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Creditworthiness of

Project
CREDITOR PERSPECTIVE - PETROZUATA C.A
Group 3 | Section B
Abhishek Singh PGP/16/03
Mamta Madhumita PGP/16/29
Vivek Pratap Singh PGP/16/57

Deepak Kumar PGP/16/16


Sudhansu Datta PGP/16/53
Pranay Meshram PGP/16/323

Repayment Risk
For investment grade, minimum DSCR should exceed 1.80X
and under various scenarios, it should exceed 1.50X
D/V ratio is 60%
Minimum DSCR is 2.08
Thus it can be given investment grade
D/V ratio is 70%
Minimum DSCR is 1.787
Thus it can be given investment grade

Year
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034

Cash
available
for Debt
Service Total Debt
(Operati Service
ng CF)
(Outflow) DSCR

317,481
384,765
389,154
366,575
401,552
398,211
433,477
435,267
438,118
373,182
371,469
378,471
387,428
328,978
358,441
391,545
383,528
382,868
327,531
308,024
283,051
299,464
295,554
294,578
289,656
289,705
278,074
276,806
274,449
263,604
247,540
250,329
242,937
240,644
226,196

-61,134
-86,816
-94,955
-111,556
-160,922
-157,694
-154,466
-176,949
-188,009
-200,307
-201,204
-210,153
-166,148
-150,455
-158,377
-164,964
-85,668
-87,403
-124,573
-137,103
-68,691
-6,653
-6,653
-6,653
-6,653
-81,653

2.845934
2.391003
2.467779
2.373176
2.269309
2.118042
2.164063
2.163312
2.084757
2.246082
2.468971
2.389684
2.348561
3.84015
4.101015
3.143097
2.797371
5.573772
49.23057
46.29851
42.54487
45.01187
3.619634

DSCR for D/V= 0.6

Cash
available
for Debt
Service Incrementa
(Operati l Debt
Year
ng CF)
Service
DSCR
1996
0
1997
-71,323
1998
-101,285
1999
-110,781
2000 317,481
-130,149 2.439372
2001 384,765
-187,742 2.049431
2002 389,154
-183,976 2.115239
2003 366,575
-180,210 2.034151
2004 401,552
-206,441 1.945122
2005 398,211
-219,344 1.815465
2006 433,477
-233,692 1.854911
2007 435,267
-234,738 1.854267
2008 438,118
-245,179 1.786935
2009 373,182
-193,839 1.925213
2010 371,469
-175,531 2.116261
2011 378,471
-184,773 2.048301
2012 387,428
-192,458 2.013052
2013 328,978
-99,946 3.291557
2014 358,441
-101,970 3.515156
2015 391,545
-145,335 2.694083
2016 383,528
-159,954 2.397747
2017 382,868
-80,140 4.777519
2018 327,531
-7,762 42.19763
2019 308,024
-7,762 39.68444
2020 283,051
-7,762 36.46703
2021 299,464
-7,762 38.58161
2022 295,554
-95,262 3.102544
2023 294,578
0
2024 289,656
0
2025 289,705
0
2026 278,074
0
2027 276,806
0
2028 274,449
0
2029 263,604
0
2030 247,540
0
2031 250,329
0
2032 242,937
0
2033 240,644
0
2034 226,196
0

DSCR for D/V= 0.7

D/V ratio is 80%


Minimum DSCR is 1.56
Thus it can be given investment grade

D/V ratio is 90%


Minimum DSCR is 1.38
DSCR is below 1.50X
Hence, the project cannot be given investment
grade

Cash
available
for Debt
Service Incrementa
(Operati l Debt
Year
ng CF)
Service
DSCR
1996
0
1997
-81,512
1998
-115,755
1999
-126,607
2000 317,481
-148,741 2.13445
2001 384,765
-214,563 1.793252
2002 389,154
-210,259 1.850835
2003 366,575
-205,955 1.779882
2004 401,552
-235,932 1.701982
2005 398,211
-250,679 1.588532
2006 433,477
-267,076 1.623047
2007 435,267
-268,272 1.622484
2008 438,118
-280,204 1.563568
2009 373,182
-221,531 1.684561
2010 371,469
-200,607 1.851728
2011 378,471
-211,169 1.792263
2012 387,428
-219,952 1.761421
2013 328,978
-114,224 2.880113
2014 358,441
-116,537 3.075761
2015 391,545
-166,097 2.357323
2016 383,528
-182,804 2.098028
2017 382,868
-91,588 4.180329
2018 327,531
-8,871 36.92293
2019 308,024
-8,871 34.72388
2020 283,051
-8,871 31.90865
2021 299,464
-8,871 33.75891
2022 295,554
-108,871 2.714726
2023 294,578
0
2024 289,656
0
2025 289,705
0
2026 278,074
0
2027 276,806
0
2028 274,449
0
2029 263,604
0
2030 247,540
0
2031 250,329
0
2032 242,937
0
2033 240,644
0
2034 226,196
0

DSCR for D/V= 0.8

Cash
available
for Debt
Service Incrementa
(Operati l Debt
Year
ng CF)
Service
DSCR
1996
0
1997
-91,701
1998
-130,224
1999
-142,433
2000 317,481
-167,334 1.897289
2001 384,765
-241,383 1.594002
2002 389,154
-236,541 1.645186
2003 366,575
-231,699 1.582117
2004 401,552
-265,424 1.512873
2005 398,211
-282,014 1.412028
2006 433,477
-300,461 1.442709
2007 435,267
-301,806 1.442208
2008 438,118
-315,230 1.389838
2009 373,182
-249,222 1.497388
2010 371,469
-225,683 1.645981
2011 378,471
-237,566 1.593123
2012 387,428
-247,446 1.565707
2013 328,978
-128,502
2.5601
2014 358,441
-131,105 2.73401
2015 391,545
-186,860 2.095398
2016 383,528
-205,655 1.864914
2017 382,868
-103,037 3.715848
2018 327,531
-9,980 32.82038
2019 308,024
-9,980 30.86567
2020 283,051
-9,980 28.36324
2021 299,464
-9,980 30.00792
2022 295,554
-122,480 2.41309
2023 294,578
0
2024 289,656
0
2025 289,705
0
2026 278,074
0
2027 276,806
0
2028 274,449
0
2029 263,604
0
2030 247,540
0
2031 250,329
0
2032 242,937
0
2033 240,644
0
2034 226,196
0

DSCR for D/V= 0.9

Cost of debt vs. D/V ratio


Sensitivity Analysis
Cost OF
Debt
25%

8%
9%
10%
11%
12%

0.4
21.87%
21.87%
21.87%
21.87%
21.87%

0.5
24.22%
24.22%
24.22%
24.22%
24.22%

0.6
25.62%
25.62%
25.62%
25.62%
25.62%

0.7
26.18%
26.18%
26.18%
26.18%
26.18%

0.8 D/V
26.02%
26.02%
26.02%
26.02%
26.02%

Type of Debt to be used


Type of Debt

Advantages

Disadvantages

Agency Debt

Large sum of unsecured loan of amount


$200 mn without PRI

Remaining of the debt of the debt would


require PRI which would increase cost of
debt

Bank debt

Drawing was possible on credit line of


Petrozuata to match cash inflows and
outflows

Smaller amount and Short maturity of this


type of debt posed serious risk in case of
constructional delays and oil price
fluctuations
Came with restrictive covenants
Variable interest rate will lead to added risk
Higher arrangement period for covered
debt (12-18 months)

Public Bond

Rule 144A

Provide huge sum of capital as compared


to other options
Long maturity, fixed interest rates and
flexible covenants

Easy execution and arranged in short time


(close to 6 months)

Funds raised in lump sum


Negative carry because of excess funds
would lead to losses
Low probability of availability of public debt
markets in Venezuela
Dependent on Venezuelan economic
stability and US bond market
Higher risk

Petrozuata Credit worthiness


Stone & Webster Overseas Consultants concluded that,
Project design: in accordance with good industry practice
Reasonable projections for performance and costs
Both Conoco and PDVSA conducted initial tests to confirm the presence and
quality of the oil in the Orinoco Belt, tests that were subsequently verified by an
independent consultant
Conoco guaranteed to buy all the output that Petrozuata would produce for the
next 35 yrs
Conoco & PDVSA guaranteed to pay project expenses, including any unexpected
cost overruns
The project passed 90 days completion tests (to make sure that the project can
produce syncrude at pre-determined quantities and qualities)
Project does not takes care of the price volatility of Maya and Composite crude oil

Risk Management Matrix


Type of Risk

Who bears the risk

PRE-COMPLETION RISKS
Resource, Force Majeure, Technological Risk, Delay
and Completion risk

Sponsors

OPERATING RISKS (POST-COMPLETION)


Raw material supply,out put risk,environment risk
Market risk: price

Sponsor

SOVEREIGN RISKS
Macroeconomic Risks
Political and Legal risks
FINANCIAL RISK
Funding Risk, Interest Rate risk,Debt service risk

Sposors/Creditors

Sponsors/Government

Sponsors/Creditors

THANK YOU

Appendix