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A Proposed Scenario for Financing Petropars Projects
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Dr. Gholamreza Manouchehri,
Managing Director of Petropars Company |
The availability of adequate
capital resources is a major prerequisite for sustainable development. The
banking system, by gathering savings and offering various financial
facilities, has been able to satisfy, in part, the need for funds required to
promote growth. But as banking resources are limited, other capital
requirements of the country should be procured from outside the banking
system. Experience from other countries indicates that the only option for
accessing investment resources is through expansion of capital markets. Such
expansion is possible through issuing bonds to attract foreign investments,
enhance incentives for savings, and encourage substantial investment in
economic sectors.
A primary and
important concern for Petropars is to arrange suitable financing for its
mega-projects and future projects likely to be awarded through tenders.
It is
possible to raise part of the required finances for the execution of projects
through developing partnerships and joint ventures with multinational
companies from around the world. However the balance of required funds should
be procured through loans secured from financial institutes.
Funds required for projects may also be raised through the issuance of bonds,
which has been done only by the Central Bank of
Iran, but in the
near future Petropars plans to issue and sell bonds based on the merits of its
projects to achieve the following objectives:
1. To increase debt capacity
2. Minimize conditions prior
to funding
3. Minimize costs
4. Increase repayment periods
5. Flexibility of finance
procurement and accepting commitments
6. Accelerate shareholders'
returns through extended maturities
7. Access to international
capital markets
The
successful sale of bonds by Petropars depends on fulfilling the following
three measures:
1. Securing
a ranking for credit risks
Credit risk
is the most critical concern for the debt security investor. It reflects the
risk that the bond issuer may default, that is the inability to pay the
interest and principal in full and on time. For most bonds, credit risk is
evaluated and ratings assigned by commercial rating agencies.
These
agencies analyze and focus on the evaluation of capital, liquidity, and
company commitments necessary to support credit enhancements.
Petropars plans to attract
domestic and foreign investments based on the merits of its oil and gas
projects and the feasibility study of such projects. Fortunately oil and gas
projects have demonstrated good feasibility and profitability in the past.
Thus, Petropars is hopeful to secure an investment grade ranking for its
projects from international rating agencies, which will form a foundation
reflecting the profitability of these projects.
2.
Successful execution of current projects under its management
Petropars is
currently implementing the following South Pars Gas Field Development
Projects:
Phase 1
Petropars is
the operator. With more than 99% of the work already completed, this project
is approaching the final stage of handover.
Phases
4 & 5
Development
of these phases was initially awarded to a consortium of Agip of Italy owning
60% and Petropars owning 40%. Petropars later transferred half of its share to
NICO. As of December 2003 the overall progress of this project is more than
61.8%.
Phases
6, 7 & 8
Petropars as
the main contractor signed into a partnership with Statoil from Norway as a
40% partner in the offshore section of the project and as the operator for
this part.
Following a
bid process, construction of offshore facilities was awarded to a joint
venture of Iranian, Japanese and Korean companies (namely IDRO, Toyo, JGC and
Daelim, with Toyo as the leader). As of December 2003 the overall progress of
this project was more than 11.77%
3.
Favorable financial statements
Submission of
favorable financial statements is another prerequisite for attracting
investment in bonds. Therefore, Petropars plans to increase its capital by
calling on its shareholders for further contributions. In addition Petropars
is hopeful to submit a more favorable financial report once remunerations due
from different phases of the projects are collected.
It is clear
from the past that capital markets are available in significant sizes for
well-structured project financing with strong sponsorships. Such markets can
provide effective counter balance to the role of banks and export credit
agencies and enforce discipline on the process of financing through
competition.
Thus, in the near future,
capital markets should be expected to increase momentum and enthusiasm for
financing well-structured mega-projects. |
