Golar LNG Limited has announced that it has entered into a 50/50 joint venture with investment vehicles affiliated with private equity firm Stonepeak Infrastructure Partners. The joint venture company, Golar Power Ltd, will offer integrated LNG based downstream solutions, through the ownership and operation of floating storage and regasification units (FSRUs) and associated terminal and power generation infrastructure.
Stonepeak shares Golar's ambition to aggressively grow in the FSRU and LNG fueled power market and is committing US$290 million in new equity to develop Golar Power.
Golar Power's initial asset base will comprise the FSRU currently being constructed at Samsung shipyard, two modern 160,000 cbm trifuel LNG carriers suited for conversion to FSRUs, and the right to invest in up to 25% of the Sergipe Power project. The Sergipe Power project is progressing well and is expected to take FID in the second half of 2016. Golar will also grant Golar Power a one year option to acquire from the Company a further two LNG carriers for conversion to FSRUs. Upon closing, Golar Power will immediately commence conversion of the first LNG carrier to a FSRU.
Subsequent to the formation of Golar Power and the contribution of the above mentioned assets, Golar LNG Limited has sold a 50% interest in Golar Power to Stonepeak. Stonepeak will acquire its 50% of Golar Power for US$117 million in cash, subscribe to US$100 million in preference shares on closing of the deal and commit to US$75 million in additional equity. This, together with an additional US$75 million funding commitment from Golar, in the period before Q1 2018, is expected to be sufficient including debt financing to fully finance the conversion of the two carriers to FSRUs, take delivery of the 2017 new-build FSRU and complete the financing of its share of the Sergipe Power project. Approximately US$214 million in ship mortgage debt and US$217 million of remaining newbuilding capex on the FSRU is projected to be transferred to Golar Power. The transaction will improve Golar's liquidity position.
LNG prices are at a significant discount to oil prices and Golar Power sees a range of potential LNG importers who would benefit from a rapid switch to gas. The first converted vessel is expected to be available within 16 months. There are only three unfixed FSRU newbuildings presently under construction and delivering within the next 28 - 30 months. Golar Power sees well in excess of three employment prospects that could be met within this window. The conversion model allows Golar Power to cost effectively and timeously address projects with bespoke requirements at a price that remains competitive with the all-in delivered cost of a newbuild equivalent.
Golar Power will also enter into an Omnibus Agreement with Golar LNG Partners L.P. This agreement will govern the events upon which Golar LNG Partners L.P will be able to acquire assets from Golar Power.
Clarksons Platou Securities AS acted as Sole Financial Advisor.
This transaction is subject to customary financial closing conditions.
Stonepeak Senior Managing Director, Luke Taylor, commented:
"We are excited to partner with the leading player in the LNG downstream market and see compelling opportunities in this market to build and operate long term LNG and power infrastructure with high quality counterparties. While our initial commitment is US$290 million we hope to invest up to US$500 million in the coming years".
"By establishing this downstream entity with a strong financial partner that has extensive experience in the energy business Golar is able to accelerate the realization of its downstream ambitions and exploit the unprecedented number of opportunities in the current market".