Lender and Investor Due Diligence

The rapidly evolving LNG trade is giving rise to unprecedented capital expenditures in order to expand the global liquefaction, shipping and regasification infrastructure. Individual gas-value-chain investments can reach into the $billions, and, as a consequence, project financing plays an increasingly crucial role, particularly as second-tier participants enter the market.

Lending institutions and equity investors seek out the required expertise to not only assess project economic and technical feasibility, but also to provide essential due-diligence review in support of investment decisions and project financing. ZECG brings seasoned expertise in project feasibility, economic and market analysis, reserves evaluation, technology assessment, risk assessment, project/structured finance and other disciplines that play a key part in the due-diligence process.

Providers of equity and debt capital must understand the factors that influence the desirability of undertaking a given project. This entails examination of the following:

• Reserves/assurance of gas supply
  
• Gas infrastructure
  
• Supply/demand drivers
  
• Macro trends in the gas value chain
  
• Commodity pricing forecasts
  
• Construction cost trends
  
• Equipment lead times and time to market
  
• Analysis of competing projects, routes to market and competitive positioning
  
• Analysis of development sponsors' competitive strengths and weaknesses
  
• In-country/project/market risks

Project risks are central to due-diligence review. Equity investors and lenders must fully understand project risks. Inflation risk, currency risk, political risk, market risk, interest-rate risk, gas-supply risk and environmental risk all play a part. A thorough due-diligence review must not only examine these factors, but must go further to examine viable/optimal mitigation strategies.

The principals and executive consultants at ZECG bring all the required skill sets to provide the client with an understanding of the risks and economic desirability of a specific investment.