1)
2) Collaborate
Innovate
Energy, Power, Chemicals, Metals, and Mining Casebook
Global Transaction Services
3)
4) “This Casebook is a testimony to
the innovative and creative spirit
of our clients. It demonstrates
how we work in collaboration
with our clients to deliver new
solutions to challenges they
may not have faced before.”
Michael Guralnick
Global Head, Client Sales Management
Treasury and Trade Solutions
Global Transaction Services, Citi
5) welcome
6) It is my pleasure to present our
the world-class professionals who
Citi Global Transaction Services
staff our offices across more than
Energy, Power, Chemicals, Metals
104 countries.
and Mining Casebook. This book of
client case studies is a compilation
of the innovative solutions that we
have designed, in partnership with
our clients, to help them achieve
excellence in meeting their key
working capital goals.
This Casebook is a testimony to
the innovative and creative spirit
of our clients. It demonstrates how
we work in collaboration with our
clients to deliver new solutions to
challenges they may not have faced
before. It is designed to share global
Against a backdrop of unrelenting
Michael Guralnick
Global Head
Client Sales Management
Treasury and Trade Solutions
Global Transaction Services, Citi
best practices, and to help our
economic challenges and a continued
clients accelerate the realization
move towards globalization, our
of their transaction services goals.
clients are focused on achieving
operational efficiencies across their
businesses and their increasingly
complex supply chains. In this global
business environment, our clients are
also looking to mitigate a wide range
of risks, such as operational risk,
settlement risk, and transaction risk.
At Citi, we are committed to helping
our clients in the energy, power,
chemicals, metals and mining
sectors respond effectively to these
challenging times. We are delighted
to share with you the insights we
have gained from working with
businesses like yours. I look forward
Citi’s Global Transaction Services
to hearing from you and welcome
business provides a global platform
the opportunity to continue and
of innovative solutions that fully
expand our successful partnership.
utilizes the creative leverage of
7) foreword
8) Welcome to the Energy, Power,
The client cases in this book
Chemicals, Metals and Mining
highlight three important areas
(EPCM&M) Industry Casebook.
for focus: optimizing working
I am delighted to present you
capital, mitigating new industry
with this collection of client
risks, and expanding into new
cases that demonstrate the
markets — whether organically or
added value that Citi brings to
inorganically. They demonstrate
EPCM&M companies who are
how our clients are successfully
now revitalizing their businesses
collaborating with us to create
and retooling for recovery.
efficiencies and address
Indeed, through our industry
experience and engagement
Peter Langshaw
Global Industry Head of Energy,
Power, Chemicals, Metals & Mining
Client Sales Management
Treasury & Trade Solutions
Global Transaction Services, Citi
their evolving strategic and
financial needs.
with clients globally, we see
I hope that the cases in this
how companies in the EPCM&M
book give you an idea of how
sectors are employing new
we can work together to employ
tools and techniques to help
Citi Global Transaction Services’
them face a new set of
unique solutions and industry-
opportunities and challenges
specific value propositions to help
during this recovery period.
you position your business for
growth and further success.
9) contents
10) retooling for recovery: optimizing working capital for growth
shoring up liquidiy, visibility and control over cash
06
18
Antam
APAC
Resolving liquidity, tax payment, and trade issues in remote locations
20
Arrow Energy
APAC
Cash optimization through effective structure, pooling, and investments
22
Oando
EMEA
Nigeria’s energy giant wanted to centralize its treasury
26
TAQA
EMEA
Appointing a single, global banking partner improves liquidity management
30
extracting liquidity from working capital
Cytec Industries Inc.
NA
Choosing payment channels to leverage financial advantages
mitigating risk and sourcing alternative funding
32
34
38
China Petroleum & Chemical
Corporation (Sinopec)
APAC
Thriving ADR program substantially increases shareholder base and liquidity
40
Reliance Industries Limited (RIL)
APAC
Receivables finance mitigates risks, increases working capital, and
diversifies funding
44
OGK-4
EMEA
Expansion for large-scale operations in central Russia, Siberia, and the Urals
46
TNK-BP
EMEA
Leading Russian oil company implements funding solution to raise capital
on demand
48
driving operational efficiency
52
Anvil Mining
APAC
Streamlined approach to cash management meets ambitious growth objectives
54
Monsanto
EMEA
Extracting value from electronic banking platforms to reach efficiency
58
Shell International
EMEA
Global cards program rollout consolidates spending and facilitates process control
60
11) retooling for
recovery:
optimizing
working capital
for growth
12) The recent signs of economic recovery following the global crisis have been a powerful catalyst for change.
In the energy, power, chemicals, metals, and mining sectors, companies are emerging from the recession and
are retooling for improved business performance and productivity.
As corporates re-energize their
The cases in this book are great
of building supporting treasury
businesses, they look to expand in
examples of how corporate
infrastructures and techniques
high-growth markets and compete
treasurers are playing an important
to help drive sales and expansion
locally and globally. How effective
role in driving business change.
into new growth markets.
they are at integrating their
They demonstrate how they deliver
strategic expansion from a treasury
on their companies’ new strategic
and sales standpoint, and at
direction as businesses emerge
managing the associated risks of
from the recession into a high-
new markets and an increasingly
growth economy that relies on
complex industry, will determine
energy and commodities to sustain
their ability to position their
development. The cases also
companies for the future.
highlight how treasurers have been
This chapter draws on insights and
practical case studies from our
energy, power, chemicals, metals,
and mining clients who operate
globally, exploring recent industry
sector trends and discussing the
effective at providing new sources
of funding and cash to improve
working capital, shore up liquidity
to improve the balance sheet, and
develop techniques for mitigating
increased risks.
techniques our clients have
With many corporates focused on
adopted to maximize financial
expanding into the emerging
performance and success.
markets to increase growth, the
cases emphasize the importance
Energy
Industry analysts believe that
commodity prices — including oil
— will remain uncertain in the
long term, while exploration and
production of oil is becoming more
challenging from a geopolitical,
sovereign, and environmental risk
perspective. Consequently, costs
are set to increase, which will limit
exploration and production, and
lower the rate at which reserves
can be replenished.
Within the energy industry, the
landscape is changing dramatically.
International oil companies (IOCs)
are restructuring their businesses
13) to improve performance and
remain competitive. Meanwhile,
8
North America and Africa
— facilitated in part by the
more and more national oil
resurgence of bank lending and
companies (NOCs) are becoming
local conditions. In the oilfield
the arms of countries’ energy
services sector, demand for
policies and are increasing their
outsourced services will continue
influence in new projects over IOCs,
to increase despite growing
especially in Russia and China. For
regulatory pressures and focus
instance, China is quickly acquiring
on costs. In turn, strong sector
assets in emerging markets such as
performance is likely to spur
Africa, Latin America, and Central
further M&A activity.
and Eastern Europe to compete
within international markets and
execute a long-term infrastructure
program to boost GDP.
In the downstream business,
refining margins remain under
pressure and companies recognize
that there is a need for long-term
restructuring of marketing while
keeping abreast of opportunities
for alternative energy sources.
In addition to the IOCs and NOCs,
independent exploration and
production companies will continue
to grow in many regions such as
“In the downstream
business, refining
margins remain
under pressure and
companies recognize
that there is a need for
long-term restructuring
of marketing while
keeping abreast of
opportunities for
alternative energy
sources.”
14) Given the increased risks and
In the midstream sector
uncertainties, the industry may
(transmission and generation),
come under pressure from external
capital expenditure is required to
ratings agencies. Therefore the
replace infrastructure that has often
ability to shore up liquidity, focus on
received little consistent investment
cost reduction, and further improve
in the past two decades and is now
efficiencies will be key.
nearing the end of its life. Moreover,
Power
The security of supply and climate
change remain at the top of the
political agenda and consequently
continue to drive change in the
additional grid infrastructure is
required to connect new sources
of power generation, such as wind
and solar, which are often located
far from the existing grid.
“However, a more
likely trend in the
coming months
and years is likely
to be deleveraging
by large energy
companies, following
a wave of debt-fuelled
M&A before the
financial crisis.”
industry. For upstream companies,
While the pressure for capital
such as power generators, the
expenditure in the upstream and
Regardless of the ultimate level
implication is a requirement for
midstream sectors is beyond doubt,
of capital expenditure required,
substantial capital expenditure.
the scale of the requirement is
large investment projects mean
difficult to assess given the potential
companies with robust balance
impacts the expenditure might have
sheets will be most successful.
on the pace of demand for growth.
While in many markets consolidation
Power companies need to be proactive
is largely complete, this pressure
when it comes to government
could fuel further M&A and
policies for renewable energy and
government intervention for
strategically plan how they intend
competition in the clean energy
to develop new opportunities.
markets. However, a more likely
For example, energy efficiency
trend in the coming months and
measures at consumer level, such
years is likely to be deleveraging
as smart meters, could slow the
by large energy companies,
pace of growth of energy demand.
following a wave of debt-fuelled
Companies making investments
have a number of issues to
consider: they need to take into
account carbon emissions and
achieve a balance of renewables
and traditional sources of power.
At the same time, they need to
recognize the immediate costs
of development, which can be
high for renewables, and the
long-term costs of things such
as decommissioning.
M&A before the financial crisis.
15) Power companies face an additional
challenge in financing capital
10
Long-term strategic objectives
remain counterbalanced by cash
expenditure. Changes to bank
and cost-management, the drivers
capital regulations are expected
of decision-making.
to limit their appetite for project
financing. Consequently, companies
will need to consider multilateral
agency and bond market financing
as an alternative while seeking
ways to use internally generated
cash more effectively, drive down
costs, and improve efficiencies.
The economic recovery will
necessarily affect parts of the
chemicals industry differently.
Leveraged players are taking the
opportunity afforded by improved
financial conditions to restructure
against a backdrop of higher
margins and increased confidence,
Chemicals
which is reflected in growing
In the chemicals industry, the focus
inventory levels. Nevertheless,
of companies on cash, cost, and
there remains a general focus
price discipline during the financial
on analysing costs and removing
crisis and economic downturn has
capacity where, for example,
ensured it has remained financially
the cost base is high by industry
robust. A recovery in demand
standards. This approach reflects
prompted the end of industrial
a new-found realism in the sector:
destocking in mid-2009. However,
many companies have used the
the recovery of the chemicals
down cycle to reconsider their
industry has been strong with
business propositions.
improved price conditions through
demand in the emerging markets.
Also, chemicals companies have
been able to restructure during the
downturn to create efficiencies in
their manufacturing processes.
While the extent of the global
recovery remains uncertain, what
is clear is how important emerging
markets such as China and India are
to global growth. Given its relatively
16) high level of emerging market
profitability over many developed
differentiator on the outlook
exposure, the chemicals sector could
market chemicals companies.
for individual commodities.
be a disproportionate beneficiary of
increased economic growth.
Longer-term trends that continue
to be played out in the chemicals
In developed and emerging
industry include the commoditization
markets, companies with more
of products that were once
sustainable pricing power will
specialties. Producers with cost-
benefit most from the economic
advantaged operating models can
recovery. Commodity names will
target these newly commoditized
perform less well owing to the
markets to capture the spread
probability of an intensification
between the semi-specialty price
of price competition as market
and their low operation costs.
conditions return to normal
As a result, the focus on creating
(although this may affect a
an efficient operating model
relatively small proportion of
“While the extent of
the global recovery
remains uncertain,
what is clear is how
important emerging
markets such as
China and India are
to global growth.”
remains critical.
the sector).
Metals and mining
One way in which well placed
One of the key drivers for metals
companies will choose to accelerate
and mining is the growth of
growth is through acquisition: asset
emerging markets, which is a
prices may allow accretive deals.
long-term support for commodities.
Players perceived to be weak are
Moreover, continued investment
being pursued by developing
fund inflows will support commodity
market chemicals companies
prices even in the face of demand
as the dynamic of the global
weakness. However, the expectation
industry changes. The ability of
of continued strong demand is not
emerging market chemicals
sufficient to maintain pricing across
players to expand by acquisition
all commodities. Instead, supply
has been enhanced by their higher
continues to be a major
With a broadly supportive backdrop,
consolidation in the metals and
mining sector will continue with
cash-rich giants having the upper
hand. An example is the fact that
metals and mining companies are
looking to expand their business
in the potash fertilizer market.
Consider BHP Billiton, which was
reported in the media to have
been looking to acquire Potash of
Saskatchewan for roughly USD40
billion. Metals and mining companies
are aware of their strong position
17) for growth and want to take
advantage of the opportunity.
12
emerging markets to grow business
and improve margins, there is a
What is important is the nature
strong need for a bank that can
of consolidation: the concept of
facilitate their expansion and
an integrated value proposition
integration into — and, equally
is gaining increased currency.
importantly, out of — emerging
Mining companies understand
the long-term geopolitical risks
involved in mining in certain
countries, especially sub-Saharan
Africa, and the royalty payments
markets. Indeed, with the changing
landscape, much of the growth
comes from local companies in
emerging markets expanding into
international markets.
demanded by governments. Given
Some successful techniques
relatively strong commodities
deployed by clients globally have
prices, royalties have generated
included the following:
increased attention. It can be
expected that higher royalties
will impact on costs of extraction,
margins, and dividend payments.
Critical industry
value drivers
1. Shoring up liquidity, visibility,
and control over cash
With rating agencies and equity
analysts focused on companies with
stronger liquidity as the key driver
of performance, optimizing visibility
and control of cash has become
There is an increased level of
increasingly important. At the same
urgency to create value from cash
time, the scarcity of credit means
and working capital through
that companies now regard cash
greater efficiencies, and shore up
as a vital internal source of funds
liquidity and the balance sheet.
— maximizing it is therefore crucial.
With the increased focus on
18) Companies need global visibility of
that they protect themselves, but
— has become sufficiently
cash balances and real-time balance
that value is created at every point
important to spur the uptake
sheet management. They also need
for the company and its
of supplier financing solutions.
a complete, end-to-end process,
counterparties in their supply chain.
from collections to investments,
to increase the velocity of cash flow
and the ability to net surpluses and
deficits across regions. The goal
of companies must be to bring all
countries within a global cash
structure, especially within
emerging markets where cash
In particular, chemicals companies
sourcing alternative funding
have been successfully deploying
The tough credit environment of
supplier finance techniques
the past two years has increased
extensively to improve their working
the importance of alternative forms
capital, with the other industry
of financing. In particular, export
sectors focused on adopting
credit agency and export agency
similar approaches.
financing activity has grown
management regulations can be
Additionally, as a result of a credit
more challenging.
situation that remains tougher
2. Extracting liquidity
from working capital
Enhancing the order-to-cash and
purchase-to-pay cycles with
financial supply chain solutions
releases substantial trapped internal
liquidity for energy, power,
chemicals, metals, and mining
companies. One significant
consideration for companies must
be to adopt integrated solutions for
each step of the financial supply
chain. They need to ensure, not only
3. Mitigating risk and
than before the financial crisis,
inefficiency is now too costly to
tolerate and there is a recognition
that extracting liquidity from
working capital can potentially
free up billions of dollars, while
integrated working capital solutions
significantly. These solutions —
which can have an agencyguaranteed portion of between
50 and 95% — are a valuable way
of diversifying funding sources and
preserving bank lines. Moreover,
they are available regardless of
market conditions, even when
funding is restricted and expensive.
have direct, significant, and
What’s more, as companies expand
beneficial impacts on companies’
into emerging markets such as
balance sheets. Similarly, risk
Asia, there is a need to remain
minimization has become a priority,
competitive by keeping costs low
and one type of risk — that of
while managing risk. Companies
suppliers being unable to survive
should partner with a global bank
19) that can offer efficient, end-to-end
solutions across geographies and
14
5. Expanding into growth markets
While emerging markets such
provide an array of risk
as Russia and China present
management techniques — from
companies in the energy,
letter-of-credit confirmations to
petroleum, chemicals, metals, and
undisclosed payment guarantees
mining industries with new sourcing
to accounts receivable discounting.
and sales opportunities, they
4. Driving operational efficiency
Manual intervention and diverse
processes in different regions often
inhibit straight-through processing,
resulting in longer processing
cycles, increased settlement risk,
and higher operating costs.
Many companies have re-
are not only important as new
consumer markets. Companies
headquartered there that were
historically domestic in focus
are responding to the increased
competitive pressure by expanding
rapidly to become significant
participants in the global economy.
engineered their key financial
Energy, petroleum, chemical, metal,
processes to drive operational
and mining companies looking to
excellence through automation
expand into new markets need a
and centralization. At a basic level,
bank that can effectively offer the
this involves standardization of
expertise, tools, and techniques to
processes and a reduction in
achieve greater visibility and control
manual processes. More ambitious
over cash, manage risk, and drive
centralization measures include
working capital efficiently.
expanding the scope of shared
service centers and rationalizing
banking relationships.
In summary, some of the challenges
facing energy, power, chemicals,
metals, and mining companies are
20) common across all sectors.
to support their renewed growth
Businesses have long had a strong
strategies. Restructuring around
focus on increasing the efficiency
high-margin businesses and
of cash management processes.
expansion into new-growth
Now that focus is being seen as
markets create new and more
part of a broader range of objectives
complex risks. Transaction banks
surrounding working capital.
have an important role to play in
providing treasurers of energy,
“As companies emerge
from the recession,
corporate treasurers
are looking to retool and establish
robust treasury
infrastructure to
support their renewed
growth strategies.
Restructuring.”
power, chemicals, metals, and
mining companies with techniques
and solutions that will allow
them to make the most of the
opportunities this new world offers.
As the following cases will
demonstrate, it is critical that
energy, power, chemicals, metals
and mining companies work
with a transaction banking partner
that understands their sectors,
and that can offer them tools
and solutions to position their
businesses for the future.
As companies emerge from the
recession, corporate treasurers
are looking to re-tool and establish
robust treasury infrastructure
21)
22) Energy, petroleum, chemical, metal, and
mining companies looking to expand
into new markets need a bank that can
effectively offer the expertise, tools, and
techniques to achieve greater visibility and
control over cash, manage risk, and drive
working capital efficiently.
23) shoring up liquidiy,
18 visibility and control
over cash
24) With rating agencies and equity analysts focused on companies with
stronger liquidity as the key driver of performance, optimizing visibility
and control of cash has become increasingly important. At the same time,
the scarcity of credit means that companies now regard cash as a vital
internal source of funds — maximizing it is therefore crucial.
25) 20
Antam
Resolving liquidity, tax payment, and trade issues in remote locations
A vertically integrated, Indonesian mining company that undertakes all
stages of the mining process from exploration, mining, smelting, and
refining, through to marketing.
26) The challenge
The remote locations and distances
The result
With six remote mining locations
from banks made tax payment
in the jungles of Indonesia, Antam
difficult, so the company needed
relationship with Antam that went
sought a single electronic platform
an electronic tax payment system.
back to 1990. With the activation of
to consolidate and optimize cash
management. It required cash
payment visibility to better manage
cash flow within these various sites
and manage the movement of funds
across different banks.
Exporting bauxite and nickel, the
company had export documentation
originating at the mines that, if
incorrect, required physical shuffling
back and forth over long distances.
Antam wanted to more efficiently
process its trade documentation
and accelerate its payments.
Building on the excellent
relationship it has
established with Antam
means Citi now provides
70 to 80% of Antam’s
cash management and
trade services.
Citi was able to build on a
the electronic cash management
The solution
By introducing CitiDirect® Online
Banking (Citi’s online banking platform)
and TreasuryVision® (Citi’s webbased, global financial information
service), Citi created a single electronic
platform that would enable Antam to
make payments and monitor its cash
balances and activities across all its
locations and banks.
The commissioning of CitiConnectSM
eTax gave Antam an electronic taxpayment solution. eTax, a web-based
platform, was linked to Antam’s bank
account. Payments made online
removed any need to travel to distant
banks or tax offices.
Another web-based system resolved
the trade documentation problems that
arose from remote locations. Documents
could be checked on the web platform
and, if given the green light, collected
from the mines by a courier.
platform, Antam was able to optimize
cash balances across its six remote
locations and with local banks.
Antam’s remote mines can now
use a web-based system to pay and
monitor their tax payments. This
removes the trouble of traveling
from the mines to submit returns.
Antam is the first company in Asia
to benefit from Citi’s innovative
system for the verification of trade
documentation on a web-based
platform. For Antam, this means
a simpler and faster process of
completion that removes the delays
caused by the shuttling of physical
documents to and from the mines.
Building on the excellent
relationship it has established with
Antam means Citi now provides
70 to 80% of Antam’s cash
management and trade services.
27) 22
Arrow Energy
Cash optimization through effective structure, pooling,
and investments
ASX- listed Arrow Energy is an energy company focused on the
development of coal seam gas throughout eastern Australia and Asia.
28) The challenge
trade and commercial cards, to
automated manner — through a
Arrow Energy is headquartered
streamline cash management
single sign-on from the CitiDirect®
in Brisbane, Australia. With rapid
processes and reduce costs
Online Banking platform. By
international expansion, and
across the company’s financial
implementing CitiDirect, Arrow
a major alliance with a major
infrastructure and supply chain.
can execute all payments and
receivables seamlessly and view
global petrochemical corporation
to develop new coal seam gas
projects, it conducted one of
the most comprehensive cash
management evaluations ever
undertaken in Asia Pacific. Among
its requirements were: a need to
significantly optimize working
capital management across the
group; develop internal treasury
management expertise; and
support onshore and offshore
growth across six key countries:
Australia, China, India, Indonesia,
Vietnam, and Singapore.
Arrow Energy needed a bank with
a global reach, regional expertise,
and local knowledge. In effect, it
required a solution that could cover
a spectrum of investment banking,
fixed income, foreign exchange, and
working capital solutions, including
its accounts in real time from
The solution
anywhere it operates.
In Brisbane and Singapore,
Citi implemented two pooling
A company in which its executives
structures for all group accounts
are constantly traveling, Arrow
— AUD in Australia and USD
Energy also required local AUD and
in Singapore — leveraging its
regional USD commercial cards to
multicurrency platform. In both
meet its on-the-go needs, while
locations, the solution included
giving its finance department a
a domestic sweep structure,
comprehensive view of expenses,
ensuring that all surplus balances
transactions, and spend data.
of multiple entities would be
optimized within the overall group.
funds to be invested through Citi
The result
With over 60 group and joint-
This also allowed for surplus
®
venture accounts established
Online Investments, the award-
across six countries, Arrow Energy
winning e-banking portal providing
is now able to achieve greater
access to an array of short-
operational efficiency and optimize
term investments, significantly
its cash management processes.
enhancing Arrow’s treasury
Citi’s online solutions — CitiDirect,
capacity to execute short-term
TreasuryVision® and Online
investment decisions in a fully
Investments — give the company
29) a comprehensive view of its cash
and foreign currency positions
24
and the flexibility to make
informed investment decisions.
Arrow Energy now saves time
collecting and analyzing data
for individual entities and enjoys
standardized reporting and a
single, shared view of its financial
standings anytime of the day,
from any time zone.
Graham Yerbury, CFO at Arrow,
says of the solution and of the
partnership with Citi: “Improved
systems have enabled Arrow to
manage cash more effectively and
has greatly improved our efficiency
and enabled a unified treasury
management operation. These
benefits, coupled with the high
levels of service that we receive
from Citi, confirm that we made
the right choice.”
30) Improved systems have enabled
Arrow to manage cash more
effectively and has greatly
improved our efficiency and
enabled a unified treasury
management operation.
31) 26
Oando
Nigeria’s energy giant wanted to centralize its treasury
Oando PLC is one of Africa’s largest integrated energy solutions company,
with gas and power operations, oilfield services, and refinery businesses.
Oando sells and distributes one in every five litres of petroleum in Nigeria
through 500+ retail outlets, and has operations across West Africa.
32) The challenge
The solution
The result
Oando maintained about 100
After some consultation with
It didn’t take long for Oando’s
accounts between its nine
Oando to learn about its
treasury to gain total visibility over
subsidiaries globally. For its
particular needs, Citi introduced
its accounts. With such central
distribution business, Oando’s
TreasuryVision , through which
oversight, Oando could not only
collection needs were met by a
Citi virtually aggregated all
manage its cash more efficiently,
diverse group of local and rural
account balance information across
minimizing interest expense on
banking relationships that were
the spectrum of Oando’s banks,
debt, but deploy it more effectively.
suited to this complex collection
presenting data in a usable format
environment.
and web-friendly environment.
Oando was particularly worried
The company
wanted to capture
third-party bank
balances that could
also be fed into its
native Enterprise
Resource Planning
system in an
accessible and
workable standard.
that it was not receiving reliable
information from its businesses
for account balances and that
there was a growing amount of idle
cash that was not being effectively
upstreamed to reduce debt.
In short, the company wanted
to capture third-party bank
balances that could also be fed
into its native Enterprise Resource
Planning system in an accessible
and workable standard.
®
33)
34) With such central oversight, Oando could
not only manage its cash more efficiently,
minimizing interest expense on debt, but
deploy it more effectively.
Oando Case Study
35) 30
TAQA
Appointing a single, global banking partner improves
liquidity management
Abu Dhabi National Energy Company (TAQA) is a leading United Arab
Emirates company, with revenues of USD4.6 billion in 2009 and a
portfolio of businesses in the Middle East, North America, Europe, and
India in upstream oil and gas, pipelines, gas storage, power generation,
and water desalination.
36) The challenge
one of which was better time-
• A global liquidity structure with
Rapid expansion abroad created
zone coverage for its worldwide
a multicurrency notional pool in
new demands on TAQA’s treasury
operations.
London.
team: the treasury organization
was decentralized, which caused
difficulty in maintaining clear
visibility of funds; multiple new
systems and processes needed to
be built to support the company’s
larger multinational operations; and
significant new injections of capital
were needed to reduce leverage
and support growth. It was for
these reasons that TAQA undertook
a restructuring of its treasury
management function.
The solution
TAQA appointed
PricewaterhouseCoopers to help
set up a Global Treasury Center
to manage TAQA’s funds flow in
all countries and currencies.
The company selected Amsterdam
The Global Treasury Center
required a single global banking
• Daily sweeping of cash balances.
• Host-to-host payment and
service provider. This mandate was
reconciliation connectivity to
awarded to Citi’s Global Transaction
TAQA’s SunGard treasury
Services in October 2008.
workstation.
TAQA will have a
single global banking
partner to help it
conduct its cash
management and
liquidity operations
effectively.
The arrangement, implemented in
early 2009, involved the provision by
Citi of a number of best-practice and
cutting-edge solutions, including:
• Domestic cash management
as the center to house its global
services for 30 legal entities
treasury operations due to a
in North America, Europe, and
number of favorable factors,
the Middle East.
• CitiDirect® Online Banking platform.
The result
As the program rolls out, TAQA
will have a single global banking
partner to help it conduct its cash
management and liquidity operations
effectively, which is an important
element towards achieving success
in its future businesses. Doug Fraser,
Chief Financial Officer of TAQA, says:
“By choosing Citi, we are gaining
access to its high-caliber expertise,
global footprint, and local knowledge.
Citi was able to provide us with
a solution that was flexible and
matched the needs of our company.”
37) extracting liquidity
32 from working capital
38) Inefficiency is now too costly to tolerate and there is a recognition that
extracting liquidity from working capital can potentially free up billions of
dollars, while integrated working capital solutions have direct, significant,
and beneficial impacts on companies’ balance sheets.
39) 34
Cytec Industries Inc.
Choosing payment channels to leverage financial advantages
Cytec Industries Inc. is a global specialty chemicals and specialty
materials company with 6,000 employees worldwide and annual
sales of USD3.5 billion.
40) The challenge
The solution
Like most companies, Cytec is
According to Gary Kawka,
its working capital goal but also
keenly focused on maximizing
Cytec’s Assistant Treasurer,
improve the strength of its supply
working capital. Even before the
Americas: “Payments can be
chain, recruiting new suppliers as
current environment of depressed
used to deliver additional value,
it extends to them the value-added
sales, increased operating costs,
be it strategic, financial, or
benefits of Supplier Finance.
and illiquid capital markets,
operational. We approached Citi
Cytec’s Treasury developed a
to help our organization move
sourcing strategy supported
from thinking of payments as
by innovative, secure payment
individual products to a process of
channels to defend and enhance
paying as the product our leading
its bottom line.
bank partner provides. We are
Having worked with Citi on
a successful Purchase Card
program and a global travel and
entertainment program, Cytec
turned once again to Citi for advice,
optimizing payments, benefiting
from the dynamic between timeto-procure, remittance date, and
settlement date.”
technology, and analytics, forging a
The result
comprehensive partnership across
Cytec’s knowledge of its own
its entire payments spectrum,
procurement process, coupled
one that would manage payment
with Citi’s detailed analysis of
streams to maximize cash flow and
payment strategy options and
working capital.
solutions to facilitate adoption and
implementation, has been essential
Cytec was also keen to hear Citi’s
to the ongoing implementation
options for optimizing the continued
of Citi® Paylink for Cards and a
growth of its Purchase Card program.
Supplier Finance program.
Cytec looks to not only accomplish
Citi colleagues continue to meet
with Cytec regularly to proactively
address training or implementation
requirements. Ongoing systemic
payments reviews continue as well,
identifying opportunities to increase
payment efficiencies through
enhanced solutions.
41) “Payments can be used to deliver
additional value, be it strategic, financial,
or operational. We approached Citi to
help our organization move from thinking
of payments as individual products to
a process of paying as the product our
leading bank partner provides.”
Cytec Industries Inc.
42)
43) mitigating risk and
38 sourcing alternative
funding
44) Companies should partner with a global bank that can offer efficient, end-toend solutions across geographies and provide an array of risk management
techniques — from letter-of-credit confirmations to undisclosed payment
guarantees to accounts receivable discounting.
45) 40
China Petroleum & Chemical Corporation (Sinopec)
Thriving ADR program substantially increases shareholder
base and liquidity
Sinopec is a major Chinese energy and chemical company with
integrated upstream, midstream, and downstream operations,
and oil and petrochemical businesses.
46) The challenge
international clients and helps
access, and proactive account
When state-owned Sinopec decided
them build programs to effectively
management has been instrumental
to list American Depositary
communicate with US investors.
in helping Sinopec build a diversified
Receipts (ADRs) on the New York
Stock Exchange in 2000, it had the
goal of growing its shareholder
base, enhancing liquidity, and
being recognized as an important
global player. Sinopec had limited
experience with the investor base
outside Asia and did not have an
Investor Relations (IR) program.
It needed to understand the
Sinopec chose Citi because its global
reach provided extensive access
to investors and broker-dealers.
Citi supported Sinopec’s program
with IR training, website advice,
shareholder base. The company’s
effective communication with
investors was also instrumental in
achieving global recognition for its
IR program.
designing an IR outreach program,
“Citi has helped us to broaden
investor targeting, organizing
our investor activities in the US
roadshows in the US, and strong
and other global markets,” says
US and local support.
Wensheng Huang, Deputy Director
expectations of US and European
Additionally, Citi assisted Sinopec
investors and learn how to conduct
with state-of-the-art technology
a successful IR outreach program
systems (Global Shares on Demand
to attract this new investor base
and Issuer Access) to enable the
to its equity.
company to get better information
on its new and existing investor base.
The solution
General, Board Secretariat,
Sinopec. “Through our joint efforts,
our shareholder base has been
increased from 6,000 to 20,000 —
aiding Sinopec’s liquidity.” He adds:
“Citi understands our needs, not
only in terms of investor relations
but at a higher level. That’s why
Citi has met the needs of
The result
Depositary Receipt (DR) issuers
Sinopec has enhanced its reputation
since 1928. Its Depositary Receipt
as a rapidly growing global player in
Services group is recognized
the energy and chemical sector with
for having former IR officers on
a highly recognized ADR program.
the team. It has a strong and
Citi’s ongoing assistance with IR and
diverse IR knowledge that serves
capital markets training, investor
we’re committed to a long-term
partnership with the bank.”
47) “Citi has helped us to broaden our investor
activities in the US and other global
markets. Citi understands our needs, not
only in terms of investor relations but at a
higher level. That’s why we’re committed to
a long-term partnership with the bank.”
China Petroleum & Chemical Corporation (Sinopec)
48)
49) 44
Reliance Industries Limited (RIL)
Receivables finance mitigates risks, increases working capital,
and diversifies funding
India’s RIL is a Fortune 500 company with activities in oil and gas,
petrochemicals, and textiles.
50) The challenge
in India — set up credit lines
not available in the Indian market.
In December 2008, RIL established
with each of its counterparties.
The solution provided financing at
a new refinery adjacent to its
Based on these lines, Citi Bahrain
competitive rates while introducing
existing refinery, doubling its
issued payment undertakings to
new diversified sources of funding.
refining capacity and requiring the
purchase receivables from these
company to find new markets for its
oil counterparties in the event of
increased production. RIL needed
non-payment on the due date on
to mitigate the risks associated
account of counterparty insolvency.
with this expansion in sales and
Consequently, RIL was able to
required substantially increased
achieve risk mitigation. In addition,
working capital funding. The
by making use of the agreed credit
company also wanted to improve
lines, RIL gained access to export
its balance sheet management and
funding and diversified its sources
diversify its sources of funding.
of funding, improving its balancesheet management.
The solution
Citi India structured a limited-
The result
recourse receivables purchase
The refinery came on stream in the
solution for RIL for financing its
first quarter of 2009 and Citi began
post-shipment sales to global oil
implementing the limited-recourse
majors such as BP Singapore, BP
receivables purchase solution
Oil United Kingdom, and Kuwait
immediately.
Petroleum International Aviation
Netherlands.
RIL met its specific counterparty
risk mitigation requirements and
Citi Bahrain — used because limited-
its liquidity management objectives
recourse financing is not permitted
using a complex structure that was
The solution benefited from Citi’s
strong relationships with RIL’s
counterparties, which facilitated
the establishment of the credit lines
that underlay the deal’s structure.
51) 46
OGK-4
Expansion for large-scale operations in central Russia,
Siberia, and the Urals
OGK-4 is the largest wholesale thermal generating company in Russia,
with the power volume to provide approximately 5% of total power
production in the country. OGK-4 consists of one-of-a-kind power plants
in terms of their technical and economic characteristics, including the
largest Eurasian thermal power plant.
52) The challenge
and launched a syndication in
The result
Russian state-owned Wholesale
the secondary market. Citi’s
Generating Company 4 (OGK-4)
extensive relationships with
2007” by Trade Finance, this
sought financing for the
financial institutions globally
complex transaction was conducted
construction, engineering and
helped overcome the adverse
smoothly, successfully enabling
commissioning of a 400-MW
credit environment, while a close
OGK-4 (subsequently acquired
power station by an overseas
Citi and ABN AMRO working
by E.ON of Germany) to extend
consortium. It needed two stand-
relationship resulted in a single set
its generating capacity. OGK-4’s
by letters of credit (SBLCs) of
of documents for the transaction,
introduction to the international
EUR140 million from internationally
easing OGK-4’s administrative
banking community by syndication
recognized banks to meet its
burden. And, though the SBLC
left the firm well placed to
payment obligations. OGK-4 faced
was issued in London, as required
potentially tap into the global capital
two obstacles: the dampened
by the consortia, most of the
markets for further expansion.
credit appetite of large banks
administration of the deal was
owing to the US subprime crisis;
conducted by the banks’ local
and the initiation of privatization
teams in Russia. That one of the
proceedings by RAO UES, Russian’s
two beneficiaries was also a Citi
energy monopoly, leaving lenders
client helped secure transaction
uncertain as to what the identity
terms acceptable to the consortia.
of the ultimate creditor might be.
The solution
An extensive tendering process
saw OGK-4 issue a joint mandate
to Citi and ABN AMRO for the
two SBLCs, who then structured
Citi’s extensive
relationships with
financial institutions
globally helped
overcome the adverse
credit environment.
Recognized as “Deal of the Year
53) 48
TNK-BP
Leading Russian oil company implements funding solution to
raise capital on demand
TNK-BP is a leading Russian oil company and is among the top ten privately
owned oil companies in the world in terms of crude oil production.
Operating a retail network of approximately 1,400 filling stations in Russia
and the Ukraine, the company is one of the key suppliers to the Moscow
retail market and is a market leader in the Ukraine.
54) The challenge
The initial program size gave
The result
Formed in 2003, as a result of the
TNK-BP the ability to raise
merger between BP’s Russian oil and
USD5 billion over multiple note
services enabled TNK-BP to access
gas assets and the oil and gas assets
issuances, depending on funding
the international capital markets to
of Alfa, Access/Renova group (AAR),
requirements. Two years later, Citi
meet its funding objectives, backed
TNK-BP employs some 63,000
worked with TNK-BP in updating
by Citi’s unrivalled global footprint,
people, mostly located in eight major
the program size to USD8 billion.
compelling branding power and
areas of Russia and the Ukraine.
Considering the size and scale
of TNK-BP’s operations, TNK-BP
wanted a funding solution that
would enable it to raise capital as
and when required. This was solved
by establishing a medium-term note
program that would give TNK-BP the
ability to access the international
capital markets to achieve its goals.
The solution
Acting as the calculation agent,
leading issuing and paying agent,
note trustee, registrar, and
transfer agent, Citi could issue
notes into the clearing systems
on behalf of the company.
Citi’s dedicated Agency and Trust
world-market expertise.
TNK-BP wanted a
funding solution
that would enable
it to raise capital as
and when required.
This was solved
by establishing a
medium-term note
program that would
give TNK-BP the
ability to access the
international capital
markets to achieve
its goals.
55)
56) Citi’s dedicated Agency and Trust services enabled
TNK-BP to access the international capital markets
to meet its funding objectives, backed by Citi’s
unrivalled global footprint, compelling branding
power and world-market expertise.
TNK-BP Case Study
57) driving operational
52 efficiency
58) Manual intervention and diverse processes in different regions often
inhibit straight-through processing, resulting in longer processing cycles,
increased settlement risk, and higher operating costs. Many companies
have re-engineered their key financial processes to drive operational
excellence through automation and centralization.
59) 54
Anvil Mining
Streamlined approach to cash management meets ambitious
growth objectives
Australia-based Anvil Mining is a leading copper producer in the
Democratic Republic of Congo (DRC). After significant challenges
posed by the global financial crisis, Anvil is now focused on developing
its flagship Kinsevere II project.
60) The challenge
The solution
A significant deterioration in the price
In collaboration with Citi, and building
jurisdictions and underpinned by
of copper during 2007-08, increases
on Anvil’s decision to establish a
automated reporting tools that help
in operating costs, and illiquid capital
single global cash management
optimize the use of cash.
markets provided major headwinds.
platform, Anvil expanded the number
For Anvil, these pressures were
of group accounts to 36 across
compounded by reviews into mining
four branches. With local account
licenses in the DRC and operational
services, automated domestic and
issues. In response, management
cross-border supplier payments,
developed a plan to reduce all but
online investments for multicurrency
essential capex, while reducing opex
cash balances, and a commercial
to all but essential operations. At
cards program all implemented, Citi
the core of the company’s plan was
has assisted Anvil in managing its
a rigorous cost-cutting initiative
suppliers and contractors efficiently.
and a strong partnership with Citi
to deliver efficiencies, flexibility, and
costs reductions by deploying Citi’s
integrated solution for managing
Importantly, Citi’s platform enabled
Anvil to separately manage and
track capex drawn under its recently
payment and receivable flows.
executed equity and debt facility,
Despite this, Anvil succeeded in
operations and internally generated
raising USD200 million using debt
cash flows.
distinguishing it from its ongoing
and equity to resume Stage II of its
Kinsevere project in the DRC and
the construction of an SX-EW plant
that would produce 60,000 tons a
year of LME-grade copper cathode
and significantly enhance the
company’s cash flows.
The result
Simplification yields efficiency
and transparency. Anvil’s finance
team in Perth now enjoys oversight
over all group accounts, enabling
faster decision-making across all
Anvil Mining’s Financial Controller,
Lui Evangelista, notes: “By
relocating onshore accounts to Citi’s
multicurrency center in Singapore,
Anvil addressed withholding-tax
issues and removed inefficiencies by
using Citi’s clearing capabilities while
consolidating its banking partners.”
Citi continues to meet with Anvil
to discuss further improvements
in operational efficiency, including,
most recently, an agency and trust
solution to manage its obligations
under its debt facility.
61)
62) “By relocating onshore accounts to Citi’s
multicurrency center in Singapore, Anvil
addressed withholding-tax issues and removed
inefficiencies by using Citi’s clearing capabilities
while consolidating its banking partners.”
Anvil Mining
63) 58
Monsanto
Extracting value from electronic banking platforms to reach efficiency
Monsanto is an agricultural company with leading seed brands in
large-acre crops like corn, cotton, wheat, and oilseeds. Monsanto also
produces leading in-the-seed trait technologies for farmers, which are
aimed at protecting famers’ yields, supporting their on-farm efficiency,
and reducing their on-farm costs.
64) The challenge
program. The solution would provide
Monsanto was a satisfied user of
on-demand training for Monsanto’s
CitiDirect® Online Banking but
current and future CitiDirect
recognized it could get more
users, tailored to the company’s
from the platform. With a high
structure and needs. In addition,
rotation of staff and frequent
Monsanto’s site delivered company
new hires, Monsanto found that
news, reports, industry updates,
providing detailed training was
and articles explaining the latest
time consuming. Moreover, it was
functionality of the platform.
not always possible to provide
training at a convenient time for
the company and trainee. In
addition, some longstanding
Monsanto staff had overlooked
CitiDirect updates and weren’t
unaware of the new functionality,
resulting in the use of sub-optimal
methods to achieve their goals.
The result
Monsanto treasury professionals
can now access their customized
on-demand training, accompanied
by step-by-step voiceover tutorials,
in three levels of training 24 hours a
day, 7 days a week. “This innovative
program ensures that consistent
and up-to-date training is available
The solution
to facilitate staff rotations,” says
Citi wanted to help Monsanto
Monsanto. This project served as a
improve its productivity using
pilot for customized training that
CitiDirect. Following onsite
developed from Citi’s Client Service
conversations to understand
Academy, which is now available
Monsanto’s processes, organization,
on four continents and in multiple
and training requirements, Citi
languages, free of charge.
created a tailor-made training
65) 60
Shell International
Global cards program rollout consolidates spending and
facilitates process control
Shell is a global energy and petrochemicals company with 108,000
employees in more than 140 countries.
66) The challenge
The program is centrally run,
the UK, and the Netherlands among
Shell wanted a single global
billed, and settled, and it has a
the first to be implemented. Six
commercial card program for travel
single contact for implementation.
implementations are underway in
and entertainment (T&E) and low-risk
It offers a consistent solution
2010 and proposals for 2011 will be
procurement expenditure. “Shell’s
across all countries except where
developed, taking into account Citi’s
policy is to eliminate, standardize,
regulatory requirements dictate
own developing footprint. Around
simplify, and automate processes,
step-outs. International payment
90% of Shell’s global T&E spending
and a strategic card program meets
cards are used in markets where
is covered by the program, covering
that brief,” says Helen Buchanan,
Citi does not offer a local currency
47,000 cardholders in 27 countries.
Senior Manager at Shell.
solution, such as the United Arab
Emirates, Qatar, or Luxembourg.
Shell has gained a detailed
visibility and control of spending
Shell runs a trust-based system
enabling procurement to leverage
and to capture consolidated global
(where expenditure reports do not
consolidated spending effectively
spending with key suppliers. It also
require supervisor physical sign-
while also facilitating more efficient
wanted to manage the card program
off) with preventative and detective
process control. “Initially the
from its Shared Business Centers,
processes in place as a safeguard.
support of senior management
Shell’s goal was to improve its
minimizing card users’ administrative
burden in the process.
“Shell has a robust program
structure and a strong risk-based
control framework,” says Buchanan.
The solution
“It’s vital to protect the reputation
Citi was selected in 2005 to
and integrity of the company.”
implement a global commercial
card program on the strength of
its global footprint and competitive
pricing. In December 2008, the
master agreement was updated
and extended to 2013.
The result
A phased implementation
determined by country spending has
been rolled out since 2005, the US,
insight into its global spending,
allowed us to overcome resistance
to change; based upon the success
of the program, we now have legal
entities in remaining countries
approaching us and asking to be
included,” Buchanan says.
67) Global Transaction Services
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68)
69) Energy, Power, Chemicals, Metals, and Mining Casebook 2010 — 2011
Global Transaction Services
