Dabhol Power Company
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DABHOL POWER COMPANY The Challenges of Developing and Financing An LNG-Fired Power Project in India William D. Gathmann Executive Vice President Enron India GASTECH 2000 Conference Houston, Texas November 2000 PROJECT HIGHLIGHTS —Largest project in India —Largest foreign investment in India —Largest non-recourse project financing in India —Largest LNG-fired power plant in the world —First LNG regassification facility in India —First long term sale of LNG to non-investment grade, emerging market country —First project financing of an LNG ship 2 DABHOL TIMELINE May 1992 Enron invited to India December 1993 Dabhol PPA signed March 1995 Financial closure of Dabhol Phase I Construction starts August 1995 Project cancelled Construction stopped Arbitration in London starts September 1995 Re-negotiations commence November 1995 Re-negotiations complete Nov-Aug 1995 New approvals obtained December 1996 Phase I financial closure (again) Construction restarts Arbitration dropped 3 DABHOL TIMELINE January 1997 Phase II Development commences December 1998 Start construction of regas terminal May 1999 Financial close of Phase II Construction begins on all Phase II Commercial operation of Phase Third Quarter 2001 Power Block B on line Fourth Quarter 2001 Power Block C on line Phase II operational on liquid fuels First Quarter 2002 LNG vessel arrives Regas facility and tanks complete Entire project switches to natural gas 4 PROJECT OVERVIEW G Project Owner Dabhol Power Company G Project Location Dabhol, Maharashtra, India G Project Sponsors Enron, Bechtel & GE G Current Equity Owners — Phase I Enron 50%, MSEB 30%, Bechtel 10%, GE 10% — Phase II Enron 80%, Bechtel 10%, GE 10% G Power Purchaser Maharashtra State Electricity Board (MSEB) Mumbai G Term of PPA 20 years from ECS of Phase II Dabhol G Power Purchase Guarantors Gov t of Maharashtra MetGas Pipeline Gov t of India (limited) 5 PROJECT OVERVIEW G Power Capacity (exportable) — Phase I 740 MW — Phase II 1444 MW — Combined 2184 MW G Regas Facility 480,000 cubic meter LNG storage 2.3 km Breakwater 1.7 km Fuel Jetty G Technology Combined cycle gas turbine G Primary Fuel Natural gas (from LNG) G Back-up fuel Naphtha and distillate Mumbai G Ancillary Facilities 50 Bed Hospital; school; Technical Dabhol institute; Roads, Housing and community facility of 200 people; Water pipelines; Jetty, Community MetGas Pipeline activities 6 KEY ISSUES G Evolving regulatory structure G Compliance with government regulations G Credit support G Inadequate Infrastructure: Following were built to support the project: —Harbor, jetties (construction and fuel), breakwater —Road/bridges —Telecommunication facilities —Housing —Hospital 7 KEY ISSUES G Local relationships: local population, media, political parties, reform in the country G Litigation: 28 lawsuits G Sourcing adequate financing G Cancellation of project/Renegotiation of PPA G Phase I/Phase II Structure G LNG Suppliers/LNG Ship 8 DPC CONTRACTUAL STRUCTURE Phase I Enron GE Bechtel MSEB* Insurance Lenders Phase II 50% 10% 10% 30% Lenders Equity Loans Terminalling Agreement MetGas Power Plant EPC (Enron/Bechtel/GE/ GEJL) Power Purchaser EPC Contracts DPC PPA (MSEB) Regas EPC (Enron) Govt. of Power Plant O&M Maharashtra Contractor PPA Guarantee (Enron) LNG O&M Agreement SPA Regas O&M Ship Charter Contractor Fuel (Enron) Manager GOI Counter EFI Ship Lenders Guarantee (limited to Phase I) * sale of equity by Enron to Distillate/Naphtha MSEB not yet completed Short Term LNG Supplier LNG Shipper Contracts 9 PHASE I FINANCING 10 PHASE I FINANCING CHALLANGES G Limited Indian appetite from international commercial lenders G Debt would need to come from gov t agencies - OPIC and US Exim G Needed to source financing in dollars and rupees G Indian banks not familiar with international financing transactions G Different lenders had different agendas and issues G New technology - GE 9FA turbines G Acceptable payment security structure 11 PHASE I FINANCING PLAN (millions) Debt Phase I — IFI Rupee Loan $ 96 — US EXIM w/ IFI guarantees $ 298 — OPIC $ 100 — Intl. Commercial Banks $ 150 Total Debt $ 644 Equity — Enron $ 218 — GE/Bechtel $ 87 — MSEB $ 130 Total Equity $ 435 Total Financing $1079 12 PHASE II FINANCING 13 PHASE II FINANCING CHALLANGES G LNG Supply G Designing/Re-designing the financing plan —Nuclear bomb blast - US sanctions —Liberal Japanese lending policies —Asia economic crisis —Russian bond defaults —Liquid Indian financial markets G LNG Ship Financing G Designing the Security Package —Sharing of the security package between Phase I & II lenders G Convincing Phase I Only Lenders G Intercreditor Issues 14 DPC PHASE II FINANCING STRATEGY G Use similar lender groups as in Phase I —They are very comfortable with project risk —Minimizes potential intercreditor problem G Utilize the same financing documentation as was used for Phase I —Minimize negotiation —Minimizes cost and time of documentation G Use same legal counsel and lender consultants as Phase I —Minimizes cost and effort 15 CREDIT SUPPORT FOR PHASE II G There was no Central Government Guarantee for Dabhol Phase II G MSEB and Government of Maharashtra by themselves are not strong enough credit support to attract long-term project financing G Solution -- build adequate credit support by layering in many levels of support 16 PAYMENT STRUCTURE BACKING PPA OBLIGATIONS Revenue Payments from GOI (limited to Phase I guarantee cap, tenor) Payment by GOM Payment from Escrow a/c maintained by Escrow Bank (certain geographic circles) Payment from MSEB’s LC Payment by MSEB DPC MSEB 17 LNG SHIP CREDIT SUPPORT Payment Deficiency LNG Gas Payment Energy Payments Trustee Account Capacity Payments DPC Retention Account Fuel/OpEx LNG Ship Debt Service Trans. Other LNG MMBTU kWh LNG DPC MSEB Supplier LC LC 18 FINAL FINANCING PLAN (Millions) Debt Phase I Phase II Total — IFI Rupee Loan $ 96 $333 $429 — US EXIM $298 $298 — OPIC $100 $ 60 $160 — Int l Commercial Banks $150 $497 $647 — J EXIM $433 $433 — OND (Belgian ECA) $ 91 $ 91 Total Debt $644 $1,414 $2,058 Equity $435 $453 $888 Total $1,079 $1,868 $2,947 19 DABHOL FINANCING AWARDS G Deal Awards for Dabhol Phase II from —Project Finance —International Finance Review —Finance Asia —IFR Asia —Global Finance —Corporate Finance —Indian Infrastructure —Institutional Investor G Ship Finance Deal of the Year from —Transportation Finance 20.