Debt bt Refina inancing ncing Invest estor Presen enta tati - - PowerPoint PPT Presentation

SLIDE 1

Consolid solidati ating ng Gains ns in Energy rgy Sector

• r

Debt bt Refina inancing ncing

Invest estor Presen enta tati tion

• n

December 2019

SLIDE 2

2

Outline

Executi cutive e Summa mary

1

The Transaction saction Structure cture

2 3 4

Amend ndmen ment t to the Programme mme

5

At a Glance: “E.S.L.A.” & The Bond d Market

6

Summa mary of Financi ncial al Model el Assum umpti ptions

• ns

7

Summa mary of Financi ncial al Model el Output puts

8

Indica icati tive e Term Sheet et

9

Update on the “E.S.L.A.” Bond Programme The Energy Sector Levy Act (“E.S.L.A.”)

SLIDE 3

3

Executive Summary

E.S.L.A. Plc lc is is a publi blic li limi mited ed li liabili ability ty compan

• mpany esta

establ blis ishe hed in in 2017 as as an an in inde dependent endent Spec ecial al Purpos

• se Vehicle

ehicle (SPV) V) prim imari arily ly to to issu issue de debt bt se securities ities to to ref efin inan ance the the Ener Energy gy Sect ector

• r Debt
• Debt. It

It was as es esta tabli blishe hed by by the he Go Govern ernment ment of

• f Ghan

Ghana ac actin ting th through

• ugh the

he Min inistr istry of

• f Fi

Finan ance, e, wi with th the Nat National

• nal Trust

st Holdin

• lding Compan
• mpany (NT

NTHC) as as its its sole sole nomin

• minee

ee sh shareh arehol

• lde
• der. E.S.L.A. Plc

lc is is man anage aged by by KPMG as as the the Ad Admin inistrat istrator

• r.
• In 2017, E.S.L.A. Plc successfully issued the first E.S.L.A. Bonds, Tranche E1 and Tranche E2 maturing in 2024 and 2027

respectively, and raising GHS 4.784 billion in total for the purpose indicated above. An additional GHS 880 million of Tranche E2 was also raised in 2018. E.S.L.A. Plc has also issued Tranche E3, a GHS 1 billion 2029 maturity bond in 2019. The Bonds are backed by the Energy Debt Recovery (EDR) Levy imposed under the Energy Sector Levy Act.

• The current outstanding issuance is GHS 6 billion, representing a total issuance of GHS 6.664 billion, out of which GHS 664

million was redeemed in a buyback transaction financed with funds from the Lock Box account.

• In the 2019 Mid-Year Budget Review, the Government of Ghana increased the EDRL for Petrol, Diesel, LPG and Marine Gas Oil

(Foreign) to GHp49, GHp49, GHp41 and GHp49 respectively, whereas Marine Gas Oil (Local) and Fuel Oil remained the same at GHp3 and GHp4 respectively.

• E.S.L.A. Plc seeks the consent of bondholders to decrease the Debt Service Coverage Ratio from 2x to 1.25x under Condition

12.3(c) of the Prospectus, in order to issue additional bonds to pay outstanding energy sector debts.

• E.S.L.A. Bonds have seen satisfactory demand and liquidity. Data from the Central Securities Depository (September 2019)

show that E.S.L.A. Bonds account for 6.26% of total bonds outstanding. The bondholder profile is as follows: Domestic Investors, 99.51%; Offshore Investors, 0.49%. Domestic Investors include Banks 42.38%, Asset Managers 25.62%, Pensions 8.52%, Bank of Ghana Welfare 3.51%, SSNIT 3.18%, Insurance Companies 1.46% and Others 14.82%.

SLIDE 4

4

The “E.S.L.A.” Bond Transaction Structure

Transac acti tion

• n structure

ture is simple e and straightf ghtfor

• rwar

ard d with buffer ers built lt-in. in.

• SPV is totally ring fenced, no cash flows back to Sponsor until bonds are fully redeemed.
• The Lock Box holds excess EDR Levy cash flows above the minimum debt service reserve amount.
• Cash built up in Lock Box account can flow back to DSRA to meet any debt service shortfall.
• MOF Capped Cash Commitment can be drawn on demand to support debt service funding shortfall, if any.

E.S.L.A .L.A. . PLC repays energy gy sector tor lender ers and supplier liers directly tly with cash from bond proceeds eeds.

Proceeds from Sales of Petroleum Products EDRL Payments Debt Service e Reserv erve e Account t (DSRA RA) 1.25x 25x Cover er Oil Marketi eting g Compa panie ies s (OMCs) s) (Iss ssuer) Energ rgy Debt Recov

• very

ery Levy y (EDRL) Lock ck Box Account (excess ess flows s abov

• ve

e DSRA RA minimu mum requirem emen ents ts) ) Energy Sector tor Lenders and Suppl pplie iers Minimum1.25x Debt Service Cover Energy Bond (Bondhol

• lders)

Debt Service Due Proceeds of Energy Bond Assignment of EDRL Flows by Government Issues Energy Bonds Cappe pped MOF Commitme tment (GHS600mn) Repayment of Energy Sector Debts Excess cashflow above (or shortfall below) DSRA Petrol

• leum

m Prod

• duct

t Consu sume mers Payable on Demand

SLIDE 5

5

Total Issuance of GHS6.664 billion

Tota

• tal

l Outsta tandin ding g of GHS 6 bill llio ion

Update on the “E.S.L.A.” Programme

E.S.L.A .L.A. . Plc was incor

• rporat
• rated

ed in Septem ember er 2017 as a Special ial Purpose Vehic icle le (SPV), , sponsor

• red

ed by the Govern ernmen ent t of Ghan ana, a, to to among ngst t

• t
• thers issue

e debt securit rities ies to to refinan nance e and repay energy rgy sector

• r debt.

t.

Source: E.S.L.A Plc.

November 2017 7 Year Tranch nche e (E1) GHS2.409 billion November 2017 10 Year Tranch nche e (E2) GHS2.375 billion November 2017 January 2018 Tap of 10 Year Tranch nche e (E2- B) B) GHS615 million January 2018 August 2018 Tap of 10 Year Tranch nche e (E2- C) C) GHS265 million August 2018 June 2019 Buyback k and cance ncell llation ion of 2024s and 2027s totall lling ing GHS664 million June 2019 10 Year Tranch nche e (E3) GHS1 billion June 2019

SLIDE 6

6

Update on the E.S.L.A. Programme

6,000.0 00.00 6,664.7 .74

Inves estor tors by Type E.S.L.A. Plc Bond Programme (GHS’ million)

Source: MOF, June 2019 E.S.L.A Management Accounts; CSD, September 2019

6,664. 64.74 74 (664. 4.74) 74) 6,000. 00.00 00 0.00 1,000.00 2,000.00 3,000.00 4,000.00 5,000.00 6,000.00 7,000.00 Origina iginal Iss ssue Buy Back y Back Outsta tstanding ing Amou mount Bank of Ghana Welfare Fund 3.51% Commercial Banks 42.38% Firms/Institutions 25.62% Insurance 1.46% Foreign Investors 0.49% Rural Banks 0.02% SSNIT 3.18% Pension 8.52% Others 14.82%

SLIDE 7

7

Energy Sector Levies Act (E.S.L.A.)

“E.S.L.A.” consolida

• lidates

es existing ing energy gy sector tor levies ies and redef efines ines a framework

• rk to

to correc ect imbalanc alances es, , promot

• te

e financ ancial ial viabilit ility of Energy gy Sector

• r State Owned

d Enterp rprise ises (SOEs) and facilitate investments into the sector. The levies imposed by the “E.S.L.A.” are deriv ived ed from the sale of petrol,

• l, diesel,

el, marin ine e gas oil, , residual dual fuel oil, l, liquef efied d petroleu

• leum gas, keros
• sen

ene, e, and electri tricit ity within in Ghana na

Source: Energy Sector Levies (Amendment) Bill, 2017

No. Levy vy Purpose

• se

Collect ection

• n Agenc

gency Accou

• unt

Levy vy Com

• mpone
• nents

1. 1.

EDR Levy y To facilitate the debt recovery

• f the TOR, downstream

petroleum sector foreign exchange under-recoveries and power generation and infrastructure support GRA

• 1. EDSA; and
• 2. PGISsA

Act 899

• Ghp41/ltr on Petrol and Diesel
• Ghp3 /ltr on Marine Gas Oil
• Ghp41 /ltr on Marine Gas Oil –

Foreign

• Ghp4 /ltr on Fuel oil
• Ghp37 /kg on LPG

Act 997

• Ghp49/ltr on Petrol and Diesel
• Ghp3 /ltr on Marine Gas Oil –

Local

• Ghp49 /ltr on Marine Gas Oil –

Foreign

• Ghp4 /ltr on Fuel oil
• Ghp41 /kg on LPG

2. 2.

Price e Stabi bilisation

• n

and Recove

• very

ry Levy vy To be used as a buffer for under-recoveries

• r subsidies to stabilise petroleum prices

for consumers NPA Price Stabilisation and Recovery Levy (“PSRL”)

• Ghp12 per litre on Petrol
• Ghp10 per litre on diesel
• Ghp10 per kg on LPG
• Ghp16 per litre on Petrol
• Ghp14 per litre on diesel
• Ghp14 per kg on LPG

3. 3.

Road Fund Levy vy To support road maintenance GRA Road Fund

• Ghp40 per litre on Petrol
• Ghp40 per litre on diesel
• Ghp48 per litre on Petrol
• Ghp48 per litre on diesel

4. 4.

Energ ergy Fund Lev evy To support the activities of the Energy Commission as technical regulator GRA Energy Commission (“EC”)

• Ghp1 per litre on Petrol
• Ghp1 per litre on Diesel
• Ghp1 per litre on Kerosene
• Ghp1 per litre on Fuel Oil

5. 5.

Public Light ghting Levy vy To support investment, maintenance and payment of energy consumed by traffic lights, street lights, public lights on highways ECG, NEDCo, VRA and other suppliers of electricity Ministry of Energy and the Electricity Distribution Companies

• 3% per price of kWh charged on all categories of consumers

6. 6.

Nationa

• nal

Elec ectrifi fication

• n

Schem eme Lev evy To provide funding to support the national electrification programme to improve access to electricity across the country ECG, NEDCo, VRA and other suppliers of electricity National Electrification Fund

• 2% per price of kWh charged on all categories of consumers

SLIDE 8

8

Energy Sector Levies Act (E.S.L.A.)

The “E.S.L.A.” (the e Act), ), was s pass ssed ed into

• law

w in 2015 5 to address ess chall lleng enges es in the energy gy sect ctor

• r,

, throug ugh h collec lections ions made e into

• the estab

abli lishe hed “E.S.L.A.” acco counts unts and other er acco counts.

• unts. The Act under

erpins pins the EDR Levy, , a levy on fuel el sold ld to cons nsume umers at the pump p to facilit cilitate e debt recov

• ver

ery, , amon

• ngst

gst other ers.

The Oil Marketing Companies (“OMCs”) who distribute the fuel are responsible for remitting the levies collected to Bank of Ghana (BoG) through the Ghana Revenue Authority’s (GRA) collection banks.

GHS 10 billion lion Bond Programm ramme

Energy gy Debt Recovery ry Levy y (EDRL)

• Ghp49/ltr on Petrol and Diesel
• Ghp3 /ltr on Marine Gas Oil (local)
• GHp49/ltr on Marine Gas Oil (foreign)
• Ghp4 /ltr on Fuel oil
• Ghp41 /kg on LPG

Total EDR Levy y collect ections ions in FY 2018 was GHS 1.35 billio ion Progr

• gramme

med Collecti tion

• ns

(P) ) Actual Collecti tion

• ns

(A) Lodge gement ment (L) ) (A - P) P) % % (A/P) P) Change (L (L-A) ) % Change ge (L (L-A) ) 1 Energy Debt Recov

• very

ery Levy 1,765 1,614 1,600 (151) 91% (14) (0.88)% 2 Price e Stabilisa isati tion

• n and

Recov

• very

ery levy 401 142 142 (259) 35% 0.00% 3 Public ic Lighti ting Levy y 118 64 11 (54) 54% (53) (481.82)% 4 Nati tion

• nal Electrif

ifica cati tion

• n

Schem eme e 157 88 70 (68) 56% (18) (25.71)% 5 Road Fund Levy y 1,314 1,324 1,254 10 101% (70) (5.58)% 6 Energy Fund Levy y 33 35 33 (2) 106% (2) (6.06)% Tota tal 3,788 788 3,267 267 3,110 110 (521) 21) 86% 86% (157 57) (5.05)% 05)%

Summary of “E.S.L.A.” levies’ audited collections for 2018 (GHS’ million)

Source: 2018 Annual Report on the E.S.L.A

100% % of EDR Levy Assign gned ed to the “E.S.L.A” Bond Programme

1,614

SLIDE 9

9

Breakdown of the E.S.L.A. Collections

Source: 2018 Annual Report on the E.S.L.A

Compos

• sit

ition ion of collec lecti tion

• ns by product

ucts (GHS) (2018)

0.0 0.3 0.5 0.8 1.0 1.3 1.5 EDRL PSRL PLL NESL RFL EFL

2017 2018

2017/2018 “E.S.L.A” Collections (GHS’ billion)

41% 41% 41% 41% 3% 3% 4% 4% 37% 37% 40% 40% 40% 40% 1% 1% 1% 1% 1% 1% 12% 12% 10% 10% 10% 10% 3% 3% 2% 2% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Petrol (ppl) Diesel (ppl) MGO (ppl) Fuel Oil (ppl) LPG (ppkg) Kerosine (ppl) Electricity (ppkwh)

EDRL RFL EFL PSRL PLL NESL

SLIDE 10

10 Fuel Oil 0.7% Premium 40.4% Gas Oil 41.4% Gasoil Mines 7.7% Gasoil Rig 2.6% MGO Local 0.6% LPG (kg) 6.5% MGO foreign 0.1%

Breakdown of the EDR Levy Collections

Source: MOF, NPA, Auditor General’s Office, EY Report

0.00 0.50 1.00 1.50 2.00 2.50 2016 2017 2018 2019* 2020 2021 2022 2023 2024 2025 2026

Actuals Projected

EDR Levy collections lections as at September ber 2019 9 have e excee eeded ded full l year r collections lections for 2018. . Collec lecti tion

• ns effic

iciency iency on vo volum lumes es declared lared is expected ed to to be in the 90% % area level, vel, improving ving gradua duall lly since e the incepti tion

• n of “E.S.L.A”, as

escrow and reconci ncilia iati tion

• n proces

esses for the energy gy bond d program ramme e are better er monitored.

• red.

Annu nual al EDRL L collec lecti tions

• ns (actu

tual al and projec jections ions, , billions lions) Jan – May 2019 EDRL Actual tual collec lecti tion

• n

volum umes es split

* 2019 actuals are annualized based on September figures

SLIDE 11

11

Amendment to Bond Programme

Enhancement of EDR Levies to “E.S.L.A.” has necessitated changes to the “E.S.L.A.” Bond Program ramme e Prospec ectus tus

• The Energy Sector Levy increments made by the Government of Ghana will increase inflows and enable “E.S.L.A.” Plc issue additional bonds to pay

down energy sector debt obligations

• “E.S.L.A.” Plc will update the existing Prospectus dated 12 October 2017 (the Prospectus) by issuing a supplement to the Prospectus (the

Supplement), to incorporate the proposed amendment which will be made available to bondholders.

• The Supplement shall be supplemental to and should be read in conjunction with the Prospectus. In the event of any conflict between the provisions
• f the Prospectus and the provisions of the Supplement, the Supplement shall prevail.
• The Supplement shall be reviewed and approved by the Securities & Exchange Commission (SEC) in accordance with Section 3 of the Securities

Industries Act and SEC regulations and the Ghana Stock Exchange (GSE).

“E.S.L.A.” Plc has no reason

• n to

to belie ieve e that the Debt t Servic vice e Cover verage age Ratio

• (DSCR

CR) requir uired ed will l not

• t be met for the balance

nce of the schedul duled ed tenors of the outstan andin ding g bonds ds and the furthe her r indebt ebtedn ednes ess of borrowed ed money. .

Proposed Amendment

Decrease the Debt Service Coverage Ratio (DSCR) from 2x to 1.25x under Condition 12.3 (c)

SLIDE 12

12

At a Glance: “E.S.L.A”. & The Bond Market

19.00% 00% 19.50% 50% 19.85% 85% 19.75% 75% 19.00% 00% 19.80% 80% 18.4% 18.6% 18.8% 19.0% 19.2% 19.4% 19.6% 19.8% 20.0% 7 7 yr yr (2024) (2024) 10 10 yr yr (2027) (2027) 10 yr yr (2 (2029) ESLA GoG 18.90% 19.50% 20.73% 20.10% 19.75% 20.10% 18.5% 19.0% 19.5% 20.0% 20.5% 21.0% 7 7 yr yr (2024) (2024) 10 10 yr yr (2027) (2027) 10 10 yr yr (2029) (2029) ESLA GoG 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 7 7 Yea ear (2024) (2024) 10 10 Yea ear (2027) (2027) 10 10 Yr (2029) (2029) 2017 2018 2019*

Curren ent Market ket Yields lds- E.S.L.A .L.A. . vs GoG Trade Volumes of “E.S.L.A” (Oct’ 17- Sep’ 19, billions) Secur urit ity Coupon

• ns- E.S.L.A

L.A. . vs GoG

*2019 figures represent trade volumes as at September, 2019

Source: CSD *Yields shown are the latest yields traded by Oct’ 17th 2019

SLIDE 13

13

At a Glance: “E.S.L.A.” & The Bond Market

41.07 07 12.81 81 5.48 8 0.58 8 6.08 8 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 2 2 to 6 to 6 yea year 7- 7- 10 10 yea ear Ab Abov

• ve 10

e 10 year year GoG Coporate Firms

Corporat

• rate

e Bond Issuances nces- GHS’ billion (Septem tember er 2019) Distrib ribution ution of Secur urit ities ies Issued d by GoG and Corpor

• rates

ates

Source: CSD, September, 2019

6.00 0.67 E.S.L.A Bonds Other Corporate Bonds

SLIDE 14

14

Summary of Financial Model Assumptions

Key Assumptions on Issuer’s Cash Flows

Petrol

• leum

m Prod

• ducts

ts Consu sumpti mption

• n Growth

wth Rate te (10 0 year CAGR) Fuel oil 1.0% Premium 5.0% Gas oil 2.8% Gasoil Mines 8.0% Gasoil Rig 6.0% MGO Local

• 10.4%

LPG 0.0% MGO Foreign 5.0% EDRL RL Rate te Levie ied Existin sting g Levies es New Levie ies Fuel oil (GHS/ltr) 0.04 0.04 Premium (GHS/ltr) 0.41 0.49 Gas oil (GHS/ltr) 0.41 0.49 Gasoil Mines (GHS/ltr) 0.41 0.49 Gasoil Rig (GHS/ltr) 0.41 0.49 MGO Local (GHS/ltr) 0.03 0.03 LPG (GHS/kg) 0.37 0.41 MGO Foreign (GHS/ltr) 0.41 0.49 Expe pense and Efficien ency y Assu sumpti mption

• ns

Percentage of Realisable EDRL Flows 87.90% WHT Rate for Gross-Up 8.00% Annual Expense Reserve 0.50% Minimum DSCR 1.25x

As E.S.L.A .L.A. . Plc has s succ cces essful sfully ly colle lected cted reven enues es over er the e last st two yea ears rs, , a com

• mbi

binati tion

• n of historic

istorical l actu tuals ls as s well l as s projec ection tions from

• m the

e Nation tional l Petrole roleum Authority (NPA) have been used to forecast petroleum products’ consumption over a 10-year r foreca ecast t period iod to 2029.

2020 20 2021 21 2022 22 2023 23 2024 24 2025 25 2026 26 2027 27 2028 28 2029 29 DSCR R Model el Outpu tput t (including MOF Cappe pped Commitme tment) t) 2.46x 3.03x 2.38x 2.51x 2.93x 3.68x 4.50x 4.68x 12.05x 17.49x DSCR R Model el Outpu tput t (excluding ing MOF F Capped ped Commit itmen ent) t) 1.99x 2.55x 2.07x 2.20x 2.59x 3.29x 4.09x 4.31x 11.21x 16.50x

Model el DSCR Output uts on Outstanding anding GHS 6 Billion lion Bonds ds

SLIDE 15

15

Summary of Financial Model Outputs

Debt t Servi vice e Profile ile (millio llions) s) Debt t Servic vice e Coverage rage Outputs ts

500,000,000 1,000,000,000 1,500,000,000 2,000,000,000 2,500,000,000 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 GHS

Year 2029 (10-Year Maturity) Principal Amortisation 2027 (8-Year Maturity) Principal Amortisation 2024 (5-Year Maturity) Principal Amortisation Total Coupon Payment

1.25x 2.46x 3.03x 2.38x 2.51x 2.93x 3.68x 4.50x 4.68x 12.05x 17.49x

0.00x 5.00x 10.00x 15.00x 20.00x 25.00x 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Year

DSCR Required DSCR Model Output (incl MOF Capped Commitment)

SLIDE 16

16

16

Indicative Terms for Potential Issuance

E.S.L.A .L.A. Plc Cedi Bond d Program amme

Issuer E.S.L.A. Plc Sponsor Republic of Ghana, acting through the Ministry of Finance Programme Size GHS10 billion Issuer/ Notes Rating Not rated Total Size of Notes Amortizing Notes in the aggregate principal amount of up to GHS10,000,000,000 Minimum Denominations GHS100,000 with integral multiples of GHS1,000 Status Senior, unsecured Bonds backed by an Assignment of ESLA Receivables by the Sponsor to the Issuer under the Assignment Agreement dated 12th October, 2017 Issue price 100.00 per cent of the principal amount of the notes Issue Date TBD Series TBD Tenor 10 to 20 Years Tranche Size 500,000,000 up to 4,000,000,000 Maturity Unless previously purchased and cancelled, the Notes will be repaid in a back end amortization as determined for each respective issuance. Investors Eligible to domestic and foreign investors Format Bond documentation as per GSE and SEC rules Use of Proceeds Refinancing of Energy Sector debts and obligations Governing Law English Law

SLIDE 17

Thank nk You