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Freeport LNG closes third train financing

LNG Industry,

Freeport LNG Expansion announced that its subsidiary, FLNG Liquefaction 3 (FLIQ3) has successfully closed on senior and mezzanine debt financing commitments of approximately US$4.56 billion in capital for the construction of the third liquefaction train at Freeport’s facility in Texas.

The construction cost for the combined three-train project is expected to be US$12.5 billion, including owner's costs and interest during construction. An additional US$3.0 billion in funds were raised for refinancing and acquisition costs associated with the existing LNG import facility, letters of credit facilities, and a special contingency fund.

Notice to proceed

With this final milestone, Freeport LNG has issued a full notice to proceed to CB&I, Zachry Industrial and Chiyoda to construct the third train. Full three-train operation is expected by 3Q19. LNG production from the first liquefaction train is expected in early 2018, with commercial operation of the first train expected to commence by 3Q18.

Approximately US$3.64 billion in senior debt financing for the third train is being provided by a syndicate of 27 commercial banks under a 7-year mini-perm construction facility. Approximately US$925 million in equity financing for the third train is being provided through mezzanine debt financing.

FLIQ3 has entered into 20-year liquefaction tolling agreements totalling 4.4 million tpy with SKE&S LNG, LLC and Toshiba Corp.

Milestone achievement

Commenting on the occasion, Michael S. Smith, CEO of Freeport LNG, said: "We are excited to achieve this next great milestone in the advancement of the Freeport LNG liquefaction project. After over four-and-a-half years of incredibly hard work from so many people within Freeport LNG and from our bankers, lawyers, and consultants, we are pleased to finally have the full three-train project under construction.

“We are thrilled to have five of the top LNG industry participants as our customers, and world class infrastructure investors and LNG end users as our partners.

Economic growth

"This expansion will further the substantial economic growth opportunities in Texas and across the United States derived from the project. With the addition of a third train, the economic benefits derived from the project will be even greater. At peak construction, the project will employ a workforce of over 5000 workers and 300 new full-time workers once the facility is in operation. In addition, an estimated 30 - 40 000 permanent new jobs will be generated upstream of the project to support the increased natural gas exploration, production and infrastructure development required to meet the project's supply demands.

“Exports from the Freeport LNG project offer substantial geopolitical benefits as well, providing secure energy supplies to our key allies around the world and resulting in more than a 1% reduction in the US trade deficit."

Macquarie Capital is serving as Freeport LNG's sole financial advisor with respect to the financing for the project.

Adapted from press release by Katie Woodward

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