page-title-bg

Project Finance of LNG Plant Expansion

lng
Business Overview

 

The very large 21 million ton p.a. Bontang LNG Plant on the Indonesian island of Borneo (Kalimantan) required expansion to meet growing demand for fuel in Asia. Maintaining and enhancing reliability of supply was also an important criterion for buyers and sellers alike.

Challenges

The strong track record of eight previous financings for the Bontang plant expansions over more than 20 years supported the new round of funding. However, this was a complex project that required excellent communication and collaboration across multiple organizations in order to ensure a successful outcome.

Project works had already started, funded by sponsor’s revenues, but these were to be recouped by raising new finance. Prior project financing of all eight process trains had been achieved through Japanese, Korean and western banks as well as export credit agencies.

Solution

$300 million of non-recourse financing was secured. It was a joint initiative managed in Public Private Partnership between:

  • Government of Indonesia
  • Gas producing companies
  • Western banks
  • Asian banks, including JICA

This large team worked very productively in an atmosphere of strong collaboration. An experienced legal firm in Project Finance, based in Singapore was used to draw up the raft of agreements.

The combination of exceptionally high quality operations, a strong delivery track record, and creditworthy customers in Japan, South Korea and Taiwan benefitted the project and lead to a timely financial close.

Results & Benefits

A current director of TenBroeke Company represented one of the corporations of the multi-company and government Public Private Partnership.

The level of team work in bringing the financing to a close was exemplary, and was strongly aided by the overall system track record of: gas production (by the producers), reliable plant operations by the Bontang Plant operator, experienced and reliable gas purchasers in Japan, South Korea and Taiwan, as well as well-known banks, and strong government support.

The loan for the expansion project was to be secured by revenues from LNG deliveries under existing unencumbered LNG sales and purchase agreements.