On Friday, the Export-Import Bank of the United States (EXIM) announced the signing of two final agreements for a historic supply chain transaction—including the first-ever use of a funder guarantee structure—that will make $50 million available to Freeport LNG, a Houston, TX-based exporter of U.S. liquefied natural gas (LNG).
EXIM says the transaction will support 200 American jobs, mostly in Texas, but also through supplier networks in Arkansas, Louisiana, Mississippi, and Oklahoma.
The groundwork for the structure was laid in September 2020, when the EXIM Board of Directors unanimously approved the renewal of EXIM’s partnership with the Private Export Funding Corporation (PEFCO) for a term of 25 years.
The two specific agreements signed by EXIM Bank Chairman Kimberly Reed—an Enhanced Guarantee Agreement between EXIM and PEFCO and a three-way agreement between EXIM, PEFCO, and Greensill Capital—provide a 90 percent guarantee of a $50 million supply chain finance facility from Greensill Capital to Freeport LNG Marketing, LLC.
“This announcement marks several firsts. From the outset of my tenure as Chairman of EXIM, I prioritized our agency’s support for U.S. LNG exports, and today’s announcement marks EXIM’s first-ever financing for this critical domestic industry. I thank our EXIM team for their innovative work to develop an important new tool in our nation’s trade toolbox—a groundbreaking supply chain structure with funder guarantee,” said EXIM Chairman Kimberly Reed. “And this particular transaction, which will provide $50 million in financing for Houston-based Freeport LNG, will help many U.S. small businesses and workers across Arkansas, Louisiana, Mississippi, Oklahoma, and Texas in an industry and related supply chains that are working hard to rebound from the negative impact of COVID-19.”
Chairman Reed added, “In addition, with these agreements, we are sending a signal to the market that EXIM, working in partnership with the private sector, now has an additional tool to support U.S. exporters and workers. The recent EXIM-PEFCO partnership renewal is making a real difference in our American supply chains—in this case, in the incredibly important U.S. LNG sector.”
“PEFCO is delighted to partner with Greensill and EXIM on this transaction bringing capital market funded liquidity to the EXIM Supply Chain Finance space,” said PEFCO Senior Vice President Gordon Hough. “It is important to PEFCO that we are able to work with our partners to support EXIM’s rejuvenated supply chain finance program and we are eager to participate in other EXIM-supported supply chain finance transactions.”
“For many leading organizations — particularly those looking to innovate in established markets — off-the-shelf solutions and traditional approaches are simply not good enough to unlock the working capital they need to operate and grow, while at the same time protecting them against potential risks,” said Lex Greensill, Founder and CEO of Greensill Capital. “They need custom solutions to precise challenges, which is why our clients have turned to us for many years. We are proud to have worked with Freeport on this milestone transaction, which represents EXIM’s first in the U.S. LNG industry as well as its latest innovation in supply chain finance. EXIM continues to demonstrate leadership in delivering innovative product solutions tailored to client needs, and Greensill looks forward to continuing its partnership with EXIM and PEFCO in support of U.S. exporters and small businesses.”
“Working capital support is essential for any supplier of free on-board LNG. Greensill and EXIM were able to help us fill this crucial need with a unique structural set up that will allow Freeport and its suppliers to more efficiently provide the global market with U.S. LNG,” said Michael Smith, Founder, Chairman, and CEO, Freeport LNG. “We are pleased to be a part of this innovative transaction that will support U.S. jobs and the energy transition around the world.”
In August 2019, Chairman Reed hosted a roundtable discussion and teleconference with LNG business leaders, including the American Petroleum Institute, Center for Liquefied Natural Gas, LNG Allies, and the U.S. Chamber of Commerce to discuss ways EXIM can assist with increasing the volume of domestic LNG exports.
And March, before the onset of the covid-19 pandemic and subsequent energy market volatility, Chairman Reed addressed LNG stakeholders at a joint panel of the United States Trade and Development Agency (USTDA), LNG Allies and the U.S. Chamber of Commerce Global Energy Institute. In her speech, Chairman Reed emphasized EXIM’s commitment to USTDA’s U.S. Gas Infrastructure Exports Initiative, which launched in 2018 to connect U.S. infrastructure companies in emerging gas markets. To date, the initiative has supported more than 350 projects across the energy lifecycle in more than 70 countries, generating $7 billion in U.S. gas sector exports.
“EXIM is committed to increasing U.S. energy exports,” said Chairman Reed. “I am thankful for the work that our public and private-sector partners, including USTDA, LNG Allies, and the U.S. Chamber of Commerce’s Global Energy Institute do to promote the export of U.S. energy.”
This week, Chairman Reed concluded a three-day visit to Oman, focused on strengthening the 200-year U.S.-Omani relationship through a mutual commitment to economic development and prosperity in the United States and Oman.
Per an official EXIM announcement, Chairman Reed’s meeting with H.M. Sultan Haitham bin Tarik Al Said, H.E. Foreign Minister Badr Albusaidi, and other high-level Omani government officials and business leaders included very robust and focussed discussions to promote U.S. exports in key sectors such as agriculture, aquaculture, 5G, and manufacturing that will bring ‘in country value’ to Oman.
The visit culminated in a Memorandum of Understanding between EXIM and Oman’s Foreign Ministry aimed at enhancing trade and economic cooperation between the two countries.