0. Requirements on the Financing of New Gas Infrastructure
Elvira Kruger
Vice President
ING Wholesale Banking
Brussels, 9 November 2006

1. Content Introduction to ING Group
Demand for Gas Infrastructure: Key Drivers & Investment Requirements
Project Finance: Key Considerations & Requirements
Case Study: Trans Austria Gasleitung GmbH
Conclusion
Contact Details

2. 1. Introduction to ING Group

3. ING Group Introduction
As an organisation, we have many strengths. In particular we are recognised for providing our clients with innovative solutions across the globe supported by our powerful capital base
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ING Group 2005 year figures
Total assets EUR 1,159bn
Shareholders’ equity EUR 37bn
Assets under management EUR 547bn
2005 net profit EUR 7,210m
Ratings Aa3/AA-
ING Group 1H 2006 figures
Total assets EUR 1,221bn
Shareholders’ equity EUR 33bn
Assets under management EUR 546bn
1H 2006 net profit EUR 4,020m
Ratings Aa3/AA-
Source: ING Group 2005 figures, Published February 2006
Source: ING Group 1H 2006 figures, Published August 2006

4. ING Group Structured Finance
Wholesale Banking
Wholesale Banking Clients
Wholesale Banking Network
Wholesale Banking Products
Corporate Finance &
Equity Markets
Financial Markets
Structured Finance
Natural Resources
Metals & Mining
Oil & Gas
Offshore Industry

5. 2. Demand for Gas Infrastructure: Key Drivers & Investment Requirements

6. Demand for Gas Infrastructure Key Drivers
Declining indigenous production combined with growth in gas demand will increase dependency on gas imports.
Concerns over the security of supply drive the need for diversification of sources of gas imports.
Large seasonal swings in demand for gas require storage infrastructure to manage the physical gas flows.
Most existing infrastructure is contracted out on a long term basis. Market liberalization will drive new market entrants to seek infrastructure access.

7. Demand for Gas Infrastructure Key Drivers
Net Gas Imports in OECD Europe are projected to rise to bcm by 2030
Source: IEA & ING Estimates

8. Demand for Gas Infrastructure Investment Requirements
Gas sector investments in OECD Europe are projected to exceed USD 375 bln between now and 2030.
Source : IEA & ING Estimates

9. 3. Project Finance: Key Considerations & Requirements

10. Project Finance Key Considerations
Source of finance to JV partners:
Risk sharing
Non-Recourse
Financial flexibility
Financing tenors reflect the economic life of the project facilities.
Debt amount is based on the cash flow generating capacity of the project.
Attractive debt/equity ratio.
Tailor-made financing solution.
Competitive pricing.

11. Project Finance Requirements
Limited pre-completion risk:
Pre-completion guarantees
Turn-key contracts
Contingent equity
Reliable operator with strong track record in operating similar projects.
Stable cash flow underpinned by long-term utilization contracts with credit-worthy parties:
Contract tenors exceeding or at least equal to the tenor of the financing
Strong use-or pay provisions ensuring compliance with minimum utilization requirements
Transparent and consistent tariff-setting mechanism

12. Project Finance Requirements
Ownership structure:
Strong market position of the sponsors/shareholders
Maintenance of ownership requirements
Stable contractual framework underpinning the financing structure.

13. 4. Case Study: Trans Austria Gasleitung GmbH

14. Case Study: Trans Austria Gasleitung GmbH
Company Background
Trans Austria Gasleitung GmbH (“TAG”) is a natural gas transmission company which holds the transportation rights to the TAG pipeline system, a 382-km pipeline stretching across Austria from the border with Slovakia to the border with Italy.
Annual capacity: 37 bcm.
The TAG pipeline system is a key piece of European gas infrastructure as it transports approximately one-third of all Italian gas imports.
Shareholders of TAG are ENI International B.V. and OMV Gas GmbH.
TAG’s existing transportation capacity is allocated to ENI and OMV under long-term ship-or-pay agreements.
The pipeline system is operated by OMV.
Project Financing Details
Facility Amount: EUR 450 million
Tenor: 12 years
Amortisation profile: Fully amortising
Security Structure: The financing structure is underpinned by the use-or-pay transportation agreements with Eni and OMV.
Advisory Details
ING advised TAG on the financing of the expansion of the TAG Pipeline System (“Expansion 04”) project. Expansion 04 will result in an increase in capacity by approximately 6.5 bcm/yr.
ING’s Role
Sole Mandated Lead Arranger & Underwriter for the EUR 450m Project Financing
Financial Advisor for the financing of Expansion04.

15. Case Study: Trans Austria Gasleitung GmbH
Key Considerations:
Strategic piece of European gas infrastructure
Strong use-or-pay agreements with Eni and OMV
Credit quality of the shareholders
Established track record of the operator
Fixed tariff base ensuring stability of cash flows
Key Structuring Issues:
Role of TAG as a transmission operator
Integrity of the existing contractual framework in light of the changing regulatory environment
Third-party access requirements
Impact of regulation on tariff levels

16. 5. Conclusion

17. Conclusion
The need for new gas infrastructure continues to grow. Additional investments in gas infrastructure projects will be required.
New infrastructure is required for an attractive gas market.
Project Finance is an important source of financing for gas infrastructure projects, particularly for mega projects requiring large initial investments.
Banks have identified numerous opportunities for financing of gas infrastructure projects in the coming years and are keen to provide project finance.
A robust, stable contractual structure is key in financing large-scale gas infrastructure projects.
Uncertainties relating to the changes in the regulatory environment may raise concerns in respect of the integrity of the contractual framework underpinning the financing of mega projects. Such concerns will impact the appetite of banks for project financing.

18. 6. Contact Details

19. Contact Details Elvira Kruger Tel: +31 20 57 68375
Structured Finance / Natural Resources - Oil & Gas
Elvira Kruger Tel:
Vice President
Oil & Gas (Europe / CIS)
Michiel de Haan Tel:
Director
Head of Oil & Gas (Europe / CIS)
Michael Klemme Tel:
Managing Director
Global Head of Oil & Gas
Jaap Jan Prins Tel:
Managing Director
Global Head of Natural Resources