Présentation Nour C..

Report
Algerian Electricity and Gas Company
Sonelgaz Group Projects funding
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Summary
1.
2.
3.
4.
5.
Introduction
Strategic choice of funding of the Sonelgaz Group
The financial arrangements used in the Sonelgaz Group
Comparison between methods of financing
Challenges
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1. Introduction
In order to cover financially its development programs, the Sonelgaz Group, in search
of financial resources, as a consolidated entity, to enable it to ensure the development of
its infrastructure has initiated a major capital raising on the banking and financial
market in accordance with national regulations
Moreover, as a public company involved heavily in the development area, the Sonelgaz
Group, has set a goal to be a major player in the national banking and financial
market. With this in mind, the Group has used various mode of financing regarded as a
lever for development.
To do this, the Group Sonelgaz studied the different funding opportunities and has
achieved the establishment of conventional funding arranged locally in the short,medium
and long term as well as the use of the bond.
The Group, since 2006, also pledged a new funding formula that is the finance project for
new investments in electricity production in partnership, through Hadjret Ennous projects
« SKH » wilaya de Cherchell Koudiet Eddraouch "SKD" wilaya d’El
Tarf and Terga"SKT" in the wilaya of Ain Temouchent
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2. Funding strategic choice
The Group Sonelgaz, and as part of the financial coverage of its investments,
characterized by the mobilization of funds for development of its activities (investment
capital) on one hand, and for rural electrification programs of public gas distribution on
the other hand, uses the following resources:



Bank loans
State grants (in respect of rural electrification programs and public gas
distribution)
Customer participation (as regards the rural electrification programs and public
gas distribution)
Self-financing
The legal and regulatory framework, requires the Sonelgaz Group to raise funds on the
Algerian banking market, and this has been since 2006.

Indeed, the Algerian banking and financial market is considered advantageous for the
development and the financial balance of Sonelgaz Group. Conditions that
are offered are financial levers of growth for the Group:
 The excess liquidity found at the Algerian public banks facilitates the fund raising
for the Group (level, time)
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2. Funding strategic choice(Cont’d)


The stability of interest rates offered by the Algerian financial
market and discount for electricity generation activities , transmission and
distribution
of
electricity
and
gas
and,
unlike
loans
raised
from banks offering external variable rates, averaged 5.87%
The use of local currency (against Value or value) in transactions exempt the
Group Sonelgaz to be exposed to currency risk. The Sonelgaz group had to
undergo
between 2000 and 2006, an exchange difference
arising on nearby 4.5 billion dinars
It should be noted however, that arbitration in the use of resources, particularly for
infrastructure projects has resulted in the deferral of some investment programs.
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3. Financial package used at the Sonelgaz Group
3.1.Bank credit lines
Contracted with Algerian national banks, these lines are granted to finance, as
appropriate,
a
part of the operation and a part of the financing needs of structuring projects and the
means of production of electricity, transmission of electricity and gas, or distribution of
electricity and gas and this in order for to meet local expenditures (disbursements,
benefits, advances ....) or foreign currency (foreign trade)
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3. Financial packages used at the Sonelgaz Group
3.2. Bonds: Financial achievements
- Institutions 2004 – 2005-2006
- Large Public 2005 - 2008
87,5 Billions Dinars
-- Generation :
22,8 B DZD
-- Power Transmission : 42,8 B DZD
-- Gas Transmission : 4,1 B DZD
-- Distribution :
17,8 B DZD
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3. Financial package used at the Sonelgaz Group
3.2. Bonds: Physical realizations
Generation
-Realization Oum El Assel diesel plant
-Acquisition of 32 diesel generators
- Refurbishing of Skikda control command
-Extension of the GT plant of Illizi
(2x3 MW)
Electricity transmission
-Strengthening the 400kV level in
-Realization of 3 links of optical fiber
-Operation and Maintenance of
high voltage networks of
Arzew and Skikda industrial areas
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Distribution
-Realization of 15 000 km for electricity
-Realization of 10 000 km for gas
Gaz transmission
-Realization of 190 DP
-realization of 28 HV substations
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3. Financial packages used at the Sonelgaz Group
3.3. The Finance project
The Project Finance is a financing method based on the ability of a project to
generate sufficient revenue to:

Cover the operating costs of the project

Allow the reimbursement of loans raised

Ensure the return on equity of investors
It is mainly characterized by :





The need to create an independent legal entity, dedicated Project Company
The provision by shareholders and lenders of necessary funds to accomplish the
project.
The assurance of a continued production from the exploitation and throughout the life
of the project
Allocation of revenues to operating costs, lenders and shareholders, without
discretion for reinvestment
The limited involvement to shareholders
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3. Financial packages used at the Sonelgaz Group
3.3.the finance Project –Design and structure
Shareholders /
Capital stock
Bank funding
70 %
Bank leader *
bank Pool
30%
Project company
Other
Sonelgaz
(*): the bank leader acts as security agent , manager and account manager .
Agreement related to
accounts
Funding agreement
Security documents
SP
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Direct agreement
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4. Comparaison of financing processes
Organisation
The Finance Project
conventional Finance




Undertaken primarily by companies
with sufficient funds
Action of the Board on behalf of the
shareholder in terms of monitoring
Affiliation to
management control (governors)
Cash flow obeys the company policy




Can be undertaken by a
corporation / partnership.
The necessary capital and cash
flows are isolated from other activities
of investors.
Contractual
arrangements have commitments that
impose control
Cash flow obeys distributed to
shareholders
Bond loan




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Undertaken primarily by companies sufficient
funds
Prior authorization of the COSOB
Organizing communication campaigns for
operations for the general public
Cash flow obeys the company policy
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4. Comparaison of financing processes
Financial Flexibility
Conventional Financing


Financing time Settingshort
Reinvestment of funds generated
Finance Project


Financing arrangements very long
and highly structured
Relatively high costs of arrangement
Bond



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Highly structured financing
arrangements
Relatively high costs of arrangement
Immediate availability of funds
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4. Comparaison of financing processes
Loan Contractual Structure
Project Finance
Conventional Financing


Debt service provided
by all fund sponsors
Signing a loan
agreement by programme


Debt service provided by cash
flows generated
Design of loan contracts based
on specific characteristics of the
project
Bond


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Debt service provided by all fund sponsors
Establishment of an information
leaflet and signed Investment Agreement and
guidance
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5. Challenges








The willingness of the SONELGAZ group to move continuously toward the local
banking and financial market and to play a key role as a major sustainable
stakeholder, which will be more confirmed by the level of trust that investors and
donors will put in the Group
Funding of projects designed by public banks
Contribution to the development of national economy
Sonelgaz main actor in the financial market
Sonelgaz, main actor in the bank marketplace with credit lines lines in excess of
100 billion dinars annually
Opening for the participation of corporations in the financing of investment projects
Financial Analysts multidisciplinary teams (legal, technical, financial)
Need to develop local expertise to advisors (technical, insurance, legal, finance) with
organization by business / industry, and specialization in practice (construction,
operation, financing ... etc.)
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Thank you
Direction Exécutive de la Stratégie Financière et de la Consolidation
Direction des Opérations Financières et Engagements
02, Boulevard Krim Belkacem - Alger
Tel
: 021.72.31.45
Fax
: 021.72.15.61
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