As part of its commitments to boost upstream operations, the Nigerian National Petroleum Corporation (NNPC) has disclosed that it has secured a prepayment funding of circa to the tune of $1b to support upstream operations of the national oil company.
It explained that the crude oil prepayment has enabled NNPC to pay its subsidiary saddled with upstream operations, Nigerian Petroleum Development Company (NPDC) tax obligations to the Federal Government of circa $700M with the balance utilized to fund NPDC’s capital and operating expenditures.
NNPC Group General Manager, Group Public Affair Division, Kennie Obateru, said that the prepayment financing was backed by future oil production of NPDC, and utilizes a well-established structure.
Through a statement released to newsmen, Obateru revealed that the said established structure was designed to enable the purchaser of the crude, Eagle Export Funding Limited, to raise financing in the domestic and international markets, to fund an upfront payment to NNPC under a Forward Sale Agreement (FSA).
“The financing which funded the prepayment has been structured over two tranches: a 5 year USD amortizing tranche (“Tranche 1”) and a 7 year NGN amortizing tranche (“Tranche 2”). Both tranches benefit from a cash sweep with the 7-year tranche having a 1-year non-call period.
“These tranches shall be repaid by Eagle Export Funding Limited from the export sale proceeds of the NPDC crude, which in turn are backed by Letters of Credit, issued by banks with a minimum credit rating, in line with market precedent.
“The export price for the crude is the relevant NNPC Official Selling Price (OSP) for the corresponding calendar month and crude grade. Vitol and Matrix Energy have executed the standard NNPC Crude Oil Sale & Purchase Agreement,” the statement said.
The NNPC spokesperson listed participants in the eagle export funding limited deal to include Standard Chartered Bank, United Bank for Africa, Afrexim Bank, Union Bank and two oil trading companies, Vitol and Matrix Energy.
According to him, the pricing and terms obtained for the USD and NGN funding tranches were competitive and better than precedent transactions despite constrained liquidity situation in financing markets occasioned by outbreak of due COVID-19.