Institutional
Banking & Markets
Australian American Chamber of
Commerce Houston
Energy Conference
Funding Investments
in Australia
Scott Speedie
Global Head of Specialized Finance
Commonwealth Bank of Australia
January 2014
Strictly Private and Confidential
The Commonwealth Bank of Australia
Australia’s largest bank by market capitalisation
KEY FINANCIALS
Statutory NPAT
Cash NPAT
Return on equity
Total assets
14.6m
3,000
Customers
Institutional Clients
 Industry specialisation and
understanding make the Bank an ideal
partner providing balance sheet strength
and broad product capability
Cash earnings per share
Dividend per share
Basel III CET1 (International)
LIQUIDITY (AUD)
 Oil & Gas industry teams placed in key
commercial and financing hubs. CBA is a
Bank that actively deploys balance sheet
into our client’s businesses
 Broad range of debt products spanning
project, corporate and acquisition finance
 Strong global financial markets
capabilities across commodities, foreign
currency and interest rates
 The only domestic Australian bank with a
full in-house equity business, focused on
retail and institutional clients
$101b
June
2011
$135b
June
2012
$137b
June
2013
CREDIT RATING
A$7,677m
A$7,819m
18.4%
A$754b
A$4.86
A$3.64
Moody’s
Fitch
Market
Capitalisation
(US$bn)
Global Market
Capitalisation
Ranking
Senior Debt Rating
Moody’s
S&P
268.02
1
A2
A+
243.52
2
A3
A
232.44
4
Aa3
A+
198.11
6
Baa2
A-
183.81
7
Baa2
A-
124.01
10
Aa2
AA-
104.29
15
Aa3
AA-
92.91
18
Baa1
A-
S&P
11.0%
GLOBAL COMPARISON
Source: Bloomberg. As at 13 January 2014. Credit rating: S&P
2
Funding Options for Upstream Companies
Equity
Project Finance
Reserve-Based Lending
Development
Finance
Small Borrowing
Base
refinance
Exploration
Single Field
Development
Start-Up
Few Producing Fields
Balance Sheet Lending
Large Borrowing
Base
refinance
Several Producing
Fields plus Permitted
Development Assets
Development of an E&P Company
Corporate Credit
Facility
refinance
Large Portfolio of
Producing Fields
Development Assets plus
Exploration Acreage
Mature E&P
Funding Investments In Australia
3
Australian Equity Market
Where does Australia stand?
Market Capitalisation of Global E&P Stocks
$80
13%
$70
5%
US
Canada
49%
18%
Australian Secondary Issuances (A$bn)
E&P
Other
$60
Asia Pac (ex Aus)
$50
Australia
$40
Other
$30
$20
15%
$10
$0
2006 2007 2008 2009 2010 2011 2012 2013
Source: CBA and Bloomberg
Funding Investments In Australia
4
Australian Loan Markets
Australian Loan Market Volumes (A$bn)
140
13.658
Energy and Resources
Other
120
9.934
3.75
100
13.078
80
60
4.41
116.042
95.066
40
53.29
103.25
66.122
20
0
2009
2010
2011
2012
2013
5
LNG – Advent of Major Australian Energy Projects



7 LNG projects in Australia currently under
construction – A$194bn total capex value
Australia benefits from geographic proximity
to Asia
Ichthys LNG Project (A$42bn):
– Largest project finance globally
– Quality sponsors – Inpex (Japan) and Total
(France)
– A$20bn of debt – funded by export credit
agencies and
commercial banks
– Forecast A$3.5bn p.a. contribution to GDP
– Supported by long term take or pay LNG
sales contracts into Asia
– LNG prices are oil-linked
Funding Investments In Australia
6
Project Finance/Development Finance
Project finance





Lending to complete a specific project
Repayment of debt from project cash flow
Security over borrower and assets
Lenders’ recourse is often limited to the project itself
Australia – 2nd largest market for project finance
(after the United States) with 10% global share of
project finance in 2013
Development project finance is
common and characterised by





Extensive technical due diligence
P90 production profile
Guarantee from the sponsor
No dividends or asset sales
Restrictions on exploration expenditure
Funding Investments In Australia
7
Reserve Based Lending


The structure of choice of the independent sector – flexible, revolving credit facility
Reserves based lending for multiple fields
– Requires diversification – no single asset must dominate portfolio
– P50 reserves can be used for producing assets
– Aggregate cash flows considered
– Covenants and pricing are lower than for single-asset financing
$
Facility size, with
amortisation to zero
Addition of new
assets allows full
utilisation of facility
Extension of
availability
Declining value
of Asset 1
time
Funding Investments In Australia
8
Balance Sheet Lending



Debt capacity linked to past performance
Debt covenants linked to balance sheet/ P&L rather than cash flow
Suited to larger independents
– Fewer restrictions
– Lower maintenance
– Increased flexibility
– Cheapest source of debt finance for the independent
Company
Corporate Debt (A$’bn)
Total Assets (A$’bn)
Market Cap (A$’bn)
4.3
24.8
31.4
3.7
17.0
13.8
2.9*
7.1
11.0
Source: Bloomberg, company annual reports
* Wholly comprised of Oil Search’s guarantee of its portion of debt associated with PNG LNG project; guarantee falls away on completion.
9
Australian Bond Markets
Significance of the A$ MTN market in a global context has grown since 2007
A$ MTN Monthly Issuance Volumes
Monthly Bond Redemptions
The A$ MTN market witnessed strong issuance activity in 2013, with total volume reaching
A$97.2bn (2012: A$99.9bn). While SSAs and FIs have dominated issuance, consistent flows of
corporate supply has been positively supported by investors.
The A$99bn of maturities over FY14 (FY13 A$72bn) is expected to drive continued support for
primary issuance
$16
$10
Redemptions (A$bn)
$14
A$ billion
$8
$6
$4
$2
$12
$10
$8
$6
$4
$2
$0
$0
Jul-12
Sep-12
Nov-12
Bank
Jan-13
Mar-13
May-13
Non-Bank Financial
Jul-13
Sep-13
Nov-13
Jun
Jul
Aug
Sept
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Corporate
A$ MTN Issuance by Industry
A$ MTN Issuance by Sector
Mining & Mining Services issuers raised A$2.3bn in the A$MTN market in 2013, accounting for
24% of total issuance (2012: 15%)
Corporate issuance remains under-represented in the A$ MTN market in 2013. The overall
contribution to total market supplies has improved in recent years to 10.2% (2012: 9.6% and
2011: 5.6%) as issuers have taken advantage of the very favourable demand conditions
14 deals
$3.6bn
A$ billion
$4.0
30.0%
$3.5
25.0%
$3.0
$2.5
$2.0
6 deals
$2.0bn
7 deals
$2.3bn
14 deals
$1.7bn
20.0%
15.0%
$1.5
10.0%
$1.0
5.0%
$0.5
$0.0
0.0%
Property
Infrastructure & Utilities
Energy & Resources
Other
Domestic
Banks
Semi
SSA
Foreign Bank /
Branches
Corporate
Non-Bank
Financial
Source: CBA and Bloomberg as at 21 January 2014
10
Highlight Transactions
11
Specialized Finance
Scott Speedie
Managing Director
P: +61 (0)2 9118 4333
E: scott.speedie@cba.com.au
201 Sussex Street Sydney 2000
Client Coverage Group
Project Finance
Grant Willis
Michael Thorpe
Managing Director Natural Resources
Managing Director
P: +44 20 77106990
E: grant.willis@cba.com.au
85 Queen Victoria St, London EC4V4HA
P: +61 (0)2 9118 4337
E: thorpemi@cba.com.au
201 Sussex Street Sydney 2000
Andrew Loadsman
Jon Verlander
Executive Director Natural Resources
Executive Director
P: +61 (0)2 9118 4330
E: andrew.loadsman@cba.com.au
201 Sussex Street Sydney 2000
P: +1 713 3419751
E: jonathan.verlander@cba.com.au
811 Main Street, Suite 4675, Houston, TX,
USA
Jeff Heazlewood
Charles Davis
Director Natural Resources
Executive Director
P: +61 (0)2 9118 4339
E: jeff.heazlewood@cba.com.au
201 Sussex Street Sydney 2000
P: +61 (0)2 9118 4304
E: charles.davis@cba.com.au
201 Sussex Street Sydney 2000
12
This presentation does not constitute an offer to provide finance on any terms. The provision of any such offer is subject to formal review and credit approval, satisfactory due diligence, sign off
by legal, tax, accounting and other professional advisers and execution of satisfactory documentation. The Commonwealth Bank shall not be bound unless and until final terms are agreed and
formal documentation is signed. That final documentation may not necessarily mirror the contents of this presentation and any actions you may choose to take should not be taken in reliance
on this presentation.
The information contained herein is confidential and is the proprietary structure of the Commonwealth Bank. It is provided on the basis that you will not disclose its contents to any
persons other than directors, employees and advisors without the written consent of the Commonwealth Bank. It is not to be discussed either directly or indirectly with any other financier. This
obligation will not apply if the information is available to the public generally (except as a result of a previous breach of this confidentiality obligation) or you are required to disclose it by law.
© Copyright Commonwealth Bank Australia
13