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Project sponsors fashion different business models to mitigate
project risks and obtain financing. In India, pipeline connectivity
has been a challenge while in Vietnam, concluding power purchase
agreements have been elusive. Consequently, few regasification
proposals have been successfully executed in South and Southeast
Asia.
Both regions have enormous growth potential for LNG. In South
Asia, IHS Markit forecast LNG imports to double within this decade.
In Southeast Asia, the outlook is just as bright and LNG demand is
forecast to quadruple. To feed growing LNG demand, a total
investment of US$4-7 billion is required in South Asia, and US$3-6
billion in Southeast Asia to fund the infrastructure build out.
The LNG value chain varies from country to country owing to the
lack of clear policies and each project faces its unique
bottleneck. Therefore, to mitigate project risks, project sponsors
have adopted these business models to fit the environment. The
following cases illustrate the approaches taken so far.
In Myanmar, VPower relied on balance sheet financing. TTCL
looked towards capital recycling for the Ahlone LNG project.
In India, a capital grant from the government solved the issue
of pipeline connectivity to the Dhamra LNG terminal.
Finally, in Vietnam, the Bac Lieu LNG project has sought to
hasten development under an IPP scheme.
Project financing continues to be the most difficult hurdle to
achieve a final investment decision. New companies that are willing
to take on more risk to move projects along will outshine the
competition to gain an early foothold. But with weaker balance
sheets, a range of measures will need to be adopted such as raising
equity through capital recycling, financing via balance sheets, or
taking on merchant risk. A combination of these methods can reduce
the time taken to reach the final stage of financial close.
Content taken from our recent insight report, "An alternate
approach to develop regasification terminals in South and Southeast
Asia."
