NOT AN OFFICIAL UNCTAD RECORD
STRUCTURED TRADE
and
COMMODITY FINANCE
A FRAMEWORK FOR SECURING
OIL COMMODITIES FINANCE
Structuring Access to Global Capital Markets to
Finance Commodity
Presented by
Andre SOUMAH
Executive Chairman
The ACE - AUDIT CONTROL & EXPERTISE
Group
ESTABLISHING
AN EFFICIENT COMMODITY FINANCE AND STORAGE SECTOR
IN DEVELOPING COUNTRIES
PARTICIPATION OF A NATIONAL DEVELOPMENT BANK AS A FINANCIER
( CREATION OF A SPECIAL PURPOSE VEHICLE SPV)
IN COLLABORATIONWITH A REPUTABLE CREDIT SUPPORT COMPANY
(TO CONTROL AND MONITORE THE COMMODITY STORAGE PROCESS AND THE END TO END TR
RELEVANT BODY OF COMMERCIAL LAWS GOVERNING STORAGE OF GOODS
Pre
Condition
Field Warehousing & Control Financing
WAREHOUSE RECEIPT FINANCE
is a form secured lending
in which the Lender advances funds against
physical goods that are
being stored in a warehouse and
that have been assigned to the lender
through warehouse receipts.
Basics of OIL Commodity Finance transactions
Structure necessitates full ownership
Ownership evidenced by stock confirmations W H R .
Market analysis and understanding of price dynamics.
Commodity risk – storage, grading, other characteristics
Comprehensive insurance covers risk of ownership.
ACE & FINANCIER/TRADE HOUSE
What about Synergies ?
ACTORS
STEPS
TYPE OF
FINANCING
SUPPLYER
Delivery of Raw
Material
Perfo
rmanc
e
Quality/Q
uantity/W
eight
ACE SUPERVISON
MONITORING
MITIGANTS
Wareho
using
Proce
ssing
Wareho
using
Supplier/Processing
Performance
Transit
Warehou
sing
Load
ing
EXPORTE
R
OFFTAKER
Export/
Shipment
Receivable
s
Carrier
Perform
ance
Terminal
Performance
Carrier
Perform
ance
ACE COLLATERAL MANAGEMENT
ACE’S
SCOPE
Plant Management /
Technical
Assistance
COLLATERAL
PORT
FINANCIER/TH’S CONVENTIONAL
Raw Material
Working Capital
SCOPE Export Product Financing
Financing
Financing (Tolling)
Suppli
er
RISKS
LOCAL AGENT
RAW MATERIAL WARRANTS
Exporter/Carrier Expertise,
Reputation & Technical Support
EXPORT GRADE PRODUCT WARRANTS
Receivab
le
Financin
g
PAYMENT
1st Class
Offtaker
or
Secured
Payment
Instrume
nt
SHIPPING DOCUMENTS
STCM Products Overview Transaction
Management
Transaction Management Overview
Managing deals closely by specific Transaction Managers
•
Weekly , Monthly reporting to clients
•
Communication with clients on an ongoing basis
•
Checking Securities
•
Stock management and control
•
MIS reporting
•
Daily Price checking
•
Through Product knowledge enhancing the Accounting processes
•
Payments Monitoring
•
Receipts
•
Vat/ Tax reporting on Weekly, monthly
•
Department of Finance, Energy, Trade and Industries reporting
Transaction Management Overview
Skills as a Transaction Manager
•
Accounting and Reporting on a deal level
•
Client interaction
•
Financial Modeling
•
Liaise with internal departments
•
Verify funding rates obtained by the Marketer
•
Adhere to International Reporting Standards
•
Statutory Reporting
SCAM Supporting Systems
• The business processes and transaction management functions
are supported by an CONTROL AND MONITORING system called E3C
• Loading , storing and release product as well as stock information
• Reporting to track trends and highlight issues
SCAM’s Business Processes
Workflow
Flag Management
Document Management
Price Checking
Month-end and ad-hoc
Month-end Process, Cost of Funds Allocation,
Insurance Claim Generation,
Tax Reporting, Reverse Transaction, Write-Off Approval,
Financial Reconciliation, Stock Reconciliation,
Securities Release
Receipts
Payments
Initiation of Following Payments:
Insurance
Contract Growing
Transferable Instrument
Invoice purchasing
Collateral Manager
Acquiring Insurance
Selling SCAF
Products and
Acquiring Clients
Product Approval
and Limit Allocation
Conducting
KYC
Drafting
Contract
Managing
Securities
Capturing Deal
Information
Deal Preparation and Capture
Marketers
Compliance
Legal
Securities
Initiating Receipts
Initiating Milldoor Receipts
Processing of Payments
Processing Receipts
Extend Contract or
Refinance
Handling Payment Errors
Handling Late/Non/Alter Receipts
Contract Closure
Deal Administration
Transaction Manager
Technical Manager Transaction Manager
Securities
Deal Closure
SCAF
« TRANSACTIONAL » FINANCING
EVALUATION OF THE TRANSACTION
TO BE FINANCED
The BANKS, The INSURERS & ACE need to
know:
Oil Specifications
Market Environment (if it is a buyer or
seller market)
Logistics aspects
Storage and Refining Capacity
Transportation availability
Security
Time Cycle
Price Mechanisms
The preparation
of the terms of the facility agreement
Selling
Mechanism and
(Firm
Offtakeunderstanding
or
requires
full knowledge
in-depth
of
Speculation)
the Risks associated to the transaction.
« TRANSACTIONAL » FINANCING
PARTIES INVOLVED IN THE TRANSACTION
The bank/Insurer & ACE have to know the various
players involved in the transaction in order to
secure the collateral and remove the lien of
the parties :










First Stage Buyers, Suppliers, Exporters
Traders
Credit Support Company
Transporters
Refineries
Tank Farm Operators
Forwarders
Shipping Agents
Insurers
Brokers
One objective only : Completion of the
transaction in facilitating
repayment of the loan
ACE - AUDIT CONTROL & EXPERTISE Group
So when talking about
performance risk
- similarly
to a loan collateral the Credit Support Company
should ensure that it does,
 give the financier clear rights over it,
 allow to liquidate it and take possession
in case of default,
 carry out all local registration procedures
and compliance,
 not give any correlation between the
counterparties
credit
risk
and
the
collateral value,
 provide for robust procedures allowing
prompt collateral liquidation if need be,
 provide for collateral segregation from
custodians' own assets.
SOLUTION
The applied
solution
AN ACE RISK MANAGEMENT SOLUTION
Field Tank Farm Receipt & Receivables
Financing
coupled with,
1. DNA Cargo Tagging,
2. IT Real Time Tank Storage Monitoring,
3. near real time fully secured over the
web reporting
The underlying principle being to:
 Use in synergy Field Tank
Receivables financing with
Farm
receipt
&
 Multilevel
biotechnical
and
chemical
cargo
marking process - which applies unique DNA codes
- allowing for unequivocal identity proof of
ownership and source of Oil/Products cargo,
 With permanent real time monitoring for Tank
Farm storage through the use of an integrated IT
graphic solution combining permanent sensor and
ultrasonic measurement technologies with Web
AN ACE RISK MANAGEMENT SOLUTION
Oil/Products
Tank Storage or
Refinery
Complex
ACE On-Site Real
Time monitoring
network &
sensors
ACE Central
Server
Wide Area
Network, via IP:
dial up, GSM,
wireless,
satellite or a
combination of
all, depending
on conditions &
existing
ACE On-Site
infrastructure
interventions
for:
-Marking /
Tagging
-Sampling &
Analysis
(Country Wide)
ACE Integrated Risk Management
Solution
- Collateral
Management & Monitoring Pre-Operation Phase - ACE
will
- Identify Tank Farm /
Terminal
- Survey Tank Farm /
Terminal
- Approved Tank Farm /
Terminal
 Sub-Lease from owners
 Operate Tank
Farm/Terminal
Pre-Operation Phase - ACE
will
- Survey Refinery Process
- Approve Refinery
Facility
 Sub-Lease from owners
 Obtain Waiver & Consent
CRUDE OIL
TANK FARM
Storage
OPERATION PHASE - ACE will
- Control Quantity and
Weight In
- Control Quality In
- Approve/Refuse crude oil
entry
- If approved, DNA Tag oil
cargo
TRANSMIT TO FINANCIER
 Quality/Quantity/Weight
Cert.
 Issued Tank Farm Receipt
OPERATION PHASE
ACE will
- Control Quantity out
- Control Weight out
- Control Quality out
- Attend & Monitor
Transport
Concept
Pre-Operation Phase - ACE
will
- Identify Field Tank Farm
- Survey Field Tank Farm
- Approve Field Tank Farm
 Sub-Lease from owners
 Operate Field Tank Farm
from owners
TANK FARM
Storage
REFINING
PROCESS
TANK FARM
Storage
OPERATION PHASE
ACE will
- Monitor Processing
- Control Quantity out
- Control Weight out
- Control Quality out
- Attend & Monitor
Transport
TANK FARM
Storage
OPERATION PHASE - ACE will
- Control Distributed
Quantity
- Control Weight Out
- Control Distributed
Quality
TRANSMIT TO FINANCIER
 Delivery Documents.
ACE Integrated Risk Management
Solution
- Collateral Pre-Operation
Management
& Monitoring Phase - ACE
will
- Identify Tank Farm /
Terminal
- Survey Tank Farm /
Terminal
- Approved Tank Farm /
Terminal
 Sub-Lease from owners
 Operate Tank Farm
Concept
2
Pre-Operation Phase - ACE
will
- Identify Field Tank Farm
- Survey Field Tank Farm
- Approved Field Tank Farm
 Sub-Lease from owners
 Operate Field Tank Farm
PRODUCTS
TANK FARM
Distribution Storage
TERMINAL/TANK
Storage
OPERATION PHASE - ACE will
- Control Quantity and
Weight In
- Control Quality In
- Approve/Refuse crude oil
entry
- If approved, DNA Tag oil
cargo
TRANSMIT TO FINANCIER
 Quality/Quantity/Weight
Cert.
 Issued Tank Farm Receipt
TANK FARM
Distribution Storage
TANK FARM
Distribution Storage
OPERATION PHASE
ACE will
- Control Quantity out
- Control Weight out
- Control Quality out
- Attend & Monitor
Transport
OPERATION PHASE - ACE will
- Control Distributed
Quantity
- Control Weight Out
- Control Distributed
Quality
TRANSMIT TO FINANCIER
 Delivery Documents.
The LEGAL Nature of ACE Risk Mgt
Services
BAILMENT CONCEPT
This is the legal term describing the
relationship when the ownership of personal
property resides in one person and possession
of it is in another.
 The depositor of the goods is known as the
« Bailor »
 The person engaged in storing the goods of
others for compensation (I.e. the
is known
the
TwoCollateral
conditionsManager)
are necessary
for as
« Bailment
» to
« Bailee »
exist,
The Depositor relinquishes possession of
property;
 ACE
assumes
«
exclusive,
continuous
notorious possession of the property ».
the
and
Oil/Products Import Structure – Legal
Agreements
Procurement/Purchase Contract
Purchase,
Waiver &
Consent
Agreements
Lease/SubLease,
Waiver &
Consent
Agreements
Transport,
Waiver &
Consent
Agreements
Financing
Bank (SPV)
Assignmen
t of
Insurance
- “All Risks” plus
misappropriation.
- Professional
Indemnity, Fraud
& Omission.
- Political Risk
(confiscation,
expropriation,
nationalization
& Depossession).
Insurance
Company
CMA & CSS
Agreements
Refining/Sto
rage or
Tolling
Agreement
Transport,
Waiver &
Consent
Agreements
ACE
Lease/SubLease,
Waiver &
Consent
Agreements
Sale &
Purchase
Agreement
Assignment
of Farm
Tank
Receipt &
Proceeds
SUPPLIER
Small
Importers
TANK FARM
Storage
Transporte
rs
REFINERY
Process &
Storage
Transporte
rs
TANK FARM
Storage
Distribution
Network
Oil/Products Import Structure – Product
Vs Cash
SUPPLIER
Classifica
tion
ACE crude
Oil Tank
Farm
Receipt
ACE
CMA &
CSM
Fees
Product
Grade ACE
Tank Farm
Receipt
ACE
Tank Farm
Receipt
Financing
Bank (SPV)
Proceeds
from
Sales
Cash for
Procurement
Small
Importers
TANK FARM
Storage
Transporte
rs
REFINERY
Process &
Storage
Transporte
rs
TANK FARM
Storage
Storage Fees
Transport
Fees
Financing
Bank (SPV)
Processing/
Storage Fees
Transport
Fees
Tax &
Duties
Storage Fees
Revenue
Authority
Distribution
Network
Field Tank Farm Receipt Financing
Benefits of implementation for
Stakeholders
Tank Farm Operators/Refinery
1. To
 Reduced
number
of
small
counterparts
or
interfaces.
 Prevent bypassing of existing infrastructure.
 Constant monitoring of storage conditions and
2.stored
To Small
Importers
quantities.
 Reduced transactional obstacles (economies of
scale).
 Reduced transactional cost (economies of scale).
Access
to Farm Tank
3.To
Tax Authorities
andfinancing
Consumers(Field Farm Tank
Warrant).
 Prevention of tax evasion and increased cargo
traceability capacity.
 No more Fuel alteration.
 Improved Quality & Safety Standards country
4.wide.
To Financing Institutions
 Securitized warrant based financing.
 Access to unratable and previously non-financed
borrowers.
ACE RISK MANAGEMENT SERVICES
ANALYSE
RISKS
1
CREATE
VALUE
4
STRUCTURE
FLOWS
2
CATALYSE
BUSINESS
5
ACE
SECURE
TRANSACTION
3
SHARE RISK
& REWARDS
6
ACE RISK MANAGEMENT SERVICES
As a Credit Support Company, do we share only risks ?
We share
KNOWLEDGE
We share
RELATIONSHIPS
» Of the producers/exporters
» Of the commodity dynamics & its
trade
» Of the countries
» Of the laws
» Of practical mitigants
» Track-record / experience /
expertise






Borrowers
Insurers
Transporters
Clearing forwarders, Shipping Lin
Participating Banks & Exchanges
Law Firms
(Headquarters) - Rue Richard-Wagner
1202 Geneva – Switzerland
Tel. : +41 22 919 91 11
Fax : +41 22 919 91 19
Email : ace.geneva@ace-group.net
www.ace-