NEW YORK--(BUSINESS WIRE)--Fitch expects to rate Cameron LNG's $2,915 million senior secured debt 'A' subject to receipt of final documentation and compliance with conditions precedent under the financing documents. The Outlook is Stable. A full rating report will follow.
The 'A' rating is consistent with Fitch's view of the credit quality of the project's offtakers. The rating is supported by substantial mitigation of completion risk, and low margin volatility anchored by availability-based tolling agreements with costs passed through to the revenue counterparties.
Key Rating Drivers
Strong Mitigation of Completion Risk- Completion Risk: Stronger Development of the 13.5 metric tons per annum (MTPA) liquefied natural gas (LNG) facility is backed by a fixed-price, date-certain construction agreement from experienced contractors. Cameron also benefits from investment-grade guarantees in which sponsors pledge on a several basis to repay all senior debt obligations if completion, based upon specified tests, is not achieved within two years after the targeted completion date (September 2021). The sponsors include the project's offtakers, further aligning completion and performance objectives.
Stable Projected Operations, Full Cost Pass-Through- Operating Risk: Stronger
Operating performance risk is mitigated by the use of proven technology with numerous applications worldwide. The offtakers' absorption of 100% of all operating and maintenance costs, Cameron's redundant equipment, and the project's ability to produce LNG in advance of scheduling reduce the impact of potential forced outages. The ability to adjust the targeted annual amount of LNG production at the beginning of each budget year provides additional flexibility to mitigate operating risks.
No Supply Risk- Supply Risk: Stronger
Cameron has no exposure to the potential variability in supply or cost for feedstock as the offtakers are responsible for procuring feed gas for LNG operations.
Stable Contracted Revenues- Revenue Risk: Stronger
Long-term availability-based tolling agreements with three investment-grade offtakers eliminate volume and price risk. The tariff increases to moderate the impact of additional debt that may be incurred due to rising capital costs during construction. There is a seven-year tail to generate additional contracted cash flow after debt maturity, and stringent provisions reduce the risk of contract termination.
Manageable Debt Structure- Debt Structure: Midrange
The total $7.415 billion senior secured debt (including the rated $2,915 million uncovered loan facility) is fully amortizing. Robust cash flow mitigates variable interest rate risk on at least 50% of the senior debt. Additional leverage is limited by covenants to support investment grade debt service coverage ratios (DSCRs) of at least 1.50x, relying on incremental equity contributions committed by the sponsors to offset potential construction cost overruns.
Resilient Cash Flow
Under a combination of stressed LIBORs (8.8%-10.7%), increased capital expenditure and conservative plant availability, Fitch projects a rising DSCR profile averaging 1.82x with a minimum of 1.43x. The project's DSCRs are resilient to extreme interest rate increases as evidenced by a breakeven DSCR of 1.0x under 22% LIBOR. A robust 2.33x project life coverage ratio in Fitch's rating case further demonstrates Cameron's strong credit profile.
Rating Sensitivities
Counterparty Risk: Downgrade of any sponsor through project completion could result in a downgrade of Cameron. Downgrade of any of the offtakers would result in a downgrade of the project. Hedge counterparties' ratings lower than the 'A' category may result in a downgrade.
Variable Operating Performance: Unstable plant performance that reduces tariff payments could result in a downgrade.
Increasing Debt Burden: LIBOR that is persistently higher than what is modelled in Fitch's rating case financial analysis, materially reducing DSCRs, would result in a downgrade.
Completion Issues: Serious and protracted construction issues, delays or cost overruns may put pressure on the rating prior to construction completion.
Transaction Summary
Cameron is to contain three equally sized trains with a total nameplate capacity of 13.5 MPTA to liquefy U.S. natural gas for export. LNG output of 12 MTPA is contracted under three long-term tolling agreements with GDF SUEZ S.A. and two subsidiaries whose obligations are backed by parent guarantees from Mitsubishi Corporation and Mitsui & Co., Ltd. Cameron will connect to the Cameron Interstate Pipeline, separately owned and upgraded by Sempra Energy ('BBB+'/Stable Outlook) and Columbia Gulf Transmission Pipeline. Cameron will be a bi-directional facility capable of liquefaction and regasification of LNG for import and export upon commercial operation of the liquefaction facilities and with the existing regasification terminal. Cameron LNG will be indirectly owned by Sempra Energy (50.2%), GDF SUEZ S.A. (16.6%), Mitsui & Co., Ltd. (16.6%), and Mitsubishi Corporation, and Nippon Yusen Kabushiki Kaisha (NYK) under a joint venture (16.6%, Mitsubishi owns approximately 11% and NYK owns approximately 5%).
Total debt of $7,415 million will be used to design, build, and operate the liquefaction LNG facilities and operate the existing regasification facilities. Loans are supported by Japan Bank for International Cooperation ($2,500 million), Nippon Export Investment and Insurance ($2,000 million) and the rated loans provided by commercial banks ($2,915 million).
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Rating Criteria for Infrastructure and Project Finance' (July 12, 2012);
--'Rating Criteria for Thermal Power Projects' (June 30, 2014).
--'Rating Criteria for Availability Based Projects (June 18, 2013)
--'Criteria for Interest Rate Stresses for in Structured Finance Transactions' (Jan. 13, 2014)
Applicable Criteria and Related Research:
Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=725537
Rating Criteria for Availability-Based Projects - Effective from 19 June 2012 - 18 June 2013
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=681351
Rating Criteria for Thermal Power Projects
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=753208
Rating Criteria for Infrastructure and Project Finance
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682867
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=852574
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