Building up energy
In a volatile market last year, JPMorgan Chase and US Ex-Im Bank helped a Russian bank facilitate Uzbekistan’s energy strategy.
JPMorgan Chase (JPMC) structured a trade finance facility for a key Russian client, Bank Petrocommerce, to support financing for the Gas Gathering System and Primary Gas Treatment Unit in the Khauzak Field of the Dengizkul Deposit in the Bukhara region of Uzbekistan.
“Modernisation of the system was essential to making Uzbekistan a market-winning gas producer and positioning the country to benefit from future upsurges in production,” says Craig Weeks, head of JPMC Global Trade Sales. “Working with Petrocommerce, JPMC’s US exporting customer BSI Industries, and the Uzbek entity and government, we were able to introduce a US Ex-Im financing structure that allowed key imports of infrastructure equipment critical to the realisation of Uzbekistan’s energy strategy.”
BSI Industries, a US-based engineering company specialising in the oil and gas industries, has fulfilled projects in Ukraine, Russia, Estonia, Poland, Uzbekistan, Kazakhstan and Georgia.
This was the exporter’s first participation in a deal with Uzbekistan and Bank Petrocommerce, and the transaction had challenging aspects, primarily the relatively high amount Petrocommerce needed to borrow and the involvement of over 20 sub-suppliers from the US and other countries.
Nonetheless, JPMC in partnership with US Ex-Im managed to structure this transaction quickly. In addition to making the importation of the equipment and the financing of the gasfield possible, the Petrocommerce deal brought significant liquidity to this project by utilising a US Ex-Im structure.
“Because of its close relationship with both Petrocommerce and US Ex-Im, JPMC was also able to meet an extremely tight deadline, bringing the deal to market in just two weeks,” adds Weeks.
“Addressing this range of issues and challenges – including volatile energy market dynamics – JPMorgan Chase helped meet the growing credit needs of both Petrocommerce and the Uzbekistan gasfield project, which is key to the country’s energy strategy.”
In 2001, the Uzbek government adopted a resolution on ‘Deepening Reforms in the Energy Sector’ calling for turning various state-owned energy functions into corporations and partially privatising them, according to GlobalSecurity.org.
Uzbekistan has been a net energy exporter since 1996, says GlobalSecurity.org. Uzbekistan is the world’s eighth largest natural gas producer, and is also a major oil producer.
However, oil and gas exports are limited by the available pipeline capacity. Uzbekistan produces most of its electricity from natural gas-fired units However, power plants and transmission system needs substantial rehabilitation, which will require foreign investment, claims GlobalSecurity.org.
Bank Petrocommerce was founded on April 22, 1992 and has developed into a leading bank operating in Russia and (through subsidiaries) certain states of the former Soviet Union.
In 2004, the controlling interest in the bank was acquired by IFD Kapital, which holds leading positions in the insurance, investment and pension businesses in Russia.
From 1998, Bank Petrocommerce has acted as a primary bank of the largest oil company in Russia – Lukoil.
The bank’s network in Russia comprises the head office and 10 additional offices in the Moscow region and 18 regional branches.
Bank Petrocommerce has four subsidiary banks: Komiregionbank Ukhtabank, CB Unibank in Moldova, Petrocommerce-Ukraine Bank, and Stavropolpromstroybank.
Borrower: Bank Petrocommerce
Mandated lead arranger: JPMorgan Chase
ECA: US Ex-Im Bank
Private insurer: Exporters Insurance Company
Tenor: 15 months
Date closed: October 2006