CASE HARVARD: PETROZUATA (35)

(PETROZUATA) CASE ANALYSIS:

Q1. HOW SHOULD PDVSA FINANCE THE DEVELOPMENT OF THE ORINOCO BASIN? WHAT ARE THE COSTS AND BENEFITS OF USING PROJECT FINANCE INSTEAD OF TRADITIONAL DEBT FINANCE?

Q2. WHAT ARE PETROZUATA’A THREE OR FOUR MOST IMPORTANT RISKS? HOW DOES THE DEAL STRUCTURE ADDRESS THESE RISKS? WHO WOULD BEAR THESE RISKS IF THE PROJECT WERE FINANCED INTERNALLY BY PDVSA INSTEAD?

Q3. AS CURRENTLY ENVISIONED, DEBT WILL COMPROMISE OF 60% OF THE FUNDS NEEDED FOR THE PROJECT. WOULD YOU RECOMMEND A HIGHER OR A LOWER LEVERAGE RATIO? WHAT HAPPENS TO THE MINIMUM DSCR AND IRR ON EQUITY AS THE PROJECT LEVERAGE INCREASES TO 70% OF THE PROJECT FUNDS? DECREASES BY 50%?

Q4. AS ONE OF THE SPONSORS, WHAT ARE YOUR EXPECTED RETURNS? ASSUME THE ASSET BETA FOR AN INTEGRATED DRILLING, PIPELINE AND REFINING FIRM IS 0.60.

Q5. WOULD YOU INVEST IN PROJECT BONDS? WOULD YOU INVEST IN EQUITY CAPITAL AS CONCO?

Q6. HOW SHOULD PDVSA FINANCE ITS OTHER OILFIELD PROJECTS?

SOLUTION WORD