Tags: blackstone | cheniere | lng

Blackstone to Invest $2 Billion in LNG Developer Cheniere

Monday, 27 February 2012 06:34 PM

Private equity firm Blackstone Group LP said on Monday it has agreed to invest $2 billion in Cheniere Energy Partners LP, in a deal that would help the company finance construction of a gas-liquefaction plant for export markets.

Houston-based LNG developer Cheniere will use the investment to build its first export plant in Sabine Pass, Louisiana.

Blackstone's investment was made via special units in Cheniere that will convert into common units once the facility begins commercial operation. The special units will carry a quarterly interest of 4.2 percent, paid out by issuing more of the shares.

The deal comes as U.S. producers are making moves to export natural gas as huge increases in domestic production thanks to shale development swamp the market, pushing gas prices way below global levels. Buyers across the world have also lined up to buy the cheap American fuel.

Indeed, Cheniere had originally planned to use the Sabine Pass site to import liquefied natural gas, but shifted the project in order to allow it to export the fuel as North American natural gas prices plummeted.

Cheniere Energy Partners is a master limited partnership (MLP) run by Cheniere Energy Inc. Cheniere Energy Inc currently owns 88.8 percent of the partnership.

Cheniere plans to break ground on its Sabine Pass project in April, pending final regulatory approval from the federal energy regulator and financing for the project.

The company said debt financing for the project is expected to be completed by the end of the first quarter. Construction is expected in the first half of 2012 and exports are anticipated to begin in 2015.

LNG is natural gas cooled to become a liquid so it can be shipped.

Cheniere is developing the first two of four liquefaction facilities at the site. The cost of the first two liquefaction facilities is expected to be $4.5 billion to $5 billion, Cheniere said.

Under the deal, Blackstone will also appoint four directors to the board of the MLP's general partner.

The company has signed a string of long-term export deals with buyers across the globe in the past few months, from Spain to India to South Korea, which has boosted Cheniere shares and improved its chances of securing financial backing for the project.

Various plans to export LNG from the United States have raised concerns that natural gas prices may increase for the U.S. consumer.

A study last month by the Energy Information Administration found that prices could rise by 3 to 9 percent over 20 years if exports go ahead.

Shares of Cheniere Energy Inc closed up 11.8 percent at $15.71, while shares of Cheniere Energy Partners rose 13.4 percent to $23.70. Both companies are listed on the American Stock Exchange.

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Monday, 27 February 2012 06:34 PM
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