Big earnings have been forecast at Golar Power as it lines up 'highly attractive' LNG projects in South America.
Fearnley Securities has reiterated its buy rating on New York-listed parent Golar LNG as a result.
"Golar’s ultimate goal has never changed. It is about cheaper and cleaner energy solutions," analysts Espen Landmark Fjermestad, Peder Nicolai Jarlsby and Ulrik Mannhart said.
"Golar Power, the third and latest business leg to the group, looks to have the greatest potential to fulfil this bald and hopefully highly rewarding ambition."
The Fearnley analysts are predicting the 50/50 joint venture with Stonepeak Infrastructure Partners could create $150m of Ebitda for Golar LNG by 2023.
On the longer term, by 2025 to 2030, this could increase to between $300 and $500 per year.
Fearnley said it estimated Golar's stake in the unit is worth $700m, against Golar LNG's market capitalisation of $760m.
Long-term deals in place
"Project economics are highly attractive and typically backed by 25-year power purchase agreements (PPAs)," the Astrup Fearnley-controlled investment bank added.
Golar Power is currently launching its 1.5GW Sergipe power plant project in Brazil, where the floating storage and regasification unit Golar Nanook (built 2015) serves as the import facility.
The company said LNG distribution operations are expected to start in 2021.
And it has three other projects in the pipeline, Barcarena, Suape and Santa Catarina. All could be cash-flow generating by 2023.
Golar Power has signed up the first three small-scale customers for its LNG distribution operations.
And Golar LNG has said a further 200 potential customers have signed letters of intent on various small-scale LNG opportunities with Golar Power.
"There are plenty of downstream opportunities that could materialise – at limited costs and with 1 to 2 years payback. Golar Power is now a self-financing vehicle," the Fearnley analysts said.
"In our view this is the most valuable business in the Golar group, and don’t forget, it should thrive in a lower-for-longer LNG price environment."
Based on historical Brazilian power prices and current LNG prices the average profit per LNG cargo is about $30m, Fearnley calculated.
But in the short term, the parent company "needs to address a thin liquidity position," the firm added.
"We expect Golar LNG to shore up its balance sheet ahead of the 2023 cash-flows through multiple financing sources."
