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Kinder Morgan sells interest in Elba Liquefaction Company

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Hydrocarbon Engineering,

Kinder Morgan, Inc. has announced that investment funds managed by EIG Global Energy Partners (EIG) have become a 49% joint venture participant in Elba Liquefaction Company, L.L.C. (ELC), which will own 10 liquefaction units and other ancillary equipment to be constructed as part of the Elba Liquefaction Project at Kinder Morgan’s existing Southern LNG Company, L.L.C. Elba Island LNG facility near Savannah, Georgia. To acquire its membership interest, EIG has made an upfront cash payment of approximately US$385 million, consisting of reimbursement to KMI for EIG’s 49% share of prior ELC capital expenditures, excluding capitalised interest, and a payment of approximately US$170 million in excess of capital expenditures in consideration of the value created by KMI 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 US$1.3 billion, excluding capitalised interest.

“We are excited that EIG will become an equity owner in Elba Liquefaction Company as construction continues at Elba Island. The project, which began construction on 1 November 2016, is supported by a 20-year contract with Shell,” said Steve Kean, Kinder Morgan president and chief executive officer. “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,” Kean said.

“This is a tremendous project that builds on our long-standing and extensive experience in LNG and LNG-related infrastructure,” said Wallace Henderson, Managing Director of EIG. “We are delighted to partner with Kinder Morgan and its outstanding development team to make the Elba Liquefaction Project a reality.”

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 authorisation from the Department of Energy (DOE) to export to Free Trade Agreement (FTA) countries, and on 16 December, 2016, the DOE issued non-FTA export authority. The project is expected to have a total capacity of approximately 2.5 million tpy of LNG for export, equivalent to approximately 350 million ft3/d of natural gas.

Barclays acted as the exclusive financial advisor to KMI during this transaction.

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