Affiliates of private equity firm Blackstone are taking a stake in Cheniere Energy Partners LP’s (CQP) project to add liquefaction and export capability to its Sabine Pass LNG terminal on the U.S. Gulf Coast as well as other activities, Houston-based Cheniere said Monday.

Blackstone Energy Partners LP, Blackstone Capital Partners VI LP, and certain affiliates agreed to buy newly issued CQP Senior Subordinated Paid-in-Kind Units (CQP PIK Units) for $2 billion. The partnership would use the proceeds to fund the equity portion of the costs of developing, constructing and placing into service the liquefaction project, as well as the purchase of the Creole Trail pipeline from Cheniere Energy Inc. and other partnership business.

“Obtaining this financing will be a significant milestone for the advancement towards construction of the first two liquefaction train,” said Cheniere CEO Charif Souki. “We expect to obtain the remaining financing needed to fund the first two trains by the end of the first quarter and to commence construction in the first half of 2012.”

Cheniere Energy Partners shares surged Monday on the news, climbing nearly 13% to close at $23.58 in heavy trading. Cheniere Energy Inc. shares were up more than 11%, closing at $15.66.

Closing of the Blackstone agreement is subject to regulatory approvals required to permit commencement of construction of the liquefaction project, closing of the purchase of the Creole Trail pipeline and closing of debt financing for the first two liquefaction trains.

“We have been impressed with the vision and capability of Cheniere’s management, which have afforded Cheniere Partners a competitive advantage and compelling opportunity to develop the first natural gas liquefaction export facility in the continental United States…” said Blackstone Energy Partners CEO David Foley.

Cheniere Energy Partners said it is proceeding toward a positive final investment decision for the development and construction of the first two of four liquefaction trains at the site at an estimated cost of $4.5-5 billion before financing costs (see Daily GPI, Feb. 27). Debt financing for the project is expected to be completed by the end of the first quarter with construction slated to begin in the first half of this year. Purchase of the Creole Trail pipeline is expected to close concurrently with the closing of the financing.

Blackstone would purchase 111 million CQP PIK Units for $18/unit. The units would have a quarterly PIK rate of 4.2% and convert into CQP common units after two liquefaction trains begin commercial operation, which is expected to occur in 2016. The board of directors of CQP’s general partner could consist of 11 members, including four directors appointed by Blackstone, four directors appointed by Cheniere Energy Inc. and three independent directors, Cheniere said.

Cheniere is but one of several parties pursuing LNG export projects while the U.S. Department of Energy (DOE) is still considering the impact of exports on domestic natural gas prices (see Daily GPI, Feb. 23; Jan. 20). Sabine Pass is the only project to have received DOE approval to export to countries that are not parties to a free trade agreement with the United States. Such authorization is seen as critical to advancing a project, and DOE has said it will wait to grant others until the impact on domestic gas prices is better understood.

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