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Moody's upgrades Sabine Pass entities on success of LNG export terminal

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Moody's upgrades Sabine Pass entities on success of LNG export terminal

Moody's has upgraded ratings on Cheniere Energy Partners LP subsidiaries, citing "constructionaccomplishments" at the Sabine Pass LNGexport terminal.

Sabine PassLiquefaction LLC's senior secured rating was raised to Ba2 from Ba3,and Sabine Pass LNG LP'ssenior secured rating was upgraded to Ba2 from B1. The ratings outlooks for bothentities remain stable, Moody's said in an April 28 news release.

Moody's sees gains ahead for the subsidiaries as SabinePass' train 1 nears completion and train 2 begins commissioning testing. Both eventsare expected to produce near-term cash flows that could fund as much as $2.5 billionin ongoing and future construction costs, assuming trains 1 and 2 begin full operationswithout material challenges, according to Moody's.

The cash flows would come from long-term LNG sale and purchaseagreements with "financially sound" off-takers. About 88% of Sabine Pass'capacity is supported by these contracts, which are expected to bring in about $2.9billion annually by 2020, Moody's said.

Besides possible cost overruns or delays, Moody's saidthe ratings action could be challenged by the weak pricing environment for spotLNG, partly due to low oil prices, reduced regional demand in Asia and an influxof new LNG capacity coming online around the globe.