China Fund Invests in US Gas Export Plant
OREANDA-NEWS. August 29, 2012. China’s sovereign wealth fund China Investment Corp has invested in Cheniere Energy Partners’ planned plant exporting liquefied natural gas from the US, in the latest sign of Asian companies’ interest in North American energy assets.
A Chinese investment in this groundbreaking and politically sensitive project, which will be the first LNG export terminal in the US outside Alaska, risks stirring up objections from politicians who have queried whether gas exports from Cheniere’s plant at Sabine Pass on the Texas-Louisiana border would be in the interests of US businesses and consumers.
However, by being a passive investor in the USD 1.5bn equity investment in Cheniere led by Blackstone, alongside Government of Singapore Investment Corp, and the state of Louisiana, CIC hopes to avoid the sort of political backlash that has doomed other energy deals, notably the failed bid by Chinese National Offshore Oil Company for Unocal in 2005.
Although Blackstone will have board seats at Cheniere, CIC itself will have no direct influence on the Houston-based energy firm.
Such co-investments are generally treated as confidential, and a spokesman for Blackstone declined to comment on the deal.
Blackstone has acted for CIC in sensitive situations in the past, as it did when it bought real estate in Japan for the Chinese fund.
The money that Blackstone is investing in Cheniere will be used for the USD 5.6bn project to construct facilities for supercooling natural gas so that it can be loaded on to tankers for export to world markets. That is a mirror image from what the planned facilities were originally designed to do: an indication of just how rapidly the US is transforming itself from an importer to an exporter of gas.
However, some in the US would argue that it should not export gas that could otherwise be sold cheaply in the domestic market.
Fears of a political backlash could mean that Chinese groups, whether financial firms or strategic operators, will not take part directly in the bidding for any US energy resources that are high profile, people familiar with the matter say.
Several weeks ago, Cnooc offered USD 15.1bn for Canadian oil company Nexen. While the perception is that Canada is more receptive to Chinese investment, the deal has unleashed a torrent of protectionist sentiment.
That may preclude China’s oil and gas group Sinopec from bidding at upcoming auctions for up to \\$14bn of the assets of ailing Chesapeake Energy. Although Chesapeake’s market value is now only \\$12bn, the Oklahoma company controls 7 per cent of all natural gas in the US, making it politically sensitive.
“It would be nuts for them to sign up to any strategic deal involving energy or finance or aerospace before this presidential election,” says one energy investor who is close to the Chinese. “Everything has become too partisan.”
Mitt Romney, the Republican candidate has repeatedly said that one of the first things he would do as president is brand China an unfair trader.
The co-head of Romney’s fundraising campaign in Asia is from Blackstone, while the other is from Morgan Stanley. Both firms are large recipients of CIC money.
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