Crown LNG Holdings AS, a leading provider of LNG liquefaction and regasification terminal technologies for harsh weather locations, and Catcha Investment Corp, a publicly traded special purpose acquisition company, today announced a definitive agreement for a business combination that would result in Crown becoming a U.S. publicly listed company. The combined company, named Crown LNG Holdings Limited (PubCo), intends to apply to list its shares on the New York Stock Exchange under the new ticker symbol “CGBS”.
Founded with a vision to secure stable energy supplies to growth markets exposed to harsh weather conditions, Crown designs and plans to own and operate offshore LNG terminals in locations where onshore facilities are not feasible or desirable for reasons of harsh weather, safety, cost, or environmental impact.
Crown is active in the two critical parts of the LNG value chain: (1) liquefaction, where natural gas from producers is supercooled to a liquid for transport by ship as LNG, and (2) regasification, where the LNG is turned back into gas and delivered to consumers and businesses as natural gas. With expertise in both areas, Crown has the potential to enable stable, secure, year-round LNG supplies to growing markets and locations exposed to harsh weather conditions. In doing so, the Company aims to expand the global market for LNG (particularly LNG supplied from the U.S.) and contribute to lower carbon emissions in markets it serves by replacing coal with LNG. Crown’s bottom-fixed, gravity based structure (“GBS”) design also is expected to ensure lower cost and a reduced environmental footprint versus a comparable land-based LNG terminal alternative.
“This business combination with Catcha is a transformative step for accelerating Crown’s growth, with the aim to provide its investors with a stable, long-term return on their investment,” said Swapan Kataria, CEO of Crown. “Our targeted blue-chip potential customer base will reflect the strong and growing global demand for harsh weather LNG infrastructure allowing for year-round operation to enable the global energy transition and ensure energy security by facilitating access to reliable natural gas supplies, as well as hydrogen, ammonia and power. The capital raised in this transaction will further strengthen our ability to execute on our diversified project pipeline in India, the UK, Vietnam, Canada, and other global markets.”
Catcha’s Patrick Grove said, “Catcha is excited to be partnering with Crown today. The LNG market is being driven by strong market tailwinds, including rising energy security concerns and the increasing use of natural gas as a transition fuel with a tenth of the emissions of coal fired plants. Crown will help to enable LNG access for under-served markets which have been traditionally ignored by existing operators and at the same time benefit everyone in the ecosystem – customers, governments, producers and investors. There is clearly a massive addressable market and use case in regions which experience harsh weather conditions, and we strongly believe that Crown, with their deep industry experience and innovative culture, will be a leader in addressing that demand.”
Strong Growth in LNG Demand
Driven by the use of natural gas as a transition fuel to replace decommissioned coal infrastructure, as well as overall energy security concerns, global demand for LNG is anticipated to increase from 351 million tons per annum (mtpa) in 2020 to approximately 570 mtpa by 2030, an increase of more than 60%. At the same time, and as a result of this rapid and dramatic increase in demand, there is expected to be an LNG supply deficit of more than 40 mtpa by 2030.
Differentiated LNG Technology for Extreme Weather
To reduce the anticipated LNG supply shortfall, additional new facilities for both export and import of LNG are needed over the next decade, many of which will need to be located in geographies prone to extreme weather events. Crown’s GBS designs for both liquefaction and regasification offshore terminals are able to significantly reduce impacts and downtime resulting from extreme weather. This is accomplished through advanced facility design that improves on and replaces floating and land-based alternatives for liquefaction and regasification.
Crown’s GBS facilities are designed to rest directly on the seabed, after preparation and leveling. The rectangular concrete structure, built onshore in drydock, is then towed to location. A typical GBS contains two membrane tank compartments, which store the LNG temporarily after unloading, or prior to delivery onshore. This ‘LNG island’ offers greater reliability allowing operations year-round, including in harsh weather conditions, when compared with floating alternatives.
Bottom-fixed solutions for energy development have a nearly 50-year track record in the offshore energy sector, with the first regasification GBS coming online in 2009. Crown will construct its GBS facilities in partnership with Aker Solutions, the leader in offshore bottom-fixed facility development and construction, as well as technology provider Wärtsilä Gas Solutions and Siemens Energy.
India and Scotland Projects Advancing to FID
Currently, Crown is advancing development of two projects toward FID – Kakinada, on the east coast of India, and Grangemouth, in Scotland.
The Kakinada project, utilizing GBS facilities, directly supports the Indian government’s target of increasing natural gas in the country’s energy mix from approximately 7% today, to 15% by 2030. India’s gas demand is expected to double during the same period to 115 BCM, with growth coming from several sectors, including city gas distribution, petrochemicals, heavy industry, fertilizer and power generation. Crown’s Kakinada project is able to uniquely address this demand growth, having received a full-year, 365-day license to operate from the Indian government’s Ministry of Environment, Forest & Climate Change based on the Company’s stable GBS terminal design. Comparable floating solutions for LNG delivery on the east coast of India have been approved for operation for just 270 days per year.
Preliminary Front End Engineering and Design (“Pre-FEED”) studies for the Kakinada project have been completed by Crown’s international partners. The project will take advantage of existing onshore natural gas infrastructure in the country, including the East-West Pipeline, which has a capacity of 3 Bcf per day and connects Kakinada to Gujarat via Hyderabad.
The Company’s Grangemouth project, located on the east coast of Scotland, seeks to address the UK’s increasing drive for energy security post-Brexit and in the context of the Ukraine War’s impact on energy markets. Currently, the UK relies on just three facilities for LNG imports, which increased 74% from 2021 to 2022.
For the Grangemouth project, Crown has entered into an exclusivity agreement with GBTron Lands Limited for use of the proposed offshore site on the Forth River. A site study for the deepwater port with LNG vessel access has been completed, and Crown has begun the consenting process with the Scottish Government, which can be completed in as few as seven months. Existing power grid and gas grid access is available within ten miles of the proposed site location. The Company will employ FSRU technology for the Grangemouth project.
Transaction Overview
Catcha has agreed to combine with Crown through PubCo based on a pre-money valuation of Crown at approximately $600 million. The transaction is expected to provide $50 million of capital, with net proceeds going to fund both the Kakinada and Grangemouth projects to final investment decision (FID). The implied pro forma enterprise valuation of PubCo is expected to be approximately $685 million.
The Company has agreed to cause all of its shareholders to roll their interest into PubCo. Shareholders who are expected to represent approximately 90% of Crown’s equity before closing have already agreed to not sell any shares and contribute their shares in exchange for PubCo’s shares, which reflects the Company’s support for the combination and confidence in the go-forward prospects for the PubCo.
After the close of the transaction, the existing Crown leadership team will remain in place, and will continue to execute on the Company’s strategy.
The transaction has been unanimously approved by the Boards of Directors of CHAA and Crown. Completion of the proposed transaction is subject to customary closing conditions, and is anticipated to occur in the fourth quarter of 2023.
Image Caption: Kakinada LNG terminal (illustration: Aker Solutions)