Brookfield, NH Investment co-invest $100 mn in CBs of US LNG terminal

  • 2017-11-30

Brookfield Asset Management and NH Investment & Securities Co. Ltd. have bought $100 million of convertible bonds (CBs) backed by a liquefied natural gas (LNG) terminal under construction in Texas, in co-investment that would be the first equity investment in a US LNG facility by a South Korean financial investor.

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Corpus Christi Liquefaction Project in April 2016

Specifically, Brookfield purchased $70 million of CBs from EIG Global Energy Partners, a US energy investment firm in August. NH Investment, a brokerage unit of South Korea’s national agricultural cooperative, bought $30 million.

The CBs are part of $1.5 billion, 10-year convertible notes issued by Cheniere Energy Inc., a Houston-based energy company and sold to EIG in late 2014.

After the transaction, EIG’ holding of CBs shrank to $20 million, according to investment banking sources Nov. 29.

The co-investment comes as NH Investment is considering committing more than $100 million to a Brookfield infrastructure fund as part of effort to build global investment networks and increase the chances of co-investing. It was unknown yet which of Brookfield funds NH Investment is looking to commit to.

NH Investment is preparing to sell down part of the CBs to other financial services units of its parent holding company NongHyup Financial Group, including a life insurer and a mutual savings bank, in December.

The CBs are understood to carry a guaranteed coupon rate of 9% per annum. Upon completion of the construction, they are convertible into either shares of the Corpus Christi LNG facility, or into common shares of Cheniere Energy.

Cheniere had sold the CBs to finance the LNG facility construction, a $13 billion project to export shale gas to Asia, Europe and Latin America.

Under the project, it plans to build two LNG carrier docks and three LNG storage tanks in Port of Corpus Christie in the Gulf of Mexico by 2019. The construction is 30~40% completed.

For South Korean investors, it is a new type of infrastructure assets coming on the market after the US is turning its booming shale production into exports.

NH Investment sees a double-digit internal rate of return from the CBs after the share conversion takes place.

Previously, the Sabine Pass LNG Terminal in Texas, developed by Cheniere, had generated annual returns of more than 20% for its CB investor Blackstone, after it was listed on the New York stock exchange.

“Domestic financial investors have invested in US renewable energy plants, Australia’s electricity transmission networks and UK infrastructure since last year. Now they are expanding into LNG terminal, the scope of alternative investments is being extended,” said one of the sources.

NongHyup Financial Group, called South Korea’s Credit Agricole, plan to commit more than $100 million each to global private equity funds in different asset classes ranging from buyout, infrastructure/energy to real estate.

The holding company has 340 trillion won in assets under management, the second biggest only after the National Pension Service’s AUM of 600 trillion won at end-July 2017.

By Donghun Lee and Daehun Kim

Leedh@hankyung.com

<Edited by Yeonhee Kim>