SWKStock/Shutterstock Save for later Print Download Share LinkedIn Twitter Equity investors have become more crucial to spurring the next wave of greenfield US LNG projects, which are facing mounting macroeconoimic and industry challenges. Rising interest rates, cost inflation and a need to keep liquefaction fees competitive are changing the traditional model for financing US LNG projects. Developers are hoping to attract deep-pocketed equity investors to reduce their projects’ debt-to-equity ratios as they try to secure enough long-term offtake commitments to hit the 80% threshold to make a final investment decision (FID). Some banks’ slow shift away from gas/LNG financing is also raising questions for sponsors and buyers, as the ESG movement gathers momentum. Sempra’s FID of its 13 million tons per year Port Arthur Phase 1 project was supported by top US independent ConocoPhillips’ purchase of a 30% stake in the project, which included a 20-year, 5 million tons/yr offtake deal. Sempra also sold an indirect, non-controlling interest in Port Arthur Phase 1 to an infrastructure fund managed by KKR. The equity investments helped reduce the debt component of the $13 billion project to less than 55% instead of the typical 70% level. While majors may not have the same appetite for investing in US LNG projects, which have a different business model from integrated LNG schemes, the door is open for more commodity traders, US E&P players and investment funds to enter.
