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Veresen responds to EFG acquisition option

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LNG Industry,

Veresen Inc. has been named as a respondent in an application commenced by Energy Fundamentals Group Inc. (EFG) in the Ontario Superior Court of Justice in Toronto. 

EFG has sought a declaration that, pursuant to a letter agreement dated 27 July 2005 between EFG and Fort Chicago Energy Partners L.P. (the predecessor to Veresen), EFG has the option to acquire up to 20% of Veresen's equity interest in the Jordan Cove LNG terminal and related assets in Coos Bay, Oregon.   

In a statement released on its website, Veresen stated its belief that the option held by EFG applied only to the prior proposal to build an LNG import terminal and that it is not valid with respect to the current proposed liquefaction and LNG export terminal.

Furthermore, Veresen believes that even if the courts determine that the option is valid, the existence of the option and whether or not it is exercised are not expected to have a material impact on the company.

The statement from Veresen continued: “In 2005 when Veresen first considered the development of Jordan Cove LNG as an import terminal project, it entered into a previously disclosed agreement with EFG to provide financial advisory services, which included an option to invest up to 20% of the development and construction capital contributed, or to be contributed, to the project by Veresen. If the option was exercised prior to construction, EFG would pay Veresen an amount equal to all development equity contributed prior to that time, together with a premium after-tax rate of return of 30% (compounded annually) on development equity from the time such costs were incurred. Given the considerable development costs incurred by Veresen since 2005, and the premium return to be paid on such amounts, if valid, the exercise of the option by EFG would require a substantial payment to Veresen.

The LNG import terminal project was designed to accommodate the import of foreign natural gas into North America. With the dramatic and long-term change in North American supply of gas, the LNG import terminal project became commercially unviable. As a result, the import project was terminated and the licenses associated with it were vacated. Veresen commenced a new process to construct a liquefaction and LNG export terminal at the Jordan Cove site.”

Adapted from press release by

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