Post on 01-Sep-2018
GCC Transport & Railways Conference19 October 2011 Doha - Qatar
Financing for Rail & Transport Projects
Presented by:
Yusuf SaeedActing Head of Structured & Project Finance
Qatar National Bank
Presentation Highlights
• Upcoming key financing opportunities
• Overall financing trend in GCC
• Financing alternatives
• Partnering with QNB
Page 2
I. Upcoming key financing opportunities
Railways
• Rail and transport projects
across Middle East have
become a point of focus.
• GCC Rail project of US$25
billion to link 6 GCC countries
through a 2,117-km railway
network.
• All in all GCC countries are
preparing to invest over US$116
billion in rail projects over next
10 years.
Page 4
• Qatar is investing heavily in its transport infrastructure in
preparation for the 2022 Football World Cup, building a
350km railway network costing US$35 billion, including:
– GCC rail Qatar portion
– Four line metro with 98 stations
– Light rail in Lusail and West bay
• Saudi Arabia has 23 projects valued at US$25.6 billion,
including the $6bn Makkah-Madina Railway Link.
• UAE
– completed Dubai Metro (phase 1) with US$6 billion
– working on eight railway projects valued at $20.6bn including
GCC rail UAE portion by way of 1,500 km railway connecting all
7 emirates, costing US$11 billion
Page 5
• Oman‟s National Freight and Passenger Railway is
underway, valued at US$10 billion.
• Kuwait is also undergoing railway development, valued
at a combined $17 billion for the National Rail Road
Network and Metro System.
• Bahrain is under going detailed study for establishing
Bahrain‟s Rapid Transport Network first phase of 184km
costing US$7.9 billion.
Page 6
Transport
• GCC has US$142 billion worth of road projects underway
or planned.
• There are also a number of maritime transport projects
planned and underway mainly in form of port projects in
each of GCC countries.
Page 7
• Qatar is working on :
– Expressway Program of US$12 billion
– New Doha Port to increase capacity from 200,000 TEUs by 15
times in 3 phases, costing US$6.8 billion
– Redesigning Qatar Bahrain Causeway, initially estimated at
US$4 billion
– Doha Bay Crossing connecting New Airport with West Bay and
Lusail
• KSA is focusing on transport projects:
– Budget allocation of US$3 billion for 389 road projects of 6600
km.
– Second container terminal at King Abdul Aziz sea port in
Dammam with contract of US$533 million with Saudi Global
Ports
Page 8
• UAE - Abu Dhabi is establishing Khalifa Port and
Industrial Zone for US$24 billion.
• Oman is working on:
– Masirah Island Causeway of US$1.5 billion
– Duqm Port marine works project of US$1.36 billion
– Batinah Coastal Road (phase 1) of US$ 713 million project
• Kuwait plans to build over next 5 years:
– Bubiyan Island harbor with US$1.25 billion
– Jaber Al-Ahmad expressway to be constructed with US$2.71
billion
• Bahrain plans for a major upgrade of the kingdom's
Khalifa Bin Salman Port.
Page 9
II. Overall financing trend in GCC
GCC Syndicated Lending
Page 11
GCC Bond and Sukuk
Page 12
GCC Equity Issuances
Page 13
III. Financing alternatives
Public Financing Alternatives
Project-specific
borrowing
Revenue-backed
borrowing
Corporate
borrowingJoint-Ventures
Privatization of
business units
Concessions
Direct Borrowing Private participation Asset finance
Government
grants
Government
loans/equity
Deficit financing
Budget sources
Export credit
Availability
contracts
Leasing
In practice, most publicly railway systems depend heavily on the budget sources,
particularly for passenger service
Page 15
Banking Requirements for projects
BANKING SERVICES PROJECT OWNER EPC / PPP CONTRACTOR
Financial Advisory - Project Financing
modeling and structuring; RFP
Financial Advisory - Bid Preparation /
ECA arrangements
Project Financing Facility – Debt (Bi-
lateral or Syndicated) and or Capital
Markets
Contractor Financing Facility – Bid
Bond; Debt (Bi-lateral or Syndicated)
and or Capital Markets
Bank Accounts – Corporate and Staff
services
Bank Accounts – Corporate and Staff
services
Letters of Credit / Payment Guarantees Letters of Guarantee – Perf. Bond;
APG; Retention Money Guarantee
Working Capital Facilities - Overdrafts Working Capital Facilities – Overdrafts;
L/Cs; Receivables financing
L/Gs and W/C Facilities may be
syndicated depending on size and
complexity of requirements
Pre – Contract Award
Post Contract Award
Page 16
Banking Sector Capacity AnalysisLocal Banks
The level of financing
requirements for the
expected GCC projects will
be too large for the domestic
market to absorb.
Key Issues:
• Credit and Performance
Risk of Contractors.
• Legal Lending Limits based
on Bank‟s Capital.
• Loans to Deposit Ratio
requirement.
• Central Bank Industry
Limits – waivers required.
• Basle Requirements.
Regional Banks
The level of interest for
financing cross border GCC
projects will be limited due to
current “internal focus” of
these banks.
Key Issues:
• Current strong demand in
respective domestic markets
• Risk Reward considerations
will be biased against cross
border lending.
International / Global Banks
The appetite for financing
GCC projects will be
selective and guarded due to
following issues:
• Stringent Target Market
and Risk Acceptance
Criteria.
• Approach to “Balance
Sheet” lending.
• High Risk Reward
Benchmarks. Basle 3
constraints.
• Cross Border and
“Sovereign” Risk issues.
Page 17
Option 1: Project Finance
Host GovernmentLegal /regulatory framework & evident support
SponsorsInjecting equity into
the project
SPVSPV is the
borrower.
Input
ContractsGuaranteed supply
of inputs to project
Off TakerProvides revenue
stream to project -
Must be
creditworthy
EPCMust show technical
experience
O&MContract with capable
firm extends beyond
repayment term
FinanciersInjecting debt into
the project
Page 18
Deal FeaturesEnhanced standard
PF requirementsi.e. feedstock, off –take, technology,
Management, etc.
Tighter covenants /More conservative Ratios
Stronger security /Collateral
Shorter Tenors
Acceptable Pricing (Benched marked)
ComplexStructures
Multi – currencyUS$ / local Cy
Tranches
Islamic and Conventional
BankingOptions
ECA Tranche
Capital MarketsProject Bonds
Syndications DynamicsNo more “Underwriting” – “Club Deals” Preferred
Participation of Strong Local Banks and Major International Banks nominated by Borrower
lead by “House Banks”
GCCProject Finance
Transaction
Credit Acceptability (RAC)High Credit Rating, Strong Owners (Gov’t),
Major Player in strong Industry
Page 19
Project Finance paradigm
Option 2: Bond Issuances
• Public sector projects can be funded by bonds issued on
– stand-alone basis or
– backed by credit worthy sovereign guarantee.
• Generally guaranteed issuance would deliver the lowest
cost of funding and the largest market capacity.
• In GCC, bond issuances have been mainly under US
regulations:
– 144A - a private placement in the US for US investors
– Reg S - a Bond issued in the Eurobond market for international
investors
• Asset managers, insurers, banks and pension funds would
buy the issue ensuring true investor diversification and no
cannibalisation of the GCC loan market investor base.
Page 20
Option 3: Infrastructure Funds
Advantages
Potential to inject additional equity
Can be listed
Can be limited in time
Transfers risk
(i.e. design / construction / op)
Off-balance sheet funding
Disadvantages
Less control over assets
Limited availability of equity funds
Needs additional debt funding
Requires a commercially viable project
More expensive (an equity return)
• A mechanism to inject equity capital
• Used extensively on infrastructure
projects
• Shifts design, construction,
financing and / or operating risk to
third parties
Investors
Sponsors
ProjectOff take agreementLoan
BanksInfrastructure
Fund
Equity
Equity
Page 21
Option 4:Public Private Partnership
Investors
Sponsors
ProjectLoan
Banks SPV
Equity
Equity Concession
• Full or partial flotation of the asset or
project or long term contract /off-take
• Shifts design, construction, financing
and / or operating risks to third parties
Page 22
Advantages
Offers a wide range of structures
Risk sharing with the private sector
Long term funding available
Off-balance sheet funding
Access to technology transfer
Disadvantages
Less control over assets
Limited availability of equity funds
Needs additional debt funding
Requires a commercially viable project
More expensive (i.e. equity return)
IV. Partnering with QNB“Undisputed Market Leader in Qatar”
“Major Player in MENA”
QNB Dominance in Qatar (Dec 2010)
17.0%
30.7%
25.8%
34.5%
17.3%
0%
10%
20%
30%
40%
QNB Commercial
Bank of Qatar
Qatar Islamic
Bank
Doha Bank Masref Al
Rayan
Net Profit (US$ million)Cost to Income Ratio (%)
Assets (US$ billion) Loans and Deposits (US$ billion)
Source: QNB Financial statements, Dec 2010
1,567
449367
290 333
0
200
400
600
800
1000
1200
1400
1600
QNB Commercial Bank of Qatar
Qatar Islamic Bank Doha Bank Masref Al Rayan
36.2
9.2 8.1 7.3 6.9
45.4
9.1 8.3 8.5 7.40
10
20
30
40
50
QNB Commercial
Bank of Qatar
Qatar Islamic
Bank
Doha Bank Masref Al
Rayan
Loans Deposits61.4
17.214.2 13.0
9.50
10
20
30
40
50
60
70
QNB Commercial
Bank of Qatar
Qatar Islamic
Bank
Doha Bank Masref Al
Rayan
Page 24
QNB Ranking 2010 in MENA
QNB is #2 bank in MENA in terms of profitability and #3 in
terms of assets.
Net Profit (US$ million)
1,806
1,566
1,260
1,183
1,077
1,003931
753 747
637
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
Rajh
i
QN
B
NC
B
Sam
ba
NB
K
NB
AD
FG
B
Riy
ad B
ank
Saudi F
ransi
EN
BD
1 2 3 4 5 6 7 8 9 10
Bank
Mil
lio
n $
Assets (US$ million)
77,92475,299
61,34457,563
49,978 49,291 48,53646,282 45,865
38,334
400
10,400
20,400
30,400
40,400
50,400
60,400
70,400
80,400
90,400
EN
BD
NC
B
QN
B
NB
AD
Sam
ba
Rajh
i
AD
CB
Riy
ad B
ank
NB
K
FG
B
1 2 3 4 5 6 7 8 9 10
Bank
Mil
lio
n $
Page 25
Partnering with QNB
• QNB is the „House Bank‟ of most Q. Inc entities
• Present in 25 countries financing large transactions in
GCC and other countries.
• We have strong teams in Structured and Project Finance
…as well as for bond issuances, IPO and Advisory.
Page 26
Track Record - 1
Qatar Telecom (Qtel)
USD 1,500 mn
Global Medium Term Note
Co-Lead Manager and
Financial Advisor
June 2009
Vodafone Qatar
QR 3,380 mn
IPO
Joint Lead Manager
April 2009
The Shard
£ 431 mn
Private Placement
Financial Adviser
October 2009
The Shard
£ 1,150 mn
Syndicated Multi Option
Facility
Arranger and
Financial Adviser
November 2009
Qatari Diar Finance
USD 3,500 mn
Global Bonds
Joint Lead Manager and
Bookrunner
July 2010
Qatar Navigation
Acquisition of
Qatar Shipping
Lead Financial Advisor
April 2010
Qatar National Bank
USD 1,500 mn
Global Bonds
Joint Lead Manager
November 2010
Qatar Telecom (Qtel)
USD 2,750 mn
Global Medium Term Note
Joint Lead Manager and
Bookrunner
October 2010
State of Qatar
USD 7,000 mn
Global Bonds
Joint Lead Manager and
Bookrunner
November 2009
Nawras
USD 500 mn
IPO
Joint Lead Manager and
Financial Advisor to Qtel
October 2010
Page 27
Track Record - 2
Al Wa‟ab City
USD 1,050 mn
Syndicated Term Loan
Mandated Lead Manager
September 2008
Al Arrab Contracting
USD 550 mn
Syndicated Term Loan
Mandated Lead Arranger
September 2008
Gulf Holding Company
QR 663 mn
IPO
Lead Receipting Bank
April 2008
Ras Laffan IWPP
USD 1,576 mn
Project Finance
Mandated Lead Arranger
August 2008
Salam Bounian
USD 137 mn
Musharaka Sukuk
Mandated Lead Arranger
June 2008
Gulf International Services
QR 1,871 mn
IPO
Receipting Bank
March 2008
Aston Martin
USD 441 mn
Syndicated Islamic Finance
Mandated Lead Arranger
January 2008
Barwa Real Estate Company
QR 1,500 mn
Rights Issue
Lead Receipting Bank
October 2008
The Shard
£ 500 mn
Private Placement
Lead Arranger
February 2009
State of Qatar
USD 3,000 mn
Global Bonds
Co-Manager
March 2009
Page 28
Track Record - 3
SABIC Innovative Plastics
Holding
USD 6,650 mn
Acquisition Finance
Mandated Lead Arranger
August 2007
KIPCO Asset Management
Company (KAMCO)
USD 75 mn
Term Loan
Mandated Lead Arranger
July 2007
QIA
USD 3,000 mn
Syndicated Acquisition
Finance
Mandated Lead Arranger
June 2007
Mauser AG
USD 2,468 mn
Acquisition Finance
Mandated Co-Arranger
June 2007
Qatar Steel Company
USD 210 mn
Subordinated Loan
Mandated Lead Arranger
May 2007
Qatar Investments & Project
Development Holding
Company (QIPCO)
USD 137 mn
Term Loan
Mandated Lead Arranger
May 2007
Ras Al Khaimah Ceramics
Company
USD 75 mn
Term Loan
Senior Co-Arranger
April 2007
Qatar Gas 4
USD 2,780 mn
Project Finance
Mandated Lead Arranger
August 2007
Qatari Diar
USD 2,468 mn
Syndicated Islamic Finance
Mandated Lead Arranger
January 2008
Salam Bounian
QR 4,269 mn
IPO
Lead Manager
October 2007
Page 29
Track Record - 4
Star Steel
USD 67 mn
Project Finance
Mandated Lead Arranger
March 2007
Qatar Telecom (Qtel)
USD 3,000 mn
Revolving Standby Credit
Facility
Mandated Lead Arranger and
Financial Advisor
and Facility Agent
March 2007
Qatar Navigation
USD 115 mn
Short Term Loan
Mandated Lead Arranger
March 2007
Emirates Steel Industries
USD 600 mn
Bridge Loan
Mandated Lead Arranger
(Technical Bank)
March 2007
Abu Dhabi Commercial Bank
USD 1,500 mn
Term Loan
Mandated Lead Arranger
March 2007
Etihad Airways
USD 400 mn
Islamic Lease
Mandated Lead Arranger
February 2007
Shuqaiq Water and Electricity
Company (Shuqaiq) IWPP
USD 230 mn
Project Finance
Mandated Lead Arranger
February 2007
Financell
USD 3,000 mn
Syndicated Finance
Lead Arranger
February 2007
Mesaieed IPP
USD 1,256 mn
Project Finance
Mandated Lead Arranger
April 2007
Al Khaliji
QR 7,380 mn
IPO
Lead Receipting Bank
April 2007
Page 30
Track Record - 5
Qatar Oman Investment
Company
QR 185 mn
IPO
Lead Manager
February 2007
Kahramaa
USD 485 mn
Project Finance
Mandated Lead Arranger
June 2006
Barwa Real Estate Company
QR 1,100 mn
IPO
Lead Manager
December 2005
Qatar Gas 2
USD 3.60bn
Project Finance
Mandated Lead Arranger
December 2004
Qatofin
USD 760mn
Project Finance
Mandated Lead Arranger
December 2005
Q-Chem 2
USD 1.21bn
Project Finance
Mandated Lead Arranger
December 2005
Qatar Gas 3
USD 1.48 bn
Project Finance
Mandated Lead Arranger
February 2006
SR Technics
USD 632 mn
Syndicated Acquisition
Finance
Joint Lead Arranger
January 2007
Qatar Navigation
QR 793 mn
Rights issue
Lead Manager
January 2007
Page 31
Thank You
Contact
Yusuf Saeed
Acting Head of Structured & Project Finance
Corporate Banking
Tel: (+974) 4440 7483
Fax: (+974) 4440 7325
yusuf.saeed@qnb.com.qa