Financing for Rail & Transport Projects - … · billion in rail projects over next ... –Four...

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

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.

• 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

• 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.

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.

• 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

• 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.

II. Overall financing trend in GCC

GCC Syndicated Lending

GCC Bond and Sukuk

GCC Equity Issuances

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

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

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.

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

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

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.

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

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

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

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 $

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.

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


USD 2,750 mn

Global Medium Term Note


Bookrunner

October 2010

State of Qatar

USD 7,000 mn

Global Bonds


Bookrunner

November 2009

Nawras

USD 500 mn

IPO


Financial Advisor to Qtel

October 2010

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


August 2008

Salam Bounian

USD 137 mn

Musharaka Sukuk


June 2008

Gulf International Services

QR 1,871 mn

IPO

Receipting Bank

March 2008

Aston Martin

USD 441 mn

Syndicated Islamic Finance


January 2008

Barwa Real Estate Company

QR 1,500 mn

Rights Issue


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

http://www.salam-bounian.com/index.html

http://www.google.com.qa/imgres?imgurl=http://upload.wikimedia.org/wikipedia/en/thumb/e/e9/AstonMartinLogo.svg/750px-AstonMartinLogo.svg.png&imgrefurl=http://en.wikipedia.org/wiki/Image:AstonMartinLogo.svg&h=345&w=750&sz=41&tbnid=1-lHygm2OekJ::&tbnh=65&tbnw=141&prev=/images?q=aston+martin+logo&hl=en&sa=X&oi=image_result&resnum=1&ct=image&cd=1

Track Record - 3

SABIC Innovative Plastics

Holding

USD 6,650 mn

Acquisition Finance


August 2007

KIPCO Asset Management

Company (KAMCO)

USD 75 mn

Term Loan


July 2007

QIA

USD 3,000 mn

Syndicated Acquisition

Finance


June 2007

Mauser AG

USD 2,468 mn

Acquisition Finance

Mandated Co-Arranger

June 2007

Qatar Steel Company

USD 210 mn

Subordinated Loan


May 2007

Qatar Investments & Project

Development Holding

Company (QIPCO)

USD 137 mn

Term Loan


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


August 2007

Qatari Diar

USD 2,468 mn

Syndicated Islamic Finance


January 2008

Salam Bounian

QR 4,269 mn

IPO

Lead Manager

October 2007

Track Record - 4

Star Steel

USD 67 mn

Project Finance


March 2007


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


March 2007

Emirates Steel Industries

USD 600 mn

Bridge Loan


(Technical Bank)

March 2007

Abu Dhabi Commercial Bank

USD 1,500 mn

Term Loan


March 2007

Etihad Airways

USD 400 mn

Islamic Lease


February 2007

Shuqaiq Water and Electricity

Company (Shuqaiq) IWPP

USD 230 mn

Project Finance


February 2007

Financell

USD 3,000 mn

Syndicated Finance

Lead Arranger

February 2007

Mesaieed IPP

USD 1,256 mn

Project Finance


April 2007

Al Khaliji

QR 7,380 mn

IPO


April 2007

Track Record - 5

Qatar Oman Investment

Company

QR 185 mn

IPO

Lead Manager

February 2007

Kahramaa

USD 485 mn

Project Finance


June 2006

Barwa Real Estate Company

QR 1,100 mn

IPO

Lead Manager

December 2005

Qatar Gas 2

USD 3.60bn

Project Finance


December 2004

Qatofin

USD 760mn

Project Finance


December 2005

Q-Chem 2

USD 1.21bn

Project Finance


December 2005

Qatar Gas 3

USD 1.48 bn

Project Finance


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

http://www.srtechnics.com/cms/index.asp?TopicID=101

Thank You

Contact

Yusuf Saeed

Acting Head of Structured & Project Finance

Corporate Banking

Tel: (+974) 4440 7483

Fax: (+974) 4440 7325

[email protected]

mailto:[email protected]

Financing for Rail & Transport Projects - … · billion in rail projects over next ... –Four...

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