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Teekay LNG Partners to Acquire Ownership Interest in $1.4Bill Maersk LNG Carriers

Published Oct 12, 2011 10:21 AM by The Maritime Executive

  • Teekay LNG Partners and Marubeni Corporation joint venture agrees to acquire ownership of eight LNG carriers from A.P. Moller-Maersk for an aggregate purchase price of approximately $1.402 billion.
  • Transaction expected to be accretive to Teekay LNG's distributable cash flow per unit.
  • Financing for the transaction secured through new loan facilities and a portion of Teekay LNG Partners' existing liquidity.

Teekay LNG Partners L.P. (Teekay LNG or the Partnership) announced that its joint venture (the Joint Venture) with Marubeni Corporation (Marubeni) has agreed to acquire ownership interests in eight liquefied natural gas (LNG) carriers from Denmark-based global conglomerate, A.P. Moller-Maersk A/S, for an aggregate purchase price of approximately $1.402 billion.

The transaction includes the acquisition by the Joint Venture of 100 percent ownership interests in six LNG carriers and 26 percent ownership interests in two additional LNG carriers, as detailed in the following table:

        -----------------------------------------------
        LNG Carrier                Year Delivered   Ownership
        -------------------------------------
        1.Maersk Meridian                2010           100%
        -------------------------------------
        2.Woodside Donaldson         2009           100%
        -------------------------------------- 
        3.Maersk Magellan               2009           100%
        -------------------------------------- 
        4.Maersk Arwa                     2008           100%
        -------------------------------------- 
        5.Maersk Marib                    2008           100%
        ------------------------------------- 
        6.Maersk Methane               2008           100%
        ------------------------------------ 
        7.Maersk Qatar                    2006            26%
        ------------------------------------ 
        8.Maersk Ras Laffan            2004           26%
        -----------------------------------------------
        

Five of the eight LNG carriers to be acquired are currently operating under long-term, fixed-rate time-charter contracts, with an average remaining firm contract period duration of approximately 17 years, plus extension options. The other three vessels are currently operating under short-term, fixed-rate time-charters; however, one of these charters includes an extension option which, if exercised, would increase the number of acquired vessels on long-term, fixed-rate charters to six. Based on the acquired vessels' current employment, the acquisition is expected to be accretive to Teekay LNG's distributable cash flow (1) per uniit.

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. 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.

To finance this transaction, the Joint Venture has secured loan facilities, which on a combined basis total approximately $1.12 billion. The remaining $280 million of the purchase price is expected to be financed with equity contributions from Teekay LNG and Marubeni, commensurate with the respective Joint Venture ownership interests of 52 percent and 48 percent. As a result, Teekay LNG's pro rata portion of the equity contribution is expected to be approximately $146 million, which will be funded from Teekay LNG's existing liquidity which totaled approximately $480 million as at September 30, 2011.

In addition, the owners of the remaining interests in the two LNG carriers in which the Joint Venture is acquiring 26 percent interests will have the right to require the Joint Venture to acquire up to all of such remaining interests.

"Working with our joint venture partner Marubeni, we are pleased to announce Teekay LNG's largest acquisition of on-the-water vessels to date," commented Peter Evensen, Chief Executive Officer of Teekay GP LLC, the Partnership's general partner. "The eight acquired vessel interests will increase the total number of vessels in which we have ownership interests, including committed newbuildings, to 45 vessels, and the time-charter contracts acquired with these vessels will broaden our customer base and add further stable cash flows to our existing large portfolio of long-term fixed-rate contracts. With three of the vessels currently employed on short-term time-charters, the Partnership should benefit from the strong near-term demand for LNG carriers. With an average age of only four years, we are acquiring a modern, well-maintained fleet that has been operated by one of the leaders in global shipping."

The transaction has been approved by the Teekay LNG, Marubeni and A.P. Moller-Maersk boards of directors and is expected to close by early 2012, subject to customary closing conditions including consent from charterers and approval from relevant regulatory authorities. Teekay Corporation will take over technical management of the acquired vessels after a transition period.

 

Source: MarketWatch