Tellurian Inc. has signed an accord to sell the site of the proposed Driftwood liquefied natural gas plant in Lake Charles in Louisiana to a New York-based institutional investor.
Tellurian said in a stock exchange filing that the sale and lease back deal has been the subject of a binding letter of intent for the 800 acres of land owned by Tellurian’s subsidiary, Driftwood LNG LLC.
The agreement with the unnamed investment firm with $120 billion in assets under management will see Tellurian receiving $1 billion for the land and a lease.
“It will consist of the sale by Driftwood LNG and purchase by a special purpose entity to be formed by the investor of Driftwood LNG’s interests in the property for $1.0Bln pursuant to a purchase and sale agreement,” said Tellurian.
On the closing of the transaction a 40-year lease of the property from the purchaser to Driftwood LNG will be signed in the form of a master lease.
The terms of the master lease will include, among other requirements, a capitalization rate of 8.75 percent and annual rent escalators of 3.00 percent as well as a requirement that Driftwood LNG posts a letter of credit equal to 12 months of rent.
Guarantors
There is also a requirement that the equity investors in Driftwood LNG become joint and contingent guarantors of the master lease.
“The master lease contingent guarantors are also required to hold an investment grade rating of BBB or higher or attain an equivalent shadow credit rating, or be otherwise acceptable to the purchaser,” noted Tellurian in its filing.
The Houston-based company is quoted on the American list of the New York Stock Exchange.
The accord contemplates that the parties will use “commercially reasonable efforts” to finalize the purchase agreement and master lease on or before July 14, 2023.
“The LOI will terminate on July 14, 2023 if Driftwood LNG fails to identify the contingent guarantors by such date and will terminate on July 31,” it said.
The satisfaction of the closing conditions in the purchase agreement also including Driftwood LNG securing financing commitments for Phase One of the LNG export project.
Leading US LNG engineering company Bechtel Energy has already been given limited notice to proceed with construction of Phase One of the Driftwood liquefaction plant.
The Tellurian project involves constructing 20 mid-scale processing Trains, each with 1.38 MTPA of capacity and built as five blocks of four Trains.
The Phase One development would include the first two of these blocks with 11 MTPA of output and two of three planned 235,000 cubic metres storage tanks and the first of three planned loading berths for LNG carriers.
