5th Pakistan Oil Gas Forum 2013 · 5th Pakistan Oil & Gas Forum 2013 M&A ... Financial Advisor...

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5th Pakistan Oil & Gas Forum 2013

M&A and Investment Opportunities in Pakistan’s Energy & Power Sector

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Table of Contents

1. BMA Capital ‐ Profile

2. Credentials in Energy & Power

3. Summary of M&A transactions in the Pakistan’s Energy & Power sectors

4. Opportunities for investors

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Introduction to BMA Capital ‐ Unrivalled Credentials

CORPORATE FINANCE Euromoney “Deals of the Year”

Top 5 2010 Asia

Deals of the year

• Selected for difficulty of execution, global bank capital raising theme & good industry feedback

INVESTMENT BANKING Euromoney Awards for Excellence 2010

#1 Best Investment Banking Firm in Pakistan

• For overall investment banking activity during the year under review

EQUITY CFA Association of Pakistan 2010

#1 Corporate Finance House of the Year – Equity

& Advisory

• For overall corporate finance activity during the year under review

PRIVATISATION Successfully executed over

50% of privatization transactions

• Completed some of the landmark transactions in the history of Pakistan

M&A FT’s The Banker ‘s “Deals of the Year”

#2 2011 Asia Pacific M&A Deal of the year

• For Albaraka Islamic Bank merger with Emirates Global Islamic Bank, first merger of Islamic banks in Asia & Pakistan

ADVISORY More than

US$ 7bn in advisory transactions

• One of the most experienced CF firms in the banking sector

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Our Landmark Transactions

ETISALAT

US$ 2.6bn Buy‐side advisor to Etisalat for acquisition of Pakistan Telecommunications Company Limited. Largest privatisation deal of Pakistan to date

KAPCO

US$ 1.6bn Sell side advisor to Government of Pakistan for privatization of Kot Addu Power Company. Largest privatisation deal of Asia at the time

OGDCL

US$ 811mn GDR issue of OGDCL on the London Stock Exchange plus Secondary Offering on the domestic stock exchanges. Joint lead manager with Goldman Sachs & Citigroup

SILK BANK LTD.

US$ 82mn Financial advisor to Silkbank sponsors for arrangement of equity‐underwriting & commitment

PTCL

US$ 898mn Sole domestic advisor and manager for PTCL GDR issue

SAUDI PAK BANK

US$ 163mn Sell‐side advisor to SAPICO for divestment of shareholding in SaudiPak Commercial Bank to consortium of global investors

ALBARAKA

US$ 73mn Financial advisor to AlBaraka for merger with Emirates Global. First merger of Islamic Banks in history of Asia

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BMA Capital in International M&A League Table Rankings

Factset M&A 2008

Thomson M&A 3Q2005

Bloomberg M&A 3Q2005

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Strategic relationships with global Oil & Gas specialists

• A leading Oil & Gas management consultancy specializing in Acquisition, Advisory & Divestment Services in the upstream segment

• Mirabaud provides buy/sell‐side advisory to the Oil & gas sector including M&A origination, financial modeling, valuations and asset acquisition services Securities

• LB Capital is a specialist Oil and Gas Corporate Finance boutique providing cutting edge strategic advisory services primarily on M&As and divestitures

• Mercatus Energy Advisors is the energy hedging and risk management advisor based out of USA. It has advised on and executed thousands of energy commodity transactions

BMA enjoys strategic relationships with a number of global advisors in the oil & gas sector

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Credentials in Energy & Power

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Company Date Role Transaction Details Appr. Deal Value

Exploration & Production Sector

Oil & Gas Development Company

Ongoing Financial Advisor

US$ 500 million Exchangeable Bond issue as a JLM with Credit Suisse, JP Morgan & Citigroup

US$ 500 million

British Petroleum 2010 Buy‐Side

Advisor

Analysis for one of the potential acquirers of BP Pakistan assets

Confidential

Private E&P Co. NOTE 2010 Strategic

Advisor

Review portfolio of oil & gas assets in Pakistan, Kazakhstan, Sudan, UK North Sea, US Gulf of Mexico and Columbia.

N/A

Pakistan Oil Fields 2009

Strategic Advisor

Strategic analysis for the Sponsors N/A

BMA’s Credentials in Energy & Power

Note: Senior Team Member of BMA Capital performed this transaction

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Exploration & Production Sector (Contd.)


2007 Joint Lead Manager

Global Depository Receipts (GDR) of OGDC on the London Stock Exchange

US$ 738 million


2007 Financial Advisor

Financial Advisor for domestic secondary offering of OGDC

PKR 4,436 million


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Oil Refining Sector

Pakistan Refinery Limited


Advised PSO for the acquisition of 30% shares or control of PRL

Confidential

Attock Refinery Limited 2009 Financial

Advisor Strategic analysis for the Sponsors N/A

National Refinery Limited


Strategic analysis for the Sponsors N/A


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Oil Marketing Sector

Byco 2010 Financial Advisor

Structured the convertible debt instrument Confidential

Attock Petroleum 2009 Financial

Advisor

Strategic analysis for the Sponsors for divestment of their stake

Confidential

Caltex 2013 Financial Advisor

Buy‐side advisory to a potential investor for acquisition of Caltex

Confidential

Power

KAPCO 1996 Sell‐side Advisor

US$1.58 billion Privatization of a 26% strategic stake to a consortium led by National Power

US$1.6 billion


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M&A transactions in the Pakistan’s Energy & Power sectors

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# of Deals Value

(US$ mn) Year Upstream Refining Downstream Marketing Power

2013 2 2 81

2012 4 1 6 646

2011 4 3 6 1,764

2010 2 4 139

2009 1 3 191

2008 1 4 632

2007 1 250

2006 1 25

2005 1 1 614

13 4 3 27 4,342

Precedent M&A Transactions

Source: Thomson Reuters, BMA Capital

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Opportunities for investors

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Potential opportunities| Summary

Acquisition of stakes in existing IPPs, where sponsors are willing to divest Investment in upcoming IPPs that need equity or debt capital to complete the project

Upon initiation of the privatization process Obtaining stakes in small entities

Acquisition of stakes in existing refineries undertaking DHDS Unit implementation to inject equity Investment in upcoming refineries that need capital to complete the project or existing refineries to improve product mix

Acquisition of stakes in OMCs where sponsors are willing to divest

E&P sector

Refinery sector

OMC sector

Power sector

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Potential opportunities| Power Sector Comparison of investment opportunities yielding high returns Company Name Sector Dividend Yield (%) ROE (%) ROA (%)

2011 2012 2011 2012 2011 2012

NCPL Electricity 14.3% 24.9% 32.9% 33.7% 6.5% 7.1%

NPL Electricity ‐ 20.1% 34.2% 28.4% 7.9% 7.2%

KAPCO Electricity 15.5% 16.1% 27.2% 25.7% 6.8% 6.1%

HUBC Electricity 15.1% 15.9% 18.4% 26.6% 3.7% 3.9%

POL Oil and Gas 12.2% 14.4% 32.4% 33.6% 23.0% 22.6%

ACPL Construction 7.6% 14.1% 11.8% 21.7% 8.8% 16.1%

PAKRI Non Life Insurance ‐ 12.8% 13.3% 16.7% 6.6% 8.0%

APL Oil and Gas 12.7% 12.0% 36.9% 33.3% 17.4% 13.5%

FFBL Chemicals 21.4% 11.0% 79.0% 34.3% 26.3% 10.7%

BAHL Banks 8.5% 10.4% 25.4% 22.8% 1.1% 1.2%

FATIMA Chemicals 8.9% 8.3% 14.7% 21.1% 5.4% 8.0%

MCB Banks 6.4% 7.4% 21.9% 20.6% 3.0% 2.7%

NML Personal Goods 5.8% 7.3% 13.7% 9.3% 9.0% 6.2%

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404

11 134 120 163 150

1,200 1,200 1,100 840 720

548 500 222

56 50

MW

Thermal – Gas Based Thermal – Oil based Coal based Hydro Wind

(1) Source: Pakistan Energy Yearbook, (2) Pakistan Economic Survey

Potential opportunities| Power Sector

Acquisition of Stakes in Existing IPP

Investment in New IPPs

1466 1292

586 450 365 362 235 225 212 200 200 200 229 157 136 136

KAPCO HUBCO Uch Rousch AESPakGen

AES Lalpir TNBLiberty

HUBCONarowal

SapphireElectric

LibertyTech

NCPL NPL Saif Kabirwala GulAhmed

Japan

MW

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Potential opportunities| E&P sector

Why invest in the E&P sector? Pakistan imports 67% of its oil & gas consumption annually

As per estimates, only 3% and 19% of oil and gas reserves, respectively have been discovered so far in Pakistan

Strong balance sheets and favorable regulatory framework augur well for local E&P companies to enhance their exploration/development activities

Since most of the E&P companies are government owned, acquisition opportunities will arise upon initiation of the privatization process

Comparison of high return yielding investment opportunities Company Name Sector Dividend Yield (%) ROE (%) ROA (%)

2011 2012 2011 2012 2011 2012

OGDC Oil and Gas 3.6% 4.8% 31.5% 36.1% 24.3% 28.6%

PPL Oil and Gas 6.1% 6.3% 33.3% 32.4% 25.3% 24.0%

POL Oil and Gas 12.2% 14.4% 32.4% 33.6% 23.0% 22.6%

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Acquisition of stakes in existing refineries undertaking DHDS Unit implementation

Potential opportunities| Refineries

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Refinery Status Costs (US$ millions)

Pak Arab Refinery Complete 132

Attock Refinery Agreement signed with Hyundai Engineering Co Ltd in 2013 for implementation

250*

National Refinery Prefeasibility studies undertaken 305*

Pakistan Refinery In process 400*

Under the directives of the Ministry of Petroleum & Natural resources, all refineries operating in Pakistan are obligated to attain Euro‐II compliance by January 2016

Compliance shall be achieved by installation of Diesel Hydro Desulphurisation (DHDS) Plants

PARCO is the only Euro‐II compliant refinery in Pakistan, whereas the other refineries are in the process of implementing DHDS units

Equity investments shall be an attractive source of funds for such refineries

Source: Public Sources * Anticipated

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Acquisition of stakes in upcoming refineries

Potential opportunities| Refineries

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Refinery Description Investment Rationale Refining Capacity

Investment Size (US$ millions)

Indus Refinery

First deep conversion refinery of Pakistan at Port Qasim, Karachi.

Company is actively seeking investors to complete the project

93,000 BPD 400‐450

Khalifa Coastal Refinery

Earmarked as Pakistan’s largest refinery in Hub

Project has stalled and sponsors may be willing to exit the opportunity

250,000 BPD 1,500‐6,000

PSO’s refinery

State of the art Euro‐IV refinery in Kohat scheduled to be completed by 2017

Project in its very initial stages and 20% stake shall be offered to strategic investors

40,000 BPD 120

Some of the companies identified below are actively seeking equity investments in order to conclude their respective refinery projects

Source: Public Sources

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Acquisition of existing OMC(s)

Potential opportunities| OMCs

OMCs have faced a challenging local competitive landscape, characterized by fixed margins amidst regulated pricing mechanics, declining rupee and volatile global oil prices

The environment is expected to be increasingly favorable to players with vertically integrated operations

Industry margins have consistently been on a declining trend. A foreign OMC with operations in Pakistan has commenced its exit from the country

We thus believe that market dynamics allude to possible exits

0.0%

2.5%

5.0%

7.5%

10.0%

2009 2010 2011 2012

PSO Shell APL

Gross margins

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PAKISTAN’S PREMIER INVESTMENT FIRM

5th Pakistan Oil Gas Forum 2013 · 5th Pakistan Oil & Gas Forum 2013 M&A ... Financial Advisor...

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