Institutional investors facing growing risks as Rio Grande LNG terminal encounters major setbacks

The proposed Rio Grande Liquified Natural Gas (LNG) terminal, a project backed by private equity firm Global Infrastructure Partners (GIP), is encountering significant obstacles that call into question the viability of its future. The pension funds and other GIP investors should be wary of the substantial capital at risk in such an uncertain venture.

On August 6th, the D.C. Circuit Court vacated the Federal Energy Regulatory Commission’s (FERC) approval of three gas projects, including Rio Grande LNG. This pivotal decision halts the progress of these gas projects until new FERC approvals can be obtained. The court highlighted significant procedural defects in FERC’s approval process, notably its failure to incorporate an updated environmental justice analysis.

The ruling only adds to a series of delays for Rio Grande LNG. Further compounding the project’s troubles, several insurance and financial backers for Rio Grande LNG have withdrawn. An insurance statement obtained via public records request revealed that insurance company CHUBB no longer insures the terminal. Major banks have also withdrawn their support, with Societe Generale, BNP Paribas, and La Banque Postale pulling out in recent years.

These financial and legal challenges come amid widespread and longstanding opposition to the Rio Grande LNG terminal from local South Texas communities and international organizations. Earlier this summer, over 70 global organizations signed a letter urging financial institutions to cease their support for the project.

“LNG is often lauded as a cleaner alternative to coal or other fossil fuels,” said Alissa Jean Schafer, PESP climate director, “but may in fact be worse for the environment and emit more greenhouse gasses than coal, in addition to potentially catastrophic impacts to local communities.

“And now, the setbacks facing the Rio Grande LNG terminal serve as an additional warning sign for investment funds with hundreds of millions exposed to this GIP-backed terminal. PESP has informed institutional investors across the country that their portfolios are exposed to additional financial and environmental risks because of GIP’s investment in Rio Grande LNG.

“Given the mounting number of issues with the project, the Rio Grande LNG terminal represents a highly risky investment for GIP. Investors should carefully consider the project’s uncertain future and the potential financial repercussions of GIP’s continued backing of the terminal.

“GIP must address the fiduciary risks Rio Grande LNG presents to its investors across the country.”