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Tellurian works on financing in tandem with equity partnerships for Driftwood LNG

Highlights

Company podcast addresses FID questions

CEO not worried about earlier JKM weakness

Houston — Banks are prepared to offer financing for the debt portion of Tellurian's startup costs for its proposed Driftwood LNG export terminal and pipeline projects, Tellurian CEO Meg Gentle said in a podcast posted Thursday on the company website.

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This would take place once the developer finalizes a sufficient number of partnerships for the equity portion.

The platform offered Gentle the opportunity to address investors' questions after the Houston-based natural gas company said last week in a slide presentation that a final investment decision may be pushed to the second half of the year, from a previous target of end-June. The developer also said in that presentation that it plans to retain more of the up to 27.6 million mt/year terminal's capacity to market on its own than previously expected, meaning less capacity would be secured in advance by equity partners.

"We may still make that FID, but we wanted to be pretty transparent with the investor community that it might take a little more flexibility," Gentle said in the podcast.

Financing for the Driftwood project in Louisiana will now rely on only about $7 billion in partners' capital, down from around $8 billion previously. It continues to expect to require about $20 billion in project finance debt for its overall costs.

At full development, about half of Driftwood's capacity is expected to be used by equity investment partners Tellurian has been soliciting. The arrangements would require the partners to make a minimum upfront $500 million equity investment in the holding company that controls the Driftwood terminal and three pipelines it plans to build, in exchange for the right to lift 1 million mt/year of LNG from the export terminal for the life of the facility. France's Total signed a heads of agreement for the minimum earlier this month based on those terms.

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Tellurian also holds shale acreage in the Haynesville to drill for some of its feedgas needs.

The same day as last week's slide presentation, the US Federal Energy Regulatory Commission granted a permit certificate to the Driftwood project. Tellurian continues to target startup in 2023.

Besides the equity commitment, Total also agreed to buy 1.5 million mt/year of offtake from Tellurian's marketing unit, indexed to the Platts JKM, the benchmark price for spot-traded LNG in Northeast Asia, and to purchase around 200 million shares of Tellurian common stock. During the podcast, Gentle suggested that weakness earlier this year in JKM prices was foreseeable given the additional global capacity that has been coming online. She said it should not be viewed as a long-term trend that could impact Tellurian's business plan.

"Of course, when prices go down, everyone feels the sky is falling," Gentle said. "Really, there should be no surprise."

Tellurian is finalizing equity partnerships with four to eight other parties consisting of state-owned oil companies and major Asian utilities. In her podcast, Gentle said those discussions are going well. Some previously interested parties "re-engaged with more seriousness" in talks with the developer after the Total deal was announced at the LNG2019 conference in Shanghai, she said.

"I would say frankly all buyers, not just the Asians, were much more transactional than I have seen them in a long time," Gentle said.

-- Harry Weber, Harry.Weber@spglobal.com

-- Edited by Jennifer Pedrick, newsdesk@spglobal.com