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Oil and gas — case study

Cairn India – Cutting-edge financing, Innovative Community development

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We welcome investment inquiries regarding all emerging markets. If you have an oil and gas project at any stage of planning or develop-ment, please contact us to see how we may be able to support and add value to your project.

Lance Crist Global Head, Oil and Gas Investments E-mail: lcrist@ifc.org Phone: + 1 (202) 473-0773 www.ifc.org/ogmc

Cairn Energy, an oil and gas company focused on exploration and production in South Asia, asked IFC in 2006 to provide compre-hensive support for development of its oil discoveries in Rajasthan, India. Cairn sought commercially-oriented financing combined with environmental advice and help in outreach to local communities. The ambitious project included exploration, appraisal, and phased development drilling, water injection, construction of oil processing, and transportation facilities.

IFC responded with a landmark financial and social development deal that met Cairn’s tight timeline:

• financing – $150 million IFC loan over nine years, giving international commercial banks the necessary risk assurance to provide an additional $850 million in five-year term funding. IFC then helped restructure the loan to facilitate Cairn’s Indian IPO. The financing was awarded “Asia-Pacific Independent Oil & Gas Deal of the Year 2006” by Project Finance/Euromoney.

• Community development – IFC’s social development special-ists took the lead in helping Cairn India establish an enterprise center, a rural dairy development project, and a child and ma-ternal health initiative to promote economic and social develop-ment around Cairn’s operations. The enterprise center provides expertise on business practices to local small and midsize firms in one of India’s least developed regions.

• environmental and social expertise – IFC provides guidance and assistance on environmental and social systems that are designed to manage large development projects.

• Investor Confidence – IFC’s long-term support, environmental and social stamp of approval, and community development advice provided other investors with the confidence to help finance the project.

Cairn requested IFC’s assistance to position the company for signifi-cant growth while helping reach its aspirations as a good corporate citizen. Cairn valued the long-term relationship with IFC and our role as a long-term investor:

• 2004: $40 million debt facility.

• 2006 (1st half): $150 million senior revolving corporate facility as part of a $1 billion credit facility. 2006 (2nd half): Restructuring credit facility to facilitate Cairn’s Indian IPO.

• 2007: IFC showed its commitment and confidence in Cairn by making a $21 million equity investment in the Indian entity after it had carried out a record-breaking IPO in India worth almost $2 billion.

Cairn, with IFC’s help, contributes to India’s long-term economic success by providing jobs and revenues and through its commitment to local community development.

“IFC’s sustained support to Cairn’s long-term capital needs has helped provide confidence to our other investors and helped us mobilize an $850 million loan for our projects in India. IFC has brought a lot of expertise to the deal. We appreciate both their commercial approach and their positive involvement in other developmental areas of the business.”

Rahul Dhir, CEO Cairn India

Milk collection and quality measuring center, part of IFC / Cairn-sponsored project to assist local dairy farmers.

Cairn India Operations