Maurice Brand, managing director of LNG.
LNG Limited is close to securing a vital 20-year tolling agreement for its planned $US3.5 billion ($4.5bn) Magnolia LNG plant in Louisiana, after one of its proposed customers secured a deal to sell US LNG to Britain through European energy giant E.ON.
The news yesterday pushed shares of Perth-based LNG, the best top-200 performer on disallowed last year, 16 per cent higher to a record high of $4.80 and brought its market value to $2.22bn.
The company could repeat the performance, having doubled its share price since the start of the year to be by far the best performing top-200 stock in 2015.
After earlier plans to build a small-scale LNG plant at Gladstone were dashed when Royal Dutch Shell and PetroChina took over the planned gas supplier, Arrow Energy, LNG managing director Maurice Brand shifted his focus to the US.
Mr Brand secured the Magnolia site, which has a major pipeline with uncontracted gas volume running through it, greatly reducing the supply risk that hit him at Gladstone.
Yesterday, LNG said Canadian fund Meridian LNG wanted to progress an earlier tolling term sheet with Magnolia, after signing a deal to sell 2 million tonnes a year of LNG for 20 years to E.ON in Britain.
“Magnolia and Meridian LNG have substantially completed the negotiation of a liquefaction tolling agreement and will now move forward to complete binding agreements for a total of 2 million tonnes per annum,” LNG said.
Europe was not seen as the chief destination for LNG from Magnolia, but according to Foster Stockbroking, demand is growing there because buyers want secure, if more expensive, alternatives to Russian gas. “The anticipated supply from Magnolia LNG completes a unique, low-cost and flexible LNG supply chain to Europe,” Meridian LNG president Roger Whelan said.
Foster, which is LNG’s broker of choice for equity raisings, said the coming agreement would be an important one for the stock and could see Magnolia receive a tolling fee of
$US3 per million British thermal units,
$US2.65 of this of which would be earnings before interest, tax, depreciation and amortisation.
Based on a 2 million-tonne contract, this would represent $US247 million a year in earnings before interest, tax, depreciation and amortisation. And if LNG can repeat this fourfold for the 8 million tonnes of annual capacity it is targeting in two stages, that equals
$US1bn of EBIT a year from the project and helps explain its $2bn-plus market value.
On top of binding tolling agreements, LNG needs approval from the US Federal Energy Regulatory Commission to build the low-cost plant technology it has patented.
“We are of the view LNG is now on the cusp of a major rerating, and … a number of investment funds … will start giving the company the attention it deserves,” Foster executive director Martin Carolan said.
http://m.theaustralian.com.au/busin...ear-tolling-deal/story-e6frg9df-1227319498486
Look how happy he looks
GO MB!
