Kinder Morgan, Inc. has agreed to sell 49% of its interest in Elba Liquefaction Company, L.L.C. to EIG Global Energy Partners. Under the terms of the agreement, EIG will own 10 liquefaction units and other ancillary equipment to be constructed as part of the Elba Liquefaction Project at Kinder Morgan’s existing Elba Island LNG facility near Savannah, Georgia.
To acquire its membership interest, EIG has made an upfront cash payment of approximately $385 million, consisting of reimbursement to Kinder Morgan for EIG’s 49 percent share of prior ELC capital expenditures, excluding capitalized interest, and a payment of approximately $170 million in excess of capital expenditures in consideration of the value created by Kinder Morgan in developing the project to this stage.
EIG has agreed to fund its share of future capital expenditures necessary to complete construction and commissioning of the liquefaction facility, subject to the terms and conditions contained in the applicable agreements. The total project cost is estimated to be approximately $1.3 billion, excluding capitalized interest.
“We are excited that EIG will become an equity owner in Elba Liquefaction Company as construction continues at Elba Island,” said Steve Kean, Kinder Morgan president and chief executive officer. “The project, which began construction on Nov. 1, 2016, is supported by a 20-year contract with Shell. As we have told the market in past months, this JV is another strategic step towards achieving our stated goals of strengthening our balance sheet and positioning the company for long-term value creation.”
Initial liquefaction units are currently expected to be placed in service in mid-2018, with final units coming on line by early 2019. In 2012, the Elba Liquefaction Project received authorization from the Department of Energy to export to Free Trade Agreement countries, and on Dec. 16, 2016, the Department of Energy issued non-FTA export authority. The project is expected to have a total capacity of approximately 2.5 million tons per year of LNG for export, equivalent to approximately 350 million cubic feet per day of natural gas.