Veresen: EFG option not valid for Jordan Cove LNG export terminal

Veresen: EFG option not valid for Jordan Cove LNG export terminal

Veresen has been named as a respondent in an application commenced by Energy Fundamentals Group in the Ontario Superior Court of Justice in Toronto on August 14.

In the application, EFG seeks a declaration that, pursuant to a letter agreement dated July 27, 2005 between EFG and Fort Chicago Energy Partners, the predecessor to Veresen, EFG has the option to acquire up to 20% of Veresen’s equity interest in the Jordan Cove liquefied natural gas (LNG) terminal and related assets in Coos Bay, Oregon.

Veresen said it believes that the option held by EFG applied only to the prior proposal to build an LNG import terminal and is not valid with respect to the current proposed liquefaction and LNG export terminal. Veresen further believes that even if the courts determine that the option is valid, the existence of the option and whether or not it is exercised are not expected to have a material impact on the Company.

In 2005 when Veresen first considered the development of Jordan Cove LNG as an import terminal project, it entered into a previously disclosed agreement with EFG to provide financial advisory services, which included an option to invest up to 20% of the development and construction capital contributed, or to be contributed, to the project by Veresen. If the option was exercised prior to construction, EFG would pay Veresen an amount equal to all development equity contributed prior to that time, together with a premium after-tax rate of return of 30% (compounded annually) on development equity from the time such costs were incurred. Given the considerable development costs incurred by Veresen since 2005, and the premium return to be paid on such amounts, if valid, the exercise of the option by EFG would require a substantial payment to Veresen.

The LNG import terminal project was designed to accommodate the import of foreign natural gas into North America. With the dramatic and long-term change in North American supply of gas, the LNG import terminal project became commercially unviable. As a result, the import project was terminated and the licenses associated with it were vacated. Veresen commenced a new process to construct a liquefaction and LNG export terminal at the Jordan Cove site.

 

Press Release, August 19, 2014; Image: Jordan Cove Energy

 

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