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Blackstone to Invest $1.5B in Sabine Pass Liquefaction Project

In another move to fund its Sabine Pass LNG liquefaction project in Louisiana, Cheniere Energy Partners LP has agreed to sell $1.5 billion in newly issued CQP Class B units to investment funds managed by Blackstone Energy Partners LP and Blackstone Capital Partners VI LP, the Houston-based company said Tuesday.

The deal follows an announcement last week that two Asia-focused investors -- Temasek and RRJ Capital -- would put $468 million into Cheniere Energy Partners affiliate Cheniere Energy Inc. (see Daily GPI, May 8). The LNG developer said it would use the proceeds, combined with cash on hand, to buy $500 million of equity securities expected to be issued by Cheniere Energy Partners LP to finance Sabine Pass LNG (see Daily GPI, April 18).

Blackstone and Cheniere Energy Inc. have agreed to purchase 100 million and 33.3 million, respectively, of Class B units for $15/unit, Cheniere said. The board of directors of the general partner of Cheniere Partners will be comprised of eleven directors, including four directors appointed by Cheniere Energy Inc., three directors appointed by Blackstone, and four independent directors.

"Financing is the last milestone we need to complete in order to proceed with the construction of the first two trains of our liquefaction project at Sabine Pass," according to Cheniere CEO Charif Souki, who said commencement of operations is targeted for 2015.

The Federal Energy Regulatory Commission (FERC) last month approved a proposal by Cheniere Energy units Sabine Pass Liquefaction LLC and Sabine Pass LNG LP to site, construct and operate facilities to liquefy domestic natural gas for export to markets worldwide (see Daily GPI, April 17). It was the Commission's first authorization of a project that would export LNG from production resources within the United States.

Sabine Pass LNG and Sabine Pass Liquefaction propose to construct and operate liquefaction and related facilities that would enable the companies to liquefy and export up to 2.2 Bcf/d, or 16 million metric tons per year, of domestically produced gas. The project would be sited at Sabine Pass' existing LNG import terminal in Cameron Parish, LA.

The project would be built in two stages, each consisting of two LNG process trains with a liquefaction capacity of an estimated 4 million metric tons per year. Each train would contain gas treatment facilities, gas turbine-driven refrigerant compressors, cold boxes and heat exchangers for cooling and liquefying natural gas, waste heat recovery systems, fire and gas detection and safety systems, among other facilities. The project would involve the permanent use of an additional 191 acres within the existing Sabine Pass terminal and would use five existing LNG storage tanks at the site. No additional marine facilities are required.

Cost before financing for the first two trains of the liquefaction project is estimated at $4.5-5 billion and is expected to be funded from a combination of debt and equity.

The project would enable the terminal to receive and process an average of 2.6 Bcf/d, including fuel and inerts such as carbon dioxide and water. Sabine Pass would continue to provide import, regasification and re-export services, as requested, to customers under existing terminal use agreements.

At the time of the FERC approval, eight financial institutions had stepped up to help finance the project. The joint lead arrangers assisting with arrangement of up to $4 billion of debt facilities were The Bank of Tokyo-Mitsubishi UFJ Ltd., Credit Agricole Corporate and Investment Bank, Credit Suisse Securities (USA) LLC, HSBC, J.P. Morgan Securities LLC, Morgan Stanley, RBC Capital Markets, and SG Americas Securities LLC.

On the contracting front Cheniere has been making steady progress. It has inked four contracts to supply LNG to units of BG Group, Spain's Gas Natural Fenosa, Korea Gas Corp. (Kogas) and Gail (India) Ltd. for a total of 16 million metric tons per year capacity (see Daily GPI, Jan. 31).

Last week Creole Trail Pipeline Co. LP asked FERC for the go-ahead to modify its system to accommodate the delivery of raw gas to the Sabine Pass Liquefaction Project (see Daily GPI, May 14).

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