Houston — Private equity group Blackstone views its foundation investment in the Cheniere Energy affiliate that owns and operates the Sabine Pass LNG export terminal and related infrastructure as effectively a mission accomplished, the chief of its energy-focused business said Wednesday.
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During a chat with S&P Global Platts reporters on the sidelines of the Gastech conference in Houston, Blackstone Energy Partners head David Foley said the firm would consider selling its 202 million shares in Cheniere Energy Partners -- a 41% stake currently valued at $9.7 billion -- if a good offer came along.
The reason? The biggest exporter of US LNG, with the terminal in Louisiana, a second one in Texas and a proposed expansion, is financially healthy and the investment is no longer considered risky, and Blackstone prefers to get in on the ground floor and build an asset up before moving on, said Foley, who sits on the board of the parent company,
"Everything we own, we have to consider selling at some point," Foley said. "We're very happy with the investment. It's great. If someone else sees that value and wants to make an offer, we'd have to consider it."
He added, "We hold things for a long time, not forever."
A Cheniere spokesman, Eben Burnham-Snyder, declined to comment on Foley's remarks.
$1.5 BILLION INVESTMENT
Blackstone was the first major backer of Cheniere's flagship export terminal at Sabine Pass. In 2012, the firm poured $1.5 billion into Cheniere Energy Partners, a limited partnership formed by Cheniere Energy, to help fund Sabine Pass. At the time, many banks were skeptical about the global market for US LNG.
That agreement called for Blackstone's class B units to convert to common units after the third liquefaction train at the facility entered service. In July 2017, Cheniere Energy Partners filed that those shares were converting to 198,978,886 common units to be issued to a Blackstone fund at a value of about $6.34 billion. It was more than four times what Blackstone originally invested.
The investment has grown even further since then. Cheniere now operates five trains at Sabine Pass and is building a sixth. It operates two trains at its export terminal near Corpus Christi, Texas, and is building a third. A midscale liquefaction expansion also is being proposed at the Texas site.
Foley's description of Blackstone's current stake in Cheniere Energy Partners is in line with the firm's position at the end of the second quarter. Blackstone held about 203 million shares, or about 42%, of Cheniere Energy Partners as of June 30, according to S&P Global Market Intelligence data.
"When we made the investment, there was a meaningful amount of risk," Foley said. "You're going to build something that hasn't been built before. How are you going to finance it? Are customers going to pay? Is it going to be on time and on budget? All seven years ago were kind of unknown. And our investment was going to be in the form of a security that didn't pay a cash dividend. It just paid in-kind. You got a piece of paper that said IOU."
Now the situation has changed, because of how well the company has performed.
"So, as more people appreciate that, as the risk profile has gone down, it's an appropriate time to consider something," Foley said.
As for further investment in the US LNG sector, Blackstone views few of the second wave export projects currently being developed as compelling options in terms of risk versus reward. It chases risk, but risk that makes sense, he said, adding that he was skeptical of the assumptions some of the developers were making.
"There's a lot of projects," Foley said. "Everyone with a bit of oceanfront real estate, and a dock, can put in the queue and say, 'Hey, I'm an LNG project.' But that's not sufficient. I think it's quite difficult now to do. And greenfield projects that aren't on an existing regas facility have a much higher cost position, and ultimately, it's a commodity business."
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