Cheniere Energy, Inc. (LNG), the first company to receive a license build a gas liquefaction plant in the U.S. in 50 years, is now moving forward in renting out use of its facility with take-or-pay contracts, says Shaun Hong, Managing Director and Equity Portfolio Manager/Research Analyst at Jennison Associates LLC.
“[A] name that’s in our top 10 is Cheniere Energy (LNG). This company doesn’t pay any dividends today. It has a liquefied natural gas receiving terminal in Louisiana. What the company is doing, basically, is adding equipment to export natural gas in the form of liquefied natural gas out to the rest of the world. They were the first to receive a license from the U.S. government, the Department of Energy, as well as FERC, the Federal Energy Regulatory Commission,” Hong said.
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Cheniere Energy is now looking toward take-or-pay contracts, where customers are renting to use LNG‘s facility and must pay whether they take gas or not. These attractive new projects are reflected in the stock’s performance, Hong says.
“Its counter-parties are all companies with investment-grade credit, and these are 25- to 30-year contracts where, basically, the customers have to pay rent for the right to use Cheniere’s facility, whether they take the gas or not. That stock has done well over the last couple of years as Cheniere has moved forward with these projects. We got involved, even though the company doesn’t pay a dividend, because we saw it as an attractive opportunity,” Hong said.
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