Bank of China (Shandong Branch) contributes to a $800 million USD syndicated loan for the St. James Parish Methanol Production Facility Construction Project

Project narrative

On March 15, 2017, a syndicate of four lenders — the Shandong and New York Branches of the Bank of China (BOC), the Shandong Branch of the Export-Import Bank of China, and the Heze Branch of Evergrowing Bank (Hengfeng Bank) — entered into a $800.00 million USD syndicated loan facility agreement with YCI Methanol One, LLC — a United States-incorporated special purpose vehicle (SPV) and a wholly-owned subsidiary of Yuhuang Chemical, Inc. (YCI), a United States-incorporated wholly-owned subsidiary of Chinese private company Shandong Yuhuang Chemical Co., Ltd. — for the St. James Parish Methanol Production Facility Construction Project. The Bank of New York Mellon acted as collateral agent. BOC contributed $400.00 million USD, as captured by Records ID #108099 (Shandong Branch) and #110392 (New York Branch). China Eximbank contributed $200.00 million USD, as captured by Record ID #108100. Evergrowing Bank contributed $200.00 million USD, as captured by Record ID #108103. BOC served as original mandated lead arranger, bringing on the other two lenders, both as mandated lead arrangers. The New York Branch of BOC served as administrative agent. The proceeds were used by the borrower to finance the construction and development of 1.8 million metric tons per year methanol plant complex on a 1,300-acre site along River Road between the Mississippi River and Louisiana Highway 3127, on the former site of the old St. James High School, located in St. James Parish, Louisiana. The methanol plant to be the first stage of a planned three phase project, if a second plant and a methanol derivatives plant were viable. The project was expected to directly employ 100 permanent people (other reports claim 400 direct jobs) and create roughly 1,000 to 2,000 construction jobs. The project had a cost of $1.85 billion USD. Once operational, the plant was expected to sell between 60% to 70% of its production to American customers, with another 20% to 30% to Chinese customers and 10% to European ones. This was reportedly the first construction project financing for a U.S. greenfield financed entirely by a Chinese syndicate debt providers. It was also the first private company project financing led BOC in the United States. This was largest Chinese-invested greenfield project in the Mexican Gulf Coast region. This was the largest greenfield investment by a Chinese company in Louisiana. This was Yuhuang's first United States project. The project was announced in July 2014, with praise from Louisiana officials including governor Bobby Jindal. The project received extensive support from the State Government of Louisiana (which helped win the site for the project), including $11.2 million USD in performance-based grants for infrastructure and riverfront improvements to be paid over a decade and $300 million USD in state property tax exemptions, though the project would still pay St. James Parish in nearly $110 million USD property tax. Yuhuang Chemical purchased the land for the project in late July 2015, originally intending construction to begin in 2016 and operations to begin in early 2018. In August 2015, Yuhuang Chemical signed a 20-year agreement with the Transcontinental Gas Pipeline to deliver gas to the site. Amec Foster Wheeler won the $604 million USD engineering, procurement, and construction (EPC) for the project in September 2017. Nexant served as independent engineer, providing technical and marketing advisory for the project. The project used steel from the U.S. market in anticipation of and allowing it to avoid tariffs on imported steel enacted by the administration of U.S. President Donald Trump. Construction began on January 9, 2017 with an expected completion date in the fourth quarter of 2019. The project received opposition faced on environmental grounds. In 2015, environmental group asked the U.S. federal government to block an air operating permit for the complex, arguing it would be a major pollution source. In May 2015, the Environmental Protection Agency (EPA) approved a permit for the first phase of the project. The rural west bank and northern east bank of St. James host predominantly African-American communities, leading local community and local and national environmental groups to argue the pollution was having a disparate impact on that community. Because of environmentalist objections, some air permits from Louisiana's Department of Environmental Quality (DEQ) were modified, though the project still had a permit to release small amounts of natural gas to re-up an auxiliary boiler. A wastewater discharge permit, which was also granted, also was criticized for potential contaminations of Mississippi River drinking water systems downstream, though DEQ stated the the discharge testing protocols were to be protective of public health. On August 22, 2018, Koch Methanol Investments LLC, a subsidiary of Koch Ag & Energy Solutions, LLC, itself a subsidiary of Koch Industries, entered into a definitive investment agreement with YCI in which Koch Methanol acquired a 40% indirect minority equity interest in YCI Methanol One, LLC for $400 million USD and the exclusive methanol offtake rights or the plant, as well as an agreement to construct, own, and operate the methanol terminal assets for the outbound flow of methanol via marine, rail, and truck logistics. The project had run into financial headwinds, which the Koch investment helped address. In 2019, Koch acquired a further 20% in the project, raising its ownership to 60%. Koch and YCI later fell into legal dispute over the project. In June 2020, Yuhuang Chemical filed a lawsuit in the Delaware Court of Chancery accusing Koch Methanol of a bad faith attempt to "usurp" Yuhuang's remaining 40% interest in the plant by falsely asserting cost overruns in late 2019 and early 2020 totaling over $38 million USD and twice engaging a self-help loan provision in their contract to pull money out of the project equivalent to the overruns, which Yuhuang alleged would require the required that YCI Methanol One's entire $400 million USD stake in the project be put up as collateral (Yuhuang claimed the expenses were Koch's to pay). Koch Methanol denied the attempt, though claimed it took a greater management and financial role, cutting Yuhuang breaks on its financial obligations and making greater cash outlays to keep the project afloat. Koch Methanol also accused Yuhuang of failing to fully disclose the project's financial condition by millions of dollars before Koch Methanol's initial investment in 2018. On October 28, 2020, Koch entered into an equity purchase agreement with YCI to purchase all of YCI's equity interests in holding company St. James Holding LLC. On December 29, 2020, a Delaware judicial officer dismissed the suit after the two parties claimed they had reached a confidential settlement, which apparently included the sale. The sale was completed and YCI Methanol One, LLC was renamed Koch Methanol St. James, LLC. The plant began operations in 2021.