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Kinder Morgan sells 49% interest in Elba Liquefaction Co.

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LNG Industry,

Kinder Morgan Inc. (KMI) has announced that investment funds managed by EIG Global Energy Partners have become a 49% joint venture (JV) participant in Elba Liquefaction Co. LLC (ELC).

ELC will own 10 liquefaction units and other ancillary equipment to be built as part of the Elba Liquefaction Project at Kinder Morgan’s existing Southern LNG Co. LLC Elba Island LNG facility near Savannah, Georgia, US.

In order to acquire its membership interest, EIG has made an upfront cash payment of approximately US$385 million. This payment consists of a US$215 million reimbursement to KMI for EIG’s 49% share of prior ELC CAPEX excluding capitalised interest, as well as payment of approximately US$170 million in excess of CAPEX in consideration of the value created by KMI in developing the project to this stage.

EIG has reached an agreement to fund its share of future CAPEX necessary to complete the construction and commissioning of the facility, subject to the terms and conditions contained in the applicable agreements. The total cost of the project is estimated to be US$1.3 billion, excluding capitalised interest.

The President and CEO of Kinder Morgan, Steve Kean, said: “We are excited that EIG will become an equity owner in Elba Liquefaction Company as construction continues at Elba Island. The project, which began construction on 1 November 2016, is supported by a 20-year contract with Shell.

“As we have told the market in past months, this JV is another strategic step towards achieving our stated goals of strengthening our balance sheet and positioning the company for long-term value creation.”

The Managing Director of EIG, Wallace Henderson, added: “This is a tremendous project that builds on our long-standing and extensive experience in LNG and LNG-related infrastructure.

“We are delighted to partner with Kinder Morgan and its outstanding development team to make the Elba Liquefaction Project a reality.”

At the moment, the initial liquefaction units are expected to be put into service in mid-2018, followed by the final units coming online in early 2019. In 2012, the Department of Energy (DOE) granted the Elba Liquefaction Project authorisation to export to free trade agreement (FTA) countries. On 16 December 2016, the DOE also issued non-FTA export authority. It is expected that the project will have an overall capacity of approximately 2.5 million tpy of LNG for export. This is equivalent to approximately 350 million ft3/d of natural gas.

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