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Workshop on Petrochemical Projects Saudi Integrated Petrochemical Project Sarosh Mewawalla Partner Linklaters, Milan Jun

Workshop on Petrochemical Projects Saudi Integrated Petrochemical Project Sarosh Mewawalla Partner Linklaters, Milan June 2007. Session Overview. Session overview. The Project Market Trends Financing Structure Security Structure Key Rights of ECAs Process Management. The Project.

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Workshop on Petrochemical Projects Saudi Integrated Petrochemical Project Sarosh Mewawalla Partner Linklaters, Milan Jun

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  1. Workshop on Petrochemical Projects Saudi Integrated Petrochemical Project Sarosh Mewawalla Partner Linklaters, Milan June 2007

  2. Session Overview

  3. Session overview • The Project • Market Trends • Financing Structure • Security Structure • Key Rights of ECAs • Process Management

  4. The Project

  5. EMEA Petrochemical Deal of the Year – SEPC Project Finance International Awards 2006 Global Deal of the Year - SEPC Euromoney Project Finance Deals of the Year 2006

  6. The Project Main features • Sited in Al Jubail Industrial City, Kingdom of Saudi Arabia • Integrated olefins complex • cracker producing 1,008,000 tpa of ethylene • polyethylene units producing 400,000 tpa HDPE and 400,000 tpa LDPE • EPC contracts • cracker – consortium of Linde and Samsung • polyethylene units - Tecnimont • Long term lifting contracts with sponsors (Tasnee and Basell) for HDPE and LDPE • Competitively priced feedstock from Saudi Aramco

  7. The ProjectTypical Project Structure – simple version Construction Contractors Feedstock Supplier Technology Provider Project Company operation products market

  8. Royal Commission Tasnee Petrochemicals Sub-Land Lease Agreement Sipchem Engineering & Procurement Contract Engineering & Procurement Contract Sub-Land Lease Agreement Linde/Samsung Tecnimont Early Works Agreement Early Works Agreement Hostalen License Agreement Lupotech License Agreement PMC Onshore Agreement PMC Offshore Agreement Technology Provision Agreement Fluor Linde Basell The Projectcont’d Pre-Operations Contracts Land Lease Agreement Land Lease Agreement PROJECT COMPANY Construction Contract Construction Contract PE Plants Cracker

  9. The Projectcont’d Operational Contracts Royal Commission Saudi Aramco Tasnee Petrochemicals Tasnee Petrochemicals Sipchem Propane Pipeline Access Agreement Utilities Supply Agreement Utilities Supply Agreement Sub-Land Lease Agreement Sub-Land Lease Agreement Ethane & Propane Supply Agreement Administrative & Operational Services Agreement SABIC Ethylene Pipeline/Port Access MoU SaudiPolyolefinsCompany Tasnee Petrochemicals Petrokemya Ibn Zahr Butene-1 Pipeline/Port Access/Supply MoU SaudiPolyolefinsCompany Ethylene Supply Agreement Nitrogen Supply Agreement Ethylene Supply Agreement Nitrogen Supply Agreement Tasnee Petrochemicals Ethylene Supply Agreement Hostalen License Agreement LDPE MOA Agreement HDPE MOA Agreement LDPE MOA Agreement HDPE MOA Agreement Lupotech License Agreement Propylene Supply Agreement Sipchem Sahara Technology Provision Agreement Tasnee Petrochemicals Marafiq GAS Basell Linde Basell Land Lease Agreement Land Lease Agreement Methane Supply Agreement Propylene Pipeline/Port Access MoU PROJECT COMPANY

  10. Market Trends

  11. Market Trends Main features - Contractual • Contracted Offtake – market risk vs fixed revenue stream • Expansion planned • Proprietary technology • No a single EPC “wrap” • No completion guarantee • Integrated site – shared services • No separate O&M • Close to low cost feedstock supplier • Sponsors as offtakers

  12. Market Trends cont’d Main features - Key Risks • Market risk • Move to sources of cheap feedstock / nearer to growing markets – political risk • Rising construction prices • Completion guarantees • Move to multi-project sites/greater integration

  13. Market Trends cont’d Main features – ECA Role • Process led by financial adviser of borrower / sponsors • ECAs appointed at the outset • Lead the process of structuring the transaction • Agree detailed term sheet with ECAs • Commercial banks subject to competitive bidding on agreed term sheet • Limited negotiation following agreement of detailed term sheet with ECAs

  14. Financing Structure

  15. US$3,426m multi-sourced package of Commercial Banks, ECA (SACE, Hermes, KEIC and K-EXIM), SIDF and PIF Loans Financing Structure Debt Commercial Banks Loan ~ US$ 882 m SACE Supported Loan EUR 250 m Hermes Supported Loan EUR 200 m KEIC Supported Loan EUR 160 m K-EXIM Supported Loan US$ 200 m SIDF Loan US$ 320m PIF Loan US$ 400m Total Debt US$ 2,626m EQUITY Private Shareholders US$ 800 m Total Available Funding~US$ 3,426m

  16. Financing Structure SECURITY AGENT ACCOUNTAGREEMENT ACCOUNTBANK SECURITYDOCUMENTS INTERCREDITORAGREEMENT LENDERS BORROWER ECAs & Multilaterals SHAREHOLDERSAGREEMENT SPONSOR SUPPORT AGREEMENT FACILITYAGREEMENT SHAREHOLDERS

  17. Security Structure

  18. Security Structure Main features in Saudi Arabia • Limited security available • Untested legal environment • Preferrential treatment for SIDF • SIDF Intercreditor Arrangements • “Defensive” Security

  19. Security Structure (cont’d) Onshore Security package • Onshore Share Pledge over 100% of shares of Saudi Holdco (which holds 75% of the shares in the Borrower) • Onshore Project Accounts Security (granted by the Borrower over the disbursement, revenues, operating, debt service, debt service reserve and distribution accounts) • Onshore Assignment Agreement (assignment over Project Documents governed by Saudi Arabian law (including Approvals and certain Insurances) granted by the Borrower) • Onshore Assignment of Reinsurances (granted by the Insurers) • Onshore Assignment of IP Rights (granted by the Borrower) • SIDF Security (granted by the Borrower in favour of SIDF): (i) Plant and Equipment Pledge (over the Borrower’s plant and equipment), (ii) Mortgage (over the Borrower’s interest in the Site and the Plant) and (iii) Assignment (over the Technology Licences and SIDF Insurances) • Security Power of Attorney (security PoA granted (i) by the Borrower, (ii) by a Saudi Shareholder and GOSI, and (iii) each Shareholder of the Borrower in respect of their ownership interest) • Assignment of Residual Proceeds (granted by the Borrower over its rights to certain residual proceeds of enforcement of the SIDF Security)

  20. Security Structure (cont’d) Offshore Security Documents • Offshore Share Pledge over 100% of shares of the Basell Shareholder (which holds 25% of the shares in the Borrower) • Assignment of Subordinated Loans (granted by the Sponsors) • Offshore Charge and Assignment (fixed and floating charge assignment granted by the Borrower) • Offshore Assignment of Reinsurances (granted by the Insurers) • Offshore Disbursement Account Security (security over the Korean Disbursement Account granted by the Borrower) • Offshore Indebtedness Security (any of the Sponsors’ financial indebtedness subordination or assignment as permitted under the ECRA)

  21. Key Rights of ECAs

  22. Rights of ECAs • Key rights required by ECAs: • Subrogation – at law or under contract • Contractual rights to step in under guarantee • Right to information – specific information and reporting provisions • Right to instruct lenders / control voting process – under contract • Largely found in facility agreement and intercreditor agreement

  23. Rights of ECAs cont’d • Key issues in Intercreditor Agreement • Parties to ICA and appointment of Security Agents and Intercreditor Agent • Security • Process for voting / decision-making amongst creditors • Majorities and decisions as to remedies

  24. Process Management

  25. Process Management • Types of decision • conditions precedent • waivers • enforcement

  26. Process Management cont’d • Conditions Precedent IC Agent notifies Facility Agents that all documentary conditions precedent satisfied Each Fac Agent /ECA confirms to IC Agent that all documentary conditions precedent, including ECA CPs, are satisfied All confirmations from Fac Agents / ECAs requesting extension due no > 10 days Decision Date Final Decision Date Agent notifies ECA and seeks instructions from ECA Notify Borrower Notify Borrower

  27. Process Management cont’d Waivers and amendments (cont’d) IC Agent notifies Borrower & Senior Creditors/ Lenders of waiver request and threshold and due date for decision Each Lender/ECA gives vote to Agent or requests extension of time (no > 10 days) All votes from Lenders / ECAs requesting extension due Usually > 20 days not > 10 days Final Decision Date Agent notifies ECA and seeks instructions from ECA Decision Date

  28. Process Management cont’d • Enforcement Event of Default occurs Any Fac Ag or ICA requests vote x days - Majority Lender Vote x+[30] days – Super Majority Lender Vote [Thereafter - Single Lender Group Vote] ICA takes action on instructions of Senior Creditors Value of x depends on type of E0D (credit, major or other)

  29. Any questions?

  30. Linklaters

  31. Linklaters • Awards 2006 • Global Law Firm of the Year 2006 • Project Finance Team of the Year 2006 • EMEA Petrochemical Deal of the Year – SEPC • EMEA Renewables Deal of the Year – Enersis • EMEA Power Deal of the Year - Siciliaenergia Waste to Energy • Asian Petrochemical Deal of the Year - Reliance Petroleum • North American PPP Deal of the Year - Golden Ears Bridge • Global Deal of the Year - SEPC • North American PPP Deal of the Year - Golden Ears Bridge • North American Midstream Oil & Gas Deal of the Year - Canaport LNG • European Renewables Portfolio (Wind/Hydro) Deal of the Year – Enersis • European PPP Deal of the Year - Limerick Tunnel PPP • European Refinancing Deal of the Year - M6 Refinancing • Asia Project Finance Deal of the Year (Transport) - Uijeongbu Light Rail Project • Renewables Legal Adviser of the Year • Oil & Gas Legal adviser of the Year • Deal of the Year - Golden Ears Bridge • Project Finance Deal of the Year - Limerick Tunnel PPP • Asian Project Finance Deal of the Year - Uijeongbu Light Rail Project • Project Finance Deal of the Year – Laibin • Airport Finance Law Award – Initial Public Offering of Aéroports de Paris • Port Finance Law Award – DP World’s takeover of P&O

  32. Linklaters • Market Position • Ranked “Tier 1”* for project finance, energy and infrastructure • Only firm with international projects team in Italy • Project Finance Law Firm of the Year 2006 • 150+ dedicated Energy lawyers across globe • World’s largest Projects practice • $500+ billion closed deals • * Chambers & Partners legal rankings

  33. Linklaters • The Firm • World’s pre-eminent project finance law firm • 2500 lawyers • 30 offices • 23 countries

  34. Contacts Sarosh Mewawalla Linklaters Partner, Global Projects Specialist – ECA Financings sarosh.mewawalla@linklaters.com +39 02 883935217 A07890354

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