Two Asian investment funds will provide $500 million of the additional $2 billion Cheniere Energy needs to build the first two natural gas liquefaction trains at its Sabine Pass terminal in Louisiana, the company and the fund said Monday.
Singapore's sovereign fund Temasek and RRJ Capital, a relatively new $2.3 billion Asian-focused fund based in Houston, will buy $468 million of Cheniere's stock at $15.10/share, Houston-based Cheniere said. RRJ's head, Richard Ong, is the brother of the Temasek's chief strategist, Charles Ong.
At mid-day, Cheniere was trading at $16.25/share, off 1%, on light volume.
Cheniere will invest the cash as part of a $500 million block of partnership units in Cheniere's master limited partnership, Cheniere Energy Partners, as part of a larger $2 billion offering to complete financing for the first stage of the export terminal's construction, Cheniere said.
Private equity fund Blackstone Partners in February made a $2 billion investment in the MLP which owns and operates the terminal.
Temasek, RRJ Capital and Cheniere also said they are in discussions over a partnership that would develop sales and trading relationships in Asian LNG markets for Sabine Pass terminals.
Temasek Managing Director Greg Lanham said Cheniere has a first-mover advantage in exporting US natural gas.
Cheniere has already received permission from the US Department of Energy to export LNG and in mid-April received US Federal Energy Regulatory Commission approval to build the export trains at Sabine Pass.
Cheniere also has signed inked long-term LNG purchase agreements for 16 million mt/year, or about 89% of the terminal's planned export capacity, with UK-based BG Group, Korea Gas, India's GAIL, and Spain's Gas Natural Fenosa.
But a Tudor Pickering Holt analyst Monday warned that exporting natural gas from the US might not have smooth sailing.
Asia is where demand for LNG has been strong and TPH analyst George O'Leary said Monday in an unrelated note to clients that he expects demand there will continue to climb.
"April marked the 30th consecutive month of [year-on-year] increases in Asian LNG imports and the 12th consecutive month of double-digit growth," O'Leary said. "We expect Asia will provide the bulk of LNG demand going forward."
While he said he expects Sabine's first two liquefaction trains to begin operating in 2015, with the final two trains coming online in 2017, he predicted US LNG export projects will face hurdles and delays.
"We believe the US will likely construct a few of these LNG projects, but that the opportunity to utilize the gas domestically via incremental industrial and petrochemical demand (think job growth!) will limit incentives for politicians to push US liquefaction in mass," O'Leary said.
