Golar LNG says it has closed on the additional debt financing needed to go ahead with a gas-to-power project off the coast of Brazil.
Golar Power, a joint venture with Stonepeak Infrastructure Partners, will build the "largest and most efficient thermoelectric power plant in Latin America and the Caribbean" in the Brazilian state of Sergipe.
Celse, the project company also controlled by Golar Power, received $1.34bn in non-recourse project financing through a bond issuance for the Sergipe project.
Golar Power chief executive Eduardo Antonello says the "financing represents a key milestone in the development of Golar Power infrastructure projects globally."
"The Project bond issuance has attracted the interest of multiple international investors and opens a new horizon of opportunities for infrastructure development," Antonello said.
The Sergipe project is expected to cost a total of $1.74bn with another equity contribution of $400m from the partners already paid in, including $123m in cash reserves.
Upon its 2020 start, Golar Power annual operating earnings of $323m, with inflation-indexed price increases and fuel pass through costs.
The Sergipe project also includes the charter of the 170,000-cbm Golar Nanook (built 2017) for a 26-year charter.
The annual operating earnings for Golar Power is currently projected to be approximately $41m with inflation indexing and additional spare capacity on the Nanook.
Evercore sees Superior returns'
Evercore analyst Jonathan Chappell says Sergipe might be the sleeper in Golar LNG as it offers "superior returns" to any of the other FSRU-based power projects in its portfolio.
He estimates that Golar LNG's minimum cash flow contribution from the two pieces of the Sergipe project exceeds $100m, providing nearly 25% returns over a 25-year time horizon.
The Golar Power project "is important as it accelerates the company's cash flow and is likely a catalyst behind a more aggressive return of cash to shareholders in the form of dividends," Chappell said.
