Corporate Finance

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Funding for Growth at BG Group Over the past three years BG Group has entered a major investment phase and this resulted in substantial changes to the balance sheet. Consequently, the company had to devise and implement changes to its funding strategy.

Funding for Growth at BG Group

by Pedro Zinner, Group Treasurer & Acting Group Head of Tax, BG Group

BG Group plc has experienced a remarkable transformation since privatisation in 1986, and its demerger from British Gas plc in 1997. The company has now developed into a high growth global E&P and LNG business with a market capitalisation of around $60bn. This was achieved by generating consistently strong cash revenues as a result of its ambitious and successful growth strategy. Over the past three years BG Group has entered a major investment phase and this resulted in substantial changes to the balance sheet: for example, as the company noted in its first quarter results last May, it now has a net debt position of $10.6bn and $4.2bn in surplus cash. Consequently, the company had to devise and implement changes to its funding strategy, as Pedro Zinner discusses in this article.

Treasury objectives

We have an efficient treasury function at BG Group, covering a wide range of funding, investment, risk and cash management responsibilities. To ensure that our activities are aligned with industry best practices and the needs of the business, we frame our activities within a series of core treasury objectives:

i) To implement an optimal debt structure that is aligned with our five-year business strategy and which enables us to optimise our capital structure and cost of funds;

ii) To adopt the most appropriate cash management techniques to effectively allocate resources and optimise cash balances;

iii) To enhance the integrity, accuracy and control of our processes and information flows.

With a change to market conditions and perceptions of risk since the global financial crisis and a shift in our borrowing requirements, financing the business in a sustainable and cost-effective way is clearly a key priority. When devising our funding strategy, we have a number of key considerations to enable us to achieve this.

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