Petrozuata CaseSolutionv3

1551 Words7 Pages
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
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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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