Golar LNG Ltd (GLNG) 2016 Q3 法說會逐字稿

Good day and welcome to the Q3 2016 Golar LNG Limited earnings conference call. Today's conference is being recorded. At this time I would like to turn the conference over to Oscar Spieler. Please go ahead, sir.

Thank you. Good morning, everybody. Welcome to the presentation of the Q3 numbers for 2016 for Golar LNG Limited. At my side I have Brian Tienzo, our CFO, who will present the Q3 numbers a bit later.

Going over to slide 3, Golar had an EBITDA loss of $11.3 million versus a loss of $17.5 million in 2Q. The improvement is mainly due to improved shipping rates. Q3 and Q4 have been extremely active and we started off with creating Golar Power, a JV between Stonepeak and Golar to provide midstream and downstream services.

We also created OneLNG, a JV with Schlumberger to offer upstream and midstream solutions. With both JVs now in place, Golar and their partners are now covering the whole LNG trade. We have agreed with the GMLP to exchange existing IDRs for additional common and GP units.

OneLNG and Ophir have formed a joint operating company to develop 2.6 Tcf at the Fortuna field in Equatorial Guinea. We have improved our cash position and our ability to deal with our convertible bonds by securing a margin loan of $150 million, raised $170 million in equity, and managed to release $34 million from Hilli LC.

Moving to slide 4, where we tried to explain how Golar will [operate] today and the reason behind it. With the new structure shown here, we are covering the complete LNG chain. OneLNG, where we own 51% of Schlumberger, [are] owned 49%, we will be able to offer a complete solution to develop stranded gas fields both at a [constant subsidy] upstream and midstream services.

OneLNG, led by the CEO, Jeff Goodrich, previous CEO of Perenco, will have laser focus on developing and delivering new projects. On the other side of the slide, you'll see Golar Power, the 50%/50% owned Golar Stonepeak Company. They will have laser focus on integrated downstream projects, including FSRU, infrastructure, and power plants.

Golar will be [part] of a service company to the rest of the group with focus on building and operating assets. Golar will also have a strong focus on shipping and recontracting of the GMLP vessels that are with FSRUs or LNG carriers. We believe that this structure will improve internal focus and enhance our ability to win more projects on upstream, midstream and downstream.

By that I will leave the slide to Brian who will go through the financials.

Thanks, Oscar, and welcome to everyone. As Oscar said just now, the 3Q operating results, whilst remaining in the loss-making territory, is an improvement over 2Q financial performance. This is a result of a much anticipated improvement in shipping, which saw our fleet utilization increase from 31% in 2Q to 37% in 3Q. Of course that is complemented by a TCE increase to $13,850 per day from 2Q level of $8,792 per day.

As both operating and admin expenses were either at level or lower than 2Q, EBITDA loss for the quarter improved from a deficit of $17.5 million in 2Q to a deficit of $11.3 in 3Q. A provision on non-cash loss of $12.2 million was recognized this quarter from a disposal of assets that make up the Golar Power JV with Stonepeak. The vast majority of this loss is recoverable over time, and is likely to adjust downwards as we finalize the purchase price adjustments in finalization [they're] accounting for this JV.

The improvement in our share price and interest rate swap levels from June to September means that our net financial expense this quarter at $7.6 million is much lower than 2Q of $40.6 million. So, all of the above has contributed to significantly reducing our loss this quarter to $17.4 million compared to a loss in 2Q of $75.2 million.

Turning over to page 6 to look at the main movements in our balance sheet, the main movements in the balance sheet from the previous quarter can be summarized as follows. You can see an improvement in liquidity position following the conclusion of the Golar Power JV in July. There's been a material reduction of our current assets including assets held for sale as both Penguin and Crystal and newbuild assets have been removed from the books.

The main item remaining in here is the Golar Tundra which we continue to consolidate. There was also an increase in assets under development as we progress with the Hilli conversion. To date we have drawn $250 million from the FLNG Hilli financing.

Turning over to page 7 to look at our liquidity and financing review, the financing activities during 3Q and subsequent activities since then have helped to strengthen the Company's credit and liquidity position. To quickly summarize those activities, in July the creation of Golar Power with Stonepeak contributed $103 million to the balance sheet. Over the past month, we have released $48.7 million from the restricted cash that secures the Hilli LC.

In October, the IDRs relating to MLP were reset and were exchanged for 3.8 million units, and these today are valued at approximately $80 million. Finally, the deal with the impending maturity of March 2017 convertible bonds, we secured a commitment for $150 million credit facility and concluded an upsized equity offering which produced net proceeds of $170 million. The result of all of these is that we currently have liquidity in credit facilities close to $500 million with which to put to work to safeguard and to grow the business.

As the Company look to develop opportunities, we also continue to build on levers that we can use for financing these opportunities, and amongst these are the cash release from the Hilli, both from the LC and also from the final debt drawdown, a potential drop down to Golar Partners of one or two trains of FLNG Hilli. Of course we could leverage against common unit investments in GMLP, which is currently valued at approximately $430 million. And, finally, we still continue to work on releasing equity from our ships.

I'll now turn the presentation back to Oscar to go through the business review.

Thank you, Brian. Let's start on shipping. The shipping market are slowly improving with significant more spot cargo in 2016 than in 2015. The result is slow increase in utilization under time charter earnings.

The [small interest in] vessels has been varying through 3Q and 4Q. However, the rates have been fairly stable and we have lately seen spot rates at $45,000 on a round basis.

We had around [16] ships recently fixed for the next 12 to 18 months, 50% increase in LNG production by 2021, limited number of newbuilding, we are positive to the LNG market going forward both near term and long term. As we see it today, the Q4 numbers will be slightly lower than the Q3 numbers. However, we are optimistic that the Q1 numbers will improve compared to Q3 numbers.

The pool have several agreements on short-term time charter and contracts of freightment with different parties. And the pool have already filled up to the 6% of the available days in Q1.

Moving over to slide 9, where we will talk a bit about Golar Power and the Sergipe project. Major progress has been made on the Sergipe project and the EPC project. EPC under operation maintenance contract with GE has been signed and limited notice to proceed has been given.

The project has purchased the land in Sergipe, the LNG supply agreement has been signed, the FSRU agreement between the Sergipe project and Golar Power has been signed with available charter of $6,000 per day for 25 years. Permits are going according to schedule and we got a permit yesterday to start on to construction.

Golar Power have also acquired Genpower's shares and now hold 50% of the equity in the Sergipe project. Total equity for Golar Power is for the moment $165 million. We believe that the financing will be secured in first half of December this year and we have seen strong interest from the banks.

Golar Power are working on several integrated projects around the world including FSRUs, infrastructure and power plants. So, the Sergipe project are really in a good state. They have managed to get up the management and things are going according to schedule.

Going over to slide number 10 on the FSRU market, a combination of falling energy LNG prices, increased availability of LNG, power shortages, [disactive] FSRUs are substantially cheaper and shorter lead time than a land-based terminal, leads to a strong pipeline of potential FSRU projects. With our leading role in the FSRU market we are well-positioned to take our share of this market, whether it is newbuild, converted [TFDE] or converted steam vessels.

We are working on a number of projects around the world, like Ghana, Ivory Coast, Sergipe, Egypt, and quite a few others which we really don't want to discuss here on the call today. We have received the first payment on Ghana and there is a meeting in Ghana in the middle of December to start off the project.

We have recently seen that some of the projects around the world do not demand the modern FSRUs with high standout and high storage, but are more focused on cost. And therefore we are in quite detailed discussion on projects for conversion of some of our modern steam vessels.

Going over to slide 11, coming into the FLNG market, there are plenty of stranded gas opportunities around the world and only a fraction of these fields are in production. And we do not see that opportunity as a limitation when it comes to FLNG.

With the Hilli concept we have limitations, with regard to issues like gas specification, weather, offloading, et cetera. However, we still believe there are enough projects for a handful of more Hilli conversions, especially in West Africa.

We have started to develop our next concept, Mark II, as we have discussed before, which [will operate] in a harsh environment and large gas envelope, potential storage of liquids and alternatively, air cooling, et cetera. Most important is actually that we are preparing to create, or we are creating, a more efficient production line for FLNG in order to meet the demand going forward.

The next two slides will cover Perenco project and the Fortuna project, so let's go over to slide 12. The first project is, as you know, Hilli, which will operate on an ACA contract in Cameroon for Perenco, a privately held French-owned company. The contract only use two out of the four trains, with option for Perenco to use train with three and four.

The Black & Veatch technology, which is used on Hilli, is proven technology. However, the fact that the liquefaction plant of the Exmar barge, which has been constructed in China, has been accepted is a very important risk-reducing factor for Hilli, since the Exmar barge has the same technology, the same supplier, and approximately the same capacity.

When it comes to the progress on Hilli, we have over 4,000 people on the project over the last week. And, so far, we are within the budget and we believe that we will be within the budget also at the end. The schedule, according to the Perenco contract we should start up with commissioning first of October or end of September next year and we are in line with that.

When it comes to the progress on board the vessel, we have started our loop checking, pre-commissioning of systems, and we continue with this until the vessel leaves Singapore. Perenco is, according to their monthly report, on schedule to be ready for startup in September, as well. We have people down in Cameroon on a regular basis and they confirm good progress.

So let's move over to slide number 13. We have been working with Ophir over several years to find a solution on developing the Fortuna field in EG, and we all believe that by creating a JV between Golar LNG and Ophir we have managed to align the upstream and the midstream, simplifying the execution.

The total project cost will be around $2 billion, and with a production of around 2.4 million tonne per year, assuming a [$6 per million BTUs] FOB price. The project will create EBITDA of around $560 million per year. The life of the project will be between 15 to 20 years.

FID is dependent on financing, which we believe we will be able to secure in Q1 2017, approved by Ophir shareholders and governmental ratification. Going over to slide 14, capturing the spreads, our business idea is to monetize stranded gasses that can currently be acquired at $10 to $20 per million BTUs and develop them into power using FLNG, LNGs, FSRUs, and power plants, thereby giving consumer cheaper, cleaner and more flexible energy.

With a [type] of 15% return on upstream, FLNG and FSRU, and a bit less on shipping, we are able to deliver LNG for around $4.4 per million BTU around the world, which we believe is extremely competitive. And the power generation, we are able to produce power all-in for $40 per megawatt hour. And an average electricity price of $120 per megawatt hour, as shown in the left hand graph, we are hopeful that Golar and its partner are able to capture some of the spreads.

Before we go into question and answer I would just like to summarize, on slide 15. Both Golar Power and OneLNG have taken significant steps forward in their first fully integrated project. And funding is now in place to settle March 2017 maturing convertible bond.

We have repaired the balance sheet. The repaired balance sheet will assist with other financing discussions.

Positive signs in the shipping market. Significant new production now ramping up with more new production on its way. Newbuilding order is under control.

FLNG Hilli moving into critical final stages of construction, on track to deliver on budget and within the contract window. Small scale Black & Veatch Prico liquefaction technology now proven to work in a marine environment, according to specification. The IDR has been reset as improved MLP currency, better positioned to contemplate part purchase of FLNG Hilli.

Financing of FLNG at an advanced stage. Good progress with permitting. And LNG offtakers for the Fortuna project is lined up.

Golar has developed a number of projects delivering over the next four years, which will add substantial EBITDA going forward. By that, I would start off with the question and answers. Please, operator.

(Operator Instructions)

We can now take our first question from Michael Webber from Wells Fargo.

Good morning, guys, how are you? Just a couple quick ones on FLNG and then a quick question on the regas side. But maybe starting off, Brian, obviously there's been a lot of progress made in the past two quarters specifically, really the last quarter, around FLNG, obviously (inaudible) the easy project going into the JV, the renewed equity raise and getting ahead of some of your liquidity bogeys. Can you lay out for us over the next three to four months the different capital calls you guys have with that JV specifically, in terms of the equity up front that needs to go in upon FID, and how those different payments will work so we can accurately map that out going forward?

Sure. We can't really go into detail just yet, Mike, as you can imagine. But I think the fact that there's been a slight delay in FID over the project itself helps the financing position. As you already heard from us, there are certain levers that we can pull ahead of those that helps to bridge the financing position.

Now, of course, one of the other things that we forgot to mention in the presentation is that we have been speaking with capital niche regard to try and help maintain a slower burn on the conversion process which helps to augment the ability to fund those projects. Don't forget that the funding of those projects is going to be over a period of three years. And, of course, we're trying to spread that as much as possible in order that we get the Hilli up and running, monetize the value of money that are sitting on the Hilli.

Certainly, there is a certain amount of funding to be required but that's something that we continue to work on, and it's really something that we can't go out to the market just yet. But I think the one thing to remember is there is, I think the economics in the Fortuna project is sufficiently compelling that when we eventually go out to the market I don't think it's going to be too much of an issue with investors, hopefully.

Got you. And maybe if I just narrow the focus here for a second, I believe one of the filings over the summer, a pawn in FID of the first project within that JV, I believe there's a $250 million capital call. But I think that also can include intellectual property. It's a bit hazy exactly how much that specific call would be. And it would obviously be relatively up front. Are you able to provide any color around that or is that still up for debate internally?

Certainly, it's pointless talking about specific amounts now. But you're absolutely right, there are certain assets and IPs and so on that Golar can contribute to the project that would be taken into account when deciding what the numbers eventually will be from a cash-contribution perspective. So, those will go towards reducing whatever the share of Golar's equity and cash injection to the project will be.

Great. Okay. It's a good problem to have. I'll follow up with you on it later. One more on FLNG. Oscar, I believe in your comments earlier you referenced an effectively next-gen conversion FLNG that you guys are looking at that involves liquid storage, air-cooling and things like that. In the sector's brief history those higher spec assets have been relatively expensive. Do you have a vague sense on what the relative economics would be on something like that, or is it too early?

No, I think the target I have is a bit ambitious. But what I told the guys who developed Mark II is that on an equal basis they should reduce their costs per produced [combitent] percent. I think is actually achievable. If you add on the ability to store liquids, the additional investment in the vessel will be paid by itself because the liquids are much more work than the LNG. So, I think that is a very positive thing if you manage to do that.

So, I'm not too concerned about the CapEx as such. And I think we as a Company, we have one thing to do, and that is actually to be the most competitive provider of liquefaction services, and I think we have a big (inaudible).

Okay, that's helpful. And, again, I can follow up on that later. Just one more and I'll turn it over. On the regas side, and forgive me, I'm out of pocket, if I missed this in the deck, but the Ivory Coast regas projects, you've got an asset in the Tundra that has not, I don't believe has been accepted yet, despite the fact that the government has approved the infrastructure needed there, but there's still going to be a lag associated with that. Is there an opportunity to realistically market the Tundra into Ivory Coast or into another project? And how should we think about the different assets heading into those two locales here?

I think the Tundra is, first of all, going to Ghana. We are in positive discussions with the customer. We have received the first payment, which is a good sign. It's a good contract, et cetera. So, when it comes to Ivory Coast, I think there will be another vessel. But it depends on how the discussions are going.

We have a contractual obligation with Ghana. We can't really start off for Tundra before that is sold one way or the other. But on Ivory Coast, we have a JV with Total and the government and so forth, where we own 6% of the terminal, where we develop FSRU plan together with them. It's early stage.

Just to be clear, you said you had received the first payment on the Tundra?

Yes. From Sahara.

That's helpful. Okay. I appreciate the time, guys, thank you very much.

We can now take our next question from Fotis Giannakoulis from Morgan Stanley.

Yes, hi, gentlemen, and thank you. I've seen that you have done a significant progress the last quarter. But I want to focus a little bit more on the new opportunities, and particularly on slide 14 where you presented the electricity cost of several countries. It seems from this slide that significant margin lies upon the conversion of gas to electricity.

And I'm wondering whether a part of the Sergipe project and 1.5 gigawatt power plant, if there are other opportunities that you are pursuing right now. And if these opportunities, if they can, in the future, be related to new FLNG projects or OneLNG to get involved into the whole value chain from liquefication to producing electricity.

I think the task of Golar Power for the moment is, first of all, to deliver Sergipe project. I think that's the most important thing. That goes very well. We have no doubt that they will deliver.

We are not spending that much capacity on trying to find new projects as we are working on projects, the integrated projects, same size of power plants, et cetera, in other parts of the world. So, that is business, which we will pursue.

And, of course, when we are talking about offtake from our FLNGs, we also have in mind the Golar Power that we should be able to deliver LNG to these power projects. I don't know if that answered your question.

Yes, that's very helpful, Oscar. And I also want to ask you about the Fortuna project. That was a project that went through a lot of different stages until it finds its final structure and comes so close to FID. Can you describe to us if you had to do this again what would be the timing that you would save in a project like that? How shall we see the lessons learned from the Fortuna project coming into the future projects and your ability to deliver faster new FLNG projects?

We had worked on Fortuna for many years, as we said earlier on, and also when it comes to Perenco, and so forth. It has taken a long time to develop those projects.

I think one of the problem the LNG chain has, in these projects, is lack of alignment in the different parts of the LNG chain. By actually establishing a model where we both have upstream, we have FLNG, we are shaping our FSRUs, and we have potentially we also have power project, I think we are much more aligned. That will reduce the time for negotiations within the chain.

We still need to do the financing. We still need to find alignment with the governments around the world. That takes time. But I believe that some of these projects will be done on a much faster track than on Fortuna and Perenco going forward. I think the model here, getting in Schlumberger, creating this downstream company, it's a very neat thing where people have focus and can focus on what they are good at.

Thank you very much, Oscar. One last very quick clarification. I read in your press release about the government approval is for 10-year gas import. Your initial contract with WAGL was for five years. Shall we assume that the vessel, the Tundra, will be needed for the next 10 years?

We are in discussions with our customer so I really can't comment on it.

Thank you very much, gentlemen.

We can now take our next question from Ken Hoexter from Bank of America.

Great, good morning. Just on the Hilli, you mentioned the third to fourth train opportunities. Can you explain maybe the process and timing for seeing that come to fruition? You talked about 10 months until this is operational, but maybe the time frame and the discussions that have to occur to get those next phases up and running.

We have discussions with Perenco and the government on this issue. So far, the feedback we've got is that they would like to see, they definitely want to get three and four up and running, but they want to see one and two in operation before they actually start to commit to do that. So, that's the process we have there. But we are in regular discussions with them and hopefully they will start to commit earlier. We are hopeful to do that but it's very uncertain.

So everybody is wait and see until operational and then you'll see some more flurry of activity thereafter?

Yes. I think in order to get off train number three there is a very limited amount of CapEx which is needed in order to for Perenco to start to produce. All the infrastructure can actually produce gas for our three trains. If we go for train number four I think there is a bigger investment. So, your guess is as good as mine.

Okay, that's a great answer. But can you then give me an idea if you have to make another capital investment what time frame from commitment until operational would be for a train on an operational vessel?

It depends. The only thing that actually needs to do, provided that there are sufficient gas in the reserves, they can just open the valve and flow more gas for the train number three. And in the meantime, they can start to do drilling and add more equipment onshore and additional piping, et cetera. So, it depends on what they actually want to do themselves.

You're talking about capital commitment onshore not on the vessel? The vessels all will be ready and operational?

The rest of it, that's zero additional CapEx.

Okay. Just then, again, to round out the answer there, the time frame for that capital investment, once the decision is made how long would be your guess until they would be able to get operational?

As I said, it depends on the gas field itself. We don't have detail about the capacity. But, as I said, we believe that train number three, they should be able, after we have commenced, to increase the production of the field and then start off. But that depends on Perenco's appetite to do it.

But I can see from a practical point of view that they should not be able to do that as soon as the vessel is accepted, and actually just increase the production from the field. But that is details which we haven't come into yet.

Okay, and then on the Nanook, the FSRU, you mentioned, I think it was about a third utilization, 35%. What are the prospects there for maximizing that capacity, as well?

There are already opportunities there. There are potentially new clients around the area. There are potentially pipeline in the area. So, I think the probability is pretty good.

As you know, Sergipe is a very poor area in Brazil. Getting in power, the industry will increase and potentially also offtakers from the rig asset. So I think it's positive, but it's still early days. And, as I said, our main focus on that project for the moment is actually to build it and get it ready to start.

Okay, thanks for that. And, Brian, just one financing question just on the converts. What's the time line to actually settling that and moving on? Is that discussions related depending on any Fortuna discussion? Or what's the process there?

Are you talking about existing converts, Ken?

Yes.

We've got the funding in place to start taking it out and to some extent we've already started doing that. We've started to buy bits here and there, small amounts at par. So, we are able to draw down in that facility anytime now until March to take it all out. If an opportunity arises to do it with no loss to Golar we will do it before it matures.

Wonderful. Appreciate the time. Thanks, guys.

We can now take our next question from Jon Chappell from Evercore.

Thank you. Good afternoon, guys. A couple quick follow-ups, Brian. First, on the Hilli cash release, $38 million thus far in the fourth quarter, and then you say in the press release $110 million in 2018. So, that leaves about $118 million left. Is that a 2017 event or is that piecemeal after 2018?

That will be a piecemeal after 2018, Ken. Essentially we've got, after the latest reduction in the LC, we've got $231 million or so left in there. If nothing else happens, once the vessel starts producing, then the level of LC drops from currently $400 million to $250 million. By virtue of that, there's a release of cash from the restricted cash of approximately $110 million, $112 million. And after that it would just be a matter of time before more is released.

Okay, understood. And then a couple follow-ups on the Tundra and the whole Ghana situation. Can you just help us understand what needs to be done by May 23, which is effectively six months from last week, to give us some confidence that this will move forward, and whether the legal proceedings are accelerating that or maybe tying it up a little bit?

As we said, we received the payment yesterday, the first payment on that, which is good. We hear that they are in discussions with the vendors, with LNG suppliers, et cetera, to get this project going. And we are going to have discussions with these people the middle of December in Ghana. We believe we will still continue our effort to secure the funding amount with WAGL and Sahara. So, that process is going forward.

And then I want to be clear about the comment on slide 10, too. I think Fotis asked about this, too, but, I'm sorry, I'm still not clear on it. It says Golar LNG recently awarded a five-year FSRU contract in Ghana. Is that associated with the Tundra or is there a new asset and new potential FSRU opportunity there?

Are you thinking about Ghana? The contract we have with Sahara and WAGL is a 5-year contract. And one option is to try to extend that to 10 years and then make a commercial settlement with them. But that's discussions which we are having with them which we really can't say anything about.

Okay. One last super quick one. Obviously the Total Ivory Coast has already asked about, as well. Just any idea on the timing on that one. Is that a 2020 event or can that move much quicker?

Ivory Coast?

Yes.

We are talking about 2018. That's the plan there. So, we are going into a development phase together with the partners where they developed the LNG terminal. So, we believe that's a 2018 project.

Okay, great. Thanks, Oscar, thanks, Brian.

We can take our next question from Gregory Lewis from Credit Suisse.

Thank you. It's Joe Nelson on for Greg today. Thanks for taking my questions and good afternoon. Maybe just one quick follow-up on the Ivory Coast project. What is Golar's responsibility there as far as development of the asset? Are you the asset provider? And what responsibilities would you have there?

The contract is, the JV, is to develop the FSRU terminal together. We will deliver advices on development of the FSRU terminals when it comes to the FSRU and so forth. We might also be involved in the terminal as such. And then during that phase there will be a selection of FSRU which potentially will be Golar. We are in a good position since we are done sitting in the terminal.

Okay, great. And just given the size of the project, time lines, is there any preference there in the type of asset they're looking for? Is it mostly conversion of a modern tri-fuel or could we see maybe the rechartering of maybe an existing FSRU on the water?

I think they are discussing all options with them. So, it could be either a conversion of a DFD or it could be an existing vessel as a temporary solution or it could be a conversion of a steam vessel.

Okay, great. And then just one higher level one for me and maybe you can help me clarify. In your opening comments, you called out, as your JV round into shape, Golar is going to be more of the project developer. But you did mention a bit of a focus on conventional LNG shipping.

Just to be clear, are you more referring to managing and marketing the existing fleet, or are you referring to maybe, if given the right opportunity, developing new greenfield LNG shipping assets, maybe backed by a long-term contract or something like that?

I think we have enough vessels in the fleet for the moment. So, it depends on how the market develops. But I don't think we will increase our fleet as such. I think the focus of Golar and its group will be on FLNG and downstream projects. Shipping is an important part of it but it's not vital.

Okay, great. Thank you, guys. That does it for me.

We can now take our next question from Herman Hildan from Clarksons Platou.

Good afternoon, guys. My first question is on the Sergipe project. You previously provided a range from 0% to 100% dispatch. Could you give a range or could you provide what the EBITDA would be with full dispatch?

I don't have that in hand.

We haven't given as wide a range as that. But certainly, when it comes to a 38% dispatch, for example, the EBITDA jumps from BRL1.1 billion to BRL1.35. You can extrapolate and say that at 100% dispatch the estimate will be close to BRL1.5 billion. But there's a big jump in the EBITDA capability of the project were it to dispatch.

Sure. And then the question is the power count, what's the efficiency and capacity factor?

I think we're producing a 1.5 gigawatt plant. Is that what you mean?

We are using the new frame. I can't recall the frame age, I think it is, with the highest efficiency in the industry. I think it's 0.605 or something like that. So, they're using the latest technology from GE and Alstom, and I think we are (inaudible).

Okay. Because then the question is whether we should expect that power count to be based on the peak load production. As you show on your slide 14, the electricity price in Brazil is just shy of $10. And based on the numbers you provided here, you're generating electricity at $7, right? So, you should assume, call it, 100% dispatch sum? Is that a fair assumption?

I think we have an IPA with the [depoor] consumers at a fixed price, as far as I know. I'm not into the detail on that. We could take that off-line.

Sure. The next question is on the $150 million facility, how many GMLP have been pledged for that?

That will depend on when we draw down in the facility. Obviously the better the share price of GMLP, the less that we will have to deliver on it. There's a certain leverage ratio that we have to maintain. As it stands we don't have to put in all of the GMLP units in there. It's close to $15 million, $16 million.

Okay. What's the leverage ratio in the [Ghana] agreement?

I'd rather not say.

Okay. And then on the FID for the Fortuna project, are you relying on securing offtake in order to close financing on the $1.2 billion, or are you able to go ahead without offtake?

Offtake is obviously an important part of the project rather than the financing. The financing is sufficiently flexible not to have it. But, of course, you need to sell your LNG to be able to service the debt. So, there is an implied amount of offtake that needs to go, but there isn't a specific amount of offtake that's required by the financing.

Right. Because you've been able to get $960 million on the Hilli, right? So, there's not that much rolling that needs to be tied down in order to get to $1.2 billion since you're providing the Tundra into the security package, right?

That's correct. All we have to do as far as the Gandria is concerned, there is a debt service ratio that we have to show, but it doesn't say the offtake has got to be a specific characteristic.

And then, finally, a short question. In the report you says that the Sergipe power plant will utilize 35% of the capacity of the FSRU. So, does that mean, is that, call it, full capacity? Is that based on full dispatch throughout the year or have you made any assumptions in that investment?

That's for full dispatch.

So the all-in capacity will be about 4 million tons per year on the regas on the FSRU?

Yes.

Okay. That's all for me. Thank you very much.

Operator, are there any more questions? (technical difficulty)

Your line is open Chris, please go ahead.

Great. Thanks, guys, for getting us on the call here. I wanted to ask about the Hilli and talk a little bit about the schedule. Just wanted to get a sense of where we are from a progress perspective. I know you talked about an aggressive window but you're still in it.

I wanted to get a sense of what needs to be done. Are there any potential risks in terms of the timing of that? I just wanted to get a little bit more color around the progress, where we stand, and what's left to be done prior to delivery.

Okay, all main equipment is on board. We have now installed the flare tower, the remaining part of the flare tower. We still need to install substantial amount of piping. We are installing approximately 600 to 700 pipes per week, so we have fairly good control over the pipe production and pipe installation.

We need to terminate all the electrical cables. We need to pull the cables. We have pulled around 900 kilometers of cable out of 1,150 kilometers, so I think that's in line.

The real challenge now is actually to do startup pre-commissioning, initiate the different systems by systems in order for us to be able to do the loop checking, and check the different systems. That's the main challenge going forward, as far as I can see it.

When does that process start?

It has started a long time ago. As soon as the system is ready to be loop checked and checked, we are checking it. So, that's progressing.

But, as you can understand, it's a huge project, so there still is a lot of outstanding loop checking. But we have good control over it, with a plan for it. We are pushing the yard every day, every week, we are down there. So, we're fairly confident that this is going according to schedule.

So, you can say that the original plan when we started the project was February 17, now it's March 17. We most probably slip a few months. But we have in our pocket from March 17, I think the vessel has to leave SIngapore by middle, end of July in order to be able to start up production in Cameroon in end of September 2017. So, we still have some contingency in our hand.

Okay. So, there still is cushion in terms of the schedule as it stands right now?

Yes. And you can say that we are working with the yard in order to make them more efficient. There are 4,300 people on board a vessel and they are, it's quite impressive. (inaudible) It's a big conversion, one of the biggest ones [keppler] have done. But so far things have gone fairly smooth. We haven't met any limit on the major obstacles which we haven't managed to solve in a good manner.

Okay, that's helpful. I appreciate it. And then maybe just a big picture one. As I think about the opportunities that are ahead of the Company, and the diversity of some of the projects, both geographically as well as from a technical expertise perspective, how do you see the scale of the Company ramping up? In other words how many projects in different markets in different technical specifications can you guys manage at one time?

I just want to get a sense of where the scope of the Company stands from an infrastructure perspective, where it might need to go to be able to harness the opportunities that you see ahead of it?

We are approximately 100 people in Oslow on the technical side, which is the heart of the Company when it comes to conversion. As I said, we are working on Mark II, we streamline the production of the FLNGs. We are taking another floor. We will employ more people when we start on the Fortuna project. And we will need to employ more people in order to undertake the Mark II project, as well.

I believe that as we are today, without doing any major, we need to employ more people. But I think we can have three projects under way at the same time, one in the beginning, one in the middle, and one in the commissioning phase. So, I think that's where we are today.

When it comes to the number of opportunities I don't think that's a big limitation. I believe there are, we can see four, five, six, seven, eight projects in West Africa. There are projects from export out of US, which we are working on. There are a number of projects around, so I don't think the number of opportunities are a limitation. It's actually, as you said, execution from our side. So, we need to find a better production line, and I think the Mark II is the answer to that question.

Okay. So, that probably gives you a higher degree of scalability as you look forward and more projects begin to present themselves?

Yes.

Okay, perfect. Thanks for the time guys, I appreciate it.

We can now take our next question from Espen Landmark from Fearnley.

Yes, guys, just wanted to touch on the shipping side again. And, firstly, seeing the market is improving, are we nearing levels where it makes sense for you guys to commit longer term and close some of these NGSs?

It depends on the market when it comes to long term. But what is long term for me, that's really long term, 10 years I think we can definitely consider. But it depends on the levels.

I think that it will take some time before we see a stronger strengthening of the market. I think, as I said last quarter, I think the shortage will improve. We might see over $50,000 in Q1. Maybe then we are going into the summer, it might be a bit slower, and then things will move upwards. But personally I don't believe that the (inaudible) to market is at the level which we will fix it today.

All right. And then, secondly, on the rationale for bringing Golar Grand back, is it destined to go back into the GMLP, or is it opportunities within, say, the frozen storage space that is more interesting?

As you know, Golar Grand is chartered in from the partnership at the moment. And that charter will end in 2017. And at that point, we need to make a decision whether there's a use for Golar Grand in Golar LNG Limited and therefore recharter it back, at a different level, of course, or if Golar LNG Partners has different use for it. So, Golar LNG Limited isn't committed to rechartering Golar Grand when that charter ends.

I understand. All right, thank you.

That's the end of the questions. There are no more questions on the line at this time. I'll now turn the call back to the host for any additional or closing remarks.

Thank you very much for listening to us, and thank you for good questions. And we look forward to update you now in Q1, before in Q1 next year. And I wish you all a Happy Christmas and a Happy New Year. Bye.

Thank you. That concludes today's conference. Thank you for your participation, ladies and gentlemen. You may now disconnect.