Blackstone Enters into an Arrangement for $2B Equity Investment for the Sabine Pass Liquefaction Project

abarrelfullabarrelfull wrote on 27 Feb 2012 14:44
Tags: blackstone cheniere deals lng usa

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Cheniere Energy Partners, L.P. ("Cheniere Partners") (NYSE Amex: CQP) announced today that it has entered into an exclusive arrangement with Blackstone Energy Partners L.P., Blackstone Capital Partners VI L.P., and certain affiliates (collectively, "Blackstone") to finalize and execute definitive agreements under which Blackstone would purchase newly issued CQP Senior Subordinated Paid-in-Kind Units ("CQP PIK Units") for $2 billion (the "Financing"). CQP would use the proceeds of the Financing to fund the equity portion of the costs of developing, constructing and placing into service its Sabine Pass liquefaction project being developed at the Sabine Pass LNG terminal (the "Liquefaction Project"), the purchase of the Creole Trail pipeline from Cheniere Energy, Inc. and other partnership business purposes.

Cheniere Partners is advancing towards a positive final investment decision for the development and construction of the first two of four liquefaction trains. The cost for the construction of the first two trains is currently estimated to be $4.5 billion to $5.0 billion, before financing costs. The debt financing for the Liquefaction Project is expected to be completed by the end of the first quarter. Construction is expected to commence in the first half of 2012. The purchase of the Creole Trail pipeline is expected to close concurrently with the closing of the Financing.

Under the units purchase agreement currently under negotiation, Blackstone would purchase approximately 111 million CQP PIK Units for $18 per unit. The CQP PIK Units would have a quarterly PIK rate of 4.2% and convert into CQP common units after two liquefaction trains begin commercial operation, which we expect to occur in 2016. The parties contemplate that the Board of Directors of CQP's general partner would consist of eleven members, including four directors appointed by Blackstone, four directors appointed by Cheniere Energy, Inc. and three independent directors.

"Obtaining this financing will be a significant milestone for the advancement towards construction of the first two liquefaction trains. Blackstone is one of the world's largest private equity investors, with significant experience in the energy sector and a history of successful development of large scale energy projects. We look forward to a successful working relationship with Blackstone as a value-added partner in the development of our Sabine Pass liquefaction project," said Charif Souki, Chairman and CEO. "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."

David Foley, Senior Managing Director of Blackstone and CEO of Blackstone Energy Partners said, "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, creating thousands of jobs for American workers and providing significant benefits to the local economy and the state of Louisiana."

The closing of the Financing is subject to, among other things, the execution of definitive documents, receipt of regulatory approvals required to permit commencement of construction of the Liquefaction Project, closing of the purchase of the Creole Trail pipeline, closing of the debt financing for the first two trains and other conditions necessary to complete the transaction.

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