Petrozuata CaseSolutionv3
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 debt = at completion the project debt would also become non-recourse to the sponsors.
Sponsor holding most of the equity are also suppliers/customers = Conoco would purchase the first 104,000 BPCD from Petrozuata upon production,
Single purpose capital asset = While the project was an integrated facility of production, transportation and refining, the main purpose was to sell syncrude.
Finite life = Petrozuata had a life time of 35 years.
In light with the above, Petrozuata 's financing was fit for project financing.
1b Costs and benefits of using project finance
Under the benefits of using project finance the following can be listed; it is cheaper to fund Petrozuata as project than in comparison to PDVSA to do it internally because PDVSA is rated as B whereas Dupont is rated as AA-; it is easier to secure an undisrupted cashflow for the project; PVSA plans further projects to fund such a Sincor. Since it would have been also possible to fund the project internally, choosing project finance takes a lot more time to structure, which is one of the disadvantages. Additionally the high fixed cost of the project financing was another disadvantage for the deal.
Project financing does not have an affect on the overall cost of capital for PDVSA. Petrozuata is acting as a private entity with its own debt (non recourse debt for PDSVA). In addition, the project financing does not show up in PDVSA’s balance sheet. Project financing increases PDVSA’s debt capacity.
2a Petrozuata 's
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 debt = at completion the project debt would also become non-recourse to the sponsors.
Sponsor holding most of the equity are also suppliers/customers = Conoco would purchase the first 104,000 BPCD from Petrozuata upon production,
Single purpose capital asset = While the project was an integrated facility of production, transportation and refining, the main purpose was to sell syncrude.
Finite life = Petrozuata had a life time of 35 years.
In light with the above, Petrozuata 's financing was fit for project financing.
1b Costs and benefits of using project finance
Under the benefits of using project finance the following can be listed; it is cheaper to fund Petrozuata as project than in comparison to PDVSA to do it internally because PDVSA is rated as B whereas Dupont is rated as AA-; it is easier to secure an undisrupted cashflow for the project; PVSA plans further projects to fund such a Sincor. Since it would have been also possible to fund the project internally, choosing project finance takes a lot more time to structure, which is one of the disadvantages. Additionally the high fixed cost of the project financing was another disadvantage for the deal.
Project financing does not have an affect on the overall cost of capital for PDVSA. Petrozuata is acting as a private entity with its own debt (non recourse debt for PDSVA). In addition, the project financing does not show up in PDVSA’s balance sheet. Project financing increases PDVSA’s debt capacity.
2a Petrozuata 's