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GasLog Partners LP buys LNG carriers

LNG Industry,

GasLog Partners LP said that it had entered into an agreement with GasLog Ltd to purchase 100% of the shares in the entities that own and charter two LNG carriers.

The LNG carriers, Methane Jane Elizabeth and Methane Rita Andrea, were built in 2006, and have a capacity of 145 000 m3. The aggregate purchase price was US$ 328 million. “The acquisition is subject to the GasLog Partners LP obtaining the funds necessary to pay the purchase price and the satisfaction of certain other closing conditions,” a statement from the company read.

GasLog Partners LP said it would finance the acquisition with a combination of equity and the assumption of the vessels’ existing credit facilities. Additionally, the company has entered into a commitment letter with Citibank for a new US$ 450 million credit facility to refinance the current credit facilities of the vessels currently owned by the company as well as the facilities for the two new LNG carriers.

GasLog acquired the Methane Jane Elizabeth and Methane Rita Andrea from an affiliate of BG Group in April 2014. GasLog supervised construction and provided technical management for the LNG carriers. The vessels are currently operating under long-term time charters with BG with initial terms of five and a half and six years, respectively (through October 2019 and April 2020). BG has the option to extend either or both of the charters for a further period of either three or five years following the initial charter period.

The acquisition represents the first transaction carried out by the two entities since GasLog Partners’ initial public offering in May 2014. GasLog Partners LP said that the acquisition is immediately accretive and consistent with its strategy to grow cash distributions for its unitholders through accretive dropdown and third-party acquisitions. The company estimated that the acquisition of the vessels will generate an annual sum of US$ 47.7 million of incremental contracted revenue over their initial charter terms, assuming full utilisation, and US$ 34.5 million of EBITDA.

The Board of Directors of GasLog, Board of Directors of the Partnership (the “Board”) and the Conflicts Committee of the Board have approved the Acquisition.

Following the completion of the deal, GasLog Partners LP intends to recommend to the Board an increase in the its quarterly cash distribution per unit of between US$ 0.05625 and US$ 0.06250, an increase of approximately 15% above the existing minimum quarterly distribution and an annualised increase of between US$ 0.225 and US$ 0.250 per unit. When combined with the existing minimum quarterly cash distribution of $0.375, this proposed increase results in a cash distribution of between US$ 0.43125 - US$ 0.43750 per quarter. Any such increase would be conditioned upon, among other things, the closing of the acquisition, the approval of such increase by the Board and the absence of any material adverse developments or potentially attractive opportunities that would make such an increase inadvisable.

Increasing fleet size

Andy Orekar, CEO of GasLog Partners, said: “I am very pleased to be announcing our first dropdown acquisition so soon after our successful IPO. The addition of these two vessels will significantly increase the size of GasLog Partners’ fleet from three to five ships, increasing the scale of [GasLog Partners] and diversifying our operations. This acquisition increases the average remaining contract term on our charters to approximately five years and adds US$ 262 million of contracted revenue under the initial charter terms of five and a half and six years, assuming full utilisation. The remaining pipeline of eligible dropdown vessels at GasLog Ltd. and the potential for further third-party acquisitions provides a highly visible path to sustainable growth over several years. Having now agreed and announced our first dropdown acquisition with GasLog, we believe GasLog Partners is well positioned to execute our strategy and substantially grow cash distributions for our unitholders.”

"Extremely significant"

Paul Wogan, CEO of GasLog Ltd., stated, “This first transaction between GasLog Ltd. and GasLog Partners is extremely significant. It validates the strategy we set out at the time of GasLog Partners’ IPO of recycling capital from the [GasLog Partners] to continue growing the GasLog fleet and take advantage of what we believe will be attractive markets for LNG shipping. We believe there is significant value to GasLog and its shareholders through GasLog holding the limited partner units, the general partner and the incentive distribution rights in GasLog Partners. In particular, I am very pleased that, upon completion of this transaction, GasLog Partners’ cash distribution per unit is expected to meet or exceed the first incentive distribution right threshold.”

Adapted from press release  by Ted Monroe

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