- Deal would refinance Sabine Pass, Creole Trail pipeline debt
- LNG import facility has never operated at full capacity
Cheniere Energy Inc. is seeking to borrow about $2.6 billion to refinance its underused Sabine Pass liquefied natural gas import facility and a pipeline, according to four people familiar with the deal.
Cheniere, which is better known because it’s on track to export the first cargo of U.S. shale gas this year, owes about $2.1 billion on the import facility in Louisiana, with $1.67 billion due in November, according to a company presentation Thursday.
Thanks to the U.S. shale boom, the $1.6 billion Sabine Pass import terminal was redundant the moment it came online in 2009. U.S. gas production is expected to climb in 2016 for the 11th straight year, and futures that soared to more than $13 per million British thermal units in mid-2008 plunged in December to a 16-year low of $1.68. The plant has never operated at full capacity, and soon after it began operations the company started planning an adjacent export facility.
Cheniere has hired Societe Generale SA as adviser and Mitsubishi UFJ Financial Group Inc. as the lead arranger, according to the people, who asked not to be identified because they’re not authorized to discuss the deal.
“It’s a sensitive issue, but Sabine’s contracts are with investment grade A quality paper, so they have high-quality sales and purchase agreements providing the cash flow to support the debt,” Ted Michael, a Genscape Inc. LNG analyst, said in a telephone interview. “I imagine the market is concerned at the moment, but for the debt markets, I assume it is within the parameters they can bear.”
The financing would replace all existing debt on the Creole Trail Pipeline and the LNG import terminal, and add some new debt. Spokesmen for Houston-based Cheniere, Mitsubishi UFJ and Societe Generale didn’t immediately respond to requests for comment.
Cheniere receives minimal quantities of imported LNG, mainly maintenance shipments to keep the plant running, according to government data compiled by Bloomberg New Energy Finance. Total SA and Chevron Corp. each contract 1 billion cubic feet of import capacity and began making annual payments totaling $250 million when the terminal came online under 20-year agreements.
The refinancing effort comes as Cheniere has hit a snag in its effort to become the first exporter of LNG from the lower 48 states. Earlier this month, the company said the first LNG cargo would be delayed by as much as two months because of faulty wiring. It now plans to ship its first LNG cargo from Sabine Pass in late February or March, missing its previous estimate of the third week of January.
The plant will load a commissioning cargo onto a tanker as part of its startup testing. The company needs final federal approval to begin commercial operations. Cheniere plans to build at least six processing plants, known as trains, to produce LNG at Sabine Pass by late 2018, allowing the terminal to supply more than 3.5 billion cubic feet a day.