Cheniere Energy sells stake in Freeport LNG

Source: Heren

2010/04/23

Houston, Texas, US-based Cheniere Energy has sold off its 30% stake in Freeport LNG Development, the operator of Freeport LNG terminal, to help meet its debt obligations.

Zachry American Infrastructure and Hastings Funds Management, a wholly owned subsidiary of Australia's Westpac Banking acting on behalf of various institutional investors, acquired it for approximately $104 million, Cheniere said on Friday. Cheniere said its Freeport stake generated $8m to $12m a year in income.

Cheniere's move is targeted at containing short-term and high-interest debt. In its 2009 annual report to the US Securities and Exchange Commission (SEC) the company said it has a $250m debt at 12% annual interest maturing in April 2011 which it was unable to pay using current resources. Cheniere's total debt is $3.1bn, according to the report.

Cheniere said it expected the transaction to go through in the second quarter of 2010 subject to due diligence and regulatory approvals.

The 1.5 billion cubic feet per day (bcf/day) Freeport LNG terminal located on Quintana Island, consists of one jetty and two 160,000m3 LNG storage tanks. The terminal is undergoing expansion to include another jetty and an LNG storage tank of 160,000m3.

Cheniere's main asset is its 4bcf/day Sabine Pass LNG terminal, which includes two Q-max-compatible jetties and five 160,000m3 LNG storage tanks, and its associated 2bcf/day Creole Trail pipeline which ships gas from Sabine Pass to the main regional gas hubs. Total holds 1bcf/day of regasification capacity in Sabine Pass under a long-term agreement, and Chevron another 1bcf/day, which it has leased to Iberdrola.

Cheniere's marketing arm Cheniere Marketing owns the capacity rights for the remaining 2bcf/day at Sabine Pass. Cheniere is in negotiations to sell one additional long-term agreement.

Earlier this month, Cheniere Marketing entered into a multi-year agreement with US-based investment bank JP Morgan, which effectively allows the company to receive financial backing for origination of both short-term and long-term deals (See GLM 1 April 2010).

The agreement includes an option for JP Morgan to reserve 0.5Bcf/day of capacity in Sabine Pass at a fixed price of $0.32/MMBtu.