1. Welcome to Our Presentation
on Case-03
RAS LAFFAN: A GLOBAL ENERGY STRATEGY

2. SL# Name ID
(MBA)
ID
(BBA)
1 A.T.M. Rajibul Akbar 15-533 15-097
2 Md. Sabuj Miah 15-541 15-107
3 Md.Rakib 15-663 15-047
Group - 35

3. PEST Analysis
Industry Analysis
• Porter’s 5 Forces Analysis
Company Analysis
• Company Overview
• SWOT Analysis
• Ratio Analysis
• Risk Analysis
• Bond Valuation
Case specific Problem Analysis
• Problem Statement
• Problem Solution
• Recomendation
ROAD AHEAD…

4. Ras Laffan’s Ownership Structure
Itochu
Ras Laffan LNG
“RasGas”
Nissho Iwai
Mobil QM
Qatar General
Petroleum
Govt. of Qatar Mobil Corp.
26.5 %66.5 %
4 % 3 %
100 % 100 %

5. Total
Expected
Funds:
3.74B
Two Bonds: 1.2B
(32.1%)
Loan from ECAs
and Commercial
Banks: 1.15B
(30.6%)
Equity: 1B
(26.9%)
Net OCF: 0.389B
(10.4%)
Ras Laffan’s Proforma Capitalization

6. Funds to be Raised Externally
$3.35 Billion
$704M $383M$1.2B $764M
Expected Funds
$302M
Mobil QMQatar
General
Petroleum
Equity Investors
(26.9%)
Bonds Commercial
Banks
Export
Credit
Agencies
Senior Debt
(62.7%)

7. The Project Finance Bonds
$1.2 Billion
$400M $800M
 Coupon rate of 7.6 %
 Matures in 2006
Non-recourse
 For institutional buyers only (Private
Placements)
 Coupon rate of 8.3 %
 Matures in 2014
Non-recourse
 For institutional buyers only only (Private
Placements)

8. The Customer
Korea Gas
 Kogas is owned by the Republic of Korea (50.1%), Kepco (34.5%) and Korean
Municipalities (15.4%).
 Accounts for 78% of LNG sales
 Signed 25 year LNG Supply & Purchase Agreement (SPA) to buy 4.8 MMTA each year.
 Spent $7 billion on LNG infrastructure investments
 Additional $1.2 billion per year until 2000.
 6 loading berths and 53 storage tanks by 2010.

9. The Customer (Cont.)
 Korea’s LNG demand: Growing 20% per year
 Kogas forecasts: 7% annual growth demand for LNG
 Korean customers pay Kogas in korean won.
 Korean regulators approved all request for price increases.
Kogas pays Ras Laffan for LNG in US dollars.

10. The Contract
 Supply & Purchase Agreement includes:
 LNG prices linked to JCC index
 4.8 million metric tons of LNG annually
 A take-or-pay clause
 Estimated start price: $3.88 per MMBTU
 Kogas responsible for transportation of LNG

11. Other Agreements
 Qatari Govt.: 12 year tax holiday.
 Mobil: $200 million fund for debt servicing shortfalls.
 The Intercreditor Protection Agreements.
 Carrying different insurances by Ras Laffan.
 The Security Trust Agreement in New York:
 Qatari law: Lenders cannot have interest in LNG facilities.
 Protect the bondholders by using sales revenues to pay Ras Laffan
operating and maintenance first and then to pay lenders.

12. ECONOMIC ANALYSIS
Rapidly growing
economy
Increasing
demand of gas as
an alternative
source of energy.

13. PORTER’S FIVE FORCES ANALYSIS
Porter’s Five
Forces
Model
Rivalry among
existing firms
(Moderate)
Threat of new
entrants
(Low)
Bargaining
power of
suppliers
(Low)Bargaining
power of
customers
(High)
Threat of
substitutes
(Low)

14. PEST Analysis:
Political Aspect :
• The Qatar is a constitutional monarchy
with the Emir of Qatar as head of state
and government.
• It has larger and sometimes aggressive
neighbors.
• The Qatar was dependent on US. and
other Western countries for diplomatic
support.
Economic Aspect:
• The standard of living was high with
average per capita income of $13,000.
• Qatar had fiscal budget deficits (7% of
GDP) between 1992 and 1996).
• Exports was increasing more than the
imports.
Socio Cultural aspect :
• Both civil and religious (Sharia) courts
exist.
• Interest is prohibited.
• Concepts of pledge, lien, and mortgage
were unfamiliar.
Technological Aspect:
• The Qatar is not technologically
sophisticated country.
•Ras Laffan was constructing the facilities
on contract basis.
• Pioneering technical advances can affect
the Ras Laffan project revenues.

15. SWOT Analysis
Strengths
•Ras Laffan 2nd Least expensive LNG in
world (1997).
• Two good sponsors: QGPC and
Mobil Corp.
•Supply and Purchase Agreement
(SPA).
Weakness
• Single customer contributing about 78%
of total revenue.
• High facilities development cost and
financial leverage.
• Risk of moderate bankruptcy.
Opportunities
•Production of environmentally
acceptable, financially economical
gas.
• Opportunity to expand operation.
Threats
• Concerned with possible take-over
threats.
•Exchange rate fluctuation.

16. RISK ANALYSIS
Business Risk
Operating
profit Volatility
Co-efficient of
Variation of
Operating Profit
0.11(Reduced Price)
0.13 (Base Case)
Sales Volatility
Co-efficient of
Variation of
Sales
0.10 (Reduced
Price)
0.12 (Base Case)

17. Degree of Operating Leverage
Base Case Reduced Price Case
1.30
0.98
0.53
1.32
1.21
0.57
1.36
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
2001 2002 2003 2004 2005 2006 2007 2008 2009
Degree of Operating Leverage
(DOL)
DOL
1.38
0.79
-0.51
1.55
1.04
-0.58
1.64
-1.00
-0.50
0.00
0.50
1.00
1.50
2.00
2001 2002 2003 2004 2005 2006 2007 2008 2009
Degree of Operating Leverage
(DOL)
DOL

18. Degree of Financial Leverage
Base Case Reduced Price Case
1.35 1.33
1.28
1.23
1.19
1.15 1.13 1.10
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Degree of Financial Leverage (DFL)
DFL
1.56
1.50
1.42
1.36
1.29
1.24 1.20 1.16
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Degree of Financial Leverage (DFL)
DFL

19. Times-Interest-Earned
Base Case Reduced Price Case
2.67
3.74
4.22
4.74
5.53
6.56
7.71
9.21
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Times-Interest-Earned (TIE)
TIE
2.00
2.81
3.12
3.43
3.97
4.61
5.27
6.21
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
2000 2002 2004 2006 2008 2010
Times-Interest-Earned (TIE)
TIE

20. Debt Coverage Ratio
Base Case Reduced Price Case
1.55
1.73
1.84
1.93
2.07
2.22
2.95
3.18
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Debt Coverage Ratio
Debt Coverage Ratio
1.16
1.30
1.36 1.40
1.49
1.56
2.02
2.14
0.00
0.50
1.00
1.50
2.00
2.50
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Debt Coverage Ratio
Debt Coverage Ratio

21. Problem Statement
ShouldBroadway invest in the
Ras Laffan project finance,
non recourse, bonds

22. Country Risk
Risk Factor Score Weight
Weighted
Score Risk
Political Risk 70.0% 0.5 0.35 Moderate
ER(Economic
Risk)* 75.0% 0.25 0.19 Low
FR(Financial
Risk)* 80.0% 0.25 0.20 Low
TOTAL 0.74 Low
This composite risk rating shows that It
is low risky country.

23. Currency Exchange Rate Risk
 If Korean Won depreciates against US Dollar then Kogas
demand for LNG may decrease. But the SPA is for 25 years so it
may not affect the demand.
 Depreciation in Korean Won may results in possible breach in
contract by Kogas and no payment to Ras Laffan will result in default to
Bondholders.
 Mitigating the risk:
 Start selling LNG into the world market.
 Kogas may hedge the US dollar-Korean won.

24.  Higher Crude Oil Prices:
 Cause higher LNG prices
 Could cause other energy sources to be more affordable
 Could cause Kogas to default.
 Mitigating Risk Factors:
 “Take or Pay” clause for 4.8MMTA
 Korea government is committed to agreement
 Will shift consumption if necessary
 Kogas has spent over $7 billion in LNG infrastructure.
Ras Laffan 2nd Least expensive LNG in world (1997)
Commodity Prices

25. Broadway Investment Decision
If they don’t invest
 No coupon interest can be availed and lose
potential coupon interest
 They can invest in other potential project and
opportunity cost will arise.

26. Broadway Investment Decision
If they invest in Bond 2006
 Capital investment will be upto $400 million and
opportunity cost will arise.
 7.6% coupon interest can be availed
 On the failure of debt repayment bondholders will not be
compensated by the parent company (Non-recourse)
 The bond will mature in 2006 and shows a shorter
maturity.
 Considering above fact the bond is to be assumed as
moderately risky

27. Broadway Investment Decision
If they invest in Bond 2014
 Capital investment will be upto $800 million and
opportunity cost will arise.
 8.3% coupon interest can be availed
 On the failure of debt repayment bondholders will not be
compensated by the parent company (Non-recourse)
 The bond will mature in 2014 and shows a longer maturity.
 Considering above fact it is assumed that the bond has
high risk and broadway will charge higher return if they
invest in the bond.

28. Face Value=$800 million
Coupon Interest Rate =
8.3%
Mature at 2014
As the bond has high risk the following facts have been assumed to value the bond
Valuation
Base case Worst Case
RF 6% 6%
Inf(1980-1996) 2% 3%
Risk Premium($800) 1.15% 2.30%
Market return($800mil) 9.15% 11.30%
Price 779.3118 656.2569

29. Broadway Investment Decision
If they invest in both Bond
 Capital investment will be upto $1200 million and
opportunity cost will arise.
 8.3% and 7.6% coupon interest can be availed
 On the failure of debt repayment bondholders will not be
compensated by the parent company (Non-recourse)
 There is no diversification scope as two bonds have been
issued by the same company.
 Considering above fact it is assumed that the bond has
higher risk and broadway will charge higher return if they
invest in those bonds.

30. Recommendation
Coupon
Interest
Risk Exposure Cost
Don’t Invest None None None
Invest in 2006 Bond Moderate Moderate Minimal
Invest in 2014 Bond High High Moderate
Invest in Both
Bonds High High High
 Initially, only invest the bond due in 2006 as the return
outweighs the risks and significant risks can be mitigated.
 Must negotiate for higher rate of return for 2014 bond