[Cancelled] ICBC provides $198 million export buyer’s credit for Caribbean Floating LNG (CFLNG) Project (Linked with Record ID#88167)

Project narrative

On June 23, 2015, Industrial and Commercial Bank of China ltd (ICBC) and Exmar — a Belgian shipping company that specializes in liquefied gas logistics and storage — signed a $198 million export buyer’s credit agreement for the Caribbean Floating LNG (CFLNG) Project (captured via Record ID#88165). The borrowing terms of the loan are unknown. The purpose of the project was to build and acquire the world's first floating LNG (FLNG) storage facility. The contractors responsible for the construction of this floating LNG storage facility were Wison (Nantong) Heavy Industry Co., Ltd. and Wison Offshore Engineering Co., Ltd. The FLNG ordered by EXMAR was to be the world’s first floating natural gas liquefaction unit. It was expected to have the functions of natural gas processing, liquefaction and storage, and represents the new generation of offshore units. The unit, which was 95% complete as of March 2015, was originally expected to serve as the gas project of Pacific Rubiales Energy, which is the second biggest oil and gas company of Colombia. However, in March 2016, Exmar and Pacific Exploration & Production (PEP) agreed to terminate a 15-year tolling agreement (liquefaction and storage agreement) because PEP was facing a possible Chapter 11 filing (bankruptcy). Miguel de Potter, Exmar’s CFO, told a media outlet that the contract termination would limit his company’s exposure to a possible bankruptcy filing by PEP. 'Looking at the latest press releases, we have a fair chance to see that they will default on their [loan] covenant and will sometime end up in a Chapter 11 situation. By terminating the contract, we can open up the vessel to other opportunities,' Potter said. In March 2016, Exmar put out a press release, which said that '[s]ince the execution of the tolling agreement, the domestic natural gas market in Colombia and international LNG market have changed substantially making the liquefaction of LNG in Colombia no longer economic for PEP.' During 2016, the export buyer’s credit agreement with ICBC was also cancelled. Then, on July 27, 2017, Exmar announced that it had taken delivery of the CFLNG from Wison Offshore & Marine in the People’s Republic of China. The CFLNG consists of a 500,000 tons per year floating liquefaction plant with 16,000 m3 of LNG storage and will remain moored in Wison Shipyard. Then, in August 2018, Exmar agreed to deploy CFLNG as a pilot production system for LNG export in Bahía Blanca, Argentina. A contract was signed by Exmar and the Argentinian Oil and Gas Company (YPF S.A.) on November 20, 2018 and the Caribbean FLNG became the Tango FLNG. Site specific modification and reactivation works were carried out in China, where the Tango FLNG unit was laid up. It was loaded onto a semi-submersible heavy lift vessel (HLV) close to Shanghai in December 2018. In parallel, gas treatment and compression equipment was sourced and procured, and modifications to the jetty were completed. The unit arrived in Bahía Blanca in February 2019. After mooring up, commissioning activities were started, ultimately resulting in the successful delivery of a first LNG cargo on June 6, 2019. Shortly after the cancellation of the ICBC agreement, Exmar entered into negotiations with Bank of China (BoC). Following the signature of a term sheet in November 2016 with BoC and the approval of terms by the latter’s credit committees in December 2016 and January 2017, Exmar finalized the documentation required to enable parties to sign the credit agreement. The final credit agreement with BoC was subject to the approval of the credit insurer, Sinosure. Exmar originally expected this approval to be available by mid-April 2017. Ultimately, at the end of June 2017, EXPORT Lng Limited -- a 100% subsidiary of EXMAR NV -- signed a $200 million loan agreement with Bank of China (Boc) and Deutsche Bank for the financing of the TANGO FLNG (captured via Record ID#88167). This loan, which was insured by Sinosure, was fully disbursed (drawn down) as of July 27, 2017. The agreement with BoC provided for a repayment period of 12 years and the loan bore interest at a rate of six-month LIBOR plus a 3% margin. The yearly estimated debt service amounted to $21.3 million. All obligations of the borrower were guaranteed by EXMAR NV (“guarantor”). There was a requirement for the owner to deposit an amount of $66 million in an escrow account (debt service reserve account). On February 26, 2020, Bank of China released $40 million from the debt service reserve account. The relaxation of the cash collateral followed the steady operational results of the TANGO FLNG since September 2019, under the 10-years’ charter with YPF S.A. The $40 million was partially allocated to the repayment of the bridge loans and to cover Exmar's capital commitments. TANGO FLNG was performing 20% above its designed capacity in Argentina until May 2020. Since its arrival in 2019 at the Bahia Blanca terminal in Argentina up to May 2020, TANGO FLNG delivered five shipments or 624,000 m³ of LNG to its customer (YPF S.A.) with an availability of 99%. However, the Argentinian Oil and Gas Company (YPF S.A.) invoked an alleged force majeure during the COVID-19 crisis, stopping all payments to Exmar. The dispute was referred to arbitration and ultimately YPF S.A. and Exmar came to a settlement whereby the 10-year contract for the TANGO FLNG was terminated. YPF S.A. is responsible for paying Exmar a cancellation fee worth $150 million payable over a period of 18 months, with payments secured. The balance of the settlement amount was payable by YPF S.A. in 13 monthly installments backed by a financial security issued by an investment grade counterparty. Meanwhile, the TANGO FLNG unit had been demobilized from Argentina and stationed in a sheltered location in Uruguay. After the effective termination of the contract with YPF S.A. in October 2020, marketing was in full swing and, given its status as a fully-proven facility, there was healthy interest from the market for the redeployment of TANGO FLNG. The fact that the start of 2021 saw increased price levels of oil and gas globally was also expected to create opportunities for reactivation. The (principal) amount outstanding under the $200 million BoC and Deutsche Bank loan was $121.6 million as of June 30, 2020. Then, on August 17, 2022, the loan was fully repaid and the related restricted cash balance (in escrow) was released.