April 6 (Reuters) – U.S. liquefied natural gas (LNG) developer Tellurian Inc (TELL.A) will sell 800 acres of land in Louisiana for $1 billion to an undisclosed institutional investor, the company said on Thursday.
The company’s shares surged about 28% to $1.52 in early trading.
The land was earmarked for the proposed Driftwood liquefied natural gas terminal facility, and the company will lease it back for 40 years at a capitalization rate of 8.75% and a letter of credit equal to 12 months of rent, among other requirements.
“It is just tip of the iceberg with respect to capital needs,” Stifel analyst Benjamin Nolan said in a note. He added that the lease would create a 40-year liability of $87.5 million annually that would escalate by 3% yearly.
The Driftwood project has seen many setbacks including the cancellation of some LNG supply deals after two major potential customers last year raised concerns around the company’s ability to finish the project.
The project, which received regulatory approvals in January to begin construction, is expected to produce 27.6 million tonnes per annum of LNG when ready.
The deal disclosed on Thursday is contingent on several factors including Driftwood LNG LLC, Tellurian’s subsidiary, securing financing commitments for Phase 1 of the project on terms satisfactory to the buyer.
