NextDecade reaches FID for Rio Grande LNG

U.S.-based energy company NextDecade has made a positive final investment decision (FID) to construct the first three liquefaction trains (Phase 1) at the company’s 27 million tons per annum (MTPA) Rio Grande LNG (RGLNG) export facility in Brownsville, Texas.

Illustration; Archive; Courtesy of NextDecade

Specifically, the company executed and closed a joint venture agreement for Phase 1 which included approximately $5.9 billion of financial commitments from Global Infrastructure Partners (GIP), GIC, Mubadala Investment Company and TotalEnergies (TTE).

It also committed to invest approximately $283 million in Phase 1, including $125 million of pre-FID capital investments into Phase 1, and closed senior secured non-recourse bank credit facilities of $11.6 billion, consisting of $11.1 billion in construction term loans and a $500 million working capital facility, as well as a $700 million senior secured non-recourse private placement notes offering.

NextDecade called the $18.4 billion project financing for RGLNG Phase 1 the largest greenfield energy project financing in U.S. history, noting that it underscores the critical role that LNG and natural gas will continue to play in the global energy transition.

In conjunction with making a positive FID, RGLNG issued the notice to proceed (NTP) to Bechtel Energy to begin construction of Phase 1 under its engineering, procurement and construction contracts (EPC).

The final EPC cost at NTP is approximately $12 billion, and NextDecade said that the remaining expected project costs to be covered by this latest financing are owner’s costs and contingencies of approximately $2.3 billion, dredging for the Brazos Island Harbor Channel improvement project, conservation of more than 4,000 acres of wetland and wildlife habitat area and installation of utilities of approximately $600 million, and interest during construction and other financing costs of approximately $3.1 billion.

Phase 1, with nameplate liquefaction capacity of 17.6 MTPA, has 16.2 MTPA of long-term binding LNG sale and purchase agreements (SPAs) with TotalEnergies, Shell NA LNG, ENN LNG, Engie, ExxonMobil LNG Asia Pacific, Guangdong Energy Group, China Gas Hongda Energy Trading, Galp Trading and Itochu Corporation, NextDecade noted.

Matt Schatzman, NextDecade’s Chairman and CEO, said that achieving FID and issuing NTP on RGLNG Phase 1 is a “landmark event,” and Bayo Ogunlesi, Chairman and CEO of GIP, called it an important milestone in NextDecade’s mission of becoming a reliable supplier of low-carbon LNG.

Patrick Pouyanné, Chairman and CEO of TotalEnergies, stated: “This project gives TotalEnergies access to competitive LNG thanks to its low production costs. LNG from this first phase will boost TotalEnergies U.S. LNG export capacity to over 15 MTPA by 2030, and thus our ability to contribute to European gas security, and to provide customers in Asia with an alternative form of energy that is half as emissive as coal.”

To note, NextDecade informed that under the joint venture agreement, NextDecade will hold equity interests that entitle it to receive up to 20.8% of the cash flows generated by Phase 1 during operations, and financial investors and TTE will hold equity interests that entitle them to a minimum of 62.5% and 16.7%, respectively.

As part of the transaction, financial investors and TTE each have options to invest in RGLNG Train 4 and Train 5 equity, and options to invest in the planned carbon capture and sequestration project at RGLNG. TTE’s right to invest in Train 4 and Train 5 is conditioned on exercising their LNG purchase rights of 1.5 MTPA in each of Train 4 and Train 5.

Schatzman noted: “Now our focus turns to safely constructing Phase 1 on time and on budget and progressing commercial negotiations on RGLNG Train 4 and Train 5 to further expand our LNG platform and grow NextDecade shareholder value.”

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