Ladies and gentlemen, thank you for standing by, and welcome to the Color LNG Limited 3Q 2020 Results Presentation Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer I must advise you that this conference is being recorded today, Monday, 30th November, 2020. I would now like to hand the conference over to the first speaker today, Golar's CEO, Mr. Ian Ross.
Thank you, and please go ahead.
Thank you, operator. Good morning, good afternoon, everyone. Welcome to the Golar LNG Q3 2020 results presentation. My name is Ian Ross, and I'm the CEO of Golar LNG. Today, I'm joined on the line by CFO, Karl Friedrich Staubot, replacing Callum Mitchell Thompson, who has resigned from his position due to personal reasons.
We'd like to thank Calum for his contribution to Golar. We're also pleased to have Eduardo Marinau, CFO of HyGo and Tor Olav Troim, Chairman of both Golar LNG and HyGo with us today. And as usual, we also have Stuart Buchanan, Head of Investor Relations on the call. I'd like to draw your attention to forward looking statement on Slide 1. And if we turn to Slide 4, let me give you some highlights before Carl takes you through the numbers in more detail.
Today, we report an adjusted EBITDA of 57 $1,000,000 and revenue of $95,000,000 for the quarter which is driven by a further solid FLNG performance and a steady result from shipping. In shipping, we achieved overall time charter earnings of $39,000 per day, which is ahead of guidance, with the TFDE's earning just under $44,000 per day if you exclude drydock days. And we ended the quarter with a shipping revenue backlog of $198,000,000 compared to $147,000,000 at the end of Q3 'nineteen. Our FSRU LNG Croatia conversion remains on track for handover to our customer LNG Hervatska in December, at which time we expect to release $17,000,000 in cash from the project and a further $30,000,000 of cash in January next year. Our FLNG operations maintained 100 percent commercial uptime through the quarter.
FLNG Gimi force majeure event with BP has ended, resulting in the project schedule being extended by 11 months and with no other changes to contractual terms. And in downstream, Paul Hanrahan has been appointed as the new CEO of Heiko Energy Transition, that's the new name for Golar Power. Full capacity payments were earned from the Sergipe power station and FSRU Nanook and more progress has been made towards Barcarena terminal FID. Turning to Page 5 and an update on governance which we take very seriously. The internal review that was instigated following the allegations against the former CEO of Heiko was completed with no findings of wrongdoing.
The review has not identified any evidence establishing bribery or other corrupt conduct involving HyGo and confirmed solid corporate governance and compliance. Eduardo will go through this overall timeline and provide more detail on Hygol later in the presentation. So more detail on the business segment is to follow. Let me now hand over to Karl take you through the numbers and more detail on financing. Thank you.
Thank you, Ian. I'm looking forward to take on the role as CFO for Golar. My name is Karl Friedrich Staugaard, and I will start by taking you through the summary results on Slide 6. Shipping TCE for the quarter came in at $39,100 per day, higher than our guidance of $35,000 a day and above Q3 of last year at $35,200 However, we were seasonally down from Q2 as expected. FLNG Hilli continued its solid and stable operations with 100% utilization and earnings in line with Q2.
Net loss for the quarter ended at $22,000,000 We report a cash position for the quarter of $177,000,000 of which $100,000,000 is restricted cash related to our letter of credit on the FLNG Hilli and consolidated VIE cash balances related to our sale leaseback finance vessels. The unrestricted cash position for the quarter of $77,000,000 was negatively impacted by $17,000,000 due to having to Equity Fund give me CapEx during the BPFM event. Following the ending of the Forsemer share event, the draw stop under our $700,000,000 facility available during construction has been lifted and we have made a $75,000,000 draw, which have replaced the $17,000,000 of equity CapEx, increasing our liquidity post quarter end. This realigns the drawdown ratios to the original debt equity funding ratios and adjusting for this equity CapEx installment, our cash position for the quarter would have been $94,000,000 Adjusted EBITDA for the quarter came in at $57,000,000 a beat against consensus at 52,400,000 dollars driven by higher than expected shipping rates. Turning to Slide 7 and adjusted EBITDA development.
Quarter over quarter, our EBITDA was down by approximately $10,000,000 from $67,000,000 in Q2 to $57,000,000 in Q3, primarily driven by seasonally lower shipping rates, which went from $45,000 a day in Q2 to $39,000 a day as mentioned. We also have a COVID-nineteen related closure of the shipyard where the Golar Tundra was being drydocked, which resulted in significant unscheduled fire during the quarter and contributed to the net reduction in our fleet utilization from 93% in Q2 to 80% in Q3. As expected, vessel operating expenses at 28 $200,000 were higher than those at Q2, which came in at $24,000,000 The $4,000,000 increase was mainly due to catch up repairs and maintenance carried out following the lifting of COVID restrictions. As for our trailing last 12 months EBITDA, we're up from $283,000,000 a year ago to $294,000,000 last trailing month, mainly driven by an average increase in our achieved shipping rates. Turning to Slide 8 and our corporate financing.
We have 2 corporate facilities maturing before year end, a $150,000,000 corporate facility secured against our HyGo shareholding and a $30,000,000 margin loan on our shareholding in Golar Partners. To address these upcoming maturities, we have entered into a $100,000,000 committed corporate debt facility secured in our HIBOR shares. This will be drawable at maturity of the $150,000,000 facility that's now maturing. Furthermore, we are in advanced discussion for an incremental $125,000,000 corporate credit facility drawable upon high go IPO. In addition to these facilities, other key financing events that will increase our available liquidity include contractual drawdown on the Golar Bear facility of an incremental $10,000,000 targeted in January 2021.
As Ian explained, the acceptance and delivery of the Golar Viking project converted to an FSRU and on its way to acceptance to LNG Croatia. That will free up net liquidity of $47,000,000 between December 2020 January 2021. We've also received term sheets for opportunistic refinancings of the vessel Golar Frost and a potential renewal of the maturing DMLP margin loan, which combined can raise $70,000,000 in liquidity to Golar. The net potential liquidity effect,
if we draw on all
of these facilities, will be an incremental $172,000,000 in liquidity after repaying the maturing $180,000,000 of corporate debt. So we're comfortable with the liquidity situation, assuming we draw on all these facilities. And we think that will create significant flexibility to continue the growth of the company. Turning to Slide 9, we have an update on our FLNG Gimi conversion funding sources. We have, as Ian alluded to, extended agreed with BP to extend the project by 11 months.
That is expected to come in at an incremental construction cost of $36,000,000 Furthermore, we have shifted some of the CapEx to later in the construction period to benefit near term liquidity. For next year, the reduction is $7,000,000 in equity requirements before we increase in 2022 and 2023, so we pushed the installments slightly out. We're also happy that the increase in the construction CapEx is not more than the $36,000,000 that we anticipated in the total increase in construction costs, and we worked hard with our subcontractors to make sure that the increase in costs are not more significant given the 11 month delay. That concludes it for the financing section. And I'll now head over for Ian to run through the shipping section.
Thank you, Karl. Turning to Slide 11 and shipping. The quarter commenced with JKM at around 2 point $5 per MMBtu and quoted TFDE headline spot rates of around $30,000 a day. The seasonal upswing was slower than usual due to a combination of around 120 U. S.
Cargo cancellations over the summer, higher than normal European storage levels and weather related supply interruptions, which continued into early September. As production resumed late Q3, the rates the shipping rates resumed their seasonal upswing, albeit later and lower than last year. The quarter ended with JKM at around $5.15 per MMBtu and quoted TFDE headline rates of around $59,000 a day. Subsequent to that, we have seen JKM above $7 and spot rates briefly above $100,000 for single voyages before dropping back. Remaining true to our shipping strategy and our focus on utilization is serving as well.
Our Q3 utilization of 80% is significantly up on Q3 2019. Our TCE of 39,000 for the quarter whilst above guidance was, as Karl has mentioned, also adversely affected by the Tundra being in dry dock for much longer than planned due to that COVID shutdown in Singapore. And this will spill over into the early part of Q4. She's now, of course, out of drydock. Additionally, we have built $123,000,000 of shipping backlog this quarter, which you can see on Slide 12.
Utilization going into 2021 is strong with around 2 thirds of 2021 fleet days already backed by contract. And whilst we may sacrifice a little of the upside during the winter months, we expect to more than make up for this during the rest of the year. We're anticipating a TCE of around $50,000 a day for Q4. And as LNG prices cycled up and as mentioned we did see JKM over $7 over the last few weeks, the prospect of FLNG development starts to become more interesting. So let's now have a look at FLNG in Slide 14.
Hilli performed well in the quarter with 100% commercial uptime as Carl noted and she has offloaded the 47th cargo. The annual 2 week maintenance shutdown was completed without incident during the quarter which I think deserves a mention due to the COVID constraints that the team operated under during that time. We agreed an amendment to the LTA with Perenco and SNH, which essentially does 2 things for us. Firstly, it removes the 500 Bcf cap on the contract volume and so converts the contract to an 8 year fixed duration deal. And secondly, it allows us to invoice for any overproduction during a calendar year which will amount to around $5,000,000 for the overproduction to the end of last year.
We expect the agreement to be formalized in due course and our discussions with Perenco on LNG production volume increase which is enabled with that amendment within the remaining term of the contract continue in the right direction and we anticipate that Perenco will start its well campaign Should we reach agreement with Perenco, there
will likely be a new
Should we reach agreement with Perenco, there will likely be a new risk aligned tariff payment for that portion of additional volumes rather than on a fixed tariff. Turning to Slide 15. On FLNG Gimi, we concluded the FM issue with BP, as Carl mentioned, as a result of the delay to commercial operations of 11 months. Importantly, all other aspects of the contract remain the same and the impact on the overall budget is minimal and the financing milestones have been restructured as Karl described. On the project in Singapore, our contractors are ramped up to over 2,400 people working within COVID restrictions and getting on with the project.
We expect the next dry dock which will include attaching parts of the large sponsors to the hull to go ahead before the year end. On the FLNG business development pipeline, we've experienced a material uplift in the level of interest in FLNG with a number of new inquiries during the quarter. The 9 opportunities currently being discussed with financially strong counterparties are geographically spread and that include potential deployments in West Africa, Asia, the Mediterranean and the Americas. We are in active engagement on both conversion and newbuild options and remain convinced of not only the commercial and schedule benefits of our design, but increasingly of the competitive carbon footprint of our offering. Clearly, we're focused on delivering Gimi right now, but these deals do take time to put together, and I'd like to think that there's potential for good convergence between opportunities being ready for FID, possibly maybe in 2022, and our ability to put together a financing package for the projects.
With that, can I hand over to Eduardo Maranhao, sorry, Eduardo, to take you through the details on Hyggell?
Thank you very much, Ian, and good morning, ladies and gentlemen. So switching to Slide 18, I just wanted to give a brief recap of the major events that took place over the past 8 weeks. So at the end of September, our IPO efforts were put on hold as a result of allegations involving our former CEO for actions predating his work at Heiko. Immediately after that, our Board of Directors engaged with external legal and accounting advisers in order to conduct a detailed internal review of the company's procedures and existing compliance policies. The final outcome of this review has been delivered in the end of October and has not identified any evidence establishing improper or other corrupt conduct involving Hygo or its executives and confirms solid corporate governance and compliance.
Also in September, our existing power station in Sergipe faced issues with one of its 4 step up transformers, which temporarily reduced the available generating capacity from 1.5 gigawatts to 1 gigawatt until the end of Q2 of 2021, when a replacement transformer is expected to be installed. We maintain business interruption insurance cover in place and we do not expect material financial impact from this event. Also on September 30, Hygo was the only qualified bidder to present a valid offer in the official tender to take over the Bahia terminal from Petrobras. Petrobras subsequently increased Hygo's perceived integrity risk, leading to a temporary disqualification of its speed. We have then appealed from this decision and now expect a final outcome from Petrobras before the end of the year.
On October, Paul Henneran was appointed as our new Chief Executive Officer. As a former CEO of AES Corporation, Paul brings extensive experience in international business development in emerging markets and has the right skill sets to lead our growth prospects. We remain fully committed to the development of our terminal in Barcarena. And after our mutual decision to terminate the existing MoU with North Hydro, we have entered into a new agreement with a state owned gas distribution company of the Para state, Gas do Para, with the goal to supply the existing regional demand for cleaner fuels. Also on November, we have reached an important milestone in the development of the Barcarena terminal when the Brazilian authorities granted us with the final authorization called Autorga to build the 605 Megawatt Power Station and associated LNG terminal.
Just as of last week, we have also been shortlisted in the open season tender to supply large natural gas volumes to the Coppergas, the state owned gas distribution company of the state of Pernambuco, which has its shareholders the state of Pernambuco itself, Mitsui and also Petrobras. This is a fundamental commercial initiative to accelerate the development of our terminal in Suape. As seen above, we strongly believe that our ability to develop larger scale projects and enter into long term partnerships in Brazil remains unchanged. With our network of strategically located terminals and critical downstream infrastructure, we'll continue our mission to deliver cheaper and cleaner energy to this huge market. If I may switch to Slide 19.
The idea would be to give an update on some of the developments in our small scale LNG business. So we continue to execute on our strategy. The first batches of equipment, including ISO containers, mobile regas units and gas filling stations have arrived in Brazil and much more are expected in the coming weeks. So we have now over 100 ISO containers in the country. In order to supply our first volumes, we have partnered with Galileo to build small liquefaction units in the states of Bahia and Sao Paulo.
And Haibo will be the 1st company to deliver bio LNG in the country by using biomethane from an existing landfill in Sao Paulo and transforming it into LNG. In the south of Brazil, we're also building our strategic distribution hub in the city of Uruguayana, which will allow us to supply the existing demand of this important region, including the states of Rio Grande do Sul, Santa Catarina and Parana. If I may switch to Slide 20, I also wanted to give an overview of the general update on some of the terminals that we have been developing in Brazil. So I wanted to highlight the significant milestones that we have achieved in the Barcarena terminal. Based on those, we believe that we could be in a position to take a final investment decision in the next couple of months.
I would like to highlight, for example, the issuance of the installation license for the construction of the LNG terminal and associated facilities for the power plant. We have also been awarded the long term port concession by CDP for the use of the existing facilities in the Vila Du Conde port in the city of Parcarena. We have also received binding EPC proposals for the construction of the 605 Megawatt power station from leading international suppliers. Moving over to Suape, we have also made significant progress over the past quarter. Subject to the receipt of final installation permits, we could also expect a final investment decision in the next couple of months.
And upon the arrival of the first of a new vessel expected for next year, SUAPE is positioned to be the leading distribution center of LNG in Brazil. Our terminal in Santa Catarina, which I also wanted to highlight, is also coming together. Preliminary environmental licenses and approvals from both UNTAC and SPU have been obtained. An FID is expected before the end of next year. Lastly, when it comes to Bahia, although we cannot guarantee the outcome of Petrobras' decision, we are confident that our proposed approach is the best solution to address all the commitments that were made towards the antitrust authorities in Brazil.
It also goes in line with the government's efforts to provide cheaper and reliable gas supply to the vast local Brazilian market. So considering the development of all of our terminals, Heigl could be in a position to deliver over 25,000,000 tons of LNG in Brazil in 2022.
Thanks, Eduardo. If we turn now to Slide 21 and our ESG progress, I can highlight a couple of items. Firstly, the carrier fleet achieved best ever fuel efficiency during the quarter resulting in lower CO2 emissions. The other point that's new is our recently announced partnership with Black and Veatch under which we will be jointly exploring opportunities to marinize some of processes and activities relating to the hydrogen economy. The initial focus will be on 2 areas.
Firstly, CO2 management, so it's capture, storage and transport, initially from the LNG supply chain, but equally it could be from other industrial users. And secondly, floating production of blue ammonia. So that's ammonia produced using methane for fuel, but capturing the carbon from the exhaust stream. 2 focus areas are clearly related, but there may well be separate market opportunities evolving from the work. Early days, but it does look interesting.
So summarizing our priorities on Slide 22, we will focus on opportunistic upsides now that the majority of the shipping fleet is on term charter. In FLNG, our focus is to deliver Gimi safely on time, on budget and to continue progress sorry, to continue to progress discussions for potential expansion of Hilli, plus development of our newbuild Mark III opportunities. In downstream, Heiko will focus on reaching FID on the terminal as Eduardo has said at Barcarena, building out the business in Brazil and pursuing international opportunities. Focus on concluding the refinancing activities that Carl discussed and of course we'll complete our budget cycle to confirm a sustainable reduction in G and A and then get back to the simplification of the Golar Group structure. I'm pleased now to hand over to Golar Chairman, Toerlak Troian for some remarks prior to Q and A.
Thanks, Dean. I think I was on this call a year ago and giving a little bit of reflections from the Board on what to do it again, particularly in the situation we have been through in the last couple of months. So it's this year 20 years since John Fredericks and I went to Singapore and bought a company which at that time was called Osprey. The jubilee company was 500D carriers and a lot of knowledge about how to operate ships, which then could compress natural gas into 1600 of the volume, freeze it down to 167 degrees Celsius and we thought it was a pretty cool business in all possible way. The vision we had when we bought the company was that LNG was an interesting energy going forward.
At that time, nobody talked about CO2 and pollution. Renewable business were extremely small. And the reason we liked the opportunity that you could transport large volume on energy from one part of the world to another part of the world. We noticed that the energy and gas prices were very different in different countries. Poor countries with high growth in population typically had high power prices and paid too much for power effectively.
LNG created a kind of bridge from cheap gas reserve to high gas price power market. But we were far, far too early. It actually took 15 years before the gas cartel lost control over LNG production and L and D became a commodity. In the meantime, the production cost for terminals on L and D production came down, LNG became cheaper. Golar was a pioneer in this business converting the 1st floating regas terminal and also delivering the 1st successful FLNG vessel.
The FLNG vessel we have working for Perenco in Cameroon today is producing gas, which otherwise would have been flared or re injected. For me, that's sustainable value creation. Gileesa tune bag was probably not born when we bought Osprey, but the focus the world have today on CO2 reduction has created a new world, at least in part of the world. It's important to know that 85% of all energy in the world is still produced from hydrocarbon. For the next 20 to 30 years, hydrocarbon will produce the material part of the world's energy with a different kind of hydrocarbons.
If an Alimina refinery in Brazil replaced heavy fuel plant with LNG, they can save 750,000 tons of CO2 on an early basis. Add to the fact that it will also save significantly energy cost and it looks like a very easy decision to make. We can sit in Europe and in USA and we can drive our Tesla to take that its renewable market will take off and the world will change very, very quickly. Just remember that the amount of energy consumption in these markets hasn't gone up for 10 years. 20 years ago, China consumed approximately half of the energy consumption in U.
S. Since that time, the energy consumption in U. S. Have actually gone down, while the energy consumption in China has gone up 3 times and are today approximately 50% larger than U. S.
India has doubled its energy at the same time. And remember that the major power development in this country is still coal. Coal between 65% to 70% of the energy consumed in these nations are coal fired. It's cold because it's cheap. For the developing world, energy is affordability.
It's their way out from poverty. When you come to Delhi, you understand that pollution is what the politicians isn't what the politicians are focusing on. They take what they can get for the money they have. The good news is that the new technology is making LNG cheaper. If some of which traded LNG, as Ian said, for less than kind of $2 per MMBtu which is $10 oil, $10, $20 oil.
You're cutting 30% of the CO2 emission, you're cutting 70% of the particle emission and you're cutting 100% of the SOX if you can convert anything from fuel to LNG. And we have something healthy and something cheap. Then you have a growth commodity. And it is a commodity growth 10% a year. There's not a mining company in the world today.
We don't think about switching from diesel or have a few to LNG. Every day you're reading stories about shipping companies, building massive container vessels, smaller boat carriers, whatever they are, they're converting into LNG. They do it because it's cheaper, it's cleaner, they expect the carbon tax to hit them. They're also doing it for the fact that the infrastructure for global distribution of LNG is now coming together. In China, the import in the COVID year is up more than 12%.
Last month, it's up 25%. They already have 450,000 trucks working on LED in that country. And that's the second leg of the LNG transformation, the transformation from coal to LNG. In India, they just announced last week that they're now going to build a massive infrastructure for LNG including 1,000 petrol stations. I'm proud of what the team in Golar have delivered in their in stewardship.
Technically, they are as good as we can get them. I'm proud when companies like Exxon and BP comes to stay in our offices for several years to learn about FLNG technology. I'm proud of the work done by the shipping team to reduce the risk in our shipping portfolio and to cover and to get contract with serious solid partners. I'm proud when I come to see the owner of Perenco, a private oil company who produced 485,000 barrels and meet the guy who are extremely thankful for what we have put on air together on the Hilli. I'm proud of the fact that the people in Brazil over the last year have built a pipeline in the 5th largest nation in the world, a pipeline which might in 3 years be bigger than Petrobras LNG.
I'm proud of the fact that they know in couple of weeks they'll produce biofuel, fueling trucks from a landfill station in Sao Paulo and I'll be working exclusively with the biggest petrol distribution in Brazil. What I'm not so proud of is the way we have financed and marketed this company. We have a lot to learn from some of our other competitors. We trade at close to 100 times book, while we are trading at 60% of book. When you're building power station FLNG costing more than $1,000,000,000 and it takes you 4 years before you see any cash, you are in need of a strong liquidity buffer.
And even if the board and management know that we have flexibility in our balance sheet to sort out these financings, investors shouldn't have to bother about short term liquidity events. Their focus should be on the 20 year cash flow coming towards them and opportunity that gives for a stable long term dividend stream. As Chairman of the company, I should take the main responsibility for the fact that too much time in this company have spent on these matters. But when you have values, you have liquid you can get liquidity. You can borrow on your house and you know you have rented it out for the next 25 years and you can balance the amortization of that bank loan with the rental income and still have money left over.
That's the flexibility we have. With a high gold stake based on the IPO price range, we'll have a value of 900 plus or a Gimi vessel with a 10 times multiple is worth 2,200,000,000 there are significant borrowing base. Let me finish with some words about the recent events. We are all sad that Callum Mitchell Thompson decided to leave the company. We liked Callum both personally and professionally.
He came with new views. He came from the host of lords and is probably going back to the political world. He took the decision to leave after 6 months based on the personal life preference, which we also confirmed to some of our largest investor. And he left the company with a nice gesture that he will always remain an enthusiastic supporter of Golar and the team. I'm pleased to say that his role has been currently been taken over by Karl Stavrou, who knows the company very well and who has late as last week confirmed his ability to deliver attractive financing to the company.
Let me also touch about the Brazilian events, which have hit us hard on September 23, when we were meant to price the high go up and the book actually was covered. This led to the fact that the former CEO, Eduardo Antonello, who was totally instrumental in building HIGO from day 1, had to leave the company. The acquisition against Antonello is linked to events that happened 5 years before he joined our company. The Board of HIGO has from day 1 meant that this investigation, not in any way indicated any wrongdoing was done with HIGO. However, the Board started an external review of business, close to 50 people were involved in 5 weeks coming through the company from A to Z, no wrongdoing was found.
It was 4 weeks of hell with a lot of sleepless life for a lot of us. And I'm pleased to say that even if it's still suffering from being underserved dragged into something which we should never have been a part of that the business is getting back to normal. We have subsequent to the event concluded a lot of new business in Brazil as talked about by Mariano, including being awarded critical installation licenses from Brazilian authorities, signed deals with state owned companies. The venture with BR are progressing well and we expect as Marenao said to take FID on the Vacaurena terminal prior to the year end. We are in addition progressing very well on some of the national ventures.
I'd like to thank our Board member, Paul Hannan, for stepping in and taking over the CEO role. Paul, you used to run AAS, a Fortune 500 company for 10 years and certainly have the skill sets and energy to help us make HEICO into that industry leader in energy transition we truly deserve to be. Both the HEIGO board and the board of Golar LNG are fully committed to complete the IPO process. The SEC documents have been updated with recent events and have been reviewed by auditors and lawyer, but have so far not been filed. The timing of the IPO will be driven by market conditions, ongoing business operation and business development activities.
As a result of the delay of the high go IPO, Golar has been approached by industrial players, which have expressed interest in different transaction involving AIGO and AIGO assets. The Board of Golar and the Board of Hygo will consider these requests, but the main track is to develop the company and the great potential we see in this business as an independent company through an IPO. People have today an extreme focus on the new energy driver like hydrogen, ammonia and others. Golar entered into this vessel as Ian mentioned to you and we have done it with a very credible engineering partner Black and Veatch. We want to be an energy transformation company.
However, I've learned one thing through my experience in LNG, 20 years is what that L and D transformation took. We are today the only independent fully integrated LNG company developing for well to grid. It's our vision to maximize the value of that strategic position over the next 10 to 20 years with strong focus on building L and D infrastructure in emerging markets. We don't want to wait 20 to 30 years for cost to come down on hydrogen production as it has with LNG over the last 20 years and we really can make good business building the LNG infrastructure today. And we can sign 25 year deals with energy majors and with PPIs with on EBITDA basis around 5 and generally think we found a very lucrative business.
Target is now to build the size of our platform so big that the new instrument of financing becomes available for us. That should come with increased EBITDA which is already programmed into this company by the $6,000,000,000 in EBITDA backlog we have secured. We need to convert from project financing to corporate financing and we need to simplify the complexity of the corporate structure with its clear target for the Board. We truly support the analyst opinion that the value of this company is significantly higher than the current share price And rest assured that the Board will do anything they can in order to materialize that differential. That might include direct distribution of assets, sale of assets, demerger or whatever it takes in order to get the underlying value of this thing up.
If we can deliver cheaper and cleaner and be to the world and make a solid longer term return, I think we have a unique good business model. Now it's time for all of us in Golar to convert a good business model and a great integrated platform into a solid return to shareholders. You truly deserve it and we have a job to do. Thank you.
Thanks, Tor Olav. And with that, I'd like to now hand back to the operator for questions.
Thank you, ladies and gentlemen. We will now begin the question and answer Our first question comes from the line of Ben Nolan from Stifel. Please ask your question.
Yes. Good morning. First, let me say I appreciate the color that you gave on all of the various projects as it related to Hygo and all of the different various things you're doing in Brazil. I did want to ask, first of all, on you'd mentioned the Sergipe power plant had a transformer issue. Could you maybe talk through a little bit and appreciating that it's covered by insurance, but could you maybe talk through a little bit what that might mean with respect to cash flows and earnings from higher from the business until it's resolved?
Sure. Hi, Ben. This is Eduardo here. So as I mentioned before, we expect that the transformer will be replaced by the end of Q2 of next year. And until then, we continue to receive our capacity payments according to the PPA.
So the capacity payments remain unchanged. As you may recall, we do benefit from a 60 day notice whenever the power plant is called for dispatch. And in the event of the power plant being called for dispatch, we would have to compensate green exposure between the current spot electricity prices and the prices that we are paid in the contract at the point in time. That exposure is then covered by insurance as mentioned before.
So
we do not expect a material impact in the event of not being called for dispatch. And in the event of being called for dispatch, we are covered by insurance for that.
Okay. That's helpful. And then secondly for me, just as it relates to the 2 thirds of the shipping book that is now contracted for next year and I appreciate it probably some of that's on a floating rate basis. But is there any color that you might be able to give us on the type of rate that you've been able to aggregately secure for that 2 thirds of the business for next year?
Hi, Ben. It's Ian. So you're right. We do have ships on index linked charters, couple of ships that potentially could be in the spot market, but the vast majority of the fleet is on a fixed rate structure, some of it on up to a year and some of it on a slightly longer. We're not guiding to longer term TCEs, but I think it's fair to say that the structure that we put in place and our focus on through year TCE is we're moving in the right direction.
And I think directionally, we wouldn't be wanting to be going backwards from where we've achieved this year.
Okay. So better year over year, I guess, is how we should think about modeling it for that portion?
Yes. At least as good as.
Okay. All right. Perfect. Well, I'll ask my two questions. I'll turn it over.
Thanks, guys.
Thank you.
Thank you. Your next question comes from the line of Mike Webber. Please ask your question.
Hey, good morning guys. How are you?
Hey, Mike.
Hey, so there's obviously there's a ton to swing at here, but I might as well start with Hygo. And maybe, Tore, I know you referenced as being a personal issue I guess a personal issue with regards to Calum. But can you just confirm that his departure is in no way related to what happened with Heiko this fall?
Yes.
Okay, good. And then with regards to the
I think I specifically said that you have been in contact with some of the biggest shareholders and Express why it's leading. So it's not related to that.
Okay. Yes, just the timing alone kind of bears the question. But in terms of that review, I mean, it certainly seems like I know there was a pretty lengthy review in terms of digging into some of the details in Brazil pre IPO and then certainly kind of post IPO. Were you guys able to coordinate at all with Brazilian authorities? I'm trying to think about an eventual high go IPO, if you do go down that road, to what degree can you formally lift any potential overhang there?
I guess maybe the right way to ask that question is, has there been an ongoing dialogue with any of the authorities in Brazil with regards to the LNG business specifically? Or have they made have they given any comments there to you all?
Absolutely, Micah. So hi, this is Eduardo here. As I mentioned during the presentation, we do not have any impediment to continue to operate and to do business in Brazil. And I think that has been clearly stated by the number of different transactions that we have entered since all the events took place. So I can refer to MOUs that have been signed with the stakeholder entities, licenses and authorizations that have been granted by the federal government.
No, but those are all
signed prior to the initial I mean those are all signed subsequently to the initial issues to begin with. So I'm not sure if that data stream actually validates the question I'm asking. I'm really just asking whether were you able to coordinate with the authorities in Brazil with regards to that with that independent review in any way?
Well, when it comes to the authorities, we have not been questioned that we have not been asked to provide any further explanation to that. I mean,
the
events that happened with Antonello referred to him on a personal level and do not indicate to the company in any way.
Sure.
Yes.
Okay.
Just maybe pivot and Tor, you mentioned in your remarks something I think we'd all kind of suspected that you guys would have been approached probably immediately from interested parties around other strategic options for that Brazilian business, so I think most people kind of view as one of the crown jewels of the EM, kind of frontier state energy transition. If you're in a unique position in the sense that you actually got almost completely done with an IPO and then subsequently had to pull it, Is the right way to think about the valuation benchmark you would use to evaluate strategic interest, that value you would have gotten in the IPO? Is that how you're looking at it and how we should think about it, if someone can come in and kind of beat that bid? Is that the right way to think about when you'd pull the trigger on maybe some other strategic transaction?
Yes, I would say, if you think about it that way, we had an IPO range which was between 1.8 and 2.1. But Golar wasn't selling neither Golar or Stonepeak were selling any shares. We were issuing primary shares. We were not selling any shares. So from that point of view, you can probably assume that we think that the value can be higher and thereby we cannot consider any kind of lower price for any of these assets.
I think we know what this works and if anything it's probably kind of I would say that with the development we now have, I think we continue to build value. It was 1 month of hell, but I think we are now on track again. I'm super happy with the team. I think Paul and I have also brought in some of the ex guys he used to work together with and they're doing an excellent job getting this up and running. And I think when it comes to things which are panicking, I think it's going to be I shouldn't say this, but I think it's going to be very hard, for instance, for North Kedrut to develop that thing with LNG without being in contact with AIGO.
And I think they clearly see that there is no alternative. We've spent 5 years on permitting this thing.
Got you. Let me sneak one more in here for Ian. You mentioned the Gimi and BP and Kosmos recently downscaled Tortue to 5,000,000 tons, which could imply there's a second FLNG unit that could potentially be in play there. Is that your understanding? And then to where would that opportunity rank within those 9 or 10 projects that you mentioned you guys are looking at?
So Mike, it's not our practice to comment on anything other than contracted work that we've announced. And as mentioned many times before and with specific reference to Gimi, any dealings that we have with BP do remain under strict NDA. But I do refer you, as you've mentioned BP's public statements on the subject, would be no surprise for you to see that the cost structure of any future phase is important. And then I'd simply repeat that our view that Golar's floating LNG solutions are cost schedule and carbon competitive, and we keep pushing for opportunities to discuss our competitiveness with the large number large and financeable counterparties. I would say that speaking specifically and hypothetically about BP, our portfolio of potential FLNG customers is very heavily weighted to large companies that we can back finance against and that can lift projects, particularly when you look at their ability to take the cargoes themselves.
So any company that has a characteristics of being able to sort out their own offtake and give us a good security package with which we can finance the project, then we're very, very interested in speaking to them.
I think Ian and the guys have done a great job selling this to the majors. And I think there is probably a lot of majors who are afraid of building another preview. So from that point of view, they are looking at solutions which work. And when you see that we have delivered 47 cargoes with Hilli and the number of cargoes from Prelude is probably kind of less than half of it and you see the cost differences. I think people are now searching for cheaper solution from the majors which works and I think our team have that credibility.
So the portfolio in E and L today is totally different from what it was 2 years ago.
Yes, certainly seems like the opportunity sets actually kind of quietly expanding this part of the cycle. So good to hear. I will turn it over. Thanks for the time guys.
Yes, Mike.
Thank you.
Thank you. Your next question comes from the line of Sean Morgan from Evercore. Please ask your question.
Hey, guys. I think my first question probably is best suited to Eduardo and it was a question on the Bahia lease with Petrobras. And so I'm just wondering with the bid acceptance from Petrobras, is that that's ongoing? And are there other counter bids out and outstanding that you guys are sort of competing at this point? Are you the last sort of the last man standing on that?
And also maybe just help clarify what this ruling by the Brazilian Mines and Energy Administration related to volume? Is Petrobras ragging their feet because they're not really anxious to lease this asset or is it more just contractual legal issues?
Hi. So let me just try to clarify here what exactly was the Bahia terminal tender. So we were the only company which was qualified to present a commercial bid and that took place on the September 30. We presented a commercial offer, which basically met all the commercial, technical and other regulatory requirements posed by Petrobras. Just on the day after that, Petrobras on the grounds of a perceived high integrity risk for Heiko, they disqualified Heiko from the process, but we have remained as the only one that have presented a commercial offer.
So based on that, we have then appealed against that decision from Petrobras and we continue to discuss a final outcome for that process. I'm not in a position to comment what were the reasons behind Petrobras' position to take that decision, But we firmly believe that there were no reasonable grounds for disqualifying Heiko from the process.
Okay. And is Petrobras obligated to find a lessor for this facility at some point by the Brazilian state?
Yes, they are.
As part of the commitment that was made towards the antitrust authority, Petrobras has the obligation to lease the terminal for a minimal period of 3 years and that lease should take place in the next few months.
Okay.
And then one for Ian on the Hilli. I'm just trying to understand the removal of the cap by SNH. What was the purpose of the cap in the first place? And was there any concession that needed to be made? I think you said it was an 8 year.
So it's just a continuation of the existing contract with this newer terms and increased overcapacity?
That's right. So the original contract, if you recall, had an endpoint stated as the earlier of 500 Bcf through the vessel or 8 years. And as we've been producing a little over the annual amount each year that would have potentially brought the contract to an end a few months early. So what this has done is moved the contract to a firm fixed 8 year duration and we've got about 5.5 years left of that. But importantly, there's 2 things that come out.
One is that we are allowed now to be paid for our overproduction. So we've made about $5,000,000 of overproduction up to the end of 2019. And we will bill the amount for 2020 in January next year when that's calculated. So that's something that will run through the contract. And then secondly, importantly, with that cap being lifted, it means there's no barrier to being able to come up with a deal that would allow us to put more volume through the Hilli.
Okay. And that I think you said is around $5,000,000 of overproduction through the end of 2019. So does that is that revenue recognition all happen in 4Q of 2020?
I think it will happen in 1Q. It could happen in 4Q 2020 if we've invoiced it by then. We can confirm that later.
Okay, thanks. That's all for me.
Thank you. Your next question comes from the line of Randy Giveans from Jefferies. Please ask your question.
Howdy, gentlemen. How's it going?
Hey, Randy. Hey.
Hey. So looking at the liquidity events, I guess a few questions. What are the terms for the new $100,000,000 credit facility against Tygo? And for the Frost refinancing, that's going to raise an additional maybe $40,000,000 And you say the margin loan, an additional 30,000,000 dollars So is this your decision to push these refinancings into the Q1? And how likely is that margin loan to be upsized and completed in the next few months?
Karl, if you could take those. Yes.
Yes, sure. Hi, Randy. So the terms of that sorry, the terms of the facility is LIBOR plus 500 bps, and it's a non amortizing bullet facility that we have on the corporate level. When it comes to the margin loan, it's a question whether we would like to leverage the shares or not. As you know, we are repaying the margin loan now in the mid of December, And we can obviously approach the same banks or a subset of those banks to renew the margin loan.
As Thor said previously, not that there's any immediate plan to do so, but if you don't have leverage on certain shareholdings, you can at a later stage consider to also distribute shareholdings to your shareholders. Whether that is at a later stage, either GMOP or HyGo, it's something that we are considering. But such facility is in place today and should certainly be able to be put in place. When it comes to the $40,000,000 net liquidity release from the potential refinancing of Frost, we received 2 different term sheets, both of which, just given the credit processes of such refinancings, is more likely to occur early in the New Year as opposed to now. But one of them, we think, is extremely effective, and we're pushing ahead in that process.
But we also we know that it takes 2 to tango on refinancing of our ship, and therefore, we're guiding on a Q1 event on the Rust. It could, of course, be pushed earlier. But then again, I think a lot of lenders find it easier to finance new initiatives early in a new year as opposed to late in an old area too. So to think about it like that.
Got it. Okay. And then for that non amortizing credit facility, the LIBOR plus 500 basis points, that's just 1 year term?
It's 1 plus 1. It's what we have engaged with.
Got it. All right. And then if we can go back to the LNG shipping backlog, increased by $123,000,000 Can you provide a little more details on those charters? Are they all fixed, all floating? And kind of what are the durations of them?
So the majority of the new backlog, in fact, I think all of the new backlog is fixed duration and the durations, I think the longest one is a couple of years. Most of them are around about a year and there's a couple that might be somewhere in
between. Got it. Good deal. Well, let's keep the train moving. Thanks so much.
Thanks, Randy.
Thank you. Your next question comes from the line of Craig Shere from 3 Brothers. Please ask your question.
Just want to clarify, the Perenco updated agreement does not allow for reduced annual cash flow if volumes are lower, does it? And does the agreement eliminate potential to get upsized and extended terms that could support a favorable project refinancing?
There's no linkage to project financing that I'm aware of that would preclude that. And I can come back to you on the if we under produce, I don't think we've really contemplated that with the way the vessel is going, but I don't believe the way that the contract is structured, we're paid for availability and throughput. It's just that we've been putting more through and so the contract has been restructured for that. But let me come back to you on that Craig, Stuart will follow-up with you in the detail. I'm sorry, I just don't know yet.
Okay. And on the project finance question, what I meant was if you had upsized it and made it a 15 year agreement, obviously, it would be a project. Whereas if it's a little more variable and flexible, even if you're going to make more EBITDA, it's harder to replace
We are focused right now on increasing the immediate throughput on Helly rather than thinking about extending the contract because the latent value that sits in that vessel, we want to do what we can to get more volume through that vessel and the outcome from that goes straight to our bottom line and that's our immediate focus. So we're not really considering extensions of this state in the game.
Sorry, this is Karl. Just to comment on your previous question. The revenue cannot come down on Hilli under the revised schedule. So it's that Ian said we're paying for the capacity and being there and it cannot come down.
Thanks, Karl. Thanks, Carla. That's good to know. On HyGo, is there potential to renew the Nors Hydro Aluminum Project MOU after the Barcarena SID and a successful high go IPO? And could we see high go contract for FLNG itself as far as offtake in the next couple of years?
Okay. So with regards to Mosk Hydro, what I can say is that we continue on an active dialogue with them. And our decisions to take the project ahead and move on with a potential FID before the end of the year are not connected entirely to the discussions with North Kydra. So we might be in a position to move ahead with the project without their contract. With regards to the potential FLNG supply to any high growth project, I think this is, of course, one of the potential synergies that we believe that could be achieved.
And we do contemplate it in some potential projects, especially in the north of Brazil. But this is something that is very premature and very preliminary as of today.
Great. And just to clarify there, I guess my thinking was if you FIDed Barcarena, you're the only game in town. There's just no way for these guys to convert, as they have promised the local state to the more emission friendly natural gas fuel without you. So I guess what I'm asking is if you do go ahead and FID in the next month or 2, do you think that there's decent opportunity for North Hydro to return to the table in coming quarters?
I think what you should do is you should call North Hydro if there are any alternatives.
Okay. Thank you.
I don't
think we should enough have been said about the Hydraul. If you see the location for our terminal, it's effectively outside the door of North Hydro's plant. So I think I'm hopeful when this thing is settling down that it is possible to get that back in the fall. But of course, don't take anything for granted.
Great. Thank you.
Thanks, Craig.
Thank you. The next question comes from the line of Ken Hoexter from BBA. Please ask your question.
Hey, good morning, good afternoon. Ian, Karl, Eduardo, Tor, thanks for the detailed updates there before. Well, maybe Tor, just your view you mentioned your kind of view on governance is primary, but yet you're on your 4th CFO here in 2 years and 4th CEO in 5 years. I guess just going back to some of the questions before, what's the concern here just in lack of continuity, given that much shuffling and to give visibility on the steady hand guiding continuing to guide the company?
I think when you're saying we are on our 4th CFO, that's not totally right, because the CFO we had before Graham Rautam, he was with us for 20 years. So he played different roles. So I don't think that's the guy Calum took over for. So I don't think necessarily that's right. We have had 2 for 20 years effectively.
I think it changed that a little bit. But Ian has now been here in 2 years, 3.5%. But of course, turnover is never good. And this is there is no doubt that this is a kind of challenging place to work. There is hard work and kind of there is an entrepreneurial company with a hard drive.
And I can admittedly saying that to have an actively involved share, it might be painful from time to time. Ian laughing at me. So I think that's the way that we were used from the Fredriksen Group that we are actively as Board and it works. But the funny thing when you're saying all the alterations also all the chief executive who was in the company, they normally came back and were several times, like Doug and Gary and all the people. So I think your point, you're not correct in your facts, because we haven't changed the CFO for 4 times at least.
But it's obviously a concern. It's less of a concern that the guy leaves us to 6 months than the guy leaves us a couple of years because, of course, it was limited what he could set himself into. But we all liked Calum and I think both Ian and I tried to convince him to stay, but kind of from personal reasons, he said that he wanted a different life.
Okay. But I mean factually in that seat, it is numerically right, right, from Tienzo to Rob Johns to Calum to new to Carl. But okay. So but I get your point in terms of still at the company for a while. Now just let me flip over, Ian, to your thoughts on the cost from the BP delay.
You mentioned the $36,000,000 Can you maybe detail those costs if I've got that right? And is the shipyard fully operational now and what those costs are associated with?
Yes. Jan, so the shipyard is fully operational. It's quite amazing what they're doing in terms of their own and it comes from the Singaporean government to start with. They have very strict rules around how do they transport people. So let me give you A lot of the workers live in dormitories and they sleep in the same area of the dormitory as their fellow workmates for a specific area of the project.
So not only is it the specific area of the yard, it's a bit of the ship that they're working on and they go from their dormitories to their canteen facility and a bus directly to their work area. They stay with their workmates all day and then they come back and they can sort of rinse and repeat. And the idea behind that is if there is a COVID case, they can isolate a unit very quickly and then deal with it. So we were down to less than 100 people during the 4 month shutdown that we experienced in Singapore and they were really on care and maintenance activity. We're now up to 2,450 as of today, working on the project, which is higher than it was before we slowed down and back on track.
In terms of the additional cost, the $36,000,000 a lot of that has gone into storage, passivation and care of equipment that was ready to ship from vendors plus additional time related costs as you might imagine. You've got certain fixed costs to discontinue and they've gone out 11 months. So as a percentage of the overall budget, dollars 36,000,000 on 13.30 €1,000,000 is pretty good under the circumstances.
Great. Thank you. And then lastly, just maybe just on going to Hyogo, the key risks for the FID at Parque Arena and Suape. Eduardo, you mentioned kind of of some of the things might be coming over the next few weeks. Is there a chance of delay or any other issues or of not getting the FIDs or anything else that could delay that process?
We are highly confident that the progress made in Barcarena today puts us in a very good position take a final investment decision in the next couple of months. When it comes to Suape, we believe that there are still some regulatory approvals that are expected in the coming weeks and could be a main driver for that decision.
Great. Thanks for the insight guys. Appreciate the time.
Yes, Ken.
Thank you.
Thank you. The next question comes from the line of Gregory Lewis from BTIG. Please ask your question.
Yes. Thank you and good afternoon and thanks for squeezing me in here. Yes, Ann, I guess I just had a question. In kind of going through the prepared remarks, it sounds like and I'm going to look for a little bit of color around what's been talked about over the last few quarters in terms of strategic reviews and kind of repositioning the company. Is it safe to assume that and realizing that the capital markets can be fickle and things are always in flux in the capital markets,
But it's the right way
to think about the event path here for Golar and trying to crystallize value. Is it all contingent on HyGo, the IPO before we think about other things like the MLP and the conventional fleet? Just kind of curious any color around that you could give us around that?
Well, let me kind of if I think about our sort of enabling strategic plan, it hasn't really changed much over the last year. And as Thor mentioned, we see the sum of the parts of the business equating more to the value recognized in the market. But to achieve that vision of creating separate investable businesses, the few things that we are focused on, let me enlist them as 7 or 8 of them. First of all, keeping operations running safely at the satisfaction of the customers. Secondly, working hard to maximize the 3 year shipping income.
So that's a change of pushing quarter by quarter where we're looking at it through the course of the year. Thirdly, delivering LNG Croatia safely on time and on budget before the end of the year to deliver that $47,000,000 in cash and take on the 10 year operations and maintenance contract. Number 4, maximize throughput on FLNG Hilli whilst on contract for Enco. So maximize that volume we can get through and therefore the revenue. 5th has talked about delivering Gimi safely on time and on budget to commence our 20 year contract with BP and our share of that EBITDA is around $150,000,000 per year.
6, developing the FLNG portfolio to create that realistic and investable set of project opportunities considering both Mark I conversion and Mark III new builds. We've talked a little bit about that already, but we think that our FLNG portfolio backed by such high quality customers can create interesting investment opportunities for potential partners going forward. 7th and it's been commented on before, the future of HyGo is going to be determined by the Board of HyGo and market conditions. And 8th, we'll dabble in new technology to make sure that we're right there on the fringes of things that are happening in the overall market. These are the things that I'm focusing on a day to day basis and they feed into considerations that the board may have and Tor, I don't know if you want to add anything.
No, I think that was a good sum up on the day to day. Obviously, the world change every day. I think what has been a problem for us is, of course, we have tried to kind of spin off the shipping activity several times. That has been difficult because that's not really the business we love to be in long term. But I think by reducing the risk and by covering it up with charter, we have at least increased the downside risk in that business.
When it comes to why we prefer in high go, no, it's because we are ready to go. So we can go effectively any day. And I think you will see us going pretty soon. And that's why we're giving priority to that first. Then when it comes to if you want to do anything as described in some of the looking for a partner to build FLNG business going forward, And you really want to get Hilli20 up and running, you want to do some more stuff with BP, you want to build a bigger portfolio before you bring in a partner.
So but I think we are pragmatic. If we can keep the upstream and downstream model together in one way or the other, I think it's great because then you have to hedge when gas prices are low and high. The midstream is not our business going forward and it shouldn't be, but there are no kind of structuring talks to other people as well about doing something. So let's see. But you're right, Heiko is priority 1 because that's on the block right now.
Okay, great. Thanks everybody. Thanks.
And with that, I'd like to draw the call to close due to time constraints. Thank you for your participation and interest in Golar. Please stay safe. We look forward to sharing our progress with you next quarter. With that, I'll hand back to the operator.
Thank you, everyone. That does conclude our conference for today. Thank you all for participating. You may all disconnect.