Canadian Pensions + Blackstone Buy LNGC Stake; SEFE / Ksi Lisims Deal Closes; Indigenous Equity Purchase in CGL

Highlights

• US private equity firm Blackstone, in partnership with four Canadian pension funds, is buying 49.9% of Japanese conglomerate Mitsubishi's stake in LNG Canada.
• Ksi Lisims LNG closed a binding sales and purchase agreement with German utility SEFE.
• A coalition of five First Nations is purchasing a small stake in the Coastal GasLink pipeline.
• Japanese utility Kyushu Electric Power has signed a 0.85 mtpa purchase agreement for LNG Canada Phase 2 cargoes.

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Details

Blackstone and Canadian Pension Plans Purchase Stake in LNG Canada

On November 2nd, Blackstone and Mitsubishi independently announced the sale of a 49.9% stake in the Mitsubishi subsidiary that owns its portion of LNG Canada (15%). Mitsubishi announced a sale worth US$1.6 billion, while Blackstone announced a transaction totalling US$3.1 billion. Much of the media coverage failed to note this distinction (e.g. Globe and Mail). Our hunch is that the US$1.6 billion represents a sale of the stake in the existing LNG Canada facility, and the additional US$1.5 billion part of the investment package for the LNG Canada Phase 2 FID, but at this time this is just speculation.

The four Canadian pension funds involved in the deal are Canada Pension Plan Investment Board, Ontario Municipal Employees Retirement System, Investment Management Corp. of Ontario, and the Public Sector Pension Investment Board. This deal represents a significant departure for Canadian pension fund investment strategies and is likely the result—perhaps the first of several results to come—of heavy pressure from the Carney government.

Blackstone, a US-based private equity firm, is also a backer of Ksi Lisims LNG, and has bought large amounts of Canadian infrastructure over the last several years. Goldman Sachs, a former employer of both Prime Minister Carney and Energy Secretary Tim Hodgson, advised Blackstone on this transaction.

Ksi Lisims and SEFE Close 20-year SPA

Ksi Lisims LNG has managed to turn its Heads of Agreement with German utility SEFE, signed in May this year, into a binding sales and purchase agreement for one million tonnes per year for 20 years. The deal means that Ksi Lisims now has offtake agreements covering 58% of its capacity. Rebecca Scott, Western LNG and Ksi Lisims's spokesperson, told Postmedia, "We are closely monitoring local and global investment conditions, along with trade and tariff discussions, and remain optimistic that an FID is possible in the coming months."

$65.3 Million Indigenous Equity Stake in Coastal GasLink

In October, First Nations CGL Pipeline Ltd. Partnership announced that it is buying a $65.3 million stake in TC Energy's Coastal GasLink. The group specified that the investment has been financed directly by the First Nations involved in the partnership and that it made no use of government loan guarantees or debt financing, which makes it relatively unique. The partnership is made up by the McLeod Lake Indian Band, Haisla Nation, Halfway River First Nation, Saulteau First Nations and West Moberly First Nations.

Coastal GasLink ultimately cost around $15 billion, meaning this investment represents just 0.43% of the cost. The project's valuation today is likely far lower than $15 billion, but this remains a very small stake in a project that is now majority owned by US-based private equity firm KKR and the Alberta Investment Management Corporation (AIMCo).

Japanese Utility Kyushu Electric Power Signs SPA for LNG Canada Phase 2

Kyushu Electric Power, a Japanese utility, has signed a 15-year sales and purchase agreement for 0.85 mtpa with Diamond Global Energy, a subsidiary of Mitsubishi that is marketing LNG Canada Phase 2 gas. Because most of LNG Canada's partners are themselves LNG traders and marketers, SPAs are not the same issue they are for a speculative project like Ksi Lisims LNG, but it is still worth keeping track of where the gas is going.