BANKING

FBNQuest Trustees – Leading The Conversation On Islamic Estate Planning

FBNQuest Trustees, a subsidiary of FBN Holdings, which is dedicated to providing Trust solutions to individuals, corporate and government institutions, brought together Muslim Faithful’s, to share deep insights on the importance of Estate Planning and the provisions for this within Islam.  The event was premised on the understanding that with increasing wealth comes complex Estates, which require robust Estate Planning for asset protection and wealth transfer across generations. The Islamic Estate Planning Clinic was, therefore, organised to address this need.

The event held on the 28th of April, 2019 in Abuja, Nigeria and presented an opportunity for the Firm to educate the public on the relevance of distributing assets and generational wealth transfer in accordance with Islamic tenets.

This Islamic Estate Clinic was hosted by Adekunle Awojobi, Managing Director, FBNQuest Trustees and featured sessions facilitated by Dr. Bashir Umar, a renowned Islamic Financial Scholar. The sessions covered Islamic Trust (Waqaf), Islamic Will (Wasiyyah), Zakat (Charitable Trust), Hibah and Takaful, among other asset preservation and wealth transfer principles. These enabled attendees understand the guidelines for distributing one-third of their assets (which Islam grants them control over), how to plan for non-heirs in line with Faraid laws and generally the importance of Sharia-compliant Estate Plans to Muslims, as highlighted in the Qur’an (and its interpretations in the Sunnah and Hadith).

Speaking at the event, Managing Director, FBNQuest Trustees, Mr Adekunle Awojobi encouraged individuals to embrace Estate Planning to ensure that their assets are well preserved and transferred according to their wishes and that the legacies they are working hard to build can be preserved for generations to come. He emphasised that Islamic Estate Planning ensures that individuals can plan for the future of their loved ones and favoured charities while fulfilling in entirety, the guidelines of the Qur’an where assets transfer is concerned.

“Estate planning is for everyone, regardless of religion, however, as the first and one of the leading providers of Trust services in Nigeria, FBNQuest Trustees is particularly positioned to support Muslim Clients in their desire to leave a legacy that aligns with their beliefs”; Awojobi said. “Over the last 40 years, we have gained experience and developed expertise in Islamic Inheritance planning, among other types of Estate Planning solutions. We help guide individuals and families on wealth creation, preservation and transfer processes in line with their desires and beliefs”; he concluded.

The Islamic Estate Planning Session brought together High Net worth Individuals, top industry players, investors, seasoned professionals and sector experts who together tackled the robust conversation on how the affairs of one’s assets should be administered and expert guidelines that come to bear in ensuring plans are made in keeping with the prescriptions of the Qur’an. FBNQuest Trustees remains committed to pioneering critical conversations such as this and helping Nigerians make sense of assets accrued in the course of their lives, without compromising their faith or values.

First Bank and FBNQuest Merchant Bank mark World Savings Day, promotes Financial Literacy in Secondary Schools

5 November, 2018, Lagos, In line with global practice and the mandate by the Central Bank of Nigeria (CBN) to all banks in the country to commemorate the World Savings Day, First Bank of Nigeria Limited and FBNQuest Merchant Bank, both subsidiaries of FBNHoldings, joined the rest of the world on 31 October to mark the 2018 World Savings Day themed “what do you wish for?”. The six geopolitical zones of the country were covered with visits to 30 secondary schools and more than 1000 students imparted with knowledge of financial literacy nuggets.

The World Savings Day is in line with FirstBank’s FutureFirst programme, specially designed to equip students with the knowledge of money management, early entrepreneurship skills, and financial independence whilst stimulating in them savings culture at an early age. Commemorating the World Savings Day is consistent with the Bank’s financial literacy initiatives.

Also, volunteers from FBNQuest Merchant Bank went further to cover and highlight how students can take advantage of investment opportunities in fixed deposits and Mutual Funds from a young age, cultivating the habit of putting money away to meet medium to long-term financial goals.

According to the official website of World Savings Day, “World Savings Day or World Thrift Day was established to inform people all around the world about the idea of saving their money in a bank rather than keeping it under their mattress” which is akin to FirstBank’s commitment to encouraging its key stakeholders, customers, to imbibe savings culture whilst having their children also carried along on the essence of savings through its youth-focused products, KidsFirsts (0 – 12 years) and MeFirst (13 – 17 years) carefully designed to meet the financial targets of the given demographics. These accounts ensure the accounts holders acquire the rudiments of banking and financial literacy as they grow into adulthood and they both come with exciting packages to support the financial journey of the children, enabling them to learn money management from an early age.

Speaking on the World Savings Day, Folake Ani-Mumuney, Group Head, Marketing & Corporate Communications, First Bank of Nigeria Limited said ‘’FirstBank’s participation in the 2018 World Savings Day is one of our many interventions in Financial Literacy. As the Bank continues to entrench the savings culture across all its markets, it has over several years engaged in Savings Promo to encourage and reward savings whilst committing human and financial resources to the development of financial literacy among secondary school students under the auspices of the FirstBank Futurefirst programme.

Sharing similar views, Kayode Akinkugbe, Managing Director/CEO FBNQuest Merchant Bank said “The CBN has created an essential platform which affords us the opportunity to enlighten the younger generation on finance-related matters, and contribute to financial literacy across the nation. It’s an initiative we are very proud to be a part of, as we believe such is crucial for the sustainable development of our nation.” “We believe that opportunities to transfer a wealth of knowledge, are crucial to the development of our economy and the sustainability of society. We, therefore, take very seriously, the responsibility of equipping the next generation so they can take our nation to its next level of success”; he added.

Only recently, FirstBank organised its week-long Corporate Responsibility and Sustainability event themed “Touching Lives; You First” which offered FirstBank employees the opportunity to give their time and resources to the service of humanity. The week-long event was simultaneously carried-out across its business communities in Nigeria, United Kingdom, Democratic Republic of Congo, Ghana, The Gambia, Guinea, Sierra-Leone and Senegal, a testament of the Bank’s brand promise to always put stakeholder needs first, while reinforcing its role in driving sustainable development in the communities where it operates

FBNQuest Merchant Bank Awarded Best Sukuk House At EMEA Finance Achievement Awards

Lagos, Nigeria – April 2018 – FBNQuest Merchant Bank, the investment banking and asset management subsidiary of FBN Holdings Plc, has emerged a winner in the Best Sukuk House category, at the 2018 EMEA Finance Achievement Awards. Now in its 11^th year, EMEA Finance has continued to spotlight the achievements of leading investment banks, asset managers and brokers in Africa.

Recognising FBNQuest Merchant Bank’s support for the development of infrastructure in Nigeria through the issuance of the FGN Sukuk II in December 2018, this award reaffirms the bank’s strong performance as a leading Investment Bank in Nigeria. With the Sukuk II issuance, FBNQuest Merchant Bank has continued to support infrastructure development in the Nigerian economy, and deepen the Nigerian capital market by offering government issued investment alternatives to ethical investors, establishing a benchmark for pricing other Sukuk bonds and helping to build an investment culture amongst retail investors.

“In 2018, we raised over N60 billion (USD167m) in various bond issues for medium and large corporates. We also raised over N260 billion (USD722m) across sixty-two (62) Series of commercial papers issued by several companies in different sectors” said Patrick Mgbenwelu, Head of Investment Banking, FBNQuest Merchant Bank Limited. In addition, FBNQuest Merchant Bank has managed both of the FGN Sukuk transactions, the most recent which closed in 2018.  “These transactions have enabled us to showcase our expertise in this category, and we appreciate the recognition from institutions such as EMEA Finance. We remain committed to delivering value added investment banking products and services to businesses and governments, leveraging our strong distribution platform and proven track record of raising funds for capital expenditure and expansion projects across different industries and the public sector.

The Best African Sukuk House Award adds to a growing portfolio of awards won by FBNQuest Merchant Bank at the EMEA Finance. Last year, the bank won the EMEA Finance 2018 African Banking Awards for “Best Asset Manager in Nigeria” and “Best Asset Manager, Pan-Africa”.

FBNQuest Asset Management Renames the FBN Heritage Fund To the FBN Balanced Fund

Lagos, Nigeria – June 2019: FBNQuest Asset Management, a subsidiary of FBNQuest Merchant Bank and part of the FBN Holdings Plc group, has proposed a change in the name of the ‘FBN Heritage Fund’ to the ‘FBN Balanced Fund’. The proposed change of name was approved by unitholders of the Fund at an Extraordinary General Meeting (EGM) of the Fund which held on 20^th June 2019.

The investment strategy of the FBN Balanced Fund, which was established in 2008, is designed to provide investors with portfolio exposure to a mutual fund that invests across multiple asset classes. This asset mix ensures that investors profiled in the medium-risk category can consider this Fund, given its implicit portfolio diversification strategy, an appropriate tool for achieving their financial objectives.  The FBN Balanced Fund invests in a mixed portfolio of instruments such as Stocks of high quality Nigerian companies, Long-term debt instruments of Nigerian federal and state governments, Long-term debt instruments of Nigerian Corporates and High quality money market securities such as Treasury Bills, and Commercial Paper.

The Fund is designed to deliver measured gains, when compared to a high risk strategy comprising an all equity portfolio, but provide significant potential return, when stocks are bullish, when compared to a low risk strategy comprising an all money market portfolio. Indeed, over the past 10 years, the FBN Balanced Fund has appreciated by over 140%, outperforming its benchmark. Indeed, an investment of N10m will have appreciated to over N24m over the 10 year period. In addition to the change in the Fund’s name, there has been a change of the asset allocation ranges of the Fund. This has been modified to range from 20-40% for long term debt instruments, 20-60% for money market instruments, 40-60% for stocks and 0-5% for cash. Real estate investments were removed from the asset allocation in a bid to streamline the assets the Fund will invest in and to prevent a drag on the portfolio.

Speaking at the EGM, Ike Onyia, the Managing Director of FBNQuest Asset Management spoke about the changes made to the Fund. He stated, “In 2008, there were 34 Funds, today we have almost 100. We thought it important to change the name of the Fund into one that is reflective of the investment strategy of the Fund, hence the change to FBN Balanced Fund”. “The underlying strategy remains the same, the asset allocation structure has been streamlined to enhance the distinct investment style of the Fund and enable investors situate how to best to benefit from this investment approach, within the context of their goals, risk profiles and expected portfolio returns”. The FBN Balanced Fund was launched in 2008 as a multi-asset mutual Fund, suitable for investors with an appetite for earning greater rewards over a long-term period. The focus of this Fund is to invest in equities, bonds, money market instruments, and other securities in the capital markets.

The Fund is featured on our easy to use, self-service application, FBN EDGE, which is available at either of the apple or google stores. Through the app, investors can begin the journey to fulfilling their financial goals and implementing their disciplined investment plans by investing a minimum of N50,000 in the FBN Balanced Fund.

About FBNQuest Asset Management

FBNQuest Asset Management is a full service investment management company and is the asset management subsidiary of FBNQuest Merchant Bank. It is also a part of FBN Holdings Plc., a leading financial services group, offering a diverse range of financial services to a broad spectrum of clients.

FBNQuest Asset Management serves the needs of individuals, institutions and governments with a broad range of solutions based on its strong fundamental and quantitative research capabilities. Our solutions include mutual funds, segregated portfolios, cash management services and other structured products. Our solutions provide exposure to various asset classes in traditional markets as well as structured opportunities in alternative investments, which enables us provide off-the-shelf or bespoke capital preservation and capital growth strategies, amongst others to different kinds of investors.

FBNQuest Asset Management considers itself as a gateway to a wide range of opportunities in complex markets and its investment management solutions have since inception developed a solid track record of outperformance.

Credit : FBNQuest

Islamic and Ethical Financing: Harnessing New Asset Class to Empower the Nigerian Economy

Islamic and Ethical Finance in Nigeria hold great potential, especially in this era where more stakeholders and investors are fully aware of the direct benefits. The development of the Islamic and Ethical Finance Industry within the Capital Markets, is vital to economic empowerment as it provides funding for corporate financing and other capital-intensive projects. This advancement can likely be attributed to the growing preference for ethical products and services, as well as the level of transparency and accountability amongst experts and key policy makers in this industry.

The Nigerian Government at both the Federal and State levels are playing key roles in ensuring that this method of financing is embraced, with the launch of the FGN Sukuk bonds three years in a row; and with key financial institutions also harnessing this asset class as a new method of investing or obtaining financing for large projects. The regulatory bodies in place have also provided a strong supervisory framework which is critical to the growth of the sector. These factors have encouraged visible progress in this new asset class, which is crucial to the socio-economic growth of the country.

When analyzing the success of such asset classes in Nigeria, it is important to note that the Sukuk Bond issued in the Nigerian market has been widely accepted, a case in point is Osun state – which was oversubscribed by about 11.4%. The FGN Sukuk I and II have also seen between 5-30% oversubscription, which means that the demand for ethical finance instruments is high. With consistency and the right practices, the sector will witness a boost which will impact economic growth. If properly harnessed, Islamic and Ethical Finance could be a key source of corporate financing, and capital raising for large projects such as funding for infrastructure development, development of the Capital Markets, and even foster increased financial inclusion – as more individuals who had not been a part of the capital markets investing community are slowly being introduced to, and are adopting Islamic and ethical finance services.

According to Oluseun Olatidoye, Head, Debt Capital Markets, FBNQuest Merchant Bank Limited, who spoke at the recently held IFN (Islamic Finance News) Nigeria Forum; a growth in the adoption of Islamic and Ethical Financing is key to profitability in the Nigerian economy as the capital generated by investors from these products can be used to close deficits in the country. He stressed that the opportunities within the Nigerian Islamic and Ethical Finance market must be harnessed, as ethical assets are gaining momentum as an alternative investment avenue both locally and internationally.

There has been an uptake in financial assets recently, especially with the Sukuk, both from Muslims and non-Muslims. Some financial institutions can attest to the fact that these products have been oversubscribed and in some cases, there has been a challenge by financial institutions to meet the demand. For Muslims, Islamic and Ethical Finance is a more acceptable form of investment, as there are no interest charges on their investments which complies directly with the tenets of The Quran. Mr. Olatidoye encouraged value seeking Islamic and Ethical investors to invest in the products offered, and for more financial services institutions, to issue more of these products.

He further highlighted that FBNQuest Merchant Bank remains committed to deepening Islamic and Ethical Financing in Nigeria, having acted as Joint Financial Advisers to the Debt Management Office (DMO) of the Federal Government on its recent Sukuk Issuances, which was dedicated to economic development across the six (6) geopolitical regions. “With more opportunities to raise funding such as this, there will be capital readily available to fund infrastructural deficits in Nigeria”. He enjoined the Federal Government to continue in its support for Islamic and Ethical Financing, with more avenues such as the IFN Forum where key stakeholders such as regulators and market leaders can engage in discourse around prospects and impediments to the development of new asset classes in the industry.

Written by:

Patrick Mgbenwelu

Head, Investment Banking, FBNQuest Merchant Bank

INTRODUCTION

This paper provides a broad overview of the financing issues to be taken into consideration for those seeking to develop a Liquefied Natural Gas (“LNG”) supply business and the concurrent development of gas fields.  It is written on the basis of a greenfield transaction that seeks to utilise project financing as the basis for its fund raising.  It is not intended to be exhaustive and we welcome the opportunity to discuss the contents of this paper in further detail.

THE LNG SUPPLY CHAIN

In establishing an LNG supply chain, a number of major capital intensive activities need to be integrated and delivered effectively. The entire value chain, from field development, gas treatment, transportation of extracted gas, liquefaction of the gas, transportation of the LNG to the end buyer’s market, regasification at the point of unloading and transportation of the gas to the end users.  Note – the entire value chain from field development through to the end-users need to demonstrate a robust fully funded financing plan and be de-risked to attract funding.  This paper addresses the business from the point of view of the LNG exporter, and thus we concentrate on the financing of the field development costs, the transportation of gas to the liquefaction facilities, and the liquefaction facilities themselves.

Although we do not specifically discuss the financing of the transportation to the buyer (typically by LNG tankers) or of the receiving facilities, the successful completion of these are an integral part of the financing of the exporter’s own facilities and various assurances or direct undertakings by the purchaser of the LNG will typically be required by those financing the exporter’s infrastructure.

INFRASTRUCTURE COST

The cost of building the exporting infrastructure will depend heavily upon, among other things, the state of development of the gas fields and location of the fields relative to the point of export.  The liquefaction equipment cost will not vary considerably between facilities of a similar size but the cost of developing the gas fields and transporting the gas obviously will vary from project to project.

Although it is therefore difficult to generalise, as an indication of the cost involved, by way of illustration, the Ras Laffan project in Qatar, which was financed in 1996 had an all-in development cost of US$2.4 billion for facilities to export 5.2 million tonnes per annum.  For this project, which financed both field development and export infrastructure, field development accounted for approximately 25% of the overall total project cost.

FINANCING STRUCTURES

Given the huge capital costs / investments involved, LNG projects are not undertaken on a speculative basis, such is more common in the petrochemicals industry for example, although well-structured petrochemicals projects “bolt-on” credible off-takers to reduce the unknown contents.  Before such investments are made, the export of LNG will need to be backed through the establishment of long term (usually 15 years or more) Sales and Purchase Agreements (‘SPA’) with one or more credible LNG purchasers.  However, given the evolution of LNG projects over the last 20 years, an increasing component of LNG sales are now being done on a much shorter basis, but overall, lenders have significantly less appetite for such short term contracts.

The SPA provides the core “building-block” of the financing structure as it defines the nature and quantum of the revenues to be received over the life of the financing of the investment and therefore banks place their spotlight / attention in this direction as it drives the transaction’s debt capacity.  SPAs will specify both the volumes to be delivered and also the price of the gas.  Volumes will typically be fixed with some limited deferral options and in the absence of a spot LNG market, pricing will typically be linked to a proxy such as the price of crude oil which as a competing fuel source gives some indication of the monetary energy value of LNG.

We have seen LNG project financing structures develop incrementally over the last two decades.  In the 1980s borrowers such as Sonatrach or ADGAS raised bank debt either on a corporate basis or with the guarantee of their shareholders.  In the 1990s project finance structures first came into use with, broadly speaking, two project finance models being adopted.  The first, of which the Qatargas LNG project is an example, separates the development of the gas fields from the remaining infrastructure including LNG Liquefaction.  The second, such as Ras Laffan, treats all elements as a single transaction and provides a single financing package – the trend globally has gravitated towards the foregoing.

The first model of adopting two financings was the first to be seen in the market.  Whilst it can be argued that this properly reflects the fact that gas field development and an LNG export facility are two separate businesses, the fact that the former is being developed as a dedicated source for the latter ensures that the financing structures for the two are heavily interlinked – this of course presumes common shareholders.  For example, the pricing of gas supply from the gas field project (revenues high enough to support its debt) and the LNG project (gas supply costs low enough to ensure sufficient cash is generated from the SPAs).  Not only is this relationship between the two project entities critical but the relationship between the two sets of lenders is equally sensitive.

These complexities have led to the adoption of an integrated approach whereby the gas field development and LNG infrastructure are financed as one integrated package.  By pooling the financing of the two elements, a more simplified structure can be achieved which will reduce the cost, time and “runaway risks” involved in concluding a successful financing.  In terms of arranging debt, a simpler and interconnected structure will also aid the raising of debt from the bond and or bank markets, and may also assist in securing better terms from export credit agencies (‘ECAs’).

SHAREHOLDER REQUIREMENTS

Historically, it has been the case that debt providers are willing to finance up to 75% to 80% of the costs for such development projects.  The balance being financed by equity from the project owner(s), typically in the form of share capital but possibly also in combinations with quasi-equity such as shareholder debt subordinated to the main commercial debt providers.  The choice will normally be dictated by the adequacy of funds for capital and taxation considerations.  Higher equity proportions may be needed for projects having SPAs with weaker credit countries or corporates.

In addition to providing a proportion of the financing requirement through equity or quasi-equity, the shareholders would normally be expected to provide guarantees to the debt providers in respect of the completion of the project.  This would usually include undertakings to complete the project within a fixed time schedule and to repay the debt providers in full in case such deadline is missed by more than an agreed extension period.

The finance providers would also generally insist on restrictions being placed on shareholder dividend distributions subject to an agreed list of financial and technical metrics – i.e. a minimum percentage of the debt having been amortized and also the project demonstrating acceptable cover ratios as a minimum over a continuous period of time.

DEBT REQUIREMENTS

The debt portion of the financing will usually comprise a mixture of “naked” commercial bank debt and other “covered” bank debt benefiting from political and commercial risk guarantees from export credit agencies supporting the contractors appointed to construct the infrastructure.  The use of ECA guaranteed debt can provide competitively priced debt (on a fixed basis) at favourable repayments terms (i.e. long term facilities of up to 14 years or longer), can offer enhancement of returns for the commercial bank debt (assuming the ECA backed debt is packaged with the unguaranteed commercial bank debt), and also reduces the use of bank country limits (the ECA covered portion being allocated to the country limit of the home country of the ECA).

Not all commercial banks will be able to provide debt that matches the maturity of the ECA guarantees.  Pricing will be on a floating basis although it is customary for the borrower to fix the rate at closing through the use of hedging instruments.  However, interest rate hedging on a long term basis for project financings are yet taking-off in Nigeria.

The issuing of bonds can enable the borrower to achieve a much longer maturity than is available in the commercial bank market: typically, 20 years or more.  Pricing will be determined by the rating assigned to the project bonds by the major rating agencies.  The rating process is something that needs to be carefully managed and the rating will depend on both the structure of the financing but also the ratings of both the country where the project is located and also the rating of the purchaser under the SPA.

Whilst bond debt offers the opportunity to secure longer term financing it should be noted that in general terms, commercial bank debt is more flexible.  This is particularly the case during the construction period of an LNG project when it is not uncommon for a host of changes to the project scope to be required which will require approval of the majority debt providers.  With a commercial bank group, this process is relatively straightforward whereas with a bond typically being held by a dispersed group of bondholders (i.e. investors), many of whom have little or no project experience, securing approvals from bondholders can be difficult.  On the other side, however, it is generally the case that bonds typically have less onerous requirements on the borrower in terms of covenants covering financial performance and project technical performance and reporting requirements.

In managing the entire process of financing such projects, borrowers usually appoint well experienced financial advisers to provide guidance throughout.  The advice and experience of advisers are essential when considering the complexities of LNG project financings and can ensure that the process progresses as smoothly as possible.  As to a timetable, from the point of appointing advisers to closing the debt finance can be expected to take in the region of up to 24 months (especially where ECAs are involved), however, well planned greenfield LNG projects have been able to achieve financial close within 9 to 12 months.

DEBT PROVIDER’S AREAS OF FOCUS

Whether debt is raised from the capital markets, commercial banks, ECA guaranteed debt, or a combination of these, the providers of such debt will by and large have the same concerns and will focus upon similar issues some of which are set out below.

1. Adequacy of gas reserves: Given the long term nature of the LNG business, lenders need to be assured that the gas reserves to be exploited are sufficient to comfortably meet projected LNG sales. Typically, reserves (proven) should be significantly in excess of forecast sales which in turn will be applied towards debt service;
2. Contractor / technology: The choice of the contractor and also the technology to be utilised (particularly the liquefaction technology) are of great importance to debt providers. The technology available for liquefaction is now well established and has a good track record, thus presenting relatively low technical risk.  Notwithstanding, the track record of the contractor as an indicator of its ability to deliver the project on time and on budget remains important;
3. Receiving Infrastructure: The receiving infrastructure comprises the LNG tanker transports, loading facilities, and regasification plant. As these will not be part of the exporters project package, undertakings from the off-taker as to the readiness and suitability of the receiving facilities is crucial, particularly as it is often the case that new infrastructure will be required to handle LNG supplied under the new SPA;
4. Credit risk of off-taker: The off-taker will be undertaking not only to purchase the LNG over an extended period but also to ensure sufficient infrastructure is in place to receive and distribute the LNG. As such the ability of the off-taker to perform its obligations will be critical – this may also extend to the ability of the off-taker to fund any penalty payments due should it fail to meet its obligations in a timely manner.  The off-taker’s credit standing and financial muscle is therefore critical;
5. Political /economic stability: It has thus far been the case that off-takers have been companies owned and controlled by the governments of the importing countries. Although this has changed over the last decade as credit worthy corporates have gradually stepped-into this role.  It will remain important that the importing country exhibits both political and economic stability in general given the long term nature of the commitments, but also has an established policy regarding the use of LNG as an energy source within the importing country.  This stability is also important in determining the off-taker’s ability to access foreign currency to meet its US dollar (usually) payment obligations required under the SPAs;
6. Financing structure: The overall structure of the financing needs to provide the debt providers with a “cast iron” level of security in terms of the projects revenue generation capacity, ability of the key / major project parties to carry out their pre and post completion obligations, project insurances and overall collateral in place. The foregoing will broadly comprise security interests in the payments under the SPA, reserve accounts, interests in the SPA itself, and where possible, interests in the project assets.  The structure also needs to allow for sufficient control over any significant changes to the project proposed by the borrower and to monitor the progress of the project once operating;
7. Other matters: lenders typically expect LLCR’s of at least 1.8x, commercial debt tenors of up to 16 years but ECA generally have appetite for much longer, project documents should ideally be on an arm’s length basis and have tenors longer than the project finance debt and EPC are preferred on a lump sum basis. Completion guarantees / support from sponsors are quite common and the Environmental and Social Impact Assessment and Environmental and Social Management will always a major focus area by debt providers;

 

The sponsors of already established LNG plants are however in a much stronger negotiating position when raising additional (i.e. expansion) financing.  Such corporates are therefore able to negotiate much friendlier terms and conditions.