UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2017
Commission File Number: 1-35123
GOLAR LNG PARTNERS LP
(Translation of registrant’s name into English)
2nd Floor
S.E. Pearman Building
9 Par-la-Ville Road
Hamilton HM 11
Bermuda
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F
ý
Form 40-F
o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): Yes
o
No
ý
.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): Yes
o
No
ý
.
GOLAR LNG PARTNERS LP
REPORT ON FORM 6-K FOR THE QUARTERLY PERIOD ENDED
JUNE 30, 2017
INDEX
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PAGE
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Financial Statements (Unaudited)
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Exhibits
The following exhibits are filed as part of this report on Form 6-K:
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4.1
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First Supplemental Letter to Facilities Agreement for an $800 million senior secured amortizing term loan and revolving credit facility, dated April 27, 2016, by and among Golar Partners Operating LLC, Citigroup Global Markets Limited, DNB (UK) Limited, Nordea Bank Norge ASA, as agent and security agent and the other parties thereto
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4.2
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Second Supplemental Letter to Facilities Agreement for an $800 million senior secured amortizing term loan and revolving credit facility, dated May 22, 2017, by and among Golar Partners Operating LLC, Citigroup Global Markets Limited, DNB (UK) Limited, Nordea Bank Norge ASA, as agent and security agent and the other parties thereto
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4.3
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Third Supplemental Letter to Facilities Agreement for an $800 million senior secured amortizing term loan and revolving credit facility, dated June 29, 2017, by and among Golar Partners Operating LLC, Citigroup Global Markets Limited, DNB (UK) Limited, Nordea Bank Norge ASA, as agent and security agent and the other parties thereto
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4.4
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Purchase and Sale Agreement by and among Golar LNG Limited, KS Investments Pte. Ltd., Black & Veatch International Company and Golar Partners Operating LLC, dated August 15, 2017
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101
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The following financial information from Golar LNG Partners LP’s Report on Form 6-K for the quarter ended June 30, 2017, filed with the SEC on September 13, 2017, formatted in Extensible Business Reporting Language (XBRL):
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i. Unaudited Condensed Consolidated Statements of Operations for the three months and six months ended June 30, 2017 and 2016;
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ii. Unaudited Condensed Consolidated Statements of Comprehensive Income for the three months and six months ended June 30, 2017 and 2016;
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iii. Unaudited Condensed Consolidated Balance Sheet as of June 30, 2017 and Audited Balance Sheet as of December 31, 2016;
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iv. Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016;
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v. Unaudited Condensed Consolidated Statements of Changes in Partners’ Capital for the six months ended June 30, 2017 and 2016; and
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vi. Notes to the Unaudited Condensed Consolidated Financial Statements.
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THIS REPORT ON FORM 6-K IS HEREBY INCORPORATED BY REFERENCE INTO THE REGISTRATION STATEMENTS ON FORM F-3 (333-219065 AND 333-214241) OF THE REGISTRANT
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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GOLAR LNG PARTNERS LP
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Date:
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September 13, 2017
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By:
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/s/ Graham Robjohns
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Name:
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Graham Robjohns
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Title:
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Principal Executive Officer
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IMPORTANT INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This Report on Form 6-K for the period ended
June 30, 2017
contains certain forward-looking statements concerning future events and our operations, performance and financial condition, including, in particular, the likelihood of our success in developing and expanding our business. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” “projects,” “forecasts,” “will,” “may,” “potential,” “should,” and similar expressions are forward-looking statements. These forward-looking statements reflect management’s current views only as of the date of this Report and are not intended to give any assurance as to future results. As a result, unitholders are cautioned not to rely on any forward-looking statements.
Important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to:
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•
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market trends in the floating storage and regasification unit (“FSRU”), liquefied natural gas (“LNG”) carrier and floating liquefied natural gas vessel (“FLNG”) industries, including charter rates, factors affecting supply and demand, and opportunities for the profitable operations of FSRUs, LNG carriers and FLNGs;
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•
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the ability of Golar LNG Partners LP (“Golar Partners,” “we,” “us” and “our”) and Golar LNG Limited (“Golar”) to retrofit vessels as FSRUs or FLNGs and the timing of the delivery and acceptance of any such retrofitted vessels by their respective charterers;
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•
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our ability to maintain cash distributions and the amount of any such distributions;
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•
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the timeliness of the
Hilli Episeyo
(the “
Hilli
”)
conversion, commissioning and delivery;
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•
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our ability to consummate the acquisition of
Hilli
on a timely basis or at all;
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•
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our ability to integrate and realize the expected benefits from acquisitions including the acquisition (the “Hilli Acquisition”) of 50% of the common units of Golar Hilli LLC (“Hilli LLC”), the indirect owner of the FLNG
Hilli
;
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•
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our anticipated growth strategies;
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•
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the effect of a worldwide economic slowdown;
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•
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turmoil in the global financial markets;
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•
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fluctuations in currencies and interest rates;
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•
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general market conditions, including fluctuations in charter hire rates and vessel values;
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•
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the liquidity and creditworthiness of our customers;
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•
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changes in our operating expenses, including drydocking and insurance costs and bunker prices;
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•
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our future financial condition or results of operations and future revenues and expenses;
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•
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the repayment of debt and settling of interest rate swaps;
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•
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our ability and Golar's to make additional borrowings and to access debt and equity markets;
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planned capital expenditures and availability of capital resources to fund capital expenditures;
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the exercise of purchase options by our charterers;
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our ability to maintain long-term relationships with major LNG traders;
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our ability to leverage the relationships and reputation of Golar, Golar Power Limited (“Golar Power”) and OneLNG S.A. (“OneLNG
SA
”) in the LNG industry;
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•
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our ability to purchase vessels from Golar, Golar Power and OneLNG
SA
in the future;
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•
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our continued ability to enter into long-term time charters, including our ability to re-charter the
Golar Spirit
, the
Golar Mazo
and the
Golar Maria
following the expiration of their respective charters in 2017;
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our ability to maximize the use of our vessels, including the re-deployment or disposition of vessels no longer under long-term time charter;
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timely purchases and deliveries of newbuilding vessels;
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future purchase prices of newbuildings and secondhand vessels;
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our ability to compete successfully for future chartering and newbuilding opportunities;
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acceptance of a vessel by its charterer;
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termination dates and extensions of charters;
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the expected cost of, and our ability to comply with, governmental regulations, maritime self-regulatory organization standards, as well as standard regulations imposed by our charterers applicable to our business;
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availability of skilled labor, vessel crews and management;
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our general and administrative expenses and our fees and expenses payable under the fleet management agreements and the management and administrative services agreement;
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the anticipated taxation of our partnership and distributions to our unitholders;
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challenges by authorities to tax benefits we previously obtained;
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estimated future maintenance and replacement capital expenditures;
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our and Golar's ability to retain key employees;
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customers’ increasing emphasis on environmental and safety concerns;
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potential liability from any pending or future litigation;
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potential disruption of shipping routes due to accidents, political events, piracy or acts by terrorists;
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our business strategy and other plans and objectives for future operations; and
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other factors listed from time to time in the reports and other documents that we file with the U.S. Securities and Exchange Commission (the “SEC”).
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Forward looking statements in this Report on Form 6-K are based upon estimates reflecting the judgment of management and involve known and unknown risks and uncertainties, many of which are beyond our control. These forward-looking statements should be considered in light of various important factors, including those set forth in this report under the caption “Risk Factors” and in our Annual Report on Form 20-F for the year ended December 31, 2016 (our “2016 Annual Report”) under the caption “Item 3
—
Key Information
—
Risk Factors.” All forward-looking statements included in this Report on Form 6-K are made only as of the date of this Report on Form 6-K. New factors emerge from time to time, and it is not possible for us to predict all of these factors. Further, we cannot assess the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement. We do not intend to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Unless the context otherwise requires, references in this report to “Golar Partners,” the “Partnership,” “we,” “our,” “us” or similar terms refer to Golar LNG Partners LP, a Marshall Islands limited partnership, or any one or more of its subsidiaries, or to all of such entities. Those statements in this section that are not historical in nature should be deemed forward-looking statements that are inherently uncertain. See “Important Information Regarding Forward-Looking Statements” on page 5 for a discussion of the factors that could cause actual results to differ materially from those projected in these statements.
This section should be read in conjunction with the interim financial statements presented in this report, as well as the historical consolidated financial statements and notes thereto of Golar LNG Partners LP included in our 2016 Annual Report.
We acquired from Golar LNG Limited (“Golar”) all of the shares of Tundra Corp., the disponent owner and operator of the Golar Tundra (“Tundra Corp”), in May 2016. Pursuant to an agreement entered into between us and Golar in connection with the acquisition of the Golar Tundra, we had the right to require Golar to repurchase the shares of Tundra Corp (the “Tundra Put Right”), and consequently Golar continued to consolidate Tundra Corp and the results of Tundra Corp are not reflected in our financial statements. In May 2017, we exercised the Tundra Put Right. Please see Recent Developments below for further details.
General
We were formed by Golar, a leading independent owner and operator of LNG carriers, to own and operate FSRUs and LNG carriers under long-term charters that generate long-term stable cash flows. As of
June 30, 2017
, our fleet consisted of six FSRUs and four LNG carriers. We intend to make additional accretive acquisitions of FSRUs and LNG carriers with long-term charters from Golar and third parties in the future as market conditions permit. Golar is also developing a floating liquefaction business and currently has one FLNG, the
Hilli.
On August 15, 2017, we entered into an agreement to purchase 50% of the common units in Hilli LLC, the indirect owner of the
Hilli
, subject to certain closing conditions, as described more fully below under “
—
Recent Developments
—Hilli
Acquisition”.
Recent Developments
Since April 1, 2017, the significant developments that have occurred are as follows:
Golar Tundra
On May 23, 2016, we acquired from Golar (the “Tundra Acquisition”) all of the shares of Tundra Corp. The
Golar Tundra
was expected to commence operations in order to serve the Ghana (Tema) LNG Project in the second quarter of 2016. However, due to delays in the Ghana (Tema) LNG Project, this has not yet occurred, because the required infrastructure, including a connecting pipeline, jetty and breakwater, are not yet in place. The
Golar Tundra
remains anchored off the coast of Ghana and the project has made limited progress. In light of this, on May 30, 2017, we elected to exercise the Tundra Put Right to require Golar to repurchase Tundra Corp at a price equal to the original purchase price (the “Tundra Put Sale”) we paid in our acquisition of Tundra Corp (the “Purchase Price”). In connection with the exercise of the Tundra Put Right, we and Golar have entered into an agreement pursuant to which we have agreed to sell Tundra Corp to Golar on the date of the closing of the Tundra Put Sale (the “Put Sale Closing Date”) in return for Golar's promise to pay an amount equal to approximately $107 million (the “Deferred Purchase Price”) plus an additional amount equal to 5% per annum of the Deferred Purchase Price (the “Additional Amount”). The Deferred Purchase Price and the Additional Amount shall be due and payable by Golar on the earlier of (a) the date of the closing of the Hilli Acquisition and (b) March 31, 2018. We agreed to accept the Deferred Purchase Price and the Additional Amount in lieu of a cash payment on the Put Sale Closing Date in return for an option (which we have exercised) to purchase an interest in the
Hilli
.
Hilli Acquisition
On August 15, 2017, Golar Partners Operating LLC, our wholly owned subsidiary, entered into a purchase and sale agreement (the “Hilli Purchase Agreement”) for the Hilli acquisition from Golar and affiliates of Keppel Shipyard Limited (“Keppel”) and Black and Veatch (“B&V”) of common units (the “Acquired Interests”) in Hilli LLC, which will, on the closing date of the
Hilli
Acquisition, indirectly own the
Hilli
. The Acquired Interests represent the equivalent of 50% of the two liquefaction trains, out of a total of four, that will be contracted to Perenco Cameroon (“Perenco”), Societe Nationale de Hydrocarbures (“SNH”) and the Republic of Cameroon (together with Perenco and SNH, the “Customer”) under an eight-year liquefaction tolling agreement (the “Liquefaction Tolling Agreement”). The purchase price for the Acquired Interests is $658 million less net lease obligations under the financing facility for the
Hilli
(the “Hilli Facility”), which are expected to be between $468 and $480 million. Concurrently with the execution of the Hilli Purchase Agreement, we paid a $70 million deposit to Golar, upon which we will receive interest at a rate of 5% per annum.
The closing of the Hilli Acquisition is subject to the satisfaction of certain closing conditions which include, among others, the execution and delivery of the Liquefaction Tolling Agreement by the parties thereto, receiving the consent of the lenders under the Hilli Facility, the closing of the previously announced Tundra Put Sale (described above), the delivery to and acceptance by the Customer of the
Hilli
, the commencement of commercial operations under the Liquefaction Tolling Agreement and the formation of Hilli LLC and the related Pre-Closing Contributions as described further below. In addition, in connection with the closing, we expect to provide a several guarantee of 50% of Golar Hilli Corp’s ("Hilli Corp") indebtedness under the Hilli Facility.
Prior to the closing of the Hilli Acquisition, Golar, Keppel and B&V will contribute their equity interests in Hilli Corp, the entity that owns the
Hilli
, to the newly formed Hilli LLC (the “Pre-Closing Contributions”) in return for equity interests in Hilli LLC. Membership interests in Hilli LLC will be represented by three classes of units: Common Units (“Hilli Common Units”); Series A Special Units (“Series A Units”); and Series B Special Units (“Series B Units”).
The operating agreement of Hilli LLC, which is expected to be entered into effective as of the Closing Date, will provide that within 60 days after the end of each quarter, Golar, in its capacity as the managing member of Hilli LLC shall determine the amount of Hilli LLC’s available cash and appropriate reserves (including cash reserves for future maintenance capital expenditures, working capital and other matters), and Hilli LLC shall make a distribution to the members of Hilli LLC (the “Members”) of the available cash, subject to such reserves. Hilli LLC shall make distributions to the Members when, as and if declared by Golar, provided, however, that no distributions may be made on the Hilli Common Units on any distribution date unless (i) Series A Distributions (defined below) for the most recently ended quarter and any accumulated Series A Distributions in arrears for any past quarter have been or contemporaneously are being paid or provided for and (ii) Series B Distributions (defined below) for the most recently ended quarter and any accumulated Series B Distributions in arrears for any past quarter have been or contemporaneously are being paid or provided for.
The Series A Units shall be entitled to receive the “Series A Distributions,” which means, with respect to any quarter, 100% of any Incremental Perenco Revenues received by Hilli Corp during such quarter. “Incremental Perenco Revenues” generally means:
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a.
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any cash received by Hilli Corp from revenues invoiced to the extent such revenues invoiced are based on tolling fees under the Liquefaction Tolling Agreement relating to an increase in the Brent Crude price above $60 per barrel;
less
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b.
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any incremental tax expense arising from or related to any cash receipts referred to in clause (a) above;
less
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c.
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the pro-rata portion of any costs that may arise as a result of the underperformance of the
Hilli
(“Underperformance Costs”) incurred by Hilli Corp during such quarter.
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Series B Units shall be entitled to receive the “Series B Distributions,” which means, with respect to any quarter, an amount equal to 95% of Revenues Less Expenses received by Hilli Corp during such quarter. “Revenues Less Expenses” generally means:
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a.
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the cash receipts from revenues invoiced by Hilli Corp as a direct result of the employment of more than the first fifty percent of LNG production capacity for the
Hilli
, before deducting any Underperformance Costs (unless the incremental capacity above the first fifty percent is supplied under the terms of the Liquefaction Tolling Agreement and the term of the Liquefaction Tolling Agreement is not expanded beyond 500 billion cubic feet of feed gas), excluding, for the avoidance of doubt, any Incremental Perenco Revenues;
less
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b.
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any incremental costs whatsoever, including but not limited to operating expenses, capital costs, financing costs and tax costs, arising as a result of employing and making available more than the first fifty percent of LNG production capacity for Hilli FLNG;
less
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c.
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any reduction in revenue attributable to the first fifty percent of LNG production capacity availability as a result of making more than fifty percent of capacity available under the Liquefaction Tolling Agreement (including, but not limited to, for example, as a result of a tolling fee rate reduction as contemplated in the Liquefaction Tolling Agreement);
less
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d.
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the pro-rata share of Underperformance Costs incurred by Hilli Corp during such quarter.
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Upon the closing of the Hilli Acquisition, which is expected to occur on or before April 30, 2018, Golar, Keppel and B&V will sell 50% of the Hilli Common Units to us in return for the payment by us of the net purchase price of between approximately $178 and $190 million. We will apply the $107 million Deferred Purchase Price receivable from Golar in connection with the Tundra Put Sale and the $70 million deposit referred to above against the net purchase price and will pay the balance with cash on hand.
We do not expect to initially consolidate Hilli LLC or Hilli Corp and so will reflect our share of net income on our income statement as "equity in net earnings of affiliates."
Our board of directors (our “Board”) and the conflicts committee of the Board (the “Conflicts Committee”) have approved the Hilli Acquisition and the purchase price. The Conflicts Committee retained a financial advisor to assist with its evaluation of the Hilli Acquisition.
The description of the Hilli Purchase Agreement contained in this report is a summary and is qualified in its entirety by reference to the terms of the Hilli Purchase Agreement, which is filed as an exhibit to this report.
Liquefaction Tolling Agreement
In October 2015, Hilli Corp entered into a binding term sheet for FLNG tolling services with the Customer for the development of the Hilli Project. The binding term sheet has been converted into a Liquefaction Tolling Agreement and we expect that the Liquefaction Tolling Agreement will be executed by September 30, 2017. The
Hilli
is scheduled to provide liquefaction services under the Liquefaction Tolling Agreement for a term of the earlier of (i) eight years from the date the delivered
Hilli
is accepted by the Customer (the “Acceptance Date”), or (ii) at the time of receipt and processing by the
Hilli
of 500 billion cubic feet of feed gas. The commissioning process of testing the
Hilli
and preparing it for service is expected to commence in November 2017, and under the Liquefaction Tolling Agreement, the commercial start date to begin providing liquefaction services is the earlier of 180 days after the scheduled commissioning start date or the Acceptance Date, as may be extended by the parties. Under the terms of the Liquefaction Tolling Agreement, the
Hilli
will be required to make available 1.2 million tonnes of liquefaction capacity per annum, which capacity will be spread evenly over the course of the contract year. The Customer will pay
Hilli
a monthly tolling fee, which will fluctuate to a certain extent in relation to the price of Brent crude. We expect that under the Liquefaction Tolling Agreement, the Customer will have an option to increase liquefaction capacity. We expect that the Liquefaction Tolling Agreement will provide certain termination rights to the Customer and Hilli Corp. The Liquefaction Tolling Agreement will provide for the payment by Hilli Corp of penalties of up to $400 million in the event of Hilli Corp’s underperformance or non-performance. If the Customer elects to terminate the Liquefaction Tolling Agreement prior to the second anniversary of the Acceptance Date, the Customer will be obligated to pay Hilli Corp $400 million, with termination payments decreasing if the Liquefaction Tolling Agreement is terminated after the second anniversary.
Charter Amendments
In July 2017, we agreed with the charterer of the
Golar Freeze
FSRU, Dubai Supply Authority ("DUSUP") certain amendments to the existing time charter that was due to end in May 2020. We and DUSUP have agreed to shorten the charter by one year (so that it will now expire in 2019) and to remove DUSUP's termination for convenience rights and extension option rights (which ran to 2024). We have the right to terminate our obligations under the charter while continuing to receive the capital element of the charter hire until the end of the new charter period in April 2019.
Golar Spirit Early Termination
In July 2017, we received an early termination fee from Petrobas for the early termination of the Golar Spirit charter. The charter, which had an original end date of August 2018, was terminated on June 23, 2017. The amount received from Petrobras was net of withholding tax paid to the Brazilian tax authorities. The
Golar Spirit
is currently in lay-up. If we are unable to employ the
Golar Spirit
under a suitable replacement charter by the 90th day following the Early Termination Date, we will be required to provide additional security to the lenders under our $800 million credit facility in the form of $40 million in cash collateral.
Financing
On May 8, 2017, we drew down $125.0 million of the $150.0 million available revolving credit facility.
Cash Distributions
On May 12, 2017, we paid a quarterly cash distribution with respect to the quarter ended March 31, 2017 of $0.5775 per unit, amounting to $40.8 million in the aggregate. On August 14, 2017, we paid a quarterly cash distribution with respect to the quarter ended
June 30, 2017
of $0.5775 per unit, amounting to $40.8 million in the aggregate.
Results of Operations
Three Month Period Ended
June 30, 2017
Compared with the Three Month Period Ended
June 30, 2016
The following table presents details of our consolidated revenues and expense information for the three months ended
June 30, 2017
compared to the three months ended
June 30, 2016
:
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Three Months Ended June 30,
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(in thousands of $, except TCE)
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2017
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2016
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$ Change
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% Change
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Operating revenues
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135,969
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111,752
|
|
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24,217
|
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22
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%
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Vessel operating expenses
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(18,620
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)
|
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(16,878
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)
|
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(1,742
|
)
|
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10
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%
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Voyage and commission expenses
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(1,561
|
)
|
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(1,429
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)
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(132
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)
|
|
9
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%
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Administrative expenses
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(2,249
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)
|
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(1,700
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)
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(549
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)
|
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32
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%
|
Depreciation and amortization
|
(26,142
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)
|
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(24,869
|
)
|
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(1,273
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)
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5
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%
|
Interest income
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1,447
|
|
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603
|
|
|
844
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140
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%
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Interest expense
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(18,856
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)
|
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(19,915
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)
|
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1,059
|
|
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(5
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)%
|
Other financial items
|
(7,710
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)
|
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(10,233
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)
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2,523
|
|
|
(25
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)%
|
Income taxes
|
(4,652
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)
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(6,013
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)
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1,361
|
|
|
(23
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)%
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Net income
|
57,626
|
|
|
31,318
|
|
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26,308
|
|
|
84
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%
|
Non-controlling interest
|
(3,798
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)
|
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(3,336
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)
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(462
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)
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14
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%
|
|
|
|
|
|
|
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TCE
(1)
(to the closest $100)
|
147,700
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121,900
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25,800
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21
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%
|
__________________________________
(1)
TCE is a non-GAAP financial measure. See “Non-GAAP Measure” for a computation of TCE.
Operating revenues:
Total operating revenues increased by
$24.2 million
to
$136.0 million
for the three months ended
June 30, 2017
compared with
$111.8 million
for the same period in
2016
. This is primarily due to:
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•
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$1.3 million of incremental revenue from the
NR Satu
as a result of increased hire rates in the three months ended
June 30, 2017
;
|
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|
•
|
$0.5 million of additional revenue from the
Golar Winter
due to increased hire rates under the Petrobras charter; and
|
|
|
•
|
recognition of the charter termination fee (net of withholding tax) for the
Golar Spirit
in the three months ended
June 30, 2017
.
|
The average daily time charter equivalent rate (“TCE”), for the three months ended
June 30, 2017
increased by
$25,800
to
$147,700
compared to
$121,900
for the same period in 2016, primarily as a result of recognition of the charter termination fee for
Golar Spirit
and an increased hire rates from the
NR Satu
and the
Golar Winter
.
Vessel operating expenses:
The increase of
$1.7 million
in vessel operating expenses to
$18.6 million
for the three months ended
June 30, 2017
, as compared to
$16.9 million
for the three months ended June 30,
2016
was primarily due to:
|
|
•
|
$1.8 million increase in operating expense with respect to the
Golar Grand
in the three months ended June 30, 2017, as she was taken out of lay-up, completed her drydock and started her new charter in mid-April 2017; and
|
|
|
•
|
$1.1 million in additional repairs and maintenance costs incurred in respect of the
NR Satu
for the three months ended June 30, 2017.
|
This was partially offset by:
|
|
•
|
$1.2 million decrease in repairs and maintenance costs incurred by the
Golar Igloo
, the
Golar Winter
and the
Methane Princess
in the three months ended June 30, 2017.
|
Administrative expenses:
Administrative expenses increased by
$0.5 million
to
$2.2 million
for the three months ended
June 30, 2017
, compared to
$1.7 million
for the six months ended
June 30, 2016
.
We are party to a management and services agreement with Golar Management, a wholly owned subsidiary of Golar, under which Golar Management provides certain management and administrative services to us and is reimbursed for costs and expenses incurred in connection with these services at a cost plus 5% basis (the “Management and Administrative Services Agreement”). Under this arrangement, for the three months ended
June 30, 2017
, we incurred charges of $1.1 million. For the three months ended June 30, 2016, management fees charged by Golar Management to us in relation to management and administrative services and technical services were recorded under both administrative expenses and vessel operating expenses respectively. From the second half of 2016, as a result of Golar's in-housing of technical operations (as a result of Golar Management Norway becoming a 100% owned subsidiary of Golar), we have subsequently accounted for more of the management fees charged by Golar Management under administrative expenses.
Depreciation and amortization
:
Depreciation and amortization increased by
$1.3 million
to
$26.1 million
for the three months ended
June 30, 2017
, compared to
$24.9 million
for the same period in
2016
. This was primarily due to $1.1 million of incremental drydock amortization on the
Golar Winter
following the decision to accelerate her planned drydocking from 2018 to the second half of 2017.
Interest expense:
Interest expense decreased by
$1.1 million
to
$18.9 million
for the three months ended
June 30, 2017
, compared to
$19.9 million
for the three months ended
June 30, 2016
. This was principally due to:
|
|
•
|
the reduction in the amortization of deferred financing costs by $3.8 million, resulting from the write-off of deferred financing costs following the refinancing of our credit facilities secured by seven of our vessels in May 2016. There was no such write off in the three months ended June 30, 2017.
|
This was partially offset by:
|
|
•
|
$2.0 million in additional interest relating to our issuance of $250 million of senior unsecured non-amortizing 2017 Norwegian Bonds in February 2017 to replace our 2012 High Yield Bonds maturing in October 2017. As of June 30, 2017, we had repurchased 77% of our 2012 High Yield Bonds; and
|
|
|
•
|
$0.9 million of incremental costs arising from our $800 million credit facility entered into in April 2016, which is larger and on average accrues interest at a margin higher than the facilities it replaced.
|
Other financial items:
Other financial items reflect losses of
$7.7 million
and
$10.2 million
for the three months ended
June 30, 2017
and
2016
, respectively, as set forth in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
June 30,
|
|
|
|
|
(in thousands of $)
|
2017
|
|
2016
|
|
$ Change
|
|
% Change
|
Unrealized mark-to-market losses for interest rate swaps
|
(4,076
|
)
|
|
(7,142
|
)
|
|
3,066
|
|
|
(43
|
)%
|
Interest expense on un-designated interest rate swaps
|
(2,169
|
)
|
|
(2,728
|
)
|
|
559
|
|
|
(20
|
)%
|
Unrealized mark-to-market gain on Earn Out units
|
500
|
|
|
—
|
|
|
500
|
|
|
100
|
%
|
Gains on repurchase of 2012 High-Yield Bonds and related cross currency interest rate swap
|
20
|
|
|
—
|
|
|
20
|
|
|
100
|
%
|
Premium on repurchase of 2012 High-Yield Bonds
|
(76
|
)
|
|
—
|
|
|
(76
|
)
|
|
100
|
%
|
Unrealized foreign exchange losses on 2012 High-Yield Bonds
|
(1,052
|
)
|
|
—
|
|
|
(1,052
|
)
|
|
100
|
%
|
Other
|
(857
|
)
|
|
(363
|
)
|
|
(494
|
)
|
|
136
|
%
|
Other financial items, net
|
(7,710
|
)
|
|
(10,233
|
)
|
|
2,523
|
|
|
(25
|
)%
|
As of
June 30, 2017
, we had an interest rate swaps portfolio with a notional value of
$1,358.5 million
(excluding the cross-currency interest rate swap related to our Norwegian Kroner (“NOK”) denominated bonds). The decrease in mark-to-market losses by $3.1 million was due to the increase in long-term swap rates during the three months ended
June 30, 2017
. We designated
6%
of these swaps as hedging instruments.
In 2012, in connection with issuance of our 2012 High Yield Bonds, to hedge our exposure, we entered into a cross currency interest rate swap with a notional value of $227.2 million (NOK 1.3 billion). This was initially designated as a cash flow hedge and accordingly the related retranslation gains and losses were previously accounted for within other comprehensive income. During 2017, we commenced the repurchase of 2012 High Yield Bonds in advance of their maturity. The majority were acquired in the first quarter of 2017 with smaller piecemeal acquisitions thereafter. Accordingly, effective January 1, 2017, this swap was de-designated as a cash flow hedge. As a consequence of cessation of hedge accounting on the swap in 2017, we have recognized an unrealized foreign exchange loss of
$1.1 million
for the three months ended June 30, 2017, which relates to the remaining 2012 High Yield Bonds.
As part of the transaction with Golar and our general partner in October 2016 pursuant to which we exchanged our old incentive distribution rights (“IDRs”) for new IDRs and the issuance of new general partner units and common units, we agreed to issue an aggregate of up to 748,592 additional common units and up to 15,278 additional general partner units in the future (collectively, the "Earn-Out Units") subject to certain conditions. These Earn Out units have been accounted for as a derivative. Accordingly, we have recognized a mark-to-market gain of $0.5 million related to these Earn-Out Units for the three months ended June 30, 2017.
Income taxes:
The tax charge for the three months ended
June 30, 2017
included (i) corporate income taxes in respect of our operations in the United Kingdom, Brazil and Kuwait; (ii) withholding taxes and interest and penalties primarily on withholding taxes in respect of our operations in Indonesia; and (iii) utilization of losses against our taxable profits in Indonesia and Jordan. We do not currently incur any corporate income tax in respect of our operations in Indonesia and Jordan given the availability of brought forward tax losses which can be utilized against taxable profits.
Taxes during the three months ended
June 30, 2017
decreased by $1.3 million to
$4.7 million
compared to
$6.0 million
in the same period in
2016
. The decrease was mainly attributable to withholding taxes and interest and penalties primarily on withholding taxes in respect of our Indonesian operations in 2016. In 2016, the tax audits for our Indonesian operations for the years 2012 and 2013 were re-opened and concluded by the local tax authorities. The conclusion of the tax audits resulted in recognition of a provision of $2.3 million to cover penalties and interest on certain taxes for the periods 2012 to June 30, 2016. See note 7 to our unaudited condensed consolidated financial statements.
Non-controlling interest:
Non-controlling interest refers to our 40% interest in the
Golar Mazo
. In addition, since our entry into a sale and leaseback arrangement with a wholly-owned subsidiary (“Eskimo SPV”) of China Merchants Bank Leasing (“CMBL”) in November 2015 relating to the
Golar Eskimo
, we have consolidated the Eskimo SPV into our results. Thus, the equity attributable to CMBL is included in our non-controlling interest.
Six Month Period Ended
June 30, 2017
Compared with the Six Month Period Ended
June 30, 2016
The following table presents details of our consolidated revenues and expense information for the six months ended
June 30, 2017
compared to the six months ended
June 30, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
(in thousands of $, except TCE)
|
2017
|
|
2016
|
|
$ Change
|
|
% Change
|
Operating revenues
|
237,354
|
|
|
212,817
|
|
|
24,537
|
|
|
12
|
%
|
Vessel operating expenses
|
(35,696
|
)
|
|
(33,066
|
)
|
|
(2,630
|
)
|
|
8
|
%
|
Voyage and commission expenses
|
(3,622
|
)
|
|
(3,248
|
)
|
|
(374
|
)
|
|
12
|
%
|
Administrative expenses
|
(4,820
|
)
|
|
(3,627
|
)
|
|
(1,193
|
)
|
|
33
|
%
|
Depreciation and amortization
|
(50,898
|
)
|
|
(49,908
|
)
|
|
(990
|
)
|
|
2
|
%
|
Interest income
|
2,620
|
|
|
2,127
|
|
|
493
|
|
|
23
|
%
|
Interest expense
|
(37,103
|
)
|
|
(33,611
|
)
|
|
(3,492
|
)
|
|
10
|
%
|
Other financial items
|
(14,613
|
)
|
|
(30,941
|
)
|
|
16,328
|
|
|
(53
|
)%
|
Income taxes
|
(8,143
|
)
|
|
(9,463
|
)
|
|
1,320
|
|
|
(14
|
)%
|
Net income
|
85,079
|
|
|
51,080
|
|
|
33,999
|
|
|
67
|
%
|
Non-controlling interest
|
(7,697
|
)
|
|
(6,347
|
)
|
|
(1,350
|
)
|
|
21
|
%
|
TCE
(1)
(to the nearest $100)
|
135,300
|
|
|
116,800
|
|
|
18,500
|
|
|
16
|
%
|
______________________________________
(1) TCE is a non-GAAP financial measure. See “Non-GAAP Measure” for a computation of TCE.
Operating revenues:
Total operating revenues increased by
$24.5 million
to
$237.4 million
for the six months ended
June 30, 2017
, compared to
$212.8 million
for the same period in
2016
. This is due to:
|
|
•
|
$2.0 million incremental revenue from the
Golar Maria
which represents six months of revenues in 2017 compared to approximately five months in the same period in 2016 following her scheduled drydocking;
|
|
|
•
|
$2.3 million of incremental revenue from the
NR Satu
as a result of increased hire rates in the six months ended
June 30, 2017
;
|
|
|
•
|
$1.2 million of additional revenue from the
Golar Winter
and the
Golar Spirit
due to increased hire rates under the Petrobras charters; and
|
|
|
•
|
recognition of the charter termination fee (net of withholding tax) for the
Golar Spirit
in the six months ended
June 30, 2017
|
This was partially offset by:
|
|
•
|
a $4.0 million reduction in revenue from the
Golar Grand
resulting from her scheduled drydocking from February to April 2017.
|
The increase of
$18,500
in the average daily TCE for the six months ended
June 30, 2017
to
$135,300
compared to
$116,800
for the same period in
2016
, is primarily a result of recognition of the charter termination fee for
Golar Spirit
and an increased hire rates for the
NR Satu
,
Golar Winter and Golar Spirit
. In addition, the
Golar Maria
operated for a full six months in 2017 compared to approximately five months in the same period in 2016 as result of her scheduled drydocking.
Vessel operating expenses:
The increase of
$2.6 million
in vessel operating expenses to
$35.7 million
for the six months ended
June 30, 2017
as compared to
$33.1 million
for the six months ended
June 30, 2016
, was due mainly to:
|
|
•
|
$2.5 million increase in operating expense with respect to the
Golar Grand
in the six months ended June 30, 2017, as she was taken out of lay-up in mid-February 2017, completed her drydock and started her new charter in mid-April 2017; and
|
|
|
•
|
$1.8 million of incremental repairs and maintenance costs incurred in connection with the scheduled maintenance of the
NR Satu
in the six months ended June 30, 2017.
|
This was partially offset by a $1.9 million decrease in vessel operating costs in the six months ended June 30, 2017 from the
Golar Freeze
, the
Golar Spirit
and the
Golar Winter
due to lower repairs and maintenance.
Administrative expenses:
Administrative expenses increased by
$1.2 million
to
$4.8 million
for the six months ended
June 30, 2017
, compared to
$3.6 million
for the six months ended
June 30, 2016
.
Under the Management and Administrative Services Agreement, we incurred charges of $2.6 million for the six months ended
June 30, 2017
. For the six months ended June 30, 2016, management fees charged by Golar Management to us in relation to management and administrative services and technical services were recorded under both administrative expenses and vessel operating expenses respectively. From the second half of 2016, as a result of Golar's in-housing of technical operations, we have subsequently accounted for more of the management fees charged by Golar Management under administrative expenses.
Depreciation and amortization
:
Depreciation and amortization increased by
$1.0 million
to
$50.9 million
for the six months ended
June 30, 2017
compared to
$49.9 million
for the same period in
2016
primarily due to $1.0 million of incremental drydock amortization on the
Golar Winter
following the decision to accelerate her planned drydocking from 2018 to the second half of 2017.
Interest expense:
Interest expense increased by
$3.5 million
to
$37.1 million
for the six months ended
June 30, 2017
, compared to
$33.6 million
for the six months ended
June 30, 2016
. This was principally due to:
|
|
•
|
$2.1 million incremental cost arising from our $800 million credit facility entered into in May 2016, which is larger and on average accrues interest at a margin higher than the facilities it replaced;
|
|
|
•
|
$3.4 million in additional interest relating to our issuance of $250 million of senior unsecured non-amortizing 2017 Norwegian Bonds in February 2017 to replace our 2012 High Yield Bonds maturing in October 2017. As of June 30, 2017, we had repurchased 77% of our 2012 High Yield Bonds; and
|
|
|
•
|
$1.7 million increase in interest expense arising on the Methane Princess lease for the six months ended June 30, 2017 compared to the same period in 2016. This was due to the effect of a reduction in corporation tax rates recognized in the prior year.
|
This was partially offset by:
|
|
•
|
the reduction in the amortization of deferred financing costs by $3.3 million, resulting from the write-off of deferred financing costs following the refinancing of our credit facilities secured by seven of our vessels in May 2016.
|
Other financial items:
Other financial items reflect losses of
$14.6 million
and
$30.9 million
for the six months ended
June 30, 2017
and
2016
, respectively, as set forth in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30,
|
|
|
|
|
(in thousands of $)
|
2017
|
|
2016
|
|
$ Change
|
|
% Change
|
Unrealized mark-to-market (losses) gains for interest rate swaps
|
(1,426
|
)
|
|
(24,377
|
)
|
|
22,951
|
|
|
(94
|
)%
|
Interest expense on un-designated interest rate swaps
|
(4,447
|
)
|
|
(5,330
|
)
|
|
883
|
|
|
(17
|
)%
|
Unrealized mark-to-market gain on Earn Out units
|
500
|
|
|
—
|
|
|
500
|
|
|
—
|
%
|
Losses on repurchase of 2012 High-Yield Bonds and related cross currency interest rate swap
|
(3,753
|
)
|
|
—
|
|
|
(3,753
|
)
|
|
—
|
%
|
Premium on repurchase of 2012 High-Yield Bonds
|
(2,820
|
)
|
|
—
|
|
|
(2,820
|
)
|
|
—
|
%
|
Unrealized foreign exchange losses on 2012 High-Yield Bonds
|
(1,238
|
)
|
|
—
|
|
|
(1,238
|
)
|
|
—
|
%
|
Other
|
(1,429
|
)
|
|
(1,234
|
)
|
|
(195
|
)
|
|
16
|
%
|
Other financial items, net
|
(14,613
|
)
|
|
(30,941
|
)
|
|
16,328
|
|
|
(53
|
)%
|
As of
June 30, 2017
, we had an interest rate swaps portfolio with a notional value of
$1,358.5 million
(excluding the cross-currency interest rate swap related to our NOK denominated bonds). The decrease in mark-to-market losses by
$23.0 million
was due to the increase in long-term swap rates during the six months ended
June 30, 2017
. We designated
6%
of these swaps as hedging instruments.
For the six months ended June 30, 2017, we have recognized an expense of $3.8 million on repurchase of the 2012 High Yield Bonds and the related swap, which includes the recycling to the income statement of $5.0 million accumulated market-to-market losses previously recorded within accumulated other comprehensive income. In addition, we have also recognized a further
$2.8 million
expense representing the premium paid on repurchase of these bonds. As a consequence of cessation of hedge accounting on the swap, we have recognized an unrealized foreign exchange loss of $1.2 million for the six months ended June 30, 2017 relating to the remaining 2012 High Yield Bonds.
For the six months ended June 30, 2017, we have recognized a mark-to-market gain of $0.5 million related to the Earn-Out Units.
Income taxes:
The tax charge for the six months ended
June 30, 2017
included: (i) corporate income taxes in respect of our operations in the United Kingdom, Brazil and Kuwait; (ii) withholding taxes and interest and penalties primarily on withholding taxes in respect of our operations in Indonesia; and (iii) utilization of losses against our taxable profits in Indonesia and Jordan. We do not currently incur any corporate income tax in respect of our operations in Indonesia and Jordan given the availability of brought forward tax losses which can be utilized against taxable profits.
Taxes during the six months ended
June 30, 2017
decreased by $1.4 million to
$8.1 million
compared to $
9.5 million
in the same period in
2016
. The decrease was mainly attributable to withholding taxes and interest and penalties primarily on withholding taxes in respect of our Indonesian operations in 2016. See note 7 to our unaudited condensed consolidated financial statements.
Non-controlling interest:
Non-controlling interest refers to our 40% interest in the
Golar Mazo
, and the equity attributable to CMBL relating to the Eskimo SPV is included in our non-controlling interest.
Liquidity and Capital Resources
Liquidity
and Cash Needs
We operate in a capital-intensive industry and we expect to finance the purchase of additional vessels and other capital expenditures through a combination of borrowings from, and leasing arrangements with, commercial banks, cash generated from operations and debt and equity financings. In addition to paying distributions, our other short-term liquidity requirements relate to servicing interest on our debt, scheduled repayments of long-term debt, funding working capital requirements, including drydocking, and maintaining cash reserves against fluctuations in operating cash flows.
Our funding and treasury activities are intended to maximize investment returns while maintaining appropriate liquidity. Cash and cash equivalents are held primarily in U.S. Dollars with some balances held in other currencies. We have not used derivative instruments other than for interest rate and currency risk management purposes.
Short-Term Liquidity and Cash Requirements
Sources of short-term liquidity include cash balances, restricted cash balances, short-term investments, available amounts under revolving credit facilities and receipts from our charters. Revenues from the majority of our time charters are received monthly in advance. In addition we benefit from low inventory requirements (consisting primarily of fuel, lubricating oil and spare parts) due to fuel costs, which represent the majority of these costs being paid for by the charterer under time charters.
As of
June 30, 2017
, our cash and cash equivalents, including restricted cash was $439.5 million, and we had access to undrawn borrowing facilities of $25.0 million. The majority of our restricted cash balances (excluding $7.7 million in performance bonds relating to certain of our charters) contribute to our short and medium term liquidity as they are used to fund payment of certain debts, swaps and capital leases which would otherwise be paid out of our unrestricted cash balances. Since
June 30, 2017
, significant transactions impacting our cash flows include:
|
|
•
|
payment of $70 million deposit to Golar upon entry into a PSA for the acquisition of equity interests in Hilli LLC, which will, on the closing date of the Acquisition, indirectly own the FLNG, the
Hilli.
|
|
|
•
|
payment of a cash distribution of $0.5775 per unit ($40.8 million in aggregate) with respect to the quarter ended
June 30, 2017
, in August 2017;
|
|
|
•
|
scheduled loan principal repayments amounting to $20.7 million;
|
|
|
•
|
receipt of termination fee (net of withholding tax) for the
Golar Spirit
from Petrobras;
|
|
|
•
|
receipt of $3.2 million for overpayments of Brazilian withholding tax from prior years; and
|
Following the termination of its charter, the
Golar Spirit
was placed under temporary lay-up and if we are unable to enter into a suitable replacement charter by the 90th day following the early charter termination date of June 23, 2017, we will be required to provide additional security to the lenders under our $800 million credit facility in the form of $40 million in cash collateral.
As of
June 30, 2017
, our current assets exceeded current liabilities by $161.4 million.
We expect that the cash to be generated from our operations (assuming the current rates earned from existing charters continue until charter termination or expiration, where applicable) will be sufficient to cover our operational cash outflows and our ongoing obligations under our financing commitments to pay loan interest, make scheduled loan repayments and make cash distributions.
We believe our current resources, including our undrawn revolving credit facility totaling $25.0 million as of August 31, 2017, are sufficient to meet our working capital requirements for our current business for at least the next twelve months.
Cash Flows
The following table summarizes our net cash flows from operating, investing and financing activities for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
June 30,
|
|
|
|
|
(in thousands of $)
|
2017
|
|
|
2016
|
|
|
$ Change
|
|
|
% Change
|
|
Net cash provided by operating activities
|
162,998
|
|
|
122,181
|
|
|
40,817
|
|
|
33
|
%
|
Net cash used in investing activities
|
—
|
|
|
(107,247
|
)
|
|
107,247
|
|
|
(100
|
)%
|
Net cash provided by financing activities
|
72,778
|
|
|
5,576
|
|
|
67,202
|
|
|
1,205
|
%
|
Net increase in cash and cash equivalents
|
235,776
|
|
|
20,510
|
|
|
215,266
|
|
|
1,050
|
%
|
Cash and cash equivalents at beginning of period
|
65,710
|
|
|
40,686
|
|
|
25,024
|
|
|
62
|
%
|
Cash and cash equivalents at end of period
|
301,486
|
|
|
61,196
|
|
|
240,290
|
|
|
393
|
%
|
In addition to our cash and cash equivalents noted above, as of June 30, 2017, we had restricted cash of $138.1 million. This consisted principally of (i) $126.0 million representing balances retained on restricted accounts in accordance with certain lease and loan requirements (these balances act as security for our obligations and, in the case of restricted cash relating to our lease obligation, is used to repay the obligation); (ii) $4.4 million in relation to cash collateral in respect of our cross-currency interest rate swap entered into in connection with the NOK denominated High-Yield Bonds, the collateral requirements of which are dependent upon the mark to market valuation of the swap; and (iii) the balance which relates mainly to collateral deposits relating to performance guarantees issued to charterers.
Net Cash Provided by Operating Activities
Net cash provided by operations increased by
$40.8 million
to $
163.0 million
for the six months ended
June 30, 2017
compared to
$122.2 million
for the same period in
2016
. The increase was primarily due to an improvement in the general timing of working capital in the six months ended June 30, 2017, compared to the same period in 2016. This includes an increase in cash inflows from trade receivables and related parties, partly offset by an increase in cash payments for drydocking expenditures.
Net Cash Used in Investing Activities
Net cash used in investing activities of $
107.2 million
for the six months ended
June 30, 2016
was due to the payment of
$107.2 million
of cash consideration in connection with the acquisition of the
Golar Tundra
in May 2016.
Net Cash Provided by Financing Activities
Net cash provided by financing activities is principally generated from funds from equity offerings, new debt and lease financings and contributions from owners, offset by debt and lease repayments.
Net cash provided by financing activities during the six months ended
June 30, 2017
of $
72.8 million
was primarily due to the following:
|
|
•
|
$250.0 million of proceeds from the issuance of the 2017 Norwegian Bonds, $180.2 million of which was used to repurchase a portion of the 2012 High-Yield Bonds and terminate the corresponding share of the related cross currency interest rate swap;
|
|
|
•
|
the receipt of $125.0 million from drawdown of our long term revolver facilities;
|
|
|
•
|
$119.4 million of proceeds from equity issuances in February 2017; and
|
|
|
•
|
a $28.4 million reduction in our restricted cash balances as a result of the partial termination of our cross currency interest rate swap in the six months ended June 30, 2017.
|
This was partially offset by:
|
|
•
|
$178.7 million repayment of long-term debt and lease obligations;
|
|
|
•
|
$85.6 million of cash distributions, $7.0 million of which were distributions to non-controlling interests; and
|
|
|
•
|
$5.3 million of financing and debt settlement costs paid.
|
Net cash provided by financing activities during the six months ended
June 30, 2016
of
$5.6 million
was primarily due to the following:
|
|
•
|
the receipt of aggregate proceeds of $815.0 million from our existing debt or debt refinancings, comprising (i) $40.0 million drawdown of our long-term revolving credit facilities; and (ii) $775.0 million proceeds from the new $800 million credit facility; and
|
|
|
•
|
a $7.6 million net reduction in restricted cash due to a decrease in the cash balances held by Eskimo SPV (see note 3 to our unaudited condensed consolidated financial statements) and the cash collateral deposits in respect of our cross-currency swap.
|
This was partially offset by:
|
|
•
|
the repayment of long-term debt and lease obligations of $720.7 million. Of this amount, $681.4 million relates to repayment of the Maria and Freeze Facility, the Golar LNG Partners Credit Facility, the Golar Partners Operating Credit Facility and the Golar Igloo Debt in connection with their refinancing in May 2016 to the new $800.0 million credit facility;
|
|
|
•
|
the payment of cash distributions during the period of $82.4 million ($6.0 million of which consisted of distributions to non-controlling interests); and
|
|
|
•
|
financing and debt settlement costs paid of $13.5 million in connection with the new $800.0 million credit facility in May 2016.
|
Borrowing Activities
Long-Term Debt.
As of
June 30, 2017
and
December 31, 2016
, our long-term debt, net of deferred finance charges consisted of the following:
|
|
|
|
|
|
|
(in thousands of $)
|
June 30,
2017
|
|
December 31,
2016
|
|
|
|
|
$800 million Credit Facility
|
706,333
|
|
|
740,667
|
|
2017 Norwegian Bonds
|
250,000
|
|
|
—
|
|
2015 Norwegian Bonds
|
150,000
|
|
|
150,000
|
|
NR Satu Facility
|
110,650
|
|
|
117,800
|
|
2012 High-Yield Bonds
|
36,422
|
|
|
150,452
|
|
Eskimo SPV Debt
|
220,728
|
|
|
232,931
|
|
Total debt
|
1,474,133
|
|
|
1,391,850
|
|
Less: Deferred financing costs, net
|
(19,277
|
)
|
|
(17,140
|
)
|
Total debt net of deferred financing costs
|
1,454,856
|
|
|
1,374,710
|
|
Our outstanding debt of
$1,474.1 million
as of
June 30, 2017
, is repayable as follows:
|
|
|
|
Period ending December 31,
(in thousands of $)
|
|
2017 (six months ending December 31)
|
77,906
|
|
2018
|
122,317
|
|
2019
|
135,183
|
|
2020
|
202,000
|
|
2021
|
716,000
|
|
2022 and thereafter
|
220,727
|
|
Total
|
1,474,133
|
|
As of
June 30, 2017
and
December 31, 2016
, the margins we paid under our bank loan agreements were LIBOR plus a fixed or floating rate ranging from 2.12% to 3.50%. The margin related to our High-Yield Bonds is 5.20% above the Norwegian Interbank Offered Rate (NIBOR). The margin related to our U.S. dollar denominated 2015 Norwegian Bonds and 2017 Norwegian Bonds are 4.4% and 6.25% above LIBOR, respectively.
The significant developments relating to our debt in the period after
December 31, 2016
are set forth below.
On February 15, 2017, we completed the issuance and sale of $250.0 million aggregate principal amount of our 2017 Norwegian Bonds which will mature in May 2021 and bear interest at a rate of 3-month LIBOR plus 6.25%. In connection with the issuance of the 2017 Norwegian Bonds, we entered into economic hedge interest rate swaps to reduce the risk associated with fluctuations in interest rates by converting the floating rate of the interest obligation under the 2017 Norwegian Bonds to an all-in interest rate of 8.194%. The 2017 Norwegian Bonds were listed on the Oslo Bors on July 17, 2017. The net proceeds from our sale of 2017 Norwegian Bonds have been and will be used to repay the outstanding 2012 High Yield Bonds and for general partnership purposes. As of June 30, 2017, a total nominal amount of NOK 996 million (or $118.2 million), or 77%, of the 2012 High-Yield Bonds had been repurchased ahead of their October 2017 maturity, and the corresponding share of its associated cross currency interest rate swap had been terminated.
Capital Lease Obligations.
As of
June 30, 2017
, we are committed to make minimum rental payments under our remaining capital lease, as follows:
|
|
|
|
Period ended December 31,
(in thousands of $)
|
Methane
Princess
Lease
|
|
2017 (six months ending December 31)
|
3,669
|
|
2018
|
7,608
|
|
2019
|
7,905
|
|
2020
|
8,207
|
|
2021
|
8,526
|
|
2022 and thereafter
|
170,574
|
|
Total minimum lease payments
|
206,489
|
|
Less: Imputed interest
|
(82,555
|
)
|
Present value of minimum lease payments
|
123,934
|
|
Methane Princess Lease.
In August 2003, Golar entered into a lease arrangement (or the Methane Princess lease) with a UK bank (or the Methane Princess lessor). Our obligation to the Methane Princess lessor is primarily secured by a letter of credit, which is itself secured by a cash deposit which since June 2008 has been placed with the Methane Princess Lessor. The value of the restricted cash deposit used to obtain a letter of credit to secure the lease obligation as of
June 30, 2017
, was $115.7 million.
In the event of any adverse tax changes to legislation affecting the tax treatment of the lease for the Methane Princess lessor or a successful challenge by the UK Revenue authorities to the tax assumptions on which the transactions were based, or in the event that we terminate the Methane Princess lease before its expiration, we would be required to return all or a portion of, or in certain circumstances significantly more than, the upfront cash benefits that we have received or that have accrued over time, together with the fees that were financed in connection with our lease financing transaction, post additional security or make additional payments to our lessor which would increase the obligations noted above. The Methane Princess Lessor has a second priority security interest in the
Methane Princess
, the
Golar Spirit
and the
Golar Grand
to secure these potential obligations. Golar has agreed to indemnify us against any of these increased costs and obligations. Refer to note 11 to our unaudited condensed consolidated financial statements included herein.
Debt and Lease Restrictions
Our existing financing agreements (debt and lease) impose certain operating and financing restrictions on us and our subsidiaries that are described above and in our
2016
Annual Report.
As of
June 30, 2017
, we were in compliance with all covenants of our various debt and lease agreements.
Capital Commitments
Possible Acquisitions of Other Vessels
Pursuant to our omnibus agreements with Golar and Golar Power, we will have the opportunity to purchase additional LNG carriers and FSRUs from Golar or Golar Power when those vessels are fixed under charters of five or more years. Subject to the terms of our loan agreements, we could elect to fund any future acquisitions with equity or debt or cash on hand or a combination of these forms of consideration. Any debt incurred for this purpose could make us more leveraged and subject us to additional operational or financial covenants.
On August 15, 2017, we entered into a PSA for the acquisition of equity interests in Hilli LLC, which will, on the closing date of the Acquisition, indirectly own the FLNG, the
Hilli
. The Acquired Interests represent the equivalent of 50% of the two liquefaction trains, out of a total of four, that have been contracted to the Customer for an eight-year term. The purchase price for the Acquired Interests, as described below, is $658 million less net lease obligations under the financing facility for the
Hilli
(the "Hilli Facility") that are expected to be between $468 and $480 million. Concurrently with the execution of the PSA, we paid a $70 million deposit to Golar, upon which we will receive interest at a rate of 5% per annum.
Upon the Closing, which is expected to occur on or before April 30, 2018, Golar, Keppel and B&V will sell 50% of the Common Units to us in return for our payment of the net purchase price of between approximately $178 and $190 million. We will apply
the $107 million deferred purchase price receivable from Golar in connection with the Tundra Put Sale and the $70 million deposit referred to above against the net purchase price and expect to pay the balance with cash on hand.
Drydockings
From now until December 31, 2020, seven of the vessels in our current fleet will undergo their scheduled drydockings. We estimate that we will spend in total approximately $51.1 million for drydocking and classification surveys on these vessels with approximately $14.6 million expected to be incurred in 2017, $15.5 million in 2018, $13.0 million in 2019 and $8.0 million in 2020. We reserve a portion of cash generated from our operations to meet the costs of future drydockings. As our fleet matures and expands, our drydocking expenses will likely increase. Ongoing costs for compliance with environmental regulations are primarily included as part of our drydocking and society classification survey costs or are a component of our operating expenses.
Ballast Water Management Convention
The International Maritime Organization (IMO) adopted an International Convention for the Control and Management of Ships’ Ballast Water and Sediments (or the BWM Convention) in February 2004. Beginning in September 2017, ballast water treatment is required by the BWM Convention. Installation of ballast water treatment systems will be needed on all our LNG carriers. As long as our FSRUs are operating as FSRUs and kept stationary, they will not need installation of ballast water treatment systems. However, under its time charter, the
Golar Winter
may be required to trade as LNG carrier. If the vessel charterer should choose to trade the
Golar Winter
internationally as an LNG carrier, the vessel will have to be equipped with ballast water treatment system and the cost of the related modifications will be split between the charterer and owner. Ballast water treatment technologies are now becoming more mature, although the various technologies are still developing. Initial estimates of the additional costs of complying with these rules are within the range of $1.5 million and $2.0 million per vessel.
Critical Accounting Policies
The preparation of our condensed consolidated interim financial statements in accordance with U.S. GAAP requires that management make estimates and assumptions affecting the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. For a description of our material accounting policies that involve a higher degree of judgment, please refer to note 2 (Significant Accounting Policies) to our consolidated financial statements included in our
2016
Annual Report.
Contractual Obligations
The following table sets forth our contractual obligations for the periods indicated as of
June 30, 2017
(in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of $)
|
Total
Obligation
|
|
Due in the
remainder of
2017
|
|
Due in
2018-2019
|
|
Due in
2020-2021
|
|
Due
Thereafter
|
Long-term debt
(1)
|
1,474.1
|
|
|
77.9
|
|
|
257.5
|
|
|
918.0
|
|
|
220.7
|
|
Interest commitments on long-term debt - floating and other interest rate swaps
(2)
|
285.0
|
|
|
37.8
|
|
|
133.4
|
|
|
80.9
|
|
|
32.9
|
|
Capital lease obligations
|
123.9
|
|
|
0.5
|
|
|
2.8
|
|
|
4.4
|
|
|
116.2
|
|
Interest commitments on capital lease obligations
(2)(3)
|
82.6
|
|
|
3.2
|
|
|
12.7
|
|
|
12.4
|
|
|
54.3
|
|
Total
|
1,965.6
|
|
|
119.4
|
|
|
406.4
|
|
|
1,015.7
|
|
|
424.1
|
|
(1) Amounts shown gross of deferred financing costs of
$19.3 million
.
(2) Our interest commitment on our long-term debt is calculated based on an assumed average USD LIBOR of 2.06% and taking into account our various margin rates and interest rate swaps associated with each debt. Our interest commitment on our capital lease obligation is calculated on an assumed all in interest rate of 5.2%.
(3) In the event of any adverse tax rate changes or rulings, our lease obligation could increase significantly. However, Golar has agreed to indemnify us against any such increase.
Off-Balance Sheet Arrangements
Refer to note 3 of our unaudited condensed consolidated financial statements for discussion on Tundra Corp. On May 30, 2017, we exercised the Tundra Put Option to require Golar to repurchase Tundra Corp in the Tundra Put Sale. The closing of the Tundra Put Sale is expected to occur by September 30, 2017. Subsequent to the closing, we will no longer be liable for charter hire payments due under the sale and leaseback financing arrangement in respect of the
Golar Tundra
.
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to various market risks, including interest rate and foreign currency exchange risks. We enter into a variety of derivative instruments and contracts to maintain the desired level of exposure arising from these risks.
Our policy is to hedge our exposure to risks, where possible, within boundaries deemed appropriate by management.
A discussion of our accounting policies for derivative financial instruments is included in note 2 — Significant Accounting Policies to our audited consolidated financial statements included in our
2016
Annual Report. Further information on our exposure to market risk is included in note 24 — Financial Instruments to our audited consolidated financial statements included in our
2016
Annual Report.
The following analyses provide quantitative information regarding our exposure to foreign currency exchange rate risk and interest rate risk. There are certain shortcomings inherent in the sensitivity analyses presented, primarily due to the assumption that exchange rates change in a parallel fashion and that interest rates change instantaneously.
Interest rate risk.
A significant portion of our long-term debt and capital lease obligations is subject to adverse movements in interest rates. Our interest rate risk management policy permits economic hedge relationships in order to reduce the risk associated with adverse fluctuations in interest rates. We use interest rate swaps and fixed rate debt to manage the exposure to adverse movements in interest rates. Interest rate swaps are used to convert floating rate debt obligations to a fixed rate in order to achieve an overall desired position of fixed and floating rate debt. Credit exposures are monitored on a counterparty basis, with all new transactions subject to senior management approval.
Assuming a 1% increase in the interest rate (including the effect of interest rates under the related interest rate swap agreements) as applied against our floating rate debt balance as of
June 30, 2017
, this would increase our interest expense by $0.9 million per annum. We have calculated our floating rate debt as the principal outstanding on our long-term bank debt and net capital lease obligations (net of related restricted cash balances). For disclosure of the fair value of the derivatives and debt obligations outstanding as of
June 30, 2017
, please read note 9 to the condensed consolidated interim financial statements for the period ended
June 30, 2017
.
Foreign currency risk.
We have transactions, assets and liabilities which are denominated in currencies other than U.S. Dollars, such as Pound Sterling, in relation to our capital leases and the administrative expenses we will be charged by Golar Management in the UK; operating expenses incurred in a variety of foreign currencies and Brazilian Real in respect of our Brazilian subsidiary which receives income and pays expenses in Brazilian Real. Based on our Pound Sterling expenses for the six months ended
June 30, 2017
, a 10% depreciation of the U.S. Dollar against Pound Sterling would have increased our expenses by approximately $0.2 million for the six months ended
June 30, 2017
. Based on our Brazilian Real revenues and expenses for the six months ended
June 30, 2017
, a 10% depreciation of the U.S. Dollar against the Brazilian Real would have increased our net revenue and expenses for the six months ended
June 30, 2017
by approximately $0.4 million.
We are exposed to some extent in respect of the lease transaction entered into with respect to the
Methane Princess
, which is denominated in Pound Sterling, although it is hedged by the Pound Sterling cash deposit that secures the obligations under the lease. We use cash from the deposits to make payments in respect of the lease transaction entered into with respect to the
Methane Princess
. Gains or losses that we incur are unrealized unless we choose or are required to withdraw monies from or pay additional monies into the deposit securing this obligation. Among other things, movements in interest rates give rise to a requirement for us to adjust the amount of the Pound Sterling cash deposit. Based on this lease obligation and the related cash deposit as of
June 30, 2017
, a 10% appreciation in the U.S. Dollar against Pound Sterling would give rise to a net foreign exchange gain of approximately $0.8 million.
The base currency of the majority of our seafaring officers’ remuneration is the Euro, Brazilian Real or Indonesian Rupiah. Based on the crew costs for the six months ended
June 30, 2017
, a 10% depreciation of the U.S. Dollar against the Euro, the Brazilian Real and the Indonesian Rupiah would have increased our crew costs by approximately $1.1 million for the six months ended
June 30, 2017
.
NON-GAAP measure
Time Charter Equivalent
The TCE rate of our fleet is a measure of the average daily revenue performance of a vessel. For time charters, this is calculated by dividing total operating revenues (including termination fees), less any voyage expenses, by the number of calendar days minus days for scheduled off-hire. Under a time charter, the charterer pays substantially all of the vessel voyage related expenses. However, we may incur voyage related expenses when positioning or repositioning vessels before or after the period of a time charter, during periods of commercial waiting time or while off-hire during drydocking. TCE rate is a standard shipping industry performance measure used primarily to compare period-to-period changes in an entity’s performance despite changes in the mix of charter types (i.e. spot charters, time charters and voyage charters) under which the vessels may be employed between the periods. We include average daily TCE, a non-GAAP measure, as we believe it provides additional meaningful information in conjunction with total operating revenues, the most directly comparable GAAP measure, because it assists our management in making decisions regarding the deployment and use of our vessels and in evaluating their financial performance. Our calculation of TCE may not be comparable to that reported by other entities. The following table reconciles our total operating revenues to average daily TCE.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June
30,
|
|
Six months ended
June 30,
|
(in thousands of $, except number of days and average daily TCE)
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Total operating revenues
|
135,969
|
|
|
111,752
|
|
|
237,354
|
|
|
212,817
|
|
Voyage and commission expenses
|
(1,561
|
)
|
|
(1,429
|
)
|
|
(3,622
|
)
|
|
(3,248
|
)
|
|
134,408
|
|
|
110,323
|
|
|
233,732
|
|
|
209,569
|
|
Calendar days less scheduled off-hire days
(1)
|
910
|
|
|
905
|
|
|
1,728
|
|
|
1,794
|
|
Average daily TCE (to the closest $100)
|
147,700
|
|
|
121,900
|
|
|
135,300
|
|
|
116,800
|
|
(1)
Scheduled off-hire days includes days when vessels are in lay-up or undergoing dry dock.
Risk Factors
In addition to the other information set forth in this Report on Form 6-K and below, you should carefully consider the risk factors discussed in Part I, Item 3. Key Information—Risk Factors in our 2016 Annual Report, which could materially affect our business, financial condition or results of operations.
The pending Hilli Acquisition may not close as anticipated or it may close with adjusted terms.
We expect the Hilli Acquisition to close by April 30, 2018, subject to certain closing conditions. If these conditions are not satisfied or waived, we will not complete the Hilli Acquisition. Certain of the conditions that remain to be satisfied include, but are not limited to:
|
|
•
|
the closing of the Tundra Put Sale;
|
|
|
•
|
the execution and delivery of the Liquefaction Tolling Agreement by the parties thereto
|
|
|
•
|
the
Hilli’s
timely delivery to and acceptance by the Customer under the Liquefaction Tolling Agreement;
|
|
|
•
|
obtaining the required consents to the transaction from governmental authorities and/or third parties;
|
|
|
•
|
the continued accuracy of the representations and warranties contained in the Hilli purchase agreement;
|
|
|
•
|
the performance by each party of its obligations under the purchase agreement;
|
|
|
•
|
the absence of any decree, order, injunction, ruling or judgment that prohibits, or other proceedings that seek to prohibit, the Hilli Acquisition or makes the Hilli Acquisition unlawful; and
|
|
|
•
|
the execution of certain agreements related to the consummation of the Hilli Acquisition.
|
We cannot provide assurance that the pending Hilli Acquisition will close by April 30, 2018, or at all, or that the Hilli Acquisition will close without material adjustments.
We may be unable to realize expected benefits from the Hilli Acquisition.
Similar to any acquisition of any vessel, the Hilli Acquisition may not result in anticipated profitability or generate cash flow sufficient to justify our investment. In addition, our acquisition exposes us to risks that may harm our business, financial condition and operating results. In particular, the Hilli Acquisition includes risks that we may:
|
|
•
|
fail to realize anticipated benefits, such as increased cash flows;
|
|
|
•
|
fail to obtain the benefits of the Liquefaction Tolling Agreement if the Customer exercises certain rights to terminate the charter upon the occurrence of specified events of default;
|
|
|
•
|
fail to obtain the benefits of the Liquefaction Tolling Agreement if the Customer fails to make payments under the Liquefaction Tolling Agreement because of its financial inability, disagreements with us or otherwise;
|
|
|
•
|
incur or assume unanticipated liabilities, losses or costs;
|
|
|
•
|
be required to pay damages to the Customer or suffer a reduction in the tolling fee in the event that the
Hilli
fails to perform to certain specifications; or
|
|
|
•
|
incur other significant charges, such as asset devaluation or restructuring charges.
|
The operations of Hilli Corp in Cameroon under the Liquefaction Tolling Agreement will be subject to higher political and security risks than operations in other areas of the world.
The operations of Hilli Corp in Cameroon under the Liquefaction Tolling Agreement will be subject to higher political and security risks than operations in other areas of the world. Recently, Cameroon has experienced instability in its socio-political environment. Any extreme levels of political instability resulting in changes of governments, internal conflict, unrest and violence, especially from terrorist organizations prevalent in the region, such as Boko Haram, could lead to economic disruptions and shutdowns in industrial activities. In addition, corruption and bribery are a serious concern in the region. The FLNG operations of Hilli Corp in Cameroon will be subject to these risks, which could materially adversely affect our revenues, our ability to perform under the Liquefaction Tolling Agreement and our financial condition.
In addition, Hilli Corp will maintain insurance coverage for only a portion of the risks incident to doing business in Cameroon. There also may be certain risks covered by insurance where the policy does not reimburse Hilli Corp for all of the costs related to a loss. For example, any claims covered by insurance will be subject to deductibles, which may be significant. In the event that Hilli Corp incurs business interruption losses with respect to one or more incidents, they could have a material adverse effect on our results of operations.
Due to the new and sophisticated technology utilized by the Hilli, the operations of the Hilli is subject to risks that could negatively affect our earnings and financial condition.
The
Hilli
will be the world’s first LNG carrier to have been retrofitted for FLNG service. Due to the new and sophisticated technology utilized by the
Hilli
, the operations of the
Hilli
are subject to risks that could negatively affect our earnings and financial condition. FLNG vessels are complex and their operations are technically challenging and subject to mechanical risks and problems. Unforeseen operational problems with the
Hilli
may lead to loss of revenue or higher than anticipated operating expenses or require additional capital expenditures. Any of these results could harm our business, financial condition, results of operations and ability to make cash distributions to our unitholders.
Golar LNG Partners LP
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
(in thousands of $, except per unit amounts)
|
Notes
|
2017
|
2016
|
2017
|
2016
|
Time charter revenues
|
|
130,429
|
|
104,472
|
|
228,631
|
|
198,257
|
|
Time charter revenues from related parties
(1)
|
|
5,540
|
|
7,280
|
|
8,723
|
|
14,560
|
|
Total operating revenues
|
|
135,969
|
|
111,752
|
|
237,354
|
|
212,817
|
|
|
|
|
|
|
|
Vessel operating expenses
(1)
|
|
18,620
|
|
16,878
|
|
35,696
|
|
33,066
|
|
Voyage and commission expenses
|
|
1,561
|
|
1,429
|
|
3,622
|
|
3,248
|
|
Administrative expenses
(1)
|
|
2,249
|
|
1,700
|
|
4,820
|
|
3,627
|
|
Depreciation and amortization
|
|
26,142
|
|
24,869
|
|
50,898
|
|
49,908
|
|
Total operating expenses
|
|
48,572
|
|
44,876
|
|
95,036
|
|
89,849
|
|
|
|
|
|
|
|
Operating income
|
|
87,397
|
|
66,876
|
|
142,318
|
|
122,968
|
|
|
|
|
|
|
|
Financial income (expenses)
|
|
|
|
|
|
|
|
|
|
Interest income
(1)
|
|
1,447
|
|
603
|
|
2,620
|
|
2,127
|
|
Interest expense
|
|
(18,856
|
)
|
(19,915
|
)
|
(37,103
|
)
|
(33,611
|
)
|
Other financial items
|
6
|
(7,710
|
)
|
(10,233
|
)
|
(14,613
|
)
|
(30,941
|
)
|
Net financial expenses
|
|
(25,119
|
)
|
(29,545
|
)
|
(49,096
|
)
|
(62,425
|
)
|
|
|
|
|
|
|
Income before tax
|
|
62,278
|
|
37,331
|
|
93,222
|
|
60,543
|
|
Tax
|
7
|
(4,652
|
)
|
(6,013
|
)
|
(8,143
|
)
|
(9,463
|
)
|
Net income
|
|
57,626
|
|
31,318
|
|
85,079
|
|
51,080
|
|
Less: Net income attributable to non-controlling interests
|
|
(3,798
|
)
|
(3,336
|
)
|
(7,697
|
)
|
(6,347
|
)
|
Net income attributable to Golar LNG Partners LP Owners
|
|
53,828
|
|
27,982
|
|
77,382
|
|
44,733
|
|
|
|
|
|
|
|
Earnings per unit
|
|
|
|
|
|
|
|
|
|
Common unit (basic)
|
13
|
0.75
|
|
0.56
|
|
1.12
|
|
0.87
|
|
Common unit (diluted)
|
13
|
0.74
|
|
0.56
|
|
1.10
|
|
0.87
|
|
|
|
|
|
|
|
Cash distributions declared and paid per unit in the period
|
13
|
0.58
|
|
0.58
|
|
1.16
|
|
1.16
|
|
______________________________
(1)
This includes amounts arising from transactions with related parties (see note 10).
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Golar LNG Partners LP
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
(in thousands of $)
|
2017
|
2016
|
2017
|
2016
|
Net income
|
57,626
|
|
31,318
|
|
85,079
|
|
51,080
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
Unrealized net (loss)/gain on qualifying cash flow hedging instruments
|
(2
|
)
|
342
|
|
103
|
|
727
|
|
Amount reclassified from accumulated other comprehensive income to statements of operations
|
—
|
|
—
|
|
4,985
|
|
409
|
|
Other comprehensive (loss)/income
|
(2
|
)
|
342
|
|
5,088
|
|
1,136
|
|
Comprehensive income
|
57,624
|
|
31,660
|
|
90,167
|
|
52,216
|
|
Comprehensive income attributable to:
|
|
|
|
|
|
|
|
Partners’ capital in Golar LNG Partners LP
|
53,826
|
|
28,324
|
|
82,470
|
|
45,869
|
|
Non-controlling interest
|
3,798
|
|
3,336
|
|
7,697
|
|
6,347
|
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Golar LNG Partners LP
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
June 30,
|
December 31,
|
(in thousands of $)
|
Note
|
2017
|
2016
|
|
|
Unaudited
|
|
Audited
|
|
ASSETS
|
|
|
|
|
|
Current
|
|
|
|
|
|
Cash and cash equivalents
|
|
301,486
|
|
65,710
|
|
Restricted cash
|
|
16,845
|
|
44,927
|
|
Other current assets
(1)
|
|
42,882
|
|
25,266
|
|
Amount due from related parties
|
10
|
2,724
|
|
23,914
|
|
Inventories
|
|
3,607
|
|
1,110
|
|
Total Current Assets
|
|
367,544
|
|
160,927
|
|
Non-current
|
|
|
|
|
|
Restricted cash
|
|
121,206
|
|
117,488
|
|
Vessels and equipment and vessel under capital lease, net
|
|
1,728,523
|
|
1,763,896
|
|
Intangible assets, net
|
|
79,723
|
|
86,133
|
|
Other long-term assets
|
|
11,684
|
|
17,017
|
|
Amounts due from related parties
|
10
|
107,247
|
|
107,247
|
|
Total Assets
|
|
2,415,927
|
|
2,252,708
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
Current
|
|
|
|
|
|
Current portion of long-term debt
|
8
|
115,758
|
|
78,101
|
|
Current portion of obligation under capital lease
|
|
1,081
|
|
787
|
|
Other current liabilities
|
|
89,272
|
|
136,584
|
|
Total Current Liabilities
|
|
206,111
|
|
215,472
|
|
Non-current
|
|
|
|
|
|
Long-term debt
|
8
|
1,339,098
|
|
1,296,609
|
|
Obligations under capital leases
|
|
122,853
|
|
116,964
|
|
Other long-term liabilities
|
|
19,938
|
|
19,234
|
|
Total Liabilities
|
|
1,688,000
|
|
1,648,279
|
|
Equity
|
|
|
|
|
|
Partners' capital:
|
|
|
|
|
|
Common unitholders
|
|
606,152
|
|
490,564
|
|
General partner interest
|
|
53,067
|
|
50,942
|
|
Total Partners' capital
|
|
659,219
|
|
541,506
|
|
Accumulated other comprehensive income
|
|
35
|
|
(5,053
|
)
|
|
|
659,254
|
|
536,453
|
|
Non-controlling interest
|
|
68,673
|
|
67,976
|
|
Total Equity
|
|
727,927
|
|
604,429
|
|
Total Liabilities and Equity
|
|
2,415,927
|
|
2,252,708
|
|
(1)
Other current assets includes the charter termination fee receivable (net of withholding tax) for the
Golar Spirit
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Golar LNG Partners LP
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
Six months ended June 30,
|
(in thousands of $)
|
Note
|
2017
|
2016
|
OPERATING ACTIVITIES
|
|
|
|
|
|
Net income
|
|
85,079
|
|
51,080
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
50,898
|
|
49,908
|
|
Movement in deferred tax liability
|
|
1,014
|
|
1,125
|
|
Release of deferred tax asset
|
|
3,230
|
|
2,251
|
|
Amortization of deferred charges
|
|
3,154
|
|
6,442
|
|
Drydocking expenditure
|
|
(6,415
|
)
|
(1,600
|
)
|
Foreign exchange losses/(gains)
|
|
1,590
|
|
(257
|
)
|
Loss on bond repurchase
|
|
6,573
|
|
—
|
|
Unit option expense
|
|
121
|
|
—
|
|
Interest element included in obligation under capital lease, net
|
|
265
|
|
(1,498
|
)
|
Change in assets and liabilities:
|
|
|
|
Trade accounts receivable
|
|
8,951
|
|
(183
|
)
|
Inventories
|
|
357
|
|
173
|
|
Prepaid expenses, accrued income and other assets
|
|
(20,701
|
)
|
2,252
|
|
Amount due to/from related companies
|
|
23,011
|
|
(22,839
|
)
|
Trade accounts payable
|
|
1,214
|
|
(1,588
|
)
|
Accrued expenses
|
|
6,704
|
|
5,310
|
|
Restricted cash
|
|
—
|
|
(62
|
)
|
Other current liabilities
|
|
(2,047
|
)
|
31,667
|
|
Net cash provided by operating activities
|
|
162,998
|
|
122,181
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
Deposit made in connection with the
Golar Tundra
acquisition
|
10
|
—
|
|
(107,247
|
)
|
Net cash used in investing activities
|
|
—
|
|
(107,247
|
)
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
Proceeds from issuance of equity
|
|
119,438
|
|
—
|
|
Repayment of debt, including debt due to related parties
|
|
(178,688
|
)
|
(720,658
|
)
|
Repurchase of high-yield bonds and related swaps
|
|
(180,188
|
)
|
—
|
|
Proceeds from long-term debt
|
8
|
375,000
|
|
815,000
|
|
Repayments of obligations under capital leases
|
|
(339
|
)
|
—
|
|
Dividend paid to non-controlling interest
|
|
(7,000
|
)
|
(6,000
|
)
|
Cash distributions paid
|
|
(78,564
|
)
|
(76,398
|
)
|
Financing costs paid
|
|
(5,290
|
)
|
(13,521
|
)
|
Restricted cash and short-term investments
|
|
28,409
|
|
7,648
|
|
Common units buy-back and cancellation
|
|
—
|
|
(495
|
)
|
Net cash provided by financing activities
|
|
72,778
|
|
5,576
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
235,776
|
|
20,510
|
|
Cash and cash equivalents at beginning of period
|
|
65,710
|
|
40,686
|
|
Cash and cash equivalents at end of period
|
|
301,486
|
|
61,196
|
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Golar LNG Partners LP
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
Partners’ capital
|
Accumulated
Other Comprehensive
Loss
|
Total Before
Non-Controlling
Interest
|
Non-Controlling
Interest
|
Total Equity
|
Common
Units
|
Subordinated
Units
(2)
|
General
Partner
|
Consolidated balance at December 31, 2015
|
486,533
|
|
12,649
|
|
40,293
|
|
(9,725
|
)
|
529,750
|
|
66,765
|
|
596,515
|
|
Net income
|
36,635
|
|
7,152
|
|
946
|
|
—
|
|
44,733
|
|
6,347
|
|
51,080
|
|
Other comprehensive income
|
—
|
|
—
|
|
—
|
|
1,136
|
|
1,136
|
|
—
|
|
1,136
|
|
Cash distributions
(1)
|
(52,125
|
)
|
(18,422
|
)
|
(5,851
|
)
|
—
|
|
(76,398
|
)
|
—
|
|
(76,398
|
)
|
Non-controlling interest dividend
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(6,000
|
)
|
(6,000
|
)
|
Common units acquired and cancelled
|
(495
|
)
|
—
|
|
—
|
|
—
|
|
(495
|
)
|
—
|
|
(495
|
)
|
Conversion of subordinated units to common units
(2)
|
1,379
|
|
(1,379
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Consolidated balance at June 30, 2016
|
471,927
|
|
—
|
|
35,388
|
|
(8,589
|
)
|
498,726
|
|
67,112
|
|
565,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
Partners’ capital
|
Accumulated
Other Comprehensive
Loss
|
Total Before
Non-Controlling
Interest
|
Non-Controlling
Interest
|
Total Equity
|
Common
Units
|
Subordinated
Units
|
General
Partner
|
Consolidated balance at December 31, 2016
|
490,564
|
|
—
|
|
50,942
|
|
(5,053
|
)
|
536,453
|
|
67,976
|
|
604,429
|
|
Net income
|
75,833
|
|
—
|
|
1,549
|
|
—
|
|
77,382
|
|
7,697
|
|
85,079
|
|
Other comprehensive income
|
—
|
|
—
|
|
—
|
|
5,088
|
|
5,088
|
|
—
|
|
5,088
|
|
Cash distributions
(1)
|
(76,993
|
)
|
—
|
|
(1,571
|
)
|
—
|
|
(78,564
|
)
|
—
|
|
(78,564
|
)
|
Non-controlling interest dividend
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(7,000
|
)
|
(7,000
|
)
|
Net proceeds from equity issuances
|
116,627
|
|
—
|
|
2,147
|
|
—
|
|
118,774
|
|
—
|
|
118,774
|
|
Unit options expense
|
121
|
|
—
|
|
—
|
|
—
|
|
121
|
|
—
|
|
121
|
|
Consolidated balance at June 30, 2017
|
606,152
|
|
—
|
|
53,067
|
|
35
|
|
659,254
|
|
68,673
|
|
727,927
|
|
(1)
This includes cash distributions to Incentive Distribution Rights (“IDRs”) holders for the six months ended
June 30, 2017
and
2016
of $
nil
and
$4.3 million
, respectively.
(2) In June 2016, our board of directors determined that the conditions precedent for the expiration of the subordination period set forth in the definition of "Subordination Period" contained in the Partnership Agreement were satisfied, and on June 30, 2016, all
15,949,831
subordinated units (all of which were held by Golar) converted into common units on a
one
-for-one basis. As of June 30, 2017, there are
no
subordinated units.
(3) As of June 30, 2017, the carrying value of the equity attributable to the IDR holders was
$32.5 million
(December 31, 2016:
$32.5 million
)
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Golar LNG Partners LP
Notes to Unaudited Condensed Consolidated Financial Statements
1.
GENERAL
Golar LNG Partners LP (the “Partnership,” “we,” “our,” or “us”) is a publicly traded Marshall Islands limited partnership initially formed as a subsidiary of Golar LNG Limited (“Golar”) in September 2007, to own and operate LNG carriers and FSRUs under long-term charters. As of
June 30, 2017
, we have a fleet of
four
LNG carriers and
six
FSRUs.
2.
ACCOUNTING POLICIES
Basis of accounting
The accompanying condensed consolidated interim financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The footnotes are condensed as permitted by the requirements for interim financial statements and, accordingly, do not include all of the information and disclosures required under U.S. GAAP for complete financial statements. Therefore, these condensed consolidated interim financial statements should be read in conjunction with our audited consolidated financial statements for the year ended
December 31, 2016
, which are included in our Annual Report on Form 20-F.
Significant accounting policies
The accounting policies adopted in the preparation of the condensed consolidated interim financial statements are consistent with those followed in the preparation of our audited consolidated financial statements for the year ended
December 31, 2016
, except for the recently adopted accounting policies as disclosed in note 4.
Use of estimates
The preparation of financial statements in accordance with the United States Generally Accepted Accounting Principles ("US GAAP") requires that management make estimates and assumptions affecting the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
As of
June 30, 2017
, we leased
one
vessel under finance lease from wholly-owned special purpose vehicle (“lessor SPV”) of financial institution in connection with our sale and leaseback transaction. While we do not hold any equity investment in the lessor SPV, we have determined that we are the primary beneficiary of the entity and accordingly, we are required to consolidate the VIE into our financial results. The key line items impacted by our consolidation of the VIE are short-term and long-term debt, restricted cash and short-term deposits, and interest expense. In consolidating the lessor VIE, on a quarterly basis, we must make assumptions regarding (i) the debt amortization profile; (ii) the interest rate to be applied against the VIEs’ debt principal; and (iii) the VIE's application of cash receipts. Our estimates are therefore dependent upon the timeliness of receipt and accuracy of financial information provided by the lessor VIE entity. Upon receipt of the audited annual financial statements of the lessor VIE, we will make a true-up adjustment for any material differences.
3. VARIABLE INTEREST ENTITIES (VIEs)
Eskimo SPV
As of
June 30, 2017
, we leased the
Golar Eskimo
from a VIE under a finance lease with a wholly-owned subsidiary (“Eskimo SPV”) of China Merchants Bank Leasing (“CMBL”). Eskimo SPV is a newly formed special purpose vehicle (SPV).
In November 2015, we sold the
Golar Eskimo
to Eskimo SPV and subsequently leased back the vessel under a bareboat charter for a term of
ten
years. From the third year anniversary of the commencement of the bareboat charter, we have an annual option to repurchase the vessel at fixed pre-determined amounts, with an obligation to repurchase the vessel at the end of the
ten
year lease period.
While we do not hold any equity investment in Eskimo SPV, we have determined that we have a variable interest in Eskimo SPV and that Eskimo SPV is a VIE. Based on our evaluation of the bareboat agreement we have concluded that we are the primary beneficiary of Eskimo SPV and, accordingly, have consolidated Eskimo SPV into our financial results. We did not record any gain
or loss from the sale of the
Golar Eskimo
to Eskimo SPV, and we continued to report the vessel in our consolidated financial statements at the same carrying value, as if the sale had not occurred.
The equity attributable to CMBL in Eskimo SPV is included in non-controlling interests in our consolidated results. As of
June 30, 2017
, the
Golar Eskimo
is reported under “Vessels and equipment, net” in our consolidated balance sheet.
The following table gives a summary of the sale and leaseback arrangement, including repurchase options and obligation as of
June 30, 2017
:
|
|
|
|
|
|
|
|
Vessel
|
Effective from
|
Sales value (in $ millions)
|
First repurchase option (in $ millions)
|
Month of first repurchase option
|
Repurchase obligation at end of lease term
(in $ millions)
|
End of lease term
|
Golar Eskimo
|
November 2015
|
285.0
|
225.8
|
November 2018
|
128.3
|
November 2025
|
A summary of our payment obligations under the bareboat charter with Eskimo SPV as of
June 30, 2017
is shown below:
|
|
|
|
|
|
|
|
(in thousands of $)
|
2017
(1)
|
2018
|
2019
|
2020
|
2021
|
After 2021
|
Golar Eskimo*
|
11,454
|
22,437
|
21,859
|
21,330
|
20,755
|
74,463
|
(1)
For the six months ending December 31, 2017.
*This payment obligation table above includes variable rental payments due under the lease based on an assumed LIBOR of
0.39%
plus margin, but excludes the repurchase obligation at the end of lease.
The impact of Eskimo SPV’s liabilities on our condensed consolidated balance sheet is as follows:
|
|
|
|
|
|
(in thousands of $)
|
June 30,
2017
|
December 31,
2016
|
Liabilities
|
|
|
Long-term debt
|
220,728
|
|
232,931
|
|
The most significant impact of consolidation of Eskimo SPV’s operations on our condensed consolidated statement of operations is interest expense of
$2.0 million
and
$3.8 million
for the three and six months ended June 30, 2017, respectively and
$1.9 million
and
$4.2 million
for the three and six months ended June 30, 2016, respectively. The most significant impact of consolidation of Eskimo SPV’s cash flows on our condensed consolidated statement of cash flows is net cash used in financing activities of
$6.2 million
and
$12.2 million
for the three months and six months ended June 30, 2017, respectively.
Tundra Corp
On May 23, 2016, we acquired from Golar (the “Tundra Acquisition”) the disponent owner and operator of the FSRU, the
Golar Tundra
(“Tundra Corp”), for a purchase price of
$330.0 million
less assumed net lease obligations and net of working capital adjustments. Concurrent with the closing of the Tundra Acquisition, we entered into an agreement with Golar (as amended, the “Tundra Letter Agreement”) pursuant to which Golar agreed to pay us a daily fee plus operating expenses, from the closing date until the date that operations commence under the vessel’s charter with West African Gas Limited (“WAGL”). In return we agreed to pay to Golar any hire or other contract-related payments actually received with respect to the vessel. The Tundra Letter Agreement also provided that in the event the Golar Tundra had not commenced service under the charter by May 23, 2017, we had the option (the “Tundra Put Right”) to require Golar to repurchase Tundra Corp at a price equal to the original purchase price (the “Purchase Price”). Accordingly, we determined that (i) Tundra Corp is a VIE and (ii) Golar is and has been the primary beneficiary of Tundra Corp. Thus, Tundra Corp was not consolidated into our financial statements.
In November 2015, prior to the Tundra Acquisition, Tundra Corp sold the
Golar Tundra
to a subsidiary of CMBL (the “Tundra SPV”) for
$254.6 million
and subsequently leased back the vessel under a bareboat charter (the “Tundra Lease”). Upon the completion of the Tundra Acquisition, Golar’s prior guarantee of Tundra Corp’s obligations under the Tundra Lease terminated, and we became the primary obligor under the Tundra Lease. Thus, despite the fact that Tundra Corp is not consolidated into our financial results, we are liable for charter hire payments due under the Tundra Lease until the Put Sale Closing Date.
The
Golar Tundra
was expected to commence operations in order to serve the Ghana (Tema) LNG Project in the second quarter of 2016. However, due to delays in the Ghana (Tema) LNG Project, this has not yet occurred because the required infrastructure, including a connecting pipeline, jetty and breakwater, are not yet in place. The
Golar Tundra
remains anchored off the coast of Ghana and the project has made limited progress. In light of this, on May 30, 2017, we elected to exercise the Tundra Put Right. The closing of the sale to Golar pursuant to the Tundra Put Right (the “Put Sale Closing”) is expected to occur by September 30, 2017.
The following table gives a summary of the sale and leaseback arrangement, including repurchase options and obligation as of
June 30, 2017
:
|
|
|
|
|
|
|
|
Vessel
|
Effective from
|
Sales value (in $ millions)
|
First repurchase option (in $ millions)
|
Month of first repurchase option
|
Repurchase obligation at end of lease term
(in $ millions)
|
End of lease term
|
Golar Tundra
|
November 2015
|
254.6
|
194.1
|
November 2018
|
114.6
|
November 2025
|
A summary of our payment obligations under the bareboat charter with Tundra SPV as of
June 30, 2017
is shown below:
|
|
|
|
|
|
|
|
(in thousands of $)
|
2017
(1)
|
2018
|
2019
|
2020
|
2021
|
After 2021
|
Golar Tundra*
|
10,432
|
20,446
|
19,934
|
19,466
|
18,953
|
68,097
|
(1)
For the six months ending December 31, 2017.
*This table includes variable rental payments due under the lease based on an assumed rate of LIBOR of
0.39%
plus margin, but excludes the repurchase obligation at the end of lease.
Following the date of the Tundra Put Sale Date, we will no longer be liable for charter hire payments due under the Tundra Lease. Refer to note 14 for further details.
PT Golar Indonesia
We consolidated PTGI, which owns the
NR Satu
, in our consolidated financial statements effective September 28, 2011. PTGI became a VIE and we became its primary beneficiary upon our agreement to acquire all of Golar’s interests in certain subsidiaries that own and operate the
NR Satu
on July 19, 2012. We consolidate PTGI as we hold all of the voting stock and control all of the economic interests in PTGI.
4.
RECENTLY ISSUED ACCOUNTING STANDARDS
Adoption of new accounting standards
In July 2015, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2015-11 “
Inventory (Topic 330): Simplifying the Measurement of Inventory
”. The standard requires inventory to be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The amendment is effective for the fiscal years beginning after December 15, 2016 and interim periods within fiscal years beginning after December 15, 2017, early adoption is permitted. The adoption of this update did not have an impact on our Consolidated Financial Statements or related disclosures.
In March 2016, the FASB issued ASU 2016-09 “
Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting
”. This standard primarily requires the recognition of excess tax benefits for share-based awards in the statement of operations and the classification of excess tax benefits as an operating activity within the statement of Cash Flows. The guidance allows an entity to elect to account for forfeitures when they occur. The new standard is effective for annual reporting periods beginning after December 15, 2016. The adoption of this update did not have an impact on our Consolidated Financial Statements or related disclosures.
Accounting pronouncements to be adopted
In May 2014, the FASB issued ASU 2014-09 “
Revenue from Contracts with Customers (Topic 606)
” and subsequent amendments. The standard provides a single, comprehensive revenue recognition model and requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to
be entitled in exchange for those goods or services. The standard introduces a new concept of “series provision” which provides accounting guidance for entities that engage in repetitive service contracts. There are also new requirements which impact the timing of costs that are reimbursed at the start or near the inception of a contract. The guidance is effective from January 1, 2018 and provides for enhanced disclosures. It may be applied retrospectively to each prior period presented subject to “practical expedients (“full retrospective) or a cumulative-effect adjustment as of the date of adoption (“modified retrospective approach”).
Management is currently assessing whether any services provided, over and above a bareboat charter, need to be accounted for on a different time basis than the underlying contract. Depending on the conclusion, the timing of the revenue could differ, however, the total amount earned from time charter contracts over all periods will remain the same. We expect to finalize our assessment in the second half of 2017.
In March 2016, the FASB issued guidance to ASU 2016-02 “
Leases (Topic 842)
”. This update requires an entity to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements regarding timing and uncertainty of cash flows arising from leases. It also offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. The standard will be effective for fiscal years beginning after December 15, 2018 including interim periods within those fiscal years, and early adoption is permitted. We are currently in the process of evaluating the impact of this guidance on our Consolidated Financial Statements and related disclosures.
Any other accounting pronouncements yet to be adopted by us are consistent with those disclosed in our audited consolidated financial statements for the year ended
December 31, 2016
.
5.
SEGMENT INFORMATION
Operating segments are components for an enterprise of which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Based on the Partnership’s methods of internal reporting and management structure, we consider that we operate in
one
segment, the LNG market. During the six months ended
June 30, 2017
and
2016
, our fleet operated under time charters with
nine
charterers, Petrobras, Dubai Supply Authority (“DUSUP”), Pertamina, the Hashemite Kingdom of Jordan (“Jordan”), PT Nusantara Regas (“PTNR”), Royal Dutch Shell plc, Eni S.p.A., Kuwait National Petroleum Company (“KNPC”) and Golar. Petrobras is a Brazilian energy company. DUSUP is a government entity which is the sole supplier of natural gas to the Emirates. Pertamina is the state-owned oil and gas company of Indonesia. PTNR is a joint venture company of Pertamina and Perusahaan Gas Negara, an Indonesian company engaged in the transport and distribution of natural gas in Indonesia. Royal Dutch Shell plc is headquartered in the Netherlands. Eni S.p.A is an integrated energy company headquartered in Italy. KNPC is a subsidiary of Kuwait Petroleum Corporation, the state-owned oil and gas company of Kuwait.
For the three and six months ended
June 30, 2017
and
2016
, revenues from the following charterers accounted for over
10%
of our consolidated revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
(in thousands of $)
|
2017
|
2016
|
2017
|
2016
|
Petrobras
|
46,920
|
|
35
|
%
|
24,896
|
|
22
|
%
|
72,497
|
|
31
|
%
|
49,670
|
|
23
|
%
|
PTNR
|
18,348
|
|
13
|
%
|
17,059
|
|
15
|
%
|
36,133
|
|
15
|
%
|
33,841
|
|
16
|
%
|
Jordan
|
14,235
|
|
10
|
%
|
14,188
|
|
13
|
%
|
28,313
|
|
12
|
%
|
28,377
|
|
13
|
%
|
KNPC
|
14,097
|
|
10
|
%
|
14,097
|
|
13
|
%
|
19,142
|
|
8
|
%
|
19,151
|
|
9
|
%
|
DUSUP
|
11,638
|
|
9
|
%
|
11,549
|
|
10
|
%
|
23,147
|
|
10
|
%
|
23,240
|
|
11
|
%
|
Geographic segment data
The following geographical data presents our revenues and fixed assets with respect only to our FSRUs, operating under long-term charters, at specific locations. LNG carriers operate on a worldwide basis and are not restricted to specific locations. Accordingly, it is not possible to allocate the assets of these operations to specific countries.
|
|
|
|
|
|
|
|
|
|
Revenues
|
Three months ended June 30
|
Six months ended June 30
|
(in thousands of $)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
Brazil
|
46,920
|
|
24,896
|
|
72,497
|
|
49,670
|
|
Indonesia
|
18,348
|
|
17,059
|
|
36,133
|
|
33,841
|
|
Jordan
|
14,235
|
|
14,188
|
|
28,313
|
|
28,377
|
|
Kuwait
|
14,097
|
|
14,097
|
|
19,142
|
|
19,151
|
|
United Arab Emirates
|
11,638
|
|
11,549
|
|
23,147
|
|
23,240
|
|
|
|
|
|
|
|
Fixed assets, net
|
June 30,
|
|
December 31,
|
|
(in thousands of $)
|
2017
|
|
2016
|
|
Brazil
|
336,744
|
|
347,366
|
|
Jordan
|
274,232
|
|
278,588
|
|
Kuwait
|
263,241
|
|
267,055
|
|
Indonesia
|
184,194
|
|
191,139
|
|
United Arab Emirates
|
116,232
|
|
122,078
|
|
6.
OTHER FINANCIAL ITEMS
Other financial items are comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
Six months ended
June 30,
|
(in thousands of $)
|
2017
|
2016
|
2017
|
2016
|
Unrealized mark-to-market losses for interest rate swaps
|
(4,076
|
)
|
(7,142
|
)
|
(1,426
|
)
|
(24,377
|
)
|
Interest expense on un-designated interest rate swaps
|
(2,169
|
)
|
(2,728
|
)
|
(4,447
|
)
|
(5,330
|
)
|
Gains/(losses) on repurchase of 2012 High-Yield Bonds
(1)
|
20
|
|
—
|
|
(3,753
|
)
|
—
|
|
Premium paid on bond repurchase
(2)
|
(76
|
)
|
—
|
|
(2,820
|
)
|
—
|
|
Foreign exchange losses on 2012 High-Yield Bonds
(3)
|
(1,052
|
)
|
—
|
|
(1,238
|
)
|
—
|
|
Foreign exchange gain/(loss) on capital lease obligations and related restricted cash
|
(253
|
)
|
493
|
|
(351
|
)
|
670
|
|
Foreign exchange losses on operations
|
(135
|
)
|
(211
|
)
|
(311
|
)
|
(976
|
)
|
Unrealized mark-to-market gain on Earn Out units
(4)
|
500
|
|
—
|
|
500
|
|
—
|
|
Mark-to-market adjustment for currency swap derivatives and other
|
(469
|
)
|
(645
|
)
|
(767
|
)
|
(928
|
)
|
Total
|
(7,710
|
)
|
(10,233
|
)
|
(14,613
|
)
|
(30,941
|
)
|
(1) This includes foreign exchange loss arising from the early repurchase of our 2012 High-Yield Bonds of
$2.9 million
and the reclassification of a
$5.0 million
loss from the Accumulated Other Comprehensive Loss upon cessation of hedge accounting for the related cross currency interest rate swap. This is offset by the mark to market gain on the cross currency interest rate swaps of
$4.1 million
.
(2) This pertains to premium paid upon the partial buy-back of the 2012 High-Yield Bonds.
(3) This relates to unrealized foreign exchange losses on the retranslation of the remaining 2012 High-Yield Bonds.
(4) This relates to the mark-to-market movement on the Earn Out units issued in connection with the IDR reset transaction in October 2016 which were recognized as a derivative liability in our Financial Statements. See note 9.
7. TAXATION
As of
June 30, 2017
a net deferred tax asset of
$1.9 million
(
$5.1 million
at
December 31, 2016
) was recognized, principally related to the recognition of certain historical tax positions on our Indonesian operations.
As of
June 30, 2017
, a net deferred tax liability of
$4.2 million
(
$3.2 million
at
December 31, 2016
) was recognized, due to the deferred tax liability from tax depreciation in excess of the accounting depreciation for the
Golar Eskimo
exceeding
the deferred tax asset related to net operating loss carryforwards generated from our Jordan operations.
Tax charge
The tax charge for the three and six months ended
June 30, 2017
included current tax charges in respect of our operations in the United Kingdom, Brazil, Kuwait and Indonesia. The Partnership does not currently incur any corporate income tax in respect of operations in Jordan given the availability of brought forward tax losses which can be utilized against taxable profits.
The total tax charge for the three months and six months ended
June 30, 2017
includes a net deferred tax charge of
$0.5 million
and
$1.0 million
respectively, in relation to the utilization of brought forward tax losses and tax depreciation in excess of accounting depreciation in Jordan. As a result, the deferred tax liability balance as of
June 30, 2017
is
$4.2 million
.
The total tax charge for the three months and six months ended
June 30, 2017
also includes a deferred tax charge of
$1.8 million
and
$3.2 million
respectively, in relation to the utilization of the brought forward tax losses in Indonesia. As a result, the deferred tax asset balance as of
June 30, 2017
amounted
$1.9 million
.
Uncertainty in tax positions
As of
June 30, 2017
, we recognized a provision of
$2.9 million
(
$2.6 million
at
December 31, 2016
) for certain risks in various jurisdictions. This provision includes interest and penalties arising from our Indonesian operations for the periods 2015 to June 30, 2017 following the conclusion of the tax audits in respect of our Indonesian operations for the year 2014.
8.
DEBT
As of
June 30, 2017
and
December 31, 2016
, we had total long-term debt outstanding of
$1,454.9 million
and
$1,374.7 million
, respectively, net of deferred debt financing costs of
$19.3 million
and
$17.1 million
, respectively.
On February 15, 2017, we completed the issuance and sale of
$250.0 million
aggregate principal amount of our senior unsecured non-amortizing bonds in the Nordic bond market (the “2017 Norwegian Bonds”). The 2017 Norwegian Bonds mature in May 2021 and bear interest at a rate of 3-month LIBOR plus
6.25%
. In connection with the issuance of the 2017 Norwegian Bonds, we entered into economic hedge interest rate swaps to reduce the risk associated with fluctuations in interest rates by converting the floating rate of the interest obligation under the 2017 Norwegian Bonds to an all-in interest rate of
8.194%
. The 2017 Norwegian Bonds were listed on the Oslo Bors on July 17, 2017. The net proceeds from our sale of the 2017 Norwegian Bonds have been used to repay a portion of our outstanding 2012 High Yield Bonds and for general partnership purposes. As of June 30, 2017, a total amount of NOK
996 million
or
$118.2 million
of the 2012 High-Yield Bonds had been repurchased ahead of their October 2017 maturity, and the corresponding share of the associated cross currency interest rate swap had been terminated.
As of
June 30, 2017
, we had drawn down
$125.0 million
of the
$150.0 million
revolving credit facility under the
$800 million
credit facility.
9.
FINANCIAL INSTRUMENTS
Interest rate risk management
In certain situations, we may enter into financial instruments to reduce the risk associated with fluctuations in interest rates. We have entered into swaps that convert floating rate interest obligations to fixed rates, which, from an economic perspective hedge, our interest rate exposure. We do not hold or issue instruments for speculative or trading purposes. The counterparties to such
contracts are major banking and financial institutions. Credit risk exists to the extent that the counterparties are unable to perform under the contracts; however, we do not anticipate non-performance by any of our counterparties.
We manage our debt and capital lease portfolio with interest rate swap agreements in U.S. dollars to achieve an overall desired position of fixed and floating interest rates. Certain interest rate swap agreements qualify and are designated for accounting purposes as cash flow hedges. Accordingly, the net gains and losses have been reported in a separate component of accumulated other comprehensive income to the extent the hedges are effective. The amount recorded in accumulated other comprehensive income will subsequently be reclassified into earnings in the same period as the hedged items affect earnings.
Fair values
We recognize our fair value estimates using a fair value hierarchy based on the inputs used to measure fair value. The fair value hierarchy has three levels based on reliability of inputs used to determine fair value as follows:
Level 1: Quoted market prices in active markets for identical assets and liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
The carrying value and estimated fair value of our financial instruments as of
June 30, 2017
and
December 31, 2016
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
December 31, 2016
|
(in thousands of $)
|
Fair value
Hierarchy
|
Carrying
Value
|
Fair
Value
|
Carrying
Value
|
Fair
Value
|
Non-Derivatives:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
Level 1
|
301,486
|
|
301,486
|
|
65,710
|
|
65,710
|
|
Restricted cash
|
Level 1
|
138,051
|
|
138,051
|
|
162,415
|
|
162,415
|
|
High-Yield and 2015 Norwegian Bonds
(1)
|
Level 1
|
186,422
|
|
181,022
|
|
300,452
|
|
293,484
|
|
2017 Norwegian Bonds
(2)
|
Level 2
|
250,000
|
|
250,000
|
|
—
|
|
—
|
|
Long-term debt — floating
(3)
|
Level 2
|
1,037,711
|
|
1,037,711
|
|
1,091,398
|
|
1,091,398
|
|
Obligations under capital leases
(3)
|
Level 2
|
123,934
|
|
123,934
|
|
117,751
|
|
117,751
|
|
|
|
|
|
|
|
Derivatives:
|
|
|
|
|
|
|
|
|
|
Interest rate swaps asset
(4) (5)
|
Level 2
|
6,461
|
|
6,461
|
|
8,194
|
|
8,194
|
|
Interest rate swaps liability
(4) (5)
|
Level 2
|
7,564
|
|
7,564
|
|
6,143
|
|
6,143
|
|
Cross currency interest rate swap liability
(6)
|
Level 2
|
17,266
|
|
17,266
|
|
81,454
|
|
81,454
|
|
Earn out units
(7)
|
Level 2
|
14,500
|
|
14,500
|
|
15,000
|
|
15,000
|
|
(1) This pertains to bonds with a carrying value of
$186.4 million
and
$300.5 million
as of
June 30, 2017
and
December 31, 2016
, respectively, which are included under long-term debt on the balance sheet. The fair value of the bonds as of
June 30, 2017
was
$181.0 million
(2016:
$293.5 million
), which is
97.1%
of their face value (2016:
97.7%
).
(2) On February 15, 2017, we completed the issuance and sale of
$250 million
of the 2017 Norwegian Bonds which will mature in May 2021 and bear interest at a rate of 3-month LIBOR plus
6.25%
. We subsequently entered into an economic hedge interest rate swap to reduce the risk associated with fluctuations in interest rates by converting the floating rate of the interest obligation under the 2017 Norwegian Bonds to an all-in fixed rate of
8.194%
.
(3) Our long-term debt and capital lease obligations are recorded at amortized cost in the consolidated balance sheets. The long term debt is presented gross of deferred financing cost of
$19.3 million
as of June 30, 2017 (2016:
$17.1 million
).
(4) Derivative liabilities are captured within other current liabilities and derivative assets are captured within long-term assets on the balance sheet.
(5) The fair value/carrying value of interest rate swap agreements (excluding the cross currency interest rate swap described in footnote 6) that qualify and are designated as cash flow hedges as of
June 30, 2017
and
December 31, 2016
was a net asset of
$0.1 million
(with a notional amount of
$77.5 million
) and a net liability of
$0.1 million
(with a notional amount of
$82.5 million
), respectively. The expected maturity of the remaining designated interest rate agreement is
February 2018
.
(6) In order to hedge our exposure to currency fluctuations under our 2012 High-Yield Bonds, we entered into a non-amortizing cross currency interest rate swap agreement. The swap hedges both the full redemption amount of the NOK obligation and the related quarterly interest payments. As of June 30, 2017, NOK
996 million
of the 2012 High-Yield Bonds had been repurchased and the corresponding share of the cross currency swap terminated. Accordingly, we ceased hedge accounting effective from January 1, 2017.
(7) This relates to the Earn Out units issued in connection with the IDR reset transaction in October 2016. The fair value of the Earn Out units was determined using a Monte-Carlo simulation method. This simulation was performed within the Black Scholes option pricing model then solved via an iterative process by applying the Newton-Raphson method for the fair value of the earn out units, such that the price of a unit output by the Monte Carlo simulation equaled the price observed in the market. The method took into account the historical volatility, dividend yield as well as the share price of the Golar Partner common units as of the IDR reset date and at balance sheet date.
As of June 30, 2017, the following are the details of our cross currency interest rate swap:
|
|
|
|
|
|
|
|
|
|
|
Instrument
(in thousands of $, unless otherwise indicated)
|
Notional amount
|
Maturity date
|
Rate
|
Fair value asset/(liability)
|
In NOK
|
In USD
|
Cross currency interest rate swap
|
304,000
|
|
53,128
|
|
Oct 2017
|
6.485
|
%
|
(17,266
|
)
|
As of
June 30, 2017
, NOK
996 million
of the 2012 High-Yield Bonds had been repurchased and the corresponding share of the cross currency swap terminated. Accordingly, we ceased hedge accounting of the cross currency interest rate swap effective from January 1, 2017. Consequently, the net loss of
$5.0 million
included in our accumulated other comprehensive loss in respect of the cross currency interest rate swap previously designated as a cash flow hedge was reclassified into earnings in the six months ended June 30, 2017.
The carrying values of accounts receivable, accounts payable and accrued liabilities, excluded from the table above, approximate fair values because of the short term maturity of these instruments.
The credit exposure of interest rate swap agreements is represented by the fair value of contracts with a positive fair value at the end of each period, reduced by the effects of master netting agreements. It is our policy to enter into master netting agreements with the counterparties to derivative financial instrument contracts, which give us the legal right to discharge all or a portion of amounts owed to that counterparty by offsetting them against amounts that the counterparty owes to us.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
(in thousands of $)
|
Gross amounts presented in the consolidated balance sheet
|
|
Gross amounts not offset in the consolidated balance sheet subject to netting agreements
|
|
Net amount
|
|
Gross amounts presented in the consolidated balance sheet
|
|
Gross amounts not offset in the consolidated balance sheet subject to netting agreements
|
|
Net amount
|
Total asset derivatives
|
6,461
|
|
|
(4,047
|
)
|
|
2,414
|
|
|
8,194
|
|
|
(4,194
|
)
|
|
4,000
|
|
Total liability derivatives
|
7,564
|
|
|
(4,047
|
)
|
|
3,517
|
|
|
6,143
|
|
|
(4,194
|
)
|
|
1,949
|
|
The cross currency interest rate swap has a credit support arrangement that requires us to provide cash collateral in the event that the market valuation drops below a certain level. Since the market valuation has fallen below this level, we have provided
$4.4 million
of cash collateral as of
June 30, 2017
.
The fair value measurement of an asset or a liability must reflect the non-performance of the entity. Therefore, the impact of our credit worthiness has also been factored into the fair value measurement of the derivative instruments in a liability position.
As of
June 30, 2017
, we have entered into the following interest rate swap transactions involving the payment of fixed rates in exchange for LIBOR as summarized below. The summary also includes those that are designated as cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
Instrument
(in thousands of $)
|
Notional amount
|
|
Maturity Dates
|
Fixed Interest Rates
|
Interest rate swaps:
|
|
|
|
|
|
|
|
|
|
|
Receiving floating, pay fixed
|
1,358,526
|
|
(1)
|
Feb 2018
|
to
|
Nov 2023
|
1.070
|
%
|
to
|
2.44%
|
(1) This excludes the nominal value of the cross currency interest rate swap of
$17.3 million
described above.
As of
June 30, 2017
, the notional principal amount of the swap agreements relating to the debt and capital lease obligations outstanding was
$1,358.5 million
(
December 31, 2016
:
$1,131.7 million
).
10. RELATED PARTY TRANSACTIONS
Net income from related parties:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
(in thousands of $)
|
2017
|
2016
|
|
2017
|
2016
|
Transactions with Golar and affiliates:
|
|
|
|
|
|
|
|
|
|
Time charter revenues (a)
|
5,540
|
|
7,280
|
|
|
8,723
|
|
14,560
|
|
Management and administrative services fees (b)
|
1,128
|
|
678
|
|
|
2,571
|
|
1,288
|
|
Ship management fees (c)
|
1,142
|
|
1,951
|
|
|
2,138
|
|
4,010
|
|
Income related to the Tundra Letter Agreement (d)
|
724
|
|
309
|
|
|
1,404
|
|
309
|
|
Interest income on short term credit arrangements (e)
|
—
|
|
—
|
|
—
|
|
—
|
|
122
|
|
Distributions to Golar (f)
|
12,858
|
|
13,100
|
|
|
25,656
|
|
26,338
|
|
Fees to Helm Energy Advisors Inc (g)
|
—
|
|
105
|
|
|
—
|
|
705
|
|
Transactions with others:
|
|
|
|
|
|
Dividends to China Petroleum Corporation (h)
|
3,600
|
|
3,200
|
|
|
7,000
|
|
6,000
|
|
Receivables from related parties:
As of
June 30, 2017
and
December 31, 2016
balances with related parties consisted of the following:
|
|
|
|
|
|
|
(in thousands of $)
|
June 30,
2017
|
|
December 31,
2016
|
Deposit paid to Golar (d)
|
107,247
|
|
|
107,247
|
|
Balances due (to)/from Golar and affiliates (e)
|
(1,085
|
)
|
|
21,908
|
|
Methane Princess
lease security deposit movements (i)
|
3,809
|
|
|
2,006
|
|
Total
|
109,971
|
|
|
131,161
|
|
(a)
Time charter revenues from related parties
- This consists of revenue from the charter of the
Golar Grand
for the three and six months ended
June 30, 2017
and 2016 respectively.
In February 2015, we exercised our option requiring Golar to charter in the
Golar Grand
for the period from February 16, 2015 until October 31, 2017 at approximately
75%
of the hire rate that would have been payable by the charterer. The daily time charter rate receivable from Golar reduced following the vessel’s lay up in December 2015.
In May 2017,
Golar Grand
started its new charter with a major international oil and gas company (the “New Charter”). We sub-chartered back the
Golar Grand
from Golar at the same time charter rate as the New Charter. The daily time charter rate receivable from Golar under the option had reverted back to the original rate following the vessel's drydocking in April 2017 but was reduced by the sub-charter income under the New Charter.
(b)
Management and administrative services agreement -
We are party to a management and administrative services agreement with Golar Management, a wholly-owned subsidiary of Golar, pursuant to which Golar Management will provide to us certain management and administrative services. The services provided by Golar Management are charged at cost plus a management fee equal to
5%
of Golar Management’s costs and expenses incurred in connection with providing these services. We may terminate the agreement by providing
120
days’ written notice.
(c)
Ship management fees
- Golar and certain of its affiliates charged ship management fees to us for the provision of technical and commercial management of the vessels. Each of our vessels is subject to management agreements pursuant to which certain commercial and technical management services are provided by certain subsidiaries of Golar, including Golar Management. We may terminate these agreements by providing
30 days
’ written notice.
(d)
Income from Tundra Letter Agreement/Deposit paid to Golar
- In May 2016, we completed the Tundra Acquisition and paid total cash purchase consideration of
$107.2 million
. Pursuant to the Tundra Letter Agreement, of the amount we are entitled to
receive under the agreement, we have accounted for
$0.7 million
and
$1.4 million
, and
$0.3 million
and
$0.3 million
as interest income for the three and six months ended
June 30, 2017
and 2016, respectively. In May 2017, we elected to exercise the Tundra Put Right to require Golar to repurchase Tundra Corp at a price equal to the original purchase price. In connection with the exercise of the Tundra Put Right, we and Golar entered into an agreement pursuant to which we agreed to sell Tundra Corp to Golar on the date of the closing of the Tundra Put Sale (the “Put Sale Closing Date”) in return for Golar's promise to pay an amount equal to
$107.2 million
(the “Deferred Purchase Price”) plus an additional amount equal to
5%
per annum of the Deferred Purchase Price (the “Additional Amount”). The Deferred Purchase Price and the Additional Amount shall be due and payable by Golar on the earlier of (a) the date of the closing of the Hilli Acquisition and (b) March 31, 2018. We agreed to accept the Deferred Purchase Price and the Additional Amount in lieu of a cash payment on the Put Sale Closing Date in return for an option (which we have exercised) to purchase an interest in Hilli Corp. See note 14.
(e)
Balances due (to)/from Golar and its affiliates -
Receivables and payables with Golar primarily comprise of unpaid fees and expenses for management and administrative services and vessel management services performed by Golar and its affiliates, and other related party arrangements including the
Golar Grand
time charter and the Tundra Letter Agreement. In addition, certain receivables and payables arise when we pay an invoice on behalf of a related party and vice versa. Receivables and payables are generally settled quarterly in arrears. Trading balances due from Golar and its affiliates are unsecured, interest-free and intended to be settled in the ordinary course of business. The change in trading balances with Golar from a receivable of
$21.9 million
as of December 31, 2016 to a payable of
$1.1 million
as of
June 30, 2017
is mainly attributable to settlement of the amounts due from Golar in respect of the
Golar Grand
time charter and the Tundra Letter Agreement.
(f)
Distributions to Golar
- During the three and six months ended
June 30, 2017
and
June 30, 2016
, we paid total distributions to Golar of
$12.9 million
and
$25.7 million
and
$13.1 million
and
$26.3 million
, respectively.
(g)
Fees to Helm Energy Advisors Inc.
- Through his co-ownership of Helm Energy Advisors Inc. (“Helm”), a company established and domiciled in Canada, Mr. Arnell, who was appointed to our Board in February 2015 and resigned in September 2016, acted and advised on various projects for us and earned approximately
$0.7 million
from us in fees for the six months ended June 30, 2016.
(h)
Dividends to China Petroleum Corporation
- During the three and six months ended
June 30, 2017
and
June 30, 2016
, Faraway Maritime Shipping Co., which is
60%
owned by us and
40%
owned by China Petroleum Corporation (“CPC”), paid total dividends to CPC of
$3.6 million
and
$7.0 million
and
$3.2 million
and
$6.0 million
, respectively.
(i)
Methane Princess lease security deposit movements
- This represents net advances to Golar since the IPO, which correspond with the net release of funds from the security deposits held relating to the
Methane Princess
lease. This is in connection with the
Methane Princess
tax lease indemnity provided by Golar under the Omnibus Agreement. Accordingly, these amounts held with Golar will be settled as part of the eventual termination of the
Methane Princess
lease.
11. OTHER COMMITMENTS AND CONTINGENCIES
Assets pledged
|
|
|
|
|
|
|
(in thousands of $)
|
At June 30,
2017
|
|
At December 31, 2016
|
Book value of vessels secured against long-term loans and capital leases
|
1,588,889
|
|
|
1,622,416
|
|
Other contractual commitments and contingencies
Insurance
We insure the legal liability risks for our shipping activities with Gard and Skuld, which are mutual protection and indemnity associations. As a member of a mutual association, we are subject to calls payable to the associations based on our claims record in addition to the claims records of all other members of the association. A contingent liability exists to the extent that the claims records of the members of the association in the aggregate show significant deterioration, which results in additional calls on the members.
Tax lease benefits
As of June 30, 2017, we have
one
UK tax lease (relating to the
Methane Princess
). A termination of this lease would realize the accrued currency gain or loss recorded against the lease liability, net of the restricted cash. As of June 30, 2017, there was a net accrued gain of approximately
$1.3 million
.
Under the terms of the leasing arrangement, the benefits are derived primarily from the tax depreciation assumed to be available to the lessor as a result of their investment in the vessel. As is typical in these leasing arrangements, as the lessee we are obligated to maintain the lessor’s after-tax margin. Accordingly, in the event of any adverse tax changes or a successful challenge by the UK Tax Authorities (“HMRC”) with regard to the initial tax basis of the transactions, or in the event of an early termination of the
Methane Princess
lease or in relation to the other vessels previously financed by UK tax leases, we may be required to make additional payments principally to the UK vessel lessor. We would be required to return all, or a portion of, or in certain circumstances significantly more than the upfront cash benefits that Golar received in respect of the lease financing transaction.
HMRC has been challenging the use of similar lease structures and has been engaged in litigation of a test case for some years. In August 2015, following an appeal to the Court of Appeal by the HMRC which set aside previous judgments in favor of the tax payer, the First Tier Tribunal (UK court) ruled in favor of HMRC. The judgments of the First Tier Tribunal do not create binding precedent for other UK court decisions and therefore the ruling in favor of HMRC is not binding in the context of our structures. Further, we consider there are differences in the fact pattern and structure between this case and our leasing arrangements and therefore is not necessarily indicative of any outcome should HMRC challenge us and we believe that our fact pattern is sufficiently different to succeed if we are challenged by HMRC. HMRC have written to our lessor to indicate that they believe the Methane Princess lease may be similar to the case noted above. We have reviewed the details of the case and the basis of the judgment with our legal and tax advisers to ascertain what impact, if any, the judgment may have on us and the possible range of exposure has been estimated at approximately
$nil
to
$26 million
(
£22.0 million
). However, under the indemnity provisions of the Omnibus Agreement, Golar has agreed to indemnify us against any liabilities incurred as a consequence of a successful challenge by the UK Revenue Authorities with regard to the initial tax basis of the Methane Princess lease and in relation to other vessels previously financed by UK tax leases. Golar is currently in conversation with HMRC on this matter, presenting the factual background of Golar's position.
Legal proceedings and claims
We may, from time to time, be involved in legal proceedings and claims that arise in the ordinary course of business. A provision will be recognized in the financial statements only where we believe that a liability will be probable and for which the amounts are reasonably estimable, based upon the facts known prior to the issuance of the financial statements.
In November and December 2015, the Indonesian tax authorities issued letters to PTGI to, among other things, revoke a previously granted VAT importation waiver in the approximate amount of
$24.0 million
for the
NR Satu
. In April 2016, PTGI initiated an action in the Indonesian tax court to dispute the waiver cancellation. The final hearing took place in June 2016 and we are awaiting the decision on the case. In the event that the revocation of the wavier is upheld, which we do not believe to be probable, PTGI will be indemnified by PTNR for any VAT liability as well as related interest and penalties under our time charter party agreement entered with them.
12. EQUITY ISSUANCES
The following table summarizes the issuances of common units and general partner units during the six months ended June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
|
|
Number of Common Units Issued
|
|
Offering Price
|
|
Gross Proceeds (in thousands of $)
(1)
|
|
Net Proceeds (in thousands of $)
|
|
Golar's Ownership after the Offering
(2)
|
|
Use of Proceeds
|
February 2017
|
|
5,175,000
|
|
|
$
|
22.67
|
|
|
119,438
|
|
|
118,774
|
|
|
31.5
|
%
|
|
General partnership purposes
|
______________________________
(1)
Includes General Partner's
2%
proportionate capital contribution.
(2)
Includes Golar's
2%
general partner interest in the Partnership.
The following table shows the movement in the number of common units and general partner units during the six months ended June 30, 2017:
|
|
|
|
|
|
(in units)
|
Common Units
|
GP Units
|
As of December 31, 2016
|
64,073,291
|
|
1,318,517
|
|
February 2017 offering
|
5,175,000
|
|
94,714
|
|
As of June 30, 2017
|
69,248,291
|
|
1,413,231
|
|
13. EARNINGS PER UNIT AND CASH DISTRIBUTIONS
The calculations of basic and diluted earnings per unit are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
Six months ended
June 30,
|
(in thousands of $, except per unit data)
|
2017
|
2016
|
2017
|
2016
|
Net income attributable to general partner and limited partner interests
|
53,828
|
|
27,982
|
|
77,382
|
|
44,733
|
|
Less: distributions paid
(1)
|
(40,807
|
)
|
(38,190
|
)
|
(81,614
|
)
|
(76,380
|
)
|
Under/(over) distributed earnings
|
13,021
|
|
(10,208
|
)
|
(4,232
|
)
|
(31,647
|
)
|
Under/(over) distributed earnings attributable to:
|
|
|
|
|
Common unitholders
|
11,644
|
|
(10,004
|
)
|
(4,147
|
)
|
(31,014
|
)
|
Net income attributable to:
|
|
|
|
|
|
|
|
|
Common unitholders
|
51,635
|
|
25,269
|
|
75,834
|
|
39,532
|
|
Basic:
|
|
|
|
|
Weighted average units outstanding (in thousands)
|
69,248
|
|
45,304
|
|
67,990
|
|
45,218
|
|
Diluted:
|
|
|
|
|
Weighted average units outstanding (in thousands)
|
69,248
|
|
45,304
|
|
67,990
|
|
45,218
|
|
Earnout units
|
749
|
|
—
|
|
749
|
|
—
|
|
Common unit and common unit equivalents
|
69,997
|
|
45,304
|
|
68,739
|
|
45,218
|
|
|
|
|
|
|
Earnings per unit (basic and diluted):
|
|
|
|
|
|
|
|
|
Basic - Common unitholders
|
$
|
0.75
|
|
$
|
0.56
|
|
$
|
1.12
|
|
$
|
0.87
|
|
Diluted - Common unitholders
|
$
|
0.74
|
|
$
|
0.56
|
|
$
|
1.10
|
|
$
|
0.87
|
|
Cash distributions declared and paid in the period per unit
(2)
:
|
$
|
0.58
|
|
$
|
0.58
|
|
$
|
1.16
|
|
$
|
1.16
|
|
Subsequent event:
Cash distributions declared and paid per unit relating to the period
(3)
:
|
$
|
0.58
|
|
$
|
0.58
|
|
$
|
0.58
|
|
$
|
0.58
|
|
______________________________________
(1) Refers to distributions made or to be made in relation to the period, irrespective of the declaration and payment dates, and is based on the number of units outstanding at the period end date. This includes cash distributions to IDR holders for the three and six months ended June 30,
2016
of
$2.2 million
and
$4.3 million
, respectively.
(2) Refers to cash distribution declared and paid during the period.
(3) Refers to cash distribution declared and paid subsequent to the period end.
As of
June 30, 2017
, of our total number of units outstanding,
68.5%
were held by the public and the remaining units were held by Golar (including the general partner units representing a
2%
interest).
14. SUBSEQUENT EVENTS
On August 4, 2017, our Board declared a distribution of
$0.5775
per unit in respect of the quarter ended
June 30, 2017
amounting to
$40.8 million
in the aggregate.
In July 2017, we executed with the charterer of the
Golar Freeze
FSRU, Dubai Supply Authority ("DUSUP") certain amendments to the existing time charter that was due to end in May 2020.
We and DUSUP have agreed to shorten the charter by
one
year and to remove DUSUP's termination for convenience rights and extension option rights (which ran to 2024). We will receive the right to terminate our obligations under the charter while continuing to receive the capital element of the charter until the end of the new charter period in April 2019.
Hilli
On August 15, 2017, we entered into a purchase and sale agreement (the "PSA") for the acquisition (the "Acquisition") from Golar and affiliates of Keppel Shipyard Limited ("Keppel") and Black and Veatch ("B&V") of equity interests (the "Acquired Interests") in Golar Hilli LLC, which will, on the closing date of the Acquisition, indirectly own the FLNG, the
Hilli
. The Acquired Interests represent the equivalent of
50%
of the
two
liquefaction trains, out of a total of
four
, that have been contracted to Perenco Cameroon SA and Societe Nationale Des Hydrocarbures (together, the "Customer") for an
eight
-year term. The purchase price for the Acquired Interests, as described below, is
$658 million
less net lease obligations under the financing facility for the
Hilli
(the "Hilli Facility") that are expected to be between
$468
and
$480 million
. Concurrently with the execution of the PSA, we paid a
$70 million
deposit to Golar, upon which we will receive interest at a rate of
5%
per annum.
The closing of the Acquisition (the "Closing") is subject to the satisfaction of certain closing conditions which include, among others, receiving the consent of the lenders under the Hilli Facility, the closing of the previously announced Put-Sale Closing with respect to the
Golar Tundra
, the delivery to and acceptance by the Customer of the
Hilli
, the commencement of commercial operations under the liquefaction tolling agreement (the
"
LTA
"
) and the formation of Golar Hilli LLC and the related Pre-Closing Contributions as described further below.
Prior to the Closing, Golar, Keppel and B&V will contribute their equity interests in Hilli Corp to the newly formed Golar Hilli LLC (the "Pre-Closing Contributions") in return for equity interests in Golar Hilli LLC. Membership interests in Golar Hilli LLC will be represented by
three
classes of units: Common Units ("Common Units"); Series A Special Units ("Series A Units"); and Series B Special Units ("Series B Units"). Common Units will be entitled to cash flows from the first
50%
of contracted capacity, initially contracted to the Customer under the LTA, at all times. Common Units will not be exposed to the oil-linked pricing elements of the tolling fee under the LTA, but will bear the operating costs of the
Hilli
, and the interest costs of the Hilli financing facility with only incremental costs accruing to the Series B Units. Series A Units will only be entitled to cash flows associated with oil price linked elements of the tolling fee under the LTA, net of incremental tax expenses and their pro rata portion of any costs that may arise as a result of the underperformance of the
Hilli
("Underperformance Costs"). Holders of Series B Units will be entitled to the cash flows associated with any expansion of contracted capacity of the
Hilli
beyond the first
50%
, net of incremental costs arising as a result of making available more than the first
50%
of production capacity of the
Hilli
("Incremental Costs"), Underperformance Costs and any reduction in revenue attributable to the first
50%
of LNG production capacity as a result of making more than
50%
of capacity available under the LTA. In the Acquisition, we will only acquire
50%
of the Common Units and
none
of the Series A Units or Series B Units.
Upon the Closing, which is expected to occur on or before April 30, 2018, Golar, Keppel and B&V will sell
50%
of the Common Units to us in return for our payment of the net purchase price of between approximately
$178
and
$190 million
. We will apply the
$107 million
deferred purchase price receivable from Golar in connection with the Tundra Put Sale and the
$70 million
deposit referred to above against the net purchase price and intend to pay the balance with cash on hand.
We do not expect to initially consolidate Golar Hilli LLC or Hilli Corp and so will reflect our share of net income on our income statement as "equity in net earnings of affiliates."
PURCHASE AND SALE AGREEMENT
DATED AUGUST 15, 2017
AMONG
GOLAR LNG LIMITED
KS INVESTMENTS PTE. LTD.
BLACK & VEATCH INTERNATIONAL COMPANY
AND
GOLAR PARTNERS OPERATING LLC
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.01
Definitions 2
ARTICLE II
PURCHASE AND SALE OF THE UNITS; CLOSING
Section 2.01
Purchase and Sale of the Units; Deposit 8
Section 2.02
Closing 8
Section 2.03
Place of Closing 8
Section 2.04
Purchase Price Adjustment 8
Section 2.05
Satisfaction of Certain Intercompany Receivables 9
Section 2.06
Construction Costs 9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 3.01
Organization; Good Standing and Authority 9
Section 3.02
Authorization, Execution and Delivery of this Agreement 9
Section 3.03
No Conflicts 9
Section 3.04
No Consents 10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Section 4.01
Organization; Good Standing and Authority 10
Section 4.02
Authority and Authorization; Execution and Delivery of this Agreement 10
Section 4.03
No Conflicts 10
Section 4.04
No Consents 10
Section 4.05
Ownership of Common Units and Hilli Corp Shares 11
Section 4.06
No Broker’s Fees 11
ARTICLE V
REPRESENTATIONS AND WARRANTIES REGARDING THE TRANSFERRED SUBSIDIARIES
Section 5.01
Organization; Good Standing and Authority 11
Section 5.02
Capitalization; No Options 11
Section 5.03
Organizational Documents 12
Section 5.04
Validity of Certain Key Agreements 12
Section 5.05
Validity of the LTA 12
Section 5.06
No Conflicts 12
Section 5.07
Title to Vessel; Encumbrances 13
Section 5.08
Litigation 13
Section 5.09
Indebtedness to and from Officers, etc 13
Section 5.10
Personnel 13
Section 5.11
Contracts and Agreements 13
Section 5.12
Compliance with Law 14
Section 5.13
No Undisclosed Liabilities 14
Section 5.14
Disclosure of Information 14
Section 5.15
Insurance 14
Section 5.16
U.S. Tax Classification 14
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
REGARDING THE VESSEL
Section 6.01
Flag 15
Section 6.02
Classification 15
Section 6.03
Maintenance 15
Section 6.04
Liens 15
Section 6.05
Safety 15
Section 6.06
No Blacklisting or Boycotts 15
Section 6.07
No Options 15
Section 6.08
Vessel Performance 16
Section 6.09
Intellectual Property 16
ARTICLE VII
PRE-CLOSING MATTERS
Section 7.01
Covenants of the Sellers Prior to the Closing 16
Section 7.02
Covenant of Buyer Prior to the Closing 17
ARTICLE VIII
CONDITIONS OF CLOSING
Section 8.01
Conditions of the Parties 18
Section 8.02
Conditions to the Sellers’ Obligations 18
Section 8.03
Conditions to Buyer’s Obligations 19
ARTICLE IX
COVENANTS OF THE SELLERS
Section 9.01
Golar Credit Support 20
Section 9.02
Golar Guarantee of Hilli Facility 20
Section 9.03
Provision of Service Boats 20
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
Section 10.01
Termination of Agreement 21
Section 10.02
Amendments and Waivers 21
ARTICLE XI
INDEMNIFICATION; REIMBURSEMENTS
Section 11.01
Indemnity by the Sellers 21
Section 11.02
Indemnity by Buyer 22
Section 11.03
Reimbursements 22
ARTICLE XII
MISCELLANEOUS
Section 12.01
Further Assurances 23
Section 12.02
Powers of Attorney 23
Section 12.03
Headings; References; Interpretation 24
Section 12.04
Successors and Assigns 24
Section 12.05
No Third Party Rights 24
Section 12.06
Counterparts 24
Section 12.07
Governing Law 24
Section 12.08
Severability 25
Section 12.09
Integration 25
Section 12.10
Notices 25
Section 12.11
Survival of Representations and Warranties 25
Section 12.12
Arbitration 25
Section 12.13
Damages 26
|
|
Schedule A
|
Common Units Owned and to be Sold by Each Seller
|
|
|
Schedule B
|
Hilli Corp Shares Owned by Each Seller
|
|
|
Exhibit I
|
Third Letter Agreement
|
|
|
Exhibit II
|
Form of Limited Liability Company Agreement of Golar Hilli LLC
|
PURCHASE AND SALE AGREEMENT
(the “
Agreement
”), dated as of August 15, 2017, by and among GOLAR LNG LIMITED, a Bermuda exempted company (“
Golar
”), KS Investments Pte. Ltd., a company incorporated in the British Virgin Islands (“
Keppel
”), and Black & Veatch International Company, a Missouri corporation (“
B&V
” and, together with Golar and Keppel, the “
Sellers
”), and GOLAR PARTNERS OPERATING LLC, a Marshall Islands limited liability company (“
Buyer
”), each a “
Party
” and collectively, the “
Parties
.”
RECITALS
WHEREAS
, Buyer wishes to purchase from the Sellers, and the Sellers wish to sell to Buyer, an aggregate of 1,230 common units representing limited liability company interests (the “
Units
”) in Golar Hilli LLC, a Marshall Islands limited liability company (“
Hilli LLC
”), that will be formed by Golar prior to the Closing Date (as defined herein);
WHEREAS
, on the Closing Date, the Sellers will be the record owners of all of the outstanding limited liability company interests of Hilli LLC which will consist of a total of 2,460 common units (the “
Common Units
”), 2,460 Series A Special Units and 2,460 Series B Special Units;
WHEREAS
, Golar GHK Lessors Limited, an indirect wholly owned subsidiary of Golar (“
Golar GHK
”), KSI Production Pte. Ltd., an indirect wholly owned subsidiary of Keppel (“
KSI Production
”) and B&V are the record owners of all of the outstanding shares of capital stock (the “
Hilli Corp Shares
”) of Golar Hilli Corporation, a Marshall Islands corporation (“
Hilli Corp
”);
WHEREAS
, prior to the Closing Date, Golar GHK will transfer all of the Hilli Corp Shares owned by it to Golar, and KSI Production will transfer all of the Hilli Corp Shares owned by it to Keppel;
WHEREAS
, prior to the Closing Date, each Seller will contribute all of the Hilli Corp Shares owned by it to Hilli LLC (the “
Hilli Corp Share Contribution
”);
WHEREAS
, Hilli Corp is the record owner of all of the outstanding shares (the “
Golar Cam Shares
”) of Golar Cameroon SASU, a Cameroon limited liability company (“
Golar Cam
”);
WHEREAS
, Hilli Corp is a party to that certain Memorandum of Agreement, dated September 9, 2015 (the “
MOA
”), pursuant to which Hilli Corp will sell to Fortune Lianjiang Shipping S.A., a company incorporated under the laws of Hong Kong (the “
Legal Owner
”), the
Hilli Episeyo
(the “
Vessel
”), a floating liquefaction vessel (“
FLNG
”);
WHEREAS
, the Vessel is subject to a bareboat charter party (including the additional clauses thereto), dated September 9, 2015, by and between Hilli Corp and the Legal Owner (the “
Bareboat Charter
”);
WHEREAS
, Hilli Corp and Golar Cam will enter into a Liquefaction Tolling Agreement (“
LTA
”) with Société Nationale Des Hydrocarbures, a Cameroon company (“
SNH
”), and Perenco Cameroon SA, a Cameroon limited liability company (“
Perenco
” and, together with SNH, the “
Customer
”), providing for certain services (“
FLNG Services
”) to be rendered to the Customer by Hilli Corp and/or Golar Cam utilizing the Vessel;
WHEREAS
, Hilli Corp and Golar Cam are parties to an Operation and Services Agreement, dated October 30, 2015 (the “
O&S Agreement
”), regarding the subcontracting of certain FLNG Services by Hilli Corp to Golar Cam; and
WHEREAS
, Hilli Corp, Golar Cam, Perenco, the Republic of Cameroon and SNH are parties to a Gas Agreement, dated September 30, 2015 (the “
Gas Agreement
”), which provides the technical, legal, financial and economic conditions for the FLNG export project in Cameroon which includes the Vessel.
NOW, THEREFORE
, the Parties hereto agree as follows:
Article I
DEFINITIONS
Section 1.01
Definitions
. In this Agreement, unless the context requires otherwise or unless otherwise specifically provided herein, the following terms shall have the respective meanings set out below and grammatical variations of such terms shall have corresponding meanings:
“
1934 Act Filings
” means the filings Golar has made with the Securities and Exchange Commission under the Securities Exchange Act of 1934.
“
Acceptance Date
”
shall have the meaning specified in the LTA.
“
Acceptance Minimum Requirements
”
shall have the meaning specified in the LTA.
“
Acceptance Tests
”
shall have the meaning specified in the LTA.
“
Additional Amount
” shall have the meaning set forth in the Third Letter Agreement.
“
Agreement
” means this Agreement, including its recitals, schedules and exhibits, as amended and supplemented.
“
Amended Hilli Facility Documents
” means the Amendments to the Hilli Facility Documents, together with any such additional documents as are necessary to provide for the Hilli Facility Amendment.
“
Applicable Law
” in respect of any Person, property, transaction or event, means all laws, statutes, ordinances, regulations, municipal by-laws, treaties, judgments and decrees applicable to that Person, property, transaction or event and, whether or not having the force of law, all applicable official directives, rules, consents, approvals, authorizations, guidelines, orders, codes of practice and policies of any Governmental Authority having or purporting to have authority over that Person, property, transaction or event and all general principles of common law and equity.
“
B&V
” has the meaning given to it in the Preamble to this Agreement.
“
Bareboat Charter
” has the meaning given to it in the recitals.
“
Business Day
” means any day other than a Saturday, Sunday or any statutory holiday on which banks in London or New York are required to close.
“
Buyer
” has the meaning given to it in the Preamble to this Agreement.
“
Buyer Attorney-in-Fact
” has the meaning given to it in
Section 12.02(a)
.
“
Buyer Indemnitees
” has the meaning given to it in
Section 11.01
.
“
Buyer Reimbursement
” has the meaning given to it in
Section 11.03(a)
.
“
Closing
” has the meaning given to it in
Section 2.02
.
“
Closing Date
” means the day on which the Closing takes place.
“
Commercial Management Agreement
” the agreement dated April 4, 2003, as novated on April 2, 2015, between Hilli Corp and the Commercial Manager in respect of the commercial management of the Vessel.
“
Commercial Manager
” means Golar Management Limited.
“
Commissioning Activities
”
shall have the meaning specified in the LTA.
“
Common Terms Agreement
” means the Common Terms Agreement, dated as of September 9, 2015, made by and between Hilli Corp, Golar and the Legal Owner.
“
Common Units
” means the common units representing limited liability company interests of Golar Hilli.
“
Conflicts Committee
” means the conflicts committee of the board of directors of Golar Partners.
“
Construction Costs
” has the meaning set forth in
Section 2.06
.
“
Contracts
” has the meaning given to it in
Section 5.045
.
“
Conversion Contract
” means the Engineering, Procurement & Construction Contract Between Keppel Shipyard Limited and Hilli Corp for the Repair Modification and Conversion of the Vessel into a FLNG Vessel.
“
Covered Environmental Losses
” means all Losses suffered or incurred by Buyer Indemnitees by reason of, arising out of or resulting from:
(a)
any violation or correction of violation of Environmental Laws; or
(b)
any event or condition relating to environmental or human health and safety matters,
in each case, associated with the ownership or operation by Buyer of the Vessel (including, without limitation, the presence of Hazardous Substances on, under, about or migrating to or from the Vessel or the disposal or release of, or exposure to, Hazardous Substances generated by or otherwise related to operation of the Vessel), including, without limitation, the reasonable and documented cost and expense of
(i)
any investigation, assessment, evaluation, monitoring, containment, cleanup, repair, restoration, remediation or other corrective action required or necessary under Environmental Laws,
(ii)
the preparation and implementation of any closure, remedial, corrective action or other plans required or necessary under Environmental Laws and
(iii)
any environmental or toxic tort (including, without limitation, personal injury or property damage claims) pre-trial, trial or appellate legal or litigation support work; but only to the extent that such violation complained of under clause (a), or such events or conditions included in clause (b), occurred before the Closing Date; and, provided that, in no event shall Losses to the extent arising from a change in any Environmental Law after the Closing Date be deemed “
Covered Environmental Losses
.”
“
Customer
” has the meaning given to it in the Recitals.
“
Customer Credit Support
”
shall have the meaning specified in the LTA.
“
Daily LDs
” shall have the meaning specified in the LTA.
“
Deferred Purchase Price
” shall have the meaning set forth in the Third Letter Agreement.
“
Deposit
” has the meaning given to it in
Section 2.01
.
“
Encumbrance
” means any mortgage, maritime or other lien, charge, assignment, adverse claim, hypothecation, restriction, option, covenant, voting trust arrangement, adverse claim, condition, encumbrance or right, whether fixed or floating, on, or any security interest in, any property whether real, personal or mixed, tangible or intangible, any pledge or hypothecation of any property, any deposit arrangement, priority, conditional sale agreement, other title retention agreement or equipment trust, capital lease or other security arrangements of any kind.
“
Enforceability Exceptions
” has the meaning given to it in
Section 3.02
.
“
Environmental Laws
” means all international, federal, state, foreign and local laws, statutes, rules, regulations, treaties, conventions, orders, judgments and ordinances having the force and effect of law and relating to protection of natural resources, health and safety and the environment, each in effect and as amended through the Closing Date.
“
FLNG
” has the meaning given to it in the Recitals.
“
FLNG Services
” has the meaning given to it in the Recitals.
“
Gas Agreement
” has the meaning given to it in the Recitals.
“
Golar
” has the meaning given to it in this Preamble to this Agreement.
“
Golar Attorney-in-Fact
” has the meaning given to it in
Section 12.02(b)
.
“
Golar Cam
” has the meaning given to it in the Recitals.
“
Golar Cam Shares
” has the meaning given to it in the Recitals.
“
Golar Credit Support
”
shall have the meaning specified in the LTA.
“
Golar GHK
” has the meaning given to it in the Recitals.
“
Golar Partners
” means Golar LNG Partners LP, a Marshall Islands limited partnership.
“
Governmental Authority
” means any domestic or foreign government, including federal, provincial, state, municipal, county or regional government or governmental or regulatory authority, domestic or foreign, and includes any department, commission, bureau, board, administrative agency or regulatory body of any of the foregoing and any multinational or supranational organization.
“
Hazardous Substances
” means
(a)
each substance defined, designated or classified as a hazardous waste, hazardous substance, hazardous material, solid waste, contaminant or toxic substance under Environmental Laws;
(a)
petroleum and petroleum products, including crude oil and any fractions thereof;
(a)
natural gas, synthetic gas and any mixtures thereof;
(a)
any radioactive material; and
(a)
any asbestos-containing materials in a friable condition.
“
Hilli Corp
” has the meaning given to it in the Recitals.
“
Hilli Corp Share Contribution
” has the meaning given to it in the Recitals.
“
Hilli Corp Shares
” has the meaning given to it in the Recitals.
“
Hilli LLC
” has the meaning given to it in the Recitals.
“
Hilli LLC Agreement
” has the meaning given to it in Section 8.01(e).
“
Hilli Facility
” means the financing arrangement for the Vessel evidenced by the Hilli Facility Documents.
“
Hilli Facility Amendment
” means the amendment to the Hilli Facility, evidenced by the Amended Hilli Facility Documents, which will increase the financing under the Hilli Facility to between $930 million and $960 million.
“
Hilli Facility Documents
” means the Bareboat Charter, the MOA, Common Terms Agreement, the Hilli Facility Amendment and the other Finance Documents (as defined in the Common Terms Agreement) and any related documents entered into in connection with the Hilli Facility and, following the entry into the Hilli Facility Amendment, shall include the Amended Hilli Facility Documents.
“
Insolvency Event
” means, with respect to any Person, that any of the following actions has occurred in relation to it:
(a)
an order has been made or an effective resolution passed or other proceedings or actions taken (including, without limitation, the presentation of a petition) with a view to its administration, bankruptcy, winding-up, liquidation or dissolution; or
(b)
it has had a receiver, administrative receiver, manager or administrator appointed over all or any substantial part of its undertaking or assets; or
(c)
any event has occurred or situation arisen in any jurisdiction that has a substantially similar effect to any of the foregoing.
“
Intellectual Property
” has the meaning given to it in
Section 6.09
.
“
Keppel
” has the meaning given to it in the Preamble to this Agreement.
“
Key Agreements
” has the meaning given to it in
Section 5.04
.
“
KSI Production
” has the meaning given to it in the Recitals.
“
Legal Owner
” has the meaning given to it in the Recitals.
“
Liquefaction License
” means the natural gas liquefaction license granted by the Minister of Water and Energy of the Republic of Cameroon to Golar Cam dated April 27, 2017.
“
Losses
” means, with respect to any matter, all losses, claims, damages (including Daily LDs), liabilities, deficiencies, costs, expenses (including all costs of investigation, legal and other professional fees and disbursements, interest, penalties and amounts paid in settlement) or diminution of value, whether or not involving a claim from a third party, however specifically excluding consequential, special and indirect losses.
“
LTA
” has the meaning given to it in the Recitals.
“
Material Agreements
” has the meaning given to it in
Section 5.11
.
“
MOA
” has the meaning given to it in the Recitals.
“
Net Purchase Price
” has the meaning given to it in
Section 2.02
.
“
Net Working Capital
” means the sum of all current assets and current liabilities as set forth on the consolidated balance sheet of Hilli LLC as of the Closing Date.
“
O&S Agreement
” has the meaning given to it in the Recitals.
“
Operating Expenses
” means, all expenditures made by Hilli LLC and its subsidiaries, including vessel operating expenses, taxes, maintenance expenses and employee compensation and benefits, and capital expenditures, in each case as computed in accordance with generally accepted accounting practices in the United States, as applied by Hilli Corp on the date of this Agreement. Operating Expenses shall not include any withholding taxes thereon.
“
Organizational Documents
” means, with respect to any entity, its articles of association, articles of incorporation and/or bylaws, certificate of formation and/or limited liability company agreement, certificate of limited partnership and/or agreement of limited partnership and/or other organizational documents.
“
Ownership Interest
” means, with respect to Golar, 89.11%, with respect to Keppel, 10.00%, and with respect to B&V, 0.89%.
“
Party
” or “
Parties
” has the meaning given to it in the Preamble to this Agreement.
“
Perenco
” has the meaning given to it in the Recitals.
“
Person
” means an individual, legal personal representative, corporation, body corporate, firm, limited liability company, partnership, trust, trustee, syndicate, joint venture, unincorporated organization or Governmental Authority.
“
Purchase Price
” has the meaning given to it in
Section 2.01
.
“
Purchase Price Adjustments
” has the meaning given to it in
Section 2.04
.
“
Related Party Indebtedness
” has the meaning given to it in
Section 5.09
.
“
Seller Indemnitees
” has the meaning given to it in
Section 11.02
.
“
Sellers
” has the meaning given to it in the Preamble to this Agreement.
“
Sellers Reimbursement
” has the meaning given to it in Section 11.03(b).
“
Taxes
” means all income, franchise, business, property, sales, use, goods and services or value added, withholding, excise, alternate minimum capital, transfer, customs, anti-dumping, countervail, net worth, stamp, registration, payroll, employment, health, education, business, school, local improvement, development and occupation taxes, surtaxes, duties, levies, imposts, rates, fees, assessments, dues and charges and other taxes required to be reported upon or paid to any Governmental Authority and all interest and penalties thereon.
“
Third Letter Agreement
” means the letter agreement, dated May 30, 2017, between Golar and Buyer attached as Exhibit I hereto.
“
Time of Closing
” has the meaning given to it in
Section 2.02
.
“
Transferred Subsidiaries
” means, collectively, Hilli LLC, Hilli Corp and Golar Cam.
“
Tundra Put Sale Closing
” means the closing of the put sale of the shares of capital stock of Golar Tundra Corp. to Golar pursuant to the Third Letter Agreement.
“
Units
” has the meaning given to it in the Recitals.
“
Vessel
” has the meaning given to it in the recitals.
“
Vessel Management Agreements
” means the O&S Agreement and the Commercial Management Agreement.
ARTICLE II
PURCHASE AND SALE OF THE UNITS; CLOSING
Section 2.01
Purchase and Sale of the Units; Deposit
. The Sellers agree to sell and transfer to Buyer, and Buyer agrees to purchase from the Sellers, for an aggregate amount equal to $658 million (the “
Purchase Price
”) and in accordance with and subject to the terms and conditions set forth in this Agreement, the Units set forth in
Schedule A
. The Purchase Price has been determined on the basis that the net lease obligations under the Hilli Facility as of the Closing Date are $960 million. The Sellers and the Buyer agree that the proceeds from the Hilli Facility Amendment will be used to pay any remaining Construction Costs with the remainder to be distributed to the Sellers in accordance with their respective Ownership Interests, it being understood that the economic benefits arising therefrom are for the benefit of the Sellers according to their Ownership Interests and not the Buyer, regardless of whether such distribution occurs before or after Closing (so as not to be an event that may delay Closing, although the Sellers will endeavor to conclude such distribution within 3 months from the date of the final disbursement of proceeds under the Hilli Facility Amendment or so soon as practicable). On the Closing Date, the Purchase Price shall be (a) increased in an amount equal to 50% of the amount by which the net lease obligations under the Hilli Facility as of the Closing Date are less than $960 million or (b) decreased in an amount equal to 50% of the amount by which the net lease obligations under the Hilli Facility as of the Closing Date are greater than $960 million. Concurrently with the execution of this Agreement, Buyer has paid an initial deposit of $70 million of the Purchase Price to Golar (the “
Deposit
”). The Deposit shall bear interest at a rate of 5% per annum and interest thereon shall be for the account of Buyer and applied as set forth in
Section 2.02
.
Section 2.02
Closing
. On the terms and subject to the conditions of this Agreement, the sale and transfer of the Units and payment of the Purchase Price less the Deposit and the interest thereon to the Time of Closing and (y) the Deferred Purchase Price and the Additional Amount (the “
Net Purchase Price
”) shall take place on April 30, 2018 or on such other date as may be agreed upon by the Sellers and Buyer (the “
Time of Closing
”). The sale and transfer of the Units is hereinafter referred to as the “
Closing
.” In the event the Closing has not occurred by April 30, 2018 for any reason, the Deposit together with interest thereon at a rate of 5% per annum shall be refunded by Golar to Buyer on such date.
Section 2.03
Place of Closing
. The Closing shall occur at a place agreed upon by the Sellers and Buyer.
Section 2.04
Purchase Price Adjustment
. Within 90 days following the Closing Date, Buyer and the Sellers shall agree upon a post-Closing adjustment to the Purchase Price in an amount by which Net Working Capital (excluding inventory, debt, payables associated with the Seller obligations pursuant to Section 11.01 and Construction Costs) exceeds or is less than $1.0 million (the “
Purchase Price Adjustment
”).
Within 120 days following the Closing Date, the Sellers or Buyer, as applicable, shall pay to the other Party or Parties an amount, in cash, equal to the Purchase Price Adjustment pursuant to this
Section 2.04
.
Section 2.05
Satisfaction of Certain Intercompany Receivables
. Each Seller hereby acknowledges that, upon receipt of the Purchase Price, any amounts payable to it and its subsidiaries by Hilli LLC, Hilli Corp or Golar Cam, other than trade receivables (excluding Construction Costs), will be extinguished.
Section 2.06
Construction Costs
. Notwithstanding anything herein to the contrary, the Sellers hereby agree to pay any amounts payable in connection with conversion or construction or payments related to the construction of the Vessel (“
Construction Costs
”).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Sellers that as of the date hereof and on the Closing Date:
Section 3.01
Organization; Good Standing and Authority
. Buyer has been duly formed and is validly existing in good standing under the laws of the Republic of the Marshall Islands and has all requisite limited liability company power and authority to operate its assets and conduct its business as it is now being conducted. No Insolvency Event has occurred with respect to Buyer and no events or circumstances have arisen that entitle or could entitle any person to take any action, appoint any person, commence proceedings or obtain any order instigating an Insolvency Event.
Section 3.02
Authorization, Execution and Delivery of this Agreement
. Buyer has the full right, power and authority to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement and all documents, instruments and agreements required to be executed and delivered by Buyer pursuant to this Agreement in connection with the completion of the transactions contemplated by this Agreement, have been duly authorized by all necessary action on its part, and this Agreement has been duly executed and delivered by Buyer and constitutes a legal, valid and binding obligation of Buyer enforceable against it in accordance with its terms, except as may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar laws of general application affecting the enforceability of remedies and rights of creditors and except that equitable remedies such as specific performance and injunction are in the discretion of a court (the “
Enforceability Exceptions
”).
Section 3.03
No Conflicts
. The execution, delivery and performance by Buyer of this Agreement will not conflict with or result in any violation of or constitute a breach of any of the terms or provisions of, or result in the acceleration of any obligation under, or constitute a default under any provision of:
(a)
Buyer’s Organizational Documents;
(a)
any Encumbrance, bond, indenture, agreement, contract, franchise license, permit or other instrument or obligation to which Buyer is a party or is subject or by which any of its assets or properties may be bound; or
(a)
any Applicable Laws.
Section 3.04
No Consents
. Except as have already been obtained or that will be obtained prior to the Time of Closing, no consent, permit, approval or authorization of, notice or declaration to or filing with any Governmental Authority or any other Person, including those related to any environmental laws or regulations, is required in connection with the execution and delivery by Buyer of this Agreement or the consummation by Buyer of the transactions contemplated hereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each Seller represents and warrants to Buyer that as of the date hereof and on the Closing Date:
Section 4.01
Organization; Good Standing and Authority
. Seller has been duly incorporated and is validly existing and in good standing under the laws of its respective jurisdiction of formation and has all requisite power and authority to operate its assets and conduct its business and, with respect to Golar, as described in the 1934 Act Filings. No Insolvency Event has occurred with respect to Seller and no events or circumstances have arisen that entitle or could entitle any person to take any action, appoint any person, commence proceedings or obtain any order instigating an Insolvency Event.
Section 4.02
Authority and Authorization; Execution and Delivery of this Agreement
. Seller has the full right, power and authority to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement and all documents, instruments and agreements required to be executed and delivered by Seller pursuant to this Agreement in connection with the completion of the transactions contemplated by this Agreement (including the Hilli LLC Agreement), have been duly authorized by all necessary action on its part, and this Agreement has been duly executed and delivered by Seller and constitutes a legal, valid and binding obligation of Seller, enforceable against it in accordance with its terms, except as may be limited by the Enforceability Exceptions.
Section 4.03
No Conflicts
. The execution, delivery and performance by Seller of this Agreement and the consummation of the transactions contemplated hereunder will not conflict with or result in any violation of or constitute a breach of any of the terms or provisions of, or result in the acceleration of any obligation under, or constitute a default under any provision of:
(a)
Seller’s Organizational Documents;
(a)
any Encumbrance, bond, indenture, agreement, contract, franchise license, permit or other instrument or obligation to which Seller is a party or is subject or by which any of its assets or properties may be bound; or
(a)
any Applicable Laws.
Section 4.04
No Consents
. Except as have already been obtained or that will be obtained prior to the Time of Closing, no consent, permit, approval or authorization of, notice or declaration to or filing with any Governmental Authority or any other Person, including those related to any environmental laws or regulations, is required in connection with the execution and delivery by Seller of this Agreement or the consummation by Seller of the transactions contemplated hereunder.
Section 4.05
Ownership of Common Units and Hilli Corp Shares
. As of the Closing Date, such Seller will own the Common Units set forth opposite its name in Schedule A and will have good and valid title to such Common Units, free and clear of any and all Encumbrances, and, upon conveyance on the Closing Date of the certificate representing the Common Units to be sold by such Seller as set forth on Schedule A, endorsed by such Seller in favor of Buyer, Buyer will receive good and valid title to such Common Units, free and clear of any and all Encumbrances. As of the date hereof, such Seller owns the Hilli Corp Shares set forth opposite its name in Schedule B and has good and valid title thereto, free and clear of any and all Encumbrances other than those arising under the Hilli Facility Documents.
Section 4.06
No Broker’s Fees
. No one is entitled to receive any finder’s fee, brokerage, or other commission in connection with the purchase of the Units or the consummation of the transactions contemplated by this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES REGARDING THE TRANSFERRED SUBSIDIARIES
Golar represents and warrants to Buyer (except (1) as to Section 5.09, each of Golar and Keppel represents and warrants to Buyer and (2), as to Section 5.11, each of Golar, Keppel and B&V represents and warrants to Buyer) that (a) in the case of the Sellers and the Transferred Subsidiaries other than Hilli LLC, as of the date hereof and on the Closing Date and (b) in the case of Hilli LLC, on the Closing Date:
Section 5.01
Organization; Good Standing and Authority
. Each of the Transferred Subsidiaries has been or will on the Closing Date have been duly incorporated and is and will be validly existing in good standing under the laws of its respective jurisdiction of formation or incorporation and has and will have all requisite power and authority to own and operate its assets and conduct its business. No Insolvency Event has occurred with respect to any of the Transferred Subsidiaries, and no events or circumstances have arisen that entitle or could entitle any person to take any action, appoint any person, commence proceedings or obtain any order instigating an Insolvency Event with respect to the Transferred Subsidiaries. Each of the Transferred Subsidiaries is qualified to do business, is in good standing and has all required and appropriate licenses and authorizations in each jurisdiction in which its failure to obtain or maintain such qualification, good standing, licensing or authorization would have a material adverse effect on its condition (financial or otherwise), assets, properties, business or prospects.
Section 5.02
Capitalization; No Options
. On the Closing Date, the issued and outstanding limited liability company interests of Hilli LLC will consist of 2,460 Common Units, 2,460 Series A Special Units and 2,460 Series B Special Units. On the Closing Date, all of such units will have been duly authorized and validly issued in accordance with the Organizational Documents of Hilli LLC and will be fully paid and non-assessable. As of the Closing Date, Hilli LLC will own all of the Hilli Corp Shares free and clear of any Encumbrances, other than those arising under the Hilli Facility Documents. The Hilli Corp Shares have been duly authorized and validly issued in accordance with the Organizational Documents of Hilli Corp and are fully paid and non-assessable. As of the date hereof, Hilli Corp owns all of the Golar Cam Shares and has good and valid title thereto, free and clear of any and all Encumbrances. The Golar Cam Shares have been duly authorized and validly issued in accordance with the Organizational Documents of Golar Cam and are fully paid and non-assessable. On the date hereof, and on the Closing Date, other than as set forth in the Organizational Documents of Hilli Corp and Hilli LLC, there are not and there will not be outstanding (i) any options, warrants, pre-emptive or other rights to purchase any equity interests of any Transferred Subsidiary, (ii) any securities convertible into or exchangeable for such equity interests of any Transferred Subsidiary or (iii) any other commitments of any kind for the issuance of additional equity interests of any Transferred Subsidiary or options, warrants or other securities of any Transferred Subsidiary.
Section 5.03
Organizational Documents
. The Sellers have supplied to Buyer true and correct copies of the Organizational Documents, as amended to the Closing Date of each Transferred Subsidiary, and no amendments will be made to the Organizational Documents prior to the Closing Date without the prior written consent of Buyer (such consent not to be unreasonably withheld).
Section 5.04
Validity of Certain Key Agreements
. The Sellers have supplied to Buyer true and correct copies of the Gas Agreement, the Vessel Management Agreements, the Hilli Facility Documents, the Liquefaction License and any related documents, as amended through the Closing Date (the “
Key Agreements
”). Each of the Key Agreements is a valid and binding agreement of the Sellers and each of the Transferred Subsidiaries party thereto, as applicable, enforceable against it in accordance with its terms and, to the knowledge of Golar and Keppel, each of the Key Agreements is a valid and binding agreement of all other parties thereto enforceable against such parties in accordance with its terms, except as may be limited by the Enforceability Exceptions.
Section 5.05
Validity of the LTA
As of the Closing Date, the LTA will have been duly authorized, executed and delivered by the parties thereto, and the LTA will be a valid and binding agreement of Hilli Corp and Golar Cam, enforceable against Hilli Corp and Golar Cam in accordance with its terms, except as may be limited by the Enforceability Exceptions. To the knowledge of Golar and Keppel, as of the Closing Date, the LTA will be a valid and binding agreement of Perenco and SNH, enforceable against Perenco and SNH in accordance with its terms, except as may be limited by the Enforceability Exceptions. The LTA and the Key Agreements are referred to collectively herein as the “
Contracts
.”
Section 5.06
No Conflicts
. The execution, delivery and performance of this Agreement will not conflict with or result in any violation of or constitute a breach of any of the terms or provisions of, or result in the acceleration of any obligation under, or constitute a default under any provision of:
(a)
the Organizational Documents of any Transferred Subsidiaries;
(a)
any Encumbrance, bond, indenture, agreement, contract, franchise license, permit or other instrument or obligation to which any of the Transferred Subsidiaries is a party or is subject or by which any of its assets or properties may be bound;
(a)
any Applicable Laws; or
(a)
give any other party thereto a right to terminate any agreement or other instrument to which any of the Transferred Subsidiaries is a party or by which it is bound.
Section 5.07
Title to Vessel; Encumbrances
. As of the Closing Date, Hilli Corp will be the disponent owner and bareboat charterer of the Vessel pursuant to the Hilli Facility Documents. As of the Closing Date, net lease obligations under the Hilli Facility, taking into account the Hilli Facility Amendment, will be between $930 million and $960 million.
Section 5.08
Litigation
.
(a)
There is no action, suit or proceeding to which any of the Transferred Subsidiaries is a party (either as a plaintiff or defendant) or to which the Vessel is subject pending before any court or governmental agency, authority or body or arbitrator; there is no action, suit or proceeding threatened against any of the Transferred Subsidiaries or the Vessel; and, to the best knowledge of Golar and Keppel, there is no basis for any such action, suit or proceeding;
(b)
None of the Transferred Subsidiaries has been permanently or temporarily enjoined by any order, judgment or decree of any court or any governmental agency, authority or body from engaging in or continuing any conduct or practice in connection with the operation of its business or the ownership of its assets or properties; and
(c)
There is not in existence any order, judgment or decree of any court or other tribunal or other agency enjoining or requiring any of the Transferred Subsidiaries to take any action of any kind with respect to their respective businesses, assets or properties.
Section 5.09
Indebtedness to and from Officers, etc
. As of the Closing Date, none of the Transferred Subsidiaries will be indebted, directly or indirectly, to any person who is an officer, director, stockholder or employee of any of the Sellers or any spouse, child, or other relative or any affiliate of any such person, nor will any such officer, director, stockholder, employee, relative or affiliate be indebted to any of the Transferred Subsidiaries, other than with respect to trade receivables (collectively, “
Related Party Indebtedness
”).
Section 5.10
Personnel
. Other than Golar Cam, none of the Transferred Subsidiaries has any employees.
Section 5.11
Contracts and Agreements
. All material contracts and agreements, written or oral, to which any of the Transferred Subsidiaries is a party or by which any of its assets are bound, including the Contracts (the “
Material Agreements
”), have been disclosed to Buyer. Except as otherwise contemplated herein, no other contracts will be entered into by any of the Transferred Subsidiaries prior to the Closing Date without the prior consent of Buyer (such consent not to be unreasonably withheld).
(a)
As of the Closing Date, each of the Material Agreements will be a valid and binding agreement of the Sellers and the Transferred Subsidiaries party thereto, as applicable, enforceable against it in accordance with its terms, and to the knowledge of the Sellers, each Material Agreement will be a valid and binding agreement of all other parties thereto enforceable against such parties in accordance with their terms, except as may be limited by the Enforceability Exceptions;
(b)
As of the Closing Date, each of the Sellers and the Transferred Subsidiaries will have fulfilled all material obligations required to have been performed by it prior to the Closing Date pursuant to the Material Agreements, and none of the Sellers or any of the Transferred Subsidiaries will have waived any material rights thereunder; and
(c)
There has not occurred any material default on the part of the Sellers or any of the Transferred Subsidiaries under any of the Material Agreements, or to the knowledge of the Sellers, on the part of any other party thereto, nor has any event occurred that with the giving of notice or the lapse of time, or both, would constitute any material default on the part of the Sellers or any of the Transferred Subsidiaries under any of the Material Agreements nor, to the knowledge of the Sellers, has any event occurred that with the giving of notice or the lapse of time, or both, would constitute any material default on the part of any other party to any of the Material Agreements.
Section 5.12
Compliance with Law
. The conduct of business by the Transferred Subsidiaries and the operation of the Vessel do not violate any Applicable Laws (including, but not limited to, any of the foregoing relating to employment discrimination, environmental protection or conservation, and the provisions of all international conventions and the rules and regulations issued thereunder applicable to the Vessel), the enforcement of which would materially and adversely affect the business, assets, condition (financial or otherwise) or prospects of the Transferred Subsidiaries, nor have any of the Transferred Subsidiaries or the Sellers received any notice of any such violation.
Section 5.13
No Undisclosed Liabilities
. None of the Transferred Subsidiaries or the Vessel has any Encumbrances, or other liabilities or obligations of any nature, whether absolute, accrued, contingent or otherwise, and whether due or to become due (including, without limitation, any liability for Taxes and interest, penalties and other charges payable with respect to any such liability or obligation), except for such liabilities or obligations arising under the Contracts and other than the Encumbrances or other liabilities or obligations disclosed (to the extent material) to Buyer before the date hereof.
Section 5.14
Disclosure of Information
. The Sellers have disclosed to Buyer all material information on, and about, the Transferred Subsidiaries, and the Vessel and all such information is true, accurate, complete and not misleading in any material respect. Nothing has been withheld from any materials provided by the Sellers to Buyer in connection with the transactions contemplated by this Agreement that would render such information untrue or misleading in any material respect.
Section 5.15
Insurance
. The insurance policies relating to the Vessel are set forth on
Schedule C
hereto, each of which will be in full force and effect at the time of the Closing.
Section 5.16
U.S. Tax Classification
. Prior to Closing, each of Hilli LLC and Golar Cam will elect to be classified for U.S. federal income tax purposes as an entity disregarded as separate from its owner and Hilli Corp will elect to be classified for U.S. federal income tax purposes as a partnership pursuant to Treas. Reg. Section 301.7701-3. Neither the Sellers nor any of the Transferred Subsidiaries will take any action to change the U.S. federal income tax classification of the Transferred Subsidiaries (other than the change of Hilli LLC to a partnership upon the Closing).
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
REGARDING THE VESSEL
Golar represents and warrants to Buyer (except as to Sections 6.03(a), 6.05(a) and 6.08(a), each of Golar and Keppel represents and warrants to Buyer) that:
Section 6.01
Flag
. At the Time of the Closing, the Vessel will be properly registered in the name of the Legal Owner under and pursuant to the flag and law of the Republic of the Marshall Islands, and all fees due and payable in connection with such registration will have been paid.
Section 6.02
Classification
. At the Time of the Closing, the Vessel will be entered with Det Norske Veritas Germanischer Lloyd. At the Time of the Closing, the Vessel will be in class without any recommendations or notation as to class or other requirement of the relevant classification society, and if the Vessel is in a port, it will not be in such condition that it cannot be detached by any port state authority or the flag state authority for any deficiency.
Section 6.03
Maintenance
. (a) Prior to the delivery of the Vessel under the Conversion Contract, the Vessel will have been maintained in a proper and efficient manner in accordance with the terms of the Conversion Contract and (b) prior to the Closing, the Vessel will have been maintained in a proper and efficient manner in accordance with internationally accepted standards for good ship maintenance, will be in good operating order, condition and repair and be seaworthy and all repairs made to the Vessel and all known scheduled repairs due to be made and all known deficiencies will have been disclosed to Buyer.
Section 6.04
Liens
. At the Time of the Closing, the Vessel will not
(a)
be under arrest or otherwise detained, (b) other than in the ordinary course of business, be in the possession of any Person (other than her master and crew) or (c) be subject to a possessory lien.
Section 6.05
Safety
. (a) Upon the delivery of the Vessel under the Conversion Contract, the Vessel will be supplied with valid and up-to-date safety, safety construction, safety equipment, radio, loadline, health, tonnage, trading and other certificates or documents as required under the Conversion Contract and (b) at the Time of the Closing, the Vessel will be supplied with valid and up-to-date safety, safety construction, safety equipment, radio, loadline, health, tonnage, trading and other certificates or documents as may for the time being be prescribed by the law of the Republic of the Marshall Islands or of any other pertinent jurisdiction, or that would otherwise be deemed necessary by a shipowner acting in accordance with internationally accepted standards for good ship management and operations.
Section 6.06
No Blacklisting or Boycotts
. On the date hereof and on the Closing Date, no blacklisting or boycotting of any type has been or will have been applied or exists or will exist in respect of the Vessel.
Section 6.07
No Options
. Other than as provided in the Hilli Facility Documents, there are no outstanding options or other rights to purchase the Vessel, and on the Closing Date, there will be no outstanding options or other rights to purchase the Vessel.
Section 6.08
Vessel Performance
. (a) Upon the delivery of the Vessel under the Conversion Contract, the Vessel will comply in all material respects with the technical and operational specifications set forth in the Conversion Contract and (b) at the Acceptance Date and on the Closing Date, the Vessel will comply in all material respects with the technical and operational specifications set forth in the LTA and will be in every way fit to perform the FLNG Services contemplated in the LTA.
Section 6.09
Intellectual Property
. (a) the Transferred Subsidiaries own or possess, or can acquire on reasonable terms, adequate patents, patent rights, licenses, inventions, copyrights, know how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names or other intellectual property (collectively, “Intellectual Property”) necessary to carry on their business in the manner contemplated under the LTA, and (b) neither the Sellers nor the Transferred Subsidiaries have received any notice and are not otherwise aware of any infringement of or conflict with asserted rights of others with respect to any Intellectual Property or of any facts or circumstances that would render any Intellectual Property invalid or inadequate to protect the interests in the Transferred Subsidiaries.
ARTICLE VII
PRE-CLOSING MATTERS
Section 7.01
Covenants of the Sellers Prior to the Closing
. From the date of this Agreement to the Closing Date, the Sellers shall cause each of the Transferred Subsidiaries to conduct its business in the usual, regular and ordinary course in substantially the same manner as previously conducted. The Sellers shall not permit any of the Transferred Subsidiaries to enter into any contracts or other written or oral agreements prior to the Closing Date, other than such contracts and agreements as have been disclosed to Buyer prior to the date of this Agreement, without the prior consent of Buyer (such consent not to be unreasonably withheld). In addition, the Sellers shall not permit any of the Transferred Subsidiaries to take any action that would result in any of the conditions to the purchase and sale of the Units set forth in
Article VIII
not being satisfied. Furthermore, each Seller hereby agrees and covenants that it:
(a)
shall cooperate with Buyer and use its reasonable best efforts to obtain, at or prior to the Closing Date, any consents required in respect of the transfer of the rights and benefits under the Material Agreements;
(b)
shall use its reasonable best efforts to take or cause to be taken promptly all actions and to do or cause to be done all things necessary, proper and advisable to consummate and make effective as promptly as practicable the transaction contemplated by this Agreement and to cooperate with Buyer in connection with the foregoing, including using all reasonable best efforts to obtain all necessary consents, approvals and authorizations from each Governmental Authority and each other Person that are required to consummate the transaction contemplated under this Agreement;
(c)
shall take or cause to be taken all necessary corporate action, steps and proceedings to approve or authorize validly and effectively the purchase and sale of the Units and the execution and delivery of this Agreement and the other agreements and documents contemplated hereby;
(d)
shall not amend, alter or otherwise modify or permit any amendment, alteration or modification of any material provision of or terminate any Material Agreement prior to the Closing Date without the prior written consent of the Conflicts Committee, such consent not to be unreasonably withheld or delayed;
(e)
shall not exercise, waive or permit any exercise of any rights or options contained in any of the Material Agreements, without the prior written consent of the Conflicts Committee, not to be unreasonably withheld or delayed;
(f)
shall observe and perform in a timely manner, all of its covenants and obligations under the Material Agreements, if any, and in the case of a default by another party thereto, it shall forthwith advise Buyer of such default and shall, if requested by Buyer, enforce all of its rights under the Material Agreements, as applicable, in respect of such default;
(g)
shall not cause or, to the extent reasonably within its control, permit any Encumbrances to attach to the Vessel other than in connection with the Hilli Facility;
(h)
shall not amend any Organizational Document of any Transferred Subsidiary without the prior written consent of Buyer (such consent not to be unreasonably withheld);
(i)
shall not cause or permit the issuance of any equity interests, or securities instruments convertible into equity securities, of any of the Transferred Subsidiaries;
(j)
shall not cause or permit any of the Transferred Subsidiaries to incur any indebtedness, other than in connection with the Hilli Facility;
(k)
shall not amend, release or adjust the Customer Credit Support (as defined in the LTA) without the prior written consent of the Conflicts Committee; and
(l)
shall permit representatives of Buyer to make, prior to the Closing Date, at Buyer’s risk and expense, such searches, surveys, tests and inspections of the Vessel as Buyer may deem desirable; provided, however, that such surveys, tests or inspections shall not damage the Vessel or interfere with the activities of the Sellers or the Customer thereon and that Buyer shall furnish the Sellers with evidence that Buyer has adequate liability insurance in full force and effect.
Section 7.02
Covenant of Buyer Prior to the Closing
. To the extent not completed prior to the date hereof, Buyer hereby agrees and covenants that during the period of time after the date of the Agreement and prior to the Closing Date, Buyer shall, in respect of the Units to be transferred on the Closing Date, take, or cause to be taken, all necessary limited liability company action, steps and proceedings to approve or authorize validly and effectively the purchase of the Units and the execution and delivery of this Agreement and the other agreements and documents contemplated hereby.
ARTICLE VIII
CONDITIONS OF CLOSING
Section 8.01
Conditions of the Parties
. The obligation of the Sellers to sell the Units and the obligation of Buyer to purchase the Units is subject to the satisfaction (or waiver by each of the Sellers and Buyer) on or prior to the Closing Date of the following conditions:
(a)
The Sellers shall have received any and all written consents, permits, approvals or authorizations of any Governmental Authority or any other Person (including, but not limited to, with respect to the Contracts) and shall have made any and all notices or declarations to or filing with any Governmental Authority or any other Person, including those related to any environmental laws or regulations, required in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereunder, including the transfer of the Units;
(b)
No legal or regulatory action or proceeding shall be pending or threatened by any Governmental Authority to enjoin, restrict or prohibit the purchase and sale of the Units;
(c)
The Amended Hilli Facility Documents shall have been entered into and the Hilli Facility Amendment shall have become effective;
(d)
Hilli LLC will have been duly formed and the Certificate of Formation of Hilli LLC will have been filed with the Republic of the Marshall Islands Office of the Registrar of Corporations;
(e)
The Sellers will have executed and delivered the Limited Liability Company Operating Agreement of Hilli LLC in substantially the form attached hereto as
Exhibit II
(the “
Hilli LLC Agreement
”);
(f)
The Hilli Corp Share Contribution shall have occurred, and as a result, on the Closing Date, Hilli LLC will own all of the Hilli Corp Shares free and clear of any Encumbrances, including for the avoidance of doubt any shareholder loans to Hilli Corp which shall have been contributed as equity capital, other than those arising under the Hilli Facility Documents.
Section 8.02
Conditions to the Sellers’ Obligations
. The obligation of the Sellers to sell the Units is subject to the satisfaction (or waiver by the Sellers) on or prior to the Closing Date of the following conditions:
(a)
The representations and warranties of Buyer made in this Agreement shall be true and correct in all material respects as of the Closing Date as though made on the Closing Date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects, on and as of such earlier date);
(b)
Buyer shall have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by Buyer by the Closing Date;
(c)
Golar Partners shall have entered into an agreement pursuant to which it shall guarantee 50% of the indebtedness of Hilli Corp under the Hilli Facility for so long as the Hilli Facility remains in effect; and
(d)
All proceedings to be taken in connection with the transactions contemplated by this Agreement and all documents incidental thereto shall be reasonably satisfactory in form and substance to the Sellers and their counsel, and the Sellers shall have received copies of all such documents and other evidence as they may reasonably request in order to establish the consummation of such transactions and the taking of all proceedings in connection therewith.
Section 8.03
Conditions to Buyer’s Obligations
. The obligation of Buyer to purchase and pay for the Units is subject to the satisfaction (or waiver by Buyer) on or prior to the Closing Date of the following conditions:
(a)
The LTA shall have been duly authorized, executed and delivered by all parties thereto in substantially the form furnished to Buyer as of the date hereof;
(b)
The Vessel shall have passed the Acceptance Tests and satisfied the Acceptance Minimum Requirements and been delivered to and accepted by Perenco under the terms of the LTA and commenced commercial operations thereunder, and the Acceptance Date shall have occurred;
(c)
The Delivery shall have occurred, as such term is defined in the Common Terms Agreement;
(d)
The representations and warranties of the Sellers in this Agreement shall be true and correct in all material respects as of the Closing Date as though made on the Closing Date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects, on and as of such earlier date);
(e)
Golar GHK shall have transferred all Hilli Corp Shares owned by it to Golar;
(f)
KSI Production shall have transferred all Hilli Corp Shares owned by it to Keppel;
(g)
The Sellers shall have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by the Sellers by the Closing Date;
(h)
The results of the searches, surveys, tests and inspections of the Vessel referred to in
Section 7.01(l)
of this Agreement are reasonably satisfactory to Buyer;
(i)
Buyer shall have obtained the funds necessary to consummate the purchase of the Units, and to pay all related fees and expenses;
(j)
The Tundra Put Sale Closing shall have occurred;
(k)
Perenco and SNH shall have provided the Customer Credit Support, as such term is defined in the LTA, and the Customer Credit Support shall be in full force and effect;
(l)
No material adverse change to the condition (financial or otherwise), assets, properties, business or prospects of the Transferred Subsidiaries, taken as a whole, shall have occurred;
(m)
No Related Party Indebtedness shall be outstanding;
(n)
All proceedings to be taken in connection with the transaction contemplated by this Agreement and all documents incidental thereto shall be reasonably satisfactory in form and substance to Buyer and its counsel, and Buyer shall have received copies of all such documents and other evidence as it or its counsel may reasonably request in order to establish the consummation of such transaction and the taking of all proceedings in connection therewith.
ARTICLE IX
COVENANTS OF THE SELLERS
Section 9.01
Golar Credit Support
. Golar and Keppel agree that Hilli Corp shall continue to provide the Golar Credit Support (as such term is defined in the LTA) for so long as the LTA remains in effect and Keppel agrees to continue to provide its letter of indemnity dated 24 November 2015, in support of the Golar Credit Support in relation to its ownership interest in the Common Units after giving effect to the Closing, and Golar shall be responsible for the balance, and Golar agrees to continue to provide its parent company guarantee and pledged cash security pursuant to the Security Agreement of All Accounts, dated November 29, 2016, made by and between Golar and Standard Chartered Bank, London as security for the Golar Credit Support for so long as the Golar Credit Support is in effect.
Section 9.02
Golar Guarantee of Hilli Facility
. Golar agrees to continue to provide its guarantee of 50% of Hilli Corp’s indebtedness under the Hilli Facility for so long as the Hilli Facility remains in effect.
Section 9.03
Provision of Service Boats
. The Sellers agree to provide, at no cost to Buyer or the Transferred Subsidiaries, any service boats necessary for the provision by the Vessel of the FLNG Services, and in the event that Hilli Corp acquires service boats, the Sellers agree to maintain and operate such service boats at no cost to Buyer for so long as the LTA remains in effect. Golar, Keppel and B&V shall bear the costs of such service boats in relation to their respective Ownership Interests.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
Section 10.01
Termination of Agreement
. Notwithstanding anything to the contrary in this Agreement, this Agreement may be terminated and the purchase and sale of the Units contemplated by this Agreement abandoned at any time prior to the Closing:
(a)
by mutual written consent of the Sellers and Buyer;
(b)
by the Sellers if any of the conditions set forth in
Section 8.01
and
Section 8.02
shall have become incapable of fulfillment, and shall not have been waived by the Sellers;
(c)
by Buyer if any of the conditions set forth in
Section 8.01
and
Section 8.03
shall have become incapable of fulfillment, and shall not have been waived by Buyer; or
(d)
by Buyer if the Closing has not occurred by May 1, 2018 for any reason;
provided, however, that the Party seeking termination pursuant to clause (b) or (c) is not then in material breach of any of its representations, warranties, covenants or agreements contained in this Agreement; and provided further that any action by Buyer to terminate this Agreement shall require the approval of the Conflicts Committee.
Section 10.02
Amendments and Waivers
. This Agreement may not be amended except by an instrument in writing signed on behalf of each Party hereto; provided, however, that any amendment of this Agreement must be approved by the conflicts committee of the board of directors of Golar Partners (the “
Conflicts Committee
”). An instrument in writing by Buyer, on the one hand, or the Sellers, on the other hand, may waive compliance by the other with any term or provision of this Agreement that such other Party was or is obligated to comply with or perform; provided, however, that a waiver by Buyer of any material obligation of the Sellers must be approved by the Conflicts Committee.
ARTICLE XI
INDEMNIFICATION; REIMBURSEMENTS
Section 11.01
Indemnity by the Sellers
. Following the Closing, Golar, jointly and severally, and Keppel and B&V, each severally in relation to its respective Ownership Interest, shall be liable for, and shall indemnify, defend and hold harmless Buyer, the Transferred Subsidiaries and each of their officers, directors, employees, agents and representatives (the “
Buyer Indemnitees
”) from and against:
(a)
any Losses suffered or incurred by such Buyer Indemnitee by reason of, arising out of or otherwise in respect of any inaccuracy in, breach of any representation or warranty, or a failure to perform or observe fully any covenant, agreement or obligation of, the Sellers in or under this Agreement or in or under any document, instrument or agreement delivered pursuant to this Agreement by the Sellers;
(b)
any fees, expenses or other payments incurred or owed by the Sellers to any brokers, financial advisors or comparable other persons retained or employed by it in connection with the transaction contemplated by this Agreement;
(c)
any Losses suffered or incurred by such Buyer Indemnitee in connection with any claim for the payment of damages in relation to the Vessel for periods prior to the Closing;
(d)
all liabilities for Taxes attributable to the Transferred Subsidiaries or the Vessel prior to the Closing Date;
(e)
any Covered Environmental Losses, to the extent that the Sellers are notified by Buyer of any such Covered Environmental Losses within five (5) years after the Closing Date;
(f)
any Losses, suffered or incurred by such Buyer Indemnitee by reason of the Acceptance Minimum Requirements (as such term is defined in the LTA) not being satisfied; and
(g)
any Losses, suffered or incurred by such Buyer Indemnitee as a result of any delay or repair costs associated with the Commissioning Activities and Acceptance Tests, including as a result of delays in the Project (as such terms are defined in the LTA) and any delays in completing the process of outfitting the Vessel with all materials, personnel and equipment required to perform FLNG Services as contemplated under the LTA.
Provided, however
, that in no event shall B&V or Keppel be liable to the Buyer Indemnitees under this
Section 11.01
for any amount in excess of the portion of the Purchase Price received by it hereunder.
Section 11.02
Indemnity by Buyer
. Following the Closing, Buyer shall indemnify the Sellers and each of their affiliates and each of their officers, directors, employees, agents and representatives (the “
Seller Indemnitees
”) against and hold them harmless from, any Losses, suffered or incurred by such Seller Indemnitee by reason of, arising out of or otherwise in respect of any inaccuracy in, breach of any representation or warranty, or a failure to perform or observe fully any covenant, agreement or obligation of, Buyer in or under this Agreement or in or under any document, instrument or agreement delivered pursuant to this Agreement by Buyer.
Section 11.03
Reimbursements
.
(a)
Buyer shall assist the Sellers in recovery of warranties claims related to periods prior to the Closing Date, and shall reimburse the Sellers in proportion to their respective Ownership Interests for 50% of any such amounts recovered after the Closing Date by any of the Transferred Subsidiaries under warranties claims related to periods prior to the Closing Date. In addition, Buyer shall reimburse the Sellers for (a) 50% of the amount, if any, by which Operating Expenses are less than $32.4 million per year and (b) 50% of the amount, if any, by which withholding taxes on Operating Expense payments are less than $4.2 million per year, for a period of eight years commencing on the Closing Date, up to a maximum amount of $20 million in the aggregate (the “
Buyer Reimbursement
”). Buyer shall pay to each of Golar, Keppel and B&V its proportionate share of the Buyer Reimbursement, based on its respective Ownership Interest.
(b)
The Sellers shall reimburse Buyer for (a) 50% of the amount, if any, by which Operating Expenses exceed $39.5 million per year and (b) 50% of the amount, if any, by which withholding taxes on Operating Expense payments exceed $5.2 million per year, for a period of eight years commencing on the Closing Date, up to a maximum amount of $20 million in the aggregate (the “
Sellers Reimbursement
”). Golar, Keppel and B&V shall each pay to Buyer its proportionate share of the Sellers Reimbursement based on its respective Ownership Interest.
ARTICLE XII
MISCELLANEOUS
Section 12.01
Further Assurances
. From time to time after the date of this Agreement, and without any further consideration, the Parties agree to execute, acknowledge and deliver all such additional deeds, assignments, bills of sale, conveyances, instruments, notices, releases, acquittances and other documents, and will do all such other acts and things, all in accordance with Applicable Law, as may be necessary or appropriate
(a)
more fully to assure that the applicable Parties own all of the properties, rights, titles, interests, estates, remedies, powers and privileges granted by this Agreement, or which are intended to be so granted,
(a)
more fully and effectively to vest in the applicable Parties and their respective successors and assigns beneficial and record title to the interests assigned by this Agreement or intended so to be and
(a)
to more fully and effectively carry out the purposes and intent of this Agreement.
Section 12.02
Powers of Attorney
.
(a)
Buyer hereby constitutes and appoints each of Brian Tienzo, Osman Ilyas, Graham Robjohns, Pernille Noraas, Abigail Baltar, Roger Swan and Siu-Yee Mac (the “
Buyer Attorney-in-Fact
”) as its true and lawful attorney-in-fact with full power of substitution for it and in its name, place and stead or otherwise on behalf of Buyer and its successors and assigns, and for the benefit of Buyer Attorney-in-Fact to demand and receive from time to time the Units conveyed by this Agreement (or intended so to be) and to execute in the name of Buyer and its successors and assigns instruments of conveyance, instruments of further assurance and to give receipts and releases in respect of the same, and from time to time to institute and prosecute in the name of Buyer for the benefit of Buyer Attorney-in-Fact, any and all proceedings at law, in equity or otherwise which Buyer Attorney-in-Fact may deem proper in order to
(i)
collect, assert or enforce any claims, rights or titles of any kind in and to the Units,
(i)
defend and compromise any and all actions, suits or proceedings in respect of any of the Units, and
(i)
do any and all such acts and things in furtherance of this Agreement as Buyer Attorney-in-Fact shall deem advisable. Buyer hereby declares that the appointment hereby made and the powers hereby granted are coupled with an interest and are and shall be irrevocable and perpetual and shall not be terminated by any act of Buyer or its successors or assigns or by operation of law.
(b)
Golar constitutes and appoints each of Brian Tienzo, Osman Ilyas, Graham Robjohns, Pernille Noraas, Abigail Baltar, Roger Swan and Siu-Yee Mac (the “
Golar Attorney-in-Fact
”) as its true and lawful attorney in fact with full power of substitution for it and in its name, place and stead or otherwise on behalf of Golar and its successors and assigns, and for the benefit of the Golar Attorney-in-Fact to demand and receive from time to time the Units conveyed by this Agreement (or intended so to be) and to execute in the name of Golar and its successors and assigns instruments of conveyance, instruments of further assurance and to give receipts and releases in respect of the same, and from time to time to institute and prosecute in the name of Golar for the benefit of the Golar Attorney-in-Fact, any and all proceedings at law, in equity or otherwise which Golar Attorney-in-Fact may deem proper in order to
(i)
collect, assert or enforce any claims, rights or titles of any kind in and to the Units,
(i)
defend and compromise any and all actions, suits or proceedings in respect of any of the Units, and
(i)
do any and all such acts and things in furtherance of this Agreement as the Golar Attorney-in-Fact shall deem advisable. Golar hereby declare that the appointment hereby made and the powers hereby granted are coupled with an interest and are and shall be irrevocable and perpetual and shall not be terminated by any act of Golar or its successors or assigns or by operation of law.
Section 12.03
Headings; References; Interpretation
. All Article and Section headings in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any of the provisions hereof. The words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All references herein to Articles and Sections shall, unless the context requires a different construction, be deemed to be references to the Articles and Sections of this Agreement, respectively. All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders, and the singular shall include the plural and vice versa. The use herein of the word “including” following any general statement, term or matter shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not non-limiting language (such as “without limitation,” “but not limited to,” or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that could reasonably fall within the broadest possible scope of such general statement, term or matter.
Section 12.04
Successors and Assigns
. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns.
Section 12.05
No Third Party Rights
. Other than Article XI, the provisions of this Agreement are intended to bind the Parties as to each other and are not intended to and do not create rights in any other person or confer upon any other person any benefits, rights or remedies and no person is or is intended to be a third party beneficiary of any of the provisions of this Agreement.
Section 12.06
Counterparts
. This Agreement (save for the arbitration agreement contained in
Section 12.11
, which shall be governed by the laws of England and Wales) may be executed in any number of counterparts, all of which together shall constitute one agreement binding on the Parties hereto.
Section 12.07
Governing Law
. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, United States of America, applicable to contracts made and to be performed wholly within such jurisdiction, except to the extent that it is mandatory that the law of some other jurisdiction, wherein the Units are located, shall apply.
Section 12.08
Severability
. If any of the provisions of this Agreement are held by any court of competent jurisdiction to contravene, or to be invalid under, the laws of any governmental body having jurisdiction over the subject matter hereof, such contravention or invalidity shall not invalidate the entire Agreement. Instead, this Agreement shall be construed as if it did not contain the particular provision or provisions held to be invalid, and an equitable adjustment shall be made and necessary provision added so as to give effect, as nearly as possible, to the intention of the Parties as expressed in this Agreement at the time of execution of this Agreement.
Section 12.09
Integration
. This Agreement, the Schedules and Exhibits hereto and the instruments referenced herein supersede all previous understandings or agreements among the Parties, whether oral or written, with respect to its subject matter hereof. This Agreement, the Schedules and Exhibits hereto and the instruments referenced herein contain the entire understanding of the Parties with respect to the subject matter hereof and thereof. No understanding, representation, promise or agreement, whether oral or written, is intended to be or shall be included in or form part of this Agreement unless it is contained in a written amendment hereto executed by the Parties hereto after the date of this Agreement.
Section 12.10
Notices
. All notices, requests or consents provided for or permitted to be given pursuant to this Agreement must be in writing and must be given by depositing the same in the mail, addressed to the Person to be notified, postpaid, and registered or certified with return receipt requested or by delivering such notice in person or by private-courier, prepaid, or by telecopier to such party. Notice given by personal delivery or mail shall be effective upon actual receipt. Couriered notices shall be deemed delivered on the date the courier represents that delivery will occur. Notice given by telecopier shall be effective upon actual receipt if received during the recipient’s normal business hours, or at the beginning of the recipient’s next business day after receipt if not received during the recipient’s normal business hours. All notices to be sent to a Party pursuant to this Agreement shall be sent to or made at the address set forth below such Party’s signature to this Agreement, or at such other address as such Party may stipulate to the other Party in the manner provided in this
Section 12.10
.
Section 12.11
Survival of Representations and Warranties
. The representations and warranties of the Sellers in this Agreement will survive the completion of the transactions contemplated hereby regardless of any independent investigations that Buyer may make or cause to be made, or knowledge it may have, prior to the Closing Date and will continue in full force and effect for a period of one year from the Closing Date. At the end of such period, such representations and warranties will terminate, and no claim may be brought by Buyer against any Seller thereafter in respect of such representations and warranties, except for claims that have been asserted by Buyer prior to the Closing Date. The covenants of the Sellers in this Agreement will survive the completion of the transactions contemplated hereby and will continue in full force and effect.
Section 12.12
Arbitration
.
The Parties acknowledge that the expeditious and equitable settlement of disputes arising under this Agreement is to their mutual advantage. To that end, the Parties agree to attempt to resolve differences of opinion and to settle all disputes through joint cooperation and consultation if possible. Any dispute, alleged breach, interpretation, challenge or disagreement whatsoever between or among any of the Parties with respect to any dispute arising out of or relating to this Agreement (or any other agreement contemplated hereby) that the Parties are unable to settle within sixty (60) days of the initial written notice of dispute, as set forth in the preceding sentence, shall be resolved by final and binding arbitration before a single arbitrator pursuant to the rules of arbitration then in force of the London Court of International Arbitration, which rules are incorporated by reference herein. The elapse of sixty (60) days shall not be a precondition to the obtaining of emergency interim relief, either via arbitration or from a court of appropriate jurisdiction.
The seat (or legal venue of ) arbitration shall be in London. Such arbitration shall be the exclusive remedy hereunder; provided that nothing contained in this
Section 12.12
shall limit any party’s right to bring (i) post arbitration actions seeking to enforce an arbitration award or (ii) actions seeking injunctive or other similar relief in the event of a breach or threatened breach of any of the provisions of this Agreement (or any other agreement contemplated hereby). The decision of the arbitrator may, but need not, be entered as judgment in a court of competent jurisdiction. If this arbitration provision is for any reason held to be invalid or otherwise inapplicable to any dispute, the Parties agree that any action or proceeding brought with respect to any dispute arising under this Agreement, or to interpret or clarify any rights or obligations arising hereunder, shall be maintained solely and exclusively in the courts of England and Wales. With respect to any action or proceeding that a successful party to the arbitration may wish to bring to enforce any arbitral award or to seek injunctive or other similar relief in the event of the breach or threatened breach of this Agreement (or any other agreement contemplated hereby), each party irrevocably and unconditionally (and without limitation): (i) submits to and accepts, generally and unconditionally the non-exclusive jurisdiction of the courts of courts of England and Wales, (ii) waives any objection it may have now or in the future that such action or proceeding has been brought in an inconvenient forum, (iii) agrees that in any such action or proceeding it will not raise, rely on or claim any immunity (including, without limitation, from suit, judgment, attachment before judgment or otherwise, execution or other enforcement), (iv) waives any right of immunity which it has or its assets may have at any time, and (v) consents generally to the giving of any relief or the issue of any process in connection with any such action or proceeding including, without limitation, the making, enforcement or execution of any order or judgment against any of its property. IN ENTERING INTO THE ARBITRATION PROVISION OF THIS
SECTION 12.12
, EACH PARTY TO THIS AGREEMENT KNOWINGLY AND VOLUNTARILY WAIVES ITS RIGHTS TO A JURY TRIAL. EACH PARTY TO THIS AGREEMENT HEREBY KNOWINGLY AND VOLUNTARILY WAIVES TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT OR ANY ANCILLARY AGREEMENT OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF.
Section 12.13
Damages
. EACH PARTY WAIVES ANY CLAIM IT MAY HAVE AGAINST ANY OTHER PARTY FOR ANY (I) PUNITIVE, REMOTE, OR SPECULATIVE DAMAGES, WHETHER BASED ON CONTRACT, STRICT LIABILITY, OTHER APPLICABLE LAW OR OTHERWISE, OR (II) INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES THAT WERE NOT REASONABLY FORESEEABLE, WHETHER BASED ON CONTRACT, STRICT LIABILITY, OTHER APPLICABLE LAW OR OTHERWISE AND WHETHER OR NOT ARISING FROM ANY OTHER PARTY’S SOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT.
[
SIGNATURE PAGE FOLLOWS.
]
IN WITNESS HEREOF, each of the Parties hereto has caused this Agreement to be signed as of the date first above written.
GOLAR LNG LIMITED
By:
/s/ Pernille Noraas
Name: Pernille Noraas
Title: Attorney-in-Fact
Address for Notice:
2nd Floor S.E. Pearman Building,
9 Par-la-Ville Road
Hamilton, HM11
Bermuda
Phone:
+44 2-7 063 7900
Fax:
+44 207 063 7901
Attention:
The President
KS INVESTMENTS PTE. LTD.
By:
/s/ Michael Chia
Name: Michael Chia
Title: Director
Address for Notice:
50 Gul Road, Singapore 629351
Phone:
+65 68637734
Fax:
+65 68631862
Attention:
Board of Directors/Legal Department
BLACK & VEATCH INTERNATIONAL COMPANY
By:
/s/ Jeff Stamm
Name: Jeff Stamm
Title: Vice President
c/o Black & Veatch Corporation
Timothy W. Triplett
General Counsel
11401 Lamar Ave
Overland Park, Kansas
Phone: (913) 458-2200
GOLAR PARTNERS OPERATING LLC
By:
/s/ Graham Robjohns
Name: Graham Robjohns
Title: Attorney-in-Fact
Address for Notice:
c/o Golar Management Ltd.
13th Floor
One America Square
17 Crosswall
London EC3N 2LB
England
Phone:
+44 2-7 063 7900
Fax:
+44 207 063 7901
Attention:
Chief Accounting Officer
SCHEDULE A
COMMON UNITS OWNED AND TO NE SOLD BY EACH SELLER
|
|
|
|
|
Seller
|
|
Common Units
Owned
Prior to Closing
|
Common Units
to be Sold
|
Golar LNG Limited
|
2,192
|
1,096
|
KS Investments Pte. Ltd.
|
246
|
123
|
Black & Veatch International Company
|
22
|
11
|
Total
|
2,460
|
1,230
|
SCHEDULE B
HILLI CORP SHARES OWNED BY EACH SELLER
|
|
|
|
Seller
|
|
Hilli Corp Shares
|
Golar LNG Limited
|
1,096*
|
KS Investments Pte. Ltd.
|
123**
|
Black & Veatch International Company
|
11
|
Total
|
1,230
|
_____________________
*Reflects an indirect ownership interest in such Hilli Corp Shares. Hilli Corp Shares shown in table are owned of record on the date hereof by Golar GHK, a wholly-owned subsidiary of Golar LNG Energy Limited, a wholly-owned subsidiary of Golar.
**Reflects an indirect ownership interest in such Hilli Corp Shares. Hilli Corp Shares shown in table are owned of record on the date hereof by KSI Production, a wholly-owned subsidiary of Keppel.
SCHEDULE C
INSURANCE
|
|
|
|
|
Insurance
|
Sum Insured
|
Basic Deductible
|
Comments
|
Operational Insurance, Physical Damage
|
USD 1,280,000,000
|
USD 3,500,000
|
Coverage for 12 months from Acceptance Date on/around 1st April 18.
Based on London Standard Platform Form or similar to be agreed
|
Business Interruption
|
USD 180,000,000
|
60 days
|
Coverage for 12 months from Acceptance Date on/around 1st April 18.
Based on Loss of Producton Income Form (JR 2005/003A) or similar to be agreed
|
Protection and Indemnity (P&I)
|
USD 250,000,000
(or TBA)
|
USD 25,000
|
As per Skuld's rule for Mobile Offshore Units
|
Extended Contractual Liability (ECL)
|
As required
|
TBA
|
To cover liabilities assumed under contract as presented to Skuld
|
War Risks Insurance
|
USD 1,280,000,000
|
None
|
Entered in Norwegian War Club. Element of political risk included as per Club rules. Stationary operation within the Gulf of Guinea subject to terms to be agreed.
|
EXHIBIT I
THIRD LETTER AGREEMENT
[
Filed separately
]
EXHIBIT II
FORM OF LIMITED LIABILITY COMPANY
AGREEMENT OF GOLAR HILLI LLC
FORM OF AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
GOLAR HILLI LLC
A Marshall Islands Limited Liability Company
Dated as of [•], 2017
TABLE OF CONTENTS
|
|
2.4
|
Registered Office; Registered Agent. 6
|
|
|
2.7
|
Limited Liability of the Members. 6
|
|
|
2.10
|
Transfer of Membership Interest; Pledge of Membership Interest. 7
|
|
|
2.11
|
Right of First Refusal. 7
|
|
|
3.
|
OWNERSHIP AND CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS 9
|
|
|
3.1
|
Initial Capital Contributions. 9
|
|
|
3.3
|
Issuances of Additional Membership Interests 9
|
|
|
3.4
|
Additional Capital Contributions. 10
|
|
|
3.5
|
Liability Limited to Capital Contributions. 10
|
|
|
3.6
|
No Interest on Capital Contributions. 10
|
|
|
4.2
|
Resignation of Managing Member. 11
|
|
|
4.4
|
Compensation of Managing Member and Officers. 13
|
|
|
4.6
|
Liability of Indemnitees. 14
|
|
|
4.7
|
Standards of Conduct and Modification of Duties. 15
|
|
|
4.8
|
Actions Required by Members. 16
|
|
|
5.1
|
Reserves and Distributions. 17
|
|
|
5.2
|
Priority of Distributions. 17
|
|
|
6.
|
SERIES A SPECIAL UNITS 17
|
|
|
6.4
|
Liquidation Rights. 19
|
|
|
6.7
|
Insurance Proceeds 19
|
|
|
7.
|
SERIES B SPECIAL UNITS 20
|
|
|
7.4
|
Liquidation Rights. 21
|
|
|
7.7
|
Insurance Proceeds 21
|
|
|
8.
|
BOOKS AND RECORDS; FISCAL YEAR; BANK ACCOUNTS; ACCOUNTING PRINCIPLES; INFORMATION 22
|
|
|
8.1
|
Books and Records. 22
|
|
|
8.4
|
Accounting Principles. 22
|
|
|
9.
|
DISSOLUTION AND LIQUIDATION 23
|
|
|
10.1
|
Complete Agreement. 23
|
|
|
10.5
|
No Third Party Beneficiary. 24
|
Exhibit 1: Form of Common Unit LLC Certificate
Exhibit 2: Form of Series A Special Unit LLC Certificate
Exhibit 3: Form of Series B Special Unit LLC Certificate
Exhibit 4: Computation of Incremental Perenco Revenues
Exhibit 5: Computation of Revenues Less Expenses
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF GOLAR HILLI LLC
This Amended and Restated Limited Liability Company Agreement of Golar Hilli LLC, a Marshall Islands limited liability company (the “
Company
”), is made and entered into effective as of the
[•]
day of
[•],
2018, by and among Golar LNG Limited, a Bermuda exempted company (“
Golar LNG
”), Golar Partners Operating LLC, a Marshall Islands limited liability company “
Golar Partners
”), KS Investment Pte. Ltd., a British Virgin Islands corporation (“
Keppel
”), and Black & Veatch International Company, a Missouri corporation (“
B&V
”).
RECITALS
WHEREAS
, the Company was formed on
[•]
, 2017 pursuant to the Marshall Islands Limited Liability Company Act, pursuant to a limited liability company agreement dated as of
[•]
, 2017 (the “
Original Agreement
”) entered into by Golar LNG as its sole member;
WHEREAS,
this amended and restated limited liability company agreement (this “
Agreement
”) amends and restates the Original Agreement;
WHEREAS,
Golar LNG, Keppel and B&V respectively own 1,096, 123 and 11 shares (“
Hilli Corp Shares
”) of Golar Hilli Corporation, a Marshall Islands corporation (“
Hilli Corp
”) and the owner of the FLNG vessel
Hilli Episeyo
(“
Hilli FLNG
”);
WHEREAS,
Golar LNG, Keppel and B&V will contribute to the Company all of their shares of Hilli Corp, in return for the issuance by the Company of Membership Interests, as provided herein, such contributions and issuances to be effective as of the Time of Closing (as defined in the Purchase Agreement);
WHEREAS,
Golar Partners, Golar LNG, B&V and Keppel have entered into a Purchase and Sale Agreement, dated as of
[•]
, 2017 (the “
Purchase Agreement
”), providing for the sale by Golar LNG, B&V and Keppel of an aggregate of 1,230 common units, representing limited liability company interests in the Company (“
Common Units
”), to Golar Partners; and
WHEREAS,
B&V, Keppel and Golar Partners will become Members of the Company effective upon the Time of Closing.
NOW, THEREFORE
, the Original Agreement is amended and restated in its entirety as follows:
When used in this Agreement, the following terms shall have the meanings set forth below:
“
Acquisition Proposal
” has the meaning set forth in
Section 2.11(b)
of this Agreement.
“
Act
” means the Marshall Islands Limited Liability Company Act (of the Republic of the Marshall Islands Associations Law), as the same may be amended from time to time.
“
Agreement
” means this Amended and Restated Limited Liability Company Agreement, as amended, modified, supplemented or restated from to time in accordance with its terms.
“
Affiliate
” means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with, the Person in question. As used in the foregoing definition, the term “
Control
” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
“
Arrears
” means, with respect to Series A Distributions or Series B Distributions, as the case may be, for any Series A Distribution Period or Series B Distribution Period, respectively, that the full cumulative Series A Distributions or Series B Distributions, as the case may be, through the most recent Series A Distribution Payment Date or Series B Distribution Date, as the case may be, have not been paid on all Series A Special Units or Series B Special Units.
“
B&V
” has the meaning set forth in the Preamble.
“
Budget
” means the budget for the Company approved or amended from time to time by the Managing Member, being initially the document in the agreed terms marked “Budget” that has been provided to all the Members on the date hereof.
“
Capital Contributions
” means the total amount of cash and/or assets which a Member contributes to the Company as capital pursuant to this Agreement.
“
Certificate of Formation
” means the Certificate of Formation filed on
[•]
, 2017 pursuant to the Act with the Republic of the Marshall Islands Registrar of Corporations pursuant to which the Company was formed as a Marshall Islands limited liability company.
“
Code
” means the Internal Revenue Code of 1986, as amended, and in effect from time to time. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of any successor law.
“
Common Unit Holder
” means a holder of Common Units.
“
Common Units
” shall have the meaning set forth in the Recitals to this Agreement.
“
Company
” means Golar Hilli LLC, a Marshall Islands limited liability company.
“
Conflicts Committee
” means the conflicts committee of the board of directors of Golar Partners.
“
Disposition Notice
” has the meaning set forth in
Section 2.11(b)
of this Agreement.
“
Golar LNG
” has the meaning set forth in the Preamble to this Agreement.
“
Golar Partners
” has the meaning set forth in the Preamble to this Agreement.
“
Hilli Corp
” has the meaning set forth in the Recitals to this Agreement.
“
Hilli FLNG
” has the meaning set forth in the Recitals to this Agreement.
“
Incremental Perenco Revenues
” for any Series A Distribution Period shall be calculated in accordance with the accounting protocol attached as Exhibit 4 to this Agreement.
“
Indemnitee
” means (a) any Person who is or was a Member, (b) any Person who is or was an Affiliate of any Member, (c) any Person who is or was an Officer, or a fiduciary or trustee, of the Company, (d) any Person who is or was a member, shareholder, partner, director, officer, fiduciary or trustee of any Member or an Affiliate of any Member, (e) any Person who is or was serving at the request of the Company, any Member or any Affiliate of any Member as an officer, director, member, partner, fiduciary or trustee of another Person,
provided
, that such Person shall not be an Indemnitee by reason of providing, on a fee for services basis, trustee, fiduciary or custodial services, and (f) any Person the Managing Member or the Company designates as an “Indemnitee” for purposes of this Agreement.
“
Junior Securities
” has the meaning set forth in
Section 6.6
of this Agreement.
“
Keppel
” has the meaning set forth in the Preamble to this Agreement.
“
LLC Certificate
” has the meaning set forth in
Section 2.8
of this Agreement.
“
Managing Member
” means initially, Golar LNG, or such other Member as may become the Managing Member pursuant to the terms of this Agreement.
“
Member
” means Golar LNG (and, immediately upon the Closing, Golar Partners, B&V and Keppel) and any Transferee, and shall have the same meaning as the term “Member” under the Act.
“
Membership Interest
” means any class or series of limited liability company interest in the Company, including the Common Units and the Special Units.
“
Offer Price
” has the meaning set forth in
Section 2.11(b)
of this Agreement.
“
Officers
” has the meaning set forth in
Section 4.3
of this Agreement.
“
Parity Securities
” has the meaning set forth in
Section 6.6
of this Agreement.
“
Perenco Contract
” means the Liquefaction Tolling Agreement, dated
[•]
, 2017, among Perenco Cameroon SA, Societe Nationale Des Hydrocarbures, Hilli Corp and Golar Cameroon SASU.
“
Person
” means a natural person, corporation, partnership, joint venture, trust, estate, unincorporated association, limited liability company, or any other juridical entity.
“
Proposed Transferee
” has the meaning set forth in
Section 2.11(b)
of this Agreement.
“
Purchase Agreement
” has the meaning set forth in the Recitals to this Agreement.
“
Revenues Less Expenses
”
for any Series B Distribution Period shall be calculated in accordance with the accounting protocol attached as Exhibit 5 to this Agreement.
“
ROFR Acceptance Deadline
” has the meaning set forth in
Section 2.11(b)
of this Agreement.
“
Sale Units
”
set forth in
Section 2.11(b)
of this Agreement.
“
Selling Holder
” set forth in
Section 2.11(b)
of this Agreement.
“
Senior Securities
”
has the meaning set forth in
Section 6.6
of this Agreement.
“
Series A Distribution Payment Date
” means each February 15, May 15, August 15 and November 15, commencing May 15, 2018;
provided, however
, that if any Series A Distribution Payment Date would otherwise occur on a day that is not a Business Day, such Series A Distribution Payment Date shall instead be on the immediately succeeding Business Day.
“
Series A Distribution Period
” means (i) the period commencing on (and including), the Series A Original Issue Date and ending on (and including) March 31, 2018, and (ii) any subsequent three-month period commencing on (and including) any January 1, April 1, July 1 or October 1 and ending on (and including) the last day in March, June, September and December, respectively.
“
Series A Distribution Record Date
” has the meaning set forth in
Section 6.2
of this Agreement.
“
Series A Distributions
” means, with respect to any Series A Distribution Period, 100% of any Incremental Perenco Revenues received by Hilli Corp during such Series A Distribution Period.
“
Series A Holder
” means a holder of the Series A Special Units.
“
Series A Original Issue Date
” means
[•]
, 2018.
“
Series A Redemption Date
” has the meaning set forth in
Section 6.3
.
“
Series A Redemption Notice
” has the meaning set forth in
Section 6.3
.
“
Series A Redemption Price
” has the meaning set forth in
Section 6.3
.
“
Series A Redemption Payments
” means payments to be made to the Series A Holders to redeem Series A Special Units in accordance with
Section 6.3
.
“
Series A Special Unit
” means a Special Unit having the designations, preferences, rights, powers and duties set forth in
Section 6
.
“
Series B Distribution Payment Date
” means each February 15, May 15, August 15 and November 15, commencing May 15, 2018;
provided, however
, that if any Series B Distribution Payment Date would otherwise occur on a day that is not a Business Day, such Series B Distribution Payment Date shall instead be on the immediately succeeding Business Day.
“
Series B Distribution Period
” means (i) the period commencing on (and including), the Series B Original Issue Date and ending on (and including) March 31, 2018, and (ii) any subsequent three-month period commencing on (and including) any January 1, April 1, July 1 or October 1 and ending on (and including) the last day in March, June, September and December, respectively.
“
Series B Distribution Record Date
” has the meaning set forth in
Section 7.2
of this Agreement.
“
Series B Distributions
” means, with respect to any Series B Distribution Period, an amount equal to 95% of Revenues Less Expenses received by Hilli Corp during such Series B Distribution Period.
“
Series B Holder
” means a holder of the Series B Special Units.
“
Series B Original Issue Date
” means
[•]
, 2018.
“
Series B Special Unit
” means a Special Unit having the designations, preferences, rights, powers and duties set forth in
Section 7
.
“
Special Units
” means a Membership Interest, designated as a “Special Unit,” which entitles the holder thereof to a preference with respect to distributions over Common Units, including the Series A Special Units and Series B Special Units.
“
Time of Closing
” has the meaning set forth in the Purchase Agreement.
“
Transferee
” has the meaning set forth in
Section 2.10(a)
of this Agreement.
“
Units
” means the units representing Membership Interests in the Company and includes the Common Units and the Special Units.
As the context requires, all words used herein in the singular number shall extend to and include the plural, all words used in the plural number shall extend to and include the singular, and all words used in any gender shall extend to and include the other gender or be neutral.
The Company was formed on
[
•
]
, 2017 as a Marshall Islands limited liability company by the filing of the Certificate of Formation.
The name of the Company is “Golar Hilli LLC” and all Company business shall be conducted in that name or such other names that comply with applicable law as the Managing Member may from time to time designate.
The purposes for which the Company is established is to engage in any lawful activity permitted by the Act.
|
|
2.4
|
Registered Office; Registered Agent.
|
The registered office of the Company required by the Act to be maintained in the Republic of the Marshall Islands shall be the office of the initial registered agent named in the Certificate of Formation or such other office as the Managing Member may designate from time to time in the manner provided by law. The registered agent of the Company required by the Act to be maintained in the Republic of the Marshall Islands shall be the initial registered agent named in the Certificate of Formation or such other person or persons as the Managing Member may designate from time to time in the manner provided by law.
The principal office of the Company shall be 2
nd
Floor, S.E. Pearman Building, 9 Par-la-Ville Road, Hamilton, HM11, Bermuda, except as may otherwise be determined by the Managing Member.
The Company commenced on the date the Certificate of Formation was accepted for filing by the Republic of the Marshall Islands Registrar of Corporations and shall have perpetual existence, unless the Company is dissolved in accordance with the Act.
|
|
2.7
|
Limited Liability of the Members.
|
In accordance with the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and the Members shall not be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a member of the Company, notwithstanding the Managing Member’s exercising powers of the Company or managing the business and affairs of the Company.
The limited liability company interests in the Company shall be represented solely by Units, which Units shall be evidenced by certificates (each, an “
LLC Certificate
”). Common Units, Series A Special Units and Series B Special Units shall be evidenced by LLC Certificates substantially in the form of Exhibit 1, Exhibit 2 and Exhibit 3, respectively.
The Company has elected or will timely elect to be disregarded as an entity separate from its owner for U.S. federal income tax purposes as of the date of its formation. It is the intention of the Company and the Members that the Company be treated as a partnership for U.S. federal income tax purposes as of the Closing. The Company and the Managing Member shall take all action necessary to qualify for and receive such tax treatment and neither of them shall take any action inconsistent with this
Section 2.9
.
|
|
2.10
|
Transfer of Membership Interest; Pledge of Membership Interest.
|
(a)
Subject to
Section 2.10(b)
and
Section 2.11
, upon the endorsement by a Member on its LLC Certificate (or on a separate transfer power) in favor of a third party (a “
Transferee
”) and the delivery of such LLC Certificate (and such separate power, if applicable) to the Company for registration and issuance of a new LLC Certificate to such Transferee, such Member shall be deemed to have assigned and transferred all its right, title and interest in the Company and in this Agreement to such Transferee and all references in this Agreement to such Member shall be deemed to refer to such Transferee, in each case effective as of the date of such LLC Certificate delivery. Golar Partners shall become a Member upon the Closing. A Member’s right, title and interest in the Company shall not be transferred other than as provided in this
Section 2.10(a)
.
(b)
The pledge of, or granting of a security interest, lien or other encumbrance in or against, any or all of the Membership Interest of a Member in the Company shall not cause the Member to cease to be a Member until the secured party shall have lawfully exercised its remedies under the security agreement and completed the endorsement in favor of a Transferee. Until the exercise of such remedies, the secured party shall not have the power to exercise any rights or powers of the Members.
|
|
2.11
|
Right of First Refusal.
|
(a)
Each Member hereby grants to the other Members a right of first refusal on any proposed transfer to a non-Member (other than a transfer to an Affiliate) of Common Units, Series A Special Units or Series B Special Units.
(b)
If a Common Unit Holder, Series A Holder or Series B Holder proposes to transfer (other than a transfer to an Affiliate) any of its Units to any non-Member pursuant to a bona fide third-party offer (an “
Acquisition Proposal
”), then such holder (the “
Selling Holder
”) shall promptly give written notice (a “
Disposition Notice
”) thereof to the other Members. The Disposition Notice shall set forth the following information in respect of the proposed transfer: the name and address of the prospective acquiror (the “
Proposed Transferee
”), the Units subject to the Acquisition Proposal (the “
Sale Units
”), the purchase price offered by such Proposed Transferee (the “
Offer Price
”) and all other material terms and conditions of the Acquisition Proposal that are then known to the other Members. To the extent the Proposed Transferee’s offer consists of consideration other than cash (or in addition to cash) the Offer Price shall be deemed equal to the amount of any such cash plus the fair market value of such non-cash consideration. Each Member will provide written notice of its decision regarding the exercise of its right of first refusal to purchase its pro rata portion of the Sale Units within 60 days of its receipt of the Disposition Notice (the “
ROFR Acceptance Deadline
”). Failure to provide such notice within such 30-day period shall be deemed to constitute a decision not to purchase the Sale Units. If any Member fails to exercise its right of first refusal during any applicable period set forth in this
Section 2.11(b)
, it shall be deemed to have waived its rights with respect to such proposed disposition of the Sale Units, but not with respect to any future offer of Units.
(c)
If a Member chooses to exercise its right of first refusal to purchase the Sale Units under
Section 2.11(b)
, such Member and the Selling Holder shall enter into a purchase and sale agreement for the Sale Units which shall include the following terms:
(i)
the Member will agree to deliver cash for the Offer Price (unless such Member and the Selling Holder agree that consideration will be paid by means of an interest-bearing promissory note);
(ii)
the Selling Holder will represent that it has good title to the Sale Units; and
(iii)
unless otherwise agreed by the Selling Holder and such Member, the closing date for the purchase of the Sale Units shall occur no later than 60 days following receipt by the Selling Holder of written notice by such Member of its intention to exercise its option to purchase the Sale Units pursuant to
Section 2.11 (b)
.
(d)
The Selling Holder and the exercising Member shall cooperate in good faith in obtaining all necessary governmental and other third party approvals, waivers and consents required for the closing. Any such closing shall be delayed, to the extent required, until the third Business Day following the expiration of any required statutory waiting periods; provided, however, that such delay shall not exceed 90 days and, if governmental approvals and waiting periods shall not have been obtained or expired, as the case may be, by such 90
th
day, then the Members shall be deemed to have waived their right of first refusal with respect to the Sale Units described in the Disposition Notice and thereafter neither the Selling Holder nor the Members shall have any further obligation under this
Section 2.11
with respect to such Sale Units unless such Sale Units again become subject to this
Section 2.11
pursuant to
Section 2.11(e)
.
(e)
If the transfer to the Proposed Transferee is not consummated in accordance with the terms of the Acquisition Proposal within the later of (A) 90 days after the later of the ROFR Acceptance Deadline, and (B) 10 days after the satisfaction of all governmental approval or filing requirements, if any, the Acquisition Proposal shall be deemed to lapse, and the Selling Holder may not transfer any of the Sale Units described in the Disposition Notice without complying again with the provisions of this
Section 2.11
if and to the extent then applicable.
|
|
3.
|
OWNERSHIP AND CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
|
|
|
3.1
|
Initial Capital Contributions.
|
On or about the date of the Company’s formation, Golar LNG made an initial capital contribution to the Company, and upon the Company’s receipt and in consideration thereof, a certificate evidencing 100% of the limited liability company interests of the Company (the “
Initial Interests
”) was issued to Golar LNG. By execution of this Agreement, such certificate and the Initial Interests represented thereby are hereby cancelled.
The Membership Interests in the Company are represented by three classes of Units: the Common Units, the Series A Special Units and the Series B Special Units, each of which shall have the rights and obligations set forth in this Agreement. Upon the effectiveness of this Agreement:
(a)
the Company shall issue to Golar LNG, in exchange for its contribution to the Company of 1,096 Hilli Corp Shares, 2,192 Common Units, (B) 2,192 Series A Special Units and (C) 2,192 Series B Special Units;
(b)
the Company shall issue to Keppel, in exchange for its contribution to the Company of 123 Hilli Corp Shares, (A) 246 Common Units, (B) 246 Series A Special Units and (C) 246 Series B Special Units; and
(c)
the Company shall issue to B&V, in exchange for its contribution to the Company of 11 Hilli Corp Shares, (A) 22 Common Units, (B) 22 Series A Special Units and (C) 22 Series B Special Units.
|
|
3.3
|
Issuances of Additional Membership Interests
|
(a)
Subject to
Section 4.8
, the Company may issue additional Units for any Company purpose at any time and from time to time to such Persons for such consideration and on such terms and conditions as the Managing Member shall determine, without the approval of any Members.
(b)
Each additional Unit authorized to be issued by the Company pursuant to
Section 3.3
may be issued in one or more classes, or one or more series of any such classes, with such designations, preferences, rights, powers and duties, as shall be fixed by the Managing Member, including (i) the right to share in Company distributions; (ii) the rights upon dissolution and liquidation of the Company; (iii) whether, and the terms and conditions upon which, the Company may or shall be required to redeem the Units (including sinking fund provisions); (iv) whether such Unit is issued with the privilege of conversion or exchange and, if so, the terms and conditions of such conversion or exchange; (v) the terms and conditions upon which each Unit will be issued, evidenced by certificates and assigned or transferred; (vi) the method for determining the percentage interest in the Company represented by such Units; and (vii) the right, if any, of each such Unit to vote on Company matters, including matters relating to the relative rights, preferences and privileges of such Membership Interests.
(c)
The Managing Member shall take all actions that it determines to be necessary or appropriate in connection with each issuance of Units pursuant to this
Section 3.3
and the admission of such additional Members in the books and records of the Company. The Managing Member shall determine the relative rights, powers and duties of the holders of the Units or other Membership Interests being so issued. The Managing Member shall do all things necessary to comply with the Marshall Islands Act and is authorized and directed to do all things that it determines to be necessary or appropriate in connection with any future issuance of limited liability company interests, including compliance with any statute, rule, regulation or guideline of any federal, state or other governmental agency.
|
|
3.4
|
Additional Capital Contributions.
|
With the Managing Member’s consent, each Member may contribute such additional sums and/or assets, if any, as the Member and the Managing Member may determine.
|
|
3.5
|
Liability Limited to Capital Contributions.
|
No Member shall have any obligation to contribute money to the Company or any personal liability with respect to any liability or obligation of the Company.
|
|
3.6
|
No Interest on Capital Contributions.
|
Except as otherwise expressly provided herein, no Member shall receive any interest on its Capital Contributions to the Company.
From and after the time at which the Company is treated as a partnership for U.S. federal income tax purposes, the Company shall maintain a capital account for each of the Members in accordance with the regulations issued pursuant to Section 704 of the Code and as determined by the Managing Member as consistent therewith.
For U.S. federal income tax purposes, from and after the time at which the Company is treated as a partnership for U.S. federal income tax purposes, each item of income, gain, loss, deduction and credit of the Company shall be allocated among the classes of Members taking into consideration any distributions paid pursuant to
Section 5
and, within a class of Members, on a pro rata basis based on the Members’ percentage interest of the total Units in that class, except that the Managing Member shall have the authority to make such other allocations as are necessary and appropriate to comply with Section 704 of the Code and the regulations issued pursuant thereto.
The management of the Company shall be vested in the Managing Member, who shall have all authority, rights and powers in the management of the Company to do any and all acts and things necessary, proper, appropriate, advisable, incidental or convenient to effectuate or further the purposes of the Company as described in this Agreement, subject to
Section 4.8
. Any action taken by the Managing Member on behalf of the Company in accordance with this Agreement shall constitute the act of and shall serve to bind the Company. Persons dealing with the Company are entitled to rely conclusively on the power and authority of the Managing Member as set forth in this Agreement. The Managing Member shall have all rights and powers of a manager under the Act. Any matter requiring the consent or approval of the Managing Member pursuant to this Agreement may be taken without a meeting, without prior notice and without a vote, by written consent, setting forth such consent or approval and signed by the Managing Member. No other Member of the Company shall have any authority or right to act on behalf of or bind the Company, unless otherwise provided herein or unless specifically authorized by the Managing Member pursuant to a resolution expressly authorizing such action that is duly adopted by the Managing Member.
|
|
4.2
|
Resignation of Managing Member.
|
The Managing Member may not voluntarily resign, unless otherwise consented to by all of the Members. Upon such resignation, the holders of at least a majority of the Common Units and the holders of at least a majority of the Series B Special Units shall appoint another Person (who
may
be a newly admitted Member) to manage the operations of the Company. The resignation of the Managing Member shall not affect its rights as a Member and shall not constitute a withdrawal of a Member.
The Managing Member may, from time to time as it deems advisable, select natural persons and designate them as officers of the Company (the “Officers”) and assign titles (including, without limitation, President, Vice President, Secretary or Treasurer) to any such person. Unless the Managing Member determines otherwise or as otherwise provided below, if the title is one that is customary under the Marshall Islands Business Corporation Act, the assignment of such title shall constitute the delegation to such person of the power, authority and duties as is customary for each such position if it were in a corporation. Any person may hold any number of offices. The Managing Member may delegate to any Officer any of the Managing Member’s powers under this Agreement, including, without limitation, the power to bind the Company; provided that any delegation pursuant to this
Section 4.3
may be revoked by the Managing Member at any time. Officers shall be appointed pursuant to this Agreement or from time to time by the Managing Member, and each such Officer shall hold office until a successor is appointed by the Managing Member or until such Officer’s earlier death, resignation or removal by the Managing Member. The Managing Member may remove an Officer, with or without cause, at any time.
(a)
President
. The President, if any, shall be the chief executive officer of the Company, shall preside at all meetings of the Members, shall be responsible for the general and active management of the business of the Company, and shall see that all orders and resolutions of the Managing Member and the Members are carried into effect. The President or any other Officer authorized by the President or the Managing Member shall execute all bonds, mortgages and other contracts, except: (i) where required or permitted by law or this Agreement to be otherwise signed and executed, and (ii) where signing and execution thereof shall be expressly delegated by the Managing Member to some other Officer or agent of the Company.
(b)
Vice President
. In the absence of the President or in the event of the President’s inability to act, the Vice President, if any (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the Managing Member, or in the absence of any designation, then in the order of their election), shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. The Vice Presidents, if any, shall perform such other duties and have such other powers as the Managing Member may from time to time prescribe.
(c)
Secretary and Assistant Secretary
. If the Managing Member selects and designates a Secretary, (i) the Secretary shall be responsible for filing legal documents and maintaining records for the Company; (ii) the Secretary shall attend all meetings of the Members and record all the proceedings of the meetings of the Company and of the Managing Member or the Members in a record to be kept for that purpose and shall perform like duties for the standing committees when required; (iii) the Secretary shall give, or shall cause to be given, notice of all meetings of the Members, if any, and special meetings of the Members, and shall perform such other duties as may be prescribed by the Member or the President, under whose supervision the Secretary shall serve. The Assistant Secretary (if any), or if there be more than one, the Assistant Secretaries in the order determined by the Managing Member (or if there be no such determination, then in order of their election), shall, in the absence of the Secretary or in the event of the Secretary’s inability to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Managing Member may from time to time prescribe.
(d)
Treasurer and Assistant Treasurer
. If the Managing Member selects and designates a Treasurer, (i) the Treasurer shall have the custody of the Company funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Company and shall deposit all moneys and other valuable effects in the name and to the credit of the Company in such depositories as may be designated by the Managing Member; (ii) the Treasurer shall disburse the funds of the Company as may be ordered by the Managing Member, taking proper vouchers for such disbursements, and shall render to the President and to the Managing Member, at its regular meetings or when the Managing Member so requires, an account of all of the Treasurer’s transactions and of the financial condition of the Company. The Assistant Treasurer (if any), or if there shall be more than one, the Assistant Treasurers in the order determined by the Managing Member (or if there be no such determination, then in the order of their election), shall, in the absence of the Treasurer or in the event of the Treasurer’s inability to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Managing Member may from time to time prescribe.
|
|
4.4
|
Compensation of Managing Member and Officers.
|
(a)
The Managing Member shall not receive compensation for its services to the Company.
(b)
The Officers shall serve with or without such compensation for their services to the Company as the Managing Member shall determine.
(a)
To the fullest extent permitted by law but subject to the limitations expressly provided in this Agreement, all Indemnitees shall be indemnified and held harmless by the Company from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, in which any Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, by reason of its status as an Indemnitee;
provided
, that the Indemnitee shall not be indemnified and held harmless if there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that, in respect of the matter for which the Indemnitee is seeking indemnification pursuant to this
Section 4.5
, the Indemnitee acted in bad faith or engaged in fraud, willful misconduct or gross negligence or, in the case of a criminal matter, acted with knowledge that the Indemnitee’s conduct was unlawful. Any indemnification pursuant to this
Section 4.5
shall be made only out of the assets of the Company, it being agreed that the Members shall not be personally liable for such indemnification and shall have no obligation to contribute or loan any monies or property to the Company to enable it to effectuate such indemnification.
(b)
To the fullest extent permitted by law, expenses (including legal fees and expenses) incurred by an Indemnitee who is indemnified pursuant to this
Section 4.5
in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Company prior to a determination that the Indemnitee is not entitled to be indemnified upon receipt by the Company of any undertaking by or on behalf of the Indemnitee to repay such amount if it shall be determined that the Indemnitee is not entitled to be indemnified as authorized in this
Section 4.5
.
(c)
The indemnification provided by this
Section 4.5
shall be in addition to any other rights to which an Indemnitee may be entitled under any agreement, as a matter of law or otherwise, both as to actions in the Indemnitee’s capacity as an Indemnitee and as to actions in any other capacity, and shall continue as to an Indemnitee who has ceased to serve in such capacity and shall inure to the benefit of the heirs, successors, assigns and administrators of the Indemnitee.
(d)
The Company may purchase and maintain (or reimburse any Member or its Affiliates for the cost of) insurance, on behalf of any Member, its Affiliates and such other Persons as the Managing Member shall determine, against any liability that may be asserted against, or expense that may be incurred by, such Person in connection with the Company’s activities or such Person’s activities on behalf of the Company, regardless of whether the Company would have the power to indemnify such Person against such liability under the provisions of this Agreement.
(e)
For purposes of this
Section 4.5
, the Company shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Company also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute “fines” within the meaning of
Section 4.5(a)
; and action taken or omitted by it with respect to any employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the best interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose that is in the best interests of the Company.
(f)
In no event may an Indemnitee subject any of the Members to personal liability by reason of the indemnification provisions set forth in this Agreement.
(g)
An Indemnitee shall not be denied indemnification in whole or in part under this
Section 4.5
because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.
(h)
The provisions of this
Section 4.5
are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons.
(i)
No amendment, modification or repeal of this
Section 4.5
or any provision hereof shall in any manner terminate, reduce or impair the right of any past, present or future Indemnitee to be indemnified by the Company, nor the obligations of the Company to indemnify any such Indemnitee under and in accordance with the provisions of this
Section 4.5
as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.
|
|
4.6
|
Liability of Indemnitees.
|
(a)
No Indemnitee shall be personally liable for the debts and obligations of the Company.
(b)
Notwithstanding anything to the contrary set forth in this Agreement, no Indemnitee shall be liable for monetary damages to the Company for losses sustained or liabilities incurred as a result of any act or omission of an Indemnitee unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that, in respect of the matter in question, the Indemnitee acted in bad faith or engaged in fraud, willful misconduct or gross negligence or, in the case of a criminal matter, acted with knowledge that the Indemnitee’s conduct was criminal.
(c)
Any amendment, modification or repeal of this
Section 4.6
or
Section 4.7
or any provision hereof shall be prospective only and shall not in any way affect the limitations on the liability of the Indemnitees under this
Section 4.6
or
Section 4.7
as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.
|
|
4.7
|
Standards of Conduct and Modification of Duties.
|
(a)
Whenever the Managing Member makes a determination or takes or declines to take any other action, or any of its Affiliates causes it to do so, in its capacity as the managing member of the Company as opposed to in its individual capacity, whether under this Agreement or any other agreement contemplated hereby or otherwise, then, unless another express standard is provided for in this Agreement, the Managing Member, or such Affiliates causing it to do so, shall make such determination or take or decline to take such other action in good faith and shall not be subject to any other or different standards imposed by this Agreement any other agreement contemplated hereby or under the Act or any other law, rule or regulation or at equity. In order for a determination or other action to be in “good faith” for purposes of this Agreement, the Person or Persons making such determination or taking or declining to take such other action must reasonably believe that the determination or other action is in the best interests of the Company, unless the context otherwise requires.
(b)
Whenever the Managing Member makes a determination or takes or declines to take any other action, or any of its Affiliates causes it to do so, in its individual capacity as opposed to in its capacity as the managing member of the Company, whether under this Agreement or any other agreement contemplated hereby or otherwise, then the Managing Member, or such Affiliates causing it to do so, are entitled to make such determination or to take or decline to take such other action free of any duty (including any fiduciary duty) or obligation whatsoever to the Company or any Member or any other Person bound by this Agreement, and, to the fullest extent permitted by law, the Managing Member, or such Affiliates causing it to do so, shall not be required to act in good faith or pursuant to any other standard imposed by this Agreement, any other agreement contemplated hereby or under the Act or any other law, rule or regulation or at equity. For the avoidance of doubt, whenever the Managing Member votes or transfers its Units, if any, to the extent permitted under this Agreement, or refrains from voting or transferring its Units, as appropriate, it shall be acting in its individual capacity.
(c)
Notwithstanding anything to the contrary in this Agreement, the Managing Member and its Affiliates shall have no duty or obligation, express or implied, to (i) approve the sale or other disposition of any asset of the Company or any of its subsidiaries or (ii) permit any of the Company or its subsidiaries to use any facilities or assets of the Managing Member and its Affiliates, except as may be provided in contracts entered into from time to time specifically dealing with such use. Any determination by the Managing Member or any of its Affiliates to enter into such contracts shall, in each case, be at their option.
(d)
Except as expressly set forth in this Agreement, neither the Managing Member or any other Indemnitee shall have any duties or liabilities, including fiduciary duties, to the Company or any Member and the provisions of this Agreement, to the extent that they restrict, eliminate or otherwise modify the duties and liabilities, including fiduciary duties, of the Managing Member or any other Indemnitee otherwise existing at law or in equity, are agreed by the Members to replace such other duties and liabilities of the Managing Member or such other Indemnitee.
|
|
4.8
|
Actions Required by Members.
|
(a)
The following actions may only be taken with the approval or consent of the holders of at least 95% of each of the Series A Special Units, Series B Special Units and Common Units:
(i)
effecting any merger or consolidation involving the Company or Hilli Corp;
(ii)
effecting any sale or exchange of all or substantially all of the Company’s assets or the assets of Hilli Corp, including Hilli FLNG;
(iii)
dissolving or liquidating the Company or Hilli Corp; and
(iv)
effecting a transfer of any of the Company’s shares of Hilli Corp;
(b)
The following actions may only be taken with the approval or consent of the holders of at least a majority of the Series A Special Units, the holders of at least a majority of the Series B Special Units and the holders of at least a majority of the Common Units:
(i)
creating or causing to exist any consensual restriction on the ability of the Company or Hilli Corp to make distributions, pay any indebtedness, make loans or advances or transfer assets to its Members or their subsidiaries;
(ii)
settling or compromising any claim, dispute or litigation directly against, or otherwise relating to indemnification by the Company of, any of the officers of the Company or any Member;
(iii)
causing the Company to incur indebtedness in excess of $50 million or issue Senior Securities or Parity Securities;
(iv)
causing Hilli Corp to incur additional indebtedness in excess of $50 million or to issue equity securities;
(v)
amending the Perenco Contract in any material manner; or
(vi)
amending the existing financing and sale and leaseback arrangement for the Hilli FLNG in any material manner.
(c)
The approval or consent of the holders of at least 95% of the Series A Special Units is required to amend any provision of this Agreement that would adversely affect the Series A Special Units.
(d)
the approval or consent of the holders of at least 95% of the Series B Special Units is required to amend any provision of this Agreement that would adversely affect the Series B Special Units.
(e)
the approval or consent of the holders of at least 95% of the Common Units is required to amend any provision of this Agreement that would adversely affect the Common Units.
(f)
The approval or consent of the holders of at least a majority of the Series B Special Units and the holders of at least a majority of the Common Units is required to cause Hilli Corp to enter into new commercial liquefaction services agreements utilizing Hilli FLNG.
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5.1
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Reserves and Distributions.
|
Within 60 days after the end of each quarter, the Managing Member shall review the Company’s accounts and determine the amount of the Company’s available cash and appropriate reserves (including cash reserves for future maintenance capital expenditures, working capital and other matters), and the Company shall make a distribution to the Members of the available cash, subject to the reserves pursuant to
Section 5.2
. The Company may make such additional cash distributions as the Managing Member may determine and without being limited to current or accumulated income or gains from any Company funds, including, without limitation, Company revenues, capital contributions or borrowed funds;
provided
, that no such distribution shall be made if, after giving effect thereto, the liabilities of the Company exceed the fair market value of the assets of the Company. In its sole discretion, the Managing Member may, subject to the foregoing proviso, also distribute to the Members other Company property or other securities of the Company or other entities.
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5.2
|
Priority of Distributions.
|
The Company shall make distributions to the Members when, as and if declared by the Managing Member pursuant to
Section 5.1
;
provided
however
that no distributions may be made on the Common Units on any Distribution Date unless (i) Series A Distributions for the most recently ended Series A Distribution Period and any accumulated Series A Distributions in Arrears for any past Series A Distribution Period have been or contemporaneously are being paid or provided for and (ii) Series B Distributions for the most recently ended Series B Distribution Period and any accumulated Series B Distributions in Arrears for any past Series B Distribution Period have been or contemporaneously are being paid or provided for. The Series A Special Units and the Series B Special Units shall be treated on a
pari passu
basis as to the right to receive distributions.
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6.
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SERIES A SPECIAL UNITS
|
The Company hereby designates and creates a series of Membership Interests to be designated as “Series A Special Units,” and fixes the preferences rights, powers and duties of the holders of the Series A Special Units as set forth in this
Section 6
. The Series A Special Units shall initially be represented by certificates issued in the name of Golar LNG, Keppel and B&V.
(a)
Distributions on the Series A Special Units shall be cumulative and shall accrue in each Series A Distribution Period from and including the first day of the Series A Distribution Period to and including the earlier of (i) the last day of such Series A Distribution Period and (ii) the date the Company pays the Series A Distribution or redeems the Series A Special Units in full in accordance with
Section 6.3
below, whether or not such Series A Distributions shall have been declared. The Series A Holders shall be entitled to receive Series A Distributions from time to time out of any assets of the Company legally available for the payment of distributions when, as, and if declared by the Managing Member. Distributions, to the extent declared by the Managing Member to be paid by the Company in accordance with this
Section 6.2
, shall be paid for each Series A Distribution Period on each Series A Distribution Payment Date. All Series A Distributions payable by the Company pursuant to this
Section 6.2
shall be payable without regard to income of the Company.
(b)
Not later than 5:00 p.m., New York City time, on each Series A Distribution Payment Date, the Company shall pay those Series A Distributions, if any, that shall have been declared by the Managing Member to Series A Holders on the record date for the applicable Series A Distribution. The record date (the “
Series A Distribution Record Date
”) for any Series A Distribution payment shall be the fifth Business Day immediately preceding the applicable Series A Distribution Payment Date, except that in the case of payments of Series A Distributions in Arrears, the Series A Distribution Record Date with respect to a Series A Distribution Payment Date shall be such date as may be designated by the Managing Member. No distribution shall be declared or paid or set apart for payment on any Common Units unless full cumulative Series A Distributions have been or contemporaneously are being paid or provided for on all outstanding Series A Special Units through the most recent respective Series A Distribution Payment Date. Accumulated Series A Distributions in Arrears for any past Series A Distribution Period may be declared by the Managing Member and paid on any date fixed by the Managing Member, whether or not a Series A Distribution Payment Date, to the Series A Holders on the record date for such payment. Subject to
Section 6.3
and
Section 6.7
, Series A Holders shall not be entitled to any distribution in excess of full cumulative Series A distributions. No interest or sum of money in lieu of interest shall be payable in respect of any distribution payment which may be in arrears on the Series A Special Units.
The Company shall have the right, at any time after the Perenco Contract has been terminated, to redeem the Series A Special Units in whole from any source of funds legally available for such purpose. Any such redemption shall occur on a date set by the Managing Member (the “
Series A Redemption Date
”). The Company shall effect any such redemption by paying cash to the Series A Holders in an aggregate amount equal to $1.00 plus all accumulated and unpaid Series A Distributions (whether or not such Series A Distributions have been declared) to the Series A Redemption Date (the “
Series A Redemption Price
”). The Company shall give notice to the Series A Holders of any redemption not less than 30 days prior to the scheduled Series A Redemption Date. Upon payment of the Series A Redemption Price to the Series A Holders, the Series A Special Units shall be cancelled by the Company. None of the Company, the Managing Member or any Affiliate of the Managing Member shall be permitted to redeem, repurchase or otherwise acquire any Common Units or any other Junior Securities unless full cumulative distributions on the Series A Special Units, the Series B Special Units and any Parity Securities for all prior and the then ending Series A Distribution Periods and Series B Distribution Periods shall have been paid or declared and set aside for payment.
Upon the occurrence of any dissolution or liquidation of the Company, the Series A Holders shall be entitled to receive out of the assets of the Company or proceeds thereof legally available for distribution to the Members, (i) after satisfaction of all liabilities, if any, to creditors of the Company, (ii) concurrently with any applicable distributions of such assets or proceeds being made to or set aside for holders of any Series B Special Units then outstanding and (iii) before any distribution of such assets or proceeds is made to or set aside for the Common Unit Holders, a liquidating distribution in an amount equal to any unpaid Series A Distributions to the date of dissolution or liquidation. Series A Holders shall not be entitled to any other amounts from the Company, in their capacity as Series A Holders, after they have received such Series A Distributions.
Notwithstanding anything to the contrary in this Agreement, the Series A Special Units shall have no voting rights except as set forth in
Section 4.8
or as otherwise provided by the Act.
The Series A Special Units shall be deemed to rank:
(a)
Senior to (i) the Common Units and (ii) any other class or series of Membership Interests established after the Series A Original Issue Date by the Managing Member, the terms of which class or series do not expressly provide that it is made senior to or on parity with the Series A Special Units or Series B Special Units as to current distributions (collectively referred to with the Common Units as “
Junior Securities
”);
(b)
On a parity with the Series B Special Units and any other class or series of Membership Interests established after the Series A Original Issue Date by the Managing Member, the terms of which class or series are not expressly subordinated or senior to the Series A Special Units and Series B Special Units as to current distributions (collectively referred to with the Series B Special Units as “
Parity Securities
”); and
(c)
Junior to any class or series of Membership Interests established after the Series A Original Issue Date by the Managing Member, the terms of which class or series expressly provide that it ranks senior to the Series A Special Units as to current distributions (collectively referred to as “
Senior Securities
”).
If the Company receives insurance proceeds resulting from damage to or loss of the Hilli FLNG (“
Insurance Proceeds
”) the Series A Holders shall be entitled to receive a payment of a portion of such proceeds (an “
Insurance Proceeds Payment
”). The Company and the Series A Holders shall negotiate in good faith to determine the amount of the Insurance Proceeds Payment payable to the Series A Holders. In determining this amount, the parties shall consider, among other things, (i) the then-recent history of Incremental Perenco Revenues, (ii) the remaining term under the Perenco Contract and reasonable estimates for future Incremental Perenco Revenues, (iii) the then-current price of Brent Crude and reasonable estimates of future Brent Crude prices and (iv) Series A Distributions paid for all prior Series A Distribution Periods. The Insurance Proceeds Payment shall be due and payable by the Company to the Series A Holders within 90 days following the Company’s receipt of Insurance Proceeds.
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7.
|
SERIES B SPECIAL UNITS
|
The Company hereby designates and creates a series of Membership Interests to be designated as “Series B Special Units,” and fixes the preferences rights, powers and duties of the holders of the Series B Special Units as set forth in this
Section 7
. The Series B Special Units shall initially be represented by certificates issued in the name of Golar LNG, Keppel and B&V.
(a)
Distributions on the Series B Special Units shall be cumulative and shall accrue in each Series B Distribution Period from and including the first day of the Series B Distribution Period to and including the earlier of (i) the last day of such Series B Distribution Period and (ii) the date the Company pays the Series B Distributions in full, whether or not such Series B Distributions shall have been declared. The Series B Holders shall be entitled to receive Series B Distributions from time to time out of any assets of the Company legally available for the payment of distributions when, as, and if declared by the Managing Member. Distributions, to the extent declared by the Managing Member to be paid by the Company in accordance with this
Section 7.2
, shall be paid quarterly on each Series B Distribution Payment Date. All Series B Distributions payable by the Company pursuant to this
Section 6.2
shall be payable without regarding to income of the Company.
(b)
Not later than 5:00 p.m., New York City time, on each Series B Distribution Payment Date, the Company shall pay those Series B Distributions, if any, that shall have been declared by the Managing Member to Series B Holders on the record date for the applicable Series B Distribution. The record date (the “
Series B Distribution Record Date
”) for any Series B Distribution payment shall be the fifth Business Day immediately preceding the applicable Series B Distribution Payment Date, except that in the case of payments of Series B Distributions in Arrears, the Series B Distribution Record Date with respect to a Series B Distribution Payment Date shall be such date as may be designated by the Managing Member. No distribution shall be declared or paid or set apart for payment on any Common Units unless full cumulative Series B Distributions have been or contemporaneously are being paid or provided for on all outstanding Series B Special Units through the most recent respective Series B Distribution Payment Date. Accumulated Series B Distributions in Arrears for any past Series B Distribution Period may be declared by the Managing Member and paid on any date fixed by the Managing Member, whether or not a Series B Distribution Payment Date, to the Series B Holders on the record date for such payment. Subject to
Section 7.7
, Series B Holders shall not be entitled to any distribution in excess of full cumulative Series B Distributions. No interest or sum of money in lieu of interest shall be payable in respect of any distribution payment which may be in arrears on the Series B Special Units.
The Series B Special Units shall not be subject to redemption.
Upon the occurrence of any dissolution or liquidation of the Company, the Series B Holders shall be entitled to receive out of the assets of the Company or proceeds thereof legally available for distribution to the Members, (i) after satisfaction of all liabilities, if any, to creditors of the Company, (ii) concurrently with any applicable distributions of such assets or proceeds being made to or set aside for holders of any Series A Special Units then outstanding and (iii) before any distribution of such assets or proceeds is made to or set aside for the Common Unit Holders, a liquidating distribution in an amount equal to any unpaid Series B Distributions to the date of dissolution or liquidation. Series B Holders shall not be entitled to any other amounts from the Company, in their capacity as Series B Holders, after they have received such Series B Distributions.
Notwithstanding anything to the contrary in this Agreement, the Series B Special Units shall have no voting rights except as set forth in
Section 4.8
or as otherwise provided by the Act.
The Series B Special Units shall be deemed to rank:
(a)
Senior to (i) the Common Units and (ii) any other Junior Securities;
(b)
On a parity with the Series A Special Units and any other Parity Securities; and
(c)
Junior to Senior Securities.
If the Company receives Insurance Proceeds the Series B Holders shall be entitled to receive an Insurance Proceeds Payment. The Company and the Series B Holders shall negotiate in good faith to determine the amount of the Insurance Proceeds Payment payable to the Series B Holders. In determining this amount, the parties shall consider (i) the then-recent history of Revenues Less Expenses, (ii) the
Hilli FLNG’s
then-current contracted production capacity and reasonable estimates of future contracted production capacity of the
Hilli FLNG
and (iii) Series B Distributions actually paid for all prior Series B Distribution Periods. The Insurance Proceeds Payment shall be due and payable by the Company to the Series B Holders within 90 days following the Company’s receipt of Insurance Proceeds.
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8.
|
BOOKS AND RECORDS; FISCAL YEAR; BANK ACCOUNTS; ACCOUNTING PRINCIPLES; INFORMATION
|
The books and records of the Company shall, at the cost and expense of the Company, be kept at the principal office of the Company or at such other location as the Managing Member may from time to time determine provided such location is in the United Kingdom, but in no circumstances shall any register of members be brought into the United Kingdom.
Unless otherwise determined by the Managing Member, the Company’s books and records shall be kept on a December 31 calendar year basis and shall reflect all Company transactions and be appropriate and adequate for conducting the Company’s affairs.
All funds of the Company will be deposited in its name in an account or accounts maintained with such bank or banks selected by the Managing Member. Checks shall be drawn upon the Company account or accounts only for the purposes of the Company and may be signed by such persons as may be designated by the Managing Member.
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8.4
|
Accounting Principles.
|
The Company shall prepare its financial statements in accordance with US GAAP.
(a)
Subject to Section 8.1, a Member may, at its own expense, at all reasonable times, inspect and make copies of all books, records, accounts, agreements and other documents relating to the affairs of the Company.
(b)
Within 90 days after the end of each quarter the Company shall furnish the Members with (i) unaudited statements of profit or loss and balance sheets of the Company, (ii) a statement of actual expenses of the Company compared to the applicable Budget and (iii) a cash flow forecast for the next quarter.
(c)
To the extent the Managing Member elects to have the books and records of the Company audited, the Company shall furnish the Members with such audited financial statements promptly after the audited financial statements have been received by the Company.
(d)
No more frequently than once in any calendar year and provided that no other Member has conducted an audit of the Company in that calendar year in respect of which each other Member may rely on the contents and conclusions contained in the relevant audit report, a Member who holds at least a 5% of any class of Membership Interests in the Company may, by providing written notification to the Company, request an independent audit of the Company. The Company shall, subject to the requesting Member bearing all costs of such audit, provide such information and access as the independent auditors may reasonably require so that the audit report may be completed within 180 days of such written request.
(e)
If a Member undertakes an audit pursuant to Section 8.5(d), that Member shall ensure that each other Member is notified that an audit is being undertaken at its request and shall at the written request of a Member, provide such Member with a copy of the audit report and shall direct that the auditor accepts that the Member receiving a copy of the report may rely on its contents and conclusions.
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9.
|
DISSOLUTION AND LIQUIDATION
|
The Company shall be dissolved, and its affairs shall be wound up, upon the expiration of its term as provided in
Section 2.6
. Upon such dissolution or liquidation, any assets remaining after payment of the Company’s debts and satisfaction of the requirements imposed under
Section 6.4
and
Section 7.4
shall be distributed to the Common Unit Holders on a pro rata basis based on each such holder’s percentage interest ownership of the total Common Units.
This Agreement and the exhibits hereto constitute the complete and exclusive statement of the agreement regarding the operation of the Company and replace and supersede all prior agreements regarding the operation of the Company.
This Agreement and the rights of the parties hereunder (save for the arbitration agreement contained in
Section 10.7
, which shall be governed by the laws of England and Wales) will be governed by, interpreted, and enforced in accordance with the laws of the Republic of the Marshall Islands, without giving regard to principles of conflicts of law.
All headings herein are inserted only for convenience and ease of reference and are not to be considered in the construction or interpretation of any provision of this Agreement.
If any provision of this Agreement is held to be illegal, invalid or unenforceable under the present or future laws effective during the term of this Agreement, such provision will be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.
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10.5
|
No Third Party Beneficiary.
|
This Agreement is made solely and specifically for the benefit of the Members and their successors and Transferees and no other Persons shall have any rights, interest or claims hereunder or be entitled to any benefits under or on account of this Agreement as a third party beneficiary or otherwise.
All amendments to this Agreement must be in writing and signed by the Members. To the extent that Golar Partners agrees to an amendment to this Agreement, such amendment must be approved by the Conflicts Committee.
The Members acknowledge that the expeditious and equitable settlement of disputes arising under this Agreement is to their mutual advantage. To that end, the Members agree to attempt to resolve differences of opinion and to settle all disputes through joint cooperation and consultation if possible. Any dispute, alleged breach, interpretation, challenge or disagreement whatsoever between or among any of the parties hereto with respect to any dispute arising out of or relating to this Agreement (or any other agreement contemplated hereby) that the Members are unable to settle within sixty (60) days of the initial written notice of dispute, as set forth in the preceding sentence, shall be resolved by final and binding arbitration before a single arbitrator pursuant to the rules of arbitration then in force of the London Court of International Arbitration, which rules are incorporated by reference herein. The elapse of sixty (60) days shall not be a precondition to the obtaining of emergency interim relief, either via arbitration or from a court of appropriate jurisdiction.
The seat (or legal venue) of arbitration shall be London. Such arbitration shall be the exclusive remedy hereunder; provided that nothing contained in this
Section 10.7
shall limit any party’s right to bring (i) post arbitration actions seeking to enforce an arbitration award or (ii) actions seeking injunctive or other similar relief in the event of a breach or threatened breach of any of the provisions of this Agreement (or any other agreement contemplated hereby). The decision of the arbitrator may, but need not, be entered as judgment in a court of competent jurisdiction. If this arbitration provision is for any reason held to be invalid or otherwise inapplicable to any dispute, the Members agree that any action or proceeding brought with respect to any dispute arising under this Agreement, or to interpret or clarify any rights or obligations arising hereunder, shall be maintained solely and exclusively in the courts of England and Wales. With respect to any action or proceeding that a successful party to the arbitration may wish to bring to enforce any arbitral award or to seek injunctive or other similar relief in the event of the breach or threatened breach of this Agreement (or any other agreement contemplated hereby), each party irrevocably and unconditionally (and without limitation): (i) submits to and accepts, generally and unconditionally the non-exclusive jurisdiction of the courts of England and Wales, (ii) waives any objection it may have now or in the future that such action or proceeding has been brought in an inconvenient forum, (iii) agrees that in any such action or proceeding it will not raise, rely on or claim any immunity (including, without limitation, from suit, judgment, attachment before judgment or otherwise, execution or other enforcement), (iv) waives any right of immunity which it has or its assets may have at any time, and (v) consents generally to the giving of any relief or the issue of any process in connection with any such action or proceeding including, without limitation, the making, enforcement or execution of any order or judgment against any of its property. IN ENTERING INTO THE ARBITRATION PROVISION OF THIS
SECTION 10.7
, EACH PARTY TO THIS AGREEMENT KNOWINGLY AND VOLUNTARILY WAIVES ITS RIGHTS TO A JURY TRIAL. EACH PARTY TO THIS AGREEMENT HEREBY KNOWINGLY AND VOLUNTARILY WAIVES TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT OR ANY ANCILLARY AGREEMENT OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF.
[Signature Page follows]
WHEREFORE, this Agreement has been executed by a duly authorized representative of each of the Members as of the date first set forth above.
Member:
GOLAR LNG LIMITED
By:
Name:
Title:
GOLAR PARTNERS OPERATING LLC
By:
Name:
Title:
KSI INVESTMENT PTE. LTD.
By:
Name:
Title:
BLACK & VEATCH INTERNATIONAL CORPORATION
By:
Name:
Title:
EXHIBIT 1
CERTIFICATE OF LIMITED LIABILITY COMPANY INTEREST
OF
GOLAR HILLI LLC
Organized Under The Laws Of The Republic Of The Marshall Islands
This Certificate evidences the ownership by _______________________ of ______ common units representing limited liability company interests in Golar Hilli LLC (the “
Company
”), which interests are subject to the provisions of the Certificate of Formation and the Amended and Restated Limited Liability Company Agreement of the Company, as each may be amended, modified or otherwise supplemented from time to time.
Witness, the signature of the Company by its duly authorized officer.
Date: __________
Name:
Title:
For value received, the undersigned hereby sells, assigns and transfers unto _________________________________________ a total of __________ common units representing limited liability company interests in Golar Hilli LLC represented by this Certificate.
Date: __________
Name:
Title:
EXHIBIT 2
CERTIFICATE OF LIMITED LIABILITY COMPANY INTEREST
OF
GOLAR HILLI LLC
Organized Under The Laws Of The Republic Of The Marshall Islands
This Certificate evidences the ownership by _______________________ of ______ Series A Special Units representing limited liability company interests in Golar Hilli LLC (the “
Company
”), which interests are subject to the provisions of the Certificate of Formation and the Amended and Restated Limited Liability Company Agreement of the Company, as each may be amended, modified or otherwise supplemented from time to time.
Witness, the signature of the Company by its duly authorized officer.
Date: __________
Name:
Title:
For value received, the undersigned hereby sells, assigns and transfers unto _________________________________________ a total of __________ Series A Special Units representing limited liability company interests in Golar Hilli LLC represented by this Certificate.
Date: __________
Name:
Title:
EXHIBIT 3
CERTIFICATE OF LIMITED LIABILITY COMPANY INTEREST
OF
GOLAR HILLI LLC
Organized Under The Laws Of The Republic Of The Marshall Islands
This Certificate evidences the ownership by _______________________ of ______ Series B Special Units representing limited liability company interests in Golar Hilli LLC (the “
Company
”), which interests are subject to the provisions of the Certificate of Formation and the Amended and Restated Limited Liability Company Agreement of the Company, as each may be amended, modified or otherwise supplemented from time to time.
Witness, the signature of the Company by its duly authorized officer.
Date: __________
Name:
Title:
For value received, the undersigned hereby sells, assigns and transfers unto _________________________________________ a total of __________ Series B Special Units representing liability company interests in Golar Hilli LLC represented by this Certificate.
Date: __________
Name:
Title:
EXHIBIT 4
COMPUTATION OF INCREMENTAL PERENCO REVENUES
“
Incremental Perenco Revenues
” means:
(a) any cash received by Hilli Corp from revenues invoiced to the extent such revenues invoiced are based on Tolling Fees in excess of that set forth in Section 5.1(a)(iii) of the Perenco Contract (such invoiced amount being the “
Invoiced Brent Premium
”), before deducting any Underperformance Costs (as defined below) (“
Incremental Perenco Cash
”);
less
(b) any incremental tax expense arising from or related to any cash receipts referred to in clause (a) above (“
Incremental Tax Expense
”);
less
(c) the Pro-Rata Share of Underperformance Costs (as defined below) incurred by Hilli Corp during such Distribution Period (as defined below).
In the event that the amount of cash received by Hilli Corp is less than the amount invoiced, the amount of such cash that shall be treated as Incremental Perenco Cash shall be determined by applying the percentage that the Invoiced Brent Premium represented of the total amount invoiced, provided however that to the extent such shortfall in the cash received is specifically identifiable as Invoiced Brent Premium than such shortfall shall be applied entirely to Incremental Perenco Cash to the extent of that identification.
“
Distribution Period
” means any Series A Distribution Period or Series B Distribution Period.
“
Underperformance Costs
” means, with respect to any Distribution Period, additional costs incurred as a result of any one or more of the following with respect to such Distribution Period:
(a) Services Unavailability;
(c) SPA Costs,
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(e)
|
LNG shortfalls pursuant to the Perenco Contract;
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(f)
|
Retainage in excess of the Operations Retainage Limit or during the Commissioning Period, Retainage in excess of the Commissioning Retainage Limit); or
|
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(g)
|
terms or provisions in any other tolling agreement (or other agreement related thereto) then in effect that are similar to those set forth in (a) through (f) above relating to any similar claims or conditions.
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Service Unavailability, Off-Spec LNG, SPA Costs, Demurrage Event, Retainage, Operations Retainage Limit, Commissioning Period and Commissioning Retainage Limit shall have the meaning given to such terms in the Perenco Contract.
“
Pro-Rata Share of Underperformance Costs
” means, with respect to any Distribution Period:
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(a)
|
Incremental Perenco Cash
less
Incremental Tax Expense for such Series A Distribution Period;
divided by
the total cash received by Hilli Corp, before deducting any Underperformance Costs, during such Distribution Period;
multiplied
by
|
(b) the total Underperformance Costs with respect to such Distribution Period.
For example (excluding the effect of any Incremental Tax Expense):
If the Pro-Rata Share of Underperformance Costs exceeds the Incremental Perenco Revenues with respect to any Distribution Period, then the remaining cost shall be deducted from the next Series A Distribution.
EXHIBIT 5
COMPUTATION OF REVENUES LESS EXPENSES
“
Revenues Less Expenses
” means:
(a) the cash receipts from revenues invoiced by Hilli Corp as a direct result of the employment of
more than
the first fifty percent of LNG production capacity for Hilli FLNG, before deducting any Underperformance Costs (unless the incremental capacity above the first fifty percent is supplied under the terms of the Perenco Contract and the Term of the contract is not expanded beyond 500 billion cubic feet of Feed Gas (as defined in the Perenco Contract)), excluding, for the avoidance of doubt, any Incremental Perenco Revenues (“
Incremental Cash
”);
less
(b) any incremental costs whatsoever, including but not limited to operating expenses, capital costs, financing costs and tax costs, arising as a result of employing and making available more than the first fifty percent of LNG production capacity for Hilli FLNG (“
Incremental Costs
”);
less
(c) any reduction in revenue attributable to the first fifty percent of LNG production capacity availability as a result of making more than fifty percent of capacity available under the Perenco Contract (including, but not limited to, for example, as a result of a Tolling Fee rate reduction as contemplated in the Perenco Contract) (“
Revenue Reduction
”);
less
(d) the Pro-Rata Share of Underperformance Costs (as defined below) incurred by Hilli Corp during such Distribution Period (as defined below).
For the avoidance of doubt, for so long as the Perenco Contract is in effect, the first fifty percent of LNG production capacity for Hilli FLNG shall be deemed to be supplied pursuant to the Perenco Contract (unless Perenco exercises its option pursuant to the Perenco Contract, in which case the percentage deemed to be supplied pursuant to the Perenco Contract shall be increased accordingly).
“
Underperformance Costs
” and “
Distribution Period
” have the meaning assigned to such terms in Exhibit 4 to this Agreement.
“
Pro-Rata Share of Underperformance Costs
” means, with respect to any Distribution Period:
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(a)
|
Incremental Cash
less
Incremental Costs
less
Revenue Reduction for such Distribution Period;
divided by
the total cash received by Hilli Corp, before deducting any Underperformance Costs, during such Distribution Period;
multiplied
by
|
(b) the total Underperformance Costs with respect to such Distribution Period.
For example (excluding the effect of any Incremental Costs or Revenue Reduction):
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|
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|
|
Revenue
|
Pro-Rata Share of Underperformance Costs
|
Net revenue
|
Total cash received excluding Incremental Perenco Revenues related to Series A Special Units and Revenues Less Expenses related to Series B Special Units (in all cases, before Underperformance Costs)
|
600
|
(100)
|
500
|
Incremental Perenco Revenues due to Series A Holders before Underperformance Costs
|
300
|
(50)
|
250
|
Revenue Less Expenses due to Series B Holders before Underperformance Costs
|
300
|
(50)
|
250
|
Total Cash Received Before Underperformance Costs
|
1200
|
|
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Underperformance Costs
|
(200)
|
|
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Total Cash Received After Underperformance Costs
|
1000
|
(200)
|
1000
|
If the Pro-Rata Share of Underperformance Costs exceeds the Revenues Less Expenses with respect to any Distribution Period, then the remaining cost shall be deducted from the next Series B Distribution.