Financing the Construction of the Calcasieu Pass Project for Venture Global LNG

Caroline, the head of project finance at Banque Industrielle de Lyon (BIL), gets a call from her former boss at Natixis. Venture Global is raising construction debt for Calcasieu Pass, a 10 million tonne per annum liquefied natural gas (LNG) export terminal in Louisiana. Natixis is offering BIL a $200 million ticket with full lead arranger fees, provided it can commit within three weeks.

 The sponsor has never built a project, and it is breaking with how US LNG terminals are usually built. Instead of two or three large trains stick-built on site, it plans 18 mid-scale trains fabricated in Italy and shipped to Louisiana as modules. Instead of a single fully wrapped, lump-sum, date-certain construction contract, it has chosen an unwrapped structure that leaves the project to manage the interfaces between contractors. The margin is attractive and the deal could open a relationship with an ambitious new client. But the risks are new and harder to size than for the Gulf Coast terminals built before it.

 The case covers the technology risk of a new design, the allocation of construction risk, how LNG export projects are financed, and the purpose and mechanics of loan syndication. Students must decide whether Caroline should recommend the commitment, weighing risk-adjusted return against relationship value and the limited time for diligence.