Australian American Chamber of Commerce Houston Energy Conference Funding Investments in Australia...

Australian American Chamber of Commerce Houston

Energy Conference

Funding Investments in Australia

Scott Speedie

Global Head of Specialized Finance

Commonwealth Bank of Australia

January 2014Strictly Private and Confidential

Institutional Banking & Markets

2

The Commonwealth Bank of Australia

Australia’s largest bank by market capitalisation

Statutory NPAT A$7,677mCash NPAT A$7,819mReturn on equity 18.4%Total assets A$754bCash earnings per share A$4.86Dividend per share A$3.64

Basel III CET1 (International) 11.0%

$101b

June 2011

$135b

June 2012

$137b

June 2013

14.6m Customers

3,000 Institutional Clients

S&P Moody’s Fitch

CREDIT RATING KEY FINANCIALS

GLOBAL COMPARISON LIQUIDITY (AUD)

Market Capitalisation

(US$bn)

Global Market Capitalisation

Ranking

Senior Debt Rating

Moody’s S&P

268.02 1 A2 A+

243.52 2 A3 A

232.44 4 Aa3 A+

198.11 6 Baa2 A-

183.81 7 Baa2 A-

124.01 10 Aa2 AA-

104.29 15 Aa3 AA-

92.91 18 Baa1 A-

Industry specialisation and understanding make the Bank an ideal partner providing balance sheet strength and broad product capability

Oil & Gas industry teams placed in key commercial and financing hubs. CBA is a Bank that actively deploys balance sheet into our client’s businesses

Broad range of debt products spanning project, corporate and acquisition finance

Strong global financial markets capabilities across commodities, foreign currency and interest rates

The only domestic Australian bank with a full in-house equity business, focused on retail and institutional clients

Source: Bloomberg. As at 13 January 2014. Credit rating: S&P

https://www.wellsfargo.com/

https://www.wellsfargo.com/

3

Funding Options for Upstream Companies

Project Finance Reserve-Based Lending Balance Sheet LendingEquity

Development Finance

Small Borrowing Base

Large Borrowing Base

Corporate Credit Facility

Exploration Single Field

DevelopmentFew Producing Fields

Several Producing Fields plus Permitted Development Assets

Large Portfolio of Producing Fields

Development Assets plus Exploration Acreage

refinance refinance refinance

Funding Investments In Australia

Start-Up Development of an E&P Company Mature E&P

4

Australian Equity MarketWhere does Australia stand?

2006 2007 2008 2009 2010 2011 2012 2013$0

$10

$20

$30

$40

$50

$60

$70

$80E&POther

Source: CBA and Bloomberg


49%

15%

18%

5%

13%

US

Canada

Asia Pac (ex Aus)

Australia

Other

Australian Secondary Issuances (A$bn)Market Capitalisation of Global E&P Stocks

5

Australian Loan Markets

2009 2010 2011 2012 20130

20

40

60

80

100

120

140

53.2966.122

116.042

95.066103.25

4.41

13.078

13.658

9.934 3.75

Energy and Resources Other

Australian Loan Market Volumes (A$bn)

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7 LNG projects in Australia currently under construction – A$194bn total capex value

Australia benefits from geographic proximity to Asia

Ichthys LNG Project (A$42bn):

– Largest project finance globally

– Quality sponsors – Inpex (Japan) and Total (France)

– A$20bn of debt – funded by export credit agencies and commercial banks

– Forecast A$3.5bn p.a. contribution to GDP

– Supported by long term take or pay LNG sales contracts into Asia

– LNG prices are oil-linked


LNG – Advent of Major Australian Energy Projects

7

Project Finance/Development Finance

Project finance

Lending to complete a specific project

Repayment of debt from project cash flow

Security over borrower and assets

Lenders’ recourse is often limited to the project itself

Australia – 2nd largest market for project finance (after the United States) with 10% global share of project finance in 2013

Development project finance is common and characterised by

Extensive technical due diligence

P90 production profile

Guarantee from the sponsor

No dividends or asset sales

Restrictions on exploration expenditure


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Reserve Based Lending


$

time

Facility size, with amortisation to zero

Declining value

of Asset 1

Extension of availability

Addition of new assets allows full utilisation

of facility

The structure of choice of the independent sector – flexible, revolving credit facility

Reserves based lending for multiple fields

– Requires diversification – no single asset must dominate portfolio

– P50 reserves can be used for producing assets

– Aggregate cash flows considered

– Covenants and pricing are lower than for single-asset financing

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Balance Sheet Lending

Debt capacity linked to past performance

Debt covenants linked to balance sheet/ P&L rather than cash flow

Suited to larger independents

– Fewer restrictions

– Lower maintenance

– Increased flexibility

– Cheapest source of debt finance for the independent

Company Corporate Debt (A$’bn) Total Assets (A$’bn) Market Cap (A$’bn)

4.3 24.8 31.4

3.7 17.0 13.8

2.9* 7.1 11.0

Source: Bloomberg, company annual reports* Wholly comprised of Oil Search’s guarantee of its portion of debt associated with PNG LNG project; guarantee falls away on completion.

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Australian Bond MarketsSignificance of the A$ MTN market in a global context has grown since 2007

A$ MTN Issuance by Industry

Mining & Mining Services issuers raised A$2.3bn in the A$MTN market in 2013, accounting for 24% of total issuance (2012: 15%)

A$ MTN Monthly Issuance Volumes

The A$ MTN market witnessed strong issuance activity in 2013, with total volume reaching A$97.2bn (2012: A$99.9bn). While SSAs and FIs have dominated issuance, consistent flows of corporate supply has been positively supported by investors.

A$ MTN Issuance by Sector

Corporate issuance remains under-represented in the A$ MTN market in 2013. The overall contribution to total market supplies has improved in recent years to 10.2% (2012: 9.6% and 2011: 5.6%) as issuers have taken advantage of the very favourable demand conditions

Domestic Banks

Semi SSA Foreign Bank / Branches

Corporate Non-Bank Financial

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

Bank Non-Bank Financial Corporate

A$

bil

lio

n

Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun$0

$2

$4

$6

$8

$10

$12

$14

$16

Red

emp

tio

ns

(A$b

n)

Monthly Bond Redemptions

The A$99bn of maturities over FY14 (FY13 A$72bn) is expected to drive continued support for primary issuance

Property Infrastructure & Utilities Energy & Resources Other$0.0

$500.0

$1,000.0

$1,500.0

$2,000.0

$2,500.0

$3,000.0

$3,500.0

$4,000.0 14 deals$3.6bn

14 deals$1.7bn

6 deals$2.0bn

7 deals$2.3bn

A$

bil

lio

n

Source: CBA and Bloomberg as at 21 January 2014

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Highlight Transactions

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Grant Willis

Managing Director Natural Resources

P: +44 20 77106990E: [email protected] 85 Queen Victoria St, London EC4V4HA

Client Coverage Group

Michael Thorpe

Managing Director

P: +61 (0)2 9118 4337E: [email protected] 201 Sussex Street Sydney 2000

Andrew Loadsman

Executive Director Natural Resources

P: +61 (0)2 9118 4330E: [email protected] Sussex Street Sydney 2000

Charles Davis

Executive Director


Jeff Heazlewood

Director Natural Resources


Jon Verlander

Executive Director

P: +1 713 3419751E: [email protected] Main Street, Suite 4675, Houston, TX, USA

Project Finance

Scott Speedie

Managing Director

P: +61 (0)2 9118 4333E: [email protected] 201 Sussex Street Sydney 2000

Specialized Finance

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This presentation does not constitute an offer to provide finance on any terms. The provision of any such offer is subject to formal review and credit approval, satisfactory due diligence, sign off by legal, tax, accounting and other professional advisers and execution of satisfactory documentation. The Commonwealth Bank shall not be bound unless and until final terms are agreed and formal documentation is signed. That final documentation may not necessarily mirror the contents of this presentation and any actions you may choose to take should not be taken in reliance on this presentation.

The information contained herein is confidential and is the proprietary structure of the Commonwealth Bank. It is provided on the basis that you will not disclose its contents to any persons other than directors, employees and advisors without the written consent of the Commonwealth Bank. It is not to be discussed either directly or indirectly with any other financier. This obligation will not apply if the information is available to the public generally (except as a result of a previous breach of this confidentiality obligation) or you are required to disclose it by law.

© Copyright Commonwealth Bank Australia

Australian American Chamber of Commerce Houston Energy Conference Funding Investments in Australia...

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