Cheniere Energy To Sell 30% Stake In Freeport LNG To Zachry

Cheniere Energy, Inc. (LNG) said Thursday that the company has agreed to sell its 30% interest in Freeport LNG Development LP to Zachry American Infrastructure LLC and Hastings Fund Management USA Inc. for $104 million.

Freeport LNG Development operates an LNG terminal off the Texas Gulf Coast. Houston-based Cheniere, a developer and owner of liquefied natural-gas terminals, plans to use the proceeds of the sale of its stake in the company to pay down part of a $400 million loan. ConocoPhillips (COP) and Colorado oilman Michael Smith have stakes in Freeport LNG Development's general partner, the entity that manages the company and receives a percentage of its profits.

Zachry American Infrastructure is an independent member of the Zachry group of construction, engineering and infrastructure companies based in San Antonio, Texas. Hastings Fund Management USA is the North American arm of Hastings Fund Management, an Australian infrastructure fund manager and subsidiary of Westpac Banking Corp (WBC.AU).

Cheniere's plans to develop the Freeport LNG terminal were hatched in 2001, when declining U.S. gas supplies were expected to drive imports of the fuel from overseas. But improved technology has led to a boom in gas production from onshore fields, and Cheniere's terminals have seen few LNG cargoes, leaving the company with meager cash flows. Cheniere also owns the Sabine Pass LNG terminal in Louisiana.

Gas marketers continue to view the U.S. as a "market of last resort" for cargoes that aren't needed in Europe and Asia, however. A unit of Russian energy giant Gazprom announced Thursday that it had signed an agreement with a subsidiary of San Diego-based Sempra Energy (SE) for the right to deliver LNG cargoes to the Cameron LNG terminal in Louisiana. In April, Cheniere announced a pact with J.P. Morgan Chase & Co. (JPM) that will give J.P. Morgan's clients access to the Sabine Pass terminal. The two firms will also work together to find other clients who want to ship through the terminal.

Cheniere expects the Freeport deal to close in the second quarter. Shares of Cheniere were up 24 cents, or 4.94%, to trade at $5.10 after hours.

-By Christine Buurma, Dow Jones Newswires; 212-416-2143; [e-mail]

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