On Monday, global independent infrastructure investor Global Infrastructure Partners (GIP) announced that it is selling its 25.7 percent minority stake in Freeport LNG to JERA Americas, the Houston, Texas-based subsidiary of Japan‘s JERA, a seven-year-old energy joint venture between Japanese utility giants TEPCO and Chubu. GIP disclosed the sale price for the stake, which it has held in its second flagship fund since 2015, as $2.5 billion.
JERA is currently the world’s largest buyer of liquefied natural gas, and already owns 25 percent of Freeport LNG Train 1 through its subsidiaries, transporting 2.32 mtpa (annual metric tons) of LNG for use in Japan and other LNG importing countries.
Freeport owns and operates an LNG export facility on Quintana Island, near Freeport, Texas.
In May 2020, Freeport completed construction on the third of its three liquefaction trains, which together produce more than 15 annual metric tons, underpinned by long-term contracts with top-tier offtakers. Today, Freeport is the seventh largest LNG facility in the world, the second largest in the U.S., and the only U.S. facility to use electric motor-driven technology, emitting 90% less CO2 than a comparable gas turbine-driven facility. Freeport is in the process of pursuing multiple accretive growth opportunities across the LNG value chain, including a fully permitted, shovel-ready Train 4 expansion.
In announcing the acquisition, JERA Americas said its rationale was driven by Asia’s high demand for both decarbonization and a stable energy supply to support economic growth. Gas-fired power generation—which, it notes, emits less CO2 than power generation using other fossil fuels—can be a flexible supplement to intermittent renewable energy, and demand for it as an energy source indispensable to promoting the energy transition is expected to continue to grow. As evidenced by the current gas price hikes around the world, the company says, securing a stable supply of competitive LNG in Japan and elsewhere is becoming increasingly important.
“As global energy needs continue to grow, there is a global push toward a low-carbon future; we are privileged to play a leading role in fulfilling both of these objectives,” Freeport Chairman, CEO, Founder (and majority shareholder) Michael Smith said. “We liquefy cost-advantaged, clean American natural gas to provide energy security to key allies such as Japan while reducing emissions by using our electric drive motors and displacing coal. Since 2015, GIP has been an invaluable partner, contributing their expertise and relationships. We look forward to building on our success with JERA, who is already a key partner and offtaker at Freeport, and are excited to have them take a larger role in our growing LNG platform.”
“We are extremely proud to have partnered with Michael Smith in transforming Freeport from a re-gasification facility into a leading LNG export platform that will help drive industrial growth and development,” said GIP Chairman and Managing Partner Adebayo Ogunlesi said in a comment on the transaction. “Through its agility and entrepreneurial spirit, Freeport is continuing to innovate and find ways to deliver more LNG with lower carbon intensity to consumers around the world. We congratulate JERA Americas as they participate in the next stage of Freeport’s growth.”
“Increasing our ownership position in Freeport not only provides JERA Americas with highly cost-competitive LNG that may be used to ensure a stable supply to the global market, it also will allow us to build upon and accelerate some of efforts that Freeport has already initiated toward the goal of cleaner energy,” JERA Americas CEO Steven Winn said. “Securing a stable supply of LNG is becoming increasingly important as we witness sharp price increases around the world. We will leverage the knowledge and expertise accumulated through JERA’s global LNG value chain business and power plant operations as we work together with Freeport on its various businesses to meet the growing demand for electricity in Asian countries and help facilitate the transition from coal to lower emission transitional fuel LNG.”
