Blackstone, Canadian pension funds to buy into LNG Canada via stake in Mitsubishi subsidiary

Funds managed by Blackstone Credit & Insurance have joined forces with four Canadian institutional investors to acquire a stake in the LNG Canada project in British Columbia. The investors have agreed to acquire a 49.9% stake in a subsidiary of Mitsubishi (8058.T) that holds the Japanese company’s interest in LNG Canada.

The announcement comes shortly after LNG Canada, which is being developed by a consortium led by Shell (LSE: SHEL), announced a final investment decision (FID) on Phase 2 of the liquefaction facility. Shell owns a 40% interest in LNG Canada, while Malaysia’s Petronas holds a 25% stake, PetroChina and Mitsubishi both own 15% interests and Korea Gas (KOGAS) holds a 5% stake. Mitsubishi and Shell had both previously been reported to be seeking to sell down their stakes in the project.

The Blackstone-led investor group includes Canada Pension Plan Investment Board (CPP Investments), through wholly owned subsidiaries of CPPIB Credit Investments, Ontario Municipal Employees Retirement System (OMERS), the Investment Management Corporation of Ontario (IMCO) and the Public Sector Pension Investment Board (PSP Investments), Blackstone said. It also said that the funds it manages had agreed to invest $3.1bn into LNG Canada, including the purchase of the Mitsubishi stake. Mitsubishi, for its part, said it valued the transaction at around $1.6bn.

LNG Canada’s first phase, which has been online since last year, has a capacity of 14mn tonnes per year (tpy) of LNG from two liquefaction trains. Phase 2 of the project will add another two trains, taking the overall capacity to 28mn tpy of LNG. The Mitsubishi subsidiary offtakes around 2.1mn currently, in proportion to the size of its stake in LNG Canada. This will increase to 4.2mn tpy once Phase 2 comes online.

Mitsubishi noted that the LNG it offtakes is sold to customers in Asia – primarily in Japan – through its wholly owned, Singapore-based LNG marketing subsidiary, Diamond Global Energy. Mitsubishi’s business in Western Canada also includes upstream gas production, as well as liquefaction at LNG Canada and offtake and marketing.

A Mitsubishi spokesperson told Reuters that the transaction is expected to close this month.

A Blackstone Credit & Insurance senior managing director, Rick Campbell, said LNG Canada would help to meet rising energy demand across global markets. And CPP Investments’ managing director and head of real assets credit, Geoff Souter, described LNG Canada as a “high-quality, globally strategic asset with strong long-term fundamentals and attractive return potential” for his fund.