Golar launches PE-backed power player

23 June 2016, Week 24 Issue 423

Golar LNG has launched a 50:50 joint venture with a private equity company, Stonepeak Infrastructure Partners, with a focus on linking LNG and power generation assets. Golar announced the move on June 20, saying the venture would provide a means to tie together floating storage and regasification units (FSRUs) with terminals and power generation. 

Stonepeak is planning to commit US$290 million to the venture, which will be known as Golar Power. The private equity group’s managing director, Luke Taylor, said the deal would allow it to “partner with the leading player in the LNG downstream market and [we] see compelling opportunities in this market to build and operate long-term LNG and power infrastructure with high-quality counterparties. While our initial commitment is US$290 million we hope to invest up to US$500 million in the coming years.”

Golar said the plan would allow it to combine its experience in the energy business with a “strong financial player”, which would allow it “to accelerate the realisation of its downstream ambitions and exploit the unprecedented number of opportunities in the current market”.

Golar Power will own an FSRU, which is being built in South Korea, while also receiving two LNG carriers that are suitable for FSRU conversion. Once the deal closes, Golar will immediately start the conversion of one of these vessels. 

The venture will also have a 25% stake in Brazil’s Sergipe Power project, which is due to take a final investment decision (FID) in the second half of this year. Golar said the venture would also have a one-year option to acquire another two LNG carriers. 

The Stonepeak funding will come with an initial cash payment of US$117 million, while also subscribing for another US$100 million of preference shares on closing and committing to another US$75 million in equity. Golar will provide a US$75 million funding commitment before the first quarter of 2018. This should be sufficient to cover the conversion of the two carriers to FSRUs, to receive the new FSRU and to finance its share of the Sergipe Power plan. 

Golar Power will also take US$214 million in ship mortgage debt and US$217 million of spending on the new FSRU. 

Golar GenPower struck a deal with ExxonMobil in March on the supply of LNG to the 1,500-MW Sergipe Power project. Golar GenPower is a joint venture between LNG Power, a subsidiary of Golar, and GenPower Participacoes. The project is contracted to start up by January 2020.