This is the first Central European exploration initiative in the project finance formula, and the first transaction involving Polish Investments for Development (PIR) under the “Polish Investments” governmental program.
This is the first Central European exploration initiative in the project finance formula, and the first transaction involving Polish Investments for Development (PIR) under the “Polish Investments” governmental program. Besides, it was one of the more complex project finance initiatives to be launched in Poland and the region in recent years.
On 25 August 2014 Lotos Petrobaltic, Polish Investments for Development (PIR), Bank Gospodarstwa Krajowego and Bank Pekao signed a contract to finance the development of the B8 oil field in the Baltic Sea. The complexity of the project called for prudent yet innovative legal solutions to make it all hang together. Dentons lawyers rose to the challenge to bring their legal expertise to bear on the project, notably in banking, environmntal, energy, tax, state aid and public procurement laws. The financial aspects of the transaction were supervised by Mateusz Toczyski and Robert Dulewicz with the support of Michal Smiechowski and Krzysztof Kazmierczyk of the Finance and Banking Team. In addition to financing issues, advice on regulatory matters was an essential element of the project. Mining and environmental laws impose diverse obligations on prospective investors wishing to explore oil from under the seabed.. Lotos Petrobaltic was advised on this issue by Ewa Rutkowska-ubocz with the support of Agnieszka Skorupinska. The tax structure of the transaction was developed by Cezary Przygodzki from the Tax Team. Over 30 Dentons lawyers worked for this success for almost three years.
This PLN 1.8 bn. project will be implemented by a special purpose vehicle set up by Lotos Petrobaltic. PIR will finance the investment out of its own funds (PLN 430 m.), the banks will provide an additional PLN 660 m., and Lotos Petrobaltic will make an in-ind contribution of its oil extraction license and oil platform. The complicated financial project structure includes senior and mezzanine/second-ien financing as well as financing via bank guarantees.
The estimated reserves of the B8 field are 3.5 million tonnes of crude oil. The company is expected to reach full capacity production at an estimated 250,000 tonnes of crude oil per year by the end of 2015. The crude oil will be processed by the Lotos oil refinery in Gdansk, and the extracted natural gas will feed the Wldoslwowo CHP plant.
