Magnolia LNG, Stonepeak to Finalise Equity Finance Agreement (USA)

Liquefied Natural Gas Limited announced that it expects to finalise and execute the Magnolia LNG Project equity finance definitive agreements, between Magnolia LNG and Stonepeak Partners in October 2013.

MLNG, a wholly owned subsidiary of the company, currently owns 100% of the Magnolia LNG Project.

The Equity Agreements provide for Stonepeak to provide 100% of the Magnolia LNG Project’s estimated equity requirement of US$660 million at Financial Close.

Based on the current Magnolia LNG Project financial model, Stonepeak would acquire an approximate 50% equity interest in MLNG, with the Company retaining an approximate 50% equity interest.

There has been no material change to the terms of the existing Term Sheet, dated 25 July 2013, as advised to shareholders on 26 July 2013, other than both parties agreeing to a 30 day extension in the expiry date of the Term Sheet, to 23 October 2013, in order to finalise legal drafting of the Equity Agreements.

This extension will have no impact on the development schedule or progress of other agreements as outlined in the August Monthly Progress Report.

The definitive Equity Agreements comprise two documents, namely:

• Equity Commitment Agreement, which governs the relationship, cooperation, rights and obligations between Stonepeak and the Company through to financial close; and
• Magnolia LLC Agreement, which sets out the respective rights and obligations of Stonepeak and the Company from financial close, including with respect to the development and funding of the Magnolia LNG Project,the management and governance of MLNG, the allocation and distribution of MLNG’s future profits, and other related matters. The Magnolia LLC Agreement serves the same purpose as a JointOperating/Venture Agreement would in Australia.

The Company’s Managing Director, Maurice Brand, said that “the Company was pleased with the progress of both Equity Agreements but both parties simply needed up to 30 days to finalise all the legal aspects and complete appropriate reviews by the Company’s Accounting, Tax and Insurance consultants. These are all long term agreements and commitments, and therefore the Company and Stonepeak need to ensure thatthey adequately address all material events in the future”.

“With the Stonepeak definitive Equity Agreements to be executed shortly, the Company’s main commercial focus will turn to the definitive Tolling Agreements with Brightshore Overseas Ltd (Gunvor Group), for firm and interruptible LNG production capacity of 2 mtpa, and Gas Natural SDG.S.A. (Gas Natural Fenosa Group) for firm and interruptible LNG production capacity of up to 2 mtpa (in aggregate covering the initial 2 LNG trains)” said Mr Brand.

In summary,the key terms under the Equity Commitment Agreement include:

• Stonepeak and the Company to form a strategic alliance dedicated to the development, construction and operation of the Magnolia LNG Project;
• Stonepeak will commit to provide 100% of the Magnolia LNG Project equity from financial close, which is currently estimated at ~US$660million;
• The Company will, at financial close of the Magnolia LNG Project, receive a one‐off success fee calculated at 3% of the total Magnolia LNG Project capital cost (such fee is estimated at US$66 million);
• Stonepeak will assist the Company secure long term project debt financing, which is estimated at US$1,540 million. In this regard, Stonepeak will work with the Company in ensuring all Magnolia LNG Project material agreements and other documents are in a bankable form; and
• Stonepeak will be entitled to appoint one manager to the Board of MLNG, but the manager will have no voting rights prior to financial close and the commencement of Stonepeak’s project equity financing contribution.

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LNG World News Staff, September 26, 2013; Image: LNG Ltd