ICBC contributes to $1.26 billion syndicated loan for Mozambique Liquefied Natural Gas (LNG) Project

Project narrative

On July 15, 2020, Moz LNG1 Financing Company Ltd — a special purpose vehicle (SPV) that is legally incorporated in the United Arab Emirates and jointly owned by TOTAL E&P Mozambique Area 1, Limitada [TEPMA1] (26.5% equity stake), Mitsui E&P Mozambique Area 1 Limited (20% equity stake), ENH Rovuma Área Um, S.A. (15% equity stake), ONGC Videsh Rovuma Limited (10% equity stake), Beas Rovuma Energy Mozambique Limited (10% equity stake), BPRL Ventures Mozambique B.V. (10% equity stake), and PTTEP Mozambique Area 1 Limited (8.5% equity stake) — signed a $14.9 billion senior debt financing agreement with a group of banks and financial institutions for the Mozambique Liquefied Natural Gas (LNG) Project. The project then achieved financial close on October 1, 2020. Direct lenders included JBIC ($3 billion), US Exim ($4.7 billion), Thai Eximbank ($150 million), African Development Bank ($300 million), and UKEF ($300 million). Several export credit agencies served as guarantors for these direct (bilateral) loans: NEXI, UKEF, ECIC, SACE, and Atradius. A group of commercial banks — including MUFG, Standard Chartered, Mizuho, Industrial and Commercial Bank of China (ICBC), Societe Generale, SMBC, ABSA, and IDC — also issued a $1.26 billion syndicated loan to Moz LNG1 Financing Company Ltd with a 16-year maturity. The borrower purchased a credit insurance policy from Sinosure. In order to finance its equity contribution to the Mozambique Liquefied Natural Gas (LNG) Project, ENH Rovuma Área Um, S.A. — a wholly owned subsidiary of Empresa Nacional de Hidrocarbonetos (ENH), which is itself a wholly state-owned energy company in Mozambique — secured shareholder loans from the other project sponsors (Moz LNG1 Financing Company Ltd shareholders) in proportion to their equity stakes. These loans (which the IMF calls ‘equity debt’ and ENH calls ‘development carry’) carry a 9% interest rate from the date incurred until one year after the completion of the development phase and then a 13% interest rate until the loans are repaid in full. The estimated value of these shareholder loans is $2.25 billion (15% of Mozambique’s GDP) and they are backed by sovereign guarantees (that lapse after approximately one year following the start of LNG production). The shareholders loans are structured such that ENH’s principal and interest payments are taken directly from LNG revenues once they start. 80 percent of ENH revenues (after the deduction of operating costs) will be used to pay its debts related to the project. 100 percent of ENH revenues will be used to repay any outstanding debt after 15 years, or when ENH’s debt level reaches a pre-determined trigger point. The Mozambique LNG project consists of the Golfinho-Atum gas field development in the offshore Area 1 Block of the deep-water Rovuma Basin and the construction of a 12.88 million tons per annum (Mtpa) onshore liquefied natural gas (LNG) facility on the Cabo Delgado coast of Mozambique. The Golfinho and Atum gas fields are located in 1,600m-deep waters within the Rovuma Basin Area 1, approximately 40km off the coast of Cabo Delgado. The Offshore Area-1 is estimated to contain 75 trillion cubic feet (tcf) of recoverable natural gas resources. The LNG processing and export facility will be developed in the Afungi peninsula in Cabo Delgado, the northernmost province of Mozambique. The Area 1 Mozambique LNG facility will consist of two liquefaction trains with a combined nameplate capacity of 12.88Mtpa in the initial phase. It will also house gas pre-treatment facilities and full-containment LNG storage tanks. The LNG production capacity of the facility is proposed to be further expanded up to 50Mtpa in future. The plant will receive feed gas supply from the Golfinho-Atum gas field through pipeline and produce LNG for export to the Asian and European markets, as well as for domestic consumption in Mozambique. Other support facilities for the LNG plant will include materials offloading facility and an LNG marine terminal capable of accommodating large LNG carriers, which will also be shared with upcoming Area 4 LNG projects. The Area 1 Mozambique LNG project is backed with 11.1Mtpa of long-term LNG off-take agreements. The customers for the project include Electricite de France (EDF, 1.2Mtpa), Japan’s JERA and Taiwan’s CPC Corporation (1.6Mtpa), CNOOC Gas and Power Singapore (1.5Mtpa), Tokyo Gas and Centrica (2.6Mtpa), Shell International Trading Middle East (2Mtpa), Bharat Petroleum Corporation (1Mtpa), and Indonesia’s Pertamina (1Mtpa). The environmental impact assessment (EIA) for the project was carried out between 2011 and 2014. The Mozambican Ministry of Coordination of Environmental Affairs (MICOA) approved the EIA report in June 2014, while the concessions to design, build and operate the marine facilities for the project were secured from the Government of Mozambique in July 2017. The Government of Mozambique gave the final approval for the Area 1 Mozambique LNG development plan in March 2018. A consortium of McDermott, Chiyoda Corporation, and Saipem is responsible for the engineering, procurement, and construction (EPC) of the onshore liquefaction plant along with its support facilities. Consortium leader Saipem's share of the EPC contract awarded in June 2019 is worth £4.7 billion ($6 billion), while that of McDermott is valued at £1.5 billion ($2 billion). The joint venture of CB&I (now McDermott), Chiyoda and Saipem (CCS JV) also provided the front-end engineering and design (FEED) for the LNG facility. Worley, a global engineering company based in Australia, was contracted by Total to provide engineering and consulting services for the delivery of onshore as well as subsea facilities for the Mozambique LNG project in February 2020. TechnipFMC, in consortium with Van Oord, is the engineering, procurement, construction, and installation (EPCI) contractor for the offshore subsea system for the project. Allseas will be engaged as a major subcontractor for the offshore installation works. TechnipFMC will also provide subsea trees, subsea controls systems, production manifolds, subsea connectors, as well as completion workover riser & installation workover control system for the subsea gathering system, through its subsidiary FMC Technologies. Oceaneering International is the supplier of subsea umbilicals and distribution hardware, while Advanced Technology Valve will provide pipeline subsea ball and subsea gate valves. Cameron Italy will supply the subsea chemical injection metering valves for the Area 1 Mozambique LNG project. In July 2020, the project satisfied all of the conditions precedent for the first debt drawdown of the project finance. Then, on April 16, 2020, the project's construction site was reportedly shut down and quarantined due to COVID-19 infections among workers. On April 26, 2021, TotalEnergies (the project operator) announced that ‘[c]onsidering the evolution of the security situation in the north of the Cabo Delgado province in Mozambique, [we confirm] the withdrawal of all Mozambique LNG project personnel from the Afungi site. This situation led TotalEnergies, as operator of Mozambique LNG project, to declare force majeure. In February 2022, TotalEnergies said that it would seek to restart the project during calendar year 2022. Later that month, TotalEnergies' CEO suggested that the resumption of the project could take another year. Then, in April 2023, TotalEnergies discussed the conditions it would need to have in place in order to restart construction. In May 2023, Global Energy Monitor reported that 'TotalEnergies’ ambitions to bring its stalled US$20 billion Cabo Delgado liquefaction plant online by 2027 remain up in the air following the publication of a report, commissioned by the company, on humanitarian and socio-economic issues. The 76-page report from Jean-Christophe Ruffin, a former French Ambassador to Senegal, was delivered to TotalEnergies last month and released only this week in the run-up to its annual meeting on May 26. Ruffin’s report was broadly positive about the French company’s hoped-for resumption of construction activities after it declared force majeure in April 2021 but raised various concerns, including the Mozambique LNG consortium’s approach to compensation for resettled communities, its relationship with local armed forces, and the fact that armed conflict is not over in the region though not currently happening in the immediate vicinity of the project site. For TotalEnergies CEO Patrick Pouyanne, renowned for being extremely cost-sensitive, an additional hurdle continues to be the reported efforts of the project’s already contracted service companies to secure an upward revaluation of their costs by as much as 20%. Further, the U.S. Export-Import Bank (Exim) has commented that a restart of the project would trigger a review of its US$4.7 billion loan agreement with the consortium. Signed off by Exim’s board in 2020 during the Trump presidency, no loan disbursements have been made to date, according to a senior Exim official.' Then, in June 2023, Bloomberg reported that TotalEnergies was slowly restarting the project, including by reinforcing security, but that it had not yet laid out an updated project timeline. As of November 2023, African Intelligence reported that TotalEnergies was aiming for a January 2024 resumption of project implementation.