Alaska LNG in the Market Context

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affordable energy*profitable export*Valdez LNG*Alaskan LNG*alternative sources*LNG*North Slope gas export*The Alaska Gasline Project*international export

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Alaska LNG in the Market Context

  1. 1. GREENGATE
  2. 2. GREENGATEAlaska LNG in the Market ContextValdez, Alaska13 September 2012Radoslav ShipkoffDirectorGreengate LLC
  3. 3. GREENGATEI. Introduction to Greengate LLC
  4. 4. GREENGATEWho We Are Independent financial advisory services firm Specializing in complex project and infrastructure debt financings Our clients:  Sponsors and developers  Financing institutions  Government entities  Institutional investors 4
  5. 5. GREENGATEOur Sector Experience Sectors LNG Experience Oil & Gas and Refining Petrochemicals, Chemicals and Industrial Multiple Closed Project Finance Pipelines Transactions: Conventional Power 45+ MMTA Renewable Energy Aggregate Volume Nuclear Energy $60 Billion Satellites and Telecom Aggregate Project cost Infrastructure / PPP 5
  6. 6. GREENGATEGreengate Deal Map 6
  7. 7. GREENGATELeague Tables: Project Finance International 2011 PFI League Tables 2010 PFI League Tables Americas Americas Advisory Mandates Won in 2011 Advisory Mandates Won in 2010 1. Ernst & Young 1. PWC 2. HSBC 2. Greengate 3. PWC 3. BNP Paribas 4. Greengate 4. KPMG 5. Taylor de Jongh 5. HSBC 7
  8. 8. GREENGATEThe Financing Timeline: Our Role Financial Development Period Close Pre-Financing Activities Project Financing Advise on equity purchase agreements  Advise on implementation of overall Advise on JV and shareholder agreements financing strategy Assist in EPC contractor bid evaluation  Prepare and evaluate financing term sheets Advise on project commercial agreements  Prepare information memoranda and related materials for financing institutions Develop and maintain financial models and advise on key assumptions  Financial model: Base case and sensitivities Advise on financial structuring issues:  Interact and manage work performed by Capital structure, leverage ratios, lease independent consultants: technical and structures, credit counterparty issues, etc. environmental, market, insurance, shipping Develop and evaluate financing plan  Advise on selection of lead arrangers where options: sources of funding, amounts, applicable pricing, tenor, etc.  Assist in negotiating financing terms Identify, analyze and develop solutions for  Advise on financing documentation mitigating project risks  Assist in financial closing activities 8
  9. 9. GREENGATEII. Project Finance for LNG: Issues and Challenges
  10. 10. GREENGATEProject Finance for LNG: Issues and Challenges LNG Projects: Highly capital intensive, large capital requirements:  Liquefaction/Storage/Marine Facilities: At 1,200 per ton capital cost, $12 billion for each 10 MMTA LNG capacity; some projects’ costs are higher  Upstream: If upstream development required, significant additional capital cost; can exceed cost of liquefaction  field development and production  gas processing  pipeline transportation Commercial Structure: Vertically Integrated / Non-Integrated 10
  11. 11. GREENGATEProject Finance for LNG: Issues and Challenges Potential Funding Sources:  Commercial Banks  in current environment, liquidity/funding cost challenges, higher pricing  market may recover in coming years  Export Credit Agencies (OECD / Non-OECD)  option for direct loan or guarantees, depending on program  “tied” and “untied” loans  long tenors generally available  Project Bonds (144A, Private Placement)  project rating: completion risk and mitigation, offtaker rating, coverage ratios, etc.  availability predicated on general market conditions 11
  12. 12. GREENGATEIII. Alaska LNG in Context
  13. 13. GREENGATECase Study A: PNG LNG  Location: Papua New Guinea  Initial Capacity: 6.6 MTPA (2 trains)  Unincorporated Joint Venture:  ExxonMobil 33.2%  Oil Search Limited 29.0%  Santos Limited 13.5% Project Cost: $16 billion  Nippon Oil 4.7%  Government of PNG 16.8% Project finance loan agreements signed:  PNG Landowners 2.8% December 2009 Financial Close: March 2010  LNG Offtake:  TEPCO 1.8 MTPA Largest ever project financing in the  Osaka Gas 1.5 MTPA energy sector  CPC (Taiwan) 1.2 MTPA  Sinopec: 2.0 MTPA PFI 2009 Asia Pacific Deal of the Year  First LNG Cargo: 2014 Project Finance 2009 Asia Pacific Oil & Gas Deal of the Year 13
  14. 14. GREENGATECase Study A: PNG LNG (cont’d) Non-associated and associated gas sourced from multiple fields 700 km new onshore and offshore gas pipeline and new 120 km condensates pipeline 6.6 MTPA, 2 train LNG plant, storage and marine facilities near Port Moresby Vertically integrated commercial structure: Upstream Production, Processing Facilities, Pipelines and LNG Plant Large financing requirements (70/30 leverage). Multi-source financing:  Six ECAs (US Ex-Im Bank, JBIC, NEXI, China Ex-Im, SACE and EFIC): $ 8.30 billion  Commercial Banks: $ 1.95 billion  ExxonMobil Co-Loans: $ 3.75 billion  Total : $14.00 billion 14
  15. 15. GREENGATECase Study B: Australia Pacific LNG  Location: Queensland, Australia  Initial Capacity: 9 MTPA (2 trains)  Joint Venture between:  ConocoPhillips 37.5%  Origin Energy 37.5%  Sinopec 25.0%  LNG Offtake:  Sinopec 7.6 MTPA  Kansai Electric 1.0 MTPA First project financing for a coal seam gas (CSG) to  Project Cost: $20+ billion LNG project  First LNG Cargo: 2015  Financing commitments for downstream portion secured in May 2012: $8.5 billion  China Ex-Im Bank  US Ex-Im Bank  Commercial Banks 15
  16. 16. GREENGATECase Study B: Australia Pacific LNG (cont’d) 9 MTPA, 2 train LNG plant, storage and marine facilities at Curtis Island, near Gladstone Multiple LNG projects located at Curtis Island 530 km gas transmission pipeline Upstream CSG development in Surat and Bowen basins: • hundreds of wells per year • gas gathering lines • gas processing facilities • water treatment facilities  Non-integrated structure: Downstream (LNG plant, storage and marine facilities) financed separately 16
  17. 17. GREENGATEAlaska LNG: Challenges and Advantages  Some of Alaska’s challenges are not unique; many of its advantages are  Extensive existing infrastructure on the North Slope  Competitive with USGC and other LNG export projects:  cost of 800-mile pipeline, but…  lower gas acquisition costs relative to US Gulf Coast export projects  lower shipping cost to Asian markets  lower unit liquefaction costs in comparison with some other projects (high pressure feed gas from pipeline, ambient conditions)  Deep water port in Valdez allows use of large LNG tankers 17
  18. 18. GREENGATEAlaska LNG: Commercial/Development Considerations  Non-integrated development:  Pipeline developed and financed as a separate entity  Smaller capital requirements for the LNG component as a standalone project  More focused development, simpler “story” to market  Allows for tolling or similar structure  LNG buyers could contract with producers/state for supply, or purchase from LNG project  Strong interest from Asian market in procuring North American LNG  Significant development work ahead is required for Alaska LNG to succeed  Alaska should not miss its “window of opportunity” 18
  19. 19. GREENGATEQuestions / Discussion
  20. 20. GREENGATEContact InformationRadoslav ShipkoffDirectorGreengate LLC1752 N Street, NW8th FloorWashington, DC 20036Phone: +1.202.887.6122Email: rshipkoff@greengatellc.com 20

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