Societe Generale Signs deal To Fund Modernization of Petroperú 's Talara Refinery

abarrelfullabarrelfull wrote on 25 May 2012 07:09
Tags: peru petroperu refinery s-america

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In the presence of the Minister of Energy and Mines Jorge Merino and Vice President of the Republic, Marisol Espinoza, among other authorities, on Wednesday 23 Mandate Charter was signed between Petroperu and French bank Société Générale for the financial structuring comprehensive service Talara Refinery Modernization Project (PMRT) is estimated to cost U.S. $ 1.711 million dollars.

The ceremony was presided by the president of state oil company directory, Humberto Sanchez Campodónico, while the document was signed by Pedro Mendez Mile, General Manager of Petroperu and Paul Miquel, CEO of Société Générale for Peru, Chile and Colombia.

To date this is the largest investment project of a public company in the last 20 years and will bring substantial benefits to the health of the population, as it will improve the quality of fuel and air, reducing the incidence of diseases caused by environmental pollution. It also will make Talara refinery in one of the five most modern refineries in Latin America.

Société Générale, a major European bank, has extensive experience in counseling and in the financial structuring of projects in the energy sector around the world as well as in Latin America and Peru. This demonstrates the confidence the international financial system in the strength of the Peruvian economy and the strength of the state oil company.

By the Mandate Letter Petroperú delegated to Societe Generale analysis, assessment, design and implementation of comprehensive financial structure of PMRT and direct due diligence (due diligence) for this purpose. Additionally, hire a reputable company that will make the international economic and financial evaluation to ensure the viability of the investment.

In addition, there will be advised by the international firm Purvin & Gertz for the study of markets and prices.

After these steps, Societe Generale structured a bridge loan for a first installment for implementing the PMRT and then provide long-term financial solution for the following expenditures required for the implementation of PMRT.

For this service, Societe Generale will charge fees ranging from a low of 0.25% of amount raised is achieved in Peru, up to 0.50% of the proceeds from bank loans or investments that are structured as captured abroad .

Société Générale was chosen through a selection process that Petroperu instructed the Development Finance Corporation (COFIDE) for the recruitment of a bank structuring. The process involved BBVA, BNP Paribas, Citibank, Mizuho, ​​Santander, Scotiabank, Société Générale.

What is the financial structuring service?

Financial structuring services include assessment, design and implementation of a comprehensive financing structure for Petroperu PMRT to the signing of financing agreements.

The scope of service includes, in general terms: i) review information Petroperu (administrative, operational, financial, legal, etc.) and PMRT ii) conduct the due diligence and implementation of IT consulting in legal matters, environmental technical and iii) design the implementation strategy of the financing operations of PMRT (bridge loan financing and integral) and iv) to structure the financing with various sources, preparing and submitting all necessary documentation for funding operations.

For its part, will continue COFIDE advice on work to develop the structuring bank selected from the financial evaluation stage, design and implementation of the structure, until the signing of the financing contracts PMRT.

Why is it important to the modernization of the Talara refinery?

One of the main objectives of PMRT is to drastically reduce the sulfur content of its fuel from 1,800 parts per million to 50 parts per million. This will substantially improve air quality in all regions of the country, which in turn will reduce the incidence of diseases caused by air pollution. World Bank studies and other independent organizations show that such a reduction of sulfur in fuels generates cost savings of health may lead to 460 million dollars annually.

The works included in the modernization of the Talara Refinery include the creation and equipping new units, and the renewal of a significant percentage of the equipment of the existing units to the extent that the expanded refinery will be virtually a new refinery and one of the five most important Latin America. This will:

  • Increase by 50% over the production and processing of oil: 65 to 95 thousand barrels per day, representing a substantial increase in the productive capacity of the refinery.
  • Dramatically reduce the amount of sulfur in fuels: from 1.800 parts per million to 50 parts per million, which will improve the quality of fuels, substantially reducing pollution and benefiting the health of the population.
  • Processing heavier crudes and more sulfur, but at a lower price.
  • Improve the performance of light fuels.
  • Produce high-octane gasolines and co-produce hydrogen.
  • Converting waste into fuel and light fuel gas.
  • Achieving self-sufficiency of reliable electricity and steam for the refinery expanded.

On the other hand, administration of the Company is making efforts to comply with the implementation phases of PMRT that, if the contract with the Spanish company Tecnicas Reunidas involves performing detailed engineering and equipment procurement and construction. This is estimated need for external financial support to ensure full implementation of the PMRT. This will be achieved through the upcoming signing of the final contract with Société Générale, after completion of work Reunidas engineering techniques.

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