Arrangers on the much-anticipated $1.06 billion Nigerian LNG-Plus deal claim Christmas in Nigeria will come early - the project will sign on December 18. 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. Syndication closed in the second week of December.

NLNG-Plus is a first on many levels - not least size. It 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 most export credit agencies are off cover for Nigeria.

NLNG-Plus is also 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 project has been structured such that is backed by strong economics. The financing for trains 4 and 5 will be covered by sale of LNG from trains 1, 2 and 3. Trains 1 and 2 are already in operation and three is nearing construction completion.

Normal risks associated with financings in Nigeria are also mitigated by the fact that NLNG-Plus is an expansion rather than greenfield - 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.

Sponsored by NLNG (49% owned by Nigerian National Petroleum Corporation), 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 Standard Bank - 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 Exim 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.

NLNG's fourth and fifth LNG process trains will be built 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.

That NLNG-Plus is closing in the current lending climate is remarkable given the location and the number and complexity of intercreditor arrangements. Co-ordination was required not only between international banks, Nigerian banks, African Development Bank and the four export credit agencies, but also between the financing of the LNG plant and the financing for the shipping. 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. And domestically, NLNG-Plus is a vital part of the Nigerian government's diversification programme and is expected to stimulate some $7.5 billion worth of new projects in the country.

NLNG-Plus
Status: Closing 18 December 2002
Total project cost: $2 billion
Project debt: $1.06 billion
Sponsor: NLNG (49% owned Nigerian National Petroleum Corporation)
Description: Funding for construction of trains four and five of NLNG's expansion programme
Location: Nigeria
Financial advisory: Citibank
Lead arrangers: BNP Paribas, Credit Lyonnais, Citibank, Mediocredito, WestLB. Subunderwriters: ABN Amro, ANZ, Credit Agricole, Fortis, Hypovereinsbank, ING, KBC, Standard Bank
Participants: Bayerische Landesbank, Natexis, Dexia, CIC, KfW, Unicredito
Pricing commercial tranche: uncovered 6.5 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 at 70bp
Legal counsel for arrangers: White & Case
Legal counsel for sponsors: Allen & Overy