Petrozuata Case Study

Petrozuata Case Study Petrolera Zuata, Petrozuata C.A. Voilis Athanasios 1) Introduction – Case Study In 1976, after nationalization of the domestic oil industry a stated owned enterprise Petroleos de Venezuela S.A. (PDVSA) was established for the purposes of managing the country’s hydrocarbon resources and promoting economic development. It was the world’s second largest oil and gas company with reserves in Venezuela and refineries across the Europe, United States, and the Caribbean. Domestically, PDVSA provided 78% of Venezuela’s export revenues, 59% of the government’s fiscal revenues, and 26% of nation’s GDP and had a reputation of being one of the best managed national oil companies. In 1990, PDVSA started an ambitious long-term project, which main aim was to double its domestic production and expand international markets. For the implementation of this venture, the company needed to raise investments for approximate amount of USD$ 65 bn. At that time neither PDVSA nor Venezuelan government had the possibility to finance the underlined expansion. As a solution, it was decided to establish a strategy called â€Å"La Apertura†, which opened the Venezuelan oil sector to foreign companies through profit sharing agreements, operating service agreements, and strategic joint ventures associations. Unfortunately, such initiative overlapped with political instability and economic turmoil in the country. Only in the early 1990s two failed military coups and the impeachment of President Perez took place. In late 1993, because of the severe crisis in the banking system, the administration suspended a number of constitutional rights, imposed price control on basic goods and services, and took direct control over most of the banking system. Moreover, the foreign exchange markets were closed and began rationing foreign currency to the private sector. Few years later, by the time of the deal closing, due to an economic and social reform program of President Caldera, the economy had begun to recover, but with coming presidential elections, public tension was also growing. All in all, the feasibility of the project was under the pressure of  the sovereign risk. The rating agencies were considering three principal risks: possible government action, currency market volatility, and Venezu elan business conditions. The first development project of reopening Venezuelan oil sector to foreign investments was Petrozuata. It is a USD$ 2.424 bn joint venture between Conoco and Maraven as a part of PDVSA. Conoco was the petroleum subsidiary of one of the largest chemical producer in the world E.I. du Pont de Nemours and Company (DuPont). That time Conoco recently completed projects in Russia, Norway, USA and was a recognized leader in refining technology and project development. Underlined parties started feasibility studies and negotiations for a joint project in 1992. After four years of planning, Conoco and Maraven had made a mutual decision to finance this deal on a project finance basis, because of financial and organizational benefits provided by such structure. PDSVA could not have built the project alone because of its lack of specialized assets needed to extract and upgrade syncrude oil. On the other hand, foreign ownership of domestic hydrocarbon resources is prohibited by law, closing all ways for a sole expansion by Conoco. In terms of ownership structure, it was strategically decided that PDVSA subsidiary contributed less than 50% of the total equity amount but, through its preferred shares, would retain voting control. Because PDVSA would be the minority shareholder, the company would be classified as private. As a consequence, it would not consolidate into PDVSA’s balance sheet and, more importantly, they would not be bound by legislation for public companies (public procurement bidding procedure, excessive accountability, etc.). Final association agreement had a term of 35 years beginning once production started in 2001. The equity ownership contributions were set up in such way that Maraven had 49.9% of shares and 50.1% for Conoco. After accomplishing of the agreement, Conoco has an obligation to transfer its shares to Maraven at no cost. Also, to give incentive to the project, the government agreed to decrease the royalty rate during early operation years and the Congress agreed to lower the income tax rate from 67,7% to 34%. The sponsors agreed to use USD$ 975 mn of equity and USD$ 1.45 bn of debt to finance the project, which corresponded to 60% of debt-to-equity ratio. Such high percent of equity contributions to the project were chosen to show the sponsor’s commitment to the project. In 1996, for the beginning of the project, sponsors contributed USD$ 79 mn of paid-in capital. Additional contributions including contingency fund were projected to infuse in the following 4 years for the total amount of USD$ 366 mn. For the outstanding sum of USD$ 530 mn, shareholders chose a risky plan to use cash flows from the sale of early production crude, after completion of the oil fields and pipeline in August 1998. It is necessary to mention that risks peculiar to underlined financial mechanism were mitigated through a good execution plan and strong sponsor guarantees. Concerning the sources of debt financing, Petrozuata raised USD$ 450 mn as a loan from commercial banks with loan guarantees from bilateral and multilateral agencies, such as U.S. ExIm Bank, Export Development Corporation of Canada, OPIC and IFC. Those agencies would mitigate Venezuela’s political and economic instability by providing political risk insurance. However, the major funding source of the project was the American private placement market. Petrozuata received USD$ 1 bn of debt from the Rule 144A market. These bonds were chosen because of the additional advantage of speed and less onerous disclosure requirements imposed by the Securities and Exchange Commission. Petrozuata project had three main components: a series of inland wells to produce the crude, a pipeline system to transport the crude to the coast, and an upgrader facility to partially refine the crude. It was unusual and a highly complicated to finance multiple component projects on a standalone basis. A special system of contracts and commitments were designed and implemented to make the project feasible. A detailed scheme of contracts and commitments is provided in Figure 2. For instance, sponsors mitigated the incentive problem and managerial inefficiency by creating a small board of directors comprised of two directors from each sponsor, and using compensation contracts for managers that were linked to the project performance. Also was realized the major benefit of project finance: public-sector management was substituted for private-sector. The construction risk was allocated to sponsors. Conoco and Maraven agreed to provide funds for any cost overruns prior to completion. Also, the parent companies guaranteed these obligations. The guarantee has a unique structure in terms of the difference in ratings between parties – DuPont (AA-) and PDSVA (B). The parties agreed to include severe penalties for failing to meet their obligations and incentives to cover the other party’s shortfalls. It was a good example of how project finance could substitute the lack of development in emerging countries. After construction would be completed, together with major risks, the sponsor guarantees would also end and the project would become non-recourse to the sponsors. Figure 2: Petrozuata contracts and commitments Source: (Esty 1998) 25 Secondly, sponsors considered within the budget, a USD$ 38 mn contingency for upstream facilities, a USD$ 139 mn contingency for downstream facilities, and sufficient funds to pay premiums on a construction all risk insurance policy covering up to USD$ 1.5 bn of physical loss or damage. Another risk allocation mechanism in the current project was the use of an off-take agreement with the guarantee from the parent company DuPont. According to this agreement, Conoco took an obligation toward Petrozuata to purchase the first 86.6% of Petrozuata’s syncrude, for the whole 35-year life of the project, based on the market price. Moreover, the project company had the right to sell the syncrude to third parties if it could get a higher price. Such scheme eliminate ex post bargaining costs, and deter opportunistic behavior by providing incentives to both sponsors to act in the project’s best interest in the area where contracts would have been costly or impossible to write. Also, with an arrangement authorized by the Venezuelan government the project had a prioritization of cash flows as a main element of the contractual agreements. Petrozuata’s customers would deposit their dollar-denominated funds from the purchases into and offshore account maintained by Banker Trust, governed by the law of New York. Afterwards, the Trustee would disburse the money according to a payment hierarchy. First, the Trustee would make the transfer to a 90-day operating expense account; second, to service the project’s debt obligations; and, third, make deposits to a Debt Service Reserve Account as needed to maintain six months of principal interest. Finally, the project implemented a â€Å"cash trap† basically meaning that if the project maintains an one-year historical and one-year projected Debt Service Coverage Ratio of 1.35X, then the Trustee would transfer any remaining funds to Petrozuata for distribution to its equityholders. To sum up, Petrozuata is an example of the effective use of project finance in developing countries. The adverse circumstances following financial closure provide further evidence of the durability and merits of the project finance structure. The deal set numerous precedents in the bank and capital markets. For these

Love Song of J.Alfred Prufrock : Representation of Modern Man Essay

Often called the first Modernist poem, â€Å"The Love Song of J. Alfred Prufrock† was published in the prestigious American journal Poetry in June 1915. About the Poem: The poem centers on the feelings and thoughts of the eponymous speaker (the somewhat neurotic Prufrock) as he walks through the streets of London route to meet a woman for tea. He is considering a question (perhaps, broadly, the meaning of life, or, more narrowly, a proposal of marriage). Far more than just the â€Å"love song† of a romantic, agonized young man, the poem explores the Modernist alienation of the individual in society. Thomas Stearns Eliot, 1888 – 1965 Born into a prosperous Midwestern family, Eliot attended Harvard and then went on to study at Oxford. Although born an American, Eliot married an Englishwoman, gave up his American citizenship, and lived most of his life in London. Eliot made his living as a teacher, a banker, and an influential literary critic. He popularized the modernist style of thinking and writing. In fiction, modernism was represented by the stark realism of such writers as Ernest Hemingway, but in poetry this new sensibility was quite different. The Imagists, including Eliot’s close friend and fellow poet, Ezra Pound, believed in the motto, â€Å"No ideas but in things,† in other words, the image is most important, the meaning secondary. Modernists embraced free verse (no regular rhyme scheme or meter) and freedom of thought (often their writing questioned accepted ideas and social norms). This anti-traditional and anti-romantic trend began before World War I; however the unprecedented loss of humanity during the war accelerated the popularization of modernism. The war caused many people to reexamine their previous beliefs in religion and the innate goods of humankind, and one radical branch of modernism, known as Dada, claimed that the only legitimate emotion left was disgust. â€Å"The Love Song of J. Alfred Prufrock,† An Overview The entire poem, â€Å"The Love Song of J. Alfred Prufrock† is an interior monologue based on the traditional dramatic monologue, a solo speech that often puts into words the speaker’s inner turmoil, as in Hamlet’s famous â€Å"To be or not to be† soliloquy. Prufrock often alludes to Shakespeare’s Hamlet, but admits, â€Å"I am not Prince Hamlet.† He has no such grand illusions. His thoughts and feelings tend to be humble and full of self-doubt. He worries not about â€Å"outrageous fortune,† as Hamlet does, but about growing old and being rejected by a woman. Critically Analyzing the poem: Contrary to what the title implies, The Love Song of J. Alfred Prufrock, by T.S. Eliot, is anything but a love song. It is instead quite the opposite. Although the poem is open to several interpretations, after careful reading of the poem, the several underlying themes can be expressed by one central idea. In the poem, the narrator, J. Alfred Prufrock, portrays his disappointment with the society he lives in. By interpreting aspects of imagery, speaker and intended audience, one can easily assess Prufrock’s views of life. His interpretation of everyday life can be described as a vacant, bleak, and repetitive. Early on in the poem, Eliot creates a scene that does not seem very inviting. Prufrock describes his surrounding on an evening out with phrases that insinuate melancholy and depression. In line 6, Prufrock describes the night as â€Å"restless† and says that the streets are â€Å"tedious arguments of insidious intent†. From this the reader can infer a certai n discontentment that Prufrock has with his surroundings. He refers to his, and his companions’, destination as â€Å"one-night cheap hotels and sawdust restaurants with oyster-shells†. Even though these descriptions leave the reader only approximately 10 lines into the poem, we already have a feeling of restlessness and dissatisfaction from Prufrock about his life. As the poem continues, the reader is bombarded with even more imagery that conveys Prufrock’s discontentment with his surroundings. Prufrock talks of the â€Å"yellow fog† that â€Å"rubs its back upon the window-panes† and the â€Å"yellow smoke that rubs its muzzle on the window panes†. He also mentions the â€Å"soot that falls from chimneys†. Later on in the poem, Prufrock refers to smoke again while describing the streets he is walking on. All this imagery leaves the reader feeling that the place Prufrock is at is dark and hazy and not at all welcoming. Among the feelings that Prufrock expresses in this poem, no feeling comes across more clearly than his feeling of restlessness and wasted time. We get the feeling that Prufrock, who is aging, would do things differently if given another chance. In lines 49-54, Prufrock asserts his overall boredom with life. He says he has â€Å"known them all already, known them all-have known the evenings, mornings, afternoons†. From this we can infer that Prufrock seems to feel as if his life is over and he has no more to offer. He makes statements similar to this throughout the poem. He proclaims to have known â€Å"the eyes that fix you in a formulated phrase† and the â€Å"arms that are bracleted and white and bare†. We get more of a sense of Prufrock’s disillusionment of life with his many references to time. In lines 24-34, he claims there is time to â€Å"meet faces†, â€Å"murder and create†, have a â€Å"hundred indecisions† and a â€Å"hundred visions and revisions†. It is not as though Prufrock is doing this in a hopeful manner, though. Instead we get the impression that he is reflecting on time as if it is plentiful only if you take advantage of it and perhaps he feels he did not Another aspect of this poem that is important is the interpretation of it is the speaker and the audience. Although the audience is never clearly identified, several assumptions can be made. It seems as though Prufrock is simply reflecting on life to himself. He makes several statements that would allow a reader to arrive at this conclusion. Throughout the poem, he asks several rhetorical questions of himself. In line 62, he asks â€Å"and how should I presume?†. He asks himself the same question again in line 68 and then follows with another â€Å"and how should I begin?†. These questions lead the reader to believe that the poem represents Prufrock’s inner-thoughts about life. This is important to consider because if the audience was anyone but Pr ufrock himself, the poem would more than likely take a very different course. Once you get past the initial misconceptions about the poem due to its misleading title, you can easily see that this is a poem about what happens if you do not make the most of your life. Prufrock is a character that we all can learn something from. Through an interpretation of this poem, one can assume that even though a person’s life may seem to be normal and in fact successful, sometimes that person may have a totally different view of their own life. From the poem we can conclude that Prufrock’s life was like many others during the time it was written. It talks of parties, drinking, and lovely ladies. This did not, however, bring his happiness. As he aged, Prufrock was left very disenchanted with his life. In the end, he discusses how he will behave in his old age and finally describes death as what can be interpreted as drowning in the sea. â€Å"The Love song of J. Alfred Prufrock,† by T.S. Eliot is about a man who is searching for something to break him for the dull life that he has been leading. In the beginning, the speaker invites us to go with Prufrock and come into his world with the statement â€Å"Let us go then, you and I.† Throughout the poem, the reader is following the speaker throughout an evening searching for the acceptance of a woman. Because of his lack of self-assurance, he fails to find the meaning and acceptance of his love. Prufrock is a timid man. He is extremely conscious of what others think of him and this has a great effect of his actions. He has problems with speaking what he feels and this is demonstrated when he â€Å"prepare(s) a face to meet the faces that (he) meet(s).† He also extremely self-conscious with his appearance and thinks that people talk about what he looks like and what he wears. Other’s opinion of Prufrock bothers him so much so that he does not want to â€Å"disturb the universe† by making an entrance into it. Finally, the last part of the poem, Prufrock show’s his final despair in life. He can not bring himself to tell the woman that he is in love with how he really feels. However, if he ever did decide to tell her, it would come out as a mess. He finds himself with no real role in life. He is no â€Å"Prince Hamlet, nor was he meant to be,† but rather an â€Å"attendant lord,† or sometimes â€Å"the Fool.† He hears the mermaids singing, but he thinks: â€Å"I do not think they will sing to me.† In the end, Prufrock feels left out of society, and can not find his own place in the universe. As an old man on the beach, looking out into the ocean, he questions if he did the right thing. But he missed everything, all because he was scared. He realizes that he has been living in an imaginary world. When this reality hits him, he drowns soul and all. This poem has always been a favorite of mine because the theme of can apply to the world as a whole. Each of us can sometime find ourselves searching for where we belong in the universe,but are afraid to act on our own desires because of the possible outcomes. In the end, we have to make our move, and not fear rejection so much so that we pass up an opportunity of a lifetime. Conclusion: The speaker of this ironic monologue is a modern man who, like many of his kind, feels isolated and incapable of decisive action. Irony is apparent from the title, for this is not a conventional love song. Prufrock would like to speak of love to a woman, but he does not have the nerve. The poem opens with a quoted passage from Dante’s INFERNO, â€Å"If I thought that my reply would be to one who would return to the world, this flame would stay without further movement; but since none has ever returned alive from depth, if what I hear is true, I answer you without fear of infamy.†, Meaning that Prufrock speaks only because he knows no one will pay attention to him and he won’t be heard. Purfrock repeats certain phrases to clue the reader in that they are part of the story. â€Å"You and I† in the first line, suggest that you must be with him to understand his story

The Taliban has Implemented Censorship in Afghanistan

Immediately after the overthrow of King Zahir Shah in 1973, Afghanistan began to experience a drastic increase of media restrictions under its next ruling powers. However, when the Taliban gained control in 1996, the Islamic State of Afghanistan began a period of regulation which can be considered the most restricted in the world. Censorship is the act of a government or powerful group filtering information, news, and media to fit approved topics and categories. Under censorship, the people now have to be cautious of what they write, say, or do because if it’s deemed offensive or â€Å"illegal†, they can be penalized. (Definitions of Censorship) The Taliban, an Islamic fundamentalist group, proved to be no different. Whether it was news,†¦show more content†¦In addition, television was banned by the Taliban in 1996. Not only was it forbidden but the Taliban closed the television stations, smashed any privately owned television sets and tied up videocassettes in trees in a form of symbolic execution by hanging. Those who failed to abide by these rules were subject to severe disciplines. However, in the Northeastern part of the country under control of the Northern Alliance, television was still used limitedly and became a symbol of light to the people. As a result of the low literacy rate in Afghanistan, radio had become a popular form of communication. While not many people owned radios, radio stations such as The Radio Voice of Sharia were controlled by the Ministry of Information and Culture. But when the Taliban gained power in Afghanistan, they programmed this station to provide domestic service of only approved and specific topics predetermined by them. These topics consisted mainly of religious learning without any breaks for music. (Press Reference–Afghanistan) The exclusion of television and heavy censorship on radio in Afghanistan definitely contributed to the countrys lack of modern day technology and formal education. B efore the Taliban gained control of Afghanistan, the prospect of having strict, Muslim leaders sounded appealing. But when given power and not afraid to use it in any way they judged appropriate, the Taliban furthered the underdevelopment status inShow MoreRelatedHuman Rights in Afghanistan4911 Words   |  20 PagesHuman rights in Afghanistan The situation of Human Rights in Afghanistan is a topic of some controversy and conflict. 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Finance - 2831 Words

BAFI 500 PRACTICE EXAM NAME:_______PRACTICE EXAM_____________________________________ Student #:_________________________________________ 1. You would be given 4 or 5 questions similar to the ones found in this practice exam. You are, however, responsible for all material covered in the course whether or not that material is covered in this exam. 2. You will have 3 hours to write this exam. 3. Answer all questions in the spaces provided. Please write legibly. 4. Use of calculator is permitted, but please show how answers were obtained. A numerical answer without an explanation will be given a grade of zero. 1 1. Robinson Crusoe (RC) lives only two periods (today and tomorrow). He prefers to consume the same amount of money†¦show more content†¦Explain why or why not. ANSWER First, convert the APR to the EAR ⎛ 0.12 ⎞ âŽÅ"1 + ⎟ = 1.12683 , i.e. 12.683% per year 12 ⎠  ⎠ ⎛ 0.12 ⎞ or equivalently, âŽÅ"1 + ⎟ = 1.01 , 1% per month. 12 ⎠  ⎠ 12 The next step consists of comparing PV: †¢ PV of your Vacation ⎠¡ ⎠¤ 1 ⎠¢1 − 4⎠¥ (1.12683) ⎠¦ Ãâ€" 1,600 = 4,790.72. PVVacation= ⎠£ 0.12683 4 †¢ Chef Tony’s deal PVChef Tony 1 ⎠¤ ⎠¡ ⎠¢1 − (1.01)48 ⎠¥ 600 600 ⎠¥ Ãâ€" 133.67 = + +⎠¢ 2 (1.12683) (1.12683)4 ⎠¢ 0.01 ⎠¥ ⎠¢ ⎠¥ ⎠£ ⎠¦ = 472.54 + 372.16 + 5,075.98 = 5,920.68 Chef Tony’s analysis ignores the time value of money. b. If you were now told that your bank is willing to finance the purchase of the time share for 10% APR, how much better or worse off are you if you using ACE’s financing instead of your bank’s if you were going to purchase the time share for $5,000? ANSWER In this case, ⎛ 0.10 ⎞ ⎟ = 1.10471 , i.e. 10.471% per year, or equivalently, âŽÅ"1 + 12 ⎠  ⎠ 12 ⎛ 0.10 ⎞ ⎟ = 1.008333 , 0.83% per month. âŽÅ"1 + 12 ⎠  ⎠ We need to borrow, $5,000 at a 10.471% per year over 48 months. The monthly payment is obtained as follows: ⎠¡ ⎠¤ 1 ⎠¢1 − 48 ⎠¥ (1.008333) ⎠¦ , 5,000 = Payment Ãâ€" ⎠£ 0.008333 hence 5,000 Payment = = 126.813 ⎠¡Ã¢Å½ ¡ ⎠¤Ã¢Å½ ¤ 1 ⎠¢ ⎠¢1 − 48 ⎠¥ ⎠¥ ⎠¢ ⎠£ (1.008333) ⎠¦ ⎠¥ ⎠¥ ⎠¢ 0.008333 ⎠¥ ⎠¢ ⎠¥ ⎠¢ ⎠¦ ⎠£ Tony wants $133.67, you are better off by $133.67-$126.81 = $6.85708, per month. The present value of the flow of payments is given by : ⎠¡ ⎠¤ 1 ⎠¢1 − 48 ⎠¥ (1.008333) ⎠¦ = $270.362. 6.85708 Ãâ€" ⎠£ 0.008333 5Show MoreRelatedFinance1352 Words   |  6 Pagesfinancial manager differ from the traditional financial manager? Does the modern financial managers role differ for the large diversified firm and the small to medium size firm? 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