Tor Olav Troim-led Golar LNG is joining forces with Idan Ofer’s Eastern Pacific Shipping for a new development that includes separating its LNG shipping business and creating a new company.
Golar said on Wednesday it has created Cool Company while Singapore’s EPS, alongside Golar, would take an active role in the new company’s further development and would chair the board of directors.
This is the second major move for Golar in 2021, following the deal with New Fortress Energy earlier this year.
“CoolCo targets to become a growth vehicle and consolidator of modern LNG carriers and provide investors with direct market exposure to an expected continued strength in the LNG freight market,” Golar said.
The consummation of the transactions contemplated by the terms agreement would result in CoolCo acquiring Golar’s 8 TFDE LNG carriers with plans to raise equity and separately list on Euronext Growth in Oslo during the first quarter next year, it said.
CoolCo would also acquire the commercial and technical organization associated with the operation of Golar’s owned and operated shipping and FSRU assets to become a fully integrated operating platform with capacity for fleet growth, the firm said.
The anticipated IPO proceeds would, together with a contemplated debt refinancing, go towards acquiring the TFDE vessels from Golar, securing attractive financing, and providing CoolCo with working capital to position the company for further growth.
According to Golar, outstanding contractual debt associated with the 8 vessels was $858 million as of September 30, 2021.
The TFDE vessels, built between 2013 and 2015, have each a capacity of about 160,000 cbm.
Separating LNG shipping business
In addition to a cash release, Golar intends to retain about one-third of CoolCo as part of the terms agreement.
On the other side, EPS has pre-subscribed for $150 million in CoolCo equity based on an average TFDE ship valuation of $145 million, making EPS the largest shareholder of CoolCo.
Subject to market conditions, the terms agreement contemplates an equity private placement to outside investors during the first quarter of 2022.
Golar said that five listed LNG carrier companies have been taken private during 2021 while remaining listed peers have limited market exposure for modern tonnage.
CoolCo aims to provide investors with “attractive market exposure, dividend distributions, attractive organic growth and pursue industry consolidation.”
Karl Fredrik Staubo, CEO of Golar, said the firm sees a bright future for the LNG carrier market due to the strong underlying market fundamentals for LNG vessels.
“The Cool Company transaction will allow Golar to separate its shipping business and simplify its corporate structure, while maintaining significant and attractive exposure to the LNG carrier business,” Staubo said.
He also said that Golar was “excited” to develop Cool Company with EPS, one of the world’s leading shipping companies and a first mover and global trendsetter in ordering LNG-fueled tonnage in traditional shipping sectors like container, dry bulk, car carriers and tankers.
Staubo said that the terms agreement was consistent with the planned business separation of Golar’s shipping activities and previously announced strategy to focus activities and growth on its FLNG business.
“Recent increases in global LNG prices have further increased the attractiveness of potential new liquefaction projects. Before considering growth projects, adjusted Ebitda generated by the FLNG segment is expected to quadruple from current levels over the next 2-3 years, supported by additional production and commodity exposure on Hilli and contracted earnings from Gimi,” he said.
EPS adding LNG shipping to its portfolio
With this deal, EPS is adding LNG shipping to its diverse shipping portfolio, according to Cyril Ducau, CEO of EPS.
Ducau said LNG would play an “essential role” as a commodity and marine fuel as the world transitions to cleaner energy solutions.
“Golar’s solid track record, mature platform, and like-minded vision made this investment an easy decision. As a provider of dual-fuel LNG tonnage across all our segments, EPS looks forward to taking a leading role in making CoolCo a world-class leader in LNG shipping, combining our complementary skills and expertise with Golar’s,” he said.
The transactions remain subject to negotiation and execution of equity purchase agreements with EPS and Golar, lessor consents, debt financing and the completion of a private placement or placements to third party investors.