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Liquefied Natural Gas Limited Raises $4.2M To Advance Magnolia LNG Project

Liquefied Natural Gas Limited (ASX: LNG) has raised $4.2 million through a placement to advance its 8 million tonne per annum Magnolia LNG project in Louisiana.

This also supports a US$2 million (A$2.22 million) Letter of Credit condition under the recently executed Precedent Agreement with Kinder Morgan Louisiana Pipeline (KMLP).

The company has in January executed a legally binding pipeline capacity agreement with KMLP that secured sufficient firm gas transportation service rights for the full 8Mtpa capacity of the MLNG Project.

This is subject to the fulfilment of various preliminary conditions including the issue by MLNG of a $2 million Letter of Credit that guarantees the minimum development costs that KMLP has and is expected to incur under the agreement.

LNG Limited had raised the funds through the issue of 10 million shares priced at $0.42 each to institutional clients of Foster Stockbroking.

"This capital raising will allow the Company to accelerate the Precedent Agreement with Kinder
Morgan," managing director Maurice Brand said.

"The formal award of capacity rights for the supply of gas to MLNG is a critical step in the project progressing through the FERC regulatory process and completion of FID later in the year. We are delighted with the increasing level of support from Australian institutions."

Recent Progress

LNG Limited had earlier this month received U.S. Department of Energy authorisation to export an additional 4Mtpa of LNG, adding to the original approval on 26 February 2013 to export up to 4Mtpa of LNG.

This followed on its executing a non‐binding Tolling Agreement Term Sheet with AES Latin American Development for LNG production capacity rights of between 800,000 tonnes per annum and 1 million tonnes per annum that supports the economics of proceeding with the fourth processing train at its proposed four train Magnolia LNG project.

LNG Limited has also executed a MoU with SK Engineering and Construction to negotiate Technical Services Agreement to undertake the necessary activities to conclude a bankable Fixed Price engineering, procurement and construction Contract.

SKEC has already estimated capital costs for an initial two train project at US$1.57 billion.

Magnolia LNG

MLNG is planned as a 8 million tonne per annum (Mtpa) liquefied natural gas export project comprising of four liquefaction trains, each capable of producing up to 2Mtpa of LNG (1.7Mtpa firm), that is fast-tracked for a robust Final Investment Decision in mid-2015.

This will use LNG Limited's OSMR® LNG process technology with the company adopting a tolling business model whereby Magnolia LNG will provide liquefaction, storage and ship loading facilities to LNG buyers who pay a monthly fixed capacity fee, plus all LNG plant operating and maintenance costs.

The LNG buyers are also responsible for the supply and transportation of gas to the project site.

Stonepeak Partners is earning an estimated 50% stake in MLNG return for contributing the full US$660 million project equity requirement.

This represents 30% of the total capital costs with LNG Limited planning to finance the remaining 70% with project debt.

To that end, the company has appointed BNP Paribas Bank as its project finance advisor.

It will also work with Stonepeak and New York based EAS Advisors, which had been instrumental in LNG lining up funding and partners for the project, to secure the proposed project debt financing for the Stage 1 development.

Analysis

With the $4.2 million placement supporting the $2 million Letter of Credit condition for the pipeline capacity agreement with Kinder Morgan Louisiana Pipeline, Liquefied Natural Gas Limited is continuing the strong progress on its 8Mtpa Magnolia LNG project.

Shares in the company had risen 96% to an intra-day high of $0.58 on 11 March 2014 since closing at $0.305 on 11 February 2014.

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