Freeport LNG starts construction after closing financing

Freeport LNG said it closed on debt and equity financing commitments of approximately $11 billion in capital required for the development of the initial two trains of its liquefaction facility on Quintana Island near Freeport, Texas.

This made it the largest fully non-recourse construction project financing ever, Freeport LNG said in a statement.

Commitments in excess of the anticipated $9.64 billion in project costs, inclusive of financing costs, provide a significant buffer for contingencies and cost overruns to ensure successful completion.

With closing on financing, Freeport LNG has completed all milestones and issued a full notice to proceed to CB&I and Zachry Industrial to construct the first two liquefaction trains of the Freeport LNG liquefaction project. Financing and commencement of construction on the third liquefaction train is expected in second quarter 2015.  The first liquefaction train is expected to start operations in third quarter 2018, with the second liquefaction train expected to commence operations five months thereafter.

For the first liquefaction train, approximately $4.369 billion in debt financing is being provided by Japan Bank for International Cooperation and the following six commercial banks: The Bank of Tokyo-Mitsubishi UFJ Sumitomo Mitsui Banking Corporation, Mizuho Bank, Sumitomo Mitsui Trust Bank, Mitsubishi UFJ Trust and Banking Corporation, and ING Bank. The portion of the loans financed by the commercial banks is insured by Nippon Export and Investment Insurance.

Osaka Gas and Chubu Electric Power are committed to investing approximately $1.24 billion for the development of the first train.

For the second liquefaction train, approximately $4.025 billion in debt financing is being provided by a syndicate of 25 commercial banks under a 7-year mini-perm construction facility.  IFM Investors is committed to investing approximately $1.3 billion in equity for the development of the second train.

Michael S. Smith, Chief Executive Officer, Freeport LNG, said, “The project will drive substantial economic growth in Texas and across the United States, requiring a peak construction workforce of over 4,000 workers and 300 new full-time workers at the facility once in operation.  In addition, an estimated 25-30,000 permanent new jobs will be generated upstream of the project to support the increased natural gas exploration, production and infrastructure development required to meet the project’s supply demands.” 

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Press Release; Image: Freeport LNG