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Are we doing enough to unlock shared value in capital projects?
- 1. www.advisian.com February 2018 Are we doing enough to unlock shared value in capital projects? Creative partnerships to reduce cost and enhance asset life cycle risk management
- 2. Are you doing enough? The US is in place to be the most competitive global manufacturer of chemicals as a result of hydraulic fracturing and natural gas, and the wave of investments is far from over. The American Chemistry Council (ACC), June 2017 Advisian / 2
- 3. Independent market drivers Petrochemical developments taking advantage of low-cost/abundant feedstock will continue to be robust. Midstream: major investment in pipelines, gas processing and LNG in US, Canada and Mexico. “Permania” in the US will dominate upstream spending. Canada becoming a more regional market with IOCs reducing presence. Infrastructure investment and structural changes will create port, rail and power opportunities. Financial investors/private equity will exert increasing control and create new market opportunities. Advisian / 3
- 4. Summary of capital spend size and growth forecast by sector in North America Sector US Capex (US Bn, 2017) US Growth CAGR 2017-2022 Canada Capex (US Bn, 2017) Canada Growth CAGR 2017-2022 1 Upstream 118 5-6% 32 2-3% 2 Downstream 15 Flat 2 Flat 3 Petrochemicals 55 3-4% 9 3-4% 4 Power 86 Flat 8 Flat 5 Mining 10 Flat 18 2-3% Advisian / 4
- 5. Indicative composition of capital projects 25% 50% 25% Utilities & Power Plants Process Plant Infrastructure Capital Outlay With $70B – $80B (USD p.a.) capital spending in North American Downstream and Petrochemicals over next 5 years (350-400B TIC), $85B - $100B USD will be spent on new utilities. Advisian / 5
- 6. Are you doing enough? Relative to other adjacent market sectors, Petrochemicals has not fully explored collaboration models to unlock third-party investment in noncore business areas, including water and power utilities. Sean Murphy, SVP Advisian Featured Panel at Petrochemical Supply Chain and Logistics Conference , Houston, Dec. 2017 “ “ Advisian / 6
- 7. Why? Lack of Attractive Assets along the Value Chain?1 Uncertainty in Regulatory and Tax Reform?2 Recent Success in Market?3 Ways things are done in the sector?4 Lack of Knowledge?5 Advisian / 7
- 8. A changing world may require an independent view Informed decisions Capital Allocation & Risk Time Net Present Value Advisian can quickly assess collaboration opportunities across the Industrial Utility Value Chain to inform our clients where to focus their future efforts. Advisian / 8
- 9. Advisian and WorleyParsons have completed over 500 utility projects (value of more than $100B) as Owner’s Engineers, PMC, Lenders Advisors, or Transaction Services in the past five years.
- 10. • Enable focus on core business • Reduce capital to achieve FID • Enhance access to advanced technologies and expertise • Mitigation of risks • Fit-for-purpose commercial structure • Whole of asset lifecycle view Patrick Mullen, Managing Director Global Water Development Partners A Blackstone Portfolio Company Over the lifecycle, the project capital construction cost is only a percentage of the overall cost impact of new infrastructure — typically, capital only makes up 30% to 50% of project costs; the rest are related to financing and O&M costs. Most projects never get priced for the entire life of the project. “ “ Benefits of a collaborative approach Advisian / 10
- 11. Clearly defined investment opportunities… The next step is up to you. We’re here to help. Sean Murphy Senior Vice President, Americas E: sean.murphy@advisian.com P: +1 281 857 0783 Gabrielle Beattie Director, Business Development E: gabrielle.beattie@advisian.com P: +1 760 412 9851 To learn how we can add value, contact:
- 12. DISCLAIMER This presentation has been prepared by a representative of Advisian. The presentation contains the professional and personal opinions of the presenter, which are given in good faith. As such, opinions presented herein may not always necessarily reflect the position of Advisian as a whole, its officers or executive. Any forward-looking statements included in this presentation will involve subjective judgment and analysis and are subject to uncertainties, risks and contingencies— many of which are outside the control of, and may be unknown to, Advisian. Advisian and all associated entities and representatives make no representation or warranty as to the accuracy, reliability or completeness of information in this document and do not take responsibility for updating any information or correcting any error or omission that may become apparent after this document has been issued. To the extent permitted by law, Advisian and its officers, employees, related bodies and agents disclaim all liability—direct, indirect or consequential (and whether or not arising out of the negligence, default or lack of care of Advisian and/or any of its agents)—for any loss or damage suffered by a recipient or other persons arising out of, or in connection with, any use or reliance on this presentation or information.
Notes de l'éditeur
- This is where you set the context of how increasingly crowded the US market is becoming. There is an estimated $180 billion dollars being invested in the North America chemical market The first wave of ethylene capacity is already online A second wave of construction is already underway for assets coming on-stream in ~2021 These projects are already well into detailed engineering Customers looking to enter the market and compete with these new units are already behind and need to get their plans in place asap As the market becomes increasingly competitive speed becomes critical
- This is where you set the context of how increasingly crowded the US market is becoming. There is an estimated $180 billion dollars being invested in the North America chemical market The first wave of ethylene capacity is already online A second wave of construction is already underway for assets coming on-stream in ~2021 These projects are already well into detailed engineering Customers looking to enter the market and compete with these new units are already behind and need to get their plans in place asap As the market becomes increasingly competitive speed becomes critical
- VALUE CHAIN: Pipelines, utilities, infrastructure along the entire value chain offer attractive opportunities for investment participation as these component are strategic to the value chain, assets can be structured and secured as liens, assets can be exited by equity investors without interruption of operations and operations risks can be ensured and managed. REGULATORY/TAX REFORM: Proposed reforms would include combination of tax reduction, tax cuts (rates), tax incentives (for capital spending) and winners and losers are still being defined? MARKET: During profitable periods, the industry tends to expand to oversupply without enough focus on margins through better feedstock sourcing and also further development of markets on the product side – both through more ownership and control of the assets involved. SECTOR: As with many industries the tendency remains to stick to your knitting / what you know best and focusing on managing the costs associated with manufacturing. LACK OF KNOWLEDGE: Collaboration is occurring in adjacent markets and perhaps a structural or other barrier is restricting access of these benefits to Industry.