Tolling Agreement Financing

Some recent projects, especially in the United States, adopt a toll agreement for third parties. In this case, the toll company is a for-profit business and, as a rule, there are few common goods in the entire value chain, if at all. Natural gas owners actually use the toll company to provide a very specific service and a normal business risk is taken care of by the toll company. Many of the considerations highlighted in this document are treated very differently with regard to third-party tolls. It is essential that the provisions on lifting and planning conditions (including port use agreements or conditions of use), the method of measurement and the allocation of LNG and other by-products are uniform for all toll parties sharing common facilities (common facilities include, inter alia, LNG and by-product tanks, walkways, lifting arms and associated equipment). Clear and non-discriminatory allocation procedures and measurement principles to accurately determine the right of each toll to support LNG and by-products are important not only for project participants, but also for financiers. Allocation procedures and measurement methods should apply equally to all tolls and be verifiable by all parties to the toll using common or common facilities or be subject to an expert assessment. Facelift conditions, measurement and allocation are often incorporated into the toll agreement; However, it is not atypical that these conditions should be included in a separate agreement signed by all parties to the toll, thus facilitating the flow of information, in particular for the preparation of the consumption gas supply plan, the annual LNG collection programme, the allocation of LNG and by-products, ship standards and verifications and the determination of liability. These payments are critical to funding the project, Feldman said. Unlike other provisions of a toll agreement, the fee structure may not be consistent beyond the project agreements. To achieve project success, financial viability is essential and the ability to generate sufficient cash flow to support project debt and other lender requirements is essential.

For liability to the toll, the agreement serves as a physical hedge of assets to cover electricity trading positions. At the same time, commercial investments can be used to extract the “volatility value” or upward trend that could be present in volatile gas and electricity markets, Feldman said. When implementing an LNG toll structure, the project`s toll company (i) provides upstream natural gas owners with a liquefaction processing service for a fee; (ii) the upstream owners of natural gas (or a subset of them) have an interest in the toll company; (iii) assume no liability in the absence of an equivalent remedy against another participant in the project; (iv) is protected to varying degrees against bankruptcy; (v) does not take possession of natural gas, LNG or by-products or does not assume the risk of loss of natural gas, LNG or by-products and (vi) no raw material risk has been taken into account. . . .

Sobre Franco Baldissare

Soy consultor en Comunicación y Personal Branding. Ayudo a personas y organizaciones a conectar para comunicarse mejor con su público. Además de brindar talleres y charlas estoy escribiendo un libro, que espero presentar este año. Casado con Noe, tengo dos hijos: Francesco y Gemma.

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