A Structured Approach to Managing Risk:
To maintain high standards of corporate governance and support the successful development of its LNG-to-Power infrastructure, GNL Guatemala S.A. (“the Company”) will establish and implement a comprehensive Enterprise Risk Management (ERM) Framework across all departments, management levels, projects, and business activities.
ERM will be an integral part of the Company’s Management System and decision-making processes. It will apply throughout the entire project lifecycle—from business development, feasibility and permitting through engineering, financing, procurement, construction, commissioning, commercial operations, maintenance, and eventual decommissioning.
The purpose of the ERM Framework is to provide the Board of Directors, executive management, employees, shareholders, and relevant project teams with a consistent and transparent methodology for identifying, assessing, managing, monitoring, and communicating risks while also recognizing opportunities capable of creating and protecting long-term stakeholder value.
Enterprise-Wide Risk Governance:
The Company’s approach to risk management will evolve from risk decisions primarily dependent on individual experience toward a structured, enterprise-wide system supported by clearly defined policies, responsibilities, risk criteria, controls, reporting mechanisms, and escalation procedures.
The Board of Directors will maintain oversight of the Company’s principal risks, while executive management will be responsible for ensuring that appropriate risk-management processes and controls are implemented throughout the organization.
Individual risks will have clearly identified risk owners, responsible for implementing mitigation measures, monitoring exposure, and reporting material changes to management.
A corporate Risk Register will consolidate the Company’s principal risks and will be periodically reviewed and updated as the Project progresses.
Risk-Based Decision Making:
Risk management will be embedded into strategic, investment, technical, commercial, and operational decisions.
Major decisions—including project configuration, technology selection, contracting strategy, LNG sourcing, financing structure, execution schedule, capital commitments, and Final Investment Decision (FID)—will be evaluated considering their potential impact on the Company’s risk profile.
The Company will assess risks according to their likelihood, potential impact, mitigation measures, residual exposure, and potential consequences for cost, schedule, safety, environment, revenues, financing, and operational performance.
This approach will allow management to prioritize resources toward the risks that could have the greatest impact on the Project.
Project Development and Execution Risk:
The development of an integrated LNG-to-Power project requires the coordination of multiple interdependent infrastructure components.
GNL Guatemala S.A. will therefore actively manage the interfaces between the LNG receiving and storage facilities, regasification infrastructure, natural gas transportation facilities, power generation plant, electrical substation and transmission infrastructure, marine and port facilities, and associated utilities.
Particular attention will be given to interface risks that could affect the critical path of the Project, including engineering completion, permitting, land and port access, procurement of long-lead equipment, construction sequencing, commissioning, grid interconnection, and achievement of Commercial Operation Date (COD).
Schedule and cost risks will be periodically evaluated against the approved project baseline, allowing management to identify emerging deviations and implement corrective measures before they materially affect project delivery.
Commercial and Offtake Risk:
The economic sustainability of the Project depends significantly on securing appropriate long-term electricity offtake arrangements.
The Company will therefore evaluate risks associated with Power Purchase Agreements (PPAs), electricity tenders, capacity commitments, dispatch assumptions, electricity pricing, counterparty creditworthiness, payment security, contractual performance obligations, and potential changes in the Guatemalan electricity market.
Commercial agreements will be evaluated not only according to expected returns but also according to their ability to provide predictable and bankable long-term cash flows.
Where appropriate, the Company will seek contractual structures that appropriately allocate risks among the parties best positioned to manage them.
LNG Supply and Commodity Risk:
A secure, diversified, and commercially competitive LNG supply chain is fundamental to the reliability of the Project.
The Company’s risk-management strategy will therefore address LNG availability, commodity-price exposure, transportation costs, shipping availability, supplier concentration, contractual flexibility, delivery schedules, weather disruption, cargo diversion, and geopolitical or international market disruptions.
GNL Guatemala S.A. intends to maintain flexibility to source LNG from multiple potential supply markets, particularly the U.S. Gulf Coast and other suitable LNG supply sources within the Gulf of Mexico and Caribbean region.
Supply diversification can reduce dependency on a single supplier or terminal while strengthening the Company’s ability to maintain security of supply and negotiate competitive commercial conditions.
Financing and Financial Risk:
The Company recognizes that access to competitive long-term financing is essential to developing capital-intensive LNG and power infrastructure.
The ERM Framework will therefore address risks related to development funding, project financing, interest rates, foreign exchange, refinancing, liquidity, cost escalation, construction contingencies, debt-service obligations, covenant compliance, and potential delays in financial close.
Financial models will be periodically stress-tested against changes in key assumptions, including LNG prices, electricity prices, CAPEX, interest rates, construction delays, plant availability, dispatch factors, and operating costs.
Particular attention will be given to maintaining an appropriate relationship between project risk allocation and the requirements of potential lenders and investors.
Regulatory, Permitting and Compliance Risk:
GNL Guatemala S.A. will systematically monitor the legal and regulatory environment applicable to the Project.
The Company will manage risks associated with environmental approvals, energy-sector regulations, electricity-generation requirements, grid interconnection, port and maritime authorizations, construction permits, land rights, tax matters, customs requirements, LNG importation, and other applicable governmental approvals.
A structured permitting and compliance matrix will be maintained to identify responsible parties, regulatory requirements, submission dates, dependencies, approval status, and potential impacts on the Project schedule.
Compliance with applicable laws, permits, licenses, contractual obligations, and Company policies will remain a fundamental component of the ERM Framework.
Technical, Process Safety and Asset Integrity Risk:
Given the characteristics of LNG and natural gas infrastructure, process safety and asset integrity risks will receive particular attention.
Risk-management activities will include appropriate technical and safety studies throughout engineering and operations, including HAZID, HAZOP, Quantitative Risk Assessment (QRA), fire and explosion studies, marine risk assessments, emergency-response planning, and other specialized assessments, as appropriate.
Safety-critical systems—including LNG containment, cryogenic equipment, pressure systems, fire and gas detection, emergency shutdown systems, regasification facilities, gas pipelines, rotating equipment and electrical infrastructure—will be subject to appropriate engineering, inspection, testing, maintenance, and assurance processes.
The objective is to reduce the probability and consequences of major incidents while protecting employees, contractors, communities, the environment, and project assets.
Environmental and Social Risk:
Environmental and social considerations will be incorporated into the Company’s risk-management processes from the earliest stages of project development.
The Company will identify and manage potential impacts associated with marine and coastal activities, biodiversity, emissions, water use, wastewater, waste management, noise, dredging, land use, construction activities, local communities, and other relevant environmental and social matters.
Where applicable to the financing structure, the Project will seek alignment with internationally recognized environmental and social practices expected for major infrastructure and project-finance transactions.
Early stakeholder engagement and transparent communication will form an important component of identifying concerns, preventing conflicts, and maintaining the Project’s long-term social acceptance.
Counterparty, Contractor and Supply Chain Risk:
The successful execution of the Project will depend on multiple third parties, including EPC/EPCM contractors, technology providers, equipment manufacturers, LNG suppliers, shipping companies, operators, financial institutions, consultants, and other strategic counterparties.
The Company will therefore conduct appropriate technical, commercial, financial, compliance, and QESH assessments of material counterparties.
Critical suppliers and contractors will be monitored throughout contract execution, with particular attention to financial capability, performance, manufacturing schedules, long-lead equipment, quality, contractual obligations, and potential supply-chain disruptions.
Where commercially reasonable, the Company will seek to reduce excessive dependency on individual suppliers and maintain alternative sourcing or contingency strategies for critical equipment and services.
Operational Resilience and Business Continuity:
The ERM Framework will also address events capable of interrupting or materially reducing operations.
Business continuity and emergency-response arrangements will consider potential disruptions involving LNG supply, marine operations, terminal facilities, power generation equipment, transmission infrastructure, extreme weather, natural hazards, cybersecurity, telecommunications, utilities, critical suppliers, and other operational dependencies.
Contingency and recovery plans will establish appropriate responsibilities and response mechanisms designed to protect personnel, stabilize operations, minimize downtime, and restore critical activities in an orderly manner.
Risk Monitoring and Key Risk Indicators:
Enterprise risk management will be a continuous process rather than a periodic compliance exercise.
The Company will establish Key Risk Indicators (KRIs) and other monitoring mechanisms for material risks. Significant changes in exposure, emerging risks, control failures, incidents, or deviations from established thresholds will be reported and escalated according to defined governance procedures.
The corporate Risk Register will identify, as appropriate:
Risk → Cause → Potential Consequence → Probability → Impact → Risk Rating → Mitigation Measures → Risk Owner → Target Date → Residual Risk.
Management will periodically report material risk exposures and mitigation progress to the Board of Directors.
Risk Appetite and Risk Tolerance
As the Company develops, the Board and management will establish appropriate risk appetite and risk tolerance levels consistent with the Company’s strategic objectives and financing requirements.
The Company may accept certain measured commercial or development risks when they provide an appropriate risk-adjusted return. However, it will maintain a substantially lower tolerance for risks capable of causing serious harm to people, major environmental impacts, regulatory non-compliance, loss of asset integrity, corruption, or material damage to the Company’s reputation and ability to operate.
This distinction will help ensure that risk-taking remains disciplined and aligned with the Company’s long-term objectives.
Continuous Improvement and Risk Culture:
Effective risk management ultimately depends on organizational culture.
GNL Guatemala S.A. will promote a culture in which employees and contractors are encouraged to identify risks early, communicate concerns, challenge assumptions, report incidents and emerging threats, and propose opportunities for improvement.
Lessons learned from project activities, audits, incidents, contractors, operations, and industry experience will be incorporated into the Management System and future decision-making.
Through its Enterprise Risk Management Framework, GNL Guatemala S.A. seeks not to eliminate all risk, but to understand, allocate, mitigate, monitor, and manage risk intelligently.