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Confidential Information Memorandum
Refinaria Abreu e Lima
USD 2,100,000,000
Guarantee Facility
and
USD 450,000,000
Loan Facility
August, 2011
STRICTLY PRIVATE AND CONFIDENTIAL
JOINT LEAD ARRANGER JOINT LEAD ARRANGER JOINT LEAD ARRANGER
CONFIDENTIAL
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Table of Contents
Administrative
Confidentiality Agreement
Notice to and Undertaking by Recipients
Letter of Authorization
Form of Commitment Advice
Contact List
Transaction Timetable
Definitions
1. Executive Summary ................................................................................................................ 1
1.1. Project Overview............................................................................................................. 1
1.2. The Agreement between Petrobras and PDVSA ............................................................. 2
1.3. BNDES Loan Requirement ............................................................................................. 2
1.4. The Transaction .............................................................................................................. 3
1.4.1. Summary of Terms and Conditions ......................................................................... 4
1.4.1.1. Loan Facility ........................................................................................................ 4
1.4.1.2. Guarantee Facility ............................................................................................... 5
1.4.1.3. Collateral ............................................................................................................. 5
1.4.1.4. The Petrobras Direct Agreement ......................................................................... 5
1.4.1.5. Transaction Structure .......................................................................................... 6
2. The Project ............................................................................................................................. 6
2.1. Project Location .............................................................................................................. 6
2.2. Project Design and Operation ......................................................................................... 7
2.3. Refinery‟s Construction and Projected Investments ....................................................... 10
2.4. Sponsors Experience .................................................................................................... 13
2.4.1. Petrobras .............................................................................................................. 13
2.4.2. PDVSA ................................................................................................................. 15
2.5. Oil Supply Contracts ..................................................................................................... 17
2.6. BNDES Loan ................................................................................................................ 18
3. Petrobras .............................................................................................................................. 19
3.1. General Overview ......................................................................................................... 19
3.2. Shareholder Structure ................................................................................................... 19
3.3. Business Segments ...................................................................................................... 20
3.4. Financials ..................................................................................................................... 21
4. PDVSA ................................................................................................................................. 22
4.1. General Overview ......................................................................................................... 22
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4.2. Shareholder Structure ................................................................................................... 23
4.3. Business Segments ...................................................................................................... 23
4.4. Financials ..................................................................................................................... 24
4.5. PDVSA‟s Investment Plan ............................................................................................. 24
5. Financial Projections ............................................................................................................. 25
5.1. RAL Financial Plan ....................................................................................................... 25
5.1.1. Investments .......................................................................................................... 25
5.1.2. Revenues assumptions ......................................................................................... 25
5.1.3. Operating Costs .................................................................................................... 26
5.1.3.1. Fixed Costs ....................................................................................................... 26
5.1.3.2. Planned Maintenance ........................................................................................ 27
5.1.3.3. Logistic Costs .................................................................................................... 27
5.1.3.4. Crude Oil ........................................................................................................... 27
5.1.4. Projected Financial Statements ............................................................................. 29
5.2. Revised Financial Plan ................................................................................................. 30
5.2.1. Foreign Exchange Rate ......................................................................................... 30
5.2.2. Capex ................................................................................................................... 31
5.2.3. Commercial Operation Date .................................................................................. 31
5.2.4. Estimated Equity Contribution ............................................................................... 31
6. Market Overview ................................................................................................................... 33
6.1. Brazilian Oil Reserves and Production .......................................................................... 33
6.2. Brazilian Refining Market .............................................................................................. 35
6.3. Brazilian Diesel Market ................................................................................................. 36
7. Risks and Mitigants ............................................................................................................... 38
7.1. Construction ................................................................................................................. 38
7.2. Equity Contribution ....................................................................................................... 38
7.3. Operations .................................................................................................................... 39
7.4. Demand ........................................................................................................................ 39
7.5. Repayment ................................................................................................................... 39
8. Term Sheet ........................................................................................................................... 40
Appendix...................................................................................................................................... 71
Appendix A – Draft Shareholders Agreement
Appendix B – RAL x BNDES Loan Agreement
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Figures
Figure 1: Envisaged Partnership Structure and the Transaction Facilities ....................................... 4 Figure 2: Transaction Facilities Guarantee Structure ...................................................................... 6 Figure 3: Project Location .............................................................................................................. 7 Figure 4: Strategic Location ............................................................................................................ 7 Figure 5: RAL‟s Differential............................................................................................................. 9 Figure 6: Project Timeline ............................................................................................................ 11 Figure 7: Actual and Projected Refinery‟s Physical Construction Progress .................................... 12 Figure 8: Actual and Projected Investments (BRL million) ............................................................. 12 Figure 9: Refining Capacity (million bbls/d) ................................................................................... 13 Figure 10: Petrobras investments breakdown ............................................................................... 14 Figure 11: Petrobras‟ historic and projected investments (annual average USD million) ................ 15 Figure 12: PDVSA‟s Refineries..................................................................................................... 16 Figure 13: PDVSA‟s Projected Investments in the Refining Segment (USD billion) ....................... 17 Figure 14: Petrobras‟ Operating Income Composition (LTM July 2010) ......................................... 20 Figure 15: Global and Venezuelan Oil and Gas Proved Reserves ................................................ 22 Figure 16: PDVSA‟s Sales Composition (1H 2010) ....................................................................... 23 Figure 17: Brazilian Oil Proved Reserves and Oil Production ........................................................ 33 Figure 18: Pre-Salt map ............................................................................................................... 33 Figure 19: Global Oil Proved Reserves and estimated Pre-Salt Impact in Brazilian Reserves ....... 34 Figure 20: Brazilian GDP and Global Oil Consumption ................................................................. 35 Figure 21: Brazilian Oil Production, Refining and Demand („000 bbls/d) ........................................ 36 Figure 22: Brazilian Energy Consumption and Diesel Consumption .............................................. 37 Figure 23: Diesel Production, Sales and Imports .......................................................................... 37
Tables
Table 1: Project‟s Estimated Sources and Uses (BRL million – from 2006 to 2016)* ....................... 2 Table 2: Loan Facility Terms & Conditions ...................................................................................... 4 Table 3: Guarantee Facility Terms & Conditions ............................................................................. 5 Table 4: Refinery‟s Environmental Permits Status .......................................................................... 8 Table 5: Refinery‟s Projected Output (m3 / year) ............................................................................ 9 Table 6: Refinery‟s Main Construction Contracts .......................................................................... 10 Table 7: Equipments and Investments .......................................................................................... 13 Table 8: Petrobras Refineries (2009) ............................................................................................ 14 Table 9: BNDES Loan Terms & Conditions .................................................................................. 18 Table 10: Petrobras‟ Capital Stock ............................................................................................... 19 Table 11: Petrobras‟ Financials (USD million) ............................................................................... 21 Table 12: PDVSA‟s Financials (USD million) ................................................................................ 24 Table 13: Financial Plan‟s Investments (USD million – real terms) ................................................ 25 Table 14: Refinery‟s Projected Output (m3 / year) ........................................................................ 26 Table 15: Oil Products Commercialization .................................................................................... 26 Table 16: Projected Sales Prices (USD/m3) ................................................................................. 26 Table 17: Projected Fixed Costs (BRL‟000 /year) ......................................................................... 27 Table 18: Projected Planned Maintenances (BRL‟000/year) ......................................................... 27 Table 19: Projected Logistic Costs ............................................................................................... 27 Table 20: Projected Crude Oil Prices (USD/m3) ........................................................................... 28 Table 21: Projected Income Statement ......................................................................................... 29
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Table 22: Projected Debt Service Coverage Ratio ........................................................................ 30 Table 23: Foreign Exchange Rates .............................................................................................. 30 Table 24: Projected Investments .................................................................................................. 31 Table 25: Sources and Uses (BRL million) ................................................................................... 31 Table 26: Equity Injection (BRL million) ........................................................................................ 32 Table 27: Brazilian Refineries Nominal Capacity (m3/day - 2009) ................................................. 35
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Confidentiality Agreement
This confidential material (the “Confidential Information Memorandum”) is being provided to you by
Banco Espírito Santo, BES Investimento do Brasil and Banco do Brasil (together, the “Lead
Arrangers”) in connection with an actual or potential transaction and must not be used or relied
upon for any purpose other than to evaluate your intention to participate in the transaction. In
addition, this Confidential Information Memorandum must not be disclosed, in whole or in part to
any third party, summarized or otherwise referred to except as agreed upon in advance in writing by
the Lead Arrangers.
The Confidential Information Memorandum is being made available only to parties who have signed
and returned a non-disclosure agreement (the “Confidentiality Agreement”) and recipients are
therefore bound by the Confidentiality Agreement in respect of all information contained herein.
The information used in preparing the Confidential Information Memorandum was obtained from or
through Petróleos de Venezuela S.A. (“PDVSA”) and PDVSA do Brasil Ltda (the “Borrower”), their
representatives or from public sources. The Lead Arrangers assume no responsibility for
independent verification of such information and have relied on such information being complete
and accurate. To the extent such information includes estimates and forecasts, the Lead Arrangers
have assumed that such estimates and forecasts have been reasonably prepared based on
assumptions reflecting the best currently available estimates and reasonable judgments. The Lead
Arrangers expressly disclaim any and all liability for any direct or indirect loss that may be based on
or may arise in connection with any information contained herein, including any errors therein or
omissions therefrom.
The Confidential Information Memorandum is intended solely for your information and the Lead
Arrangers assume no obligation to update or otherwise revise the Confidential Information
Memorandum. The information and analysis contained herein constitute the Lead Arrangers´
present understanding which is subject to change at any time without notice. Nothing contained
herein should be construed as advice of any kind including investment, tax, accounting or legal
advice.
The Confidential Information Memorandum has been prepared solely for informative purposes to
assist you in making your own evaluation of a potential transaction and with the express
understanding that it will be used for only such purpose. In all cases, you should conduct your own
investigation and analysis of a potential transaction, and you should consider the advice of your
own legal, accounting, tax and other advisors and such other factors that you consider appropriate.
The Confidential Information Memorandum is not a recommendation, offer or solicitation to
purchase or sell any security, commodity, currency or other instrument.
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Notice to and Undertaking by Recipients
This confidential material (“Confidential Information Memorandum”) provided herein refers to the
proposed USD 2.1 billion Guarantee Facility and USD 450 million Loan Facility (together, the
“Transaction Facilities”), that will support PDVSA do Brasil Ltda‟s (the “Borrower”) capital
participation in the Refinaria Abreu e Lima S.A. (the “Project”), and have been obtained by Banco
Espírito Santo, BES Investimento do Brasil and Banco do Brasil (together, the “Lead Arrangers”)
from, or are based upon information supplied to the Lead Arrangers by Petróleos de Venezuela
S.A. (“PDVSA”) and the Borrower, and other sources, and should not be construed as Lead
Arrangers‟ representation. It is further understood that PDVSA and the Borrower make no
representations or warranties concerning any projections or forward-looking statements included in
the Confidential Information Memorandum, except that such projections and forward looking
statements have been prepared in good faith based upon assumptions and estimates management
believes to be reasonable as of the date of the Confidential Information Memorandum. Whether or
not such projections or forward-looking statements are in fact achieved will depend upon future
events, some of which are not within the control of PDVSA and/or the Borrower. Accordingly, actual
results may vary from the projections and such variations may be material. As a potential lender,
you agree to conduct an independent investigation of the financial condition, creditworthiness,
affairs and status of the Project and of all parties involved in the Transaction Facilities, and to base
your decision whether or not to participate in the Transaction Facilities solely on such investigation.
Accordingly, you hereby confirm that, in connection with your consideration of the proposed
Transaction Facilities you will not rely on the Lead Arrangers with respect to the adequacy,
accuracy or completeness of any information provided herewith. In addition, you hereby agree to
continue to independently assess and keep under review the financial condition, creditworthiness,
affairs and status of the Project and of all the parties involved in the Transaction Facilities from the
date hereof until the earlier of your decision not to participate in the Transaction Facilities or your
execution and delivery of an assignment agreement or your signing definitive documentation for the
Transaction Facilities.
A brief description of the terms and conditions of the Transaction Facilities is included in this
Confidential Information Memorandum. Such description does not purport to be comprehensive and
all references to agreements are qualified in their entirety by reference to the same.
This notice and the enclosed confidential information are delivered to you subject to your
agreement to the Confidentiality Agreement and specifically in connection with your consideration of
committing in the Transaction Facilities, and neither they nor their substance shall be disclosed or
used for any other purpose other than to evaluate your decision whether or not to participate in the
Transaction Facilities.
Your receipt of this Confidential Information Memorandum constitutes your agreement to the
foregoing and the further obligation to return the material as provided in the Confidentiality
Agreement, together with all copies that you may have made thereof, should you decide not to
pursue this matter and to participate in the Transaction Facilities; provided, however that you shall
be permitted to retain such copies of the material as you shall be required to retain (a) pursuant to
applicable record retention regulations of any governmental authority having jurisdiction over you,
or (b) pursuant to your internal record retention policy, provided that upon expiration of such
requirements, if any, the other provisions of this paragraph concerning return or destruction of
material shall apply. In addition, nothing herein shall be construed as an obligation to remove or
CONFIDENTIAL
viii
erase any material contained in an automated back-up system not accessible in the ordinary course
of business.
BES Investimento do Brasil S.A. Av. Brigadeiro Faria Lima, 3729 6° andar São Paulo, SP 04358-905 Brazil
Banco do Brasil S.A. Av. Paulista, 2163 6° andar São Paulo, SP 01311-933 Brazil
Banco Espírito Santo S.A. Rua Braamcamp, 2 5° andar 1250-050 Lisboa Portugal
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Letter of Authorization
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Letter of Authorization
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Form of Commitment Advice
[Lender's Letterhead] [Date]
BES Investimento do Brasil S.A. Av. Brigadeiro Faria Lima, 3729 6° andar São Paulo, SP 04358-905 Brazil
Banco do Brasil S.A. Av. Paulista, 2163 6° andar São Paulo, SP 01311-933 Brazil
Banco Espírito Santo S.A. Rua Braamcamp, 2 5° andar 1250-050 Lisboa Portugal
Attn.: [•] We are in receipt of your Confidential Information Memorandum (“CIM”), dated July 2011, prepared in connection with the proposed USD 2,100 million Guarantee Facility and USD 450 million Loan Facility
(together, the “Transaction Facilities”), that will support PDVSA do Brasil Ltda‟s (the “Borrower”) capital participation in the Refinaria Abreu e Lima S.A. (“Project”) as described in the CIM. __________(“Lender”) hereby provides for the Transaction Facilities its commitment in the amount of USD________ million under the USD 2,550 million Transaction Facilities, allocated as follows:
USD______ toward the USD 2,100 billion in the Guarantee Facility; and USD______ toward the USD 450 million in the Loan Facility.
The Lender acknowledges that it has, independently and without reliance on the Lead Arrangers or any other bank, and based on documents and information about the Project and the parties involved in the Transaction Facilities as it has deemed appropriate, made its own credit analysis and decision to enter into this commitment. Our commitment is subject only to our favorable review of the credit documentation, which shall be based on the terms and conditions set forth in the CIM. The Lead Arrangers shall have no liability or responsibility to the Lender if such financing is not entered into. The Lender understands and agrees that its proposed commitment amount is subject to acceptance and allocation at the discretion of Petróleos de Venezuela S.A. and the Lead Arrangers. Sincerely, Name of Authorized Officer Title Lender Telephone Number
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Contact List
BES Investimento do Brasil
Alan Fernandes
Head of Project Finance, Brazil
+55 11 3074-7494 alanf@besinvestimento.com.br
Rogério Graziottin
Vice President - Project Finance, Brazil
+55 11 3074-7496 rgraziottin@besinvestimento.com.br
Carlos Pacheco
Vice President – Client Coverage, Brazil
+55 11 3074-7338 cpacheco@besinvestimento.com.br
Guilherme Galego
Associate - Project Finance, Brazil
+55 11 3074-7463 ggalego@besinvestimento.com.br
Banco Espírito Santo
Paulo Nacif
Director – International Corporate Banking Americas
+351 21 883 4579 paulo.nacif@bes.pt
Banco do Brasil
Sandro Kohler Marcondes
Commercial Director, Brazil
+55 61 3310-5353 marcondes@bb.com.br
Renato Proença Lopes
Executive Manager, Brazil
+55 11 3066-9810 rpl@bb.com.br
Nildo Ribeiro do Rosario Neto
Manager, Brazil
+55 11 3066-9907 nildo@bb.com.br
Leny Marcia Ferreira da Silva
Senior Analyst, Brazil
+55 11 3066-9934 lenymarcia@bb.com.br
Tito Santos Tavares da Silva
Senior Analyst, Brazil
+55 11 3066-9258 tito.silva@bb.com.br
PDVSA
Abraham Ortega
Chief Financial Officer
+58 212 708-1405 ortegaae@pdvsa.com
Renny Bolívar
Financing Manager +58 212 708-1438 bolivars@pdvsa.com
PDVSA do Brasil Ltda
Sérgio A. Tovar Amaro
Executive Director
+55 21 3235-0800 tovars@pdvsa.com
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Transaction Timetable
M T W T F S S M T W T F S S M T W T F S S
1 2 3 4 1 2 1 2 3 4 5 6
5 6 7 8 9 10 11 3 4 5 6 7 8 9 7 8 9 10 11 12 13
12 13 14 15 16 17 18 10 11 12 13 14 15 16 14 15 16 17 18 19 20
19 20 21 22 23 24 25 17 18 19 20 21 22 23 21 22 23 24 25 26 27
26 27 28 29 30 24 25 26 27 28 29 30 28 29 30
31
Syndication Timetable
September 9th, 2011 · Commitments due from Lenders
September 13th, 2011 · Determine allocation amounts
September 27th, 2011 · Legal documentation distributed to Lenders
October 10th, 2011 · Lender comments due on legal documentation
November 10th, 2011 · Sign documentation
November 18th, 2011 · Financial Close and funding
September 2011 October 2011
Key Date
Holiday
November 2011
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Definitions
ANP: Brazilian Petroleum National Agency
API: the American Petroleum Institute gravity, or API, is a measure of how heavy or light a
petroleum liquid is compared to water. If its API gravity is > 10, it is lighter and floats on water; if
<10, it is heavier and sinks.
bbls: Barrels of Oil
bbls/d: Barrels of Oil per Day
boe: Barrels of Oil Equivalent
boe/d: Barrels of Oil Equivalent per Day
CAGR: Compounded Annual Growth Rate
E&P: Exploration and Production
FPSO: Floating Production Storage and Offloading Unit
GDP: Gross Domestic Product
HCGO: Heavy Coker Gas Oil
LNG: Liquefied Netroleum Gas
LPG: Liquefied Petroleum Gas
PAC: Brazilian Government‟s Growth Acceleration Program
PSA: Production Sharing Agreement
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1. Executive Summary
1.1. Project Overview
In March 2008, Petróleo Brasileiro S.A. (“Petrobras”) and Petróleos de Venezuela S.A. (“PDVSA”)
(together, the “Sponsors”) entered into an association agreement (the “Association Agreement”) to
construct and operate a 230,000 barrels of oil per day (bbls/d) capacity oil refinery called Refinaria
Abreu e Lima (the “Project”, “Refinery” or “RAL”) in Recife, Brazil. The Refinery is one of the
primary endeavors under the Brazilian Government‟s Growth Acceleration Program (“PAC”) aimed
at improving Brazilian refining capacity, especially for diesel. The Project will be located in the
Ipojuca municipality near Recife, the capital of Pernambuco, a state in the northeast region of
Brazil. Petrobras, which currently owns 100% of the Refinery, is managing the construction process
and has engaged, through RAL, several contracts with renowned Brazilian construction companies
for the engineering, procurement, and construction of the Project. As of June 2011, 37% of the
Project‟s physical construction had been completed.
The Refinery will be comprised of two uniformly sized refining units. Unit 1 is expected to
commence operations in January 2013, while Unit 2 is scheduled to commence operations in
August 2013. The two units‟ combined total refining capacity of 230,000 bbls/d is equivalent to 11%
of the current Brazilian installed refining capacity.
The Project will enter into oil supply contracts with each of the Sponsors, whereby the Project will
source 50% of its crude oil input from Brazil and 50% from Venezuela. Approximately 70% of the
Refinery‟s total output will be in the form of diesel, which amounts to 9.04 million m3/ of diesel
production and represents approximately 20% of Brazil´s current diesel consumption. The Project
intends to sell all of its output to the domestic market at market rates. Additionally, the Project is
expected to generate more than USD 2 billion per year in federal and state tax revenue and will
contribute more than 20% of Pernambuco‟s total GDP.
According to the review carried out by PDVSA (see section 5.2), total construction costs are
expected to amount to BRL 28.5 billion (USD 16.3 billion) during an investment schedule that
commenced in 2006 and will conclude in 2016, approximately three years after the Project‟s
commercial operation date. As per the table below, the construction costs and associated financial
costs, will be financed via BRL 17.6 billion (USD 10.1 billion) of equity contributions, a BRL 9.9
billion (USD 5.2 billion) loan (the “BNDES Loan”) from Banco Nacional de Desenvolvimento
Econômico e Social (“BNDES”), the Brazilian Development Bank, and BRL 6.3 billion (USD 3.6
billion) from operational cash flows.
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Table 1: Project’s Estimated Sources and Uses (BRL million – from 2006 to 2016)*
Source: PDVSA
* Preliminary figures. Updated Sources and Uses, which is under development, will be supplied by
the Refinery's revised Economic and Financial Feasibility Study (see more details in section 5).
The BNDES Loan was signed and disbursed to RAL in full in August 2009. The BNDES Loan has
a 20 year tenor, due in March 2029, and will be repaid via semi-annual equal amortization
payments following a seven year grace period. Additionally, the BNDES Loan is fully guaranteed by
a Petrobras Corporate Guarantee.
1.2. The Agreement between Petrobras and PDVSA
Petrobras and PDVSA signed the Association Agreement in March 2008, which states that PDVSA
will participate in RAL‟s capital structure through subscription of new shares equivalent to 40% of
the Refinery‟s capital. The subscription will be materialized through PDVSA‟s wholly owned
subsidiary PDVSA do Brasil Ltda., established in Rio de Janeiro. Furthermore, the Association
Agreement established the conditions for PDVSA‟s participation in RAL‟s capital structure,
including:
PDVSA commitment to:
o Immediate equity injection of BRL 854 million (USD 510 million) - this amount is
based on August 2009 numbers subject to inflation, and will be updated by
Petrobras and certified by an independent consultant - to achieve 40% ownership
of the Refinery‟s capital (the “Initial Equity Contribution”); and,
o Future equity injections of BRL 6.2 billion (USD 3.6 billion), which is equivalent to
40% of the remaining BRL 15.5 billion required equity contribution.
The terms and conditions of RAL‟s governing documents upon PDVSA‟s equity
participation in the Project:
o Shareholder Agreement and Bylaws;
o Project‟s Midterm Business Plan; and,
o Oil Supply Contracts.
The Brazilian Economic Defense Administrative Counsel (“CADE”) has already approved the
association between Petrobras and PDVSA.
1.3. BNDES Loan Requirement
As previously mentioned, in August 2009, BNDES signed and fully disbursed the USD 5.2 billion
BNDES Loan to RAL to finance a portion of the Project costs. The BNDES Loan is secured by a
corporate guarantee from Petrobras for the full amount of the loan.
Uses So urces
Capex 28,500 84% BNDES Loan 9,890 29%
Debt Service (BNDES Loan) 5,330 16% Equity 17,586 52%
Petrobras 10,551 31%
PDVSA 7,034 21%
Operational Cash Flow 6,354 19%
T o tal 33,830 100% T o tal 33,830 100%
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Also, as a condition for PDVSA‟s capital participation in RAL, Petrobras will require PDVSA to
assume 40% of the existing guarantee issued in favor of BNDES. Therefore, PDVSA will be
obligated to guarantee the BRL equivalent of USD 2.1 billion of the BNDES Loan.
For that reason, and in order to comply with Association Agreement and BNDES Loan requirement,
PDVSA is approaching commercial banks with sufficient credit limits with BNDES, to provide
guarantees to BNDES on PDVSA‟s behalf in the amount of USD 2.1 billion.
1.4. The Transaction
Considering the above mentioned, PDVSA is seeking:
Equity Financing: An up to USD 450 million senior secured bank loan to finance 80% of
the Initial Equity Contribution (the “Loan Facility”);
Bank Guarantee: USD 2.1 billion in bank guarantees to secure 40% of the BNDES Loan
(the “Guarantee Facility”).
Banco Espírito Santo, BES Investimento do Brasil and Banco do Brasil (together, the “Lead
Arrangers”) were mandated by PDVSA to structure the Loan Facility and the Guarantee Facility
(together, the “Transaction Facilities”) and arrange the appropriate bank syndicate. The banks that
will join the syndicate (the “Lenders”) are expected to commit pro-rata to the Transaction Facilities.
The Lead Arrangers are committed to hold up to 50% of the Transaction Facilities as follows:
Banco Espírito Santo and BES Investimento do Brasil: 25%
Banco do Brasil: 25%
The structure of the Project‟s organizational structure and the related Transaction Facilities are
illustrated in the figure below.
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Figure 1: Envisaged Partnership Structure and the Transaction Facilities
1.4.1. Summary of Terms and Conditions
The summary of the terms and conditions of the Transaction Facilities are presented below. A more
detailed description of the terms and conditions of the Transaction Facilities can be found in the
Term Sheet section.
1.4.1.1. Loan Facility
The Loan Facility will have the following characteristics:
Table 2: Loan Facility Terms & Conditions
Amount Up to USD 450 million
Borrower PDVSA Brasil Ltda
Lenders Lead Arrangers plus other banks to be selected by PDVSA and Lead Arrangers
Tenor 5 years (2.5 year average life)
Repayment Semi-annual equal principal payments
Floating Rate 6 month Libor
Margin 550 bps per annum
Up-Front Fee 100 bps
Commitment Fee 200 bps per annum payable at Financial Close and accrued from Commitment Letter Acceptance Date
Petrobras
Abreu e Lima
RefineryBNDES
BNDES Loan
(BRL 9.9 bi – USD 5.2 billion)
PDVSA Brasil
40% 60%
PDVSA
Petrobras Corporate Guarantee
(60% of the BNDES Loan)
Initial Equity Contribution
(~ BRL 854 million)
Lenders
Guarantee Facility
100%
Bank Guarantee
(40% of the BNDES Loan)
Funds from the Loan Facility
(up to 80% of the Initial
Equity Contribution)
Loan Facility
Equity Injection
(minimum of 20% the
Initial Equity Contribution)
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1.4.1.2. Guarantee Facility
The Guarantee Facility will have the following characteristics:
Table 3: Guarantee Facility Terms & Conditions
Amount Up to USD 2,100 million
Applicant PDVSA Brasil Ltda
Guarantors Lead Arrangers plus other banks to be selected by PDVSA and Lead
Arrangers
Underlying
Contract
BNDES Loan
Beneficiary BNDES
Tenor 5 years; Renewable for consecutive 5-year tenors until the maturity of the BNDES Loan (March 2029)
Commission First 5 years: 400 bps per annum paid semi-annually in advance
Thereafter: 600 bps per annum paid semi-annually in advance
Up-Front Fee 20 bps
Commitment Fee 200 bps per annum payable at Financial Close and accrued from
Commitment Letter Acceptance Date
1.4.1.3. Collateral
The Transaction Facilities will benefit pari-passu from the following security package:
Corporate Guarantee issued by PDVSA for the total amount of the Transaction Facilities;
Pledge over 40% of the Refinery‟s shares;
Pledge over 100% of the Borrower‟s shares;
Standby Letter of Credit (“SBLC”) issued by Banco de Desarrollo Económico y Social de
Venezuela (“BANDES”) in the amount of USD 235 million;
o The SBLC will be 100% cash collateralized by a time deposit in BES; and
Pledge over the dividends payable by the Project to the Borrower. The dividends shall be
retained as collateral, in an amount up to USD 10 million dollars, until the liquidation of the
Transaction Facilities.
1.4.1.4. The Petrobras Direct Agreement
The Direct Agreement to be entered into between Petrobras, the Borrower, and the Lenders (the
“Petrobras Direct Agreement”) will include the following conditions:
If Borrower‟s equity interest in the Project falls below 40%, then Petrobras shall:
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o Provide replacement security and cause BNDES to release collateral provided by
the Borrower in an amount corresponding to the Borrower‟s equity shortfall.
o Indemnify the Lenders from any failure to accomplish the undertaking above.
A call mechanism whereby, in the event of default, Petrobras will have the option to
purchase and the Lenders will be obliged to sell the pledged Refinery‟s shares.
1.4.1.5. Transaction Structure
The structure of the Transaction Facilities and related collateral package is exhibited in the figure
below.
Figure 2: Transaction Facilities Guarantee Structure
2. The Project
2.1. Project Location
The Project is located in the Ipojuca municipality of the Recife metropolitan area in the state of
Pernambuco, in the northeast region of Brazil (the “Northeast”). The Refinery is located in a 630
hectare area in the Suape Industrial and Port Complex (“Suape”).
Petrobras
Abreu e Lima
Refinery
BANDES
Pledge over 40%
of the Refinery‟s
shares
PDVSA Brasil
40% 60%
PDVSA
Lenders
Parent Company
Guarantee
USD 235 million
SBLC, 100%
collateralized by
Time Deposit
Pledge over
dividends up to the
amount of USD 10
million dollars
Pledge over 100%
of shares in
PDVSA Brasil
Petrobras
Direct
Agreement
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7
Figure 3: Project Location
Source: RAL Business Plan
Suape is a strategic location in the center of the Northeast, acting as a hub for the cargo
transportation in the region. The complex is very well connected to the primary consumption points
in the Northeast region via a sophisticated network of roads and highways.
Figure 4: Strategic Location
Source: RAL Business Plan
2.2. Project Design and Operation
The Refinery will be comprised of petrochemical units capable of performing the following
processes: Atmospheric Distillation, Delayed Coking, Diesel and Naphtha Hydrotreating, Hydrogen
Generation, Treatment of Amine, Caustic Regeneration Treatment, Sulfur Recovery, and Tail Gas
SNOX (Emissions Abatement Unit) and ancillary units (utilities and offsite). The Refinery will also
rely on conventional production units, but with the incorporation of advanced technology to process
heavy crude oil, which produced high value-added products.
The Project was designed following the concepts of high performance units which determines
technical specifications and requirements for the achievement of the following characteristics:
High reliability level
RefinariaAbreu e Lima
Aracajú
São Luís
Teresina
Fortaleza
Recife
Suape
Salvador
João Pessoa
Maceió
Natal
7 capitals7 international airports8 international ports1 river port30 million people90% of the GDP of the Northeast Region
800 km
4 capitals4 international airports5 international ports12 million peopleMore than 35% of the GDP of the Northeast Region
300 km
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Low maintenance cost
Automation, optimization and advanced control
Ecological balance
Safety
Low intervention requirement
High quality products
Production flexibility
Low energetic consumption
Optimized water usage
Operational efficiency
The Project was designed to match quality and safety management system (“QSMS”) norms which
establish minimum safety, environmental and health quality specifications. The Refinery‟s chimney
will have gas sampling points, complying with the Brazilian National Environmental Council‟s
(CONAMA) established criteria.
The Refinery has already received the necessary environmental permits to start construction from
the appropriate regulatory authority, and consequently, construction has commenced.
Table 4: Refinery’s Environmental Permits Status
Source: RAL
Permit # Issuing Date Valid Until
Preliminary Permit 0096/2007 July 26th, 2007 July 26
th, 2008
Installation Permit 00880/2007 August 27th, 2007 August 26
th, 2009
Installation Permit (renewal) 08.09.08.007732-8 August 26th, 2009 August 26
th, 2011
The Project is in the process of obtaining a new operating permit from the Brazilian Petroleum
National Agency (“ANP”). The need for the new operating permit arises from increasing the
Project‟s refining capacity to 230,000 bbls/d, from the originally projected capacity of 200,000
bbls/d. This permit is not necessary during the construction period and is expected to be obtained
well before commercial operations.
The Refinery will have the capacity to process heavy crude oil with low API gravity, high acidity and
an elevated content of sulfur and nitrogen into high quantities of diesel. RAL will have the highest
diesel conversion capacity among all Petrobras‟ units.
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9
Figure 5: RAL’s Differential
Source: Petrobras
The Project includes two distillation units with total nominal capacity of 35.770 m³/d or 230,000
bbls/d. Each unit will have a refining capacity of 115,000 bbls/d. Unit 1 will process the Brazilian
crude oil BC-16 or equivalent and Unit 2 will process the Venezuelan crude oil Carabobo 16 or
equivalent.
The Refinery‟s projected capacity is equivalent to 11% of Brazil‟s total installed refining capacity.
Additionally, the Project‟s diesel production, which is equivalent to approximately 70% of the
Refinery‟s total output, will amount to 9.04 million m3/year which represents approximately 20% of
the Brazilian current consumption of the product.
According to the Brazilian Energy Balance, which is developed by the Brazilian Ministry of Mining
and Energy, diesel was the country‟s primary source of energy in 2009, accounting for 18% of the
Brazilian Energy Matrix. Diesel represented 47% of the consumption of oil products in the country.
The transportation sector is the main diesel consumer representing 82% of the total consumption.
The Northeast was responsible for 16% of the Brazilian diesel consumption in 2009.
Given that domestic diesel production does not currently satisfy demand, approximately 10% of
Brazilian diesel consumption is imported. Therefore, the Refinery´s production will play a significant
role in making Brazil a self-sufficient diesel country in the short term, and eventual net diesel
exporter in the medium to long term.
In addition to diesel, the Project will produce petrochemicals and other related products such as,
coke, naphtha, LPG, HCGO, Sulfuric Acid and Sulfur. Assuming a 96% utilization factor, which is
management‟s current forecast, the Project‟s annual output will be as follows:
Table 5: Refinery’s Projected Output (m3 / year)
Source: RAL Business Plan
1 – Processed Oil API Index 2 – Refineries Solomon Index 3 – Refineries’sDiesel Output
26
16
Petrobras Average - 2010 RAL
7,7
9,6
Petrobras Average - 2010 RAL
39%
70%
Petrobras Average - 2010 RAL
P ro duct Unit 1 Unit 2 T o tal
Diesel 4,580,547 4,465,232 9,045,779
Naphta 339,537 429,226 768,763
Coke 787,982 1,127,519 1,915,501
LPG 307,505 243,442 550,947
HCGO 358,756 83,283 442,039
Sulfuric acid 70,470 140,940 211,410
Sulfur 19,219 102,502 121,721
T o tal 6,464,017 6,592,144 13,056,160
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The Project is expected to commence operations in two phases, with Unit 1 becoming operational
in January 2013 and Unit 2 becoming operational in August 2013.
The crude oil to be processed by the Refinery will be brought to Suape Port through high capacity
ships (90.000 to 170.000 tons) and will be received by a new pier (PGL3) that is being constructed
by Pernambuco Government. The pier will be connected to the Refinery by underground pipelines
which will take the crude oil to the Refinery and oil products to the port (The Refinery is located 6
km from the Port). Underground pipelines will also connect the Refinery to distribution companies
which supply the local market.
In addition to the underground pipelines, the Refinery‟s output may be distributed to local and
regional markets via Suape‟s highway network, which consists of 41 kilometers of road connecting
the industrial complex to the main federal and state roads in the region, and rail system, which
connects to the national rail network.
2.3. Refinery’s Construction and Projected Investments
The Refinery is one of the largest and most imperative endeavors under PAC, with a total projected
investment of USD 16.3 billion. As of June 2011, 37% of the Project‟s physical construction had
been completed.
The Project will create approximately 20,000 direct and 150,000 indirect jobs during the
construction period. As of December 2010, there were close to 20,000 people working on the
Project‟s management and execution plan.
The construction process is being managed by Petrobras. Following PDVSA‟s capital participation
in the Project, the construction team will be managed by representatives from both Sponsors in
direct portion to their ownership interest in the Project.
To date, Petrobras has contracted, through RAL, several renowned Brazilian construction
companies with extensive experience in the sector to execute the supply, construction and
assembling of the main units of the Refinery. Below is a list of the Project‟s primary subcontracts:
Table 6: Refinery’s Main Construction Contracts
Source: RAL
Object Scope Contractor
Delayed Coking Unit and Caustic
Regeneration Treatment Sections
Supply, construction, assembling, tests, pre
operation and assisted operation Camargo Corrêa / CNEC
Hydrotreating Units and Hydrogen
Generation
Supply, construction, assembling, tests, pre
operation and assisted operation Odebrecht / OAS
Pipelines, Torch and Pump House Design, supply, construction, assembling,
tests, pre operation and assisted operation Queiroz Galvão / IESA
Atmospheric Distillation Unit Supply, construction, assembling, tests, pre
operation and assisted operation Odebrecht / OAS
Power House and Compressed Air Unit Design, supply, construction, assembling,
tests, pre operation and assisted operation Alusa Engenharia
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The Project is currently in the third and final phase of its three distinct construction phases:
1. Conceptual Design: This phase occurred during September 2005 to December 2006;
2. Basic Design: This phase occurred during December 2006 to November 2009; and
3. Execution: This phase commenced in the second semester of 2007 and is expected to end
in August 2014.
The figure below illustrates the chronological order of the three phases and their respective tasks.
Figure 6: Project Timeline
Source: RAL Implementation Report
Phase 1 Approval
Phase 2 Approval
Hiring of earthmoving
Hiring the implementation of the Power House
Hiring the implementation of Storage Tanks
Hiring the implementation of administrative buildings
Phase 3 Approval
Hiring the implementation of the producing units
Construction and Assembly concentration
Beginning of the operations of Atmospheric Distillation Unit
Beginning of the operations of the Unit - 1
Beginning of the operations of the Unit - 2
End of the assisted operation
1) Conceptual Design
2) Basic Design
3) Execution
Sep
, 2005
Dec, 2
006
Au
g, 2
007
Jan
, 2009
Mar,
2009
Mai, 2
009
No
v, 2
009
Dec, 2
009
Dec, 2
012
Jan
, 2013
Au
g, 2
013
Au
g, 2
014
CONFIDENTIAL
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Figure 7: Actual and Projected Refinery’s Physical Construction Progress
Source: RAL Implementation Report
As the figure above demonstrates, as of June 2011, approximately 37% of construction has been
completed. At this point BRL 6.9 billion (equal to 24% of expected BRL 28.5 billion construction
capex) had been invested in the Refinery‟s construction.
Figure 8: Actual and Projected Investments (BRL million)
Source: RAL
0,00%
10,00%
20,00%
30,00%
40,00%
50,00%
60,00%
70,00%
80,00%
90,00%
100,00%
jan
/05
jun
/05
no
v/0
5
abr/
06
set/
06
fev/
07
jul/
07
de
z/0
7
mai
/08
ou
t/0
8
mar
/09
ago
/09
jan
/10
jun
/10
no
v/1
0
abr/
11
set/
11
fev/
12
jul/
12
de
z/1
2
mai
/13
ou
t/1
3
mar
/14
ago
/14
jan
/15
jun
/15
no
v/1
5
5 99 523 814
3.075
8.802 8.783
5.288
740 314 57
-
5.000
10.000
15.000
20.000
25.000
30.000
2006 A 2007 A 2008 A 2009 A 2010 A 2011 P 2012 P 2013 P 2014 P 2015 P 2016 P
Investments Accumulated Investments
CONFIDENTIAL
13
As of June 2011, 34% of the Refinery‟s equipment has been delivered on-site and an additional
48% has been contracted and ordered, while the remaining 18% are expected to be bided in the
upcoming months. By the same date, 26% of the Project‟s total investment has been executed and
65% of the Project‟s construction and equipment procurement sub-contracts have been executed.
Table 7: Equipments and Investments
Source: RAL Implementation Report
2.4. Sponsors Experience
Both Sponsors have extensive experience in the construction and operation of refineries. Petrobras
has a refining capacity of 2.2 million bbls/d and is responsible for 98% of the total Brazilian refining
capacity. PDVSA is one of the main players in the global refining market, operating 21 refineries
around the world with a total refining capacity of 3.0 million bbls/d.
As seen in the graph below, together PDVSA and Petrobras have a refining capacity of 5.3 million
bbls/d and rank among the largest oil refiners in the world.
Figure 9: Refining Capacity (million bbls/d)
Source: PFC Energy WRMS, Petrobras and PDVSA
2.4.1. Petrobras
As mentioned above, Petrobras controls 98% of the total refining capacity in Brazil and, as of 2009,
owns the following refineries:
Delivered 176 34%
Ordered 253 48%
Hiring Process 94 18%
T o tal 523 105%
Equipments (units - Jun/ 2011)
6,3
5,3
3,63,0 2,9 2,7 2,6
2,2 2,2
0,70,3
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14
Table 8: Petrobras Refineries (2009)
Source: Petrobras
Most of the Brazilian refining industry was constructed during the 1960s and 1970s. During this
period, Petrobras invested approximately 50% of its total capex in the downstream segment.
However, in the last three decades, Petrobras has focused its investments on the upstream
segment, primarily in exploration and production of hydrocarbons (“E&P”). Petrobras invested only
USD 30 billion in the downstream segment in the last decade, representing an average annual
investment of only slightly more than USD 2.9 million. Consequently, much of the refining assets in
Brazil are relatively outdated and in need of investment. The figure below illustrates Petrobras‟
historical investments by segment.
Figure 10: Petrobras investments breakdown
Source: Petrobras
R efineries C apacity ( '000 bbls/ d) T hro ughput ( '000 bbls/ d)
Paulínia - Replan (SP) 365 324
Landulpho Alves - Rlam (BA) 279 254
Duque de Caxias -Reduc (RJ) 242 256
Henrique Lage - Revap (SP) 251 205
Alberto Pasqualini - Refap (RS) 189 142
Pres. Getúlio Vargas - Repar (PR) 189 183
Pres. Bernardes - RPBC (SP) 170 168
Gabriel Passos - Regap (M G) 151 143
M anaus - Reman (AM ) 46 39
Capuava - Recap (SP) 53 45
Fortaleza - Lubnor (CE) 7 6
Pasadena - Estados Unidos 100 98
Ricardo Eliçabe - Argentina 31 24
San Lorenzo - Argentina 50 30
Okinawa 100 45
T o tal 2,223 1,962
46% 42%
84%
55% 49%
43% 52%
15%
23%21%
4%10%
11% 13%2% 2%11% 5%
1%6% 5%
60-69 70-79 80-89 90-99 00-09
E&P Downstream Gas & Energy International Distribution Others
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After three decades of investments focused on E&P, Brazilian oil production and demand vastly
exceeds its refining capacity. In order to satisfy the growing domestic demand for oil products and
to eventually develop Brazil as a net oil exporter, Petrobras has recently presented a revised
investment plan to increase its refining capacity and complexity. The plan will permit Brazil to
produce high value-added products by refining heavy crude oil and producing diesel and gasoline of
high quality to match international standards.
Figure 11: Petrobras’ historic and projected investments (annual average USD million)
Source: Petrobras
Petrobras‟ projected investments in the downstream segment from 2010 to 2014 amounts to USD
73.6 billion, a substantial increase from previous years and evidence of Petrobras‟ renewed focus
on the segment. Refinaria Abreu e Lima is one the biggest Petrobras‟ projects in the downstream
segment and will account for approximately 7% of all investment in the segment.
2.4.2. PDVSA
PDVSA has interests in 21 refineries around the world, comprised of five in Venezuela, five in US,
eight in Europe and three in the Caribbean. In aggregate, PDVSA has a refining capacity of 3.0
million bbls/d.
23.760
14.720
6.320
154 1.041 2.277 3.159
14.204
44.800
60-69 70-79 80-89 90-99 00-09 10-14 P
E&P Downstream Others
CONFIDENTIAL
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Figure 12: PDVSA’s Refineries
Source: PDVSA
PDVSA is the fourth largest supplier of crude oil and refined oil products in the United States of
America (“US”). Three of PDVSA‟s US based refineries are held by Citgo which is wholly owned by
PDVSA. Citgo is a leading energy company engaged in refining, transportation and marketing of
petroleum in the US market. Citgo is considered to be one of the largest and most complex
(weighted nelson complexity index of 12.38) independent refineries in US and the sixth largest
marketer of gasoline in the country (6,500 branded independent stations).
PDVSA has consistently invested in the downstream segment to increase its refining capacity and
its capability to process heavy crude oil and produce high value-added products. Including the
Project, PDVSA plans to invest more than USD 39 billion in the refining segment during the next
five years.
• 100% PDVSA
• Lake Charles
• Corpus Christi
• Lemont
• Saint Croix 50% PDVSA
• Chalmette 50% PDVSA
Kingston 49% PDVSA6 Ref ineries 100% PDVSA
Camilo Cienfuegos
49% PDVSA
Nynashamn 50% PDVSA
Gothenburg 50% PDVSA
Dundee 50% PDVSA
Eastham 25% PDVSA
Gelsenkirchen 50% PDVSA
Karlsruhe 12% PDVSA
Schwedt 19% PDVSA
Newstadt 13% PDVSA
Ref inery rented to Curacao Government – 100% PDVSA
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Figure 13: PDVSA’s Projected Investments in the Refining Segment (USD billion)
Source: PDVSA
2.5. Oil Supply Contracts
The Refinery has established the primary terms and conditions of the oil supply contracts with each
of the Sponsors (the “Oil Supply Contracts”) which will be signed by the parties upon PDVSA‟s
capital participation in RAL. The Oil Supply Contracts assure that the Refinery will have the
necessary oil supply to operate at its full capacity of 230,000 bbls/d. The main terms and conditions
of the Oil Supply Contracts are as follows:
Oil Specification:
o Oil from Petrobras must be BC 16 or equivalent;
o Oil from PDVSA must be CARABOBO 16, MEREY 16, DECON 16 or equivalent;
Quantity:
o Minimum 115,000 bbls/d to be supplied individually by both Petrobras and PDVSA
o If the Refinery is operating below full capacity, the 50:50 ratio will continue to apply
(i.e., neither party will be obligated to supply more oil than the other).
Term:
o The contract is valid from the Refinery‟s commercial operation date to September
30th, 2036;
Crude Oil Delivery Location:
o Oil will be delivered to Suape from where it will be transported to the Refinery by
underground pipelines;
Price:
o Price will be determined according to formulas mutually agreed by both Sponsors.
These formulas have been developed based on International Crude Market
Indicators, referential crudes and consider price adjustments due to crude gravity
and quality;
2
7
16
25
32
41
0
5
10
15
20
25
30
35
40
45
2010 2011 2012 2013 2014 2015
Local refining Foreign refining Accumulated Investments
CONFIDENTIAL
18
2.6. BNDES Loan
BNDES signed and fully disbursed the BRL 9.9 billion (USD 5.2 billion) BNDES Loan in August
2009 to finance a portion of the Project costs. The BNDES Loan has the following characteristics:
Table 9: BNDES Loan Terms & Conditions
Amount BRL 9.9 billion (USD 5.2 billion)
Borrower Refinaria Abreu e Lima S.A.
Repayment Semi-annual equal principal payments following a 7-year grace period
Interest Rate Fixed rate of 7.43% per annum
Interest Payment
Semi-annual; No grace period
Currency BRL
Index USD
Guarantee Petrobras Corporate Guarantee
CONFIDENTIAL
19
3. Petrobras
3.1. General Overview
Petrobras, Brazil‟s largest company in terms of revenue, is an integrated international oil and gas
company engaged in the exploration, development and production of hydrocarbons and in the
refining, marketing, transportation, and distribution of oil and a wide range of petroleum products,
petroleum derivatives, petrochemicals and liquid petroleum gas.
Petrobras was founded in 1953 as the Brazilian national oil company. It began operations with 15
million barrels of oil equivalent (“boe”) of reserves and two refineries which were transferred from
the former National Council of Petroleum. The company carried out oil and gas operations on behalf
of the Brazilian government until 1997 when Brazil enacted the Oil Law which opened Brazilian oil
and gas markets to private competitors.
Petrobras is currently one of largest companies in the world by market capitalization, with a market
value of USD 237 billion as of December 2010.
At the end of 2009, Petrobras had proven reserves of 12.2 billion boe. During the same year the
company produced 2.2 million boe/d and refined 1.9 million boe/d. Petrobras has a dominant
position in the Brazilian oil and gas market, the 10th largest oil-consuming nation. The company
owns 98% of Brazil‟s refining capacity, more than 7,000 retail stations, several pipelines, all or part
of 23 gas-fired power plants, and is developing capacity in petrochemicals, ethanol, and LNG.
3.2. Shareholder Structure
The Brazilian Government owns directly and indirectly 64% of Petrobras‟ common stock and 28% of
Petrobras‟ preferred stock. Brazilian law mandates that the government own at least 50% of the
voting stock and has the right to appoint majority of the directors on the Board.
Table 10: Petrobras’ Capital Stock
Source: Petrobras
Shares %
Federal Government 4,057,432,419 31.10%
BNDESPAR 1,514,749,158 11.61%
BNDES 218,845,426 1.68%
Fundo de Participação Social - FPS 8,433,460 0.06%
FFIE (Fundo Soberano) 505,652,285 3.88%
American Depositary Receipts (Common Shares) 1,521,989,590 11.67%
American Depositary Receipts (Preferred Shares) 1,477,085,956 11.32%
FM P - FGTS Petrobras 183,772,748 1.41%
Foreigners (RES. No 2689 C.M .N) 1,190,957,444 9.13%
Bovespa and Others 2,365,578,444 18.13%
T o tal 13,044,496,930 100.00%
CONFIDENTIAL
20
3.3. Business Segments
Petrobras is structured along five primary business lines: E&P; Refining, Transportation and
Marketing; Gas and Power; Distribution and International.
Figure 14: Petrobras’ Operating Income Composition (LTM July 2010)
Source: Petrobras
E&P: Petrobras is engaged in oil and gas exploration and production in Brazil. Brazilian
production represents approximately 90% of Petrobras‟ total production and Petrobras‟
production makes up an estimated 99% of total Brazilian production. Petrobras holds
concessions all over Brazil, but over 84% of proven reserves are concentrated in the
offshore Campos basin.
Refining, Transportation & Marketing: The refining, transportation & marketing segment is
primarily engaged in refining crude oil, but it also produces petrochemicals and fertilizer.
Petrobras has 2.2 million bbls/d of refining capacity in Brazil, which is equivalent to 98% of
Brazil‟s total capacity. Petrobras operates 15 refineries, 11 of which are in Brazil, located
primarily in the southeastern region of the country. Petrobras‟ refineries are typically smaller
and less complex when compared to its international peers. It plans to spend USD 74 billion
from 2010 to 2014 to increase its refining capacity and its ability to handle lower quality
crude oil while achieving higher environmental standards. Petrobras also owns a significant
stake in Braskem S.A., Brazil‟s largest petrochemical company.
Distribution: Through its distribution segment, Petrobras owns more than 7,000 retail
petroleum stations under the BR brand. Most of stations are operated by franchisees and
ones that are owned by Petrobras are operated by third-party contractors, as required by
Brazilian law.
Gas and Power: The gas and power segment is engaged in the transportation and
distribution of natural gas, and gas-fired electricity generation. As a source of Brazil‟s
energy needs, natural gas has grown from 4% in 1998 to 7% in 2009. Domestic production
has been supplemented with imports from Bolivia and will be increasingly supplemented
with LNG via its two import terminals. Petrobras owns all or part of 20 local gas distribution
companies throughout Brazil. Additionally, Petrobras maintains interests in 23
thermoelectric power plants.
E&P65%
Refining and Marketing
27%
Distribution4%
Gas and Power4%
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International: Petrobras operates in 24 countries outside of Brazil. It has assets around the
world, but it is particularly active in South America, the Gulf of Mexico, and offshore West
Africa. The company‟s international operations are focused on oil and gas exploration and
production, but also include refining and petrochemical assets located in Argentina, US,
and Japan. Petrobras‟ international operations produced 225,000 boe/d and had proven
reserves of 529 million boe at the end of 2009. The company aims to leverage its
experience in exploring and developing deepwater assets by assembling a global portfolio
of E&P assets. However, following the discovery of its pre-salt resources in Brazil,
Petrobras will reduce investment in its international assets to focus on pre-salt
development.
3.4. Financials
Table 11: Petrobras’ Financials (USD million)
Source: Petrobras
2005 2006 2007 2008 2009 2010
Net Revenues 56,324 72,347 87,735 118,257 91,869 120,052
EBITDA 17,638 22,923 25,333 31,083 28,982 32,665
EBITDA margin 31% 32% 29% 26% 32% 27%
Net Income 10,344 12,826 13,138 18,879 15,504 19,184
Capex 10,365 14,643 20,978 29,874 35,134 45,078
Cash & Equivalents 9,871 12,688 6,987 6,499 16,169 17,633
Total Debt 21,177 21,338 21,895 27,123 57,132 69,431
Net Debt / Ebitda 0.6x 0.4x 0.6x 0.7x 1.4x 1.6x
CONFIDENTIAL
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4. PDVSA
4.1. General Overview
PDVSA is Venezuela‟s largest company and ranks as one of the world‟s largest vertically integrated
oil and gas companies. According to Petroleum Intelligence, PDVSA is the fourth largest oil
company in the world. The company is wholly owned by the Republic of Venezuela and is
responsible for the country‟s development and exploration of oil and gas reserves.
PDVSA plays a strategic role in Venezuela‟s economy. In 2010, it was estimated that PDVSA
accounted for 16% of Venezuela‟s GDP, 90% of Venezuela‟s exports and 55% of the country‟s
fiscal revenues.
Venezuela‟s crude oil reserves are the largest in the world, estimated at 297 billion boe which
equates to more than 170 years of production at current levels. However, approximately 80% of its
reserves consist of extra-heavy crude oil which requires special processing.
According to US Geological Survey, the undiscovered Orinoco Basin reserves in Venezuela have
the potential to reach 512 billion boe. If these reserves are proven, Venezuela will own the largest
oil reserve in the world.
Figure 15: Global and Venezuelan Oil and Gas Proved Reserves
Source: OPEC Annual Statistical Bulletin
PDVSA currently produces approximately 3.0 million bbls/d of crude oil and 633 thousands boe/d of
natural gas. PDVSA has interests in 21 refineries around the totaling a refining capacity of 3.0
million bbls/d. The Company currently refines around 2.7 million bbls/d.
PDVSA has an extensive distribution network in the US through Citgo. In fact, PDVSA is the fourth
largest supplier of crude oil and refined petroleum products in the US after Canada, Mexico and
Saudi Arabia.
Over 95% of PDVSA‟s revenues in 2009 came from the international market, including both, exports
and foreign sales.
Venezuela’s oil and gas proved reserves (billion boe) Global oil proved reserves (billion boe)
2005 2006 2007 2008 2009
Saudi Arabia 264 264 264 264 265
Venezuela 80 87 99 172 211
Iran 136 138 136 138 137
Iraq 115 115 115 115 115
Kuwait 102 102 102 102 102
United Arab Emirates 98 98 98 98 98
Russia 78 79 79 79 79
Libya 41 41 44 44 46
Kazakhstan 40 40 40 40 40
Nigeria 36 37 37 37 37
80 87 99
172 211
26 29 29
30
31
106 116
129
203
242
2005 2006 2007 2008 2009
Oil Gas
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23
4.2. Shareholder Structure
PDVSA is 100% owned by the Venezuelan Government.
4.3. Business Segments
PDVSA is structured along four primary segments: E&P, Gas, Refining, Trade and Supply and
Other activities.
Figure 16: PDVSA’s Sales Composition (1H 2010)
Source: PDVSA
E&P: PDVSA has exploration activities in Venezuela and other countries such as Bolivia,
Ecuador, Cuba, Argentina and Uruguay. Production activities remain located strictly in the
Venezuelan territory. The E&P activities include the search for oil and gas reserves,
production of oil and gas, and the transportation of oil and natural gas to refineries and
fractionation plants.
Refining, Trade and Supply: PDVSA‟s activities in Venezuela include the administration of
refineries, marketing and transportation of crude oil and refined products, under the brand
name PDV. The refining, trade and supply activities in the US consist of the administration
of refineries and gasoline and by-products marketing, mainly on the East Coast and the
Midwest regions of the country, under the brand name CITGO. PDVSA also has refining
activities in the Caribbean and Europe.
Gas: PDVSA‟s activity includes the management of gas processing plants, upgrading and
commercialization of natural and liquid gas, both for industrial and household appliance, as
well as its transportation, distribution, storage and sale.
E&P42%
Refining Trade and Supply
56%
Gas1%
Other1%
CONFIDENTIAL
24
4.4. Financials
Table 12: PDVSA’s Financials (USD million)
Source: PDVSA
4.5. PDVSA’s Investment Plan
PDVSA‟s investment program is currently being undertaken via the 2010-2015 business plan called
Plan Siembra Petrolera (Oil Sowing Plan). The plan outlines USD 252 billion in projects in
Venezuela, the Caribbean and Latin America.
Some of the key projects and goals under the plan are the following:
Increase crude oil production to 4,460 million bbls/d by 2015;
Expand refining capacity from 3 million bbls/d to 3.2 million bbls/d by 2015;
Develop the gas sector and double production by 2015;
Increase tanker capacity to add new markets for crude oil; and,
Reduce domestic gasoline demand by increasing natural gas dispatch facilities for dual-fuel
vehicles.
2005 2006 2007 2008 2009 2010
Revenues 82.915 99.252 96.242 125.465 73.683 94.929
EBITDA 22.559 27.174 28.563 32.837 11.734 28.402
EBITDA margin 27% 27% 30% 26% 16% 30%
Net Income 6.483 5.452 6.273 9.413 4.498 3.202
Capex 3.939 1.748 13.187 15.848 15.313 13.307
Cash & Equivalents 1.800 2.282 3.325 4.483 6.981 6.017
Total Debt 3.433 2.914 16.611 15.095 21.419 24.950
Net Debt / Ebitda 0,1x 0,0x 0,5x 0,3x 1,2x 0,7x
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5. Financial Projections
RAL engaged Ernst & Young to produce an economic and financial study (the “Financial Plan”)
regarding the feasibility of the Project. The Financial Plan, dated as of April 2010, was delivered to
Petrobras and PDVSA, and considers several assumptions that were considered valid and
reasonable at that time.
In an effort to provide an updated equity contribution forecast, PDVSA carried out a limited review
of the Financial Plan in the 2011 first quarter (the “Revised Financial Plan”). The Revised Financial
Plan (see section 5.2) was limited to updates related to foreign exchange rates, capital
expenditures, and commercial operation dates.
Despite the limited review carried out by PDVSA, it is important to highlight that, as a condition
precedent to signing legal documentation, the Lenders will receive an updated Revised Financial
Plan that considers updated projections regarding capital expenditures, crude oil and oil product
prices, macroeconomic indicators, and any other assumptions that may impact the financial
projections of the Refinery.
5.1. RAL Financial Plan
All financial projections contained in the Financial Plan were developed in USD in real terms (i.e.
does not consider inflation). The USD/BRL rate is kept constant at 2.34 for the entire projection.
The main assumptions and outputs of the Financial Plan are presented below.
5.1.1. Investments
The Financial Plan considers investments of USD 13.36 billion, itemized as follows:
Table 13: Financial Plan’s Investments (USD million – real terms)
Source: Financial Plan
5.1.2. Revenues assumptions
The Financial Plan considers that Unit 1 and Unit 2 will commence operations in October 2012 and
July 2013, respectively.
2006 2007 2008 2009 2010 2011 2012 2013 2014 T o tal
Engineering 0 2 10 26 118 139 117 86 10 508
Equipments 1 20 99 249 1,112 1,314 1,103 811 90 4,797
M aterials 0 6 31 78 347 410 344 253 28 1,497
Civil Work 0 11 57 143 638 754 633 465 52 2,753
Assembling 0 11 55 139 623 735 617 454 50 2,686
Others 0 0 2 5 22 26 22 16 2 94
M anagement 0 4 21 53 239 282 237 174 19 1,029
T o tal 2 55 276 693 3,098 3,659 3,072 2,258 250 13,363
CONFIDENTIAL
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The Financial Plan assumes a 96% utilization factor for the Project and assumes that 50% of the oil
to be refined comes from Brazil (BC 16) and 50% comes from Venezuela (Carabobo 16 or
equivalent). These assumptions result in the following annual output:
Table 14: Refinery’s Projected Output (m3 / year)
Source: Financial Plan
The Financial Plan considers that the Project will sell its entire output in the domestic market, with a
substantial portion being sold in Pernambuco state.
Table 15: Oil Products Commercialization
Source: Financial Plan
The price of oil and related products were based on the Plano Decenal de Energia 2008-2017,
produced by the Brazilian Energetic Research Company (Empresa de Pesquisa Energética). The
prices illustrated in the table below include taxes.
Table 16: Projected Sales Prices (USD/m3)
Source: Financial Plan
5.1.3. Operating Costs
5.1.3.1. Fixed Costs
The table below exhibits the projected fixed costs, including materials, workforce, utilities and
regular maintenance that are assumed in the Financial Plan.
P ro duct Unit 1 Unit 2 T o tal
Diesel 4,580,547 4,465,232 9,045,779
Naphta 339,537 429,226 768,763
Coke 787,982 1,127,519 1,915,501
LPG 307,505 243,442 550,947
HCGO 358,756 83,283 442,039
Sulfuric acid 70,470 140,940 211,410
Sulfur 19,219 102,502 121,721
T o tal 6,464,017 6,592,144 13,056,160
Diesel 10% 90%
Naphta 0% 100%
Coke 100% 0%
LPG 100% 0%
HCGO 100% 0%
Sulfuric acid 0% 100%
Sulfur 100% 0%
Inside P ernambuco
State
Outside
P ernambuco State
2012 2013 2014 2015 2016 2017 ...
Diesel 911 883 857 836 820 808 808
Naphta 556 539 524 511 502 494 494
Coke 210 139 99 99 99 99 99
LPG 1536 1495 1457 1426 1401 1383 1383
HCGO 490 478 467 457 450 444 444
Sulfuric acid 99 99 99 99 99 99 99
Sulfur 121 121 121 121 121 121 121
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Table 17: Projected Fixed Costs (BRL’000 /year)
Source: Financial Plan
5.1.3.2. Planned Maintenance
The table below exhibits the estimated annual projected maintenance cost:
Table 18: Projected Planned Maintenances (BRL’000/year)
Source: Financial Plan
5.1.3.3. Logistic Costs
The Financial Plan‟s projected logistic costs are presented in the following table:
Table 19: Projected Logistic Costs
Source: Financial Plan
5.1.3.4. Crude Oil
Crude oil price projections were also based on the Plano Decenal de Energia 2008-2017 and are
held constant from 2017 onward. The values in the following table are net of taxes.
M aterials 9,494
Workforce 149,400
Utilities 34,777
Regular M aintenance 45,000
Total 238,671
F ixed C o sts
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Planned M aintenance 0 6,000 61,000 30,000 336,840 6,000 6,000 85,000 6,000 336,840 6,000
2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
Planned M aintenance 30,000 61,000 6,000 336,840 30,000 6,000 61,000 6,000 360,840 6,000 85,568
Oil Products (output) Cost Unit Crude Oil (raw material) Cost Unit
Diesel - Inside Pernambuco state BC 16 or equivalent (Domestic Oil)
Pipelines 0.4 BRL/ m3 Pipelines and freight 11.0 BRL/ m3
Diesel - Outside Pernambuco state Suape Terminal 2.5 BRL/ ton
Pipelines 0.4 BRL/ m3 Port Fees 2.7 BRL/ ton
Suape Terminal 2.5 BRL/ ton
Port Fees 2.7 BRL/ ton Carabobo 16 or equivalente (Foreign Oil)
Naphta - Outside Pernambuco State Pipelines and freight 18.1 BRL/ m3
Pipelines 0.4 BRL/ m3 Suape Terminal 2.5 BRL/ ton
Suape Terminal 2.5 BRL/ ton Port Fees 2.7 BRL/ ton
Port Fees 2.7 BRL/ ton
LPG - Inside Pernambuco state
Pipelines 0.4 BRL/ m3
HCGO - Inside Pernambuco state
Pipelines 0.4 BRL/ m3
CONFIDENTIAL
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Table 20: Projected Crude Oil Prices (USD/m3)
Source: Financial Plan
2012 2013 2014 2015 2016 2017 ...
Crude Oil 430 417 405 395 388 382 382
CONFIDENTIAL
29
5.1.4. Projected Financial Statements
Table 21: Projected Income Statement
Source: Financial Plan
USD millio n (real terms) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Gro ss R evenues
Diesel 1,043 6,018 7,755 7,564 7,414 7,305 7,305 7,305 7,305 7,305 7,305
Naphta 47 299 403 393 386 380 380 380 380 380 380
Coke 41 188 189 189 189 189 189 189 189 189 189
LPG 118 642 803 785 772 762 762 762 762 762 762
HCGO 44 191 206 202 199 196 196 196 196 196 196
Sulfuric acid 2 14 21 21 21 21 21 21 21 21 21
Sulfur 1 9 15 15 15 15 15 15 15 15 15
Gro ss R evenues 1,296 7,361 9,391 9,170 8,995 8,868 8,868 8,868 8,868 8,868 8,868
Sales D educt io ns (34) (1,444) (2,059) (2,025) (1,992) (1,967) (1,967) (1,967) (1,967) (1,967) (1,967)
PIS and COFINS - (1,240) (1,788) (1,754) (1,721) (1,696) (1,696) (1,696) (1,696) (1,696) (1,696)
ICM S - - - - - - - - - - -
CIDE (34) (204) (271) (271) (271) (271) (271) (271) (271) (271) (271)
N et R evenues 1,262 5,917 7,332 7,145 7,004 6,901 6,901 6,901 6,901 6,901 6,901
C o sts and Expenses (785) (4,755) (6,303) (6,143) (6,160) (5,935) (5,935) (5,969) (5,935) (6,076) (5,936)
M aterials (1) (3) (4) (4) (4) (4) (4) (4) (4) (4) (4)
Workforce (8) (48) (64) (64) (64) (64) (64) (64) (64) (64) (64)
Utilities (2) (11) (15) (15) (15) (15) (15) (15) (15) (15) (15)
Regular M aintenance (1) (6) (9) (9) (9) (9) (9) (9) (9) (9) (9)
Planned M aintenance - (3) (26) (13) (144) (3) (3) (36) (3) (144) (3)
Other Operational Costs (1) (8) (11) (11) (11) (11) (11) (11) (11) (11) (11)
Crude Oil (759) (4,587) (6,049) (5,903) (5,788) (5,704) (5,704) (5,704) (5,704) (5,704) (5,704)
Logistic Costs (13) (89) (126) (126) (126) (126) (126) (126) (126) (126) (126)
EB IT D A 477 1,161 1,029 1,001 844 966 966 932 966 824 965
EBITDA M argin 38% 20% 14% 14% 12% 14% 14% 14% 14% 12% 14%
Depreciation (271) (1,311) (1,336) (1,336) (1,336) (1,336) (1,336) (1,336) (1,336) (1,336) (1,065)
EB IT 206 (150) (307) (335) (492) (370) (370) (404) (370) (512) (100)
Financial Result (149) (149) (149) (149) (149) (143) (131) (120) (109) (97) (86)
EB T 57 (298) (456) (484) (641) (513) (502) (524) (479) (609) (186)
Income Tax and Social Contribution (6) - - - - - - - - - -
N et Inco me 50.95 (298.36) (455.58) (483.51) (641.01) (513.25) (501.82) (524.21) (478.97) (609.16) (186.09)
Net M argin 4% -5% -6% -7% -9% -7% -7% -8% -7% -9% -3%
USD millio n (real terms) 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
Gro ss R evenues
Diesel 7,305 7,305 7,305 7,305 7,305 7,305 7,305 7,305 7,305 7,305 7,305
Naphta 380 380 380 380 380 380 380 380 380 380 380
Coke 189 189 189 189 189 189 189 189 189 189 189
LPG 762 762 762 762 762 762 762 762 762 762 762
HCGO 196 196 196 196 196 196 196 196 196 196 196
Sulfuric acid 21 21 21 21 21 21 21 21 21 21 21
Sulfur 15 15 15 15 15 15 15 15 15 15 15
Gro ss R evenues 8,868 8,868 8,868 8,868 8,868 8,868 8,868 8,868 8,868 8,868 8,868
Sales D educt io ns (1,967) (1,967) (1,967) (1,967) (1,967) (1,967) (1,967) (1,967) (1,967) (1,967) (1,967)
PIS and COFINS (1,696) (1,696) (1,696) (1,696) (1,696) (1,696) (1,696) (1,696) (1,696) (1,696) (1,696)
ICM S - - - - - - - - - - -
CIDE (271) (271) (271) (271) (271) (271) (271) (271) (271) (271) (271)
N et R evenues 6,901 6,901 6,901 6,901 6,901 6,901 6,901 6,901 6,901 6,901 6,901
C o sts and Expenses (5,946) (5,960) (5,936) (6,078) (5,946) (5,936) (5,960) (5,936) (6,088) (5,936) (5,970)
M aterials (4) (4) (4) (4) (4) (4) (4) (4) (4) (4) (4)
Workforce (64) (64) (64) (64) (64) (64) (64) (64) (64) (64) (64)
Utilities (15) (15) (15) (15) (15) (15) (15) (15) (15) (15) (15)
Regular M aintenance (9) (9) (9) (9) (9) (9) (9) (9) (9) (9) (9)
Planned M aintenance (13) (26) (3) (144) (13) (3) (26) (3) (154) (3) (37)
Other Operational Costs (11) (11) (11) (11) (11) (11) (11) (11) (11) (11) (11)
Crude Oil (5,704) (5,704) (5,704) (5,704) (5,704) (5,704) (5,704) (5,704) (5,704) (5,704) (5,704)
Logistic Costs (126) (126) (126) (126) (126) (126) (126) (126) (126) (126) (126)
EB IT D A 954 941 965 823 954 965 941 965 813 965 930
EBITDA M argin 14% 14% 14% 12% 14% 14% 14% 14% 12% 14% 13%
Depreciation (25) - - - - - - - - - -
EB IT 929 941 965 823 954 965 941 965 813 965 930
Financial Result (74) (63) (51) (40) (29) (17) (3) - - - -
EB T 855 878 913 783 926 947 938 965 813 965 930
Income Tax and Social Contribution (203) (209) (217) (186) (220) (225) (223) (230) (193) (230) (221)
N et Inco me 651.51 669.16 695.81 596.61 705.40 721.93 714.88 734.98 619.24 734.98 709.03
Net M argin 9% 10% 10% 9% 10% 10% 10% 11% 9% 11% 10%
CONFIDENTIAL
30
Table 22: Projected Debt Service Coverage Ratio
Source: Financial Plan
5.2. Revised Financial Plan
In order to estimate the amount of equity that will have to be injected in the Refinery, PDVSA
updated some of the Financial Plan‟s assumptions. The assumptions that were updated include
foreign exchange rates, capital expenditures, and commercial operation dates.
It is important to highlight that these are preliminary figures and, although PDVSA does not expect
significant variations, a further updated Revised Financial Plan shall be submitted to Lenders as a
condition precedent to signing of legal documentation.
5.2.1. Foreign Exchange Rate
The projections for the USD/BRL exchange rate were based on figures from the Focus Report as of
March 2011. The Focus Report is released weekly by the Brazilian Central Bank.
The EUR/BRL exchange rate was based on projections from BES Investimento do Brasil‟s
Economic Department.
Table 23: Foreign Exchange Rates
Source: Brazilian Central Bank and BES Investimento do Brasil
USD millio n (real terms) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
D SC R 3.17x 8.55x 7.31x 6.72x 2.41x 1.77x 1.81x 1.79x 1.90x 1.66x 1.98x
C ash Generat io n 471 1,270 1,086 998 841 964 966 932 966 824 965
EBITDA 477 1,161 1,029 1,001 844 966 966 932 966 824 965
Income Tax and Social Contribution (6) - - - - - - - - - -
Changes in working capital 0 109 57 (3) (3) (2) - - - - -
D ebt Service 149 149 149 149 350 544 532 521 509 498 486
Principal Amortization - - - - 201 401 401 401 401 401 401
Interest Payment 149 149 149 149 149 143 131 120 109 97 86
USD millio n (real terms) 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
D SC R 1.69x 1.58x 1.66x 1.43x 1.73x 1.77x 3.54x N / A N / A N / A N / A
C ash Generat io n 801 733 749 629 742 740 717 737 610 744 707
EBITDA 954 941 965 823 954 965 941 965 813 965 930
Income Tax and Social Contribution (203) (209) (217) (186) (220) (225) (223) (230) (193) (230) (221)
Changes in working capital 50 1 2 (8) 8 1 (1) 2 (9) 9 (2)
D ebt Service 475 464 452 441 429 418 203 - - - -
Principal Amortization 401 401 401 401 401 401 200 - - - -
Interest Payment 74 63 51 40 29 17 3 - - - -
2006 A 2007 A 2008 A 2009 A 2010 A 2011 P 2012 P 2013 P 2014 P 2015 P 2016 P
USD/BRL (year average) 2.18 1.95 1.84 1.99 1.76 1.68 1.74 1.79 1.84 1.87 1.87
EUR/BRL (year average) 2.74 2.67 2.70 2.78 2.33 2.28 2.20 2.17 2.19 2.25 2.25
CONFIDENTIAL
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5.2.2. Capex
Capex assumptions were updated considering the progress of the Refinery‟s construction as of
December 2010, as well as, the estimated schedule for remaining investments based on contracts
that have been executed or that are under negotiation.
Table 24: Projected Investments
Source: PDVSA
5.2.3. Commercial Operation Date
The commercial operation dates for Unit 1 and Unit 2 were updated to January 2013 and August
2013, respectively.
5.2.4. Estimated Equity Contribution
Considering the updates mentioned above, the total amount of equity injection in the Refinery is the
forecast at BRL 17.6 billion (USD 10.1 billion).
Table 25: Sources and Uses (BRL million)
Source: PDVSA
Considering that PDVSA will be responsible for 40% of total equity, PDVSA commits to contribute
BRL 7.0 billion (USD 4.1 billion), with BRL 854 million (USD 510 million) as Initial Equity
Contribution and BRL 6.2 billion (USD 3.6 billion) from 2011 to 2013.
2006 A 2007 A 2008 A 2009 A 2010 A 2011 P 2012 P 2013 P 2014 P 2015 P 2016 P T o tal
USD/BRL (year average) 2.18 1.95 1.84 1.99 1.76 1.68 1.74 1.79 1.84 1.87 1.87
EUR/BRL (year average) 2.74 2.67 2.70 2.78 2.33 2.28 2.20 2.17 2.19 2.25 2.25
Actual Investments (BRL million) 5 99 523 814 3,075 - - - - - - 4,516
Projected Investments (by currency)
BRL (million) - - - - - 8,403 8,319 5,009 701 297 54 22,783
USD (million) - - - - - 50 60 36 5 2 0 154
EUR (million) - - - - - 139 163 98 14 6 1 420
Projected Investments (BRL million) - - - - - 8,802 8,783 5,288 740 314 57 23,984
T o tal Investments (B R L millio n) 5 99 523 814 3,075 8,802 8,783 5,288 740 314 57 28,500
T o tal Investments (USD millio n) 2 51 284 408 1,748 5,240 5,048 2,954 402 168 31 16,336
So urces 2006 A 2007 A 2008 A 2009 A 2010 A 2011 P 2012 P 2013 P 2014 P 2015 P 2016 P T o tal
Cash Flow from Operating Activities - - - - - - - 2,707 1,953 1,768 1,406 7,835
BNDES Loan - - - 9,890 - - - - - - - 9,890
Equity Injection 5 99 523 654 - 3,575 9,456 3,273 - - - 17,586
T o tal So urces 5 99 523 10,544 - 3,575 9,456 5,980 1,953 1,768 1,406 35,311
Uses 2006 A 2007 A 2008 A 2009 A 2010 A 2011 P 2012 P 2013 P 2014 P 2015 P 2016 P T o tal
Capex 5 99 523 814 3,075 8,802 8,783 5,288 740 314 57 28,500
Debt Service - - - 96 681 650 673 693 712 724 1,100 5,330
Interest Payment - - - 96 681 650 673 693 712 724 725 4,954
Principal Amortization - - - - - - - - - - 376 376
T o tal Uses 5 99 523 911 3,756 9,453 9,456 5,980 1,452 1,038 1,158 33,830
Cash Flow - - - 9,634 (3,756) (5,878) - - 501 731 249 1,481
C ash B alance - - - 9,634 5,878 - - - 501 1,232 1,481 1,481
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Table 26: Equity Injection (BRL million)
Source: PDVSA
2006 A 2007 A 2008 A 2009 A 2010 A 2011 P 2012 P 2013 P T o tal
Total Equity Injection 5 99 523 654 - 3,575 9,456 3,273 17,586
P D VSA Equity Injectio n - - - - - 1,942 3,783 1,309 7,034
Initial Equity Contribution - - - - - 854 - - 854
Remaining Projected Equity Injection - - - - - 1,088 3,783 1,309 6,180
CONFIDENTIAL
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6. Market Overview
6.1. Brazilian Oil Reserves and Production
Brazil has the 16th largest proven oil reserve in the world with 12.9 billion bbls by the end of 2009.
Brazilian reserves have been consistently increasing in the last ten years, presenting a
compounded annual growth rate (CAGR) of 4.7% from 1999 to 2009. In the same period, global
reserves grew at an annual average of 2.1%. Brazilian oil production has been growing even more
than oil reserves, presenting a CAGR of 6.6% in the last ten years.
Figure 17: Brazilian Oil Proved Reserves and Oil Production
Source: ANP
In 2006, Petrobras discovered the first signs of oil in the pre-salt section. In 2007, a consortium
formed by Petrobras, BG Group, and Petrogal discovered the Tupi field. Tupi contains substantial
reserves in a pre-salt zone, 18,000 feet below the ocean‟s surface, under a thick layer of salt.
Following Tupi, numerous additional pre-salt finds were announced in the Santos Basin, such as
Iracema, Carioca, Iara, Libra, Franco and Guara. Additional pre-salt discoveries were also
announced in the Campos and Espirito Santo Basins. The total pre-salt resources are difficult to
define, but specialists estimates the oil reserves at more than 36 billion bbls.
Figure 18: Pre-Salt map
Source: Petrobras
8,2 8,5 8,5 9,8
10,6 11,2 11,8 12,2 12,6 12,8 12,9
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Onshore Offshore
401 451 472
531 546 541 596 629 638 663
712
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Onshore Offshore
Oil Proved Reserves (billion bbls) Oil Production (million bbls)
CAGR: 4.7% CAGR: 6.6%
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Brazil‟s pre-salt announcements immediately transformed the nature and focus of Brazil‟s oil sector.
Moreover, the potential impact of the discoveries on the global oil market cannot be over-
emphasized. The scale of the potential expansion in production will test Petrobras‟ exploration and
production resources and Brazil‟s infrastructure.
Figure 19: Global Oil Proved Reserves and estimated Pre-Salt Impact in Brazilian Reserves
Source: OPEC and Análise Energia Annual Report 2010
In its 2010-2014 business plan, Petrobras plans to invest USD 33 billion in pre-salt and USD 75.2
billion in post-salt production E&P activities to achieve a domestic oil production of 4 million bbls/d
by 2020. More than a quarter of this production is expected to come from pre-salt oil.
The Brazilian government released the proposed regulatory framework for the pre-salt reserves in
August 2009. The framework consists of four acts of legislation.
The first two bills were signed into law in July of 2010. The first law creates a new agency,
Petrosal, to manage new pre-salt production. The second law allows the government to
capitalize Petrobras by granting the company 5 billion bbls of unlicensed pre-salt oil
reserves in exchange for a larger ownership share.
The other two bills were approved by Congress in December 2010, but have not yet been
signed into law. The first bill establishes a new development fund to manage government
revenues from pre-salt oil, and the second bill lays out a new production sharing agreement
(“PSA”) system for pre-salt reserves.
In contrast to the earlier concession-based framework, Petrobras will be the sole operator of each
PSA and would hold a minimum 30% stake in all pre-salt projects.
Once a final agreement is in place, Brazil is expected to hold an auction round for exploration
blocks.
13
18
19
25
37
40
44
49
79
98
102
115
137
211
265
14th- Brazil
13th- China
12th- United States
11th -Qatar
10th- Nigeria
9th- Kazakhstan
8th- SP Libyan AJ
8th- Brazil with Pre-Salt
7th- Russia
6th- United Arab Emirates
5th- Kuwait
4th- Iraq
3rd- IR Iran
2nd- Venezuela
1st -Saudi Arabia
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6.2. Brazilian Refining Market
According to ANP, as of 2009 Brazilian refining capacity amounted to 332,703 m3/day. Petrobras
currently operates 11 of the 16 refineries in Brazil, most of which are located near the major
demand and production centers. The largest refinery in Brazil is located in Paulínia, São Paulo with
a refining capacity of 66,000 / m3 / day.
Table 27: Brazilian Refineries Nominal Capacity (m3/day - 2009)
Source: ANP
Despite being the 10th largest oil consumer in the world, Brazil is expected to experience sharp
growth in demand for oil products in the coming years, primarily a result of the economy‟s strong
growth projections.
Figure 20: Brazilian GDP and Global Oil Consumption
Source: IPEA and Petrobras
The growth of Brazil‟s refining capacity has not kept pace with domestic demand. While Brazil‟s oil
production and demand have been growing fast in recent years, Brazil‟s refining capacity has hardly
R efineries (States) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Replan (SP) 56,000 56,000 56,000 58,000 58,000 58,000 58,000 58,000 61,000 66,000
RLAM (BA) 47,000 47,000 47,000 51,350 51,350 51,350 51,350 51,350 46,950 44,500
Revap (SP) 36,000 36,000 36,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000
Reduc (RJ) 38,500 38,500 38,500 38,500 38,500 38,500 38,500 38,500 38,500 38,500
Repar (PR) 30,000 30,000 30,000 30,000 30,000 30,000 30,000 32,000 35,000 35,000
Refap (RS) 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000
RPBC (SP) 27,000 27,000 27,000 27,000 27,000 27,000 27,000 27,000 27,000 27,000
Regap (M G) 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000
Recap (SP) 8,500 8,500 8,500 8,500 8,500 8,500 8,500 8,500 8,500 8,500
Reman (AM ) 7,300 7,300 7,300 7,300 7,300 7,300 7,300 7,300 7,300 7,300
Polo de Guamaré (RN) 1,728 1,728 1,728 1,728 1,728 4,328 4,328 4,328 4,328 4,328
Riograndense (RS) 2,000 2,000 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700
M anguinhos (RJ) 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200
Lubnor (CE) 1,000 1,000 1,000 1,000 1,000 1,100 1,100 1,100 1,300 1,300
Univen (SP) - - - - - - - 1,100 1,100 1,100
Dax Oil (BA) - - - - - - - - 275 275
T o tal 311,228 311,228 311,928 322,278 322,278 324,978 324,978 328,078 330,153 332,703
Brazilian GDP (BRL trillion) Global Oil Consumption (million boe/d)
2,7 2,8 3,0
3,1 3,1 3,4
3,5 3,7
3,9 4,0
2005 2006 2007 2008 2009 2010 E
2011 P
2012 P
2013 P
2014 P
18,7
8,6
4,43,2 2,8 2,7 2,6 2,4 2,4 2,3 2,2 1,9 1,9 1,8 1,7 1,6 1,6
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increased in the last decade, presenting a CAGR of less than 1.0%. Brazil‟s oil production and
demand has overtaken refining capacity, resulting in Brazil being a net importer of refined oil
products.
In order to satisfy growing domestic demand for oil products, Petrobras has recently presented an
aggressive plan to increase its refining capacity in order to make Brazil self-sufficient in oil products
in the short term, and eventual net exporter of high value-added oil products in the medium to long
term. Petrobras plans to increase the volume of oil processed domestically by 470,000 bbls/d by
2014 and by an additional 936,000 bbls/d by 2020. The company‟s projected investment in the
refining and supply segment from 2010 to 2014 amounts to USD 73.6 billion.
Figure 21: Brazilian Oil Production, Refining and Demand (‘000 bbls/d)
Source: Petrobras
6.3. Brazilian Diesel Market
Diesel is the main source of energy in Brazil. According to the Brazilian Energy Balance, diesel
accounted for 18% of the Brazilian energy consumption in 2009 and represented 47% of the
consumption of energy oil products in the country. The transportation sector is the main consumer
of diesel representing 82% of the total domestic consumption.
181
1.971
2.980
3.950
1.3931.791
2.260
3.196
1.036
1.9332.356
2.794
134%
93% 96%114%
-150%
-100%
-50%
0%
50%
100%
0
1.000
2.000
3.000
4.000
5.000
6.000
7.000
1980 2009 2014E 2020E
A) Oil Production B) Processed Oil C) Demand for Oil Products (B) / (C)
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Figure 22: Brazilian Energy Consumption and Diesel Consumption
Source: Brazilian Energy Balance
Nowadays, Brazil‟s diesel production is not enough to meet domestic demand thus the product is
imported in large quantities. In the last five years Brazil has imported on average 10% of its
domestic diesel consumption. Approximately 95% of imported diesel comes from Asia and the US.
Figure 23: Diesel Production, Sales and Imports
Source: ANP
Brazilian Energy Consumption Brazilian Diesel Consumption
Diesel18%
Electricity18%
Sugar cane bagasse
14%Firewood
8%
Gasoline7%
Natural Gas7%
Others28%
Transportation
82%
Agriculture and
Livestock15%
Industrial2%
Others1%
Domestic Diesel Production and Sales (million m3) Diesel Imports (million m3)
38,739,1
39,6
41,1
42,9
39,2 39,0
41,6
44,844,3
2005 2006 2007 2008 2009
Diesel Production Diesel Sales
2,4
3,5
5,1
5,8
3,5
6%
9%
12% 13%
8%
-10%
-5%
0%
5%
10%
0,0
1,0
2,0
3,0
4,0
5,0
6,0
7,0
2005 2006 2007 2008 2009
Diesel Imports
Diesel Imports / Diesel Domestic Sales
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7. Risks and Mitigants
The main risks associated with the Transaction Facilities are listed below, along with the
corresponding mitigants:
7.1. Construction
Risk:
Delays and/or cost-overruns.
Mitigants
The Sponsors have a proven track-record and possess significant construction
management credentials, having constructed several refineries in the past decades.
The Sponsors are two of the main players in the global refining market with 36 refineries
worldwide and a combined refining capacity of 5.3 million bbls/d, equivalent to the second
largest refining capacity in the world;
The Refinery will consist of conventional production units and incorporate proven
technologies familiar to the Sponsors;
The Project has contracted several of the most renowned construction companies in Brazil,
with extensive experience in the sector, to undertake certain construction and equipment
procurement activities;
The Refinery has all the necessary permits for its construction; and,
Construction is well underway. As of December 2010, 31% of construction was complete,
20% of equipment had been delivered on site, and another 46% of equipment had been
already ordered.
7.2. Equity Contribution
Risk:
Delay or failure by the Sponsors to contribute equity, resulting commercial operation delay;
Mitigants
Both Sponsors rank among the largest oil companies in the world;
Both Sponsors maintain favorable leverage ratios and have the ability to raise funds in the
capital markets;
o PDVSA and Petrobras have Net Debt / EBITDA ratios of 0.6x and 1.6X,
respectively.
The Project is of strategic importance to both Sponsors; and,
o The Refinery enables Petrobras to process large volumes of oil expected to be
produced in the pre-salt area and reduce Brazil‟s diesel imports; and,
o The Refinery represents PDVSA‟s first significant investment in the Brazilian oil
market and allows the company to process its enormous reserves of heavy crude
oil.
As of financial close, both Sponsors will have jointly injected more than BRL 2.1 billion in
equity in the Project.
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7.3. Operations
Risk:
Unsatisfactory operation due to technical problems, lack of crude oil supply (raw material)
or logistic problems.
Mitigants
As previously mentioned, the Sponsors have extensive experience in the refining market,
being responsible for the operation of 36 refineries globally;
The Project has entered into Oil Supply Contracts assuring crude oil supply until 2036; and,
The Refinery is located in Suape, which provides the necessary infrastructure network to
receive crude oil and distribute diesel and other refined oil products.
7.4. Demand
Risk:
Low demand or low prices for oil products.
Mitigants:
The Refinery‟s main output will be diesel, which was the main Brazilian source of energy in
2009, accounting for 18% of the Brazilian Energy Matrix, and represented 47% of the
consumption of energetic oil products in the country; and,
Furthermore, current domestic diesel production does not satisfy demand, and
consequently, Brazil is importing 10% of diesel consumption.
7.5. Repayment
Risk:
The Project and Borrower are unable to repay the BNDES Loan and the Transaction
Facilities, respectively, due to lack of cash flows from the sale of oil products.
Mitigants:
The Project‟s Minimum and Average DSCR are 1.43x and 2.91x, respectively;
The Sponsors are strongly committed to the Project and will inject a significant amount of
equity. Furthermore, the BNDES Loan Agreement is also guaranteed by Petrobras;
The Transaction Facilities are guaranteed in full by a Corporate Guarantee issued by
PDVSA;
Additionally, the Transaction Facilities are also guaranteed by a pledge over 40% of the
Refinery‟s shares and a USD 235 million cash collateralized SBLC issued by BANDES.
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8. Term Sheet
SUMMARY OF INDICATIVE TERMS AND CONDITIONS
This Summary of Indicative Terms and Conditions does not constitute a binding offer by Banco
Espírito Santo (“BES”), BES Investimento do Brasil S/A – Banco de Investimento (“BESI”) and
Banco do Brasil S.A. (“BB”), or any of them (the “Mandated Lead Arrangers”) to provide financing or
to issue first demand guarantees or fianças on the terms set forth herein and, if the debt facility
described herein is entered into, will be replaced by definitive Finance Documents (as defined
below) and the terms set forth herein shall thereafter be without force or effect. In addition, this
Summary of Indicative Terms and Conditions is subject to (i) credit committee approvals by the
Lenders, (ii) satisfactory due diligence, including financial, environmental and legal, by the Lenders
and their advisors (including Venezuelan counsel) and (iii) there being, in the reasonable opinion of
the Mandated Lead Arrangers, no material adverse change occurring in the syndicated loan
markets or in the business or financial condition of any Credit Party or the group taken as a whole
or in financial, economic or political conditions generally in Venezuela or Brazil prior to the signing
of the Loan Facility based upon the terms set forth herein.
A. Key Parties and Transaction
Borrower
PDVSA do Brasil Ltda., a sociedade limitada formed under the laws of
the Federative Republic of Brazil and owned, directly or indirectly, by
the Quotaholders (“PDVSA Brasil”).
Quotaholders
PDV Sur S.A., a sociedad anónima formed under the laws of the
Bolivarian Republic of Venezuela (“PDV Sur”) and Deltaven S.A. a sociedad anónima formed under the laws of the Bolivarian Republic of
Venezuela (“Deltaven”), each of which is, directly or indirectly, wholly-
owned by the Guarantor.
Guarantor
Petróleos de Venezuela S.A., a sociedad anónima formed under the
laws of the Bolivarian Republic of Venezuela (“PDVSA” and,
collectively with the Borrower, the “Credit Parties”).
PDVSA Group
PDVSA and those entities in which PDSVA directly or indirectly owns
a majority of the issued and outstanding equity interests.
Project Company
Refinaria Abreu e Lima S.A., a sociedade anônima formed under the
laws of the Federative Republic of Brazil (“RAL”).
Project
The two unit, 230,000 bpd capacity petroleum refinery under
construction in the Ipojuca municipality of the Recife metropolitan area
of the state of Pernambuco, Brazil and to be owned by the Project
Company.
Sponsors
Petróleo Brasileiro S.A., a sociedade anônima formed under the laws
of the Federative Republic of Brazil (“Petrobras”) and PDVSA Brasil.
Currently, the Project Company is wholly-owned by Petrobras.
Transaction
The Borrower will (a) make an initial equity contribution to the Project
in the approximate amount of USD550 million through the subscription
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of new shares equivalent, after issuance, to 40% of the Project
Company‟s total share capital (the “Initial Equity Contribution”) and will
finance up to 80% of such equity contribution (approximately USD450
million) with the proceeds of the Loan Facility described below and
(b) request the Lenders (as defined below) to issue a bank guarantee or fiança acceptable to Banco Nacional de Desenvolvimento
Econômico e Social (“BNDES”) (with each Lender‟s participation
therein to be in an amount of USD (or its equivalent) that is
proportionate to such Lender‟s participation in the Loan Facility), to
guarantee 40% of the obligations of the Project Company under the
BNDES Loan Agreement, which guaranteed amount shall in no event
exceed in the aggregate the equivalent of USD2.1 billion (the
“Guarantee Facility”).
Transaction
Facilities
The Loan Facility and the Guarantee Facility.
Transaction
Documents
The Finance Documents and the Equity Documents.
Finance Documents
The Loan Facility, the Guarantee Facility, the Promissory Note, the
ECSRA, and each Security Document (such instruments and
agreements being, together with the Intercreditor Agreement, the
“Finance Documents”).
Security
Documents
The RAL Fiduciary Transfer Agreement, [the PDVSA Brasil Fiduciary
Transfer Agreement,] the Onshore Dividend Account Fiduciary
Transfer Agreement, the Petrobras Direct Agreement, the BANDES
SBLC, the BANDES Time-Deposit Account Control and Pledge
Agreement and the PDVSA Guarantee.
Project Company
Shareholders
Agreement
The shareholders agreement to be entered into between PDVSA Brasil, Petrobras and the Project Company (as interveniente) in
relation to the Project Company.
Investment
Agreement
Either (a) an investment agreement to be entered into between
PDVSA, Petrobras and the Project Company (as interveniente) or (b)
an amendment to the ACN (as defined below), in either case (x)
attaching forms (in form and substance satisfactory to the Lenders) of (i) the Estatuto Social to be adopted by the Project Company, (ii) the
Project Company Shareholders Agreement, (iii) the Business Plan,
(iv) the sales contract to be entered into between PDVSA and the
Project Company (the "PDVSA Sales Contract") and (v) the sales
contract to be entered into between Petrobras and the Project Company (the "Petrobras Sales Contract") and (y) regarding, inter
alia, PDVSA Brasil's initial equity contribution to the Project.
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Petrobras Direct
Agreement
The direct agreement to be entered into between Petrobras, the
Borrower and the Lenders providing, inter alia, (a) that if the
Borrower's equity interest in the Project Company falls below 40% (a
"Reduction"), Petrobras shall (i) provide all replacement security
required by BNDES as collateral security for the Project Company's
obligations under the BNDES Loan Agreement (and in particular, that
portion of the Project Company's obligations under the BNDES Loan
Agreement that corresponds to the Reduction), (ii) cause BNDES to
release a portion of the collateral security provided by the Borrower for
the Project Company's obligations under the BNDES Loan Agreement
corresponding to the Reduction, (iii) indemnify the Lenders for any
loss they may suffer arising from any failure by Petrobras to
accomplish the undertaking described in subsection (ii) above and (iv)
assume the obligation to pay a guarantee commission (to be defined)
if Petrobras has failed to accomplish the undertaking described in
subsection (ii) within [●] days, (b) a call mechanism in respect of
shares of the Project Company whereby upon an Event of Default or
Guarantee Event of Default Petrobras will have the option to purchase
(and the Lenders will be obliged to sell) such shares for a set period of
time at a price to be determined and (c) for the giving of notice of any
failure by the Borrower to make equity contributions or shareholder
loans following a call by the Project Company to do so.
Equity Documents
The Project Company Shareholders Agreement, the Investment
Agreement, the Contrato de Associação dated March 26, 2008
between Petrobras and PDVSA and the Acordo de Conclusão das
Negociações dated October 31, 2009 between Petrobras and PDVSA
(the "ACN").
BNDES Loan
Agreement
The agreement dated as of July 30, 2009 between BNDES, the
Project Company and Petrobras pursuant to which BNDES has
disbursed a loan in the principal amount of the Brazilian Reais ("BRL")
equivalent of approximately USD5.2 billion to the Project Company to
finance the construction and commissioning of the Project. Currently,
the BNDES loan is fully guaranteed by Petrobras, together with any
amendment(s) thereto made in connection with the Transaction.
Mandated Lead
Arrangers
BES, BESI and BB.
The Mandated Lead Arrangers will structure the Transaction Facilities
and arrange, on a "best efforts" basis, a syndicate of commercial
banks acceptable to the Borrower (acting reasonably) to participate in
both facilities.
Mandated Lead
Arrangers
[Maximum Final
Hold]
BES and BESI USD[637.5] million
BB USD[637.5] million
The Lenders
The Mandated Lead Arrangers and other financial institutions to be
selected by the Mandated Lead Arrangers with the consent of the
Borrower, such consent not to be unreasonably withheld.
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Commitment
Letters
Letters issued by each Lender, in form and substance satisfactory to
it, to the Borrower describing the terms and conditions of any
commitment of such Lender to participate in the Transaction Facilities.
Onshore Account
Agent
TBD
Offshore Account
Bank
BES Madeira Branch, Portugal
Offshore Collateral
Agent
BES Madeira Branch, Portugal
Onshore Collateral
Agent
TBD
Onshore Account
Bank
TBD
Administrative
Agent
BES Madeira Branch, Portugal and, together with each other agent
and Account Bank set forth above, the “Agents”).
Secured Parties
Each Lender, each Agent and the Offshore Account Bank.
Lenders' Advisors
Technical Advisor
to Lenders
[●]
Legal Advisors to
Lenders
Allen & Overy LLP (New York law)
Machado, Meyer, Sendacz e Opice Advogados (Brazilian law)
[●] (Venezuelan law)
Credit Parties'
Advisors
Legal Advisors to
each Credit Party
Shearman & Sterling LLP (New York law)
Bastos-Tigre, Coelho da Rocha e Lopes Advogados (Brazilian law)
[●] (Venezuelan law)
B. Loan Overview1
Loan Facility
A senior, single-tranche, syndicated debt facility structured as a foreign loan (“empréstimo externo” or "Loan") secured by the
Collateral Security described below on a pari passu basis with the
Guarantee Facility.
1 Loan Facility provisions are subject to Venezuelan counsel input with respect to Venezuela-specific regulatory issues.
CONFIDENTIAL
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Loan Facility
Amount
An amount equal to 80% of the Initial Equity Contribution, as
calculated [15] days prior to the projected Financial Closing Date, but
not to exceed the BRL equivalent of USD[450] million.
Currency
United States Dollars (“USD”)
Purpose
The proceeds of the Loan Facility will be used by the Borrower on the
Financial Closing Date (as defined below) to fund its equity
contribution to the Project Company as described under “Transaction”
and to pay associated costs, fees and expenses.
Financial Closing
Date
The date on which the disbursement under the Loan Facility occurs.
Availability Period
The Availability Period shall commence on the date on which each of
the conditions precedent to the Financial Closing Date have been
satisfied or waived. The full amount of the Loan Facility must be
drawn in a single drawing no later than August 31, 2011, which date
may be extended to October 31, 2011 upon an agreement to that
effect between PDVSA and Petrobras. Amounts borrowed under the
Loan Facility that are repaid or prepaid shall not be reborrowed.
Amortization
Semi-annual equal payments, with the first payment of principal to
occur on the [date that is six months after the Financial Closing Date]
and subsequent payments of principal to be made on the last day of
each succeeding six-month period (each such date, a “Payment
Date”).
Final Maturity Date
5 years from the Financial Closing Date.
Commitment Fee
To each Lender for its own account, a fee equal to its pro rata portion
of an amount equal to 2.0% of the Loan Facility Amount, such fee to
(a) accrue during the period from and including the date all Lenders
have received a copy of their Commitment Letters duly executed by
the Borrower (such date, the "Commitment Letter Acceptance Date")
to but excluding the earlier to occur of (i) the Financial Closing Date or
(ii) the date on which PDVSA has officially notified each Lender that
the Transaction has been cancelled and (b) be non-refundable and
earned, due and payable in full upon the Financial Closing Date out of
the proceeds of the first disbursement, all as set forth in each Lender's
Commitment Letter.
Upfront Fee
To each Lender for its own account, a fee equal to its pro rata portion
of an amount equal to 1.0% of the Loan Facility Amount, such fee to
be non-refundable and earned, due and payable in full upon the
Financial Closing Date out of the proceeds of the first disbursement,
all as set forth in a fee letter to be executed by the parties.
Interest Rate and
Interest Periods
The outstanding principal of the Loan Facility will bear interest at a
rate equal to the 6 month London Interbank Offered Rate (“LIBOR”)
for the relevant interest period plus the Applicable Margin. Interest
accrued shall be paid on each Payment Date starting with the first
Payment Date.
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Upon the occurrence and continuance of an Event of Default relating
to a payment obligation, the Interest Rate shall increase by 200 basis
points per annum.
IFRS
International accounting standards within the meaning of the IAS
Regulation 1606/2002 to the extent applicable.
Applicable Margin
The margin over LIBOR for the term of the Loan Facility shall be 5.5%
per annum.
Voluntary
Prepayments /
Cancellations
The Borrower shall have the option to prepay the Loan Facility, in
whole or in part, at any time on 3 business days‟ irrevocable notice
without premium or penalty subject to reimbursement of any
applicable breakage costs.
Partial prepayments shall be in multiples of USD10 million.
The Borrower shall have the option to cancel the Loan Facility, in
whole but not in part, at any time during the Availability Period on 3
business days‟ irrevocable notice.
With respect to any prepayment or cancellation, whether voluntary or
mandatory:
1. amounts prepaid or cancelled shall not be re-borrowed, and
2. amounts prepaid shall be applied pro rata across the remaining
principal installments.
Mandatory
Prepayments
To be agreed in the definitive documentation.
There will be no prepayment penalties (except LIBOR breakage costs)
for mandatory prepayments.
As a condition to, and effective upon, any prepayment, mandatory or
voluntary, of a non-pro rata portion of a Lender‟s interest in the Loan
Facility, such prepaid Lender shall transfer and assign to the other
Lenders with remaining interests in the Loan Facility (and each such Lender shall assume) a pro rata portion of such prepaid Lender‟s
obligations under the Guarantee Facility.
Conditions
Precedent to
Signing
Such conditions precedent as are customary for a facility of this nature
including, but not limited to each of the following in form and
substance satisfactory to the Lenders:
1. entry into force of the Investment Agreement;
2. entry into force of the Project Company Shareholders
Agreement providing, inter alia, for the authorization of the
pledge by the Borrower in favor of the Lenders of the
Borrower's present and future shares of the Project Company,
and otherwise in form and substance satisfactory to the
Lenders; and
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3. delivery of a revised financial model reflecting the current capex
curve and macroeconomic conditions.
Conditions
Precedent to
Financial Closing
Date
Such conditions precedent as are customary for a facility of this nature
including, but not limited to each of the following in form and
substance satisfactory to the Lenders:
1. entry into force of the Finance Documents;
2. receipt of corporate documents and officer certificates of the
Credit Parties that, inter alia, demonstrate due authorization of
the transactions contemplated by and due execution of, the
Finance Documents;
3. receipt of certified copies of all necessary approvals, consents
and authorizations required by applicable law in connection with
the transactions contemplated by the Finance Documents and
the Project;
4. receipt of legal opinions from New York, Brazilian and
Venezuelan legal counsel to the Credit Parties and the
Quotaholders;
5. confirmation that the Agents and Lenders (and their advisors)
have received (or, in the case of the Commitment Fee, the
Initial Bank Guarantee Commitment Fee and the Upfront Fee,
will receive out of the proceeds of the Loan Facility
disbursement pursuant to irrevocable instructions of the
Borrower) all fees and other amounts due and payable on or
prior to the Financial Closing Date, including, to the extent
invoiced at least 3 business days prior to the Financial Closing
Date, reimbursement or payment of all out-of-pocket expenses
required to be reimbursed or paid by the Borrower;
6. confirmation that all accounts contemplated herein have been
established in accordance with the relevant Finance
Documents;
7. receipt of the Borrower's, the Guarantor's, each Quotaholder's
and the Project Company‟s most recent consolidated, audited
financial statements; and, with respect to the Project Company,
the current calendar year's, and each subsequent year's,
Project budget (showing a sources and uses of funds for all
Project costs through the Project's commissioning and reaching
of commercial operations, including a separate line item for
equity infusions as well as a construction chronogram showing
milestones in reasonable detail and anticipated Project cost
expenditure as at each such milestone and to be annexed to
the Loan Facility, the Guarantee Facility and the ECSRA)
(collectively, the "Project Budget")2;
2 The Project Budget will set forth, in reasonable detail, the construction schedule for the Project including the expected
commercial operation date as well as a timetable for equity infusions to fund such works from each of the Sponsors.
Note that the Project Budget contemplated here is static.
CONFIDENTIAL
47
8. receipt of documentation and information required under
applicable “know your customer” and anti-money laundering
rules and regulations including, without limitation, the U.S.
Patriot Act;
9. accuracy in all material respects of all representations and
warranties in the Finance Documents;
10. no defaults or events of default under the Transaction
Documents shall have occurred and are continuing or would
result from the disbursement;
11. creation and perfection of the liens over the Collateral
contemplated in the Security Documents;
12. the deposit by the Borrower, into an account designated by the
Lenders, of an amount equal to the difference between the
Initial Equity Contribution and the Loan Facility Amount, and
such amount shall be standing to the credit of such account on
the Financial Closing Date;3
13. entry into force of an amendment to the BNDES Loan
Agreement providing, inter alia, for (a) the authorization that the
guarantees or fianças arising under the Guarantee Facility will
be for the benefit of BNDES to guarantee repayment of a
maximum amount of the BRL equivalent of USD2.1 billion in
principal outstanding (and interest accrued thereon) under the
BNDES Loan Agreement, replacing an existing Petrobras
financial guarantee covering such amount and (b) the
authorization of the pledge by the Borrower in favor of the
Lenders of the Borrower's present and future shares of the
Project Company, in form and substance satisfactory to the
Lenders; and
14. subscription by the Borrower of new shares equivalent, after
issuance, to 40% of the Project Company's total share capital.
3 To the extent that there is any shortfall in the amount contributed and the price of the new shares, the Borrower will be
required to cover such shortfall.
CONFIDENTIAL
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Representations
and Warranties
The Borrower will make such representations and warranties as are
customary for a facility of this nature including, but not limited to:4
1. each of the Borrower and the Project Company is duly
organized and validly existing and has the full power and
authority to enter into the Transaction Documents to which it is
a party, and the Project Company is duly organized and validly
existing and has the full power and authority to enter into the
BNDES Loan Agreement and the material project documents to
which it is a party or is intended to become a party to effect the
construction, testing and commissioning and operations of the
Project in accordance with the Business Plan (such other
documents, the "Material Project Documents");
2. the Transaction Documents, the BNDES Loan Agreement and
the Material Project Documents have been duly registered (to
the extent required by law) and are in proper legal form,
effective and enforceable in the relevant jurisdiction and each
Finance Document to which the Borrower is a party and the
BNDES Loan Agreement, the Project Company Shareholders
Agreement, the Investment Agreement and each Material
Project Document to which the Borrower or the Project
Company, as applicable, is a party constitute a legal, valid and
binding obligation of the Borrower or the Project Company, as
applicable, enforceable against the Borrower or the Project
Company, as applicable, in accordance with its terms;
3. neither (a) the Borrower‟s nor (b) the Project Company's
entering into and performance of the Finance Documents (in
the case of the Borrower), the BNDES Loan Agreement and
each Material Project Document (in the case of the Project
Company) and the Project Company Shareholders Agreement
(in the case of both the Borrower and the Project Company)
conflicts with applicable law, the Borrower‟s or the Project
Company's constitutive documents or other material
agreements to which it is a party, and the Borrower and the
Project Company, as applicable, have obtained all necessary
approvals, consents and authorizations as required by
applicable law in connection with the Transaction Documents,
the BNDES Loan Agreement, each Material Project Document
and the Project, as applicable;
4 Lenders will include all required representations and warranties relating to (a) the Guarantor in the PDVSA Guarantee
and (b) the Quotaholders in the ECSRA and/or the PDVSA Brasil Fiduciary Transfer Agreement, with cross-default
provisions related thereto in the Transaction Facilities.
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4. (a) the Borrower and (b) the Project Company are subject to
civil and commercial law with respect to their obligations under
the Transaction Documents (in the case of the Borrower) and
the BNDES Loan Agreement, the Project Company
Shareholders Agreement, the Investment Agreement and each
Material Project Document (in the case of the Project Company)
and the execution and delivery of the documents and
agreements to which each is a party constitute, private and
commercial activities rather than public or governmental acts;
5. the most recent consolidated, audited financial statements of
(a) the Borrower and (b) the Project Company have been
prepared in good faith, are based on reasonable assumptions
and present fairly such party‟s financial position in all material
respects;
6. each of (a) the Borrower and (b) the Project Company has good
title to all the real and personal property it purports to own and
lease;
7. there is no legal, administrative or other action current, pending
or threatened that has had, or is reasonably likely to have, a
Material Adverse Effect (as defined in Annex A, Part 2) on the
Borrower or on the Project Company;
8. with respect to (a) each Transaction Document to which the
Borrower is party and (b) the BNDES Loan Agreement, the
Project Company Shareholders Agreement, the Investment
Agreement and each Material Project Document to which the
Project Company is a party, there is no default or event of
default outstanding (or solely with respect to the Material
Project Documents, of which the Borrower is aware);
9. each of (a) the Borrower and (b) the Project Company is solvent
under applicable bankruptcy or insolvency law;
10. all of the (a) taxes of the Borrower and (b) the material taxes of
the Project Company have been timely filed and paid except for
those being contested in good faith and for which adequate
reserves have been made in accordance with applicable law
and accounting principles;
11. the Borrower is not subject to any withholding or documentary
(stamp) taxes on or by virtue of the execution of the Transaction
Documents other than as specified therein;
12. the share capital of each of the Project Company and the
Borrower is fully issued as described in a Schedule and not
subject to any liens other than those created under the Security
Documents, and neither the Project Company nor the Borrower
has any subsidiaries other than as set forth in such Schedule;
no party other than the Borrower and Petrobras holds any
equity rights in the Project Company;
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13. the Borrower has the ability to lawfully pay in US Dollars the
total amount which is, or may become payable by it to the
Lenders under each Finance Document to which it is a party;
14. the Security Documents confer and create in favor of the
Secured Parties a valid and perfected first priority security
interest in the Collateral, subject only to liens preferred by
operation of law or any judicial order (provided that such judicial
orders are in respect of immaterial amounts and/or properties);
15. the Borrower‟s obligations and liabilities under the Finance
Documents are its unconditional and general obligations and
rank at least pari passu with all of its other present or future
unsecured and unsubordinated indebtedness (both actual and
contingent);
16. all information provided in writing by or on behalf of the
Borrower or any of its affiliates was on its date of issue true,
complete and accurate in all material respects and does not
contain any misstatements or omissions that would make it
misleading;
17. in any proceedings in New York, Brazil or Venezuela to enforce
the Finance Documents, the choice of the laws of the State of
New York, Brazil or Venezuela (as applicable) as the governing
law of any Finance Documents will be recognized and applied,
the Borrower‟s irrevocable submission to jurisdiction under such
Finance Documents shall be legal, valid, binding and
enforceable and any judgment obtained in New York, Brazil or
Venezuela will be recognized and enforceable against the
Borrower and its assets in Brazil or Venezuela (as applicable)
without reexamination of the merits of the underlying cause of
action, subject to the limitations set forth in applicable law;
18. the Borrower has no outstanding debt (contingent or otherwise)
other than Borrower Permitted Financial Indebtedness (as
defined in Annex A, Part 3), and the Project Company has no
outstanding debt (contingent or otherwise) other than Project
Company Permitted Financial Indebtedness (as defined in
Annex A, Part 3);
19. each of the Borrower‟s and the Project Company's waiver of
immunity is valid and neither it nor its assets benefit from any
immunity from final suit or judgment with respect to its
obligations under the Finance Documents in the case of the
Borrower, under the BNDES Loan Agreement, the Project
Company Shareholders Agreement, the Investment Agreement
or any Material Project Document, in the case of the Borrower
or the Project Company, as applicable, subject to any
limitations set forth in any such waiver;
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20. the Borrower is not required to be registered as an “investment
company”, or a company “controlled” by a company that is
required to be registered as an “investment company”, within
the meaning of the U.S. Investment Company Act of 1940, as
amended;
21. the Borrower is not engaged principally, or as one of its
important activities, in the business of extending credit for the
purpose of buying or carrying margin stock;
22. usual and customary provisions regarding the Employee
Retirement Income Security Act of the United States of America
(ERISA); and
23. none of the activities of the Borrower have, and none of the
borrowing of the Loan by the Borrower or the Borrower's use of
the proceeds thereof will, violate any of the following: (a) the
regulations of the Office of Foreign Assets Control of the United
States of America Department of Treasury; (b) the U.S.A.
Patriot Act of the United States of America; and (c) the Foreign
Corrupt Practices Act of the United States of America.
Affirmative
Covenants
The Borrower shall, and to the extent possible based upon its
ownership interests in the Project Company and its exercise of all
rights associated thereunder, shall cause the Project Company to,
comply with such affirmative covenants (with "baskets" to be
negotiated in the definitive documentation) as are customary for a
facility of this nature including, but not limited to, covenants regarding:
1. delivery of certain information (and making customary
representations and undertakings regarding the same),
including, without limitation, in respect of the Borrower and the
Project Company, notice of any call by the Project Company for
equity contributions or shareholder loans and any failure by the
Borrower and/or Petrobras to make such equity contributions or
shareholder loans, financial statements, material changes in
accounting or financial reporting practices, regulatory filings, no
outstanding default certificates, compliance certificates and
notices in respect of the following: default, material litigation,
force majeure events, material governmental proceedings or
investigations and, in respect of the Project Company and the
Project, annual budgets, reports relating to insurance coverage,
construction reports, material Project Budget variations and
overruns in each case containing comparisons against the
original Business Plan, and notices in respect of environmental
proceedings and claims;
2. performance of all material obligations arising under the
Transaction Documents and performance of all obligations
arising under the BNDES Loan Agreement and each Material
Project Document;
3. preservation of existence;
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4. maintenance of good title to all real and personal property
material to its business;
5. compliance in all material respects with all applicable laws and
insurance requirements and maintenance of all necessary
approvals, consents and authorizations as required by
applicable law and compliance in all respects with all
environmental laws, in all cases in connection with the
Transaction and, in the case of the Project Company, the
Project;
6. maintenance of books and records;
7. compliance with all reporting obligations of any relevant
governmental authority;
8. consultation and inspection rights upon reasonable request and
notice and maintenance of an independent accountant;
9. timely payment and filing of all taxes, except for those being
contested in good faith and for which adequate reserves have
been made in accordance with applicable law;
10. in respect of the Borrower, the use of proceeds of the Loan
Facility;
11. in respect of the Project Company, completion of the Project in
accordance with the business plan (to be annexed to the Loan
Facility, the Guarantee Facility, the Project Company
Shareholders Agreement, the Investment Agreement and the
ECSRA and in form and substance satisfactory to the Lenders)
(the “Business Plan”);
12. in the event of any cost overrun (whether actual or anticipated)
of any line item in the Project Budget, prompt (and in any event
no later than 15 days after the Borrower or the Project
Company becomes aware of such cost overrun) notification by
the Borrower thereof, and if any such cost overrun, when
aggregated with any other cost overrun of the Project existing at
such time, exceeds the amount of available and uncommitted
contingency set forth in the Project Budget, delivery by the
Borrower of a plan for the financing of such cost overrun in form
and substance satisfactory to the Lenders and acknowledged
and agreed by the Guarantor no later than 60 days prior to the
date on which any required expenditures in respect of such cost
overrun must be made;
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13. (a) the pledge and creation of a valid and perfected security
interest over any note or instrument evidencing subordinated
indebtedness of the Project Company to the Borrower or of the
Borrower to any Quotaholder or the Guarantor and (b) the
assignment and creation of a valid and perfected security
interest over the Borrower's rights under any agreement
contemplating subordinated indebtedness of the Project
Company to the Borrower, and of any Quotaholder‟s rights
under any agreement contemplating indebtedness of the
Borrower to any Quotaholder, in each case within 10 days of
the date on which such indebtedness has occurred;
14. from the Financial Closing Date until the second anniversary of
the date on which commencement of operation of the Project
occurs (as such date is defined in the definitive documentation),
the Borrower (a) shall provide to the Lenders and their
Technical Advisor all monthly Project construction reports
produced by the Project Company and/or Petrobras on a
current basis and (b) shall provide all information and shall
render such assistance (including facilitating Project site access
and access to Project Company management) as is reasonably
required to allow the Lenders' Technical Advisor to render
industry-standard semi-annual Project reports;
15. the obligations of the Borrower under the Finance Documents
shall at all times be secured by a valid and perfected first
priority security interest in and over the Collateral subject only
to liens preferred by operation of law; and
16. the obligations and liabilities under the Finance Documents
shall be the Borrower's unconditional and general obligations
and shall rank at all times at least pari passu with all of its other
present or future unsecured and unsubordinated indebtedness
(both actual and contingent).
Negative Covenants
The Borrower shall, and to the extent possible based upon its
ownership interests in the Project Company and its exercise of all
rights associated thereunder, shall cause the Project Company and,
where expressly mentioned below, the Quotaholders, as applicable, to
comply with such negative covenants (with exceptions, materiality and
"baskets" to be negotiated in the definitive documentation) as are
customary for a facility of this nature including, but not limited to,
negative covenants regarding:
1. in respect of the Borrower, no further Financial Indebtedness
(as defined in Annex A, Part 1) other than Borrower Permitted
Financial Indebtedness;
2. restrictions on transactions with affiliates except on arms‟ length
terms;
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3. restrictions on the creation of security interests on the assets
and shares of the Borrower and Project Company (other than
permitted liens to be agreed and, with respect to the Project
Company, as permitted by the BNDES Loan Agreement as in
effect on the date of the Loan Facility);
4. restrictions on material amendments under the Borrower's and
Project Company‟s constitutive documents;
5. in respect of the Borrower, restrictions on material amendments
of any of the Transaction Documents without the prior approval
of the Lenders, and in respect of the Project Company,
restrictions on material amendments to the Business Plan, the
Project Budget, the BNDES Loan Agreement, the Project
Company Shareholders Agreement, the Investment Agreement
or any Material Project Document without the prior approval of
the Lenders, acting reasonably in consultation with their
Technical Advisor;
6. restrictions on the Borrower‟s and Project Company‟s making of
any distributions or dividends except as in accordance with the
Finance Documents and, in the case of the Project Company,
the BNDES Loan Agreement and the Project Company
Shareholders Agreement as in effect on the date of the Loan
Facility;
7. restrictions on mergers, consolidations or other fundamental
changes to the Borrower or Project Company and restrictions
on the sales or other dispositions of any of such parties‟
Material Property or Material Assets (as such terms will be
defined in the definitive documentation);
8. in respect of the Borrower and the Project Company,
restrictions on its business activity other than in the case of
(a) the Borrower, owning the Project Company shares, entering
into, and performing its obligations in accordance with, the
Transaction Documents and undertaking activities as are strictly
related to acting as a representative office for the Guarantor,
provided that such activities shall not involve the Borrower's
incurring any liability (whether contingent or otherwise), or
entering into any contract or agreement, or series of contracts
or agreements, with an aggregate value in excess of USD50
million or its equivalent in any other currency, or that would
result in liabilities or undertakings of the Borrower at any one
time outstanding of USD50 million or its equivalent in any other
currency and (b) the Project Company, development,
construction and operation of the Project in accordance with the
Business Plan; and
9. in respect of the Project Company, no further financial
indebtedness, other than Project Company Permitted Financial
Indebtedness.
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Events of Default
Such events of default (with cure periods to be negotiated in the
definitive documentation) as are customary for a facility of this nature
including, but not limited to:
1. (i) any Credit Party or any Quotaholder fails to pay when due
any amount payable pursuant to a Transaction Document at the
place and in the currency in which it is expressed to be payable,
or the Project Company fails to pay when due any amount
payable pursuant to the BNDES Loan Agreement and (ii) such
amount remains unpaid for a period of 3 business days;
2. (a) any representation or warranty of any Credit Party set forth
in any Transaction Document proves to have been materially
incorrect or misleading when made or confirmed or (b) any
representation or warranty of any Quotaholder set forth in any
Transaction Document proves to have been materially incorrect
or misleading when made or confirmed and has or would be
reasonably likely to result in a Material Adverse Effect, if such
circumstances that rendered such representation or warranty of
such Credit Party or such Quotaholder to be materially incorrect
or misleading shall be continuing for more than 30 days after an
officer of such Credit Party or such Quotaholder has actual
knowledge thereof or receives notice thereof from the
Administrative Agent or any Lender;
3. (a) any applicable Credit Party fails to perform or observe any
covenant or other obligation (other than an obligation to make
payment referred to in item 1 above) as set forth in, or any
default occurs under, the BNDES Loan Agreement, in each
case after the expiry of any applicable cure period set forth
therein, (b) any Credit Party or any Quotaholder fails to perform
or observe any covenant or other obligation (other than an
obligation to make payment referred to in item 1 above) as set
forth in, or any default occurs under, the Transaction
Documents, after the expiry of any cure period to be agreed or
(c) any Credit Party fails to perform or observe any covenant or
other obligation (other than an obligation to make payment
referred to in item 1 above) as set forth in, or any default in
respect of such party occurs under, the Project Company
Shareholders Agreement or the Investment Agreement after the
expiry of any cure set forth therein;
4. the bankruptcy or insolvency of, or the commencement of
bankruptcy or insolvency proceedings in respect of, any Credit
Party, any Quotaholder or the Project Company (with grace
periods applicable for involuntary proceedings) or the
appointment of a receiver, liquidator, or similar official for all or
any substantial part of the property of any such party;
5. the rendering of monetary judgments against (a) the Guarantor
in an aggregate amount exceeding USD250 million (or its
equivalent in any other currency), (b) the Borrower in an
aggregate amount exceeding USD 20 million (or its equivalent
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in any other currency) or (c) the Project Company in an
aggregate amount exceeding USD 20 million (or its equivalent
in any other currency), except, in each case, to the extent that
such judgments are being diligently contested by the relevant
party in good faith by appropriate proceedings and for which the
relevant party has set aside adequate reserves in accordance
with IFRS;
6. any Transaction Document, the BNDES Loan Agreement, the
Project Company Shareholders Agreement, the Investment
Agreement or any Material Project Document ceases to be in
full force and effect or ceases to be a valid and binding
obligation of any party thereto;
7. any obligations of the Borrower or any Quotaholder under the
Finance Documents cease to be secured by a first priority
(except for any liens preferred by application of law) perfected
lien and security interest in and over all of the Collateral;
8. any of the Credit Parties or the Project Company defaults in the
payment when due (after giving effect to any applicable grace
period) of the principal of or the interest on, or other monetary
amount is owing in respect of, any of such parties‟ Financial
Indebtedness not incurred under the Finance Documents, in an
amount individually or in the aggregate exceeding (a) in the
case of the Guarantor, USD250 million (or its equivalent in any
other currency), (b) in the case of the Borrower, USD 20 million
(or its equivalent in any other currency), or (c) in the case of the
Project Company, USD 20 million (or its equivalent in any other
currency);
9. (a) the Borrower ceases to be the record and beneficial owner
of at least 40% of the total share capital (together with all
related economic and voting rights) of the Project Company or
(b) the ratio of the total amount of capital contributions to the
Project Company made by Petrobras to those made by the
Borrower is not 60:40 (the total amount of capital contributions
of a Sponsor being the aggregate of all equity contributions and
shareholder loans made by such Sponsor after accounting for
any replacement equity contributions or shareholder loans
made by it on behalf of the other Sponsor, and any repayments
of such replacement equity contributions or shareholder loans
by the other Sponsor, in accordance with the Shareholders
Agreement);
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10. a delay of more than 60 days by the Project Company in
reaching certain construction milestones in accordance with the
construction schedule of the Project Budget unless the Project
Company has implemented a corrective action plan acceptable
to the Lenders and their Technical Advisor;
11. (a) the Borrower does not make its pro rata share of any equity
contribution or shareholder loan (to the extent such shareholder
loan constitutes Project Company Permitted Financial
Indebtedness) to the Project Company in the amounts, and at
the times, contemplated by the Project Budget or called for by
the Project Company or (b) the Borrower does not exercise its
right to make a replacement equity contribution or shareholder
loan on behalf of Petrobras as contemplated in the
Shareholders Agreement;
12. If any of the following occurs:
(a) the Consolidated Tangible Net Worth of the Guarantor is, at
any time, less than USD35,000,000,000;
(b) the Consolidated Debt to Consolidated EBITDA Ratio of
the Guarantor is more than 2.5:1; and
(c) the Consolidated Interest Coverage Ratio of the Guarantor
is less than 4:1.
The defined terms for this section are found in Annex A, Part 1.
13. any material part of the Collateral or the property of the Project
Company or the Borrower is expropriated or nationalized or any
procedure for the same is commenced and not stayed or
overturned within 30 days;
14. any event occurs or any condition exists that has had or would
be reasonably likely to result in a Material Adverse Effect;
15. the Guarantor ceases to be the beneficial owner (directly or
indirectly) of 100% of the total share capital of the Quotaholders
and the Borrower, and to control each such entity;
16. the amount available under the SBLC (as defined below) is not,
within 15 business days, reinstated, together with a concomitant
reinstatement or top-up of the USD time-deposit referred to
under part D (Collateral Security) below, in each case up to
USD235 million after a payment made by BANDES and/or a
liquidation of the USD time-deposit pursuant to a demand made
by the Lenders;
17. there occurs any change in any treaty to which Venezuela is a
party, or any new Venezuelan law or policy (or any official
interpretation of any existing law or policy) or any order of any
competent authority or decision of any court of competent
jurisdiction which renders or purports to render any material
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provision of the ECSRA, PDVSA Guarantee or any other
Transaction Document unlawful, invalid or unenforceable, and
(i) has a material adverse effect on the enforceability of the
obligations of the Guarantor under the ECSRA, PDVSA
Guarantee or any other Transaction Document (or the ability of
any creditor to realize upon any judgment or arbitral award
rendered in connection therewith) or (ii) would prevent or delay
the performance or observance by the Guarantor of any of its
material obligations thereunder.
C. Guarantee Facility5
Bank Guarantee
Each Lender shall issue an irrevocable, first-demand guarantee or fiança (a) in a face amount such that its participation in the Guarantee
Facility is pro rata to its participation in the commitments under the
Loan Facility and (b) for the benefit of BNDES to guarantee
repayment to BNDES of a maximum amount of the BRL equivalent of
USD2.1 billion in principal outstanding (and interest accrued thereon).
PDVSA Brasil shall undertake to repay any amounts paid under the
Guarantee Facility and the Collateral described under “Collateral
Security” below will secure PDVSA Brasil‟s repayment obligations
equally and ratably with the obligations owing to the Secured Parties
under the Loan Facility.
Guarantee Facility
Amount
An amount sufficient to guarantee 40% of the obligations of the
Project Company under the BNDES Loan Agreement, which
guaranteed amount shall in no event exceed in the aggregate the
equivalent of USD2.1 billion.
BNDES Credit Limit
Each Lender‟s participation in the Guarantee Facility and
consequently in the Transaction Facilities is subject to acceptance by
BNDES.
First Bank
Guarantee Term
5 years, commencing at the Financial Closing Date.
Initial Bank
Guarantee
The Bank Guarantee issued and valid during the period of the First
Bank Guarantee Term.
Subsequent Bank
Guarantee
The Bank Guarantees issued upon the expiration of Initial Bank
Guarantee.
Subsequent Bank
Guarantee Terms
5 years from expiry date of the Initial Bank Guarantee or the expiry
date of any Subsequent Bank Guarantee.
5 Drawing conditions for the Guarantee Facility shall be substantially similar to the Loan Facility's CPs, including
satisfactory completion of legal due diligence.
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Initial Bank
Guarantee
Commitment Fee
To each Lender for its own account, a fee equal to 2.0% of such
Lender's commitment under the Guarantee Facility, such fee to (a)
accrue during the period from and including the Commitment Letter
Acceptance Date to but excluding the earlier to occur of (i) the
Financial Closing Date or (ii) the date on which PDVSA has officially
notified each Lender that the Transaction has been cancelled and (b)
be non-refundable and earned, due and payable in full upon the
Financial Closing Date out of the proceeds of the first disbursement,
all as set forth in each Lender's Commitment Letter.
Initial Bank
Guarantee Issuance
Fee
To each Lender for its own account, a fee equal to 0.20% of such
Lender's commitment under the Guarantee Facility, such fee to be
non-refundable and earned, due and payable in full upon the date of
issuance of the Initial Bank Guarantee, all as set forth in a fee letter to
be executed by the parties.
Initial Bank
Guarantee
Commission
4.0% per annum paid in advance on a semi-annual basis and
calculated based on the aggregate amount outstanding under the
BNDES Loan Agreement.
Renewal Conditions
Upon the issuance of any Subsequent Bank Guarantee, the
commission shall be 5.0 % per annum also paid in advance on a
semi-annual basis and calculated based on the aggregate amount
outstanding under the BNDES Loan Agreement.
The issuance of any Subsequent Bank Guarantee is subject to (a) no
Event of Default or Guarantee Event of Default (as defined below)
having occurred and (b) no event having occurred and no condition
existing that has resulted in or would be reasonably likely to result in a
Material Adverse Effect.
Guarantee
Commission Step-
up
Upon the occurrence and continuance of an Event of Default or
Guarantee Event of Default relating to a payment obligation, the Initial
Bank Guarantee Commission or the commission for the Subsequent
Bank Guarantees shall immediately increase by 2.0% per annum.
Representations
and Warranties
Representations and warranties substantially similar to those
described under the Loan Facility above.
Affirmative
Covenants
Affirmative covenants substantially similar to those described under
the Loan Facility above.
Negative Covenants
Negative covenants substantially similar to those described under the
Loan Facility above.
Events of Default
Events of default substantially similar to those described under the
Loan Facility above and cross-default to the Loan Facility for events of
default relating to payment obligations (each a "Guarantee Event of
Default").
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Sharing
If BNDES shall make a non-pro rata draw upon any Lender's
guarantee or fiança issued under the Guarantee Facility, the
remaining Lenders shall make payment to such in such amount, and
make such other adjustments from time to time as shall be equitable,
to the end that all the Lenders shall make payment of the drawn amount(s) pro rata in accordance with their participation in the
Guarantee Facility.
Loans
PDVSA Brasil shall, within 5 days of any draw on any guarantee or
fiança, repay the applicable Lender(s) in full the amount of such draw,
with interest thereon calculated at the Reimbursement Loan Interest
Rate (such amount owed by PDVSA Brasil, a "Reimbursement Loan").
Reimbursement
Loan Interest Rate
1 month LIBOR + 6.0% per annum; and
in either case, such rate shall be subject to a 2.0% per annum step-up
in case of the failure by PDVSA Brasil to repay the Reimbursement
Loan within 15 days of the relevant draw on the relevant guarantee or fiança.
Voluntary
Cancellation
PDVSA Brasil shall have the option to cancel the Guarantee Facility,
in whole but not in part, at any time during the Availability Period on
10 business days‟ irrevocable notice.
D. Collateral security
Generally
Applicable
Provisions
Each pledge, grant of a lien under a security agreement, assignment,
account and letter of credit referred to below shall secure, on a pari
passu basis, the repayment when due to the Secured Parties of all
amounts from time to time owing under the Finance Documents
(including, for the avoidance of doubt, any Reimbursement Loan), the
property over which a lien or security interest is granted, or regarding
which an assignment occurs, the “Collateral”. Each Finance
Document shall be in form and substance satisfactory to the Lenders.
RAL Fiduciary
Transfer Agreement
The Borrower, the Project Company and the Onshore Collateral Agent
(on behalf of the Secured Parties) shall enter into a Fiduciary Transfer
Agreement under Brazilian law providing for the creation and
perfection of a first priority security interest in and over or for the
assignment of all the Borrower‟s right, title and interest in, to and over,
all share capital of the Project Company that is owned by the
Borrower from time to time (including all related voting and economic
rights, dividends and other rights and revenues derived therefrom), as
well as the credit rights the Borrower has or may have against the
Project Company and/or Petrobras resulting from a shareholder loan
or equity contribution made on behalf of Petrobras. The shares
arising from any capital increase and subscribed by the Borrower will
also be subjected to the RAL Fiduciary Transfer Agreement.
PDVSA Brasil
Fiduciary Transfer
Agreement
The Borrower, the Quotaholders and the Onshore Collateral Agent (on
behalf of the Secured Parties) shall enter into a Fiduciary Transfer
Agreement under Brazilian law providing for the creation and
perfection of a first priority security interest in and over, or for the
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assignment of, all of their respective right, title and interest in, to and
over, all quotas of the Borrower (including all related voting and
economic rights, dividends and other rights and revenues derived
therefrom), as well as the credit rights any Quotaholder has or may
have against the Borrower, as a result of a Quotaholder loan.
Onshore Dividend
Account Fiduciary
Transfer Agreement
All dividends payable by the Project Company to the Borrower shall
be deposited into an onshore account maintained with the Onshore
Account Bank that is pledged for the benefit of the Secured Parties
(the “Dividend Account”). No funds may be transferred from the
Dividend Account to or for the account of the Borrower or its affiliates
unless (a) after giving effect to such transfer, not less than the BRL
equivalent of USD10 million will remain standing to the credit of the
Dividend Account and (b) prior to and after giving effect to such
transfer, no Default or Event of Default under the Finance Documents
has or will have occurred and is or will be continuing.
BANDES Stand-by
L/C
Banco de Desarrollo Económico y Social de Venezuela (“BANDES”)
shall issue a New York law-governed stand-by L/C (the “SBLC”) in the
amount of USD235 million. The SBLC shall be subject to the [Uniform
Customs and Practice for Documentary Credits 2007 Revision,
International Chamber of Commerce Publication No. 600 (“UCP
600”)][International Standby Practices - ISP 98, International Chamber
of Commerce Publication No. 590 (“ISP 98”)] and, to the extent not
inconsistent therewith, the SBLC shall be governed by and construed
in accordance with the laws of the State of New York. For the
avoidance of he doubt, in the event of any conflict between the laws of
the State of New York and the [UCP 600][ISP 98], the [UCP 600][ISP
98] shall prevail. The SBLC shall be (a) issued for successive periods
of one (1) year until the final repayment of all obligations of the Credit
Parties under the Transaction Facilities, and (b) automatically
renewed by not later than 60 days prior to the expiration of each
period of one (1) year and the failure to so renew for any reason by
such date shall entitle the Beneficiary(ies) to draw thereunder and
(c) the amount available under the SBLC shall be reinstated up to
USD235 million as a consequence of any payment made by BANDES
pursuant to any demand made by the Lenders (in such role, the
“Beneficiary of the SBLC” or the “Beneficiary”), provided that:
(1) PDVSA has reimbursed BANDES for any amounts paid, and
(2) BANDES has notified the Beneficiary of such reinstatement
through the Offshore Collateral Agent. The Beneficiary shall be
entitled to make multiple drawings under this SBLC, provided that the
total amount drawn shall not exceed the available limit at the relevant
time.
BANDES Time-
Deposit Account
Control and Pledge
Agreement
BANDES shall establish with the Offshore Account Bank an account
in Portugal and governed by an Account Control and Pledge
Agreement construed in accordance with the laws of the State of New
York, USA, and shall fund such account with USD time-deposits in an
amount of USD equivalent to the initial face amount of the SBLC.
PDVSA Guarantee
PDVSA shall issue in favor of the Offshore Collateral Agent for the
benefit of the Lenders an unconditional, irrevocable New York law-
governed parent company guarantee guaranteeing the prompt
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payment and performance when due of all obligations of the Credit
Parties and the Quotaholders under the Finance Documents and
providing for customary representations, warranties and covenants to
be agreed.6
E. Equity Contribution and Share Retention
ECSRA
The Quotaholders, the Guarantor and the Administrative Agent shall
enter into an Equity Contribution and Share Retention Agreement (the
“ECSRA”) providing for the Quotaholders‟ and Guarantor‟s joint and
several obligation to make equity contributions to the Borrower in an
aggregate amount equal to the Borrower‟s obligation to provide
(a) base equity as set forth in the Business Plan and called for by the
Project Company in accordance with the provisions of the Project
Company Shareholders Agreement and (b) equity necessary to pay
interest, principal, commissions or any other amount arising from the
Transaction Facilities and owing to any Secured Party.
In the ECSRA the Guarantor will undertake (a) not to transfer or
permit to be transferred any equity (or economic interest) in any
Quotaholders to a party that is not directly or indirectly 100% wholly-
owned by the Guarantor, (b) not to permit the Borrower or
Quotaholders to transfer or allow to be transferred any equity interest
in the Borrower or in the Project Company, and (c) to maintain control
over each Quotaholder and the Borrower (with “control” meaning the
ability to direct the policies and material decisions of the relevant
entity and the ownership of 51% of the record and beneficial
ownership of the equity interests of such entity).
Representations
and Warranties
The Guarantor
7 shall make representations and warranties to be
mutually agreed, including, but not limited to, the following additional
items:
1. the Guarantor has complied with all public bidding and other
requirements under applicable Venezuelan law with respect to
the Transaction Documents;
2. there is no applicable Venezuelan law that limits the
Guarantor‟s or Quotaholders‟ ability to enter into the ECSRA or
limits such agreement‟s effectiveness or enforceability; and
3. the Guarantor and each Quotaholder have received the
requisite authorization to submit disputes under the ECSRA to
resolution in the manner set forth therein, which shall include
dispute resolution before an Arbitral Tribunal.
Affirmative
Covenants
Affirmative covenants by the Guarantor to be mutually agreed.
Negative Covenants
Negative covenants by the Guarantor to be mutually agreed.
6 The need for an aval of PDVSA to be attached to the Promissory Note of the Borrower is subject to review by
Venezuelan counsel. 7 Venezuelan counsel to review and refine reps and other provisions related to PDVSA and other Venezuelan entities.
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F. Other Finance Documents and Miscellaneous
Promissory Note
The Loans will be represented by a Promissory Note, governed by
Brazilian law, in an aggregate principal amount equivalent to 125% of
the principal amount of all the Loans.
Intercreditor
Agreement
The Lenders and Agents shall enter into an Intercreditor Agreement
governed by New York law that shall, inter alia, regulate matters
regarding Lender voting, the taking of enforcement actions and
realization upon Collateral Security, waivers and consents, the ratable
sharing of payments received across the Loan and Guarantee
Facilities and other actions arising in respect of the Loan and
Guarantee Facilities.
Increased Costs
The Loan and Guarantee Facility documents will contain customary
provisions protecting the Lenders in the event of unavailability of
funding, illegality, increased costs and funding losses and capital
adequacy due to changes in law or regulations, all of the foregoing
subject to customary mitigation provisions acceptable to the Borrower,
the Guarantor and the Lenders. Unilateral prepayment will be
permitted for affected Lenders (subject to the payment of breakage
costs).
The Lenders will be permitted to charge, as and to the extent incurred,
any applicable reserves, regulatory charges and other regulatory
requirements, applicable to their funding of LIBOR that arise as a
result of changes in law after the execution of Loan or Guarantee
Facility documents, it being understood that customary provisions
acceptable to the Borrower, the Sponsor and the Lenders shall be
included for the mitigation of the Borrower‟s increased costs.
Taxes
All payments made to the Lenders shall be made free and clear of,
and without deduction or withholding for, any present or future taxes
or other charges, and any and all taxes, levies or contributions
imposed by the Brazilian or any other taxing authorities relating to the
Loan or Guarantee Facility or payments made thereunder will be
borne and paid for by the Borrower. Unilateral prepayment will be
permitted for Lenders who are subject to increased costs or taxes
after the Financial Closing Date (subject to the payment of breakage
costs).
In the event any such taxes or other charges are required to be paid
under applicable law, the Borrower shall pay the full amount thereof
and pay each Lender such amount as would have been payable had
no such withholding been made.
Expenses
All reasonable costs and out-of-pocket expenses of the Lenders and
Agents incurred in the due diligence regarding, and negotiation and
execution of, the Transaction and the Transaction Documents or any
other instruments contemplated herein or therein shall be for the
account of the Borrower (whether or not the Transaction Documents
are executed and the Transaction Facilities are made available to the
Borrower or BNDES).
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Dispute Resolution
Any dispute arising under any Finance Document (other than the
Brazilian law-governed Security Documents) to which any Credit Party
is a party shall be finally settled under the rules of the International
Court of Arbitration of the International Chamber of Commerce (the
"ICC Rules") by a panel of three arbitrators (the “Arbitral Tribunal”)
nominated in accordance with the ICC Rules. The place of arbitration
shall be Paris. The arbitration shall be bilingual (Spanish and
English). Any award issued by the Arbitral Tribunal shall be final and
binding, and the parties shall agree that a judgment recognizing such
award may be entered in any court with jurisdiction and irrevocably
submit to the jurisdiction of any such court over the parties or their
assets for purposes of recognizing and enforcing the award. The
Credit Parties shall waive all immunities under the laws of any
jurisdiction.
Each Credit Party and each Quotaholder party to any Brazilian law-
governed Security Document shall (a) unconditionally and irrevocably
submit to the jurisdiction of the courts of Rio de Janeiro, State of Rio
de Janeiro, Brazil for the resolution of any dispute or controversy
arising under such Security Document and (b) grant to the Secured
Parties the right to raise any claim against such Credit Party or such
Quotaholder in relation to such Security Documents in any jurisdiction
in which such Credit Party or such Quotaholder is domiciled or where
any of such Credit Party's or such Quotaholder's assets are located.
Indemnification
The Borrower shall indemnify the Lenders and each other Secured
Party, including their respective affiliates and officers, directors,
employees, advisors and agents (the “Indemnified Parties”) against all
losses, liabilities, claims, damages or expenses relating to their loans
or commitments and their participation in the Transaction Facilities (or
any Transaction Document), including, but not limited to, reasonable
attorney and other professional fees and settlement costs and losses,
liabilities, claims, damages or expenses arising from or relating to the
environmental impact of the Project (except, in each case, to the
extent that such losses, liabilities, claims, damages or expenses are
found by a final, non-appealable judgment of a court of competent
jurisdiction to result directly from the Indemnified Parties‟ gross
negligence or willful misconduct) but shall not include any indirect or
consequential damages.
Waiver of Immunity
Each Credit Party shall agree that, to the extent that such Credit Party
or any of its assets has, at the time of execution of the Transaction
Documents, or thereafter acquires, any right of immunity, whether
characterized as sovereign immunity or otherwise, from any legal
proceedings, to enforce or collect upon the Loans or any other liability
or obligation of such Credit Party related to or arising from the
transactions contemplated by any of the Transaction Documents
including immunity from service of process, immunity from jurisdiction
or judgment of any court or tribunal, immunity from execution of a
judgment, and immunity of any of its property from attachment prior to
any entry of judgment, or from attachment in aid of execution upon a
judgment, such Credit Party shall irrevocably waive any such immunity
and agree not to assert any such right or claim in any such
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proceeding.
Governing Law
The Finance Documents (other than any fianças under the Guarantee
Facility, which will be governed by Brazilian law) shall be governed by
and construed in accordance with the laws of the State of New York,
USA, except that certain Security Documents and project documents
will be governed by Brazilian law.
Syndication and
Transfers, Clear
Market
The Lenders will be permitted to assign loans under the Loan Facility
with prior notification and consent (such consent not to be
unreasonably withheld) of the Borrower, unless there is a Default
outstanding in respect of the Loan Facility, in which case no consent
from the Borrower shall be required. All assignments will also require
the consent of the Administrative Agent, not to be unreasonably
withheld or delayed. Each assignment will be in an amount of an
integral multiple of USD1 million and shall require, as a condition to its effectiveness, the assignee‟s assumption of a pro rata portion the
assignor‟s obligations and rights under the Guarantee Facility.
The Lenders will be permitted to sell participations in loans and
commitments without restriction. Voting rights of participants, as
established in the Intercreditor Agreement, shall be limited to matters
in respect of (i) increases in commitments of such participant,
(ii) reductions of principal, interest or fees payable to such participant,
(iii) extensions of final maturity or scheduled amortization of the loans
or commitments in which such participant participates, (iv) releases of
all or substantially all of the value of the Collateral, (v) approvals of
any changes in the Project Company‟s Project Budget and Business
Plan and (vi) waivers of any breach of the ECSRA.
The Borrower shall be responsible for any taxes or increased costs
affecting any assignee or participant in the same amount that the
assigning or participating Lender would have been affected.
During the period from the date of this Summary of Indicative Terms
and Conditions until such time as the Mandated Lead Arrangers
receive firm commitments from financial institutions sufficient to
consummate the Transaction on the terms described herein, the
Borrower must not announce, enter into discussions to raise, raise or
attempt to raise any other finance in the international or any relevant
domestic syndicated loan, debt, bank, capital or equity market(s)
(including, but not limited any bilateral or syndicated facility, bond or
note issuance or private placement) without the prior written consent
of the Mandated Lead Arrangers. With respect to other financings of
a similar nature which are intended to be raised in the international or
any relevant domestic syndicated loan, debt, bank, capital or equity
market(s) (including, but not limited any bilateral or syndicated facility,
bond or note issuance or private placement) by the other members of
the PDVSA Group, the Borrower will ensure, subject to applicable
confidentiality obligations, that such members of the PDVSA Group
will coordinate with the Mandated Lead Arrangers to cause such
financings to be brought to market in a manner and time frame that
shall not compete with the Transaction Facilities.
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Yield Protection
Customary, for a facility of this nature, including a market disruption
clause. Unilateral prepayment will be permitted for affected Lenders
(subject to the payment of breakage costs).
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ANNEX A – Term Sheet
Part 1 – Financial Definitions
Consolidated Debt
As to any person at any time of determination, all Financial
Indebtedness of such person and its subsidiaries determined on a
consolidated basis in accordance with IFRS.
Consolidated Debt
to Consolidated
EBITDA Ratio
As to any person at any time of determination, the ratio of (a) such
person's Consolidated Debt as of such time of determination to (b)
such person's Consolidated EBITDA for the 12-month period ending
on the last day of its fiscal quarter then ending, or if not then ending,
most recently ended.
Consolidated
EBITDA
The sum of such person's and its subsidiaries'
1. Consolidated Net Income;
2. depreciation and amortization;
3. corporate tax and other taxes on income and gains;
4. financial expenses (including interest on loans and financings, the
interest component of any payments made under finance leases,
commissions, fees, discounts, monetary and exchange variation
on liabilities, losses on hedging agreements and other finance
charges); and
5. non-operational costs and charges,
minus
1. the sum of such person's and its subsidiaries'
2. financial income (including monetary and exchange variations on
assets, gains on hedging agreements and other finance income);
and
3. non-operational income or gains,
in each case, for such period and determined on a consolidated basis
in accordance with IFRS.
Consolidated
Interest Coverage
Ratio
As to any person at any time of determination, the ratio of (a) such
person's Consolidated EBITDA for the 12-month period ending on the
last day of its fiscal quarter then ending, or if not then ending, most
recently ended to (b) such person's Consolidated Interest Expense for
the 12-month period ending on the last day of its fiscal quarter then
ending, or if not then ending, most recently ended.
Consolidated
Interest Expense
As to any person for any period, the sum of (a) all interest incurred or
accrued in respect of all outstanding Consolidated Interest
Indebtedness of such person and (b) all interest capitalized or
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deferred in respect of Consolidated Interest Indebtedness of such
person, in each case, during such period and determined on a
consolidated basis in accordance with IFRS.
Consolidated
Interest
Indebtedness
As to any person, all Financial Indebtedness of such person and its
subsidiaries for borrowed money that bears interest or otherwise
accrues interest expense, determined on a consolidated basis in
accordance with IFRS.
Consolidated Net
Income
As to any person for any period, the aggregate of all amounts
(exclusive of all amounts in respect of any extraordinary gains but
including extraordinary losses other than any extraordinary non-cash
losses) which would be included as net income (loss) on the
consolidated financial statements of such person and its subsidiaries,
determined on a consolidated basis in accordance with IFRS.
Consolidated Net
Worth
As to any person at any time of determination, the sum of all items
that would be included under shareholders', partners' or members'
equity on the balance sheet of such person, determined in accordance
with IFRS.
Consolidated
Tangible Net Worth
As to any person at any time of determination:
the Consolidated Net Worth of such person,
minus
all goodwill and intangible assets of such person and its subsidiaries
at such time of determination and determined on a consolidated basis
in accordance with IFRS.
Financial
Indebtedness
As to any person at any time of determination, any indebtedness for or
in respect of the following to the extent accounted for as financial debt
in the accounts of such person prepared in accordance with IFRS:
1. moneys borrowed;
2. any amount raised by acceptance under any acceptance credit
facility;
3. any amount raised pursuant to any note purchase facility or the
issue of bonds, notes, debentures, loan stock or any similar
instrument;
4. the amount of any liability in respect of any lease or hire purchase
contract which would, in accordance with IFRS, be treated as a
finance or capital lease;
5. receivables sold or discounted (other than any receivables to the
extent they are sold on a non-recourse basis);
6. any amount raised under any other transaction (including any
forward sale or purchase agreement, sale and sale back or sale
and leaseback agreement and any amount prepaid or required to
be prepaid under or in connection with any commercial contract)
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having the commercial effect of a borrowing;
7. any derivative transaction entered into in connection with
protection against or benefit from fluctuation in any rate or price
(and, when calculating the value of any derivative transaction,
only the marked to market value shall be taken into account);
8. any counter-indemnity obligation in respect of a guarantee,
indemnity, bond, standby or documentary letter of credit or any
other instrument issued by a bank or financial institution in respect
of an underlying liability of an entity which is not a member of the
PDVSA Group which liability would fall within one of the other
paragraphs of this definition;
9. without double counting, the amount of any liability in respect of
any guarantee or indemnity for any of the items referred to in
paragraphs (1) to (8) above; and
10. any amount of any liability in respect of any of the items referred
to in paragraphs (1) to (9) above of any other person which is not
a member of PDVSA Group for which any security has been
granted.
Part 2 – Material Adverse Effect Definition
Material Adverse
Effect
A material and adverse effect on (a) the business, financial condition
or operations of the Borrower, or of the Guarantor, or the ability of the
Guarantor or the Borrower to perform its obligations under any
Transaction Document to which it is a party, (b) the business, financial
condition or operations of the Project Company or the ability of the
Project Company to (x) perform its obligations under the BNDES Loan
Agreement or any other Material Project Document to which it is a
party or (y) construct, commission and operate the Project according
to the construction schedule, within the Project Budget, and in
accordance with the operating phase projections set forth in the
Business Plan, (c) the rights and remedies of the Lenders set forth in
or intended to be established pursuant to the Finance Documents or
(d) the validity or enforceability of any material provision of any
Transaction Document, or the validity, enforceability, priority or
perfection of the security interests under the Security Documents over
any material portion of the Collateral.
Part 3 – Permitted Indebtedness Definitions
Borrower Permitted
Financial
Indebtedness
The Loan, any Reimbursement Loan and any loan from any
Quotaholder or the Guarantor to the Borrower subordinated on terms,
and documented in form and substance, acceptable to the Lenders
and subject to restricted payment conditions.
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Project Company
Permitted Financial
Indebtedness
Indebtedness permitted under the BNDES Loan Agreement as in
effect as of the date of the Loan Facility including any permitted loan
from the Borrower or Petrobras to the Project Company subordinated
on terms, and documented in form and substance, acceptable to the
Lenders.
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Appendix
A) Draft Shareholders Agreement
B) RAL x BNDES Loan Agreement
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