Project Finance Petrozuata - 4755 Words

Evaluation of Petrolera Zuata, Petrozuata C.A. Project Finance Case Study 1 Table of Content Petrozuata introduction ....................................................................................................................... 4 1. How should PDVSA finance the development of the Orinoco Basin? What are the costs and benefits of using project finance instead of traditional internal debt finance? ...................... 4 1.1. Project finance scenario (BBB) ................................................................................................. 6 1.2. Corporate finance scenario (BB) ............................................................................................... 6 2. What are Petrozuata’s†¦show more content†¦Moreover, PDVSA is an OPEC member. 1. How should PDVSA finance the development of the Orinoco Basin? What are the costs and benefits of using project finance instead of traditional internal debt finance? Corporate finance department representatives from PDVSA and Conoco decided to finance the project off-balance sheet. In order to assess whether this solution was optimal in the case of Petrozuata, it is essential to consider the advantages and disadvantages of both, financing the project on-balance sheet and off-balance sheet respectively. Project Finance : Table 1 - Advantages Disadvantages Project Finance Advantages  §Ã¯â€š § Preserves debt capacity of the parent company: keeps debt to equity (D/E) ratio low, which enables future investments by parent companies Disadvantages  §Ã¯â€š § Requires a very high level of debt (here 60%)  §Ã¯â€š § Highly risky, due to the high level of debt (1.4 bn)  §Ã¯â€š § Avoids exposure of the parent company to the o debt payments have to be made through project’s risks (e.g. no negative impact on escrow account as soon as cash flows shareholders in case of loss making)  §Ã¯â€š § Limited liability: decreases cost of default occur  §Ã¯â€š § Agency issues: the sponsors may have a 4  §Ã¯â€š § Sponsor agreements: DuPont and Conoco’s involvement promotes project’s success because of given expertise  §Ã¯â€š § Participation of more shareholders different objective  §Ã¯â€š § Extra costs from all the necessary agreements (lawyers, sponsors†¦) allows PDVSA to haveShow MoreRelatedPetrozuata CaseSolutionv31551 Words   |  7 Pagesï » ¿ Petrolera Zuata, Petrozuata C.A. Students: Kausik Ash | Javier Echave | Trang Ho | Sarah Nash | Ayse Zeynep Saka | Raj Sambasivan | 1a Financing of Orinoco Basin The generally understood criterion for using project finance to fund a project and Petrozuata s compliance comparison are as below; Legally independent company = Once the project was completed, Petrozuata would become a stand-alone entity, with the sponsors warranty coming to an end Non-recourse debtRead MoreDebt and Project7455 Words   |  30 PagesGovernance Restructuring Petrolera Zuata Petrozuata C.A. Maastricht University School of Business and Economics Maastricht, 19th September 2012 Driessen, G. (i6060635) Koerselman, W. (i561398) Park, D. (i6051671) International Business – Finance Corporate Governance and Restructuring Course Code: EBC4052 Tutor: Dr. S. Kleimeier Case 2: Petrolera Zuata, Petrozuata C.A. Introduction Petrolera Zuata, hereinafter referred to as Petrozuata, was the first joint venture in a series ofRead MoreProject Finance1543 Words   |  7 Pages1. How should PDVSA finance the development of the Orinoco Basin? Can you define project finance? Is Petrozuata a project? What are the costs and benefits of using project finance instead of the traditional (debt) finance – as Mr. Bustillos said, PDVSA could have finance the debt internally (p.7 of the case)? Project finance is a kind of Financing that has a priority does not depend on the creditworthiness of the sponsors proposing the business idea to launch the project. Approval does not evenRead MoreHutchison Whampoa Ltd1156 Words   |  5 PagesHUTCHISON WHAMPOA S FINANCING STRATEGY PRIOR TO JUNE 1997 A financing strategy is integral to an organization’s strategic plan. It sets out how the organization plans to finance its overall operations to meet its objectives now and in the future. Hutchison, like other large firms in Hong Kong, relied heavily on internally generated funds to fuel growth. Having reserves of 67,994m (more than twiceof operating expenses in 1996), it is stable enough to continue without external funding, indicatingRead MoreHedging Currency Risks at Aifs Case Questions1021 Words   |  5 Pageswould be the range of discount rates that AES would use around the world? 3) Does this make sense as a way to do capital budgeting? 4) How does the adjusted cost of capital for the Pakistan project reflect the probabilities of real events? What does the discount rate adjustment imply about expectations for the project because it is located in PAkistan and not in the US? Bidding on the Yell Group Case Questions: 1) Is Yell a good leveraged buyout candidate? 2) How similar are the UK and US businessesRead MoreHedging Currency Risks at Aifs Case Questions1037 Words   |  5 Pageswould be the range of discount rates that AES would use around the world? 3) Does this make sense as a way to do capital budgeting? 4) How does the adjusted cost of capital for the Pakistan project reflect the probabilities of real events? What does the discount rate adjustment imply about expectations for the project because it is located in PAkistan and not in the US? Bidding on the Yell Group Case Questions: 1) Is Yell a good leveraged buyout candidate? 2) How similar are the UK and US businessesRead MoreCrosswell1474 Words   |  6 PagesBUSINESS AND MANAGEMENT LEN RUSHFIELD MBA 610.63 INTERNATIONAL FINANCE SPRING 2005 WEDNESDAY 6:00 PM – 10:00 PM WESTLAKE VILLAGE CENTER SYLLABUS 1 International Finance MBA 610.63 Westlake Village Center Wednesday 1/5-2/16/05 Len Rushfield (310) 474-5848 (603) 843-9683 (efax) leonard.rushfield@pepperdine.edu/ asiaptner@aol.com Course Objectives MBA 610.63 is intended to provide a foundation of understanding of international finance and the critical options for corporate financial management