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
*…show more content…*

Avg. annual change in oil price

2.5%

0%

The average Maya price was relative consistent for the 10 year period of 1986-1996 ($14.27) vs. the most recent 5 year period of 1991-1996 ($14.25). Both of these averages are lower than the average for 1982-1996 ($16.57), so the assumption of 2.5% annual growth seems aggressive.

VZ Govt. royalty rate

1.0%

16.67%

According to the case (p.3), the royalties paid by operating subsidiaries of PDVSA are 16.67%.

Initial Leverage

60%

60%

Same as given.

Market Risk Premium

7.5%

7.0%

Utilizing the market risk premium listed in Exhibit 11.

Country Risk Premium

0.0%

6.67%

Utilizing the country risk premium listed in Exhibit 11.

In addition, we noted that the asset beta, risk-free rate and tax rate were different from the values given in the case, so we altered these to be consistent with the case [asset beta: 0.6 0.38 (Exhibit 11 – p. 21), risk-free rate: 6.81% 5.60% (Exhibit 11 – p. 21) and tax rate: 34% 67.7% as an operating subsidiary of a state-owned enterprise).

As Is

Our Alterations

Leverage Ratio

DSCR

IRR

DSCR

IRR

50%

2.47x

21.3%

0.97x

12.1%

60%

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