Deals

Blackstone’s credit arm buys 49% of $2bn US LNG facility

The acquisition from EIG of Elba, which has a 20-year contract with Shell, comes at a critical juncture for US LNG facilities.

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Blackstone‘s credit unit has bought a 49 percent equity stake in the Elba Liquefaction Company, owner of the Elba Island LNG facility in the US state of Georgia.

Blackstone Credit bought the stake from EIG, which invested in the project in 2017. Kinder Morgan, which originally sold the stake to EIG, retains its 51 percent shareholding. While equity investments are uncommon for Blackstone Credit, in March it joined Greenbelt Capital Partners, Energy Impact Partners and Trilantic Energy Partners II North America to make an investment in US-based rooftop solar provider ION Solar.

Blackstone did not respond to requests for comment on the deal.

ELC is comprised of 10 movable modular liquefaction units with a capacity of about 2.5 million tons per annum of liquefied natural gas. The project became fully operational in August 2020 and cost about $2 billion to build, according to a Kinder Morgan statement at the time.

In 2017, EIG made an upfront payment to Kinder Morgan of $385 million for the share, while also committing to fund its share of future capital expenditures needed to complete construction and commissioning of the site. A term loan of $646 million was initially provided to EIG for the construction, led by Société Générale, before later being upsized to $730 million.

Blackstone’s investment comes at a critical juncture for US LNG facilities, after President Biden agreed in March with the European Commission that the US would provide a further 15 billion cubic metres of LNG through 2022, with increases expected thereafter, to make up for a shortfall of Russian gas.

The Elba project was granted authorisation to export LNG to non-free trade agreement countries in 2016, although Shell is subscribed to all of its current output under a 20-year agreement. However, Kinder Morgan could look at expanding the facility further.

“We had those discussions [on expanding Elba] a couple of years ago. Obviously, with what is happening now, we’re dusting that off again,” Tom Martin, president of Kinder Morgan’s natural gas pipelines unit, told shareholders on a Q1 2022 investor call last month.