Just running the numbers in terms of the equity deals Souki is now offering (not a ramp just an assessment of an interesting new business model in the LNG tolling game).
they are selling 1mpta of the project for $1500 a metric tonne.
That means for a 1mpta reserved right that is $1.5bn up front. The equity holder can then use this capacity to sell as they please- there is no tolling charge.
Souki reckons including the cost of financing and the long term shale acerage they bought in the Haynesville (rough $2.20 mmbtu all in gas cost) you can get gas at $6mmbtu FOB. At such a cost and with LNG trading with a 8 handle this means this trade is now in the money.
This is to tap into the fact that equity sponsors can borrow money at much better rates than the project could.
It also opens up investments to other equity players such as funds and sovereign wealth funds who take credit risk on the supply contracts they write for the capacity.
In our case, say you sell 2mpta for $3bn taking the Tellurian numbers. This covers cost of construction with the Stonepeak contribution. You can then enter into shorter term contracts (less than 20 years) because the banks arent lending. You can also take on risk with non-investment grade (eg Meridian, which is ultimately backed by a commitment from Edison). You could also trade uncontracted supply on the spot markets given the market right now is shifting away from long term to short term supply contracts.
Tellurian are also booking LNG shipping capacity- you can see where they are going- they sell some of the project to pay for cosntruction, then they make money trading LNG.
GV are you getting creative?
Are you talking to upstream suppliers for locked in long term gas supply?
We want to see evidence of your creativity.
We want to see your marketing strategy being proactive to what the market is telling you.
LNG Price at posting:
41.5¢ Sentiment: Hold Disclosure: Held
