RE:Shell Transfer Applications Set for an AER Public Hearing I have always thought that Shell is a de facto guarantor of that $206m term loan- that if the AER declines the transfer, or Pieridae defaults.... Shell has to pay the loan off.
The 15% interest Pieridae pays is oviously a lot for them (it keeps them cash starved). But that is just breakeven for the business Third Eye is in. It keeps them from losing money. When they put that money up their upside was Pieridae succeeding with the FID. But that was always a big crapshoot.... and the downside of that was losing everything if the FID did not happen. (They could not turn around and sell the Fotthill assets.)
So the downside was huge, unless "someone" was guaranteeing the loan....
Pieridae has already been in default on a number of counts. But even after they stop being able to make full payment on interest (they are at least on the verge)... if Third Eye has a guarantee on the loan, it is not in their interest to call it in until/if an FID becomes practically impossible..... because once they call the loan, they can never get the big payday they are after from all that stock they own.
msawyer5 wrote: The Alberta Energy Regulator (AER) has decided not to approve the Shell applications to transfer the so-called "foothills assets" to Pieridae at this time and instead has referred the applications to a public hearing process. Over 35 individuals, organizations and corporations, some from the oil and gas industry, filed statements of concern opposing the asset transfer, largely because of concerns that Pieridae will not have the financial capability to safely operate the foothills assets or to take responsibility for the environmental liabilities associated with the assets, estimated at nearly $3 Billion. The AER has not yet appointed a hearing panel or issued a Notice of Hearing and the hearing dates and location will be announced shortly.
So I wonder, how can Pieridae proceed with a FID, which the deadline is coming up fast, without getting a resolution about whether or not they will be able to gain ownership of the foothills assets. Additionally, if they do not gain ownership, what are the contractual implications with Shell and the financial implications for Pieridae. Time will tell but this is starting to look very shaky...
I'm interested in what others think?