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Liquefied Natural Gas Limited fully funded for Magnolia LNG project

Published: 12:10 06 May 2014 AEST

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Liquefied Natural Gas Limited’s (ASX: LNG) 8 million tonne per annum Magnolia LNG project in Louisiana is now fully funded to financial close in mid-2015 after it raised $49.5 million through a placement.

This follows the company filing the formal application for the liquefied natural gas export project with the U.S. Federal Energy Regulatory Commission.

The company had placed 90 million shares priced at $0.55 each to cornerstone US institutional investors as well as existing Australian institutional shareholders.

Managing director Maurice Brand said the placement is a significant milestone with the strong demand a recognition of the outstanding progress that Magnolia LNG has achieved to date.

“The company plans to use some US$30 million to fully fund Magnolia through to 30 June 2015 with the balance of funds to be used for LNGL working capital including the identification of other LNG opportunities,” he said.

“In regard to the FERC application filed last week, the Magnolia LNG Project is placed among a small group of projects to have formally filed.”

“To the end of April 2014, the Magnolia LNG Project has expensed a total of US$11 million, including the delivery of its filing application to FERC. 

“While these costs are substantially lower than what has been reported by other US LNG developers, Magnolia LNG has had the benefit of a considerable amount of technical, engineering and development work that was associated with the company’s Fisherman’s Landing Gladstone LNG project in Australia.

“With this funding in place the team is now fully focused on delivering the EPC contract and
entering into binding Liquefaction Tolling Agreements.”

Placement Details

The $49.5 million placement of 90 million shares priced at $0.55 received very strong demand from existing Australian institutional shareholders and a group of US institutional investors.

This includes the addition of Fairview Capital Asset Management and Claren Road Asset Management as substantial shareholders of the company.

The placement will be made in two tranches, the first 31,207,254 shares under the company’s placement capacity while placement of the remaining 58,792,746 shares will be subject to shareholder approval.

Foster Stockbroking Pty Ltd acted as Sole Lead Manager and was supported by the company’s
U.S. advisor, New York based EAS Advisors LLC, acting through Merriman Capital, Inc.

Magnolia LNG

Magnolia LNG is planned as a 8Mtpa liquefied natural gas export project comprising of four liquefaction trains, each capable of producing up to 2Mtpa of LNG (1.7Mtpa firm).

This will use LNG Limited’s OSMR® LNG process technology with the company adopting a tolling business model whereby Magnolia LNG will provide liquefaction, storage and ship loading facilities to LNG buyers who pay a monthly fixed capacity fee, plus all LNG plant operating and maintenance costs.

The LNG buyers are also responsible for the supply and transportation of gas to the project site.

LNG Limited has tolling agreements covering 7Mtpa of the project’s planned 8Mtpa capacity and is currently focused on converting the first 4Mtpa to binding status in the first half of 2014.

SK Engineering and Construction Group, which recently signed a Technical Services Agreement with the company, has estimated engineering, procurement and construction costs for an initial two train project at US$1.57 billion.

In addition, Stonepeak Partners is earning an estimated 50% stake in MLNG return for contributing the full US$660 million project equity requirement.

This represents 30% of the total capital costs with LNG Limited planning to finance the remaining 70% with project debt.

To that end, the company has appointed BNP Paribas Bank as its project finance advisor.

It will also work with Stonepeak and New York based EAS Advisors, which had been instrumental in LNG lining up funding and partners for the project, to secure the proposed project debt financing for the Stage 1 development.

LNG Limited has also secured U.S. Department of Energy approval for it to export its full 8 million tonne per annum of LNG production to Free Trade Agreement countries.

Completion of the FERC filing process is a critical step toward permitting and approval necessary for the Project’s construction.    

Magnolia LNG anticipates receiving all approvals during 2015. Construction will commence shortly thereafter with first LNG exports planned for the second half of 2018.

Analysis

Liquefied Natural Gas Limited continues to make strong progress with its Magnolia LNG project, this time securing the funding required until financial close.

That about 80% of the placement was made to U.S. institutional investors demonstrates that LNG Limited is now firmly on the radars of North American investors.

This funding allows the company to focus on operational activities including converting the first 4Mtpa of its tolling agreements into binding deals that will allow it to commit to the first two trains of the project.

Shares in LNG Limited have performed strongly in the past month, hitting a high of $0.695 last week, and are currently trading at $0.65.

Notably, its shares has risen 135% since a Research Report by Proactive Investors’ Andrew McCrea in February.

We continue to maintain a Speculative Buy recommendation with a 18 month price target of $2.25.

 

Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX “Small and Mid-cap” stocks with distribution in Australia, UK, North America and Hong Kong / China.

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