Hamilton, Bermuda - August 17, 2017
Golar LNG Partners LP (NASDAQ: GMLP) (the "Partnership") announced today that it has entered into a purchase and sale agreement (the "PSA") for the acquisition (the "Acquisition") from Golar LNG Limited ("Golar") and affiliates of Keppel Shipyard Limited ("Keppel") and Black and Veatch ("B&V") of equity interests (the "Acquired Interests") in Golar Hilli LLC, which will, on the closing date of the Acquisition, indirectly own the FLNG, Hilli Episeyo (the "Hilli"). The Acquired Interests represent the equivalent of 50% of the two liquefaction trains, out of a total of four, that have been contracted to Perenco Cameroon SA and Societe Nationale Des Hydrocarbures (together, the "Customer") for an eight-year term. The purchase price for the Acquired Interests, as described below, is $658 million less net lease obligations under the financing facility for the Hilli (the "Hilli Facility") that are expected to be between $468 and $480 million. Concurrently with the execution of the PSA, the Partnership paid a $70 million deposit to Golar, upon which it will receive interest at a rate of 5% per annum.
The closing of the Acquisition (the "Closing") is subject to the satisfaction of certain closing conditions which include, among others, receiving the consent of the lenders under the Hilli Facility, the closing of the previously announced Put-Sale Closing with respect to the Golar Tundra (the "Tundra Put Sale"), the delivery to and acceptance by the Customer of the Hilli, the commencement of commercial operations under the liquefaction tolling agreement (the "LTA") and the formation of Golar Hilli LLC and the related Pre-Closing Contributions as described further below.
Prior to the Closing, Golar, Keppel and B&V will contribute their equity interests in Golar Hilli Corporation ("Hilli Corp"), the entity that owns the Hilli, to the newly formed Golar Hilli LLC (the "Pre-Closing Contributions") in return for equity interests in Golar Hilli LLC. Membership interests in Golar Hilli LLC will be represented by three classes of units: Common Units ("Common Units"); Series A Special Units ("Series A Units"); and Series B Special Units ("Series B Units"). Common Units will be entitled to cash flows from the first 50% of contracted capacity, initially contracted to the Customer under the LTA, at all times. Common Units will not be exposed to the oil-linked pricing elements of the tolling fee under the LTA, but will bear the operating costs of the Hilli, and the interest costs of the Hilli financing facility with only incremental costs accruing to the Series B Units. Series A Units will only be entitled to cash flows associated with oil price linked elements of the tolling fee under the LTA, net of incremental tax expenses and their pro rata portion of any costs that may arise as a result of the underperformance of the Hilli ("Underperformance Costs"). Holders of Series B Units will be entitled to the cash flows associated with any expansion of contracted capacity of the Hilli beyond the first 50%, net of incremental costs arising as a result of making available more than the first 50% of production capacity of the Hilli ("Incremental Costs"), Underperformance Costs and any reduction in revenue attributable to the first 50% of LNG production capacity as a result of making more than 50% of capacity available under the LTA. In the Acquisition, the Partnership will only acquire 50% of the Common Units and none of the Series A Units or Series B Units.
Upon the Closing, which is expected to occur on or before April 30, 2018, Golar, Keppel and B&V will sell 50% of the Common Units to the Partnership in return for the payment by the Partnership of the net purchase price of between approximately $178 and $190 million. The Partnership will apply the $107 million deferred purchase price receivable from Golar in connection with the Tundra Put Sale and the $70 million deposit referred to above against the net purchase price and will pay the balance with cash on hand.
The Partnership estimates that its proportionate share of the Hilli's annual contracted revenues less operating expenses under the LTA will be approximately $82 million. However, the Partnership does not expect to initially consolidate Golar Hilli LLC or Hilli Corp and so will reflect its share of net income on its income statement as "equity in net earnings of affiliates." The Partnership may not realize these levels of estimated annual revenues from the Acquisition.
The Partnership's board of directors (the "Board") is pleased that the Partnership has entered into the PSA in connection with the acquisition of its first interest in a FLNG vessel. The Board and the conflicts committee of the Board (the "Conflicts Committee") have approved the Acquisition and the purchase price. The Conflicts Committee retained a financial advisor to assist with its evaluation of the acquisition.
The Acquisition is expected to be an accretive transaction and is consistent with the Partnership's growth strategy, as it increases the diversity of the Partnership's fleet and contracted cash flow. The Partnership's management does not intend to recommend to the Board an increase in the Partnership's quarterly cash distribution as a result of this transaction.
The Acquisition is expected to add significantly to the Partnership's revenue backlog. It will also further diversify the Partnership's revenue streams as well as help offset the Partnership's recontracting risk related to the vessels that come off contract in 2017. The acquisition will also give significant support to distributions going forward.
The Hilli conversion is nearing completion and no major issues have been identified. All equipment has been installed and pre-commissioning work is well underway. Golar is focused on doing as much testing as possible in the yard and at anchorage in order to minimize the risk of issues being encountered in Cameroon. The extra days spent in Singapore are expected to reduce the time required for commissioning on site. The Hilli is scheduled to leave Singapore for Cameroon at the end of September or beginning of October. LNG bunkering has been booked for mid-September. The mooring system has been installed in Cameroon and is ready for hook up of Hilli. All being well, the voyage between Singapore and Cameroon is expected to take 32 to 40 days, allowing Golar to tender its notice of readiness during the first half of November. The Customer remains on track with its scope of works and the Hilli conversion currently remains materially under budget.
Golar LNG Partners LP press release