Lng Station Economic Obsolescence

[The Hound]

I'm valuing a Liquid Natural Gas distribution facility built in 2014 in Washington State. The property was completed, but never put to use due to a decline in LNG demand with the dropping in Gas and Diesel prices.

I'm looking for ideas in how to calculate economic obsolescence. The inutility formula doesn't work (or at least I don't see how it does) considering that actual production is zero. Also according to the company they don't have any idea based on the current market when it will be economically feasible to put the facility in to operation.

Thank you in advance!!

 

[Terrel L. Shields]

That should be EZ PZ.. Seriously, natural gas is coming back price wise. It's up a dollar per MCF. So demand will be the issue and unless one can get some sense of when markets will improve, you are guessing how long before it is a viable operation. Perhaps demand from Japan would be an issue. They want to eliminate nukes and LNG would be ideal substitute but again, basically imnsho, you have a salvage value and land problem.

 

[Michael S]

A colleague of mine appraised an ethanol plant that had been closed down for several years. Basically it came down to land value (not much) less demolition. The equipment appraiser who was handling that aspect basically concluded the salvage value of the piping and other equipment would just offset the cost to tear it all out. This was a property that had probably cost several million to build.

From what I understand there's only a handful of LNG export terminals in the country. Is that what this is, or is it something smaller? If it's the kind of property used to fill LNG tankers that could then travel to Asia I would guess there's a market for that as we can produce it much cheaper than most countries. The regulatory burden could be very high as there's also sorts of groups that oppose that. Maybe not as much as coal. There was a big coal export terminal planned up in Bellingham that got shoot down but environmentalists worry about China creating CO2 from burning American coal.

 

[Terrel L. Shields]

worry about China creating CO2 from burning American coal.

Sweeping back the sea. Japan just contracted to build a number of coal fired plants