Cheniere says cost of Sabine LNG nears $1.5Bln

Wednesday, 07 November 2007

During the quarter, Cheniere said progress continued on construction of the Sabine Pass terminal and estimated costs, before financing charges, would be $1.4Bln to $1.5Bln.


Sabine Pass is expected to begin operations in the second quarter of 2008 with initial send-out capacity of 2.6 billion cubic feet per day of natural gas and storage capacity of 10.1 Bcf.


Construction is also underway to expand the terminal to a total send-out capacity of 4 Bcf/d and storage capacity of 16.8 Bcf by the second quarter of 2009, Cheniere said.


The start of operations of the 2.0 Bcf/d Creole Trail pipeline for its related LNG terminal in Louisiana was expected to coincide with the initial start up of the terminal, the company said in its earnings report.


Results for the quarter were primarily affected by costs associated with the development of the infrastructure of the three terminals Cheniere is building in the Gulf of Mexico as well as the continued development of the organization in preparation for operations.


The primary reasons for the $20.4M increase in the net loss between corresponding quarters in 2006 and 2007 included the general and administrative expenses increasing by $22.9M because of personnel costs for the expansion of Cheniere's business.


LNG terminal and pipeline development expenses increasing by $7.1M due to the hiring of employees who will be operating and maintaining the Sabine Pass LNG receiving terminal and the Creole Trail pipeline.


There was also an increase in interest expense of $17.1M related to the Sabine Pass LNG senior notes, the company said.


These increases were partially offset by increased interest income of $9.9M and by the effect in 2006 of a $15.1M income tax provision, the statement added.


Cheniere said that at the end of the quarter it had unrestricted cash and cash equivalents of $446.6M compared to $463M on December 31, 2006.


The primary sources of cash and cash equivalents during the first nine months of 2007 were the receipt of $203.9M in net proceeds from the sale of Cheniere Energy Partners common shares to investors and the receipt of $391.7M in net proceeds from a $400M term loan in May 2007.


The primary use of the proceeds from the term loan was to purchase 9,175,595 shares of the company's common stock at a cost of $325M, as previously announced.


Another significant use of cash was for the construction of the Creole Trail pipeline, with costs incurred through September 30, of $310.6M. Estimated costs of the Creole Trail pipeline, before financing costs, are approximately $500M to $550m, Cheniere said.


Cheniere also held restricted cash, cash equivalents and treasury securities totaling $930.5M which was comprised of $513.6M dedicated to the completion of the construction of the Sabine Pass LNG terminal, including the expansion to 4 Bcf/d throughput capacity, $284.7M reserved for interest payments on Sabine Pass LNG senior notes and $86.7M as a reserve for distributions to Cheniere Partners' common unit holders.