Freeport LNG CEO sees public offering for gas export company

By ZAIN SHAUK

Bloomberg

Freeport LNG Development CEO Michael Smith said he anticipates an initial public offering of the company, which has proposed a $14 billion facility in Texas to export LNG.

“I fully expect our company to be a $10 billion-plus public company at some phase during the construction of the facility,” Smith said in a phone interview. Construction is due to start next month and the company expects to begin exporting fuel as early as 2018.

Freeport LNG is one of several companies seeking to build export terminals on the U.S. Gulf Coast to send output from booming North American shale-gas formations to overseas buyers who pay higher prices for the fuel. The Freeport export facility, which may be the second in the continental U.S. to start construction after Cheniere Energy Inc., will eventually have the capacity to process 13.2 million metric tons a year.

“If Freeport were to go public it would be, other than Cheniere, the only direct pure-play stock for investors to play North American LNG exports,” said Pavel Molchanov, an analyst for Raymond James & Associates in Houston.

Smith said he holds 57.5% of Freeport, with Dow Chemical Co. owning 7.5% and Japan’s Osaka Gas Co. 10%. Global Infrastructure Partners, a private-equity firm, agreed in July to buy a 25% interest in the closely held company for $850 million, taking over a stake held by Zachry American Infrastructure LLC and Hastings Funds Management (USA) Inc.

Cheniere Value

Cheniere, which went public in 1994 and has climbed 85% in the past year, probably provided inspiration for Smith as he considers options to create more value for Freeport LNG owners, Molchanov said.

Freeport has contracts in place to sell the gas, which is chilled to liquid form for shipment by tanker, with companies including Osaka, BP Plc and Toshiba Corp.

A spokesman for Global Infrastructure Partners declined to comment. Dow didn’t immediately respond to a request for comment and Osaka Gas wasn’t available before regular business hours in Japan.

Dominion Resources Inc. is planning a public offering for a master-limited partnership that would own its planned LNG export terminal in Maryland. Sempra Energy has also said it’s considering an IPO for an LNG terminal in Louisiana. The partnerships may also eventually hold other assets, including pipelines and storage facilities.

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