Can LNG Remain A Magnet for Global Funding?

Project finance in LNG is compared to other sectors, such as power and infrastructure. We look at financing trends in LNG versus the wider project finance market and examine why LNG has continued to compete successfully with other industries for global funds. It is timely to examine this success as the LNG moves from a bumper year – three US projects attracted almost $30 billion in funding in 2014 – to times of crude pricing uncertainty. The main appeal of LNG projects to lenders is the use of long term take-or-pay contracts with investment grade counterparties. Stress-tested to breakeven at low gas prices they allow for loan payback across the 14-plus year horizons typical for LNG project finance. The use of contracts with strong tolling counterparties by some US projects can offer an even lower risk profile. An added attraction is that these counterparties may provide support via their host country’s export credit agencies. Minimizing market exposure is important because it is the main cause of the rare instances of project finance default, as seen in some volume-based toll road and merchant power plant deals. Please fill out form below to view article.