Teekay GP LLC, the general partner of Teekay LNG Partners L.P., has announced that it has approved a plan to reduce its quarterly cash distributions to US$0.14 per common unit, down from US$0.70 per common unit in 3Q15, commencing with the 4Q15 distribution payable in February 2016.
The Partnership said that it expects to use a significant portion of its internally generated cash flow to fund equity capital requirements on its future profitable growth projects and reduce debt levels.
LNG business remains strong
Peter Evensen, Chief Executive Officer of Teekay GP LLC, said: “Despite significant weakness in the global energy and capital markets, Teekay LNG’s businesses remain strong […] The Partnership’s cash flows remain stable and growing, supported by a large and well-diversified portfolio of fee-based contracts with high quality counterparties […] However, as a growing MLP, Teekay LNG does require capital and there is currently a dislocation in the capital markets relative to the stability of our businesses such that the Partnership’s cost of equity has increased to the point where it is currently not an economically attractive source of capital. Based on the upcoming capital requirements for our committed growth projects, coupled with the uncertainty regarding how long it will take for the energy and capital markets to normalise, management and the Partnership’s Board of Directors believe that it is in the best interest of the Partnership’s unitholders to conserve our internally generated cash flows to fund future growth projects and reduce our debt levels.”
Mr Evensen added: “This decision by management and the Partnership’s Board of Directors was not taken lightly. Numerous options were considered, including selling existing assets and future growth projects, and evaluating potential alternative sources of capital, which could have resulted in permanent dilution to existing unitholders. Rather than take this course, we determined that temporarily reducing our cash distributions is the most reliable way to fund our future profitable growth projects with the lowest cost of capital. We believe this prudent approach will strengthen the Partnership’s financial position, preserve our long-term growth potential, and will result in higher distributable cash flow per unit.
Edited from press release by Callum O'Reilly
Read the article online at: https://www.lngindustry.com/lng-shipping/17122015/teekay-to-reduce-cash-distributions-1781/