KITIMAT
A consortium led by Blackstone Inc. and four major Canadian pension funds is investing US$3.1 billion for a minority stake in the LNG Canada export terminal in Kitimat, B.C.
The group is acquiring the stake from Mitsubishi Corp., which owns 15 per cent of the project, and will be responsible for the cost of expanding the facility.
The money managers are investing because they regard LNG Canada as a reliable, cash-spinning business.
The Blackstone consortium views this infrastructure asset as a substitute for bonds and other fixed-income investments in credit portfolios they run for insurers and pensioners.
LNG Canada is a source of predictable double-digit returns in a world where returns on credit and equity investments are increasingly unpredictable.
The largest shareholder in LNG Canada, Shell PLC, recently shut down a process to sell down its 40-per-cent stake, according to sources familiar with the company’s strategy.
The spike in oil prices in the wake of the conflict in Iran is boosting Shell’s balance sheet and making it easier to pay for projects such as the Kitimat facility.
Analysts estimate over the next 18 months, Shell will spend at least US$10-billion buying back its own stock.
State-controlled Korea Gas Corp., a 5-per-cent stakeholder, has also backed LNG Canada for strategic reasons.
Choi Yeon-hye, then the company’s chief executive, praised the reliability of a “strategic energy asset we can control ourselves.”
Duplicating equipment and suppliers from the first phase of the project is expected to shorten the construction schedule and cut costs, said Choi, who retired in July.
The utility wants to diversify away from Middle East producers such as Qatar, which historically supplied 15 per cent of South Korea’s natural gas.
Prime Minister Mark Carney gave the Major Projects Office responsibility for speeding up the LNG Canada expansion on economic grounds.
The facility is part of a strategy to realize the country’s potential as an energy superpower.
The Global Infrastructure Investor Association said its members rank Canada as the most attractive infrastructure market in the world.
For CC&L Private Capital, this recognition reinforces confidence in the asset class.
“For CC&L Private Capital, this recognition reinforces our conviction that Canadian infrastructure investments specifically, and the alternatives asset class in general, has a key role to play in the qualified investor’s portfolio,” the firm said.
CPP Investments Insights Institute has stressed that investibility in Canada can be strengthened through policy and market structure improvements.
The institute points to clearer project pipelines, more predictable regulation, revenue certainty, and investment structures built to institutional scale as pivotal elements.
Less than two months after asset managers, including Blackstone, spent a day listening to Carney pitch opportunities at the Canada Investment Summit, the deals are coming.
Kitimat joins Manitoba’s Port of Churchill as a target for global capital.
In October, Dubai-based port operator DP World Ltd. signed a memorandum of understanding with the port’s owner to expand the northern shipping corridor, potentially adding container terminals.
e2gold.ca reported earlier this week that the group is acquiring a 49.9 percent interest in a Mitsubishi subsidiary that owns part of the terminal.
This story was written by the e2gold.ca newsroom from reporting by The Globe and Mail and RichTV.io. Quotes are checked word for word against that reporting.