LNG Shipping Projects May Be Voyaging Toward Investment-Grade Territory, says S&P
NEW YORK March 6, 2006--Global project finance liquified natural gas (LNG) shipping transactions have the potential to reach investment-grade credit ratings, according to a report published today by Standard & Poor's Ratings Services titled "Global LNG Shipping Projects May Be On Course For Investment Grade."
The strong global demand for liquefied natural gas attracts huge investment for construction and operation of LNG liquefaction plants, LNG ships, and LNG regasification terminals, largely on a nonrecourse project financing basis. Because LNG ships are part of the value chain linking the LNG plant and the regasification terminal, debt ratings on LNG ships will largely derive from the rating on the LNG plant, which in most cases will set a ceiling for the ratings potential.
"Few LNG projects are rated, but the overall credit profile for LNG plants with tight construction, solid operations, and long-term offtake arrangements with strong counterparties generally argues for investment-grade ratings, provided the host country also has an investment-grade rating and a good business climate," said Standard & Poor's credit analysts Terry Pratt.
The article focuses on key credit analysis aspects of LNG shipping projects. Standard & Poor's uses its project finance rating criteria to rate LNG shipping transactions. These criteria have served as the foundation for rating more than 500 project finance transactions since we began covering project finance in the early 1990s.
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