DECEMBER 13, 2012 — Eyeing the expected demand for U.S. LNG exports, Teekay LNG Partners L.P. (NYSE:TGP) has inked an agreement with Daewoo Shipbuilding & Marine Engineering (DSME) of South Korea for the construction of two 173,400 cu.m LNG newbuildings that will be among the largest that can transit the expanded Panama Canal. , with options to order up to three additional vessels.
The partnership intends to secure long-term contract employment for both vessels prior to their delivery in the first half of 2016. The newbuildings will be constructed with M-type, Electronically Controlled, Gas Injection (ME-GI) twin engines that are expected to be significantly more fuel-efficient and have lower emission levels than other engines currently being utilized in LNG shipping.
The contract with DSME includes a favorable installment payment schedule, with the majority of the purchase price due upon delivery. The partnership intends to finance the installment payments during construction with a portion of its existing liquidity, which was approximately $420 million as of September 30, 2012 (after deducting the equity required to complete a recently announced Exmar LPG joint venture acquisition), and expects to secure long-term debt financing for the two vessels prior to their scheduled delivery.
"The delivery of these vessels is timed to coincide with the next wave of increased demand for LNG carriers which is expected when a large number of new LNG export projects come on-stream commencing from late-2015," said Peter Evensen, Chief Executive Officer of Teekay GP LLC. "They are also among the largest LNG carriers that will be able to transit the Panama Canal after its expansion project is complete, which makes them ideal for U.S. LNG exports. The recent U.S. Department of Energy study supported the export of LNG from the U.S."
"In addition," noted Mr. Evensen, "we are confident these newbuildings will be especially attractive to our customers given their fuel-efficient engines as well as being built to a high specification at DSME. With scheduled delivery in 2016, we believe that we are well-positioned to charter these LNG newbuildings on fixed-rate charter contracts prior to their delivery, thereby providing Teekay LNG with visible built-in growth."