional debt capital markets have not developed meaningfully ? Limited fixed income investor base in the region primarily because ? No long tenor local currency market ? Typical bond distribution list for the Gulf is 95% banks ? Banks forced DCM out of market ? Willing to do 15-25 years tenors at aggressive pricing ? Combine ancillary business from borrower and sponsors to meet return hurdles ? DCM investor make non-relationship trades: No opportunity for ancillary income, so pricing needs to be higher ¾ A strong fixed income bid from public and private pools of capital would enhance the continued economic stability of the region ¾ Project Bond Market has an important role to play ? Strong indication that its time has come ? Very Important for Project Finance Market ? Will help offset retrenchment of banks
16
Challenges – Financing Costs & Capacity
The primary driver of financing strategy today is Capacity Larger investments mean all debt sources now important Commercial banks are insufficient for many mega projects Islamic tranches, Govt funds & ECAs increasingly critical Continued reliance on international debt capital Limited Underwriting
However
Capital costs are dropping rapidly Government stimulus packages will drive investments and provide opportunities for Project Finance Security/ covenants package will tighten Look for flexibility in structures Project Finance will continue to see a flight to quality and will remain an attractive asset class
17
Thank You ! Outlook
Saudi Economic Saudi Economy – Vital Statistics Outlook
doc_635544967.pdf