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Investing.com -- Fitch Ratings has downgraded Sempra Infrastructure Partners, LP’s (SI) Long-Term Issuer Default Rating to ’BBB’ from ’BBB+’ following the company’s final investment decision for Port Arthur LNG Phase 2 (PALNG2).
The rating agency also downgraded SI’s $400 million senior unsecured notes to ’BBB’ from ’BBB+’, while maintaining a Stable outlook.
SI will retain a 50.1% controlling stake in PALNG2 and sell 49.9% to investor members led by Blackstone Credit & Insurance, alongside KKR, Apollo-managed funds, and private credit at Goldman Sachs Alternatives. This structure increases SI’s exposure compared to Phase 1, where it holds only 28%.
Fitch cited SI’s "aggressive growth strategy" as a key factor in the downgrade, noting the company plans to advance PALNG2 while two trains at Phase 1 remain under construction, with projects overlapping from 2025-2028.
PALNG2 represents a $14 billion expansion that will add two liquefaction trains with 13 Mtpa total capacity, a new storage tank, and associated facilities. The trains are expected to begin commercial operations in 2030 and 2031.
The project will operate on a debt-free basis, except for a working-capital facility. Investor members will provide approximately $7.0 billion upfront, while SI’s owners will contribute about $7.8 billion in equity to fund PALNG2 capital expenditures.
Fitch identified offtaker concentration as a risk factor, with ConocoPhillips (NYSE:COP) representing a significant share of contracted volume. ConocoPhillips has signed agreements for 5 Mtpa from PALNG1 and an additional 4 Mtpa from PALNG2, while also acquiring a 30% equity stake in PALNG1.
On a proportional consolidation basis, SI’s debt/EBITDA is expected to remain in the 3.3x to 3.8x range during construction of both phases.
Fitch expects SI’s EBITDA mix to shift to about 58% LNG and 42% pipelines by 2030, compared to 45% LNG and 55% at year-end 2024, noting that entry into LNG production increases business risk.
Separately, Sempra has agreed to sell a 45% equity interest in SI to KKR affiliates, with closing expected during the second or third quarter of 2026. After closing, KKR is expected to assume control of SI.
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