Teekay LNG Partners L.P. announced that it has reached an agreement in principle to acquire a 50 percent interest in two liquefied natural gas (LNG) carriers owned by Belgium-based shipping group Exmar NV for an equity purchase price of approximately $70 million (including approximately $7 million of working capital and other cash assets) plus the assumption of approximately $100 million in pro rata debt secured by these vessels. Exmar will retain a 50 percent ownership interest and continue to operate the two vessels.
The two vessels to be acquired are the 2002-built Excalibur, a conventional LNG carrier, and the 2005-built Excelsior, a specialized gas carrier which can both transport and regasify LNG onboard. Both vessels are on long-term, fixed-rate charter contracts to Excelerate Energy LP, a leading provider of LNG offshore solutions, for firm periods until 2022 and 2025, respectively.
The vessels are expected to generate distributable cash flow1 of approximately $10 million per annum for the Partnership over the firm period of the charter contracts. The equity portion of the purchase price is to be financed through the issuance of approximately 1,050,000 common units by the Partnership to Exmar and the remaining $35 million is to be financed by drawing on one of the Partnership’s existing revolving credit facilities. The Partnership is not required and does not intend to raise any additional equity capital to finance this transaction.
1 Distributable cash flow represents net income adjusted for depreciation and amortization expense, non-controlling interest, non-cash items, estimated maintenance capital expenditures, gains and losses on vessel sales, unrealized gains and losses from derivatives, non-cash income taxes and unrealized foreign exchange related items. Maintenance capital expenditures represent those capital expenditures required to maintain over the long-term the operating capacity of, or the revenue generated by, the Partnership's capital assets. Distributable cash flow is a quantitative standard used in the publicly-traded partnership investment community to assist in evaluating a partnership’s ability to make quarterly cash distributions. Distributable cash flow is not defined by U.S. generally accepted accounting principles (GAAP) and should not be considered as an alternative to net income or any other indicator of the Partnership’s performance required by GAAP.
“This transaction provides the Partnership with an opportunity to accretively grow its portfolio of stable fixed-rate cash flows while also benefiting from Exmar’s extensive experience in the specialized floating LNG regasification sector,” commented Peter Evensen, Chief Executive Officer of Teekay GP LLC, the Partnership's general partner. “We look forward to expanding our relationship with Exmar.
The proposed transaction with Exmar remains subject to the negotiation and execution of definitive documentation. There is no assurance that the proposed transaction will be completed on the terms described above or at all.