NLNG-Plus
African Oil and Gas Deal of the Year 2002
When it closed on 18 December 2002 NLNG-Plus had evolved from the deal only the most optimistic thought would happen when it was first mooted, to the deal everyone wanted a piece of ? four international sponsors, 19 international banks, four ECAs, one development bank and five local banks.
Final close was, in effect, a formality. General syndication of the $800 million international tranche came in oversubscribed in the second week of November, with Bayerische Landesbank, Natexis, Dexia, CIC, KfW and Unicredito all signing up.Sponsored by NLNG, NLNG-Plus is the largest-ever private-sector financing project to be put together in sub-Saharan Africa. It is also Nigeria's most ambitious construction project, the country's biggest project financing to date and a miracle of arranger marketing and structuring, given that most export credit agencies are off cover for Nigeria.According to Andrew Jamieson, managing director of Nigeria LNG, ?the loan is a major milestone for both NLNG and Nigeria. It represents a quantum leap in foreign direct investment by lenders to Nigeria.? It is a sentiment shared by Barbara O'Boyle, head of project finance at US Ex-im: ?Nigeria LNG is the largest transaction that Ex-Im Bank has financed in Nigeria. Both the country and the sector have a lot of potential.?NLNG-Plus involves the construction of fourth and fifth LNG process trains at the existing NLNG project at Bonny Island, Rivers State. Each of the new trains will have an annual production capacity of approximately four million tonnes. The plant, when completed in 2005, will have an overall production capacity of 16.8 million tonnes per year of LNG and 2.3 million tonnes of liquefied petroleum gas. Daily production at the two new trains is estimated at around 1.1 billion cubic feet, bringing overall production at Bonny Island to 2.3 billion cubic feet per day. In addition to the construction of the liquefaction plant, eight new LNG tankers will also be required to support the project. Four of these will be built and owned by NLNG subsidiary, Bonny Gas Transport, while the other four will be chartered from Bergesen. ABN Amro, BNP Paribas, Fortis, Hypo, ING, KBC and WestLB are also in the frame for an arranging slot on this second deal which is expected to come in at around $460 million. Overall, the NLNG project will use 18 LNG ships to deliver 280 cargoes annually ? the largest single dedicated LNG fleet in the world.NLNG-Plus is a break with past NLNG financings. The three existing LNG trains were funded on the back of shareholder funds. Trains 4 and 5 (which this deal finances) have gone the non-recourse route. The volatility of local market conditions and the fact that this is a market first meant creating deep comfort for investors. The financing for trains 4 and 5 will be covered by sales of LNG from trains 1, 2 and 3. Trains 1 and 2 are already in operation and have long-term purchase agreements with ENEL (49% of production volume); Spain's Enagas (22%); Turkey's Botas (17%); Gaz de France (7%); and Transgas of Portugal (5%). Train three is nearing completion. Normal risks associated with financings in Nigeria are mitigated by the fact that NLNG-Plus is an expansion rather than greenfield project ? it is producing a dollar-denominated commodity, has creditworthy offtakers in place and is offshore. The security structure for the project is thus tried and tested and builds upon that developed by the shareholders in 1995 for the shareholder funding of the first three trains. Lead arrangers on the deal are BNP Paribas, Credit Lyonnais, Citibank, Mediocredito and WestLB. Eight subunderwriters ? ABN Amro, ANZ, Credit Agricole, Fortis, Hypoveriensbank, ING, KBC and SCMB ? also came on board in October. Legal counsel for the arrangers was provided by White & Case whilst Allen & Overy advised the sponsor.Total project cost is around $2 billion. The $1.06 billion debt package comprises an $800 million international commercial tranche, a $160 million domestic bank tranche and a $100 million direct loan from the African Development Bank (ADB).The international portion is split between an uncovered 6.25 year tranche priced at 250bp and an 8.25-year tranche covered by four export credit agencies. The $620 million covered tranche is priced as follows: US Ex-Im $115 million at 20bp over libor; ECGD $215 million at 30bp, Gerling NCM $100 million at 65bp and Sace $190 million at 70bp. ECGD and Ex-Im are guaranteeing 100% of their tranches against political and commercial risk. Conversely, Sace and NCM are providing political and commercial risk insurance for 90% of their tranches.Of the African-placed tranches, the ADB has matched the deal's longest tenor with 8.25 years for its whole $100 million take. The $160 million domestic commercial tranche also demonstrates that African banks are capable of raising financing of significant size and tenor. The domestic tranche is priced at 290bp with a tenor of 7.25 years. Local debt providers include Nigeria International (Citigroup), FSB International Bank, Guaranty Trust Bank, Union Bank and United Bank for Africa.That NLNG-Plus is closed in the current lending climate is remarkable given the location and the number and complexity of inter-creditor arrangements. And despite Nigeria being off cover for most ECAs, NLNG-Plus pulled in mass ECA backing. Ex-Im Bank alone is supporting a variety of US exports: GE Gas Turbines is providing gas turbine compressor units; Air Products & Chemicals is exporting cryogenic heat exchangers; and Kellogg Brown & Root is has a contract for engineering.But financial complexity and size aside, the NLNG-Plus project is important both domestically and internationally. On the international side, the two new trains and associated facilities will increase the capability of the complex to process associated gas feedstock, enabling a major reduction in gas flaring in Nigeria. Domestically, NLNG-Plus is central to achieving the Nigerian government's objective of turning out gas flares by 2008 (to meet the Kyoto Protocol) and a vital part of the government's economic diversification programme.
NLNG-Plus
Status: Closed 18 December 2002
Total project cost: $2 billion
Project debt: $1.06 billion
Sponsors: Nigerian National Petroleum Corporation (49%); Shell (25.6%); TotalFinaElf (15%); Agip (10.4%)
Description: Funding for construction of trains 4 and 5 of NLNG's expansion programme.
Location: Nigeria
Lead arrangers: BNP Paribas, Credit Lyonnais, Citibank,Mediocredito, WestLB.
Subunderwriters: ABN Amro, ANZ, Credit Agricole, Fortis, HypoVereinsbank, ING, KBC, SCMB
General syndication: Bayerische Landesbank, Natexis, Dexia, CIC, KfW, Unicredito
Pricing commercial tranche: uncovered 6.25 year tranche priced at 250bp.
Pricing covered tranche: US Exim $115 million at 20bp; ECGD $215 million at 30bp, Gerling NCM $100 million at 65bp and Sace $190 million at 70bp.
Legal counsel for the arrangers: White and Case; Clifford Chance; Aluko and Oyebode; Perchstone
Legal counsel for the sponsor: Allen & Overy; Olaniwun & Ajayi
Advisory: Citibank
Consultants: Merlin Associates (Independent Engineer); DeGoyler and MacNaughton (Reserves Consultant); Dawson Risk Management Services (Insurance Consultant); Environmental Resources Management (Environmental Consultant); Poten & Partners (Shipping Consultant); Pannell Kerr Forster (Model Auditor)
When it closed on 18 December 2002 NLNG-Plus had evolved from the deal only the most optimistic thought would happen when it was first mooted, to the deal everyone wanted a piece of ? four international sponsors, 19 international banks, four ECAs, one development bank and five local banks.
Final close was, in effect, a formality. General syndication of the $800 million international tranche came in oversubscribed in the second week of November, with Bayerische Landesbank, Natexis, Dexia, CIC, KfW and Unicredito all signing up.Sponsored by NLNG, NLNG-Plus is the largest-ever private-sector financing project to be put together in sub-Saharan Africa. It is also Nigeria's most ambitious construction project, the country's biggest project financing to date and a miracle of arranger marketing and structuring, given that most export credit agencies are off cover for Nigeria.According to Andrew Jamieson, managing director of Nigeria LNG, ?the loan is a major milestone for both NLNG and Nigeria. It represents a quantum leap in foreign direct investment by lenders to Nigeria.? It is a sentiment shared by Barbara O'Boyle, head of project finance at US Ex-im: ?Nigeria LNG is the largest transaction that Ex-Im Bank has financed in Nigeria. Both the country and the sector have a lot of potential.?NLNG-Plus involves the construction of fourth and fifth LNG process trains at the existing NLNG project at Bonny Island, Rivers State. Each of the new trains will have an annual production capacity of approximately four million tonnes. The plant, when completed in 2005, will have an overall production capacity of 16.8 million tonnes per year of LNG and 2.3 million tonnes of liquefied petroleum gas. Daily production at the two new trains is estimated at around 1.1 billion cubic feet, bringing overall production at Bonny Island to 2.3 billion cubic feet per day. In addition to the construction of the liquefaction plant, eight new LNG tankers will also be required to support the project. Four of these will be built and owned by NLNG subsidiary, Bonny Gas Transport, while the other four will be chartered from Bergesen. ABN Amro, BNP Paribas, Fortis, Hypo, ING, KBC and WestLB are also in the frame for an arranging slot on this second deal which is expected to come in at around $460 million. Overall, the NLNG project will use 18 LNG ships to deliver 280 cargoes annually ? the largest single dedicated LNG fleet in the world.NLNG-Plus is a break with past NLNG financings. The three existing LNG trains were funded on the back of shareholder funds. Trains 4 and 5 (which this deal finances) have gone the non-recourse route. The volatility of local market conditions and the fact that this is a market first meant creating deep comfort for investors. The financing for trains 4 and 5 will be covered by sales of LNG from trains 1, 2 and 3. Trains 1 and 2 are already in operation and have long-term purchase agreements with ENEL (49% of production volume); Spain's Enagas (22%); Turkey's Botas (17%); Gaz de France (7%); and Transgas of Portugal (5%). Train three is nearing completion. Normal risks associated with financings in Nigeria are mitigated by the fact that NLNG-Plus is an expansion rather than greenfield project ? it is producing a dollar-denominated commodity, has creditworthy offtakers in place and is offshore. The security structure for the project is thus tried and tested and builds upon that developed by the shareholders in 1995 for the shareholder funding of the first three trains. Lead arrangers on the deal are BNP Paribas, Credit Lyonnais, Citibank, Mediocredito and WestLB. Eight subunderwriters ? ABN Amro, ANZ, Credit Agricole, Fortis, Hypoveriensbank, ING, KBC and SCMB ? also came on board in October. Legal counsel for the arrangers was provided by White & Case whilst Allen & Overy advised the sponsor.Total project cost is around $2 billion. The $1.06 billion debt package comprises an $800 million international commercial tranche, a $160 million domestic bank tranche and a $100 million direct loan from the African Development Bank (ADB).The international portion is split between an uncovered 6.25 year tranche priced at 250bp and an 8.25-year tranche covered by four export credit agencies. The $620 million covered tranche is priced as follows: US Ex-Im $115 million at 20bp over libor; ECGD $215 million at 30bp, Gerling NCM $100 million at 65bp and Sace $190 million at 70bp. ECGD and Ex-Im are guaranteeing 100% of their tranches against political and commercial risk. Conversely, Sace and NCM are providing political and commercial risk insurance for 90% of their tranches.Of the African-placed tranches, the ADB has matched the deal's longest tenor with 8.25 years for its whole $100 million take. The $160 million domestic commercial tranche also demonstrates that African banks are capable of raising financing of significant size and tenor. The domestic tranche is priced at 290bp with a tenor of 7.25 years. Local debt providers include Nigeria International (Citigroup), FSB International Bank, Guaranty Trust Bank, Union Bank and United Bank for Africa.That NLNG-Plus is closed in the current lending climate is remarkable given the location and the number and complexity of inter-creditor arrangements. And despite Nigeria being off cover for most ECAs, NLNG-Plus pulled in mass ECA backing. Ex-Im Bank alone is supporting a variety of US exports: GE Gas Turbines is providing gas turbine compressor units; Air Products & Chemicals is exporting cryogenic heat exchangers; and Kellogg Brown & Root is has a contract for engineering.But financial complexity and size aside, the NLNG-Plus project is important both domestically and internationally. On the international side, the two new trains and associated facilities will increase the capability of the complex to process associated gas feedstock, enabling a major reduction in gas flaring in Nigeria. Domestically, NLNG-Plus is central to achieving the Nigerian government's objective of turning out gas flares by 2008 (to meet the Kyoto Protocol) and a vital part of the government's economic diversification programme.
NLNG-Plus
Status: Closed 18 December 2002
Total project cost: $2 billion
Project debt: $1.06 billion
Sponsors: Nigerian National Petroleum Corporation (49%); Shell (25.6%); TotalFinaElf (15%); Agip (10.4%)
Description: Funding for construction of trains 4 and 5 of NLNG's expansion programme.
Location: Nigeria
Lead arrangers: BNP Paribas, Credit Lyonnais, Citibank,Mediocredito, WestLB.
Subunderwriters: ABN Amro, ANZ, Credit Agricole, Fortis, HypoVereinsbank, ING, KBC, SCMB
General syndication: Bayerische Landesbank, Natexis, Dexia, CIC, KfW, Unicredito
Pricing commercial tranche: uncovered 6.25 year tranche priced at 250bp.
Pricing covered tranche: US Exim $115 million at 20bp; ECGD $215 million at 30bp, Gerling NCM $100 million at 65bp and Sace $190 million at 70bp.
Legal counsel for the arrangers: White and Case; Clifford Chance; Aluko and Oyebode; Perchstone
Legal counsel for the sponsor: Allen & Overy; Olaniwun & Ajayi
Advisory: Citibank
Consultants: Merlin Associates (Independent Engineer); DeGoyler and MacNaughton (Reserves Consultant); Dawson Risk Management Services (Insurance Consultant); Environmental Resources Management (Environmental Consultant); Poten & Partners (Shipping Consultant); Pannell Kerr Forster (Model Auditor)
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