PFI – Nigeria back into debt capital markets

* NLG2 seeks US$1.1bn
* NLNG working on US$2bn loan
* US$4bn satellite financing expected next year

By Rod Morrison

LONDON (Project Finance International) – A US$1.1bn
programme debt financing for Nigeria National Petroleum
Corporation (NNPC) and Exxon Mobil NGL2 liquids producing asset
has been launched to the bank market by Standard Chartered and
local bank UBA. The deal is described as a programme financing
rather than a project financing as the raising of debt will not
be linked to a specific project. But the proceeds will be used
towards drilling more oil and gas wells to serve the NGL2 plant.
The loan tenor is seven years. Exxon Mobil (XOM.N: ) is
providing 51% of the loan and the rest, uncovered by any
multilateral agencies, is intended to be supplied by
international and local banks. The debt will run side-by-side
with the US$1.275bn debt arranged by Credit Suisse in 2004,
which had a direct loan tranche from US government agency OPIC.
This loan runs for a further five years.

The NLG2 asset can support a good deal more debt as its cash
flow is more than US$500m pa. Indeed, given that the new loan is
structured as a programme financing, it is intended to raise
more debt on the asset in another debt deal next year.

Banks will be asked to bid on pricing, with bids due back in
early December. A year-end closing is planned for the loan.
Pricing indicated in the financial model is 350bp. This equates
to the pre-completion margin on the 2004 deal with the margin
being offered on a post-completion operating asset. The issue
for banks considering the deal will be Nigerian risk, although
the scheme is an export project.

International banks are being offered a top ticket of
US$100m each. The local bank market is expected to absorb
between US$100m and US$200m of the deal. Part of the new
financing will take out all of the three-year US$265m term loan
put in place last year to cover completion costs on the NGL2
scheme.

NNPC and Exxon are hoping to smooth the deal flow to banks
in the coming years. Between 2004/5, when the first NGL2 and
first satellite oil field financings were transacted, and
2008/9, when the extra NGL2 bridge and term loans were put in
place, was a significant time gap. This time it is hoped that
the new NGL2 deal will be followed quickly by more loans from
the NGL2 programme and by a significant new satellite financing,
the US$4bn Satellite 2 oil field financing.

In late 2005, the first satellite oil field financing was
signed at a pre-credit crunch margin of 175bp. The scheme was a
project financing and directly funded three new oil fields. The
seven-year uncovered deal was split into a US$270m international
loan, a US$90m local bank loan and a US$250m direct loan from
ExxonMobil.

Satellite 2 will follow a similar structure but will be a
lot bigger. The second financing will benefit from cash flows
from the first deal, so construction risk will be mitigated to
some extent. However, the risk profile will obviously be
different to NGL2. Credit Suisse, Credit Agricole, Natixis, RBS,
SG, Standard Chartered and WestLB transacted the first deal. The
local banks were IBTC, United Bank for Africa, UBA, Guaranty
Trust, Zenith Bank, Access Bank and First Bank. The second deal
will be a lot bigger and is said to be akin to the size of the
Jubilee oil field project in Ghana.

There are further deals planned in Nigeria. Work on the
US$2bn corporate-style loan for the Nigeria LNG (NLNG) scheme
has restarted. It was pushing forward during the summer but was
delayed by political issues. Standard Chartered and UBA are
working on the deal.

It is believed that part of the new loan will be used for
upstream gas-gathering facilities to ensure gas supplies to the
existing six trains. The US$1bn project loan from 2002 on the
asset has nearly been repaid. NLNG is a consortium made up of
NNPC, Royal Dutch Shell (RDSa.L: ), Total (TOTF.PA: ) and ENI
(ENI.MI: ).
[email protected] – www.pfie.com

PFI – Nigeria back into debt capital markets