Golar Power's first electricity-linked FSRU project could deliver more value to its New York-listed parent than previously predicted, several analysts said Monday.
The terms of the Sergipe Power Project and related floating, storage and regasification unit (FSRU) charter could add $7 per share, or $100m, to Golar LNG's valuation, said Evercore ISI's Jonathan Chappell.
That's somewhat higher than the $4.70-per-share estimated contribution in the analyst's most bullish forecast for the project before Golar announced the details earlier today.
FID announced
Monday's announcement that Golar Power took a final investment decision (FID) on the Brazilian project led Chappell to hike his price target for Golar LNG's shares to $40 from $34.
Golar LNG announced today that its joint venture with Stonepeak Infrastructure Partners finalised deals allowing it to move forward with the Sergipe project and signed a 25-year charter for the newbuilding FSRU Golar Nanook.
The project provides two streams of cash flow for Golar LNG. Golar Power increased its ownership stake in the project from 25% to 50%, which should deliver $82.5m in annual earnings before interest, taxes, depreciation and amortisation (Ebtida) to Golar LNG, Chappell said in a note to clients.
And the Oscar Spieler-led company should receive half of the $39m in annual Ebitda from the FSRU charter.
Clarksons Platou Securities analyst Harman Hildan (pictured at left) said the FID announcement hints at significant value potential in Golar Power, and he estimated that the project could add $7.90 per share in value to Golar LNG.
The analyst said project returns revealed today are better than expected. He pointed out that Golar Power should bring in BRL 1.1bn ($344m) in total annual Ebitda even if no electricity is sold, and the FSRU charter includes upside from unused vessel capacity.
"We view this FSRU contract structure highly interesting as it allows Golar Power to capitalise on price spreads between Brazil and the global market when arbitrage opportunities open," Hildan wrote.
Analysts say the Sergipe project's details could serve as a template for future projects for Golar Power.
Arctic weighs in
Arctic Securities' Erik Nikolai Stavseth pointed out that the power project's capacity can only utilise a portion of the Golar Nanook potential.
"Our view is that Golar Power will attempt to use the FSRU as a hub for its power plant services and hence see the additional capacity enabling Golar Power to pursue more power projects," he said in a note to clients.
