ENH seeks USD 2.6bn loan refiinancing, Standard Chartered advising – VP

14 Dec 2016 – Empresa Nacional de Hidrocarbonetos (ENH), Mozambique’s state-owned oil company, has hired Standard Chartered to advise on the refinancing of two debt facilities worth a total of USD 2.6bn, Tavares Martinho, the company’s vice president of exploration, told Debtwire.

The company is beginning to reach out to banks over potential deals, Martinho added.

The two debt facilities are for ENH’s capex obligations for its equity stakes in Mozambique’s two LNG projects, Martinho said. ENH has a USD 500m facility for the Block 4 project, which it has a 10% interest in, and a USD 2.1bn for its 15% stake of the Block 1 project, Martinho added.

Martinho declined to give further details over the terms ENH would be looking for and the potential timelines involved.

Renegotiating the two facilities will be very tough for ENH to do because of Mozambique’s recent default on its sovereign debt, noted a source with knowledge of the situation.

“ENH is wholly owned by government. The government as a whole has defaulted on its loans,” the source added. “A guarantee from the Mozambique government is useless.”

The only way it could do this would be for ENH to give its interest in the petroleum in Blocks 1 and 4 as security to a lender, the source said. ENH does not have the cash to meet its obligations for the two blocks, the source added.

ENH probably will not have to relinquish its interest in the two blocks, as that would be politically awkward for the other companies developing the LNG projects, the source said. However, ENH might negotiate with Anadarko and Eni for a carry on its exploration and development costs for Block 1 and Block 4, the source said.

In July Moody’s downgraded Mozambique’s issuer and senior unsecured debt ratings to Caa3 from Caa1. And earlier this month S&P lowered its rating of Mozambique to CC from CCC.

In October the Government of Mozambique, alongside financial and legal advisers Lazard and White & Case, invited creditors to form one – or several – committees to engage in talks over a potential sovereign debt restructuring

Debtwire reported earlier this month that the International Monetary Fund is to send a mission to Mozambique in December to assess the instability of its banking system.

Mozambique’s LNG projects could be a potential game-changer for the country’s economy, should the country’s vast reserves of gas be brought into production.

Block 4 has estimated reserves of 85 trillion cubic feet of gas (tcf), held in its two gas fields – Mamba and Coral. Block 4’s operator is Eni East Africa, which is a joint venture between Eni and the China National Petroleum Corporation (CNPC), where CNPC holds a 28.57% stake, which translates to a 20% stake of Block 4. Other stakeholders include ENH, Galp Energia and Kogas, who each hold stakes of 10%.

Block 1 has estimated reserves of 75 tcf of gas. The consortium holding the licence for Block 1 is made up of Anadarko, with 26.5% of the equity and also operatorship, ENH with 15%, Mitsui & Co with 20%, Thai state oil company PTTEP with 8.5%, and with (ONGH), Oil India Limited and Bharat Petroleum Corp each holding 10%.

by Katie McQue

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