Update: Freeport LNG project-financing

White & Case LLP, who represented Freeport LNG and its subsidiaries in the successful close and funding of the Freeport LNG multi-train natural gas liquefaction and export facility, have announced details of the transactions in the combined financing.

The global law firm structured five distinct transactions.

First, White & Case represented Freeport LNG in a negotiated joint venture between Freeport LNG and Osaka Gas Co. Ltd. (Osaka Gas) and Chubu Electric Power Co. Inc. (Chubu Electric) in respect of Train 1 of the Freeport LNG facility. Pursuant to these arrangements, Osaka Gas and Chubu Electric will together acquire a 50% equity interest in Freeport LNG’s subsidiary, FLNG Liquefaction LLC (FLIQ1), in consideration of up to US$ 1.24 billion of committed cash equity funding. Osaka Gas and Chubu Electric are also the offtakers of liquefaction services for the full committed capacity of the first train.

Second, White & Case represented Freeport LNG in the US$ 4.369 billion export credit agency-supported debt financing of Train 1. The Train 1 debt financing is being provided by Japan Bank for International Cooperation (JBIC) through a direct loan, which is insured by Nippon Export and Investment Insurance (NEXI) to be funded by The Bank of Tokyo-Mitsubishi UFJ Ltd; Sumitomo Mitsui Banking Corp.; Mizuho Bank Ltd; Sumitomo Mitsui Trust Bank Ltd; Mitsubishi UFJ Trust and Banking Corp.; and ING Bank N.V., Tokyo Branch, and certain uncovered working capital loans provided by such commercial banks. The Train 1 financing is the first LNG financing by JBIC and NEXI that did not include a completion guaranty and the largest JBIC financing in the US to date.

The law firm also represented Freeport LNG in the competitively tendered auction for the cash equity investment in Freeport LNG’s subsidiary FLNG Liquefaction 2 LLC (FLIQ2), which was won by Industry Funds Management (IFM). IFM was among five shortlisted infrastructure and private equity investors that ultimately bid for the right to invest over US$ 1.3 billion of Train 2 equity. 

Fourth, White & Case represented Freeport LNG in the US$ 4.025 billion debt financing of Train 2. The Train 2 debt financing was structured as a seven-year mini-perm construction facility with an anticipated takeout in the capital markets. The Train 2 debt financing is being provided by a syndicate of 25 commercial banks. BP is the offtaker for the committed firm capacity of Train 2. 

Finally, White & Case represented Freeport LNG in the structuring of a wide array of complex commercial arrangements among FLIQ1, FLIQ2 and the owners of subsequent liquefaction trains. These commercial arrangements underpin the integrated development of the Freeport LNG facility by FLIQ1, FLIQ2 and the owners of subsequent liquefaction trains and the mutualised production from the liquefaction trains upon completion. 

Complex contract

White & Case has confirmed that it developed many first-in-kind contractual arrangements across the various work streams, including joint funding arrangements to fully mitigate project-on-project risk and the first deal-contingent interest rate swap in any major project finance transaction, which locked in interest rates for the Train 2 debt months prior to closing with no recourse to Freeport LNG or IFM. The innovative multi-borrower financing structure also created a wide array of complex issues of first impression both within and between the various individual equity and debt financing structures that required highly bespoke structural mitigants.

“We are proud to have worked shoulder-to-shoulder with Freeport LNG and their financial advisor Macquarie Capital to structure this landmark financing,” said partner Jason Webber, who leads White & Case’s multiple teams of lawyers. 

White & Case is also representing Freeport LNG in the equity and debt financing of Train 3 of the Freeport Facility, which is expected to close in Q2 2015. SK E&S and Toshiba are the offtakers for the committed firm capacity of Train 3.

Adapted from press release by Callum O'Reilly

Read the article online at: https://www.lngindustry.com/liquefaction/26112014/update-freeport-lng-project-financing-1859/