Pieridae’s financier faces tight deadline ahead of June investment decision on East Coast LNG project

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CALGARY — Ahead of a long-planned final investment decision, Pieridae Energy Ltd.’s Japanese investment bankers have a short timeline to raise funds for its $10-billion liquefied natural gas project in Nova Scotia.

Pieridae president and CEO Alfred Sorensen said the company is hoping to win investor go-ahead for the proposed Goldboro LNG project with the announcement last week of a carbon capture, utilization and storage facility in Alberta that will offset the East Coast development’s emissions.

“There is no doubt that the way of doing business before doesn’t exist any more and without a plan to reach some type of carbon neutrality by 2050, we would not be able to raise the full $10 billion,” Sorensen said. “There’s just too much capital that comes with the caveat that you are meeting certain ESG requirements.”

He said Pieridae’s investment bank, Tokyo-based Mitsubishi UFG Financial Group Inc. (MUFG), put the Calgary-based natural gas producer and LNG proponent through an environmental, social and governance, or ESG, analysis before taking the Goldboro LNG facility on as a client last year.

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Pieridae hired MUFG after parting ways with Paris-based Société Générale two years ago, Sorensen said.

Historically a backer of LNG projects, SocGen’s decision to move away from most oil and gas projectsfurther reduces investment options for a dozen North American LNG projects still requiring financing.

Though SocGen is no longer working with Pieridae, GNL Quebec confirmed to the Financial Post the French bank is continuing to work on its proposed Énergie Saguenay liquefaction project in northern Quebec.

HSBC has tightened restrictions on lending for high-carbon energy projects and Royal Bank of Scotland has said it won’t lend to oil majors without a climate plan.

Sorensen, however, said his team clashed with the French bank over Pieridae’s business model. Pieridae intends to be an integrated LNG exporter, whereas Société Générale was interested in financing a pure-play exporting company similar to American firm Cheniere Energy Inc., which operates fee-for-service LNG projects on the U.S. Gulf Coast. SocGen was not able to provide comment on why it pulled out of the Goldboro project by the time the Financial Post went to press.

Regardless, the pressure is now on Pieridae’s new investment bankers at MUFG to raise funds on a short timeline. If approved, it would be the first major Canadian fossil fuel project to secure the go-ahead from investors since the International Energy Agency said in May that the world should not proceed with new oil, natural gas and coal projects to achieve Paris Agreement climate goals. Japan was among the G7 countries that pushed back against the IEA’s recommendations.

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“It’s going to be tight,” Sorensen said of whether Pieridae is on track to raise sufficient capital ahead of its planned final investment decision on the Goldboro LNG project at the end of June.

He said that Pieridae has received some inquiries from interested private equity firms after the company announced May 27 it plans to build a large CCUS project in Alberta, a 200-megawatt power complex near Caroline, Alta. with a carbon sequestration system in place to capture 3 million tonnes of CO2 per year and help the company achieve a net-zero emissions profile for the project by 2050.

“There’s no way that Pieridae would have ever been financeable if we hadn’t found an overall carbon solution,” Sorensen said, adding the markets are demanding carbon reduction plans. “How do we deal with these issues as a carbon project? How do we make it carbon neutral?”

Tudor, Pickering, Holt & Co. analysts wrote in a May 28 research note the proposed Goldboro LNG facility’s expected emissions are 3 million tonnes per year, so the CCUS project would offset the emissions from the LNG project, for which engineering work should be delivered early this week.

Virginia-based engineering and construction firm Bechtel Corp. was due to provide Pieridae with an all-in construction price tag for the Goldboro LNG project on Monday.

Sorensen said the construction estimate needs to reflect a price that’s less than $1,000 per tonne of LNG exported from the Goldboro LNG facility in order for the project to be competitive and the two sides are negotiating over the price.

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