NextDecade shares drop despite major LNG project sanction - Upstream Online

NextDecade shares drop despite major LNG project sanction | Upstream Online

Shares in US liquefied natural gas player NextDecade fell 23% on Thursday following investor concern over the terms of $18.4 billion financing for the first phase of the Rio Grande LNG project on the US Gulf coast.

The country’s liquefied natural gas projects have faced an uphill struggle this year to secure final investment decisions amid a tightening of credit availability, inflation and market volatility.

But on Wednesday, operator NextDecade and partners TotalEnergies and Global Infrastructure Partners sanctioned the Rio Grande LNG project — one of the largest ever US greenfield energy project financings.

However, analysts said NextDecade may have given up more equity than expected to its financial partners, Reuters reported on Friday.

NextDecade said its financial partners and French supermajor TotalEnergies combined will hold a stake that could fetch them at least 79.2% of the cash flow generated from the project’s first phase, comprising three liquefaction trains with a total capacity of 17.5 million tonnes per annum.

But analysts TD Cowen warned that 20% more equity than expected has been given up to its financial partners, according to Reuters.

The news agency also quoted Sean Morgan, an analyst at Evercore, as saying: “Investors are looking at the huge portion of cash flow that the new project level investors get relative to the equity holders and don’t love that.”

The final investment decision on the project followed the recent agreement that saw TotalEnergies acquire an ownership interest and offtake agreement in the development.

In an agreement with NextDecade, TotalEnergies will hold a 16.7% interest in the first phase of the project.

The French company will acquire a 17.5% interest in NextDecade in three tranches for $219 million — the first tranche of 5.06% having already been acquired on 13 June 2023 for $40 million.

NextDecade has been approached for comment.

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