NextDecade has taken a final investment decision (FID) to construct the first three liquefaction trains (Phase 1) at the Company’s 27 million tonnes per annum (MTPA) Rio Grande LNG (RGLNG) export facility in Brownsville, Texas.
NextDecade announced that it had executed and closed a joint venture agreement for Phase 1 which included approximately $5.9 billion of financial commitments from Global Infrastructure Partners (GIP), GIC, Mubadala Investment Company (Mubadala), (collectively, the Financial Investors), and TotalEnergies (NYSE: TTE);
And it had committed to investing approximately $283 million in Phase 1 – including $125 million of pre-FID capital investments into Phase 1;
The company said it had closed senior secured non-recourse bank credit facilities of $11.6 billion, consisting of $11.1 billion in construction term loans and a $500 million working capital facility; and closed a $700 million senior secured non-recourse private placement notes offering.
NextDecade said the $18.4 billion project financing for RGLNG Phase 1 was the largest greenfield energy project financing in U.S. history and underscores the critical role that LNG and natural gas will continue to play in the global energy transition. Industry experts expect a global shortfall of LNG before 2030, which if not addressed by projects such as RGLNG, may result in a prolonged reliance on other more carbon intensive fuels such as coal and oil, the company said.
In conjunction with making a positive FID, RGLNG issued the notice to proceed to Bechtel Energy Inc. (Bechtel) to begin construction of Phase 1 under its lump-sum turnkey engineering, procurement, and construction contracts (EPC). The final EPC cost at NTP is approximately $12.0 billion. The remaining expected project costs to be covered by the financing that closed recently are: owner’s costs and contingencies of approximately $2.3 billion, dredging for the Brazos Island Harbor Channel Improvement Project, conservation of more than 4,000 acres of wetland and wildlife habitat area and installation of utilities of approximately $600 million, and interest during construction and other financing costs of approximately $3.1 billion.
Phase 1, with nameplate liquefaction capacity of 17.6 MTPA, has 16.2 MTPA of long-term binding LNG sale and purchase agreements (SPAs) with TotalEnergies, Shell NA LNG LLC, ENN LNG Pte Ltd, Engie S.A., ExxonMobil LNG Asia Pacific, Guangdong Energy Group, China Gas Hongda Energy Trading Co., Galp Trading S.A. and Itochu Corporation.
“Achieving FID and issuing NTP on RGLNG Phase 1 is a landmark event reflecting years of hard work and dedication by NextDecade’s employees, shareholders, construction partners, equipment suppliers, and customers,” said Matt Schatzman, NextDecade’s Chairman and Chief Executive Officer. “I want to specifically recognize the Rio Grande Valley community, the Port of Brownsville and the countless leaders and officials at the local, state, and federal levels that have supported us throughout the development of RGLNG Phase 1.”
“Achieving FID is an important milestone in NextDecade’s mission of becoming a reliable supplier of low-carbon LNG that will replace coal with a cleaner source of energy,” said Bayo Ogunlesi, Chairman and Chief Executive Officer of Global Infrastructure Partners. “Our investment in RGLNG affirms GIP’s commitment to promoting decarbonization, energy security and energy affordability.”
“We are delighted with this final investment decision that enables us to launch the construction of this new LNG liquefaction plant in the United States, to which TotalEnergies will contribute its expertise in the development of major LNG projects,” said Patrick Pouyanné, Chairman and CEO of TotalEnergies. “This project gives TotalEnergies access to competitive LNG thanks to its low production costs. LNG from this first phase will boost TotalEnergies U.S. LNG export capacity to over 15 MTPA by 2030, and thus our ability to contribute to European gas security, and to provide customers in Asia with an alternative form of energy that is half as emissive as coal.”
“This announcement marks a pivotal milestone in Mubadala’s enduring partnership with NextDecade in the development of RGLNG,” said Khaled Abdulla Al Qubaisi, Chief Executive Officer of Mubadala’s Real Estate & Infrastructure Investments platform. “Mubadala is delighted to welcome GIP, GIC and TotalEnergies into the partnership as RGLNG enters its next phase of development.”
“NextDecade is on a mission to produce lower-carbon intensive LNG for its customers, and we’re honoured to be their partner,” said Paul Marsden, President of Bechtel Energy. “Today, as we commence engineering, procurement, and construction on the first phase of this project, we reaffirm our commitment to the community through quality jobs, training, and support for the supply chain and small businesses.”
Under the joint venture agreement, NextDecade will hold equity interests that entitle the Company to receive up to 20.8% of the cash flows generated by Phase 1 during operations. Financial Investors and TTE will hold equity interests that entitle them to a minimum of 62.5% and 16.7% of the cash flows generated by Phase 1 during operations, respectively.
As part of the transaction, Financial Investors and TTE each have options to invest in RGLNG Train 4 and Train 5 equity, and options to invest in the planned carbon capture and sequestration project at RGLNG. TTE’s right to invest in Train 4 and Train 5 is conditioned on exercising their LNG purchase rights of 1.5 MTPA in each of Train 4 and Train 5. The Company believes these options with its partners will enable NextDecade to deliver the full FERC-approved five-train RGLNG project over time.
“We look forward to delivering this important LNG project that will supply the world with reliable, and lower-carbon intensive LNG, while proudly supporting the Rio Grande Valley community by investing billions of dollars and creating thousands of much needed and well-deserved jobs,” said Schatzman. “Now our focus turns to safely constructing Phase 1 on time and on budget and progressing commercial negotiations on RGLNG Train 4 and Train 5 to further expand our LNG platform and grow NextDecade shareholder value.”
Latham & Watkins LLP acted as lead outside counsel to NextDecade on the project financing transactions. MUFG Bank, Ltd. acted as financial advisor to NextDecade in connection with the debt financing and Macquarie Capital (USA) Inc. acted as financial advisor to NextDecade in connection with the equity financing.
Kirkland & Ellis LLP acted as legal counsel to GIP, Jones Day acted as legal counsel to TotalEnergies, Sidley Austin LLP acted as legal counsel to GIC, White & Case LLP acted as legal counsel to Mubadala and Norton Rose Fulbright US LLP acted as legal counsel to the lenders.
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