Transcript Presentation Title

Financing Energy Sector
Requirements, Challenges and Opportunities
Jagannatha Kumar,
CFO, Reliance Petroleum Ltd.
July 2006
RIL’s Existing Refinery At Jamnagar, Gujarat
Contents
Financing Requirements for Energy Sector
Key Challenges in Financing
Sources of Finance
Key Requirements
RPL - A case Study
www.ril.com
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Contents
Financing Requirements for Energy Sector
Key Challenges in Financing
Sources of Finance
Key Requirements
RPL - A case Study
www.ril.com
3
Increase in World Energy – Production and Consumption
1971-2000
2001-2030
Almost all the increase in production will occur outside OECD
www.ril.com
Source
:IEA
4
Energy Investment by Region 2001-2030
More than $ 16 Trillion ($550 bn/ year) needs to be invested in
Energy Supply infrastructure till 2030. India needs average
investment of USD ~25 Bn per annum
www.ril.com
Source
: IEA
5
World Energy Investment 2001-2030
Except for electricity, production accounts for majority of investment
in supply chain
www.ril.com
Source
: IEA
6
Energy investment share in GDP 2001-2030
Much higher share of GDP in developing countries than in OECD
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Energy Investment and Domestic Savings
Challenge is to channel some of the domestic savings to
investments in Energy sector
www.ril.com
Source
:IEA
8
Contents
Financing Requirements for Energy Sector
Key Challenges in Financing
Sources of Finance
Key Requirements
RPL - A case Study
www.ril.com
9
Financing- Challenges
 Pressure on Public Sources
 Limitations of Private Investments
 Availability of Institutional Finance:
– Bankability of Projects
– Risk Appetite of Banks/FI
– Exposure Norms
 Sector caps and
 Company/Group caps
Need to Diversify
www.ril.com
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Contents
Financing Requirements for Energy Sector
Key Challenges in Financing
Sources of Finance
Key Requirements
RPL - A case Study
www.ril.com
11
Sources Of finance
 Need to tap all possible sources of finance.
– Promoter and Market Equity (Availability of funds,
expectations of returns, cost of servicing)
– Domestic Banks and FIs (Lack of depth, Exposure
Norms, cost of borrowing)
– Domestic Bond Market (Under developed, lack of
depth)
– Offshore debt (Exchange risk, Political/Regulatory
risks, Lack of appetite for longer tenors)
Need to have proper balance of various sources
www.ril.com
12
Contents
Financing Requirements for Energy Sector
Key Challenges in Financing
Sources of Finance
Key Requirements
RPL - A case Study
www.ril.com
13
Key requirements to get finance
 Stable regulatory framework
 Robust Business Model
 Resourceful Promoters with adequate experience and
financial strength
 Optimum Debt Equity Mix
 Competitive Costs
 Optimum Size
 Risk Allocation amongst various parties
Need to have a well structured project
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Contents
Financing Requirements for Energy Sector
Key Challenges in Financing
Sources of Finance
Key Requirements
RPL - A case Study
www.ril.com
15
RPL: Key Strengths
Strong Promoters
– India’s only private sector company in Fortune Global 500
Low capital costs
– Amongst lowest both in terms of $/bbl as well as
$/complexity bbl
Global size and scale
– Will be amongst Top-10 refineries globally
Superior complexity
– Nelson Complexity Index of ~14
Robust Business Model
– Wide feedstock and product options and positive GRM
outlook
Well structured project meeting requirements of various parties
www.ril.com
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Results So Far…………
 Entire Equity Raised Including by way of Pre IPO
placement of USD 600 Mn and Net Public Offer of USD
600 Mn.
 Chevron invested Rs 1350 Crores (~USD 300 mn) in the
project for 5% equity stake
 IPO generated demand for 23,050 Mn shares (~USD 32
Bn) against offer size of 450 Mn shares
 QIB demand of over ~25 Bn including FII demand of
~USD 21 Bn;
 Over 1.4 Mn investors.
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Set New Benchmarks
RPL
Prev. Best
Overall
Subscription
51.22x
13.14x
QIB Demand
USD 25.37 BN
USD 10.69 BN
137%
Retail Demand
USD 2.77 BN
USD 1.07 BN
250%
# Applications
2.10 MM
1.45 MM
45%
Monies Collected
USD ~7 BN
USD 4.49 BN
39%
290%
Note: (1) IPOs above USD 500 MM
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Summary
 Large investment requirements
 Limited availability of long term sources
 Need to attract investments from diverse sources
 Enabling investment framework is key requisite
www.ril.com
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Thank You