Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
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 2 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 www.ril.com 7 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 10 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 www.ril.com 14 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 16 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. www.ril.com 17 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 www.ril.com 18 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 19 Thank You