Current portfolio comprises companies in the information technology, alternate energy and entertainment sectors.

KHALIL AHMED, Senior Correspondent
Feb 19 - 25, 2007

Under the supervision of Saeed Iqbal, the Executive Vice President, Group Head UBL Investment Banking, has been performing exceedingly well.

PAGE approached the UBL Investment Banking for information.

UBL is the second largest private sector bank in Pakistan and the most active corporate and investment bank.

"We Know the Business - As It Happens"

UBL Investment Banking is currently involved in both advisory and structuring/ arrangement capacities with almost all initiatives that are being undertaken under the second wave of IPPs and IPP-expansions coming online under the 2002 power policy. The power sector is currently undergoing a shift in so far as several key underpinnings of the earlier power policies are concerned. UBL remains at the forefront of embracing, and in certain cases, influencing such changes. Some notable changes currently occurring are: Declared availability is replacing the earlier prevalent capacity payment concept. Implications of the above concept on terms and conditions of the O&M arrangement and insurance arrangements for fuel/gas-fired power plants, with gas suddenly becoming a scarce resource, the current concessions being negotiated are introducing concepts of complete pass-through for alternate fuel and its coverage as a force majeureevent. UBL actively works with and enables other transaction stakeholders involved, especially lenders' legal counsel and insurance advisors, to build on and improve the due-diligence regime applicable to transactions. This is specifically true for power projects and generally, for all non-recourse infrastructure project financings. UBL boasts of excellent contacts at various levels within the PPIB, NEPRA, OGRA, SBP and other government authorities/regulators which allows adherence to transaction timelines.


Limited Recourse Project - financing of Pakistan's first co-generation plant at a total estimated cost of US$ 114 million.

HBL and UBL were the Joint Lead Arrangers (JLAs) for the arrangement of project debt.

The transaction involved advising and structuring for Pakistan's first cogeneration (94 MW power and 3.0 million gallons per day of water) plant.

It is important to note that the plant was not set up under the aegis of any of the power policies (i.e. Power Policy 1994 or Power Policy 2002), but it followed the typical contractual structure (except the sovereign guarantees for the off-taker and gas supplier's performance) but due to proper structuring, financial and other covenants, was well-received in the banking market.

Actual services rendered by the JLAs included: Advising the client on the optimum capital structure for the project; assisting the client in negotiating key commercial contracts; advising on relevant corporate and regulatory matters; assisting in obtaining necessary approvals from the SBP; successful syndication of the project debt in liaison with associated consultants (technical consultant, local and off-shore legal counsel and insurance advisor); active monitoring (on-going) of the project vis-a-vis the estimated completion schedule. Majority of the construction work has been done and the project is very near to its commercial operations date.


The transaction involved advising and structuring for Pakistan's first liquid petroleum gas (LPG) container terminal and allied marketing and distribution services across Pakistan, at a total capital cost of US$ 32.6 million. UBL acted as Lead Arranger (LA) in a Lenders' Syndicate of five members. The project was a joint venture between KUB Malaysia Berhad and Sterling Ventures International Limited (British Virgin Islands). The project contractors were SNC Lavalin International Inc., China Shanghai (Group) Corporation for Foreign Economic & Technological Corporation and Shanghai Industrial Engineering Co. Limited. Actual services rendered by UBL included: advising the client on the optimum capital structure and other transaction features with respect to marketability of the project in the domestic capital markets; assisting the client in negotiating key commercial contracts; advising on relevant corporate and regulatory matters; obtaining necessary approvals from the State Bank of Pakistan - a record number of seven approvals were obtained from various departments of the SBP for this landmark transaction; successful syndication of the debt component of the project in liaison with other transaction stakeholders; active monitoring of the project vis--vis the estimated completion schedule. The project terminal and the marketing business stand successfully commissioned today.

IBG provides innovative and unique solutions to its clients enabling them to meet the challenges of an ever-changing market.

- Dedicated specialist team of 14 investment bankers.

- Supported by over 50 relationship managers in six different locations in Pakistan alone.

- Well established execution experience.

- Rich international and domestic investment banking product knowledge.

- Strong distribution capability.

THREE SPECIALIST BUSINESS AREAS: Project & Structured Finance Syndications & Debt Capital Markets Equity & Advisory.

1-PROJECT & STRUCTURED FINANCE DEALS WITH: Green field projects and expansion initiatives of highly leverages entities that seek non-recourse/limited recourse financing options.

PRODUCTS: Highly structured, and syndicated, funding supported by well developed legal / financial frameworks, aimed at optimizing allocation of risks involved.

2-DEBT CAPITAL MARKETS DEALS WITH: Existing corporates with significant long term funding requirements that cannot be met by single lenders, either due to per party limits or risk diversification considerations.

PRODUCTS: Syndicated Loans, Term Finance Facilities, Listed, Privately Placed, Securitization, Commercial Paper, Bonds.

3-EQUITY & ADVISORY DEALS WITH: Sectors with potential for consolidation/mergers etc; privatization deals; highly leveraged companies in cyclical industries, and start ups/ growth companies with substantial capital requirements.

Products Ordinary Shares, Preference Shares and other quasi equity instruments, customized advisory related products/services, private equity.


- Current mandates add up to over PKR37 billion (US$ 609 million).

- A healthy mixture of Debt, Equity & Advisory transactions.

- Structured and executed debt and equity transactions totaling over PKR 46 billion (US$ 754 million) in 2006, PKR165 billion (US$ 2.75 billion) in 2005, and PKR52 billion (US$ 866 million) in 2004.


- Pakistan's first IPP under Power Policy 2002 for Orient Power Company Limited PKR 8,600 million.

- Pakistan's largest non-recourse Project Finance Facility for Fatima Fertilizer Company Limited - PKR 23,000 million.

- Pakistan's first listed floating rate preferred share issue for Masood Textiles Mills Limited -PKR600 million.

- Pakistan's First Commercial Financing of an undersea fiber optic network for Trans world Associates (Pvt.) Limited PKR 1,400 million.

- Buy-Side Advisor for acquisition of Pak-Arab Fertilizers Limited -Pakistan's largest leveraged buy-out (LBO) to Fatima Group & Arif Habib Group PKR 14,675 million.

- Joint Advisor & Arranger - Pakistan's largest privately placed bond for Pakistan International Airlines PKR 15.14 billion.

- Pakistan's first co-generation plant on a 100% non-recourse basis and which also had the first FX option issued by a Pakistani bank for DHA Cogen Limited PKR 1,150 million.

Advisor on the divestment of stake in Pakistan PTA Ltd -Pakistan's largest equity block transaction to date to ICI Pakistan Limited PKR 4,000 million.

Joint Advisor & Arranger: Pakistan's largest syndicated transaction involving syndication of PKR 20.5 billion and the largest FX swap in Pakistan for PARCO -US$387 million.

- Largest privately placed bond issue in the telecom sector for Pakistan Mobile Communication Limited -PKR2.5 billion.

FINANCIAL ADVISOR & ARRANGER: First listed and rated asset backed securitization for Paktel Limited PKR 990 million.


- A demonstrated ability and successful track record of advising domestic and foreign investors and government agencies in the power sector, locally and internationally.

- Thorough understanding of the domestic power sector environment and policy framework and departures from the same, as they are currently happening.

- High level contacts with government and regulatory authorities which ensure adherence to project timelines.

- Strong financial modeling expertise.

- A recognized core competency in identifying, analyzing and allocating risks to ensure smooth project closure.

- Close and long-standing relationships with all major technical, legal, tax and accounting consultants in Pakistan (and off-shore) generally, and with respect to the domestic energy sector in particular.

- Excellent contacts within all principal export credit agencies and equipment suppliers, contractors and operators for the power sector. A proven ability to arrange funding for big ticket project finance transactions, as evidenced by our arrangement credentials presented in this submission.


- A non-traditional lending method tailored to specific client needs.

- Usually cash flow based rather than asset reliant.

- Allows borrowing against the value of a specific asset, project or income stream rather than on the basis of the borrower's own credit rating. In general a structured finance solution seeks to isolate the risk of the loan facility from the overall risks of the borrower's business.

- Scenarios best suited to structured finance solutions are: companies with capitalization issues, i.e. who can't borrow any further on the strength of their existing balance sheets.

- Service entities with little or no tangible assets of worth, e.g. technology and telecom.

- Where the financing risks are too large for the borrower and/or lenders to cope with, e.g. cross-border.


- Special focus on the project finance with a solid portfolio of project finance executed deals and mandates.

- Advised/financed a broad range of project finance transactions including LPG container terminal, refineries, oil pipelines, power generation and distribution amongst others.

- Serves project finance client needs through a wide array of products ranging from project & structured finance to cash management, bonds and plain vanilla debt.

- Project finance transaction successfully completed during 2005 amounted to PKR 6,550 million.


Our methodology for a given project finance transaction is predicated on the following parameters:

Development of a comprehensive decision-making tool viz. the financial model to assist the sponsors in key project decisions notably the levelized tariff and capital structure; development of a Risk Assessment Matrix for equitable allocation of risks amongst the stakeholders; ensuring that all essential ingredients are in place for managing lender as well as project sponsor expectations; serving as the nexus between the regulators, lenders, sponsors and other project stakeholders to ensure a smooth interface amongst them.

The methodology can be encapsulated within the following concrete steps:

Financial modeling & analysis; risk evaluation; project structuring; negotiation of key project contracts; identification of sources of finance; and bankable term sheet.

FINANCIAL ANALYSIS: Development of elaborate financial models to ascertain the project's economic viability; level of detail allows approximation of expected real-world conditions; rigorous sensitivity analyses of major project variables viz. construction cost and period, financing parameters and technical and operating assumptions; scenario building to determine the impact of a specific set of technical, operating and financing parameters; model output in the form of projected financial statements, graphs and key financial ratios.

RISK EVALUATION: For all limited/non-recourse projects, the importance of an accurate identification of risks and rewards cannot be understated; hence, we conduct an extensive review of both pre-completion and post-completion risks. This allows for risk mitigation and/or allocation amongst the various stakeholders which are best capable of managing those risks

PROJECT STRUCTURING: Based on the foregoing, development of an optimal project structure for the client that balances lender expectations (in terms of cash flow sufficiency for meeting debt obligations) while avoiding undue stress on the project cash flows.

NEGOTIATION ON KEY PROJECT CONTRACTS: Keeping in view the output of the financial model and risk analysis, UBL assists the client in identifying key consents required and negotiating key project contracts with the various stakeholders viz. the GOP, WAPDA/NTDC, fuel supplier, EPC contractor and O&M contractor.

UBL also assists the client in general negotiations and meetings with relevant entities including the PPIB and NEPRA. If required, the team also provides advice on pertinent regulatory matters and coordinates amongst the legal and various other professional service providers to the project.

IDENTIFICATION OF SOURCES OF FINANCE: Balance sheet strength; ability to raise funds efficiently using most appropriate sources of debt and equity; ability to provide or arrange from third parties, an array of hedging solutions.

Bankable Term Sheet covers all major facets of the transaction viz. structure, legal, security, financing parameters etc. - should provide a comprehensive basis for negotiation and preparation of transaction documentation. Standard comprehensive term sheets have been developed in-house and being regularly used during the past years for structured transactions.


UBL is the only commercial bank in Pakistan actively providing private equity financing to start-up companies. In a short period of 2 years, UBL has completed seven private equity/start-up transactions. Current portfolio comprises companies in the information technology, alternate energy and entertainment sector.