Corporate Finance Webinar Energy Finance 2015 Tom

Transcript:Corporate Finance Webinar Energy Finance 2015 Tom:
Corporate Finance Webinar Energy Finance 2015 Tom Sanzillo, Director of Finance March 5, 2015 Overview Economic Analysis Financial Analysis Corporate and Project Analysis and Risk Risks from Public Opposition Purpose of IEEFA Finance 2015 “BiG” Picture – World, NATION, Markets, region Economics Economic Measures What is economy? GDP “Gross Domestic Product”: How economy/ countries/ markets/ regions work Types & size of sector: agriculture, energy, manufacturing, mining, energy, retail Most important for economy: Growth Market profitability Project Profits: mines, plants, ports, & rail Corporate Profits: “pure play,” integrated companies, diversified Critical role of extractive industries Coal/oil economics: Reserves, supply/demand (tons, barrels, cubic feet), location Price of coal/oil/natural gas/power from plants/electricity Cheap power – household budgets and business Competition Within coal Between coal & other energy sources Adani’s Corporate Structure Example of Corporate Presentation Mining Company: Cloud Peak Link to presentation: http://tinyurl.com/qzfd5gp “Little” Picture INDUSTRY, COMPANY, PROJECT Finance Income Statement: The Business/Production Process Income Statement 10 Income Statement: Understanding Debt Why Important? – Extraction, Power – rely heavily on debt. What is function of debt? Raises money to build plants/mines/ports -- assets. Assets produce revenue/pay back debt and profit. Or not. How much is too much debt, overleverage? When operating profit cannot cover interest. (taxes, depreciation and other expenses) Income Statement: Where Does Debt Come From Borrowing: Debt and Equity Private Investment Banks – Bonds, Private Equity, Project Related Financing – JP Morgan, Morgan Stanley, Citi, UBS. Public Banks – “Development Banks” - International Financial Institutions (“IFI”) – multiple countries provide capital to spur development Company Equity: Stock, Cash, Assets – Borrow from Shareholders Combination of all three is not unusual in energy. COrPORATE AND PROJECT ANALYSIS Corporate and Project Analysis Public/Private Corporations drive project development Similarity – Growth Differences of enterprise wide missions – Profit versus, Development Policy Project Finance is a piece of broader corporate strategy and finance Corporate parents and subsidiaries Business and Capital Markets Policy and Development Goals of Country Companies and Projects Require Investment: All investments have risks Profit: Investment + time and effort must return revenue - cover costs, spur more investment Risks to Successful Projects Economic – GDP Health, Markets, Demand/Supply, Price Business Leadership, Vision, Policy, CEO and Board Finance – Asset Allocation - Revenue/Expense/Profit/Loss Good Management: Board/Managers Setting Policy/Execution Legal & Regulatory – Good Citizen, Good Partner, Good Neighbor Traditional Concepts of Political Risk Good Negotiator, Knows How To Get Things Done Cumulative Risk: