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Golar forms Cool Company Ltd

Published by , Assistant Editor
LNG Industry,

Golar has announced the formation of Cool Company Ltd, and the entry into a pre-commitment agreement. CoolCo targets to become a growth vehicle and consolidator of modern LNG carriers and provide investors with direct market exposure to an expected continued strength in the LNG freight market.

The consummation of the transactions contemplated by the terms agreement would result in CoolCo acquiring Golar’s eight tri-fuel diesel electric propulsion (TFDE) LNG carriers with plans to raise equity and separately list on Euronext Growth in Oslo during 1Q22. CoolCo is also expected to acquire the commercial and technical organisation associated with the operation of Golar’s owned and operated shipping and FSRU assets to become a fully integrated operating platform with capacity for fleet growth. The anticipated IPO proceeds will, together with a contemplated debt refinancing, be used to acquire the eight TFDE vessels from Golar, secure attractive financing, and provide CoolCo with working capital to position the company for further growth. Outstanding Contractual Debt associated with the eight vessels was US$858 million as of 30 September 2021.

In addition to a cash release, Golar intends to retain approximately 1/3 of CoolCo as contemplated by the terms agreement. Eastern Pacific Shipping (EPS), a privately-owned shipping company, has as part of the agreement pre-subscribed for US$150 million in CoolCo equity based on an average TFDE ship valuation of US$145 million, making EPS the largest shareholder of CoolCo. Subject to market conditions, the terms agreement contemplates an equity private placement to outside investors during 1Q22. Alongside Golar, EPS will take an active role in the further development of CoolCo and will chair the Board of Directors.

Five listed LNG carrier companies have been taken private during 2021. Remaining listed peers have limited market exposure for modern tonnage. CoolCo aims to provide investors with attractive market exposure, dividend distributions, attractive organic growth, and pursue industry consolidation.

Karl Fredrik Staubo, CEO of Golar commented:

“We are encouraged by the strong underlying market fundamentals for LNG carriers. The Cool Company transaction will allow Golar to separate its shipping business and simplify its corporate structure, while maintaining significant and attractive exposure to the LNG carrier business.

We are excited to develop Cool Company with Eastern Pacific Shipping. EPS is one of the world’s leading shipping companies and a first mover and global trendsetter in ordering LNG-fuelled tonnage in traditional shipping sectors such as container, dry bulk, car carriers, and tankers.

The terms agreement is consistent with the planned business separation of Golar’s shipping activities and previously announced strategy to focus activities and growth on its FLNG business. Recent increases in global LNG prices have further increased the attractiveness of potential new liquefaction projects. Before considering growth projects, Adjusted EBITDA generated by the FLNG segment is expected to quadruple from current levels over the next two to three years, supported by additional production and commodity exposure on Hilli and contracted earnings from Gimi.”

Cyril Ducau, CEO of Eastern Pacific Shipping commented:

“EPS is pleased to be adding LNG shipping to our diverse shipping portfolio. LNG will play an essential role as a commodity and marine fuel as the world transitions to cleaner energy solutions.

Golar’s solid track record, mature platform, and like-minded vision made this investment an easy decision. As a provider of dual-fuel LNG tonnage across all our segments, EPS looks forward to taking a leading role in making CoolCo a world-class leader in LNG shipping, combining our complementary skills and expertise with Golar’s.”

Clarksons Platou Securities has acted as advisor to EPS and Golar.

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