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Buffett’s retreat from Quebec LNG project a ‘temporary’ setback, backers say

Buffett’s retreat from Quebec LNG project a ‘temporary’ setback, backers say
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Investors backing GNL Quebec’s ambitious $14 billion gas liquefaction complex and pipeline are “disappointed” with Berkshire Hathaway’s withdrawal from the project, but assure that it’s only a “temporary setback.”

“The sponsors of both projects are disappointed with the loss of a highly respected investor. But all the remaining shareholders are strongly committed to the project” commented a source close to the project’s backers, who was granted anonymity because they were not authorized to discuss these matters publicly.

“We were surprised by the withdrawal of Berkshire Hathaway’s investment and only learned about their concerns in mid February,” continued the source.

The Quebec project is in fact a two-pronged construction. The first is a $9.5 billion natural gas liquefaction complex at Port Saguenay, Que., that would eventually lead to annual exports of 11 million tonnes of liquefied natural gas.

The second is the creation of a $4.5 billion, 780-kilometre-long pipeline to carry the gas through Quebec and Ontario, which would be built and operated by a separate company called Gazoduq. Both are slated to begin operating in 2025.

Two companies are currently sponsoring the project: Freestone International, founded in 2013 by energy executive Jim Illich; and Breyer Capital, headed by venture capitalist Jim Breyer. Both are based in California.

In addition to those two publicly disclosed backers, there are 13 other investors who are involved in GNL Quebec’s proposal. As of now, the 15 groups have poured $100 million into the mega project, according to the source.

But news on March 5 that Warren Buffett’s Berkshire Hathaway was pulling its $4 billion from GNL Québec has cast doubt on the project’s viability. Now, the current investors are trying to reassure both current and potential new backers.

One of the crucial factors in attracting more financial support will be the upcoming environmental assessment process in Quebec that is slated to begin next week. If GNL Quebec can receive all the necessary governmental approvals without too many hiccups, then many backers will breath a sigh of relief.

Berkshire Hathaway CEO Warren Buffett. Johannes Eisele/AFP via Getty Images/File

“A number of investors want to wait and see how that process will go before they make a decision regarding the project”, said the industry source.

In the meantime, GNL Quebec’s sponsors hope the federal and Quebec governments can calm the current “political climate” that they claim is the reason Buffett’s fund pulled out in the first place.

“One of the most important facts is that this highly respected investor’s decision has nothing to do with the projects commercial viability. If anything, their due diligence confirms that it is one of the strongest LNG projects in North America, with sound long-term viability, and the environmental attributes that go with it,” analyzed the source.

“So the partners are going to move forward with the permitting and environmental process this year before making a final financial decision next year […] This is only a temporary setback,” they added.

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