About 30 banks are set to sign a $7.5 billion loan early next month for a U.S. shale gas project that could offer Japan imports from fracking, according to three people familiar with the matter.
Japan’s three biggest lenders are among banks that will supply $5 billion to the Hackberry, Louisiana-based Cameron liquefied natural gas development, two separate people said. The rest will be extended by state-owned Japan Bank for International Cooperation, they said.
The Cameron LNG project may give Asia’s second-largest economy an alternative source for fuel after a nuclear industry shutdown following the 2011 Fukushima disaster forced it to boost energy imports, resulting in a record run of trade deficits. For the nation’s banks, the deal will provide income from overseas as loan rates at home fall to the lowest ever due to central bank stimulus.
“It’s worthwhile for Japanese banks to participate in these projects at a time when there’s fierce competition” in domestic lending, said Hironari Nozaki, an analyst at Citigroup Inc. in Tokyo. The lenders’ “capital is ample,” he said.
The lending units of Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. are among the Japanese banks taking part in the deal, according to the two people. HSBC Holdings Plc, Societe Generale SA and ING Groep NV are also among the lenders, they said. Nippon Export and Investment Insurance will guarantee $2 billion of the private-sector bank loans, the people said.
The loan will be for 16 years, and its guaranteed portion will initially pay 125 basis points over the London interbank offered rate while the non-guaranteed part will pay 175 basis points more than Libor, according to the people. Japan’s average interest rates on new lending dropped to a record-low 0.779 percent in May, Bank of Japan data show. A basis point is 0.01 percentage point.
The $10 billion Cameron project is slated to produce 12 million tons of LNG a year starting 2018. It’s owned by Sempra Energy, GDF Suez, Mitsui & Co., and a joint venture between Mitsubishi Corp. and Nippon Yusen KK, according to the project’s website.
Pati Mitchell, a spokeswoman for Sempra Energy, said “we can only say that it will be this year,” when asked about the timing of the loan signing.
Spokesmen for Mitsubishi and Mitsui, who asked not to be named citing company policy, declined to comment. Spokesmen for Nippon Yusen and GDF Suez weren’t immediately available to comment.
Japan’s trade deficit in June exceeded economist forecasts at 822.2 billion yen ($8.1 billion), marking the 24th straight month of shortfalls, according to government data released today. Imports in the first six months of 2014 were the most in any half-year in comparable data back to 1979.
Fracking, which has created a shale gas boom in the U.S., refers to the process of injecting liquid at high pressure into subterranean rocks and boreholes so as to force open existing fissures and extract oil or gas.