Would like to make known how powerful the partnership struck...

Would like to make known how powerful the partnership struck between Foxconn (who ranked #24 on Fortune 500 list in 2018, #27 in 17’, #25 in 16’) & IDG will be for LNG LTD.

Foxconn Technology bought a 24.4 per cent stake in Hong Kong-based oil and gas company IDG Energy Investment for a combined HK$1.48 billion (US$190 million), in a move that signalled the Taiwan-based electronics manufacturer’s entry into the natural gas market.

Foxconn, also known as Hon Hai Precision Industry, became IDG’s second-largest shareholder.

“ The new shareholder [Foxconn], as a world-class multinational group and one of the world’s largest electronics manufacturers, can bring strategic value adding and unique resources to the company,” said IDG.
“The company [IDG] expects that its business development and operations will benefit from Foxconn Technology’s global network, customer resources, public relationship as well as its leading experience of operational excellence.”

IDG plans to use the net proceeds from the deal to invest in the natural gas industry along its value chain, including liquefied natural gas (LNG) terminal projects, expanding its business through investments in other oil and gas projects, and making other investments for the future development of the company.

Now isn’t this a wonderful sight to be seen!

UPDATED ON FEBRUARY 02, 2019 18:47 JST

U.S. President Donald Trump joins Foxconn Technology Group Chairman Terry Gou during a ground-breaking ceremony at the company's site in Mount Pleasant, Wisconsin, in June 2018. © Reuters

Hmm, just maybe Mr Gou might have a connection or 2 with natural gas end-users in China??!

A little insight in-to Foxconn's latest investment in the US economy... It seems Foxconn’s plans for a $10 billion Wisconsin plant are back on. After a couple of years of back and forths, the manufacturing giant says it’s recommitting to plans for a plant in the upper Midwest. Foxconn late on Friday night (Feb 1) said in a statement;

“ After productive discussions between the White House and the company, and after a personal conversation between President Donald J. Trump and Chairman Terry Gou, Foxconn is moving forward with our planned construction of a Gen 6 fab facility, which will be at the heart of the Wisconsin Valley Science and Technology Park,” the statement reads. “ This campus will serve both as an advanced manufacturing facility as well as a hub of high technology innovation for the region.” Gen-6 LCD technology will mainly churn out smaller but value-added displays for such uses as automotive, aviation and medical.

" U.S. President Trump shared with me yesterday on the phone that the negotiation progress between China and the U.S. is going well and it is likely that they will come up with an agreement soon," Gou said in opening remarks at Foxconn's annual carnival for employees in Taipei.

He later told reporters that he discussed the matter with Trump because he has investments in the U.S. and is concerned about the friction between Washington and Beijing.

" It's the right decision to invest in the U.S. " Gou said on Saturday Feb 2, without mentioning the Gen-6 project during his speech.

" I was honoured to receive a phone call from President Trump. Actually, in December last year, I also went to the White House to have an extensive discussion with the president about the outlook on the trade situation between the U.S. and China, as well as our investment in the U.S."

Feb 6 2019 “ This is the Eighth Wonder of the World.” So declared President Donald Trump onstage last June at a press event at Foxconn’s new factory in Mount Pleasant, Wis. He was there to herald the potential of the Taiwanese manufacturing giant’s expansion into cheesehead country. He’d joined Foxconn Chairman Terry Gou and then-Wisconsin Governor Scott Walker to celebrate a partnership he’d helped broker—“ one of the great deals ever,” Trump said. In exchange for more than $4.5 billion in government incentives, Foxconn had agreed to build a high-tech manufacturing hub on 3,000 acres of farmland south of Milwaukee and create as many as 13,000 good-paying jobs for “ amazing Wisconsin workers ” as early as 2022.

In front of national media and an audience of several hundred, Trump talked up the larger meaning. For too long, he said, bad trade deals sent factory jobs to places like China, and that era was over. Yes, this Foxconn deal represented the largest public subsidy package to a foreign company in U.S. history, but it also marked a turning point for “ restoring America’s industrial might.” Blue-collar jobs were coming home, starting with the Mount Pleasant facility and its LCD TV production. And what better bellwether for the success of his trade war than Foxconn Technology Group, a leading iPhone maker in China long synonymous with overseas manufacturing? “ As Foxconn has discovered, there is no better place to build, hire, and grow than right here in the U.S.,” Trump said. “ Made in the USA. It’s all happening.”

The deal will cost taxpayers more than $4.5 billion in subsidies, but because manufacturing companies in Wisconsin are already exempt from paying taxes, “Foxconn, which generated a hundred and fifty-eight billion dollars in revenue last year, will receive much of this subsidy in direct cash payments from taxpayers” — the largest subsidy given to a foreign corporation in U.S. history!

Foxconn currently manufactures iPhones, and analysts estimate that Apple could provide as much as half of Foxconn’s revenue. Foxconn is the world's largest contract electronics maker, and is best known for assembling Apple's iPhones. Last year, Foxconn relied on Apple for about 54% of its revenue, according to Arthur Liao, an analyst at Fubon Research.

On IDG’s FY 2017 Annual Results released in June 2018, the company highlights in bullet points under the heading, “ The Significance Of Foxconn’s Investment In The Company “...

- Helping secure long term gas supply contracts for customers in LNG end-user market of China.
- As an electronic product manufacturer, Foxconn itself is also a large energy end-user.
- Gaining supports from local governments in North America through the influence of Foxconn!
- Helping obtain tax incentives for projects in North America.
- Synergy from Foxconn’s energy logistic.
- Synergy and support in energy trading.

I managed to hunt down GV’s appearance on the Bloomberg NEF panel @ the LNG conference in Shanghai April 1-5. There were quite a few important take aways from these discussions on the present/future LNG industry. Will share the link and highlight those points I thought were “on the money”. https://vimeo.com/326657015

Moderator - “ What are the hubs that matter these days? What the contracts look like? What are the buyers looking for in terms of what hub you’re pricing off of? “ Meg Gentle CEO Tellurian - “ So when we talk to buyers, the overwhelming first priority is flexibility and then they really struggle as they look for a pricing mechanism... whether indexing to HH or indexing to oil is going to be advantageous for them. Since they don’t really need long term contracts per se, they’re really managing price risk if they are entering into long term contracts so they are seeking the absolutely lowest price! We have been trying to convert our long term pricing to JKM index really because it’s the most liquid index today and looks like the price clearing point for LNG trading. It would be best for the industry to move away from other indexes and simply sell LNG on an LNG index. I think that we’ll see more than one LNG index develop over time so Singapore has an index, Shanghai has talked about developing an index, the Gulf Coast. As we have more cargoes leaving the Gulf of Mexico I believe that we’ll see the Gulf Coast marker actually be listed as a futures contract. So all of these indexes are perfect for LNG which is now finally becoming a grown up commodity. GV - “ What we’re seeing is I actually have no-one asking me for anything but HH pricing when we talk to customers. We actually had an Asian buyer lecture us if can you can believe this, that it had to be on HH because that was going to be the most stable price over for the next 20yrs . Great, mission accomplished right, now sign a contract. “

Moderator - “ There are a lot of facilities being built. There are a lot of facilities being proposed. Obviously Ashish is very bullish on those prospects but I wondered if you guys who are actually doing this have any comment on how many of those proposals will become real? “ Meg Gentle - “ Not enough! We have not even begun to really understand how much stranded gas we are creating in the US. We are expecting an increase of 20BCF a day of gas production. Much of that gas is coming regardless of the price because it is associated gas in the Permian and other fields that have associated gas production. And Tina, you mentioned negative prices in the Permian... today spot prices in the Permian there was a print at negative 80c an MMbtu and an able contract as at yesterday was at negative 5c so that shouldn’t continue to persist as long as there is enough infrastructure to move that gas. The negative prices are telling you they desperately need infrastructure. We are flaring 400MCF a day in the Permian alone and almost a BCF a day in this country, which could be exported and like Greg said, displacing oil or coal and going for not only profitable use but also beneficial environmental use in the global economy. So in order for us to support the market for all of that gas, we really need to build another approximately 100MT of export capacity from the US alone. Moderator - “ Wow, that’s a big number “. GV - “ I love that answer “. Meg Gentle, “ That’s where I get to... not enough! “

Moderator - “ We’ve seen other folks in the LNG industry talking about modular approaches to building. What are some of the panelists thoughts on that and the relative benefits or risks associated with it? “ Meg Gentle - “ There are no economies of small. So even though we have tried as an industry to save costs and I think we are successful doing that getting to smaller units, they are still are part of very large plants. For example at Driftwood LNG, the Tellurian project in Louisiana, we have gone to a 1.4MT refrigeration unit that’s much smaller than the more conventional units which are 5-7mts but we’re installing 20 of those units... so the plant in total capacity is still almost 28MT. The fact that the refrigeration units are more modular is great for assembly line style production in manufacturing the refrigeration units, so it brings down the cost of it and we actually increase the efficiency of the plant because on maintenance we take down 1 and a half MT instead of 5 or 7. So I think that the modular technology has a very important role to play in bringing down the costs and we have to continue to drive costs down as we become more and more commoditised. “

GV - “ On your modular question, obviously we’re a big fan of modular. I think this latest stage of modular, if you go back historically here’s this big plant, let’s cut it up into 11 modules and then take it on sight and basically stick build it again. So to Megs point, this generation of modular is much more “ plug and play “ and can be manufactured off sight and shipped in and connected very quickly. What it does for us, we’re actually very competitive at 8mt... so it’s a 4 train, 2mt per train and I think we’re offering the lowest, realistic prices in the industry if I can say it that way. And I think it’s because of the competitiveness of being modular “.

Moderator - “ And Greg, you’ve talked about being the lowest cost, realistic supplier out there. I won’t name names of other people who’ve claim to be lower cost than you “. Moderator laughs which intimates companies offering unrealistic prices and making lots of noise (eg Venture Global) in trying to entice buyers to sign contracts with them!

On a different tangent... in respect to China, in my last report I brought to attention the statement from CNPC who predicted China’s imports could reach 110BCM (80MT) by 2025. Last year the country imported 54MT. Rystad Energy forecasts Chinese demand to reach 90MT by 2025 while the annual IGU report is forecasting regasification capacity to pinch just over 100MT by 2024. China currently has HOAs with the following companies and their respective projects (will follow with the remaining worldwide HOAs in place;

CNOOC - New Age in Congo... 1mt 20yrs starting 2021

ENN - Mexico Pacific Ltd in Mexico... 1mt 15yrs

ENN - Venture Global in USA... 1mt 20yrs starting 2024

ENN - Next Decade/ Rio Grande in USA... 1mt 20yrs starting 2023

ENN - Woodside portfolio in Australia... 1mt 10yrs starting 2025

Mitsui - Sempre/ Costa Azul in Mexico... .8mt 20yrs starting 2023

Tokyo Gas - Sempre/ Costa Azul in Mexico... .8mt 20yrs starting 2023

Total - Sempre/ Costa Azul in Mexico... .8mt 20yrs starting 2023

Sumitomo - Freeport LNG train 4 in USA... 2.2mt 20yrs starting 2023

PGNiG - Sempre/ Port Arthur in USA... 2mt 20yrs starting 2023

Toho Gas - Mitsubishi/ LNG Canada in Canada... .3mt 15yrs starting 2024

Tokyo Gas - Mitsubishi/ LNG Canada in Canada... .6mt 13yrs starting 2026

Vitol - Petronas/ LNG Canada or portfolio... .8mt 15yrs starting 2024

Jera - ADNOC in UAE... .5mt 3yrs starting 2019

BP - Tortue LNG in Mauritania & Senegal... 2.4mt starting in 2022

Petrobangla - AOT Energy portfolio... 1.25 15yrs

Pertamina - Mozambique LNG2 in Mozambique 1mt 20yrs starting 2018

India in 2018 had 30mt of LNG import capacity with a 75% capacity utilisation rate and 22.4mt in long term supply contracted. In summarising India’s potential, future demand;

Currently has 5 existing LNG terminals in operation; 1) Dahej 15mt 2) Hazira 5mt 3) Dabhol 5mt 4) Kochi 5mt 5) Ennore 5mt (commissioned in Mar 2019) = 35mt

Currently has 5 terminals under construction; 1) Jaigarh 4mt/ commissioning expected April 2019 2) Dahej Expansion 2.5mt/ expected commissioning 2019 3) Mundra 5mt/ expected 19’/20’ 4) Dhamra 5mt/ expected 2nd half 2021 5) Jafrabad FSRU 5mt/ expected in 2020 = 21.5mt

Currently 7 proposed projects that are frontrunners to reach FID -

1) Dabhol expansion 5mt/ expected commissioning 2021

2) H-Energy in West Bengal 1.5-3mt/ expected May 2021

3) Phillipines based AG&P in Puducherry 1mt/ expected end 2019

4) H-Energy in Kolkata Port 4mt/ FID expected 2019

5) Petronet in Gangavaram 5mt

6) HPCL & Shapoorji Pallonji in Chhara 5mt

7) Bharat Pvt LTD Krishnapatam Port 2.5mt

Total = 24mt

The Top 6 Asian countries who imported the most LNG from the Spot Market or on short term contracts in 2018 were;

China - 17.7mt (8.2mt 2017’)
Japan - 14.6mt (12.2mt 17’)
Sth Korea - 14.6mt (8.9mt 17’)
India - 11.5mt (8.7mt 17’)
Taiwan - 9.2mt (5.4mt 17’)
Pakistan - 2.6mt (.12mt 17’)

Magnolia story line of achievements/ milestones to reflect the SP rise from " 29c on January 3 2014 " peaking at its first all-time high of " $4.31 on Sep 12 2014 " before going on to reach a historical high of $4.90 on May 1 2015;

Jan 21 2013 - Louisiana Economic Development announced plans for the development of a $2.2B LNG export facility at the Port of Lake Charles, Louisiana by the company's wholly owned USA subsidiary, Magnolia.

Jan 29 2013 - Site Option to Lease Term Sheet signed with the Lake Charles Harbour and Terminal District Authority.

Feb 28 2013 - DOE granted authorisation for Magnolia to export 4mt of LNG to FTA countries.

Mar 7 2013 - Legally binding Site Lease Option agreement signed with the Lake Charles Harbour and Terminal District Authority for proposed Magnolia project site.

Mar 22 2013 - FERC approves Magnolia request to commence pre-filing process.

Jul 17 2013 - 2mt Tolling Term Sheet signed with Gunvor.

Jul 26 2013 - Project Development Cooperation & Equity Term Sheet signed with Stonepeak.

Oct 16 2013 - Magnolia applied to DOE to export and additional 4mt to FTA countries.

Oct 26 2013 - Legally binding Equity Commitment Agreement signed with Stonepeak for US$660M to provide 100% of the construction equity.

Nov 26 2013 - 1.7mt Tolling Term Sheet signed with LNG Holdings Corp.

Jan 29 2014 - Legally binding pipeline capacity agreement, a PA (Precedent Agreement), signed with KMLP to secure sufficient firm gas transportation service rights for full 8mt capacity over 20yrs.

May 15 2014 - Filing application approved by FERC seeking siting, construction, ownership and operation of Magnolia.

Jul 13 2014 - EPC contract Term Sheet signed with SK E&C for FEED design and cost estimate works.

Jan 5 2014 - Technical Services Agreement (TSA) signed with KBR to undertake cost verification supporting Magnolia project delivery.

Jan 19 2015 - EPC MOU executed with KBR & SK E&C where both propose to execute a Joint Venture Agreement (JVA) on a 70/30 percent participation basis.

Apr 23 2015 - Meridian notifies Magnolia of its intentions to progress the 20yr 2mt LTA to a legally binding agreement now that Meridian has executed a 20yr GSA with EOn. Meridian went on to lock that binding deal in on Jul 25 2015.

By April 8 2016 we had crashed to 48c. Amazing to think how far we were from the finish line back in mid 2015... all the major, important milestones (besides SPAs) having been ticked off since then, a completely de-risked project, yet we're languishing in the rock bottom 40's. Market sentiment is certainly interesting with LNG LTD!

With IDG, the powerful/ influential Foxconn & JUSDA all working to hunt down buyers on our behalf. IDG being the first and only Chinese investor to invest directly in US. LNG projects, choosing Magnolia as its investment objective due to its unique advantages. KSJV having initially selected Chinese subcontractors to build our modules. And LNG LTD being showcased to the world at the Shanghai LNG conference in front of the big 3 NOCs (CNOOC, Sinopec, CNPC)..... we’re no longer the best kept secret in town! Word is out and we’ve got the right support/ the right backers and the right assembled team that will ensure our success in reaching FID!

It's only a matter of time! The patience & perseverance required over the years to see the Magnolia dream become reality will be a fairytale story to remember and worth the meteoric rise in SP...

Best. JK.