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Takeover deal for LNGL collapses, putting company in danger
NORTH AMERICA
A planned takeover deal for Australia-head- quartered LNG Ltd (LNGL) has collapsed, after the buyer, LNG9, failed to secure financing for the transaction and withdrew its bid. The move puts North America-focused LNGL’s survival in question, as the company only has sufficient cash to meet all of its commitments until May, and has said it must urgently secure additional funding to continue operating beyond then.
Singapore-based LNG9 had planned to buy LNGL for $75mn, but it emerged in late March that merchant bank First Wall Street Capital would not provide funding for the deal. LNG9 initially informed LNGL that it would look for other sources funding, but informed the latter this week that it was withdrawing its bid.
Even now, LNGL has not completely given up on the takeover, and said that it would continue working with LNG9 to find a mutually accept- able transaction structure, as the Singaporean company remained interested in acquiring part or all of its assets. However, given the status of LNGL’s funds, there is little time in which to revive the transaction.
The development is the latest blow for LNGL, which had already been struggling to lock in buyers for output from its planned Magnolia LNG terminal in Louisiana in an increasingly oversupplied market. The company has US fed- eral authorisation to build the facility, which would have a capacity of 8mn tonnes per year (tpy). Indeed, it was awaiting a final decision from the US Federal Energy Regulatory Com- mission (FERC) to permit it to increase the facil- ity’s capacity to 8.8mn tpy. The decision is due this month, and follows a final environmental
impact statement (FEIS) on the expansion that was issued by the regulator in January.
However, the company has only found a buyer for around a quarter of Magnolia LNG’s output, and that deal – involving 2mn tpy of supply for a planned gas-to-power project in Vietnam – is only preliminary and has yet to be finalised. The finalisation of the deal was thought to be progressing, with the Vietnam- ese government adding the Bac Lieu project to its National Power Development Plan in 2019. Under the plan, Singapore-based Delta Offshore Energy will build a gas-fired power plant in Bac Lieu Province and a supporting offshore LNG import facility. The government’s move paved the way for Delta to finalise the supply agree- ment for the venture, but this too will be in jeop- ardy if LNGL is unable to secure new funding quickly.
LNGL had previously been targeting a final investment decision (FID) on Magnolia in 2019, but pushed it back to 2020 amid its ongoing struggle to secure offtakers for the project.
The company is also proposing a second export terminal – Bear Head LNG in Nova Sco- tia, Eastern Canada, which would have a capac- ity of 8-12mn tpy. Both of LNGL’s projects could now be delayed further even if it finds enough funding to keep operating beyond May.
In its announcement this week, LNGL noted that its US-based LNG Management Services subsidiary had received a Paycheck Protection Program (PPP) loan of $388,552 from the US Small Business Administration (SBA). No fur- ther progress on obtaining funding has been reported as yet.™
LNGL had previously been targeting a final investment decision on the Magnolia terminal this year, having delayed it from 2019.
The company has only found a buyer for around a quarter of Magnolia LNG’s output.
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w w w . N E W S B A S E . c o m Week 15 16•April•2020