Ten domestic financial institutions, including the Export-Import Bank of Korea (www.koreaexim.go.kr, Chairman Lee Duk-Hoon, “Korea Eximbank”) and Korea Trade Insurance Corporation ("K-sure") will provide financing to a large scale overseas project in project financing.

* PF(Project Finance) : While traditional corporate loans are secured by the credit worthiness of the project sponsor, project finance loans are secured by project assets only and repaid mostly from cash flows generated by the project.

Korea Eximbank and K-sure announced on July 2 that they will provide USD 1.75 billion in project financing to 'Sabine Pass LNG Plant Extension Project Phase Ⅲ', each supporting USD 1 billion and USD 0.75 billion, respectively. The USD 1.75 billion PF provided by the two organizations accounts approximately for 40 percent of the funds demanded for the USD 4.6 billion project. In 2013, Korea Eximbank and K-sure had extended USD 1.5 billion in project financing to 'Sabine Pass LNG Plant Extension Project Phase Ⅱ'.

In this project, seven local financial institutions and one securities company* participate through the provision of loan guarantees by Korea Eximbank and insurance by K-sure.

* Kookmin bank, Nonghyup bank, Shinhan bank, Korea Exchange bank, Woori bank, Hana bank, Korea Development bank, NH Investment and Securities

In particular, since the facility loans covered by the guarantees are mini-perm structured*, the financial institutions which opted for the loan guarantees by Korea Eximbank are able to provide a stable supply of funding with the condition of the 'lump sum advance.'

* mini-perm structure : Medium term financing (5~7 years) intended to be refinanced out through bond issuance on the premise that it is refinanced within its tenor.

By applying such lending instrument, Korea Eximbank established a financial bridge for Korean commercial banks seeking to enter the overseas PF markets and to internationalize their banking business.

A Korea Eximbank official remarked, "Having participated as a lender in the 'Sabine Pass Phase Ⅱ project', we are participating as a lender again in the Phase Ⅲ project, not following the bidding method for financial participation. This decision proves that Korea Eximbank's financial competitiveness is recognized in the international market." The official added, "Through our close cooperation with domestic banks and foreign law firms which dispatched their employees to Korea Eximbank for overseas projects, our decision to participate in the project was made rather quickly."

'Sabine Pass Project' aimed at building an LNG Plant in Sabine Pass, Louisiana, the U.S. is the first-ever LNG export project in the U.S. Once another train is constructed in the LNG terminal in the phase Ⅲ additionally to the existing four trains built in the phase Ⅰ·Ⅱ, the LNG liquefaction facility whose scale is large enough to produce 22.5 million tons per year, will be completed. Upon completion of the Sabine Pass LNG Project, which acquired the first-ever LNG export license in the U.S., Korea Gas Corporation Korea Gas Corporation (KOGAS) will purchase the x-equivalent to 10% or 3.5 million tons of Korea's annual LNG imports for the next 20 years starting from 2017. The project is expected to bring about stabilized gas prices in Korea since the world's second-largest LNG importer can now expand its once concentrated LNG import sources, diversifying away from the Southeast Asia and Middle East.

The official remarked, "At a time when domestic financial institutions fail to achieve tangible results to make their entry into the overseas project market, the solid relationship that the Bank, as a policy financial institution, has built with project sponsors in foreign countries made it possible for the financial firms to participate in the project." He added, "Although Korean financial firms are facing a tough environment for offshore natural resources development projects such as the drop in oil prices, as this financing provides opportunities for them, we look forward to their sustained participation in the natural gas development projects in North America."