Golar LNG sells Golar Viking
Golar LNG Ltd has announced the completion of the sale and delivery of the 2005 built LNGC Golar Viking to PT Perusahaan Pelayaran Equinox ("Equinox"). The transaction has been concluded at a sale price of US$ 135 million. The vessel has been re-named "Salju" under Indonesian flag and Registry, the company said in its press release.
Under Indonesian Cabotage regulations, LNG cargoes produced and sold within Indonesia must be transported on an Indonesian flagged vessel. With an anticipated increase in domestic allocation for Indonesian produced LNG cargoes in 2015, Equinox believe the timing is right to acquire the Golar Viking and transfer the vessel to Indonesian flag.
The growth in the Indonesian domestic trade of LNG is the direct result of the recent introduction of 3 new LNG Terminals which are supplied from LNG production facilities at Bontang and Tangguh. The receiving Terminals are the FSRU Nusantara Regas Satu (commenced operations in Q2 2012) located in West Java, PGN FSRU (Q3 2014) located in Lampung and the Arun Receiving Terminal in Aceh Province, scheduled to commence operations in the first quarter of 2015.
FSRU Nusantara Regas Satu is owned and operated by PT Golar Indonesia, a joint venture company between Golar and Equinox's parent company.
The technical specification of Golar Viking, now renamed Salju, is well suited for the short haul nature of the domestic Indonesian trade. The transfer of ownership and the anticipated future employment of the vessel recognises that long haul sea borne trade will increasingly become dominated by modern, larger and more efficient vessels providing greater economies of scale. In connection with the sale, Golar has repaid a secured bank loan of approximately USD 82 million. The sale was concluded at the vessel's approximate book value as at December 31, 2014 and Golar therefore do not expect this transaction to materially impact its first quarter results for 2015.
In addition to a limited amount of equity initially invested in the transaction by Equinox, Golar have provided a bridging loan facility. It is Equinox's intention to refinance a majority of this debt with third party debt for which Equinox already has commitments from banks. After this, it is anticipated that approximately $53 million of the Golar debt will be outstanding, secured with a second priority security over the vessel. This debt will have a tenure of 10 years. The return on this debt will be based on libor plus a blended margin of 4%, with a further kicker driven by the ships actual operational performance. Golar will also provide risk management support to Equinox, thereby indirectly increasing the Company's presence in the growing Indonesian domestic LNG trade. Golar will work together with Equinox should the vessel be available for international trade in the future.
"The sale of the vessel in support of Equinox's aim of actively servicing Indonesian domestic LNG shipping demand fits with our strategy of maximizing cash flows in the currently challenging shipping environment. Golar's support to Equinox strengthens the ties we have with our long term partners in the important Indonesian market. The transaction further confirms Golar's strategy of reducing the Company's exposure to the LNG shipping market and focusing its investment in the FLNG business." said Gary Smith, CEO Golar Management. Equinox view this transaction as a major step in achieving their aim of building on their long involvement in LNG and establishing Equinox as a leading, first class Indonesian LNG ship owner and operator.