- U.S. denied application for gas export terminal in Oregon
- LNG terminal developers already facing market challenges
Pipeline and power plant owner Veresen Inc. fell by the most in more than four years after U.S. regulators denied its application for a $5.3 billion liquefied natural gas export terminal in Oregon and BMO Capital Markets downgraded its stock.
Shares slid as much as 12 percent, the biggest decline intraday since Aug. 8, 2011, on the rejection filed by the Federal Energy Regulatory Commission late Friday. BMO Capital Markets downgraded the stock to “underperform” from “market perform,” with analyst Ben Pham saying in a note that the commission’s decision came as a surprise. Veresen was down 6.6 percent at C$7.97 at 1:20 p.m. New York time.
The rejection of the Jordan Cove terminal comes as LNG export projects are already facing headwinds. An emerging global supply glut is depressing prices amid slowing demand from consuming nations in Asia, throwing into question the economics of terminals being proposed along America’s coasts.
“Regardless of whether Veresen will be successful in its appeal of the FERC decision (or in reapplying for regulatory approval), it would appear to us highly unlikely that investors will be willing to ascribe any value to Jordan Cove for quite some time,” Raymond James analysts including Chris Cox said in a research note.
Dorreen Miller, a spokeswoman for Veresen, did not immediately respond to a telephone message seeking comment Monday on the stock decline. The company was "extremely surprised and disappointed by the FERC decision," Chief Executive Officer Donald Althoff said in a statement March 11.
A day earlier in a call with analysts, Althoff said the project was “a very attractive option for Veresen even in the context of today’s global LNG dynamics.”
The energy commission rejected the Jordan Cove export terminal as well as Veresen’s plan to build a pipeline with Williams Partners LP to supply gas to the complex. The agency said the companies had failed to demonstrate that the pipeline’s benefits would outweigh the “adverse effects on landowners.” And without a pipeline feeding gas, the Jordan Cove export terminal “can provide no benefit to the public to counterbalance” the impacts associated with its construction, the agency said.
Tulsa, Oklahoma-based Williams "is thoroughly reviewing the announcement and consulting with its project partner, Veresen, on a path forward," spokesman Tom Droege said in an e-mailed statement Monday.
The terminal and an associated power plant were expected to cost $5.3 billion, with the Pacific Connector pipeline estimated at $2.3 billion, Michael Hinrichs, a spokesman for the project, said in an e-mail.