Narrative
Full Description
Project narrative
On November 25, 2014, financial close was reached on a deal in which a syndicate of 26 banks — including the Industrial and Commercial Bank of China (ICBC) — entered into a $4.02502 billion USD syndicated loan agreement with FLNG Liquefaction 2, LLC (FLIQ2) — a Delaware-incorporated special purpose vehicle wholly-owned by FLIQ2 Holdings, LLC, a Texas-incorporated SPV and joint venture of Freeport LNG Expansion, L.P., a Delaware-incorporated wholly-owned subsidiary of Delaware-incorporated American liquefied natural gas developer Freeport LNG Development, L.P. (FLEX) (42.4% equity stake) and IFM FLIQ Holding GP, a Delaware-incorporated company, a subsidiary of IFM Global Infrastructure Fund (IFM GIF), a Cayman Islands-incorporated global infrastructure investment fund advised by Australian investment management firm IFM Investors Pty Ltd (57.6% equity stake) — for Train 2 of the Freeport Liquefied Natural Gas (LNG) Project. This mini perm loan was divided into two tranches: a $3.97501 billion USD term loan tranche and a $50.00 million USD working capital tranche. This loan carried a maturity period of seven years, a final maturity date of November 25, 2021, a variable interest rate based LIBOR plus a margin of 225 basis points (bps), and a commitment fee of 90 bps. ICBC contributed $84.15 million USD to the $3.97501 billion USD term loan tranche, as captured by Record ID#107589. 26 lenders, including ICBC, contributed to the tranche: Bank of Montreal ($84.15 million USD), Barclays Bank Plc ($84.15 million USD), Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) ($150.53 million USD), Canadian Imperial Bank of Commerce (CIBC) ($84.15 million USD), Crédit Agricole Group ($230.00 million USD), Credit Suisse AG ($186.06 million USD), Deutsche Bank AG ($150.53 million USD), General Electric Capital Corporation (GE Capital) ($150.00 million USD), Goldman Sachs Group Inc. ($150.53 million USD), HSBC Bank ($230.00 million USD), ING Group N.V. ($186.06 million USD), Intesa Sanpaolo S.p.A. ($150.53 million USD), Lloyds Bank plc ($230.00 million USD), Metropolitan Life Insurance Company (MetLife) ($58.91 million USD), Mizuho Bank, Ltd. ($230.00 million USD), Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU) ($186.06 million USD), Natixis ($150.53 million USD), QBE Insurance Group Limited ($25.26 million USD), Royal Bank of Canada (RBC) ($150.53 million USD), Royal Bank of Scotland (RBS) ($150.53 million USD), Banco Santander, S.A. ($84.15 million USD), the Bank of Nova Scotia (Scotiabank) ($186.06 million USD), Société Générale S.A. (SocGen) ($186.06 million USD), Standard Chartered Bank plc ($230.00 million USD), and Sumitomo Mitsui Banking Corporation (SMBC) ($186.06 million USD). ICBC contributed $1.10 million USD to the $50 million USD working capital tranche, as captured by Record ID#107591. 22 lenders, including to ICBC, contributed to the tranche: Bank of Montreal ($1.10 million USD), Barclays ($1.10 million USD), BBVA ($1.97 million USD), CIBC ($1.10 million USD), Crédit Agricole Group ($3.01 million USD), Credit Suisse ($2.43 million USD), Deutsche Bank ($1.97 million USD), Goldman Sachs ($1.97 million USD), HSBC ($7.10 million USD), ING Group ($2.43 million USD), Intesa Sanpaolo ($1.97 million USD), Lloyds Bank ($3.01 million USD), BTMU ($2.43 million USD), Natixis ($1.97 million USD), RBC ($1.97 million USD), RRBS ($1.97 million USD), Santander ($1.10 million USD), Scotiabank ($2.43 million USD), SocGen ($2.43 million USD), Standard Chartered Bank ($3.01 million USD), and SMBC ($2.43 million USD). All 26 lenders served as mandated lead arrangers and Credit Suisse served as global syndication coordinator for train two. The proceeds were used by the borrower to finance the development of the 4.64 million tons per annum (mtpa) second liquefaction train of the Freeport LNG Project, a 13.2 mtpa three-liquefaction train complex and export terminal on Quintana Island on the Gulf Coast, south of Freeport in Brazoria County, Texas, about 70 miles south of Houston. The project used Air Products’ C3MR (AP-C3MR™) propane-precooled mixed-refrigerant liquefaction process and powered all trains with General Electric's 75 MW motors with variable frequency drives. The Freeport LNG Project was a conversion of an import facility to an export one due to the shale revolution in the United States. The project had a $5.34302 billion USD value, with $1.318 billion USD in equity from IFM Investors. The project had a debt-to-equity ratio of 75:25. Train 2 had a 20-year offtake agreement with BP Energy for 4.4 mtpa of liquefied natural gas (LNG). Train 2 was closed concurrently with Train 1, which had its own financing from a syndicate of Japan-based lenders and equity investors from Osaka Gas and Chubu Electric Power; together, the two projects were worth some $9.64 billion USD. Though Train 2 was financed via a standalone special purpose vehicle, Train 2's operation would be integrated into the total Freeport LNG Project, all managed by the same operations & maintenance provider, sharing costs, access to and ownership of various common facilities, and a joint bearing of he risk of operating performance. After installing Train 1 and 2, the existing regasification terminal was to be converted to a bi-directional facility capable of importing and exporting LNG. Upon completion of the entire project, Freeport LNG would consist of three liquefaction trains, three natural gas pre-treatment facilities, a second marine dock and loading lines, a 165,000 cubic meter full containment LNG storage tank, and related equipment and facilities. The entire project was expected to require a peak construction workforce of over 4,000 workers and 300 new full-time workers once in operation, and generate 25,000 to 30,000 permanent new jobs upstream for increased natural gas exploration, production and infrastructure development and offer geopolitical benefits by unlocking a new source of energy for U.S. allies and an expected reduction of the U.S. trade deficit by reportedly 1%. On July 30, 2014, the U.S. Federal Energy Regulatory Commission (FERC) approved the application for Freeport LNG to site, build, and operate the three liquefaction trains, including Train 2. On November 14, 2014, the U.S. Department of Energy issued final authorizations for the project to export LNG to non-free-trade-agreement countries for up to 20 years. A joint venture between CB&I, Inc. and Zachry Industrial, Inc. was awarded the contract to construct both Train 1 and 2. Train 2 was expected to be completed 50 months (January 2019) from the start of construction. Upon financial close on November 25, 2014, Freeport issued a full notice to proceed to CB&I, Inc. and Zachry Industrial, Inc. to construct the two trains. On December 6, 2019, production of LNG of Train 2 began. On December 18, 2019, the first commissioning cargo of LNG from Train 2 was completed. On January 17, 2020, Train 2 began commercial operations and commenced gas deliveries to BP. On January 21, 2020, IFM Global Infrastructure Fund transferred its 57.6% equity interest in Train 2 to Buckeye Partners, L.P., a wholly owned investment of IFM GIF. In June 2022, a fire and explosion occurred in a pipe rack near the LNG storage tanks at the facility, reportedly due an overpressure and rupture of a segment of an LNG transfer line connecting the facility’s LNG storage tanks to its dock facilities, leasing some 120,000 cubic feet of LNG. The project was taken offline, with a mandate from the U.S. Pipeline and Hazardous Materials Safety Administration to take corrective actions before it could be restarted. As of June 2023, after a series of anticipated and delayed restarts, all trains went back online. In January 2024, a freeze hit the facility which caused damage to Train 3's electric motors. As a result, Freepoint LNG reviewed Train 1 and 2 and found similar problems and in March 2024, Train 2 was temporarily shut down. In April 2024, Freeport LNG filed a lawsuit in Texas district court against Zachry Industrial (which filed for bankruptcy in May 2024), Chiyoda International, and CB&I alleging that their work on the project, including Train 2, had installation defects that caused prolonged outages and costly repairs; specifically, it alleged defects in electric motors resulting from loose assembly hardware, including nuts and bolts, a "significant partial discharge" partly due to excessively long cables, and additional workmanship issues found in Train 2. As of June 2024, the facility had experienced roughly a dozen incidents. Because of the LNG facility's large production capacity, these outages roiled global gas markets. In July 2024, Hurricane Beryl forced shutdown of the facility, which was reopened by the end of the month. In November 2021, Freeport announced plans to develop a carbon capture and sequestration (CCS) project adjacent to the project's gas pretreatment facilities. In April 2023, the Texas Commission on Environmental Quality fined Freeport LNG $152,173 USD for violating state air pollution emissions rules for periods between 2019 and 2021, with emissions exceeding allowable levels included carbon monoxide, hydrogen sulfide, nitrogen oxides, sulfur dioxide, and volatile organic compounds from the project.