LNG

Saudi Arabian Oil Company (Aramco) has signed a second US LNG accord to receive volumes from another Texas export, the Port Arthur liquefaction joint venture in Texas being developed by Sempra Infrastucture, and has followed up on a deal signed earlier in June with the Rio Grande export project in the Port of Brownsville.

Sempra, the US utility company with power and natural gas services centred on California and Texas and LNG developments in the US and Mexico through the Sempra Infrastructure subsidiary, reported a 25 percent drop in first-quarter profits as commodity prices fell along with revenues.

Sempra, the US utility company with power and natural gas services centred on California and Texas and LNG developments in the US and Mexico through the Sempra Infrastructure subsidiary, reported a surge in net income for the year and the fourth quarter.

Sempra Infrastructure, the US company controlling Sempra LNG and its Cameron export plant at Hackberry in Louisiana and related assets in Mexico, has sold a 10 percent stake to the Abu Dhabi wealth fund in the United Arab Emirates.

Sempra Energy has sold a 20 percent interest in the new business platform, Sempra Infrastructure Partners, to global equity fund Kohlberg, Kravis, Roberts (KKR) for $3.37 billion in cash.

“This transaction values Sempra Infrastructure Partners at around $25.2 billion, including expected asset-related debt at closing of $8.37Bln,” said Sempra, developer of the Cameron LNG export plant in Louisiana on the Gulf Coast and the Costa Azul project in northern Mexico.

In a series of transactions outlined at the end of 2020 that are intended to simplify Sempra Energy's non-utility infrastructure investments under one self-funding platform, the San Diego-based company combined the strengths of Sempra LNG and Sempra’s Mexican arm, IEnova.

“Over the next decade, we expect the energy markets in North America to continue to grow and become increasingly integrated,” said Jeffrey W. Martin, Chairman and Chief Executive of Sempra Energy.

“Combining our resources with KKR improves our ability to capture new investment opportunities in cleaner forms of energy and the critical infrastructure that stores and transports it,” added Martin.

The CEO explained that the transaction also sent a clear signal about the value and expected growth of its infrastructure portfolio.

“Investing in critical new energy infrastructure creates jobs, delivers reliable energy with fewer emissions and supports North America's economic recovery," said Raj Agrawal, KKR Partner and Global Head of Infrastructure.

“That is why we are excited to partner with Sempra Energy. This infrastructure platform provides a strong foundation to expand cleaner energy resources across the continent,” added Agrawal.

“Backed by strong, contractually-supported, long-term cash flows, our investment is also consistent with KKR Infrastructure's strategy to seek stable and predictable returns for our investors,” he stated.

The transaction is expected to be completed by mid-2021, subject to customary closing conditions, including consents from certain third parties and regulators.

Sempra Energy said it would exchange the publicly-held stake in its Mexican subsidiary and LNG plant developer IEnova for Sempra Energy shares and form a new North American infrastructure company grouping Cameron LNG in Louisiana, Costa Azul on Mexico’s Pacific Coast and the Port Arthur LNG project in Texas as well as other assets including natural gas pipelines.

Sempra currently owns 66.43 percent of IEnova, whose full name is Infraestructura Energética Nova, and is making a tender offer for the outstanding shares listed on the Mexican stock exchange, the Bolsa Mexicana de Valores (BMV) to be swapped for Sempra Energy shares.

The transaction for IEnova shares in Mexico is for the 29.83 percent, which were sold in an initial public offering in March 2013.

The IEnova IPO had been for 218 million shares which at the time raised the equivalent in pesos of $567 million.

The new Mexican share deal is necessary to clear the way for the pooling of Sempra’s LNG and natural gas and renewable assets into one company to be called Sempra Infrastructure Partners.

The San Diego, California-based company added that it would also sell a non-controlling interest in the Sempra Infrastructure Partners unit to help fund growth.

Sempra said it expected all transactions to be completed in the first quarter of 2021.

“The LNG portfolio consists of approximately 45 million tonnes per annum of LNG export capacity in development, construction or operation on the North American Pacific and Gulf Coasts,” said Sempra, in reference to Costa Azul, Cameron and the Port Arthur project.

With the IEnova shares of Mexican investors being exchanged for shares in Sempra, the US parent company Sempra Energy would be listed on the Mexican exchange in place of IEnova.

“We are excited about the announcement. In large measure, it is because we believe Sempra Infrastructure Partners is well positioned to be a leader in the global energy transition,” said Jeffrey W. Martin, Chairman and Chief Executive of Sempra Energy.

“By focusing on the critical need for new energy infrastructure right here in North America, both Sempra LNG and IEnova have created a significant pipeline of development projects that are expected to provide differentiated growth for decades to come,” added Martin.

“More importantly, this will provide an improved platform for innovation and potential new investments in renewables, hydrogen, energy storage and carbon sequestration," he added.

Martin said he was “especially excited” to be listing Sempra Energy shares on the BMV.

“Many of Mexico's most successful companies are listed there, and our plans to list our shares locally is a positive affirmation of our commitment to Mexico and desire to continue investing in the country and improving economic prosperity,” Martin explained.

“As part of Sempra Energy's family of companies, IEnova has delivered critical energy infrastructure to the country of Mexico for over two decades, supporting economic growth and the health and wellbeing of millions,” he stated.

In its stock-for-stock offer Sempra tendered for all the outstanding shares of IEnova at an exchange ratio of 0.0313 shares of Sempra Energy common stock for each ordinary share of IEnova.

Sempra Energy presented a non-binding offer to IEnova consisting of a fixed exchange ratio implying a price of 82 Mexican pesos ($4.10) per IEnova ordinary share, representing premiums of 11.6 percent and 22.6 percent over IEnova's 30-day and 90-day volume-weighted average stock prices.

To facilitate the exchange of the two sets of shares, Sempra Energy also filed a preliminary prospectus and exchange offer documents with the Mexican National Banking and Securities Commission and the BMV.

Sempra Energy said the third liquefaction Train at the Cameron LNG export plant at Hackberry in Louisiana has begun production.

Commercial operations for Train 3 under Cameron LNG's tolling agreements now remain on track to begin in the third quarter of 2020.

Cameron LNG achieved commercial operations of Train 1 and Train 2 in August 2019 and February 2020 respectively.

Sempra Energy noted that its mission was still to be the premier North American LNG infrastructure company by providing natural gas producers with access to global markets.

Sempra LNG owns a 50.2 percent interest in Cameron LNG, now ramping up to production of 12 million tonnes per annum, or 1.7 billion cubic feet per day of natural gas.

Three other projects are planned, the expansion of Cameron LNG, the construction of the Port Arthur LNG plant in Texas and the Costa Azul facility on the Pacific Coast of Mexico.

“Congratulations to the entire Cameron LNG team for reaching this last major milestone toward full commercial operations for Phase 1 of this critical energy infrastructure facility,” said Justin Bird, Chief Executive of Sempra LNG.

“We look forward to the completion of this world-class LNG facility that will be an outlet for exporting abundant US natural gas to world markets,” added Bird.

“Sempra LNG is proud of the thousands of engineering and construction jobs and millions of tax revenues the project has provided to Southwest Louisiana,” he stated.

“As the construction phase of the project concludes with a remarkable record of over 88 million hours without a lost time incident, we are confident in Cameron LNG's commitment to operating safely and continuing to support the local economy and community that has welcomed us since day one,” he said.

Cameron LNG is jointly owned by affiliates of Sempra LNG, French major Total, Japanese trading house Mitsui & Co. and Japan LNG Investment, a joint venture involving Mitsubishi Corp. and Nippon Yusen Kabushiki Kaisha (NYK Line).

Japanese LNG engineering firm Chiyoda Corp. is part of the construction joint along with McDermott International of the US.

“I applaud the hard work and commitment of the entire joint venture project team whose focus on safety and delivery during this dynamic time brought Train 3 to the state of producing LNG,” said Mark Coscio, McDermott's Senior Vice President for North, Central and South America.

“The teamwork and diligence they have placed on safety and health as we navigate through the current Covid-19 pandemic has enabled us to continue our operations and deliver the project,” added Coscio.

McDermott and Chiyoda have provided the engineering, procurement and construction for the Cameron LNG project since the project's initial award in 2014.

The US Cameron LNG project on the Calcasieu Ship Channel in Louisiana has been granted permission by US regulators to start commissioning procedures for the third liquefaction Train.

The Port Arthur liquefied natural gas export project in Texas proposed by Sempra Energy has formally filed with regulators for authorization for an expansion at the plant which will have the largest liquefaction Trains of any so far constructed in the US.

Sempra Energy, the California company operating the Cameron LNG export plant in Louisiana, has signed a fixed-price contract with US engineer Bechtel to construct its second Gulf Coast plant at Port Arthur in Texas to be backed by a subsidiary of Saudi Aramco, the largest oil producing company.