Korea Eximbank announced on October 6 that the Bank provided financing of USD 750 million for the takeover of the British oil and gas explorer, Dana Petroleum Plc. by Korea National Oil Corporation (KNOC, www.knoc.co.kr, CEO Young-Won Kang).

The funding provided will be used to bankroll KNOC’s purchase of the controlling stake and accounts for approximately 25% of the total estimate for the takeover, which is expected to reach USD 2.95 billion.

Korea Eximbank and KNOC have been in close partnership since signing a commitment agreement of USD 2 billion supporting KNOC’s prospective merger and acquisition (M&A) activities of overseas energy companies in February of this year.

With strong support from Korea Eximbank, KNOC was able to take drastic measures and attempt the hostile takeover once negotiations with Dana Petroleum Plc. fell through.

※ Korea Eximbank Financing for KNOC
- Peru Petro-Tech M&A (USD 50 million)
- Nigeria Offshore Exploration Project (USD 300 million)

Backed by Korea Eximbank, KNOC was able to takeover Dana Petroleum Plc and increase Korea’s self-sufficiency in developing oil and gas to double digits for the first time at 10.5%.

An official from Korea Eximbank said that “the Dana case is meaningful in that it paved a new way of securing overseas resources through a hostile company takeover. Korea Eximbank plans to continue using a wide variety of financial techniques such as reserve-based financing and increase its support for M&A activities in order to improve Korea’s self-sufficiency in developing oil and gas reserves.”

※ Reserve-based Financing is a financial technique that provides financing based on the cash flows generated from the future sale of encumbered reserves

※ Korea Eximbank financing support for M&A of overseas energy companies:
USD 150 million (2009) → USD 1.27 billion (as of October 2010)

Korea Eximbank plans to finance a total of KRW 3.2 trillion as opposed to its initial plan of KRW 2 trillion for this year to the development of overseas natural resources in order to promote the government’s plan of increasing Korea’s energy development capacity and helping Korean energy companies enter the global energy market.