Consortium acquires $4.33B minority stake in LNG Canada project

Key Takeaways:

• Blackstone Credit & Insurance and Canadian institutional partners (CPP Investments, OMERS, IMCO, PSP) will acquire a 49.9% non-controlling interest in Mitsubishi’s LNG Canada corporate holding unit for US$3.1 billion.
• Mitsubishi Corporation remains the controlling entity of the corporate subsidiary and maintains its full contractual share of terminal LNG offtake.
• The capital supports the Kitimat, B.C., terminal as it advances a Phase 2 expansion to reach 28 million tonnes per annum of total export capacity.

The Whole Story:

Private equity manager Blackstone and a group of leading Canadian institutional investors have agreed to invest $4.33 billion to acquire a 49.9% non-controlling interest in a Mitsubishi Corporation subsidiary that holds the Japanese trading company’s stake in the LNG Canada export project.

Announced Monday, the consortium is led by funds managed under Blackstone Credit & Insurance (BXCI) in partnership with four major Canadian pension and asset managers: Canada Pension Plan Investment Board (CPP Investments) through subsidiaries of CPPIB Credit Investments Inc., Ontario Municipal Employees Retirement System (OMERS), Investment Management Corporation of Ontario (IMCO), and the Public Sector Pension Investment Board (PSP Investments).

The investment targets Canada’s first and only large-scale liquefied natural gas export terminal, located in Kitimat, B.C. Once operational, a planned Phase 2 expansion is set to double the terminal’s overall liquefaction capacity to 28 million tonnes per annum, making it one of the largest LNG export facilities worldwide. Under the transaction framework, Mitsubishi Corporation will continue to act as the controlling partner and will preserve 100% of its existing LNG volume offtake.

Rick Campbell, Senior Managing Director at Blackstone Credit & Insurance, highlighted the deal as a major cross-border partnership supporting critical domestic energy infrastructure to help meet growing global energy demand. Geoff Souter, Managing Director and Head of Real Assets Credit at CPP Investments, described LNG Canada as a high-quality global asset with strong long-term market fundamentals that offers compelling risk-adjusted returns for the national pension plan.

The transaction builds on Blackstone’s recent corporate credit investments in the Canadian market, which include a $7-billion financing arrangement for Rogers Communications and a $2.5-billion partnership with Air Canada’s Aeroplan. Goldman Sachs acted as lead structuring agent and financial advisor to Blackstone, alongside Scotiabank as financial advisor, with legal counsel provided by Kirkland & Ellis and Stikeman Elliott.