Case studies

Reviewing the terms of a LNG sales contract for potential project lenders

Working for the lead project bank, Bill reviewed the LNG sales contracts to a number of buyers from a new LNG supply project. As part of a wider due diligence process, this work aimed to provide potential lenders with an industry perspective answering questions such as:

● are the principal terms broadly reasonable for both parties?

● would the contracts be workable in practice over the course of a 20 year period?

● are the contracts self-consistent and broadly in line with current industry practices and “norms”?

● do the contracts contain any clauses that might cause an interruption to the project’s cash flow and so be of specific concern to lenders?

This review was presented as part of an extensive written report for lenders and was supported with discussions with lenders, as necessary, to provide further information to them.

Although no “showstoppers” were identified, a number of unusual clauses were found and flagged-up to lenders. These resulted in some changes to the finally executed contracts to remove some specific concerns. Project financing then proceeded successfully.

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