1996 Started as oil & gas exploration company
2005 Switched to LNG, invested heavily in terminals
2010 Became LNG exporter
2012 Temasek bought 15,500,000 new shares in May (US$217,775,000)
2012 Temasek bought another 2,800,000 shares in Q3
2013 Temasek divested
2014 Temasek bought 6-1/2 year 4.875% pa Convertible PIK Notes (est US$335,000,000)
2020 In Q1 Temasek sold part of the Convertible Notes
Cheniere Energy Inc is in no way a troubled company. It is included in Temasek Tracking blogs as an interesting commentary on the SWF's investment in the oil sector..
Cheniere is a Houston-based energy company primarily engaged in LNG-related businesses. It owns and operates 2 major LNG terminals - the Sabine Pass terminal and the Corpus Christi terminal. It is today the 3rd largest LNG exporter in the world. In years 2010-2015 it rode on the expansion of US export of LNG. Its financials is aggressive, dividends lacklustre but outlook is stable. It has high volume capacity and long term contracts locked in. In 2018 it signed a 25 year supply contract for US$25B with Taiwan's NCC state-run oil company.
Temasek's investment and divestment:
Date | Shares | Low | US$ | High | US$ | |
May 2012 | 15,500,000 | US$14.05 | 217,775,000 | US$14.05 | 217,775,000 | Bought at IPO |
2012 Q4 | 2,800,000 | US$12.50 | 35,280,000 | US$16.63 | 46,564,000 | Bought |
2013 Q1 | -9,100,000 | US$18.25 | -166,075,000 | US$28.00 | -254,800,000 | Sold |
Aug 2013 | -9,200,000 | US$27.93 | -256,956,000 | US$27.93 | -256,956,000 | Sold |
Having fully divested, Temasek re-invested in mid-2015 by subscribing to a convertible notes issue. This is a 6-1/2 years 4.875% Convertible PIK Note. It is unsecured with bi-annual coupons. PIK means payment-in-kind. There is no cash payment for interest; it is added onto the Note principal amount. From SEC filing 31 Mar 2020, the value balance was shown at US$428,186,000. Working backwards, the original Notes purchased is estimated at US$335,000,000. In Q2 this year, Temasek sold off principal value of US$162,353,000. leaving a current balance of US$265,833,000. With bond prices at historic highs due to depressed interest rates, and the Notes having about a year to run, the sales probably fetched some capital gains. However, the issue was not listed which means the sales was a negotiated one, thus incurring heavy legal costs. That said, the sales should have easily fetched cash inflow of at least US$262,000,000. Partial sales of the bonds in Q2 this year was most likely to free up some liquidity under the difficulties of the Covid pandemic.
The investment and divestment raised some questions.
Temasek had said the Cheniere investment is a “longer term interest” in the energy sector. The stake was part of a broader plan to co-operate with Cheniere and RRJ Capital, a US private equity group, to take advantage of the US shale gas revolution. In April 2012 Temasek had created a separate unit, known as Pavilion Energy, to invest in LNG supply chains, with an “initial capital commitment” of $1bn.
Given this statement, the divestment of Cheniere within 1-1/2 years is puzzling. It is possible Temasek acted opportunistically to realise substantial gains.The divestment was made when Cheniere was on a bull run. Perhaps the decision was made with some foresight as oil prices started to collapse from Q4 of 2013. The argument against this is, in the US market, LNG price is not indexed to oil and Cheniere has long term supply contracts. That's why Cheniere was out-performing the oil industry at the time. If it was a trading call, the timing was bad.
It is more likely the divestment was due to change in plans with regards to Pavilion's direction. Again, if that was the case, subscribing US$335,000,000 to the Cheniere PIK Convertible Notes in 2015 does'nt make sense. The oil and LNG market had collapsed. Why pick bonds that has a conversion price of US$93.64 which was 50% above traded price at the time and the market in nosedive. Why pick a 4.875% pa bond when its own total shareholder return for 2015 was 19.2%, and longer term returns from 5 to 30 years were all higher than the bond coupons. Why pick an unsecured, unlisted bond with a "B+" credit rated company. And why have a term that allows co-investor RJJ Capital the right to transfer their bonds to Temasek.
No loss was incurred, but the investment throws up puzzling questions.
Follow this blog for the curious case of RJJ Capital and Temasek that I will blog on in due time.
Temasek's investments in oil companies has'nt been rosy. Check out other companies I have covered : FTS International, Chesapeake, Kunlun Energy, Orchard Energy, Venari Resources Seven energy
Check out Portfolio Compilation>
Given this statement, the divestment of Cheniere within 1-1/2 years is puzzling. It is possible Temasek acted opportunistically to realise substantial gains.The divestment was made when Cheniere was on a bull run. Perhaps the decision was made with some foresight as oil prices started to collapse from Q4 of 2013. The argument against this is, in the US market, LNG price is not indexed to oil and Cheniere has long term supply contracts. That's why Cheniere was out-performing the oil industry at the time. If it was a trading call, the timing was bad.
It is more likely the divestment was due to change in plans with regards to Pavilion's direction. Again, if that was the case, subscribing US$335,000,000 to the Cheniere PIK Convertible Notes in 2015 does'nt make sense. The oil and LNG market had collapsed. Why pick bonds that has a conversion price of US$93.64 which was 50% above traded price at the time and the market in nosedive. Why pick a 4.875% pa bond when its own total shareholder return for 2015 was 19.2%, and longer term returns from 5 to 30 years were all higher than the bond coupons. Why pick an unsecured, unlisted bond with a "B+" credit rated company. And why have a term that allows co-investor RJJ Capital the right to transfer their bonds to Temasek.
No loss was incurred, but the investment throws up puzzling questions.
Follow this blog for the curious case of RJJ Capital and Temasek that I will blog on in due time.
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Temasek's investments in oil companies has'nt been rosy. Check out other companies I have covered : FTS International, Chesapeake, Kunlun Energy, Orchard Energy, Venari Resources Seven energy
Check out Portfolio Compilation>
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