Sri Lankan LPG terminal secures debt funding

August, 24, 2017

Sri Lankan conglomerate LAUGFS Gas has secured US$80mn in debt finance from Standard Chartered, for an LPG terminal in Hambantota.

It marks the first private sector financing facility in Sri Lanka to be supported by Sinosure, the Chinese-state insurer. It will be built by China Huanqiu Construction and Engineering Corporation (HQC) and once completed, will be one of the largest import and export terminals in South Asia.

Standard Chartered arranged, co-ordinated and lent the entire sum, with the 30,000MT terminal due to come on in the second half of 2018.

In July, the government of Sri Lanka signed a US$1.1bn deal with the Chinese government for the control and development of Hambantota Port, in the country’s southeast. Hambantota is a deep-sea port and located on a strategic shipping channel along the Southern Indian Ocean.

The government said at the time that it would use the US$1.1bn to repay other foreign debt, while a Chinese state-owned enterprise will run the port for 99 years. China meanwhile envisions Hambantota Port as a key part of its Belt and Road plans.

The deal has, however, proven controversial in Sri Lanka, with many local people and unions upset at the growing level of Chinese influence in the island nation. China has funded road and port projects previously, with accusations that the funding, despite being disbursed by policy banks who usually offer concessional rates, was unaffordable.

Furthermore, the latest plan will see the eviction of thousands of local people from villages along the proposed site.

The signatories of the debt finance facility, however, praised the “visionary endeavour” of Sinosure’s first private sector activity in Sri Lanka. “The strategic location of the terminal in the midst of the world’s largest shipping routes will undoubtedly be an enormous advantage that the company can leverage on,” Guo Yilin, deputy general manager of Sinosure, added.

WKH Wegapitiya, the chairman of LAUGFS Holdings, the parent company of LAUGFS Gas, says: “This marks a significant milestone for our LPG Terminal project, which is well on track to be commissioned in the second half of 2018. Once completed, the LAUGFS terminals in Hambantota will garner tremendous economic benefits to our country by helping to position Sri Lanka as a central energy hub in the region.”

 

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