7/14/14 05:01:00: GIP Agrees to Buy Hastings Funds Stake In Freeport LNG
NEW YORK-- Global Infrastructure Partners has agreed to buy 25% of Freeport LNG Development LP for $850 million , securing a front seat in North America's drive to become a major exporter of natural gas, people familiar with the matter said.
Sharp increases in production of shale gas in the U.S. have depressed domestic prices, prompting many companies to consider chilling the gas into a liquid so it can be exported on a ship to Asia , where demand is rising quickly.
Freeport LNG is a holding company for its namesake project in Quintana island, Texas , which counts ConocoPhillips as a major investor.
Existing infrastructure at Quintana island completed in 2008 was originally designed to receive LNG imports. But the U.S. shale gas revolution has inspired its owners to commit US$14 billion to convert it to an LNG export hub.
GIP will buy the stake from funds managed by Australia's Hastings Funds Management and Zachry American Infrastructure, the people said.
A spokesman for GIP wasn't immediately available for comment.
Hastings also agreed to sell a further 30% interest in the holding company to Freeport LNG's chief executive and founder Michael Smith for around $250 million . This deal was based on the value of previous import contracts only, the people said.
Hastings typically invests in infrastructure assets that can generate steady, low-risk returns. Its move to sell followed Freeport LNG's decision to risk large amounts of capital to become an LNG exporter. The $1.1 billion sale price represents a return of more than 5.5 times the value of Hastings's initial investment in 2010.
Last year, the Freeport joint venture received approval from the U.S. Department of Energy to export LNG ahead of a final decision by the country's Federal Energy Regulatory Commission .
The venture hopes to start building its first two liquefaction units, known as trains, next year and start shipping LNG around four years later. Japanese power generators Osaka Gas Co. and Chubu Electric Power Co. are among companies which have already committed to buy LNG from the project.
Freeport was the second LNG project in the U.S. to receive approval from the Department of Energy . The first, known as Sabine Pass , is being built by a joint venture led by Cheniere Energy Partners LP . Construction of Sabine Pass began in 2012 and first shipments are expected as soon as next year.
Eurasia Group , a Washington -based consultancy, expects three more U.S. LNG projects will receive final regulatory approval by the end of this year, including Freeport. That would boost U.S. LNG export capacity to 6.52 billion cubic feet a day by 2020, catapulting the nation into third place among global LNG exporters behind Australia and Qatar .
GIP had earlier sought to invest in the project, but was trumped last December when Australia's IFM Investors won a process to invest $1.3 billion of equity funding into its second train, according to people familiar with the matter.
Write to Gillian Tan at gillian.tan@wsj.com and Ross Kelly at ross.kelly@wsj.com
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07-14-14 0701ET
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NEW YORK-- Global Infrastructure Partners has agreed to buy 25% of Freeport LNG Development LP for $850 million , securing a front seat in North America's drive to become a major exporter of natural gas, people familiar with the matter said.
Sharp increases in production of shale gas in the U.S. have depressed domestic prices, prompting many companies to consider chilling the gas into a liquid so it can be exported on a ship to Asia , where demand is rising quickly.
Freeport LNG is a holding company for its namesake project in Quintana island, Texas , which counts ConocoPhillips as a major investor.
Existing infrastructure at Quintana island completed in 2008 was originally designed to receive LNG imports. But the U.S. shale gas revolution has inspired its owners to commit US$14 billion to convert it to an LNG export hub.
GIP will buy the stake from funds managed by Australia's Hastings Funds Management and Zachry American Infrastructure, the people said.
A spokesman for GIP wasn't immediately available for comment.
Hastings also agreed to sell a further 30% interest in the holding company to Freeport LNG's chief executive and founder Michael Smith for around $250 million . This deal was based on the value of previous import contracts only, the people said.
Hastings typically invests in infrastructure assets that can generate steady, low-risk returns. Its move to sell followed Freeport LNG's decision to risk large amounts of capital to become an LNG exporter. The $1.1 billion sale price represents a return of more than 5.5 times the value of Hastings's initial investment in 2010.
Last year, the Freeport joint venture received approval from the U.S. Department of Energy to export LNG ahead of a final decision by the country's Federal Energy Regulatory Commission .
The venture hopes to start building its first two liquefaction units, known as trains, next year and start shipping LNG around four years later. Japanese power generators Osaka Gas Co. and Chubu Electric Power Co. are among companies which have already committed to buy LNG from the project.
Freeport was the second LNG project in the U.S. to receive approval from the Department of Energy . The first, known as Sabine Pass , is being built by a joint venture led by Cheniere Energy Partners LP . Construction of Sabine Pass began in 2012 and first shipments are expected as soon as next year.
Eurasia Group , a Washington -based consultancy, expects three more U.S. LNG projects will receive final regulatory approval by the end of this year, including Freeport. That would boost U.S. LNG export capacity to 6.52 billion cubic feet a day by 2020, catapulting the nation into third place among global LNG exporters behind Australia and Qatar .
GIP had earlier sought to invest in the project, but was trumped last December when Australia's IFM Investors won a process to invest $1.3 billion of equity funding into its second train, according to people familiar with the matter.
Write to Gillian Tan at gillian.tan@wsj.com and Ross Kelly at ross.kelly@wsj.com
Subscribe to WSJ: online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
07-14-14 0701ET
Copyright (c) 2014 Dow Jones & Company, Inc.
