Washington, DC-based EIG Global Energy Partners, a firm which invests in energy and energy infrastructure, has signed a binding commitment letter to purchase approximately $1.5 billion of convertible notes that will be issued by Cheniere Energy to finance the development and construction of the Corpus Christie Liquefaction Project in Texas, the Houston-based energy company said in a statement.
The convertible notes will have a 10-year maturity date and will be issued by a wholly-owned subsidiary of Cheniere. The subsidiary, which is not yet formed, will be the indirect owner of 100 percent of the equity interests in Corpus Christie Liquefaction and Cheniere Corpus Christie Pipeline, according to the statement. Closing of the purchase and sale of the convertible notes is subject to the closing of the debt financing for the Liquefaction Project, funding of the initial equity contribution and other conditions.
“Cheniere’s undisputed leadership in North American LNG [liquid natural gas] development, and our belief in the global cost advantage of US natural gas, made this an ideal opportunity for our funds,” EIG chairman and chief executive Blair Thomas said, referring to EIG’s investment funds that will be purchasing the convertible notes.
“The globalisation of natural gas through LNG, together with continued fuel substitution, makes natural gas attractive on a long-term basis, and companies like Cheniere are well-positioned to benefit,” he added.
The Corpus Christie Liquefaction Project is being designed for up to three liquefaction trains with an expected aggregate annual production capacity of approximately 13.5 metric tonnes per year (mtpa), three LNG storage tanks and two LNG carrier docks. Development of the project is subject to Cheniere obtaining regulatory approvals, securing long-term customer contracts, obtaining financing and making a final investment decision, as well as other conditions. If all conditions are met, the Houston-based company expects construction to begin in early 2015 and LNG exports from the facility to commence in 2018.
As for the convertible notes, they would be convertible into Cheniere common stock before the ninth anniversary of the closing date, at the option of the issuer on or after completion of Train 3 and at the option of EIG six months after substantial completion of Train 3 through one year prior to the maturity date.
In addition to the liquefaction project the company is planning in Texas, Cheniere already owns and operates the Sabine Pass LNG terminal and Creole Trail Pipeline in Louisiana. It “is pursuing related business opportunities both upstream and downstream of the Sabine Pass LNG terminal,” Cheniere said.
Established in 1982, EIG specializes in private investments in energy and energy-related infrastructure on a global basis. Its clients include pension plans, insurance companies, endowments, foundations and sovereign wealth funds. As of September 30, 2014, EIG had $15.1 billion in assets under management. Over its 32-year course, the firm has invested over $16.6 billion in the sector through 300 projects or companies in 35 countries.
In addition to its Washington DC headquarters, the firm also has offices in Houston, London, Sydney, Rio de Janeiro, Hong Kong and Seoul.