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GASPETRO / TNS

Financing the Oil and Gas Sector Projects

09.june.2004

Dry Closing Has Been Easy,

Difficult Is To Get Wet!

Transportadora do Nordeste e Sudeste S.A. – TNS

Alvaro de Sá Bahia – abahia@petrobras.com.br

NOT AN OFFICIAL UNCTAD RECORD

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GASPETRO / TNS

The opinions contained herein shall be construed

as my personal opinions and suggestions and by

no way should be viewed as PETROBRAS formal’s

views, positions or opinions.

Disclaimer

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GASPETRO / TNS

AGENDA

Motivations for Project Financing

Figures for Existing Projects

Project Structures

Structuring Timeline

Carrying Cost for the Projects (1Q2004)

Lenders Concerns and Fears

Guarantees Usually Required

Petrobras New Boundaries Effect

Difficulties for Initial Disbursement (Wet Closing)

Difficulties for Subsequent Disbursement

What Lenders Would Like to See

What Petrobras Would Like to Achieve

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GASPETRO / TNS

- investment constraints

- budget constraints

- off-balance

- access to BNDES funds

- cash flow generation

- primary surplus results

- financial indicators improvement

(leverage, ROCE)

- financial partners x strategic partners

Motivations for Project Financing

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GASPETRO / TNS

Project US$ bi Client Project US$ bi Client

Marlim 1.,50 E&P Albacora 0.41 E&P

NovaMarlim 0.83 E&P PCGC 0.13 E&P

Cabiunas 0.85 Gas Malhas 1.00 Gas

Barracuda 2.50 E&P REFAP 0.31 Down

EVM 1.23 E&P

Total: US$ 8.77 billions

Figures for Existing Projects

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GASPETRO / TNS

Marlim Marlim ConsortiumConsortium

Marlim Marlim ConsortiumConsortium

CommercialCommercialPapers / BondsPapers / Bonds

CommercialCommercialPapers / BondsPapers / Bonds

BNDESBNDESBNDESBNDES

Debt - US$ 1.3 billion

Medium Term NotesMedium Term NotesMedium Term NotesMedium Term Notes

Equity - US$ 0.2 billion

BNDESParBNDESParValia Valia Bco ABN AMRO Bco ABN AMRO PETROS PETROS Bradesco Previd. Bradesco Previd. JPM Part.JPM Part.Bco Sul América Bco Sul América

BNDESParBNDESParValia Valia Bco ABN AMRO Bco ABN AMRO PETROS PETROS Bradesco Previd. Bradesco Previd. JPM Part.JPM Part.Bco Sul América Bco Sul América

Revenues

Concession

Revenues

MarlimMarlim(CPM)(CPM)

MarlimMarlim(CPM)(CPM)

MarlimMarlimParticipaçõesParticipações

MarlimMarlimParticipaçõesParticipações

ANPANPANPANP

Investment (Assets)

MarlimField December 1998

• US$ 700 MM + R$ 1.314 MM

• Repayment: 1999 a 2008

MARLIM

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GASPETRO / TNS

Concession

ANPANP Investment:Assets and Operational Costs

RevenuesRevenues

SPCSPCSPCSPC

EquityEquityUS$ 49.5 US$ 49.5 millionsmillions

Subordinated LoanSubordinated LoanUS$ 100.5 millionsUS$ 100.5 millions

ConsortiumConsortium

BondsBondsUS$ 684.0 millionsUS$ 684.0 millions

Campo

Marlimde

December 2001

• R$ 2.164 MM

• Repayment: 2002 a 2009

NOVA_MARLIM

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Cayman Cabiunas

Investment Company

JCABIC Toyo

Equity

Petrobras

Operational Lease Completion Undertaking Agreement

Bank Syndicate

Mitsui & Sumitomo

Loan

Asset

Owne

rship

Asset Ownership

JBIC

Loan

December 1999 / March 2000

• US$ 850 MM

• Repayment: 2003 a 2009

CABIÚNAS

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Back-upOil Purchase

Contract

JBICJBIC

BNDESBNDES

JapaneseJapaneseTradingTrading

CompaniesCompaniesLoan Loan

JapaneseJapanese

EntityEntity

BANKSBANKS

LoanLo

an

OperatingManagementAgreement

Top SideTop SideFacilitiesFacilities Sub-SeaSub-Sea WellsWells

SubordinatedLoan Construction

ManagementAgreement

PETROBRASPETROBRAS

Oil

Pu

rch

ase/

D

eliv

ery

Co

ntr

act

Ch

arte

r A

gre

emen

t

PETROBRASBarracuda/Caratinga

Business Unit

CARDOSCARDOS(Netherlands)(Netherlands)

Mas

ter

Lea

seA

gre

emen

t

Su

bL

ease

Ag

reem

ent

EPCContract EPCEPCKBRKBR

BCICBCIC(Japan)(Japan)

Equity

JapaneseJapaneseTradingTrading

CompaniesCompanies

June 2000

• US$ 2.500 MM

• Repayment: 2004 a 2010

BCLC BCLC (b)(b)

BARRACUDA & CARATINGA

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EVM Leasing

Corporation

EPIC

Loan

Toyo

Equity

BNDES

(FINAME)

Petrobras

Operational Lease

Completion Undertaking Agreement

Bank Syndicate

Sumitomo, Itochu Mitsubishi, Marubeni

and Mitsui

Asset

Owne

rship

Assets Ownership

JBIC

Loan Loan

June 2000

• US$ 1.078 MM

• Repayment: 2001 a 2007

EVM

Loan

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Nissho IwaiNissho Iwai InpexInpex

AJPLAJPL PETROBRASPETROBRASPETROBRASPETROBRAS

EquityEquityOFFSHOREOFFSHORE

ONSHOREONSHORE

JBICJBIC

Bank SyndicateBank SyndicateIBJ & BOTMIBJ & BOTM

Loan

Loans

ASSETS

Consortium

November 2000

• US$ 171 MM

• Repayment: 2001 a 2008

ALBACORA - AJPL

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PETROSPETROS PETROBRASPETROBRASPETROBRASPETROBRAS

ASSETS

Consortium

December 2000

• R$ 560 MM

• Repayment: 2001 a 2010

ALBACORA - PETROS

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JPM Prever

CRSecCRSec PETROBRASPETROBRASPETROBRASPETROBRAS

EquityEquity

ASSETS

Rent

Casas Bahia BNDESPar

December 2001

• R$ 198 MM

• Repayment: 2003 a 2009

PCGC

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GASPETRO / TNS

July 2003

• US$ 1.000 MM

• Repayment: 2005 a 2014

MALHAS

Gaspetro

NTN / NTSNew Assets

TNSExisting Assets

ShipperPETROBRAS

TranspetroO&M

EPC- N

EPC Contract(Toyo Eng)

Mitsui, Itochu e Mitsubishi

ANP

GTA = Gas Transportation Agreement

Transportadora Nordeste Sudeste

Nova Transportadora SudesteNova Transportadora Nordeste

EPC- S

CMA = Construction Management Agreement

GTA

Environmental

Consortium

CMA

Petrobras Loans

JBIC Bancos BNDES

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Structuring Timeline

MARLIM2001 2002

US$ 700 +R$ 1,31420081988 2005

CABIÙNAS US$ 85020092000 2005

EVM

2002 2003US$ 1,079

20072000 2005

BARRACUDA2003

US$ 2,50020102000 2004 2005

ALBACORA - AJPL

2001US$ 171

20082000 2005

ALBACORA - PETROS R$ 47120092000 2005

NOVAMARLIM2001

R$ 2,16420082005

PCGC2001 2002 2003

R$ 17720102005

MALHAS2003

US$ 744 +R$ 83020152005FIGURES IN MM US$ or MM R$

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Carrying Cost for the Projects (1Q2004)Cost % Index Utilized

4.6 (Libor + variable spread linked to Brent)

7.8 (Libor + spread) and fixed spread

8.5 (Libor + spread) and fixed spread

9.6 (Libor + spread) and fixed spread

10.9 (ANBID + spread); (IGPM + spread) and (CDI + Spread)

13.6 (Libor + spread) and fixed spread

15.2 (ANBID + spread); (IGPM + spread); (CDI + Spread) and fixedspread

16.5 (IGPM + variable spread linked to Brent)

17.3 (IGPM + spread) and (CDI + Spread)ASSUMPTIONS:

2004 2005 2006 2007 2008

ANBID 15.0% 14.0% 13.5% 13.5% 13.5%

CDI 15.0% 14.0% 13.5% 13.5% 13.5%

IGPM 4.5% 4.0% 4.5% 4.5% 4.5%

FX Rate (R$/US$) 2.8892 2.8892 2.8892 2.8892 2.8892

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Lenders Concerns and Fears

Enforceability of Contracts

Court Unpredictably

Time Consuming Court Procedures

Sudden High R$ Devaluation

Moratorium

Environmental Aspects

Unstable Rules and Regulations

Project Wealth and Strength

Petrobras Commercial Risk

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Guarantees Usually Required

New York Law and Arbitration Procedures

Pledge over assets

Pledge over shares of the SPC

Pledge over products (oil, gas or oil & gas)

Pledge over revenues

Political and Commercial Risk Insurance

(Commercial Banks Portion ONLY)

Semi-annual anticipation of repayment

Central Bank 2644 account

Debt Service Coverage Ratio (value negotiated)

Payment Waterfall

Petrobras Contribution

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Petrobras Projects New Boundary Effect

Cross Border Operational Lease (Cabiúnas, EVM and Barracuda)

Pledge Over Assets– Movable x Immovable Assets (Cabiúnas and Malhas)

“Shift Oil” Concept

Central Bank 2644 Ordinance Applicability and Authorization

ANP Ordinance 170/98 Use

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Petrobras Projects New Boundary Effect

Consortium Framework (MARLIM and ALBACORA)– ANP Tax Collection (Participações Especiais)

Consortium Framework (Malhas)– State ICMS Tax Collection

– Federal PIS/COFINS Tax Collection

– ANP Reluctance to Use Concept

– Environmental Body Reluctance

– Central Bank x ANP x Environmental Body

– Licensing Ownership Transfer

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Difficulties for Initial Disbursement (Wet Closing)

Environmental Licensing– Preliminary License (Licença Prévia)

– Installation License (Licença de Instalação)

– Absence of Delivery Date (6 months never ends)

Pipeline Authorization for Construction (in some cases)

Presidential Decree (in some cases)

Central Bank Authorization for Opening 2644 Account

Insurance

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Difficulties for Subsequent Disbursement

Environmental Licensing– Installation License

• Non Edificandi Area

• 2,5% Compensation Measure

– Absence of Delivery Date (6 months never ends)

Pipeline Authorization for Construction

Presidential Decree x Rights of Way Deeds

Central Bank ROF (Registro de Operações Financeiras)

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What Lenders Would Like to See

Clear and Stable Rules and Regulations

Contract Enforceability

Fast and Reliable Court Procedures

No Moratorium Ghosts

No Moratorium at All

Economic Stability

Account Statement Transparency

Good Project

Good Rates

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What Petrobras Would Like to Achieve

More Flexibility to Carry EPC Works

More Flexibility to Define and Adapt Insurance Policies

Commercial Banks Requirement Linked to Their Pricing

Lower Structuring Costs

Lower Financing Pricing

Longer Tenor

Event of Default Classes or Categorization

Reduced Set of Conditions Precedent for Disbursement

Brazilian Governing Law (as a rule not exception)

More Flexibility Over Rights of Way

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Resume

Alvaro de Sá Bahia is almost 50 years old, married, has a son and two daughters, a lovely wife and, unfortunately, also an ex-. He has a major degree as civil engineer (UFRJ-1978), a master degree in Computation and System Engineering (COPPE-UFRJ-1990) and has a MBA in Economic and Management of Natural Gas and Energy (COPPEAD/UFRJ and Economy Institute/UFRJ -2001). He is in Petrobras since 1979, having worked as system analyst, application developer, application developer manager for exploration and production business unit, project finance coordinator, project finance manager and is currently in charge of the financial area for the Transportadora do Nordeste e Sudeste S.A - TNS. He has been responsible for structuring Cabiúnas and Malhas deal (aggregate amount of US$ 1,850 millions) and also held responsible for the management of ongoing project finance structures (Cabiúnas, EVM, Marlim, NovaMarlim, PCGC, Albacora-AJPL and Albacora-Petros).

Alvaro de Sá Bahia abahia@petrobras.com.br

Av. República do Chile 500, 28 andar tel: 55 21 3212-6143

20031-170 - Rio de Janeiro - RJ