claytons contract with chinese by icon, page-3

pmunt- its taken you almost 2 weeks to make your comments.
some of those issues have merit.

But in reality, i reckon if the Chinese want to back out of the deal, they will just back out anyway!
because what are we going to do? take on China?

No.

i reckon that outcome probably applies to any dealings with the CHinses - look what they did to WA crayfish! just part of the territory.

The issue (and the reality) is what we have been saying all along.

China, and Asia, simply want all the gas they can get:

+ they want it at a market price, on a L/T contract, so they don't get screwed like with iron ore.
+ they want supply security.
+ they generally seem to want equity in the project and resource now.

those two Buyer conditions precedent appear to come as a result of the change in J/V partner. Whilst it says "Buyer", i thought the Chinese govt was a j/v partner to construct the receiving terminal.

Anyway, with the Chinses govt involved, one would think Govt approvals are foregone conclusion.

the condition precedent wrt ratings Agency would have been inserted by Icon to enable Funding of plant and infrastructure, and reduce the buyer completion risk.


as i have mentioned before, and above, I reckon that the Chinese govt is happy for minnows like Sino to organise the LNG for its city for a whole heap of reasons.
imho, it is making more sense now - from the Chinese viewpoint.

doing a deal with icon is a plus for Chinese because:

* it potentially contracts supply for a whole region on a L/T contract at a contracted price.

* the price will not be subjected to manipulation as has been for iron ore

* icon contract provides feedstock for Sino receiving terminal (so Sino J/V can get it built)

* potential for Chinese to get equity in resource and project (because Icon got no money to develop LNG plant and fields

* MOST importantly - (imho) - is that with Sino and Chinese govt doing deal with Icon, it opens door to a new independent supplier, and therefore lessens possibilty for collusion of suppliers, lessens pssibilities of Chinese getting screwed over, and introduces competition and diversity of supply - and of course PRICING !

* dealing with Icon means Sino is not competing with other CHinese entities who also want LNG !

* also, if Icon fails to deliver on its end of the deal (ie reserves) the Chinese don't have much downside - i guess a receiving terminal with no LNG. But they will know the outcome well in advance, because Icon has to prove its supply by March 2013. So Sino can go look for other LNG supplies elsewhere.

all in all, I think your reservations are worth consideration, but I think the real "insurance" wrt this GSA, is related to supply and demand.

Chinse, japanese, indians, Taiwanese, Koreans etc, have the demand, and WE (Aust) have the supply !

because of that equation, the Chinese are prepared to bet that Icon will in fact deliver.

cheers