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About the Bank

Policy Lenders and Commercial Banks Collaborate to Provide Project Financing

  • Date2013.05.27
  • View26929
Four government-mandated financial institutions including the Export-Import Bank of Korea partnered up with seven commercial banks to participate jointly in an overseas project for the first time in history.

The Export-Import Bank of Korea (www.koreaexim.go.kr, Chairman Kim Yong-hwan, “Korea Eximbank”) and Korea Trade Insurance Corporation (K-Sure) announced on May 27 that they are each providing USD 750 million in project financing* for the Sabine Pass LNG plant project.

* While traditional corporate loans are secured by the creditworthiness of the project sponsor, project finance loans are secured by project assets only and repaid mostly from cash flows generated by the project (sponsors are thus shielded from the risk of project failure).

The USD 1.5 billion to be provided by these two agencies would represent 17% of the project’s total loan value of USD 8.9 billion.

In particular, Korea Eximbank and K-Sure are also providing loan guarantees and insurance coverage for seven Korean commercial banks (Industrial Bank of Korea, Kookmin Bank, Nonghyup Bank, Shinhan Bank, Woori Bank, and Hana Bank) that are co-financing the Sabine Pass LNG plant project.

Backed by Korea Eximbank’s loan guarantees, these commercial banks will be able to receive payment as senior creditors after a seven-year period.

By offering loan guarantees and senior creditor status to these lenders, the government-mandated financial institutions enabled domestic commercial banks to participate in an overseas project financing deal for practically the first time.

A Korea Eximbank official commented, “The joint participation of commercial banks in this PF deal is the result of the active financial advisory and arrangement services we have been providing to commercial banks based on our accumulated expertise. Our long-running collaboration with representatives of domestic and foreign law firms and commercial banks assigned to Korea Eximbank has paid off.”

The Sabine Pass project involves building an LNG terminal with four trains in the Gulf of Mexico in Louisiana, U.S, to build and operate a natural gas liquefaction facility with an annual production capacity of 18 million tons.

Korea Gas Corporation will be participating in the deal as a long-term LNG purchaser under the first-ever US government authorization to export LNG.

Korea, the world’s second-largest LNG importer after Japan, had signed an agreement in January 2012 with Sabine Pass Liquefaction LLC to purchase 3.5 million tons of LNG per annum for 20 years, as part of its effort to diversify its LNG import sources and stabilize gas prices.

This volume represents 10% of Korea’s annual LNG imports.

Chairman Kim of Korea Eximbank remarked, “This project financing deal is meaningful in that policy lenders and commercial banks have cooperated to secure energy resources at a much lower price than before by seizing the opportunity presented by the US’ first-ever LNG export project. I hope this opportunity will pave the way for Korean companies to win other projects in similar sectors such as shale gas development, LNG ships, and industrial plants.”
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