Golar LNG’s joint venture with a private equity firm is getting kudos from investors today as the scheme frees up cash for future investments and reduces exposure to weak rates for LNG carriers.
Shares in the Oscar Spieler-led company rose as much as 13% in the immediate wake of the earlier announcement that Stonepeak Infrastructure Partners will acquire a 50% stake in the Golar Power project.
The gains were tempered by midday with Golar LNG shares up roughly 6% to $16.92 per share. But the performance still lapped other shipping equities which were mostly positive in light of a better outlook on the upcoming “Brexit” vote in the UK.
The Golar Power project will supply a floating storage and regasification unit (FSRU) and two dedicated LNG carriers for the proposed Sergipe power in Brazil. Stonepeak is paying $117m for the stake and subscribing to $100m in preferred shares.
Golar Power will also be granted an option to acquire two additional LNG carriers for conversion into FSRUs and it has the right to invest in up to 25% of the Sergipe power project, which is expected to reach a final investment decision in the second half of this year.
Evercore ISI analyst Jonathan Chappell wrote in a research report that the deal with Stonepeak “enables investors to finally ascribe some value to the venture.”
He revised lower estimates of Golar LNG’s loss-per-share estimates for this year to $1.81 per share, up from an earlier forecast of $1.85 per share, and for next year from an earlier forecast of a loss of $0.57 per share to a new estimate of a loss of $0.47 per share for 2017.
The revisions stem from Golar LNG being able to reduce operating losses from its fleet if the two LNG carriers are converted into FSRUs, instead of being deployed in the current poor LNG shipping market. Stonepeak’s stake in the venture also removes a financing overhang as the new cash helps fully finance the remaining FSRU newbuild.
