Asia Money and the U.S. LNG Business

Temasek, Singapore’s state investment company, has joined with RRJ, a private equity firm founded by Richard Ong, a Malaysian dealmaker, to purchase $1 billion in convertible bonds to be issued by Cheniere Energy (LNG-NYSE) for financing the construction of its liquefied natural gas (LNG) export terminal.

 

The bonds have a 6 ½ year maturity and carry an annual interest rate of 4.87 percent and will be convertible into Cheniere’s common stock in a year’s time. RRJ already had an equity investment in Cheniere.

 

This move comes at the same time Asian buyers appear less interested in buying U.S. LNG. We don’t know why they are turning down what is supposed to be cheaper LNG, but we wonder whether they have less confidence that U.S. LNG supplies will be available in the volumes projected, and especially at the current low price that is projected to remain so for many years.

 

It is also possible that Asian gas demand will not grow as much as projected due to slow-growing economies, increased conservation and efficiency that trim demand growth, and other alternative gas supplies being available with long-term, fixed-price terms that prove cheaper than U.S. gas volumes.

 

We continue wondering whether the U.S. LNG export terminals will become white elephants just as the LNG import terminals did.

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