UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation)
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(Commission File Number)
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(IRS Employer Identification No.)
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, , 10011
(Address of principal executive offices, including zip code)
(516 ) 268-7400
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions
(see General Instruction A.2):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2
of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 8.01. |
Other Events.
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As previously reported on its current report on Form 8-K filed on January 20, 2020, New Fortress Energy Inc. (“NFE”) has signed:
(i) an Agreement and Plan of Merger with Golar LNG Partners LP, a Marshall Islands limited partnership (“GMLP”), Golar GP LLC, a
Marshall Islands limited liability company and the general partner of GMLP, Lobos Acquisition LLC, a Marshall Islands limited liability company and an indirect subsidiary of NFE (“GMLP Merger Sub”), and NFE International Holdings Limited, a private
limited company incorporated under the laws of England and Wales and an indirect subsidiary of NFE, pursuant to which GMLP Merger Sub will merge with and into GMLP, with GMLP surviving the merger as an indirect subsidiary of NFE (the “GMLP
Merger”); and
(ii) an Agreement and Plan of Merger with Hygo Energy Transition Ltd., a Bermuda exempted company (“Hygo”), Golar LNG Limited, a
Bermuda exempted company (“GLNG”), Stonepeak Infrastructure Fund II Cayman (G) Ltd., and Lobos Acquisition Ltd., a Bermuda exempted company and an indirect, wholly-owned subsidiary of NFE (“Hygo Merger Sub”), pursuant to which Hygo Merger Sub will
merge with and into Hygo (the “Hygo Merger and together with the GMLP Merger, the “Proposed Mergers”) with Hygo surviving the Hygo Merger as a wholly owned subsidiary of NFE.
In connection with the Proposed Mergers, this current report on Form 8-K provides the following financial information which is being filed as Exhibits 99.1, 99.2
and 99.3, respectively, and incorporated in this Item 8.01 by reference:
| i. |
audited consolidated financial statements of GMLP as of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019 and 2018 and the notes thereto;
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audited consolidated financial statements of Hygo as of December 31, 2020 and 2019 and for the years ended December 31, 2020 and 2019 and the notes thereto;
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unaudited pro forma condensed combined financial statements
of NFE reflecting the Hygo Merger and the GMLP Merger.
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| Item 9.01. |
Financial Statements and Exhibits.
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(d)
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Exhibits. The following exhibits are being filed herewith:
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Exhibit
No. |
Description
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Consent of Ernst & Young LLP relating to the audited consolidated financial statements of GMLP
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Consent of Ernst & Young LLP relating to the audited consolidated financial statements of Hygo
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Audited consolidated financial statements of GMLP as of December 31, 2020 and 2019, and for the years ended December 31, 2020, 2019 and 2018
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Audited consolidated financial statements of Hygo as of December 31, 2020 and 2019, and for the years ended December 31, 2020 and 2019
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Unaudited pro forma condensed combined
financial statements of NFE reflecting the Hygo Merger and the GMLP Merger
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104
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Cover Page Interactive Data File, formatted in Inline XBRL
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
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NEW FORTRESS ENERGY INC.
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By:
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/s/ Christopher S. Guinta | |
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Christopher S. Guinta
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Chief Financial Officer
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Dated: March 18, 2021
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement on Form S-3 (No. 333-236921) of New Fortress Energy Inc. and incorporation by reference in the Post-Effective
Amendment No. 1 to the Registration Statement on Form S-8 (No. 333-229507) pertaining to the Amended and Restated New Fortress Energy Inc. 2019 Omnibus Incentive Plan of our report dated March 16, 2021, relating to the consolidated financial
statements of Golar LNG Partners LP as of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019 and 2018 appearing in this Current Report on Form 8-K of New Fortress Energy Inc.
/s/ Ernst & Young LLP
London, United Kingdom
March 18, 2021
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement on Form S-3 (No. 333-236921) of New Fortress Energy Inc. and incorporation by reference
in the Post-Effective Amendment No. 1 to the Registration Statement on Form S-8 (No. 333-229507) pertaining to the Amended and Restated New Fortress Energy Inc. 2019 Omnibus Incentive Plan of our report dated March 15, 2021, relating to the
consolidated financial statements of Hygo Energy Transition Ltd. as of and for the years ended December 31, 2020 and 2019 appearing in this Current Report on Form 8-K of New Fortress Energy Inc.
/s/ Ernst & Young LLP
London, United Kingdom
March 18, 2021
Exhibit 99.1
INDEX TO FINANCIAL STATEMENTS
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Page
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GOLAR LNG PARTNERS LP
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AUDITED CONSOLIDATED FINANCIAL STATEMENTS
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Reports of Independent Registered Public Accounting Firm
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F-2
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Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018
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F-6
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Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019 and 2018
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F-7
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Consolidated Balance Sheets as of December 31, 2020 and 2019
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F-8
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Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018
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F-9
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Consolidated Statements of Changes in Partners’ Capital for the years ended December 31, 2020, 2019 and 2018
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F-11
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Notes to the Consolidated Financial Statements
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F-12
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F-1
Report of Independent Registered Public Accounting Firm
To the Unitholders and the Board of Directors of Golar LNG Partners LP
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Golar LNG Partners LP (the “Partnership”) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income,
changes in partners’ capital and cash flows for each of the three years in the period ended December 31, 2020 and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Partnership at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in
conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Partnership’s internal control over financial reporting as of December 31, 2020,
based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 16, 2021 expressed an unqualified opinion thereon.
The Partnership's Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Partnership will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Partnership has
a senior secured credit facility that matures in April 2021, bonds that mature in November 2021 and currently projects that it may not comply with certain financial covenants in the twelve-month period following issuance of these consolidated
financial statements. Accordingly, the Partnership has stated that substantial doubt exists about the Partnership’s ability to continue as a going concern. Management's evaluation of the events and conditions and management’s plans regarding these
matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. This matter is also described in the “Critical Audit Matters” section of our report.
Basis for Opinion
These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on the Partnership’s financial statements based on our audits. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and
that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
F-2
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Going concern assessment
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Description of the
matter
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The consolidated financial statements of the Partnership are prepared on the going concern basis of accounting. As described above and in Note 1, the Partnership has significant debt balances
that fall due within the twelve-month period from the date the consolidated financial statements are issued, and has stated that substantial doubt exists about the Partnership’s ability to continue as a going concern.
As described in Note 1 to the consolidated financial statements, on January 13, 2021, the Partnership entered into an agreement and plan of merger (the “Merger”) with New Fortress Energy
(“NFE”). As a result of the pending Merger, management has deferred activities related to the refinancing of its maturing debt facilities, including taking steps to secure the necessary waivers and/or covenant amendments in respect of
projected non-compliance with certain financial covenants, as they anticipate that NFE will refinance such facilities upon consummation of the Merger. As the successful completion of the Merger is dependent on factors outside of the
Partnership’s control, and the refinancing of the maturing debt facilities has been deferred based on an expectation of the Merger closing, management concluded that there is substantial doubt over the Partnership’s ability to continue as a
going concern for the twelve month period from the date the consolidated financial statements are issued.
Management’s going concern assessment includes assumptions related to financing plans. This involves an assessment of the probability of the successful closing of the Merger and management’s
plans should the Merger not complete, including the refinance of maturing debt facilities with banks and bondholders and securing any necessary waivers and/or covenant amendments.
Auditing the Partnership’s going concern assessment described above is complex because it involves a high degree of auditor judgment to assess the reasonableness of the cash flow forecasts,
planned refinancing actions and other assumptions used in the Partnership’s going concern analysis. The Partnership’s ability to execute the planned refinancing actions are especially judgmental as they are outside of management’s control
given the expected Merger, and that the global financial markets and economic conditions have been, and continue to be volatile, particularly with the COVID-19 pandemic, which provides additional uncertainty.
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How we addressed
the matter in our
audit
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We obtained an understanding, evaluated the design, and tested controls over the Partnership’s going concern assessment process. For example, we tested controls over management’s review of
significant assumptions in relation to financing options used in the assessment and the key inputs to the cash flow forecasts.
Further, we evaluated the key inputs to the cash flow forecast in management’s going concern assessment. We independently assessed the sensitivity and impact of reasonably possible changes in
the key assumptions and estimates included in management’s cash flow forecasts and liquidity position, including reperformance of covenant calculations through the going concern period. We inspected the relevant documents in relation to the
Merger and management’s assessment of conditions and approvals required for the completion of the Merger.
In assessing management’s plans to secure waivers and/or covenant amendments for the covenant impacted by the projected non-compliance, we understood the nature and extent of past covenant
amendments obtained by the Partnership, discussed the status and timeline of any discussions with lenders, evaluated the proposed amendments and inspected the loan agreements for the impact of any potential covenant breaches and remedies
available.
In relation to management’s plans for loan and bonds refinancing, we validated management’s assertion that their plans, while effective, have been deferred due to the Merger and are therefore
not advanced enough as of the date of the consolidated financial statements are issued to be considered probable. These procedures included, among others, understanding the nature and extent of past financing transactions concluded with the
counterparties, assessing relevant data and metrics (such as contracted cash flows and existing loan to value ratios, where applicable) and inspection of the terms and conditions proposed by banks.
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F-3
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We compared the proposed terms and conditions of the financing arrangements with those of the Partnership’s existing loan facilities. We discussed the status of the refinancing efforts and their
viability with management and assessed the probability of the Partnership executing the plans effectively.
We involved a professional with specialized knowledge of capital and debt markets, to assist us in our assessment of whether it is probable that management’s financing plans will be achieved to
allow the Partnership to meet the anticipated liquidity requirements over the twelve-month period of their assessment.
We assessed the adequacy of the Partnership’s going concern disclosures included in Note 1 to the consolidated financial statements.
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Vessel impairment
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Description of the
matter
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The Partnership’s vessel and equipment and vessel under finance lease balances were $1,308 million and $103 million, respectively, as of December 31, 2020. As explained in Note 2 to the consolidated financial
statements, management performs an annual impairment assessment at the year-end and whenever events or changes in circumstances indicate that the carrying value of a vessel might exceed its fair value in accordance with the guidance in ASC
360 – Property, Plant and Equipment (“ASC 360”). If indicators of impairment are identified, management analyses the future cash flows expected to be generated throughout the remaining useful life of
those vessels. These undiscounted cash flows are estimated using forecasted charter rates and other assumptions. In relation to forecasted charter rates, the Partnership applies the currently contracted charter rate for the period in the cash
flow where the vessel is on charter. For vessels with no contracted charters or when the vessels’ forecasted cash flow period falls beyond the contracted charter the forecasted charter rates are based on industry analysis and broker reports
(‘charter rates post-contract expiry’).
Auditing the Partnership’s impairment assessment was complex due to the significant estimation uncertainty, subjectivity and judgement in forecasting the undiscounted cash flows of the vessels and the degree of
subjectivity involved in determining the fair value of the impaired vessel. Significant assumptions and judgements used in management’s analysis included the estimation of charter rates post-contract expiry and vessel utilization percentages.
These significant assumptions are forward looking and subject to future economic and market conditions.
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How we addressed
the matter in our
audit
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We obtained an understanding of the Partnership’s impairment process, evaluated the design, and tested the operating effectiveness of the controls over the Partnership’s determination of key
inputs to the impairment assessment, including charter rates post-contract expiry and vessel utilization percentages.
We analysed management’s impairment assessment by comparing the methodology used to assess impairment of each vessel against the accounting guidance in ASC 360. We tested the reasonableness of
the charter rates post-contract expiry and vessel utilization percentages by comparing them to forecasted market rates and historical information. We evaluated whether the gradual step up and step down of charter rates estimated by management
is comparable to the liquefied natural gas ('LNG') curves published in the market. We also inspected market reports and analysed how the economic factors such as future demand and supply for LNG carriers and floating storage regasification
units ('FSRUs') have been incorporated in the charter rates post-contract expiry and vessel utilization percentages. Further, we calculated the average charter post-contract expiry rate used across the remaining useful life of the vessels and
compared it to the historical average across a similar period. We identified vessels which are not employed under active charters or are nearing the end of the charter and considered them to be highly sensitive to the charter rate
post-contract expiry. In relation to these vessels, we independently calculated the charter rate at which the undiscounted cash flows equalled the carrying value of the vessel (‘break-even charter rate’) and compared the rates against
forecasted market rates. Further we calculated the minimum utilization percentages required for these vessels by analysing the break-even charter rates relative to the forecasted market rates, and assessed the reasonability of these
percentages by comparing against historical utilization average and the LNG market outlook for a similar type of vessel. We also compared the assumptions and estimates made by management in their impairment assessment for the prior year
against the actual results in 2020 to assess the precision of management’s forecasting process.
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F-4
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UK Tax lease
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Description of the
matter
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At December 31, 2020, as described in Note 26 to the consolidated financial statements, the Partnership has disclosed a contingent tax liability in the range of $nil to $34.2 million in respect to historical
lease arrangements. Contingencies are evaluated based on the likelihood of the Partnership incurring a liability and whether a loss or range of losses is reasonably estimable in accordance with the guidance on ASC 450 - Contingencies. In relation to the UK tax lease, the likelihood and amount of a loss or range of losses are estimated with reference to the claims submitted from the relevant tax authorities, the legal
basis for such claims and the status of discussions thereon with the authorities.
Auditing the Partnership’s contingent tax liability is complex and requires a high degree of judgement in assessing the likelihood of a liability arising as a result of the UK tax lease matter and the amount of
any potential outflow. Further, auditing the contingent tax liability involved professionals with specialised skills to evaluate the relevant tax regulations in order to assess the likelihood of a liability arising.
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How we addressed
the matter in our
audit
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We obtained an understanding over the Partnership’s assessment of the likelihood of a contingent liability arising in relation to these UK tax lease benefits, as well as the development of the estimate of a
liability. We evaluated the design and tested the operating effectiveness of controls over management’s review of contingencies, including significant judgements made.
To understand developments in relation to the matter, we inquired and obtained confirmations from internal and external legal counsel of the Partnership and read minutes of board meetings and management
committee meetings.
We involved our tax professionals with specialized skills and knowledge in relation to UK tax lease structures, who assisted us in evaluating management’s conclusion that these represent a contingent liability.
Our procedures also included inspecting correspondence with Her Majesty’s Revenue and Customs (‘HMRC’) and external legal counsel as well as re-performing the calculation performed by management to estimate the contingent liability. We
assessed the adequacy of the Partnership’s disclosures in relation to tax contingencies
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/s/ Ernst & Young LLP
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We have served as the Partnership’s auditor since 2014.
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London, United Kingdom
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March 16, 2021
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F-5
GOLAR LNG PARTNERS LP
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018
(in thousands of $, except per unit amounts)
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Notes
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2020
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2019
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2018
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Operating revenues
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Time charter revenues
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284,734
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299,652
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346,650
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Total operating revenues
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6
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284,734
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299,652
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346,650
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Operating expenses
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Vessel operating expenses
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6
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(56,509
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)
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(60,958
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)
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(65,247
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)
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Voyage and commission expenses
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6
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(7,986
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)
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(7,648
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)
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(11,222
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)
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Administrative expenses
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6
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(15,367
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)
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(13,412
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)
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(14,809
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)
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Depreciation and amortization
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(79,996
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)
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(83,239
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)
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(98,812
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)
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Total operating expenses
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(159,858
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)
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(165,257
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)
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(190,090
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)
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Operating income
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124,876
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134,395
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156,560
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Other non-operating income
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15
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661
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4,795
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449
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Financial income/(expense)
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Interest income
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15
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17,354
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13,278
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8,950
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Interest expense
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(68,855
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)
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(79,791
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)
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(80,650
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)
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||||||||||
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(Losses)/gains on derivative instruments, net
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7
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(51,922
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)
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(38,796
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)
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8,106
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Other financial items, net
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7
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1,000
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675
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(592
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)
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Net financial expenses
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(102,423
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)
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(104,634
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)
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(64,186
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)
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Income before tax, equity in net earnings of affiliate and non-controlling interests
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23,114
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34,556
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92,823
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|||||||||||||
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Income taxes
|
8
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(16,767
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)
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(17,962
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)
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(17,465
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)
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|||||||||
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Equity in net earnings of affiliate
|
10
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11,730
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4,540
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1,190
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||||||||||||
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Net income
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18,077
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21,134
|
76,548
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|||||||||||||
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Net income/(loss) attributable to:
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||||||||||||||||
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Non-controlling interests
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(1,119
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)
|
3,329
|
3,358
|
||||||||||||
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Golar LNG Partners LP Owners
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19,196
|
17,805
|
73,190
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|||||||||||||
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General partner's interest in net income
|
142
|
115
|
1,223
|
|||||||||||||
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Preferred unitholders’ interest in net income
|
12,109
|
12,042
|
12,042
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|||||||||||||
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Common unitholders’ interest in net income
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6,945
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5,648
|
59,925
|
|||||||||||||
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Earnings per unit - Common units:
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||||||||||||||||
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Basic and diluted
|
29
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0.10
|
0.08
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0.86
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||||||||||||
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Cash distributions declared and paid per Common unit in the year
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29
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0.46
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1.62
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1.96
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The accompanying notes are an integral part of these consolidated financial statements.
F-6
GOLAR LNG PARTNERS LP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018
(in thousands of $)
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Notes
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2020
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2019
|
2018
|
|||||||||||||
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Net income
|
18,077
|
21,134
|
76,548
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|||||||||||||
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Unrealized net loss on qualifying cash flow hedging instruments:
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Amounts reclassified from accumulated other comprehensive loss to the statement of operations
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—
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—
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(26
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)
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||||||||||||
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Net other comprehensive loss
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—
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—
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(26
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)
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||||||||||||
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Comprehensive income
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18,077
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21,134
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76,522
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|||||||||||||
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Comprehensive income/(loss) attributable to:
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Golar LNG Partners LP Owners
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19,196
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17,805
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73,164
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|||||||||||||
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Non-controlling interests
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(1,119
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)
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3,329
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3,358
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||||||||||||
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18,077
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21,134
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76,522
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The accompanying notes are an integral part of these consolidated financial statements.
F-7
GOLAR LNG PARTNERS LP
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2020 AND 2019
(in thousands of $)
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Notes
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2020
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2019
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ASSETS
|
||||||||||||
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Current assets
|
||||||||||||
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Cash and cash equivalents
|
48,783
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47,661
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||||||||||
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Restricted cash and short-term deposits
|
17
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55,547
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46,333
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|||||||||
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Trade accounts receivable
|
11
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16,466
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17,303
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|||||||||
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Amounts due from related parties
|
25
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804
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5,098
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|||||||||
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Current portion of investment in leased vessel, net
|
15
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2,570
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2,308
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|||||||||
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Inventories
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1,719
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2,702
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||||||||||
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Other current assets
|
12
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20,932
|
11,894
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|||||||||
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Total current assets
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146,821
|
133,299
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||||||||||
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Non-current assets
|
||||||||||||
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Restricted cash
|
17
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129,838
|
135,928
|
|||||||||
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Investment in affiliate
|
10
|
185,562
|
193,270
|
|||||||||
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Vessels and equipment, net
|
13
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1,308,206
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1,369,665
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|||||||||
|
Vessel under finance lease, net
|
14
|
102,534
|
108,433
|
|||||||||
|
Investment in leased vessel, net
|
15
|
109,216
|
111,829
|
|||||||||
|
Intangible assets, net
|
16
|
41,295
|
50,409
|
|||||||||
|
Other non-current assets
|
18
|
4,189
|
2,779
|
|||||||||
|
Total assets
|
2,027,661
|
2,105,612
|
||||||||||
|
LIABILITIES AND EQUITY
|
||||||||||||
|
Current liabilities
|
||||||||||||
|
Current portion of long-term debt
|
21
|
702,962
|
225,254
|
|||||||||
|
Current portion of obligation under finance lease
|
22
|
2,521
|
1,990
|
|||||||||
|
Trade accounts payable
|
1,766
|
2,756
|
||||||||||
|
Accrued expenses
|
19
|
25,157
|
23,451
|
|||||||||
|
Other current liabilities
|
20
|
99,871
|
55,703
|
|||||||||
|
Total current liabilities
|
832,277
|
309,154
|
||||||||||
|
Non-current liabilities
|
||||||||||||
|
Long-term debt
|
21
|
416,746
|
991,679
|
|||||||||
|
Obligation under finance lease
|
22
|
122,029
|
120,789
|
|||||||||
|
Other non-current liabilities
|
23
|
31,288
|
31,296
|
|||||||||
|
Total liabilities
|
1,402,340
|
1,452,918
|
||||||||||
|
Commitments and contingencies
|
26
|
|||||||||||
|
Equity
|
||||||||||||
|
Partners’ capital:
|
||||||||||||
|
Common unitholders: 69,301,636 units issued and outstanding at December 31, 2020 (2019: 69,301,636)
|
28
|
361,912
|
387,631
|
|||||||||
|
Preferred unitholders: 5,520,000 preferred units issued and outstanding at December 31, 2020 (2019: 5,520,000)
|
28
|
132,991
|
132,991
|
|||||||||
|
General partner interest: 1,436,391 units issued and outstanding at December 31, 2020 (2019: 1,436,391)
|
28
|
48,306
|
48,841
|
|||||||||
|
Total partners’ capital before non-controlling interests
|
543,209
|
569,463
|
||||||||||
|
Non-controlling interests
|
82,112
|
83,231
|
||||||||||
|
Total equity
|
625,321
|
652,694
|
||||||||||
|
Total liabilities and equity
|
2,027,661
|
2,105,612
|
||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-8
GOLAR LNG PARTNERS LP
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018
(in thousands of $)
|
Notes
|
2020
|
2019
|
2018
|
|||||||||||||
|
Operating activities
|
||||||||||||||||
|
Net income
|
18,077
|
21,134
|
76,548
|
|||||||||||||
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||||||||||
|
Depreciation and amortization expenses
|
79,996
|
83,239
|
98,812
|
|||||||||||||
|
Equity in net earnings of affiliate
|
(11,730
|
)
|
(4,540
|
)
|
(1,190
|
)
|
||||||||||
|
Deferred tax expense
|
8
|
2,114
|
3,620
|
1,728
|
||||||||||||
|
Amortization of deferred charges and debt guarantee, net
|
23, 25
|
3,402
|
2,683
|
7,154
|
||||||||||||
|
Foreign exchange losses/(gains)
|
435
|
941
|
(995
|
)
|
||||||||||||
|
Unit options expense
|
27
|
50
|
207
|
234
|
||||||||||||
|
Drydocking expenditure
|
(1,641
|
)
|
(10,463
|
)
|
(25,522
|
)
|
||||||||||
|
Dividends received from affiliates
|
11,352
|
2,328
|
1,191
|
|||||||||||||
|
Interest element included in obligation under finance lease
|
19
|
3
|
(55
|
)
|
||||||||||||
|
Gain on recognition of net investment in leased vessel
|
15
|
—
|
(4,195
|
)
|
—
|
|||||||||||
|
Sales-type lease payments received in excess of interest income
|
2,308
|
2,030
|
—
|
|||||||||||||
|
Movement in credit loss allowances
|
(371
|
)
|
—
|
—
|
||||||||||||
|
Change in market value of derivatives
|
7
|
35,306
|
43,746
|
(5,921
|
)
|
|||||||||||
|
Change in assets and liabilities:
|
||||||||||||||||
|
Trade accounts receivable
|
837
|
10,682
|
(9,730
|
)
|
||||||||||||
|
Inventories
|
983
|
(670
|
)
|
1,475
|
||||||||||||
|
Other current assets and non-current assets
|
(12,362
|
)
|
(6,421
|
)
|
3,906
|
|||||||||||
|
Amounts due to/(from) related parties
|
(2,852
|
)
|
3,622
|
(319
|
)
|
|||||||||||
|
Trade accounts payable
|
(990
|
)
|
(2,836
|
)
|
(3,610
|
)
|
||||||||||
|
Accrued expenses
|
2,503
|
3,414
|
(6,566
|
)
|
||||||||||||
|
Other current liabilities
|
15,470
|
4,183
|
26
|
|||||||||||||
|
Net cash provided by operating activities
|
142,906
|
152,707
|
137,166
|
|||||||||||||
|
Investing activities
|
||||||||||||||||
|
Additions to vessels and equipment
|
(3,188
|
)
|
(10,232
|
)
|
(10,735
|
)
|
||||||||||
|
Dividends received from affiliates
|
12,627
|
14,216
|
755
|
|||||||||||||
|
Acquisition of investment in affiliate from Golar
|
—
|
(10,296
|
)
|
(9,652
|
)
|
|||||||||||
|
Net cash provided by/(used in) investing activities
|
9,439
|
(6,312
|
)
|
(19,632
|
)
|
|||||||||||
|
Financing activities
|
||||||||||||||||
|
Repayments of long-term debt (including related parties)
|
(148,114
|
)
|
(100,156
|
)
|
(155,902
|
)
|
||||||||||
|
Proceeds from long-term debt (including related parties)
|
45,000
|
40,000
|
51,419
|
|||||||||||||
|
Repayments of obligation under finance lease
|
(1,922
|
)
|
(1,569
|
)
|
(1,286
|
)
|
||||||||||
|
Financing arrangement fees and other costs
|
(4,339
|
)
|
—
|
(1,699
|
)
|
|||||||||||
|
Advances from related party for Methane Princess lease security deposit
|
2,605
|
601
|
633
|
|||||||||||||
|
Cash distributions paid
|
(44,954
|
)
|
(126,599
|
)
|
(165,250
|
)
|
||||||||||
|
Common units repurchased and canceled
|
28
|
—
|
(1,565
|
)
|
(13,980
|
)
|
||||||||||
|
Proceeds from issuances of equity, net of issue costs
|
28
|
—
|
—
|
13,854
|
||||||||||||
|
Net cash used in financing activities
|
(151,724
|
)
|
(189,288
|
)
|
(272,211
|
)
|
||||||||||
|
Effect of exchange rate changes on cash
|
3,625
|
3,723
|
(6,118
|
)
|
||||||||||||
|
Net increase/(decrease) in cash, cash equivalents and restricted cash
|
4,246
|
(39,170
|
)
|
(160,795
|
)
|
|||||||||||
|
Cash, cash equivalents and restricted cash at beginning of year (1)
|
229,922
|
269,092
|
429,887
|
|||||||||||||
|
Cash, cash equivalents and restricted cash at end of year (1)
|
234,168
|
229,922
|
269,092
|
|||||||||||||
F-9
|
Notes
|
2020
|
2019
|
2018
|
|||||||||||||
|
Supplemental disclosure of cash flow information:
|
||||||||||||||||
|
Cash paid during the year for:
|
||||||||||||||||
|
Interest expense
|
68,792
|
75,892
|
81,962
|
|||||||||||||
|
Income taxes
|
10,021
|
13,791
|
5,929
|
|||||||||||||
(1) The following table identifies the balance sheet line-items included in "cash, cash equivalents and restricted cash" presented in
the consolidated statements of cash flows:
|
December 31,
|
||||||||||||||||
|
(in thousands of $)
|
2020
|
2019
|
2018
|
2017
|
||||||||||||
|
Cash and cash equivalents
|
48,783
|
47,661
|
96,648
|
246,954
|
||||||||||||
|
Restricted cash and short-term deposits - current
|
55,547
|
46,333
|
31,330
|
27,306
|
||||||||||||
|
Restricted cash - non-current
|
129,838
|
135,928
|
141,114
|
155,627
|
||||||||||||
|
234,168
|
229,922
|
269,092
|
429,887
|
|||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-10
GOLAR LNG PARTNERS LP
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL FOR THE YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018
(in thousands of $)
|
Partners’ Capital
|
||||||||||||||||||||||||||||||||
|
Notes
|
Preferred
Units
|
Common
Units
|
General
Partner Units
and IDRs (1)
|
Accumulated
Other
Comprehensive
loss(2)
|
Total
before
Non-
controlling
interest
|
Non-
controlling
Interest
|
Total
Owner’s
Equity
|
|||||||||||||||||||||||||
|
Consolidated balance at December 31, 2017
|
132,991
|
585,440
|
52,600
|
26
|
771,057
|
76,544
|
847,601
|
|||||||||||||||||||||||||
|
Net income
|
12,042
|
59,925
|
1,223
|
—
|
73,190
|
3,358
|
76,548
|
|||||||||||||||||||||||||
|
Cash distributions
|
(12,042
|
)
|
(149,606
|
)
|
(3,066
|
)
|
—
|
(164,714
|
)
|
—
|
(164,714
|
)
|
||||||||||||||||||||
|
Other comprehensive loss
|
—
|
—
|
—
|
(26
|
)
|
(26
|
)
|
—
|
(26
|
)
|
||||||||||||||||||||||
|
Net proceeds from issuance of common units
|
—
|
13,563
|
291
|
—
|
13,854
|
—
|
13,854
|
|||||||||||||||||||||||||
|
Common units repurchased and canceled
|
28
|
—
|
(13,980
|
)
|
—
|
—
|
(13,980
|
)
|
—
|
(13,980
|
)
|
|||||||||||||||||||||
|
Grant of unit options
|
—
|
234
|
—
|
—
|
234
|
—
|
234
|
|||||||||||||||||||||||||
|
Consolidated balance at December 31, 2018
|
132,991
|
495,576
|
51,048
|
—
|
679,615
|
79,902
|
759,517
|
|||||||||||||||||||||||||
|
Net income
|
12,042
|
5,648
|
115
|
—
|
17,805
|
3,329
|
21,134
|
|||||||||||||||||||||||||
|
Cash distributions
|
(12,042
|
)
|
(112,235
|
)
|
(2,322
|
)
|
—
|
(126,599
|
)
|
—
|
(126,599
|
)
|
||||||||||||||||||||
|
Units options expense
|
—
|
207
|
—
|
—
|
207
|
—
|
207
|
|||||||||||||||||||||||||
|
Common units repurchased and canceled
|
28
|
—
|
(1,565
|
)
|
—
|
—
|
(1,565
|
)
|
—
|
(1,565
|
)
|
|||||||||||||||||||||
|
Consolidated balance at December 31, 2019
|
132,991
|
387,631
|
48,841
|
—
|
569,463
|
83,231
|
652,694
|
|||||||||||||||||||||||||
|
Opening adjustment (3)
|
—
|
(501
|
)
|
(10
|
)
|
—
|
(511
|
)
|
—
|
(511
|
)
|
|||||||||||||||||||||
|
Balance at January 1, 2020
|
132,991
|
387,130
|
48,831
|
—
|
568,952
|
83,231
|
652,183
|
|||||||||||||||||||||||||
|
Net income
|
12,109
|
6,945
|
142
|
—
|
19,196
|
(1,119
|
)
|
18,077
|
||||||||||||||||||||||||
|
Cash distributions
|
(12,109
|
)
|
(32,213
|
)
|
(667
|
)
|
—
|
(44,989
|
)
|
—
|
(44,989
|
)
|
||||||||||||||||||||
|
Units options expense
|
—
|
50
|
—
|
—
|
50
|
—
|
50
|
|||||||||||||||||||||||||
|
Consolidated balance at December 31, 2020
|
132,991
|
361,912
|
48,306
|
—
|
543,209
|
82,112
|
625,321
|
|||||||||||||||||||||||||
| (1) |
As of December 31, 2020 and 2019, the carrying value of the equity attributable to the incentive distribution rights holders was $32.5 million.
|
| (2) |
Relates to unrealized net losses on qualifying cash flow hedges.
|
| (3) |
Opening Total Equity has been adjusted following the adoption of ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent
amendments effective January 1, 2020, see note 3.
|
The accompanying notes are an integral part of these consolidated financial statements.
F-11
GOLAR LNG PARTNERS LP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
Golar LNG Partners LP (the “Partnership,” “we,” “our,” or “us”) is a publicly traded Marshall Islands limited partnership initially formed as a subsidiary of Golar LNG Limited (“Golar”) in September 2007, to own and
operate LNG carriers and FSRUs under long-term charters.
We completed our initial public offering (“IPO”) in April 2011. Our common units are traded on the NASDAQ under the symbol: GMLP.
On July 12, 2018, we acquired an interest in the Hilli Episeyo (the “Hilli”), a floating liquefied natural gas (“FLNG”) vessel through
the acquisition of 50% of the common units (the “Hilli Common Units”) in Golar Hilli LLC ("Hilli LLC") (the “Hilli Acquisition”) (see note 10).
As of December 31, 2020 and 2019, we had a fleet of six FSRUs, four LNG carriers and an interest in the Hilli.
As of December 31, 2020, Golar held 30.8% (December 31, 2019: 30.6%) of our common units, a 2% (December 31, 2019: 2%) general partner interest in us and 100% (December 31, 2019: 100%) of our incentive distribution
rights (“IDRs”).
References to Golar in these consolidated financial statements refer, depending on the context, to Golar LNG Limited and to one or any more of its direct or indirect subsidiaries.
Going concern
The consolidated financial statements have been prepared on a going concern basis.
On January 13, 2021, we announced that we and our general partner entered into an agreement and plan of merger (the “Merger Agreement”) with New Fortress Energy Inc. (“NFE”) and the other parties thereto. Under the
Merger Agreement, NFE has agreed to acquire all of the outstanding common units of the Partnership for $3.55 per unit in cash, with the Partnership surviving the merger as a wholly-owned subsidiary of NFE (the “Merger”). As a result of the pending
Merger, which is expected to close in the first half of 2021, we have deferred our activities related to the refinancing of our $800 million credit facility and the 2015 Norwegian Bonds, both of which will mature within the 12-month period from the
date these consolidated financial statements were issued. It is currently anticipated that NFE will refinance these maturing debt facilities (the “Related Debt Refinancings”), including related accrued interest and fees, upon consummation of the
Merger.
In the event the Merger is delayed or does not complete, we would pursue extension of the maturity of, or obtain the necessary funding to meet, our payment obligations under the $800 million credit facility and 2015
Norwegian Bonds, which are repayable in April 2021 and November 2021 respectively. Also, the Partnership currently projects that it may not comply with certain financial covenants during the 12-month period following issuance of these consolidated
financial statements, in which event we would take the necessary steps to secure the necessary waivers and/or covenant amendments. The fundamentals of our underlying assets remain strong (contracted cash flows and existing leverage ratios); however,
due to the pending Merger, the refinancing of the $800 million credit facility and the 2015 Norwegian Bonds have not progressed to a stage, such that we can be certain that these could be executed in time or at all. Further, if the Partnership is
unable to meet or amend certain financial covenants, the Partnership’s indebtedness could become immediately due and payable in the event of default. Global financial markets and economic conditions have been and continue to be volatile, particularly
with the COVID-19 pandemic, which provides for additional uncertainty.
Although the Partnership believes the Merger and Related Debt Refinancings will close in the first half of 2021, the successful completion of the Merger and Related Debt Refinancings are dependent on factors outside of
the Partnership’s control, and therefore there is substantial doubt over the Partnership’s ability to continue as a going concern for the 12-month period from the date these consolidated financial statements were issued. The consolidated financial
statements do not include any adjustments that might result from the outcome of these uncertainties.
F-12
2. BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
These consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).
The accounting policies set out below have been applied consistently to all periods in these consolidated financial statements, except for accounting policy that changed as a result of adopting the requirements of
Accounting Standards Updates ("ASU") 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendments ("Topic 326"), effective January
1, 2020.
Principles of consolidation
A variable interest entity (“VIE”) is defined by the accounting standard as a legal entity where either (a) equity interest holders, as a group, lack the characteristics of a controlling financial interest, including
decision making ability and an interest in the entity’s residual risks and rewards, or (b) the equity holders have not provided sufficient equity investment to permit the entity to finance its activities without additional subordinated financial
support, or (c) the voting rights of some investors are not proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected residual returns of the entity, or both and substantially all of the
entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights. A party that is a variable interest holder is required to consolidate a VIE if the holder has both (a) the power to direct the
activities that most significantly impact the entity’s economic performance, and (b) the obligation to absorb losses that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant
to the VIE.
These consolidated financial statements include the financial statements of the entities listed in notes 4 and 5.
Investments in entities in which we directly or indirectly hold more than 50% of the voting control are consolidated in the financial statements, as well as certain variable interest entities in which we are deemed to
be the primary beneficiary. All intercompany balances and transactions are eliminated. The non-controlling interests of the above mentioned subsidiaries are included in the consolidated balance sheets and consolidated statements of operations as
“Non-controlling interests”.
Foreign currencies
We and our subsidiaries’ functional currency is the U.S. dollar as the majority of the revenues are received in U.S. dollars and a majority of our expenditures are incurred in U.S. dollars. Our reporting currency is
U.S. dollars.
Transactions in foreign currencies during the year are translated into U.S. dollars at the rates of exchange in effect at the date of the transaction. Foreign currency monetary assets and liabilities are translated
using rates of exchange at the balance sheet date. Foreign currency non-monetary assets and liabilities are translated using historical rates of exchange. Foreign currency transaction and translation gains or losses are included in the statements of
operations.
Lease accounting versus revenue accounting
Contracts relating to our LNG carriers and FSRUs can take the form of operating leases, sales-type leases, direct financing leases and operating and services agreements. Although the substance of these contracts are
similar, the accounting treatment varies. We outline our policies for determining the appropriate U.S. GAAP treatment below.
To determine whether a contract conveys a lease agreement for a period of time, we assess whether, throughout the period of use, the customer has both of the following:
F-13
| • |
the right to obtain substantially all of the economic benefits from the use of the identified asset; and
|
| • |
the right to direct the use of that identified asset.
|
If a contract relating to an asset fails to give the customer both of the above rights, we account for the agreement as a revenue contract. A contract relating to an asset will generally be accounted for as a revenue
contract if the customer does not contract for substantially all of the capacity of the asset (i.e. another third party could contract for a meaningful amount of the asset capacity).
Where we provide services unrelated to an asset contract, we account for the services as a revenue contract.
Lease accounting
When a contract is designated as a lease, we make an assessment on whether the contract is an operating lease, sales-type lease, or direct financing lease. An agreement will be a sales-type lease if any of the
following conditions are met:
| • |
ownership of the asset is transferred at the end of the lease term;
|
| • |
the contract contains an option to purchase the asset which is reasonably certain to be exercised;
|
| • |
the lease term is for a major part of the remaining useful life of the contract, although contracts entered into the last 25% of the asset’s useful life are not subject to this criterion;
|
| • |
the discounted value of the fixed payments under the lease represent substantially all of the fair value of the asset; or
|
| • |
the asset is heavily customized such that it could not be used for another charter at the end of the term.
|
Lessor accounting
In making the classification assessment, we estimate the residual value of the underlying asset at the end of the lease term with reference to broker valuations. None of our lease contracts contain residual value
guarantees, and any purchase options are disclosed in note 9. Agreements with renewal and termination options in the control of the lessee are included together with the non-cancellable contract period in the lease term when “reasonably certain” to
be exercised or if controlled by the lessor. The determination of reasonably certain depends on whether the lessee has an economic incentive to exercise the option. Generally, lease accounting commences when the asset is made available to the
customer, however, where the contract contains specific customer acceptance testing conditions, lease accounting will not commence until the asset has successfully passed the acceptance test. We assess a lease under the modification guidance when
there is change to the terms and conditions of the contract that results in a change in the scope or the consideration of the lease.
Costs directly associated with the execution of the lease or costs incurred after lease inception or the execution of the contract but prior to the commencement of the lease that directly relate to preparing the asset
for the lease (i.e. bunker costs), are capitalized and amortized to the consolidated statements of operations over the lease term. We also defer upfront revenue payments (i.e. repositioning fees) to the consolidated balance sheets and amortize to the
consolidated statements of operations over the lease term.
Time charter operating leases
Revenues include fixed minimum lease payments under time charters and fees for repositioning vessels. Revenues generated from time charters, which we classify as operating leases, are recorded over the term of the
charter on a straight-line basis as service is provided and is included in "Time charter revenues" in our consolidated statement of operations. Variable revenue is accounted for as incurred in the relevant period. Fixed revenue includes fixed
payments (including in-substance fixed payments that are unavoidable) and variable payments based on a rate or index. However, we do not recognize revenue if a charter has not been contractually committed to by a customer and us, even if the vessel
has discharged its cargo and is sailing to the anticipated load port on its next voyage. For our operating leases, we have elected the practical expedient to combine our service revenue and operating lease income as the timing and pattern of transfer
of the components are the same.
F-14
Repositioning fees (included in "Time charter revenues") received in respect of time charters are recognized at the end of the charter when the fee becomes fixed and determinable. However, where there is a fixed amount
specified in the charter, which is not dependent upon redelivery location, the fee will be recognized evenly over the term of the charter.
Time charter sales-type leases
On inception of a sales-type lease for which we are lessor, we de-recognize the related asset and record "Net investment in leased vessel” on our consolidated balance sheets. The net investment in leased vessel
represents the fixed payments due from the lessee, discounted at the rate implicit in the lease. We allocate sales-type lease income to the consolidated statements of operations in the "Interest income” line item to reflect a constant periodic rate
of return on our sales-type lease investment.
For sales-type leases, non-lease revenue and operating and service agreements in connection with the time charters are recorded over the term of the charter as the service is provided. The transaction price is based on
the standalone selling price for the service.
Amounts are presented net of allowances for credit losses, which are assessed at the individual lease level, reflecting the risk profile for each vessel unique to each project. The allowance is calculated by
multiplying the balance exposed on default by the probability of default and loss given default over the term of the lease. The exposure at default is calculated net of the vessel collateral that is returned on default. As forecasts for counterparty
probability of default and loss given default are not readily available or supportable for the life of the applicable instrument, annualized rates have been applied based on a 5-year period forecast. A probability weighting has been applied to each
period of default over the remaining instrument life.
Lessor expense recognition
Initial direct costs (those directly related to the negotiation and consummation of the lease) are deferred and allocated to earnings over the lease term.
Under our time charters, the majority of voyage expenses are paid by our customers. Voyage related expenses, principally fuel, may also be incurred when positioning or repositioning the vessel before or after the
period of time charter and during periods when the vessel is not under charter or is off-hire, for example when the vessel is undergoing repairs. These expenses are recognized as incurred.
Vessel operating expenses, which are recognized when incurred, include crewing, repairs and maintenance, insurance, stores, lube oils, communication expenses and third party management fees.
Use of estimates
The preparation of financial statements requires that management make estimates and assumptions affecting the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
In assessing the recoverability of our vessels’ carrying amounts, we make assumptions regarding estimated future cash flows, estimates in respect of residual or scrap value, charter rates, ship operating expenses, and
drydocking requirements.
Investment in affiliate
Affiliates are entities over which we generally have between 20% and 50% of the voting rights, or over which we have significant influence, but over which we do not exercise control or have the power to control the
financial and operational policies. Investments in these entities are accounted for by the equity method of accounting. Affiliates are also entities in which we hold a majority ownership interest, but we do not control, due to other parties'
participating rights. Under the equity method of accounting, we record our investment in the affiliate at cost, and adjust the carrying amount for our share of the earnings or losses of the affiliate subsequent to the date of the investment and
report the recognized earnings or losses in income. Dividends received from an affiliate reduce the carrying amount of the investment. The excess, if any, of the purchase price over book value of our investments in equity method affiliates, or basis
difference, is included in the consolidated balance sheets as "Investment in affiliate". We allocate the basis difference across the assets and liabilities of the affiliate, with the residual assigned to goodwill. The basis difference will then be
amortized through the consolidated statements of operations as part of the equity method of accounting. When our share of losses in an affiliate equals or exceeds the value of our interest, we do not recognize further losses, unless we have incurred
obligations or made payments on behalf of the affiliate.
F-15
We recognize gains and losses in earnings based on the economic results allocated based on a contractual agreement, net of interest, tax and basis difference amortization.
Guarantees
Guarantees issued by us, excluding those that are guaranteeing our own performance, are recognized at fair value at the time that the guarantees are issued, and reported in “Other current liabilities” and "Other
non-current liabilities". A liability is recognized in " investment in affiliate" for an amount corresponding to the fair value of the obligation undertaken in issuing the guarantee. If it becomes probable that we will have to perform under a
guarantee, we will recognize an additional liability if (and when) the amount of the loss can be reasonably estimated. The recognition of fair value is not required for certain guarantees such as the parent's guarantee of a subsidiary's debt to a
third party. For those guarantees excluded from the above guidance requiring recognition of the liability for its fair value, financial statement disclosures of such items are made. Financial guarantees are assessed for credit losses, and any
allowance is presented as a liability for off-balance sheet credit exposures where the balance exceeds the collateral provided over the remaining instrument life. The allowance is assessed at the individual guarantee level, calculated by multiplying
the balance exposed on default by the probability of default and loss given default over the term of the guarantee.
F-16
Business combinations
When the assets acquired and liabilities assumed constitute a business, then the acquisition is a business combination. If substantially all of the fair value of the gross asset acquired is concentrated in a single
identifiable asset or group of similar identifiable assets, the asset is not considered a business. Business combinations are accounted for under the acquisition method. On acquisition, the identifiable assets, liabilities and contingent liabilities
are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognized as goodwill. In instances where the cost of acquisition is lower than the
fair values of the identifiable net assets acquired (i.e. bargain purchase), the difference is credited to the statement of operations in the period of acquisition. The consideration transferred for an acquisition is measured at fair value of the
consideration given. Acquisition related costs are expensed as incurred. The results of operations of acquired businesses are included from the date of acquisition.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, we will recognize a measurement-period adjustment during the period in which we
determine the amount of the adjustment, including the effect on earnings of any amounts we would have recorded in previous periods if the accounting had been completed at the acquisition date.
Income taxes
Income taxes are based on a separate return basis. The guidance on income taxes prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. Penalties and interest related to uncertain tax positions are recognized in “Income taxes” in our consolidated statements of operations.
Deferred tax assets and liabilities are recognized principally for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Deferred tax assets
are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Realization of the deferred income tax asset is dependent on generating
sufficient taxable income in future years.
We use a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return regarding uncertainties in income tax positions. The first step is recognition: we determine whether
it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The second step is measurement: a tax position that
meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50 percent likely of
being realized upon ultimate settlement.
Cash and cash equivalents
We consider all demand and time deposits and highly liquid investments with original maturities of three months or less to be equivalent to cash. Amounts are presented net of allowances for credit losses, which are
assessed based on consideration of whether the balances have short-term maturities and whether the counterparty has an investment grade credit rating, limiting any credit exposure.
F-17
Restricted cash and short-term deposits
Restricted cash and short-term deposits consist of bank deposits, which may only be used to settle certain pre-arranged loan or lease payments, other claims which requires us to restrict cash, performance bonds related
to charters, cash collateral required for certain swaps, and cash held by the VIE. We consider all short-term deposits as held to maturity. These deposits are carried at amortized cost. We place our short-term deposits primarily in fixed term
deposits with high credit quality financial institutions. Amounts are presented net of allowances for credit losses, which are assessed based on consideration of whether the balances have short-term maturities and whether the counterparty has an
investment grade credit rating, reducing any credit exposure.
F-18
Trade accounts receivable
Trade receivables are presented net of allowances for expected credit losses. At each balance sheet date, all potentially uncollectible accounts are assessed individually for the purposes of determining the appropriate
allowance for expected credit loss. The expected credit loss allowance is calculated using a loss rate applied against an aging matrix, with assets pooled based on the vessel type that generated the underlying revenue (LNG carrier or FSRU), which
reflects similar credit risk characteristics.
Our trade receivables have short maturities so we have considered that forecasted changes to economic conditions will have an insignificant effect on the estimate of the allowance, except in extraordinary
circumstances.
Allowance for credit losses
Financial assets recorded at amortized cost and off-balance sheet credit exposures not accounted for as insurance (including financial guarantees) reflect an allowance for current expected credit losses ("credit
losses") over the lifetime of the instrument. The allowance for credit losses reflects a deduction to the net amount expected to be collected on the financial asset. Amounts are written off against the allowance when management believes the
uncollectability of a balance is confirmed or certain. Expected recoveries will not exceed the aggregate of amounts previously written-off or current credit loss allowance by financial asset category. We estimate expected credit losses based on
relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. We have elected to calculate expected credit losses on the
combined balance of both the amortized cost and accrued interest from the unpaid principal balance. Specific calculation of our credit allowances are included in the respective accounting policies included herein; all other financial assets are
assessed on an individual basis calculated using the method we consider most appropriate for each asset.
Inventories
Inventories, which are comprised principally of fuel, lubricating oils and vessel spares, are stated at the lower of cost or market value. Cost is determined on a first-in, first-out basis.
Vessels and equipment
Vessels are stated at cost less accumulated depreciation. The cost of vessels less the estimated residual value is depreciated on a straight-line basis over the assets’ remaining useful economic lives. Management
estimates the residual values of our vessels based on a scrap value cost of steel and aluminum times the weight of the vessel noted in lightweight tons. Residual values are periodically reviewed and revised to recognize changes in conditions, new
regulations or other reasons.
The cost of building mooring equipment is capitalized and depreciated over the initial lease term of the related charter.
Refurbishment costs incurred during the period are capitalized as part of vessels and depreciated over the vessels’ remaining useful economic lives. Refurbishment costs are costs that appreciably increase the capacity,
or improve the efficiency or safety of vessels and equipment.
Drydocking expenditures are capitalized when incurred and amortized over the period until the next anticipated drydocking, which is generally every five years. For vessels that are newly built or acquired, we have
adopted the “built-in overhaul” method of accounting. The built-in overhaul method is based on the segregation of vessel costs into those that should be depreciated over the useful life of the vessel and those that require drydocking at periodic
intervals to reflect the different useful lives of the components of the assets. The estimated cost of the drydocking component is amortized until the date of the first drydocking following acquisition, upon which the cost is capitalized and the
process is repeated. When a vessel is disposed, any unamortized drydocking expenditure is charged against income in the period of disposal.
F-19
Useful lives applied in depreciation are as follows:
|
Vessels (excluding converted FSRUs)
|
40 years
|
|
Vessels - converted FSRUs
|
20 years from conversion date
|
|
Drydocking expenditure
|
5 years
|
|
Mooring equipment
|
11 years
|
Vessel under finance lease
We lease one vessel under an agreement that has been accounted for as a finance lease. Obligations under finance lease are carried at the present value of future minimum lease payments, and the asset balance is
amortized on a straight-line basis over the remaining economic useful life of the vessel. Interest expense is calculated at a constant rate over the term of the lease.
Depreciation of the vessel under finance lease is included within depreciation and amortization expense in the statement of operations. The vessel under finance lease is depreciated on a straight-line basis over the
vessel’s remaining useful economic life, based on a useful life of 40 years. Refurbishment costs and drydocking expenditures incurred in respect of the vessel under finance lease is accounted for consistently as that of an owned vessel.
Our finance lease is ‘funded’ via long term cash deposits which closely match the lease liability. Future changes in the lease liability arising from interest rate changes are only partially offset by changes in
interest income on the cash deposits, and where differences arise, this is funded by, or released to, available working capital.
Income derived from the sale of subsequently leased assets is deferred and amortized in proportion to the amortization of the leased assets (see note 22). Amortization of deferred income is offset against depreciation
and amortization expense in the statement of operations.
Intangible assets
Intangible assets pertain to customer related and contract based assets representing primarily long-term time charter party agreements acquired in connection with the acquisition of certain businesses from Golar
(business combinations). Intangible assets identified are recorded at fair value. Fair value is determined by reference to the discounted amount of expected future cash flows. These intangible assets are amortized over the term of the time charter
party agreement and the amortization expense is included in the statement of operations in the depreciation and amortization line item. Impairment testing is performed when events or changes in circumstances indicate that the carrying amount of the
intangible asset may not be recoverable.
Impairment of long-lived assets
We continually monitor events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. In assessing the recoverability of our vessels’ carrying amounts, we make
assumptions regarding estimated future cash flows and estimates in respect of residual scrap value. Management performs an annual impairment assessment and when such events or changes in circumstances are present, we assess the recoverability of
long-term assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, an impairment loss
shall be measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value.
During the year ended December 31, 2020, following the novel coronavirus ("COVID-19") outbreak and its impact on our operations, we considered whether indicators of impairment existed that could indicate that the
carrying amounts of the vessels may not be recoverable or whether changes in circumstances had occurred to warrant a change in the assumptions. We performed a recoverability test and concluded no impairment should be recognized on our vessels as of
December 31, 2020.
F-20
Deferred charges
Costs associated with long-term financing, including debt arrangement fees, are deferred and amortized over the term of the relevant loan under the effective interest method. Amortization of debt issuance cost is
included in "Interest expense". These costs are presented as a deduction from the corresponding liability, consistent with debt discounts.
Provisions
In the ordinary course of business, we are subject to various claims, suits and complaints. Management, in consultation with internal and external advisers, will provide for a contingent loss in the financial
statements if the contingency was present at the date of the financial statements and the likelihood of loss was probable and the amount can be reasonably estimated. If we have determined that the reasonable estimate of the loss is a range and there
is no best estimate within the range, we will provide the lower amount within the range.
F-21
Derivatives
We use derivatives to reduce market risks associated with our operations. We use interest rate swaps for the management of interest risk exposure. The interest rate swaps effectively convert a portion of our debt from
a floating to a fixed rate over the life of the transactions without an exchange of underlying principal.
We seek to reduce our exposure to fluctuations in foreign exchange rates through the use of foreign currency forward contracts.
All derivative instruments are initially recorded at fair value as either assets or liabilities in the accompanying consolidated balance sheets and subsequently remeasured to fair value, regardless of the purpose or
intent for holding the derivative.
Where the fair value of a derivative instrument is a net liability, the derivative instrument is classified in “Other current liabilities” in the consolidated balance sheets. Where the fair value of a derivative
instrument is a net asset, the derivative instrument is classified in “Other current assets” or “Other non-current assets” in the consolidated balance sheets depending on its maturity. The method of recognizing the resulting gain or loss is dependent
on whether the derivative contract is designed to hedge a specific risk and qualifies for hedge accounting. For derivative instruments that are not designated i.e. economic hedges and/or those that do not qualify for hedge accounting purposes, the
changes in fair value of the derivative instruments are recognized in earnings and recorded each period in current earnings in “Gains/(losses) on derivative instruments”.
Cash flows from derivative instruments that are accounted for as cash flow hedges are classified in the same category as the cash flows from the items being hedged. We have no existing interest rate swaps held for
hedging.
Unit-based compensation
We expense the fair value of unit options issued to employees over the period the options vest. We amortize unit-based compensation for awards on a straight-line basis over the period during which the employee is
required to provide service in exchange for the reward - the requisite service (vesting) period. No compensation cost is recognized for unit options for which employees do not render the requisite service. The fair value of employee unit options is
estimated using the Black-Scholes option-pricing model.
Fair value measurements
We account for fair value measurements in accordance with the accounting standards guidance using fair value to measure assets and liabilities. The guidance provides a single definition of fair value, together with a
framework for measuring it, and requires additional disclosure about the use of fair value to measure assets and liabilities.
Related parties
Parties are related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also
related if they are under common control with, or subject to significant influence by, another party. Amounts owed from or to related parties are presented net of allowances for credit losses, which are calculated using a loss rate applied against an
aging matrix.
Segment reporting
A segment is a distinguishable component of the business that is engaged in business activities from which we earn revenues and incur expenses whose operating results are regularly reviewed by our Board of Directors,
being the Chief Operating Decision Maker (CODM), and which are subject to risks and rewards that are different from those of other segments. We have identified three reportable industry segments: FSRUs, LNG carriers and FLNG.
F-22
3. RECENTLY ISSUED ACCOUNTING STANDARDS
Adoption of new accounting standards
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement
of Credit Losses on Financial Instruments and subsequent amendments, including ASU 2018-19, ASU 2019-04 and ASU 2019-11: Codification Improvements to Topic 326 ‘‘Financial Instruments-Credit Losses”.
Topic 326 replaces the incurred loss impairment methodology with a requirement to recognize lifetime expected credit losses (measured over the contractual life of the instrument) immediately, based on information about past events, current conditions
and forecasts of future economic conditions. This will reflect the net amount expected to be collected from the financial asset and is referred to as the current expected credit losses, or "CECL", methodology, with measurement applicable to financial
assets measured at amortized cost as well as off-balance sheet credit exposures not accounted for as insurance (including financial guarantees). Topic 326 also makes changes to the accounting for available-for-sale debt securities and purchased
credit deteriorated financial assets, however, no such financial assets existed on date of adoption or in the reporting periods covered by these consolidated financial statements.
Using the modified retrospective method, reporting periods beginning from January 1, 2020 are presented under Topic 326 while comparative periods continue to be reported in accordance with previously applicable GAAP
and have not been restated. The cumulative effect of adoption on January 1, 2020 resulted in recognition of an allowance for credit losses on our consolidated balance sheets of $0.5 million (of which $0.3 million reflects a reduction to line-item
‘Other current assets’ and $0.2 million represents a reduction to line-items ‘Current portion of investment in leased vessel, net’ and ‘Investment in leased vessel, net’), with an offset to total equity of $0.5 million.
In August 2018, the FASB issued ASU 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The
amendments in this ASU remove some disclosure requirements relating to transfers between Level 1 and Level 2 of the fair value hierarchy and introduced new disclosure requirements for Level 3 measurements. We adopted the disclosure improvements
prospectively on January 1, 2020, but this amendment has not had a material impact on our disclosure requirements as we do not have any transfers between Level 1 and Level 2 and we have no Level 3 measurements as of December 31, 2020.
In October 2018, the FASB issued ASU 2018-17 Consolidation (Topic 810) - Targeted Improvements to Related Party Guidance for Variable Interest Entities, effective January 1,
2020. The amendments in this ASU specify that for the purposes of determining whether a decision-making fee is a variable interest, a company is now required to consider indirect interests held through related parties under common control on a
proportionate basis as opposed to as a direct investment. We are required to adopt the codification improvements retrospectively using a cumulative-effect method to retained earnings of the earliest period presented herein, but the amendment had no
impact on historic consolidation assessments or retained earnings.
In March 2020, the FASB issued ASU 2020-03 Financial Instruments (Topic 825) - Codification Improvements. The amendments in this ASU propose seven clarifications to improve the
understandability of existing guidance, including that fees between debtor and creditor and third-party costs directly related to exchanges or modifications of debt instruments include line-of-credit or revolving debt arrangements. We adopted the
codification improvements that were effective on issuance from January 1, 2020 under the specified transition approach connected with each of the codification improvements. These amendments have not had a material impact on our consolidated financial
statements or related disclosures, including retained earnings, as of January 1, 2020.
F-23
Accounting pronouncements that have been issued but not yet adopted
The following table provides a brief description of other recent accounting standards that have been issued but not yet adopted:
|
Standard
|
Description
|
Date of Adoption
|
Effect on our Consolidated
Financial Statements or Other
Significant Matters
|
||||
|
ASU 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.
|
The amendment removes certain exceptions previously available and provides some additional calculation rules to help simplify the accounting for income taxes.
|
January 1, 2021
|
No impacts are expected as a result of the adoption of this ASU.
|
||||
|
ASU 2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.
and
ASU 2021-01 Reference Rate Reform (Topic 848): Scope.
|
The amendments provide temporary optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The applicable expedients
for us are in relation to modifications of contracts within the scope of Topic 310, Receivables, Topic 470, Debt, and Topic 842, Leases. This optional guidance may be applied prospectively from any date beginning March 12, 2020 and cannot be
applied to modifications that occur after December 31, 2022.
|
Under evaluation
|
Under evaluation
|
||||
|
ASU 2020-06 Debt with equity and other options (Topic 470) and contracts in Entity’s Own Equity (Topic 815).
|
The amendments simplify the issuer’s accounting for convertible instruments and its application of the equity classification guidance. The new guidance eliminates some of the existing models for assessing convertible instruments, which
results in more instruments being recognized as a single unit of account on the balance sheet and expands disclosure requirements. The new guidance simplifies the assessment of contracts in an entity’s own equity and existing EPS guidance in
ASC 260. This optional guidance is effective on a modified retrospective basis on January 1, 2022.
|
Under evaluation
|
No impacts are expected as a result of the adoption of this ASU.
|
F-24
4. SUBSIDIARIES
The following table lists our significant subsidiaries and their purpose as of December 31, 2020. Unless otherwise indicated, we own 100% of each subsidiary.
|
Name
|
Jurisdiction of
Incorporation
|
Purpose
|
||
|
Golar Partners Operating LLC
|
Marshall Islands
|
Holding Company
|
||
|
Golar LNG Holding Corporation
|
Marshall Islands
|
Holding Company
|
||
|
Golar Maritime (Asia) Inc.
|
Republic of Liberia
|
Holding Company
|
||
|
Golar Servicos de Operacao de Embaracaoes Limited
|
Brazil
|
Management Company
|
||
|
Golar Winter Corporation
|
Marshall Islands
|
Owns Golar Winter
|
||
|
Golar Winter UK Ltd
|
United Kingdom
|
Operates Golar Winter
|
||
|
Golar Spirit Corporation
|
Marshall Islands
|
Owns Golar Spirit
|
||
|
Faraway Maritime Shipping Company (60% ownership)
|
Republic of Liberia
|
Owns and operates Golar Mazo
|
||
|
Golar LNG 2215 Corporation
|
Marshall Islands
|
Leases Methane Princess
|
||
|
Golar 2215 UK Ltd
|
United Kingdom
|
Operates Methane Princess
|
||
|
Golar Freeze Holding Corporation
|
Marshall Islands
|
Owns Golar Freeze
|
||
|
Golar Freeze UK Ltd
|
United Kingdom
|
Operates Golar Freeze
|
||
|
Golar Khannur Corporation
|
Marshall Islands
|
Holding Company
|
||
|
Golar LNG (Singapore) Pte. Ltd.
|
Singapore
|
Holding Company
|
||
|
PT Golar Indonesia*
|
Indonesia
|
Owns and operates NR Satu
|
||
|
Golar Grand Corporation
|
Marshall Islands
|
Owns and operates Golar Grand
|
||
|
Golar LNG 2234 LLC
|
Republic of Liberia
|
Owns and operates Golar Maria
|
||
|
Golar Hull M2031 Corporation
|
Marshall Islands
|
Owns and operates Golar Igloo
|
||
|
Golar Eskimo Corporation**
|
Marshall Islands
|
Leases and operates Golar Eskimo
|
* We hold all of the voting stock and control all of the economic interests in PT Golar Indonesia (“PTGI”) pursuant to a Shareholder’s Agreement with the other shareholder of PTGI, PT Pesona Sentra Utama (“PT Pesona”).
PT Pesona holds the remaining 51% interest in the issued share capital of PTGI.
** The above table excludes Eskimo SPV, from which we lease one of our vessels, the Golar Eskimo, under a sale and leaseback. See note 5.
5. VARIABLE INTEREST ENTITIES (“VIEs”)
Eskimo SPV
As of December 31, 2020 and 2019, we leased one vessel from a VIE under a finance lease with a wholly-owned subsidiary, Sea 23 Leasing Co. Limited (“Eskimo SPV”) of China Merchants Bank Leasing (“CMBL”). Eskimo SPV is
a special purpose vehicle (SPV).
In November 2015, we sold the Golar Eskimo to Eskimo SPV and subsequently leased back the vessel under a bareboat charter for a term of ten years. From the third year
anniversary of the commencement of the bareboat charter, we have an annual option to repurchase the vessel at fixed pre-determined amounts, which we have not exercised. The next repurchase option is in November 2021. We have an obligation to
repurchase the Golar Eskimo at the end of the ten year lease period.
While we do not hold any equity investment in Eskimo SPV, we have determined that we have a variable interest in Eskimo SPV and that Eskimo SPV is a VIE. Based on our evaluation of the bareboat agreement we have
concluded that we are the primary beneficiary of Eskimo SPV and, accordingly, have consolidated Eskimo SPV into our financial results. We did not record any gain or loss from the sale of the Golar Eskimo to
Eskimo SPV, and we continued to report the vessel in our consolidated financial statements at the same carrying value, as if the sale had not occurred, and our contractual debt with the Eskimo SPV eliminates on consolidation.
F-25
The equity attributable to CMBL in Eskimo SPV is included in "Non-controlling interests" in our consolidated results. As of December 31, 2020 and 2019, the Golar Eskimo is
reported under “Vessels and equipment, net” in our consolidated balance sheets.
The following table gives a summary of the sale and leaseback arrangement, including repurchase options and obligation as of December 31, 2020:
|
Vessel
|
Effective from
|
Sales value
(in $ millions)
|
Subsequent
repurchase option
(in $ millions)
|
Subsequent
repurchase
option
|
Repurchase
obligation at end of
lease term
(in $ millions)
|
End of lease term
|
|
Golar Eskimo
|
November 2015
|
285.0
|
189.1
|
November 2021
|
128.3
|
November 2025
|
A summary of our payment obligations under the bareboat charter with Eskimo SPV as of December 31, 2020 is shown below:
|
(in thousands of $)
|
2021
|
2022
|
2023
|
2024
|
2025
|
|||||||||||||||
|
Golar Eskimo*
|
19,724
|
19,230
|
18,893
|
18,685
|
15,358
|
|||||||||||||||
*The payment obligation table above includes variable rental payments due under the lease based on an assumed LIBOR plus margin but excludes the repurchase obligation at the end of lease term.
The most significant impact of consolidation of Eskimo SPV’s liabilities on our consolidated balance sheets is as follows:
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Liabilities
|
||||||||
|
Short-term debt (note 21)
|
11,083
|
11,436
|
||||||
|
Long-term debt (note 21)
|
153,384
|
169,395
|
||||||
The most significant impact of consolidation of Eskimo SPV’s operations on our consolidated statement of operations is interest expense of $5.7 million, $7.6 million and $8.0 million for the years ended December 31, 2020, 2019, and 2018 respectively. The most significant impact of consolidation of Eskimo SPV’s cash flows on
our consolidated statement of cash flows is net cash of $22.1 million, $20.1 million, and $12.8 million used in financing activities for the years ended December 31, 2020, 2019, and 2018, respectively.
Hilli LLC
On July 12, 2018, we acquired an interest in the Hilli through the acquisition of 50% of the Hilli Common Units for a purchase price of $658 million less assumed net lease
obligations and net of working capital adjustments. Concurrently with the closing of the Hilli Acquisition, we have determined that (i) Hilli LLC is a VIE, (ii) Golar is the primary beneficiary and retains sole control over the most significant
activities and the greatest exposure to variability in residual returns and expected losses from the Hilli and (iii) we are not the primary beneficiary. Thus, Hilli LLC was not consolidated into our
financial statements.
As of December 31, 2020, our maximum exposure as a result of our ownership in the Hilli LLC is the carrying value of our investment in affiliate of $185.6 million (note 10) and the outstanding portion of the Hilli
Facility which we have guaranteed (note 25).
F-26
PTGI
We consolidate PTGI, which owns the NR Satu, in our consolidated financial statements effective September 28, 2011. PTGI became a VIE, and we became its primary beneficiary
upon our agreement to acquire all of Golar’s interests in certain subsidiaries that own and operate the NR Satu on July 19, 2012. We consolidate PTGI as we hold all of the voting stock and control all of the
economic interests in PTGI.
F-27
The following table summarizes the balance sheets of PTGI as of December 31, 2020 and 2019:
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
ASSETS
|
||||||||
|
Cash
|
11,040
|
13,108
|
||||||
|
Restricted cash (note 17)
|
8,723
|
9,543
|
||||||
|
Vessels and equipment, net*
|
206,315
|
227,418
|
||||||
|
Other assets
|
7,373
|
3,158
|
||||||
|
Total assets
|
233,451
|
253,227
|
||||||
|
LIABILITIES AND EQUITY
|
||||||||
|
Accrued liabilities
|
4,077
|
2,704
|
||||||
|
Current portion of long-term debt
|
14,462
|
14,382
|
||||||
|
Amounts due to related parties
|
19,901
|
51,203
|
||||||
|
Other current liabilities
|
1,076
|
974
|
||||||
|
Long-term debt
|
44,403
|
58,865
|
||||||
|
Total liabilities
|
83,919
|
128,128
|
||||||
|
Total equity
|
149,532
|
125,099
|
||||||
|
Total liabilities and equity
|
233,451
|
253,227
|
||||||
*PTGI recorded the NR Satu at the acquisition price when it purchased the vessel from a Golar related party entity. However, as of the date of the acquisition of the
subsidiaries which own and operate the NR Satu, the acquisition was deemed to be a reorganization of entities under common control, and accordingly, we recorded the NR Satu
at historical book values.
Trade creditors of PTGI have no recourse to our general credit. The long-term debt of PTGI is secured against the NR Satu and has been guaranteed by us.
PTGI paid no dividends to PT Pesona during each of the years ended December 31, 2020, 2019 and 2018.
6. SEGMENT INFORMATION
A segment is a distinguishable component of the business that is engaged in business activities from which we earn revenues and incur expenses whose operating results are regularly reviewed by the CODM, and which are
subject to risks and rewards that are different from those of other segments.
As of December 31, 2020, we operate in the following three reportable segments: FSRUs, LNG carriers and FLNG.
| • |
FSRUs are vessels that are permanently located offshore to regasify LNG. Six of our vessels are FSRUs, of which one vessel is in cold layup;
|
| • |
LNG carriers are vessels that transport LNG and are compatible with many LNG loading and receiving terminals globally. Four of our vessels are LNG carriers, of which one vessel is in cold layup; and
|
| • |
FLNG is a vessel that is moored above an offshore natural gas field on a long-term basis. A FLNG receives, liquefies and stores LNG at sea and transfers it to LNG carriers that berth while offshore.
|
The accounting policies applied to the reportable segments are the same as those applied in the Consolidated Financial Statements, except that our equity in net earnings of affiliate is presented under the effective
share of interest consolidation method for the segment reporting.
F-28
|
December 31, 2020
|
||||||||||||||||||||||||||||
|
(in thousands of $)
|
FSRU(1)
|
LNG Carrier
|
FLNG(2)
|
Unallocated(3)
|
Total
Segment
Reporting
|
Elimination(4)
|
Consolidated
Reporting
|
|||||||||||||||||||||
|
Statement of operations:
|
||||||||||||||||||||||||||||
|
Total operating revenues
|
229,530
|
55,204
|
104,271
|
—
|
389,005
|
(104,271
|
)
|
284,734
|
||||||||||||||||||||
|
Vessel operating expenses
|
(38,570
|
)
|
(17,939
|
)
|
(22,701
|
)
|
—
|
(79,210
|
)
|
22,701
|
(56,509
|
)
|
||||||||||||||||
|
Voyage and commission expenses
|
(4,613
|
)
|
(3,373
|
)
|
—
|
—
|
(7,986
|
)
|
—
|
(7,986
|
)
|
|||||||||||||||||
|
Administrative expenses(5)
|
(9,594
|
)
|
(5,773
|
)
|
(1,408
|
)
|
—
|
(16,775
|
)
|
1,408
|
(15,367
|
)
|
||||||||||||||||
|
Amount invoiced under sales-type lease(6)
|
18,300
|
—
|
—
|
—
|
18,300
|
(18,300
|
)
|
—
|
||||||||||||||||||||
|
Adjusted EBITDA
|
195,053
|
28,119
|
80,162
|
—
|
303,334
|
(98,462
|
)
|
204,872
|
||||||||||||||||||||
|
Balance sheet:
|
||||||||||||||||||||||||||||
|
Total assets (7)
|
1,033,742
|
486,214
|
185,562
|
322,143
|
2,027,661
|
—
|
2,027,661
|
|||||||||||||||||||||
|
Other segmental financial information:
|
||||||||||||||||||||||||||||
|
Capital expenditure(7)
|
(2,902
|
)
|
(1,242
|
)
|
—
|
—
|
(4,144
|
)
|
—
|
(4,144
|
)
|
|||||||||||||||||
|
December 31, 2019
|
||||||||||||||||||||||||||||
|
(in thousands of $)
|
FSRU(1)
|
LNG Carrier
|
FLNG(2)
|
Unallocated(3)
|
Total
Segment
Reporting
|
Elimination(4)
|
Consolidated
Reporting
|
|||||||||||||||||||||
|
Statement of operations:
|
||||||||||||||||||||||||||||
|
Total operating revenues
|
240,695
|
58,957
|
104,073
|
—
|
403,725
|
(104,073
|
)
|
299,652
|
||||||||||||||||||||
|
Vessel operating expenses
|
(40,978
|
)
|
(19,980
|
)
|
(23,042
|
)
|
—
|
(84,000
|
)
|
23,042
|
(60,958
|
)
|
||||||||||||||||
|
Voyage and commission expenses
|
(4,467
|
)
|
(3,181
|
)
|
(230
|
)
|
—
|
(7,878
|
)
|
230
|
(7,648
|
)
|
||||||||||||||||
|
Administrative expenses(5)
|
(8,090
|
)
|
(5,322
|
)
|
(1,093
|
)
|
—
|
(14,505
|
)
|
1,093
|
(13,412
|
)
|
||||||||||||||||
|
Amount invoiced under sales-type lease(6)
|
11,500
|
—
|
—
|
—
|
11,500
|
(11,500
|
)
|
—
|
||||||||||||||||||||
|
Adjusted EBITDA
|
198,660
|
30,474
|
79,708
|
—
|
308,842
|
(91,208
|
)
|
217,634
|
||||||||||||||||||||
|
Balance sheet:
|
||||||||||||||||||||||||||||
|
Total assets (7)
|
1,079,369
|
510,558
|
193,270
|
322,415
|
2,105,612
|
—
|
2,105,612
|
|||||||||||||||||||||
|
Other segmental financial information:
|
||||||||||||||||||||||||||||
|
Capital expenditure(7)
|
(13,465
|
)
|
(15
|
)
|
—
|
—
|
(13,480
|
)
|
—
|
(13,480
|
)
|
|||||||||||||||||
|
December 31, 2018
|
||||||||||||||||||||||||||||
|
(in thousands of $)
|
FSRU
|
LNG Carrier
|
FLNG(2)
|
Unallocated(3)
|
Total Segment Reporting
|
Elimination(4)
|
Consolidated Reporting
|
|||||||||||||||||||||
|
Statement of operations:
|
||||||||||||||||||||||||||||
|
Total operating revenues
|
294,889
|
51,761
|
49,754
|
—
|
396,404
|
(49,754
|
)
|
346,650
|
||||||||||||||||||||
|
Vessel operating expenses
|
(42,736
|
)
|
(22,511
|
)
|
(9,834
|
)
|
—
|
(75,081
|
)
|
9,834
|
(65,247
|
)
|
||||||||||||||||
|
Voyage and commission expenses
|
(7,138
|
)
|
(4,084
|
)
|
(434
|
)
|
—
|
(11,656
|
)
|
434
|
(11,222
|
)
|
||||||||||||||||
|
Administrative expenses(5)
|
(9,384
|
)
|
(5,425
|
)
|
(1,306
|
)
|
—
|
(16,115
|
)
|
1,306
|
(14,809
|
)
|
||||||||||||||||
|
Adjusted EBITDA
|
235,631
|
19,741
|
38,180
|
—
|
293,552
|
(38,180
|
)
|
255,372
|
||||||||||||||||||||
|
Balance sheet:
|
||||||||||||||||||||||||||||
|
Total assets (7)
|
1,115,663
|
534,805
|
206,180
|
384,169
|
2,240,817
|
—
|
2,240,817
|
|||||||||||||||||||||
|
Other segmental financial information:
|
||||||||||||||||||||||||||||
|
Capital expenditure (7)
|
(28,307
|
)
|
(13,894
|
)
|
—
|
—
|
(42,201
|
)
|
—
|
(42,201
|
)
|
|||||||||||||||||
F-29
(1) Includes revenue relating to operating and service contracts, that is a non-lease component of sales-type leases recognized on a
straight line basis over the contract term.
(2) Relates to the effective share of revenues, expenses and Adjusted EBITDA attributable to our 50% ownership of the Hilli Common Units
which we acquired in July 2018 (see note 10). The earnings attributable to our investment in Hilli LLC are reported in the equity in net earnings of affiliate on the consolidated statement of operations.
(3) Relates to assets not allocated to a segment, but included to reflect the total assets in the consolidated balance sheets.
(4) Eliminations reverse the effective earnings attributable to our 50% ownership of the Hilli Common Units and the amounts invoiced
under the sales-type lease. There are no transactions between reportable segments.
(5) Indirect administrative expenses are allocated to the FSRU and LNG carrier segments based on the number of vessels while
administrative expenses for FLNG relate to our effective share of expenses attributable to our 50% ownership of the Hilli Common Units.
(6) This represents the actual invoiced amounts on the Golar Freeze sales-type lease. As the income generated from the Golar Freeze
sales-type lease is not reflected in our total operating revenues, we have included the amounts invoiced under the lease in arriving at our FSRU Adjusted EBITDA to enable comparability with the rest of our FSRU segment's charters.
(7) Total assets and capital expenditure by segment refers to our principal assets and capital expenditure relating to our vessels,
including the net investment in leased vessel.
Revenues from external customers
During 2020, our FSRUs and LNG carriers operated under medium to long-term time charters with eight charterers, including, among others, Petrobras, PT Nusantara Regas (“PTNR”), the Hashemite Kingdom of Jordan
(“Jordan”), and Kuwait National Petroleum Company (“KNPC”).
For the years ended December 31, 2020, 2019 and 2018, revenues from each of the following customers accounted for over 10% of our total consolidated operating revenues:
|
(in thousands of $)
|
Segment
|
2020
|
2019
|
2018
|
|||||||||||||||||||||
|
PTNR
|
FSRU
|
68,196
|
24
|
%
|
68,089
|
23
|
%
|
68,474
|
17
|
%
|
|||||||||||||||
|
Petrobras
|
FSRU
|
64,841
|
23
|
%
|
64,368
|
21
|
%
|
63,098
|
16
|
%
|
|||||||||||||||
|
Jordan
|
FSRU
|
55,639
|
20
|
%
|
57,535
|
19
|
%
|
57,337
|
14
|
%
|
|||||||||||||||
|
KNPC
|
FSRU
|
32,708
|
11
|
%
|
40,379
|
13
|
%
|
48,093
|
12
|
%
|
|||||||||||||||
|
Dubai Supply Authority
|
FSRU
|
—
|
—
|
—
|
—
|
|
56,823
|
14
|
%
|
||||||||||||||||
Geographical data
The following geographical data presents our consolidated reporting information: revenues from customers and fixed assets with respect only to our FSRUs, while operating under long-term charters, at specific locations.
LNG carriers operate on a worldwide basis and are not restricted to specific locations. Accordingly, it is not possible to allocate the assets of these operations to specific countries:
|
Revenues (in thousands of $)
|
2020
|
2019
|
2018
|
|||||||||
|
Indonesia
|
68,196
|
68,089
|
68,474
|
|||||||||
|
Brazil
|
64,841
|
64,368
|
63,098
|
|||||||||
|
Jordan
|
55,639
|
57,535
|
57,337
|
|||||||||
|
Kuwait
|
32,708
|
40,379
|
48,093
|
|||||||||
|
United Arab Emirates
|
—
|
—
|
56,823
|
|||||||||
|
Fixed assets (in thousands of $)
|
2020
|
2019
|
||||||
|
Jordan
|
247,776
|
254,881
|
||||||
|
Kuwait
|
257,498
|
262,530
|
||||||
|
Brazil
|
194,129
|
203,889
|
||||||
|
Indonesia
|
134,940
|
149,247
|
||||||
F-30
|
(in thousands of $)
|
2020
|
2019
|
2018
|
|||||||||
|
Mark-to-market (losses)/gains for interest rate swap derivatives
|
(35,306
|
)
|
(43,746
|
)
|
(1,455
|
)
|
||||||
|
Interest income/(expense) on un-designated interest rate swaps
|
(16,616
|
)
|
4,950
|
2,161
|
||||||||
|
Mark-to-market adjustment on Earn-Out Units (1)
|
—
|
—
|
7,400
|
|||||||||
|
(Losses)/gains on derivative instruments, net
|
(51,922
|
)
|
(38,796
|
)
|
8,106
|
|||||||
|
Foreign exchange (losses)/gains on finance lease obligations and related restricted cash
|
(71
|
)
|
(941
|
)
|
1,105
|
|||||||
|
Amortization of Partnership guarantee (note 25)
|
1,772
|
2,065
|
503
|
|||||||||
|
Financing arrangement fees and other costs
|
(441
|
)
|
(531
|
)
|
(1,363
|
)
|
||||||
|
Foreign exchange gains/(losses) on operations
|
(260
|
)
|
82
|
(837
|
)
|
|||||||
|
Other financial items, net
|
1,000
|
675
|
(592
|
)
|
||||||||
|
(1)
|
This relates to the mark-to-market movement on the Earn-Out Units issued in connection with the IDR reset transaction in October 2016 which were recognized as a derivative liability in our consolidated
balance sheets. In October 2018, we declared a reduced quarterly distribution of $0.4042 per common unit. Consequently, the second tranche of Earn-Out Units was not issued. Accordingly, we recognized a $nil valuation on the Earn-Out
Units derivatives as of December 31, 2018, resulting in a mark-to-market gain related to the Earn-Out Units. See notes 28 and 29.
|
The components of income tax expense are as follows:
|
(in thousands of $)
|
2020
|
2019
|
2018
|
|||||||||
|
Current tax expense
|
14,653
|
14,342
|
15,737
|
|||||||||
|
Deferred tax expense
|
2,114
|
3,620
|
1,728
|
|||||||||
|
Total income tax expense
|
16,767
|
17,962
|
17,465
|
|||||||||
The income taxes for the years ended December 31, 2020, 2019 and 2018 differed from the amounts computed by applying the Marshall Islands statutory income tax rate of 0% for all years as follows:
|
(In thousands of $)
|
2020
|
2019
|
2018
|
|||||||||
|
Effect of taxable income in various countries
|
15,590
|
18,023
|
16,342
|
|||||||||
|
Effect of change on uncertain tax positions
|
1,177
|
(61
|
)
|
1,329
|
||||||||
|
Effect of recognition of deferred tax asset
|
—
|
—
|
(206
|
)
|
||||||||
|
Total tax expense
|
16,767
|
17,962
|
17,465
|
|||||||||
Pursuant to the Internal Revenue Code of the United States (the “Code”), U.S. source income from the international operations of vessels is generally exempt from U.S. tax if the company operating the ships meets
certain requirements. Among other things, in order to qualify for this exemption, the company operating the ships must be incorporated in a country which grants an equivalent exemption from income taxes to U.S. citizens and U.S. corporations and
must either satisfy certain public trading requirements or be more than 50% owned by individuals who are residents, as defined, in such country or another foreign country that grants an equivalent exemption to U.S. citizens and U.S. corporations.
We believe that we satisfied these requirements and therefore by virtue of the above provisions, we were not subject to tax on our U.S. source income.
F-31
Jurisdictions open to examination
The earliest tax years that remain subject to examination by the major taxable jurisdictions in which we operate are UK (2019), Brazil (2015), Indonesia (2017), Kuwait (2020), Jordan (2015) and Barbados (2017).
Interest and penalties charged to “Income taxes” in our statement of operations amounted to $0.1 million, $0.2 million and $0.1 million for the years ended December 31, 2020, 2019 and 2018 respectively.
Deferred taxes
Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes.
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
At January 1
|
||||||||
|
Deferred tax assets
|
—
|
103
|
||||||
|
Deferred tax liabilities (note 23)
|
(10,643
|
)
|
(7,126
|
)
|
||||
|
(10,643
|
)
|
(7,023
|
)
|
|||||
|
Recognized in the year
|
||||||||
|
Adjustment in respect of prior year
|
—
|
(1,537
|
)
|
|||||
|
Recognition of deferred tax liability on fixed asset temporary differences
|
(2,114
|
)
|
(2,083
|
)
|
||||
|
(2,114
|
)
|
(3,620
|
)
|
|||||
|
At December 31
|
||||||||
|
Deferred tax assets
|
—
|
—
|
||||||
|
Deferred tax liabilities (note 23)
|
(12,757
|
)
|
(10,643
|
)
|
||||
|
(12,757
|
)
|
(10,643
|
)
|
|||||
There is no deferred tax asset as of December 31, 2020 and December 31, 2019.
The total deferred tax liability as of December 31, 2020 and 2019, related to the accounting net book value of the Golar Eskimo, operated under time charter in Jordan,
being greater than the tax written down value, arising from excess of tax depreciation over accounting depreciation.
There are no potential deferred tax liabilities arising on undistributed earnings within the Partnership. This is because either: (i) no tax would arise on distribution, or (ii) in the case of PTGI, the Partnership
intends to utilize surplus earnings to reduce borrowings or reinvest its earnings, as opposed to making any distribution.
The minimum contractual future rentals represent revenues to be recognized on a straight line basis for each of the following periods, as of December 31, 2020:
|
Year ending December 31,
(in thousands of $)
|
Total
|
|||
|
2021
|
266,522
|
|||
|
2022
|
229,890
|
|||
|
2023
|
137,300
|
|||
|
2024
|
109,944
|
|||
|
2025 and thereafter
|
25,961
|
|||
|
Total
|
769,617
|
|||
F-32
Minimum lease rentals are calculated based on contractual future revenue expected to be recognized on a straight-line basis over the lease term with certain assumptions such as those relating to expected off-hire
days.
PTNR has the right to purchase the NR Satu at any time after the first anniversary of the commencement date of its charter at a price that must be agreed upon between us
and PTNR. We have assumed that this option will not be exercised. Accordingly, the minimum lease rentals set out above include revenues arising within the option period.
Jordan has the option, for a termination fee, to terminate the charter after June 2020, the fifth anniversary of the delivery date of the Golar Eskimo. The minimum
contractual future revenues above assume that this option will not be exercised.
All our vessels are held for contractual future leasing, see note 13 and note 14. For arrangements where operating costs are borne by the charterer on a pass through basis, the pass through of operating costs are
reflected in both revenue and expenses.
The components of operating lease income were as follows:
|
(in thousands of $)
|
|
2020 |
|
2019 | ||||
|
Operating lease income
|
274,924
|
291,806
|
||||||
|
Variable lease income (1)
|
1,665
|
2,148
|
||||||
|
Total operating lease income
|
276,589
|
293,954
|
(1)‘Variable lease income’ is excluded from lease payments that comprise the minimum contractual future revenues from
non-cancellable leases.
The components of equity in net assets of our non-consolidated affiliate are as follows:
|
(in thousands of $)
|
|
2020 |
|
2019 | ||||
|
Equity in net assets of affiliate at January 1,
|
193,270
|
206,180
|
||||||
|
Dividends
|
(19,438
|
)
|
(17,450
|
)
|
||||
|
Equity in net earnings of affiliate
|
11,730
|
4,540
|
||||||
|
Equity in net assets of affiliate at December 31
|
185,562
|
193,270
|
Quoted market prices for Hilli Common Units are not available because they are not publicly traded.
Hilli LLC
On July 12, 2018, we purchased 50.0% of the Hilli Common Units from Golar, affiliates of Keppel Shipyard Limited ("Keppel") and Black & Veatch ("B&V") (together, the “Sellers”). Hilli LLC owns Golar Hilli
Corporation ("Hilli Corp), the disponent owner of the Hilli. The Hilli Common Units provide us with significant influence over Hilli LLC. The Hilli is currently
operating under an 8-year liquefaction tolling agreement (the “LTA”) with Perenco Cameroon S.A. (“Perenco”) and Société Nationale des Hydrocarbures (“SNH” and together with Perenco, the “Customer”). The purchase price for the Hilli Acquisition
was $658 million, less 50% of the net lease obligations under the Hilli Facility on the Closing Date, plus working capital adjustments. The post closing purchase price adjustments were finalized in October 2018.
We entered into the Amended and Restated Limited Liability Company Agreement of Hilli LLC (the “Hilli LLC Agreement”) on July 12, 2018. The ownership interests in Hilli LLC are represented by three classes of
units, the Hilli Common Units, the Series A Special Units and the Series B Special Units. We do not own any of the Series A Special Units or Series B Special Units. The ownership interests of Hilli LLC are represented below:
F-33
|
Percentage ownership interest
|
|
|
Hilli Common Units
|
|
|
The Partnership
|
50.0%
|
|
Golar
|
44.6%
|
|
Keppel
|
5.0%
|
|
B&V
|
0.4%
|
The Hilli LLC Agreement provides that within 60 days after the end of each quarter, Golar, in its capacity as the managing member of Hilli LLC shall determine the amount of Hilli LLC’s available cash and
appropriate reserves (including cash reserves for future maintenance capital expenditures, working capital and other matters), and Hilli LLC shall make a distribution to the unitholders of Hilli LLC (the “Hilli Unitholders”) of the available
cash, subject to such reserves. All three classes of ownership interests in Hilli LLC have certain participating and protective rights. Hilli LLC shall make distributions to the Hilli Unitholders when, as and if declared by Golar; provided,
however, that no distributions may be made on the Hilli Common Units on any distribution date unless Series A Distributions (defined below) and Series B Distributions (defined below) for the most recently ended quarter and any accumulated Series
A Distributions and Series B Distributions in arrears for any past quarter have been or contemporaneously are being paid or provided for.
The Series A Special Units are entitled to receive the “Series A Distributions,” which means, with respect to any quarter, 100% of any Incremental Perenco Revenues received by Hilli Corp during such quarter.
“Incremental Perenco Revenues” is contractually defined as:
| • |
any cash received by Hilli Corp from revenue invoiced to the extent such revenue invoiced are based on tolling fees under the LTA relating to an increase in the Brent Crude price above $60 per barrel; less
|
| • |
any incremental tax expense arising from or related to any cash receipts referred to in the bullet point above; less
|
| • |
the pro-rata portion of any costs that may arise as a result of the underperformance of the Hilli (“Underperformance Costs”) incurred by Hilli Corp during such quarter.
|
Series B Special Units are entitled to receive the “Series B Distributions,” which means, with respect to any quarter, an amount equal to 95% of Revenues Less Expenses received by Hilli Corp during such quarter.
“Revenues Less Expenses” is contractually defined as:
| • |
the cash receipts from revenues invoiced by Hilli Corp as a direct result of the employment of more than the first 50% of LNG production capacity for the Hilli, before deducting any
Underperformance Costs (unless the incremental capacity above the first 50% is supplied under the terms of the LTA and the term of the LTA is not expanded beyond 500 billion cubic feet of feed gas), excluding, for the avoidance of doubt,
any Incremental Perenco Revenues; less
|
| • |
any incremental costs whatsoever, including but not limited to operating expenses, capital costs, financing costs and tax costs, arising as a result of employing and making available more than the first 50% of LNG production capacity
for the Hilli; less
|
| • |
any reduction in revenue attributable to the first 50% of LNG production capacity availability as a result of making more than 50% of capacity available under the LTA (including, but not limited to, for example, as a result of a
tolling fee rate reduction as contemplated in the LTA); less
|
| • |
the pro-rata share of Underperformance Costs incurred by Hilli Corp during such quarter.
|
Hilli Common Units: Distributions to Hilli Common Units may not be made until any Series A Distributions and Series B Distributions for the most recently ended quarter and
any accumulated Series A Distributions and Series B Distributions in arrears for any past quarter have been paid. Hilli LLC Common Unitholders may also receive, with respect to any quarter, an amount equal to 5% of Revenues less Expenses received
by Hilli Corp during such quarter.
F-34
Summarized financial information of Hilli LLC*
The following table summarizes the financial information of Hilli LLC shown on a 100% basis as of and for the years ended December 31, 2020 and 2019:
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Balance sheet
|
||||||||
|
Current assets
|
56,481
|
54,000
|
||||||
|
Non-current assets
|
1,203,805
|
1,300,065
|
||||||
|
Current liabilities
|
(32,337
|
)
|
(45,106
|
)
|
||||
|
Non-current liabilities
|
(845,658
|
)
|
(924,578
|
)
|
||||
|
Statement of operations
|
||||||||
|
Liquefaction services revenue
|
226,061
|
218,095
|
||||||
|
Net income
|
71,684
|
70,756
|
||||||
*The summarized financial information of Hilli LLC excludes the Hilli LLC lessor VIE's financial information.
As of December 31, 2020 and 2019, there was no provision for doubtful accounts.
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Prepaid expenses
|
1,810
|
2,087
|
||||||
|
Indemnity amount receivables
|
17,325
|
8,200
|
||||||
|
Other receivables
|
1,797
|
1,607
|
||||||
|
20,932
|
11,894
|
|||||||
Indemnity amount receivables relates to amounts expected to be recovered pursuant to indemnity clauses relating to past performance of a bareboat charter and operating and services agreement with a charterer. The
indemnity relates to how the bareboat charter and operating and services agreement should be taxed under the Jamaican tax authority and the receivable includes withholding and payroll taxes that are treated as operating expenses. As of December
31, 2020, we have recognized the corresponding liabilities for payment of taxes and associated charges of $1.2 million (2019: $0.6 million) and $16.1 million (2019: $7.6 million), which are included within ‘Accrued expenses’ (note 19) and ‘Other
current liabilities’ (note 20), respectively.
There was no accrued interest included within the other current assets balance as of December 31, 2020 and 2019.
F-35
13. VESSELS AND EQUIPMENT, NET
|
2020
|
||||||||||||||||
|
(in thousands of $)
|
Vessels
|
Drydocking
expenditure
|
Mooring equipment
|
Total
|
||||||||||||
|
Cost
|
||||||||||||||||
|
As of January 1
|
1,941,948
|
47,228
|
37,826
|
2,027,002
|
||||||||||||
|
Additions
|
3,013
|
1,131
|
—
|
4,144
|
||||||||||||
|
Write-off of fully depreciated and amortized asset
|
(1,691
|
)
|
(4,283
|
)
|
—
|
(5,974
|
)
|
|||||||||
|
As of December 31
|
1,943,270
|
44,076
|
37,826
|
2,025,172
|
||||||||||||
|
Depreciation and amortization
|
||||||||||||||||
|
As of January 1
|
(605,243
|
)
|
(24,929
|
)
|
(27,165
|
)
|
(657,337
|
)
|
||||||||
|
Charge for the year
|
(52,507
|
)
|
(9,549
|
)
|
(3,547
|
)
|
(65,603
|
)
|
||||||||
|
Write-off of fully depreciated and amortized asset
|
1,691
|
4,283
|
—
|
5,974
|
||||||||||||
|
As of December 31
|
(656,059
|
)
|
(30,195
|
)
|
(30,712
|
)
|
(716,966
|
)
|
||||||||
|
Net book value as of December 31
|
1,287,211
|
13,881
|
7,114
|
1,308,206
|
||||||||||||
|
2019
|
||||||||||||||||
|
(in thousands of $)
|
Vessels
|
Drydocking
expenditure
|
Mooring
equipment
|
Total
|
||||||||||||
|
Cost
|
||||||||||||||||
|
As of January 1
|
2,143,388
|
65,088
|
37,826
|
2,246,302
|
||||||||||||
|
Additions
|
7,547
|
5,933
|
—
|
13,480
|
||||||||||||
|
Disposal (1)
|
(208,987
|
)
|
(17,430
|
)
|
—
|
(226,417
|
)
|
|||||||||
|
Write-off of fully depreciated and amortized asset
|
—
|
(6,363
|
)
|
(6,363
|
)
|
|||||||||||
|
As of December 31
|
1,941,948
|
47,228
|
37,826
|
2,027,002
|
||||||||||||
|
Depreciation and amortization
|
||||||||||||||||
|
As of January 1
|
(663,123
|
)
|
(23,804
|
)
|
(23,618
|
)
|
(710,545
|
)
|
||||||||
|
Charge for the year
|
(55,796
|
)
|
(8,282
|
)
|
(3,547
|
)
|
(67,625
|
)
|
||||||||
|
Disposal (1)
|
113,676
|
794
|
—
|
114,470
|
||||||||||||
|
Write-off of fully depreciated and amortized asset
|
—
|
6,363
|
—
|
6,363
|
||||||||||||
|
As of December 31
|
(605,243
|
)
|
(24,929
|
)
|
(27,165
|
)
|
(657,337
|
)
|
||||||||
|
Net book value as of December 31
|
1,336,705
|
22,299
|
10,661
|
1,369,665
|
||||||||||||
(1) Relates to the de-recognition of the vessel asset carrying value of the Golar Freeze.
See note 15.
F-36
As of December 31, 2020 and 2019, vessels and equipment with a net book value of $1,188.2 million and $1,241.9 million, respectively, were pledged as security for certain debt facilities (note 26).
The following table presents the market values and carrying values of seven of our vessels that we have determined have a market value that is less than their carrying value as of December 31, 2020. While the
market values of these vessels are below their carrying values, no vessel impairment has been recognized on any of these vessels as the estimated future undiscounted cash flows relating to such vessels are greater than their carrying values.
|
Vessel
|
2020 Market value(1)
|
2020 Carrying value
|
Deficit
|
|
(in millions of $)
|
|||
|
Golar Winter
|
145.0
|
194.0
|
(49.0)
|
|
NR Satu
|
124.0
|
135.0
|
(11.0)
|
|
Methane Princess
|
45.0
|
103.0
|
(58.0)
|
|
Golar Maria
|
73.0
|
166.0
|
(93.0)
|
|
Golar Grand
|
71.0
|
98.0
|
(27.0)
|
|
Golar Mazo
|
54.0
|
120.0
|
(66.0)
|
|
Golar Igloo
|
231.0
|
258.0
|
(27.0)
|
(1) Market values are determined with reference to average broker values provided by independent brokers. Broker values are
considered an estimate of the market value for the purpose of determining whether an impairment trigger exists. Broker values are commonly used and accepted by our lenders in relation to determining compliance with relevant covenants in
applicable credit facilities for the purpose of assessing security quality.
Since vessel values can be volatile, our estimates of market value may not be indicative of either the current or future prices we could obtain if we sold any of the vessels. In addition, the determination of
estimated market values may involve considerable judgment, given the illiquidity of the second-hand markets for these types of vessels.
F-37
14. VESSEL UNDER FINANCE LEASE, NET
|
2020
|
||||||||||||
|
(in thousands of $)
|
Vessel
|
Drydocking
expenditure
|
Total
|
|||||||||
|
Cost
|
||||||||||||
|
As of January 1, and December 31
|
163,231
|
11,280
|
174,511
|
|||||||||
|
Depreciation and amortization
|
||||||||||||
|
As of January 1
|
(63,447
|
)
|
(2,631
|
)
|
(66,078
|
)
|
||||||
|
Charge for the year
|
(3,643
|
)
|
(2,256
|
)
|
(5,899
|
)
|
||||||
|
As of December 31
|
(67,090
|
)
|
(4,887
|
)
|
(71,977
|
)
|
||||||
|
Net book value as of December 31
|
96,141
|
6,393
|
102,534
|
|||||||||
|
2019
|
||||||||||||
|
Vessel
|
Drydocking
expenditure
|
Total
|
||||||||||
|
Cost
|
||||||||||||
|
As of January 1, and December 31
|
163,231
|
11,280
|
174,511
|
|||||||||
|
Depreciation and amortization
|
||||||||||||
|
As of January 1
|
(59,425
|
)
|
(375
|
)
|
(59,800
|
)
|
||||||
|
Charge for the year
|
(4,022
|
)
|
(2,256
|
)
|
(6,278
|
)
|
||||||
|
As of December 31
|
(63,447
|
)
|
(2,631
|
)
|
(66,078
|
)
|
||||||
|
Net book value as at December 31
|
99,784
|
8,649
|
108,433
|
|||||||||
As of December 31, 2020 and 2019, we operated one vessel, the Methane Princess, under a finance lease. The lease is in respect of a refinancing transaction undertaken
during 2003, as described in note 22. In connection with the Methane Princess Lease, we recorded an amount representing the difference between the net cash proceeds received upon sale of the vessel and the present value of the minimum lease
payments. The depreciation and amortization expense for the year is offset against the amortization of the deferred credit in the consolidated statement of operations (note 23).
F-38
15. INVESTMENT IN LEASED VESSEL, NET
On May 15, 2019, we executed a modification to the Golar Freeze Charter which triggered a change in lease classification from an operating lease to a sales-type lease. This classification change resulted in the
de-recognition of the vessel asset carrying value, the recognition of net investment in leased vessel (consisting of present value of the future lease receivables and unguaranteed residual value), and a gain on disposal of $4.2 million, which is
included within "Other non-operating income" in our consolidated statement of operations for the year ended December 31, 2019. Post modification to sales-type lease, all charter hire revenue from the Golar Freeze sales-type lease has been
recognized as interest income. We recognized interest income of $16.2 million and $9.5 million for the years ended December 31, 2020 and 2019, respectively, which is included within "interest income" in our
consolidated statement of operations, gross of expected credit loss allowance.
The following table lists the components of our investment in leased vessel, net and the maturity profile of the undiscounted lease receivables:
|
Year ending December 31,
(in thousands of $)
|
||||
|
2021
|
18,250
|
|||
|
2022
|
18,250
|
|||
|
2023
|
18,250
|
|||
|
2024
|
18,300
|
|||
|
2025 and thereafter
|
171,050
|
|||
|
Total minimum lease receivable
|
244,100
|
|||
|
Unguaranteed residual value
|
16,000
|
|||
|
Gross investment in sales-type lease
|
260,100
|
|||
|
Less: unearned interest income
|
(148,271
|
)
|
||
|
Expected credit loss allowance
|
(43
|
)
|
||
|
Investment in leased vessel, net
|
111,786
|
|||
|
Less: current portion of investment in leased vessel, net
|
(2,570
|
)
|
||
|
Non-current portion of investment in leased vessel, net
|
109,216
|
|||
As of December 31, 2020 and 2019, there is $nil accrued interest included within the balance.
The Golar Freeze Charter includes an option for the charterer, upon twelve months' written notice, to terminate the charter with effect not before the third anniversary of the hire commencement date of March 31,
2019 in order to substitute the FSRU for an alternative vessel but only if certain throughput targets have not been achieved. In the event the charterer issues a termination notice, we have a matching right. The charter also includes a 5-year
extension option and we have assumed that this option will not be exercised.
F-39
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Cost
|
||||||||
|
As of January 1
|
95,517
|
114,616
|
||||||
|
Write-off of fully amortized asset
|
—
|
(19,099
|
)
|
|||||
|
As of December 31
|
95,517
|
95,517
|
||||||
|
Depreciation, amortization and impairment
|
||||||||
|
As of January 1
|
(45,108
|
)
|
(54,247
|
)
|
||||
|
Charge for the year
|
(9,114
|
)
|
(9,960
|
)
|
||||
|
Write-off of fully amortized asset
|
—
|
19,099
|
||||||
|
As of December 31
|
(54,222
|
)
|
(45,108
|
)
|
||||
|
Net book value as of December 31
|
41,295
|
50,409
|
||||||
The intangible assets pertain to customer related and contract based assets representing primarily the long-term time charter party agreements acquired in connection with the acquisition of the Golar Igloo in March 2014 and Golar Eskimo in January 2015. The intangible asset acquired in connection with the acquisition of the Golar
Igloo was amortized over the term of the contract with KNPC, which expired in December 2019. Accordingly, the intangible asset in connection with the Golar Igloo was fully amortized and written
off as of December 31, 2019. The intangible asset acquired in connection with the acquisition of the Golar Eskimo is amortized over the term of the contract initially entered into with Jordan for ten
years with termination option after five years expected not to be exercised. Both intangible assets have been assigned a zero residual value. As of December 31, 2020 and 2019, there were no impairment of intangible assets.
Amortization expense for the years ended December 31, 2020, 2019 and 2018 was $9.1 million, $10.0 million and $12.8 million respectively.
The estimated future amortization of intangible assets as of December 31, 2020 is as follows:
|
Year Ending December 31,
(in thousands of $)
|
||||
|
2021
|
9,114
|
|||
|
2022
|
9,114
|
|||
|
2023
|
9,114
|
|||
|
2024
|
9,114
|
|||
|
2025
|
4,839
|
|||
|
Total
|
41,295
|
|||
F-40
Our restricted cash balances are as follows:
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Methane Princess lease security deposits (note 22) (1)
|
118,455
|
114,676
|
||||||
|
Restricted cash relating to the $800 million facility (note 21) (2)
|
16,450
|
23,552
|
||||||
|
Restricted cash relating to our interest rate swaps (note 24)
|
29,440
|
14,810
|
||||||
|
Restricted cash relating to the NR Satu facility (notes 5 and 21)
|
8,723
|
9,543
|
||||||
|
Restricted cash relating to security deposits(3)
|
12,317
|
19,680
|
||||||
|
Total restricted cash
|
185,385
|
182,261
|
||||||
|
Less: current portion of restricted cash
|
(55,547
|
)
|
(46,333
|
)
|
||||
|
Non-current restricted cash
|
129,838
|
135,928
|
||||||
Restricted cash does not include minimum consolidated cash balances of $30.0 million required to be maintained as part of the financial covenants in some of our loan facilities, as these amounts are included in
“Cash and cash equivalents” (note 21).
(1) As of December 31, 2020 and 2019, the value of deposits used to obtain letters of credit to secure the obligations for the lease
arrangements described in note 22 was $118.5 million and $114.7 million, respectively. These security deposits are referred to in these financial statements as restricted cash. The Methane Princess Lease security deposit earns interest based upon
Pound Sterling LIBOR.
(2) Restricted cash required by the $800 million facility provides additional security to the lenders following the early
termination of the Golar Spirit's charter and amendments to the Golar Freeze's charter. Under the amendments in 2018 to the $800 million facility, the restricted
cash relating to the Golar Freeze was released upon securing an acceptable replacement charter. The security deposit may be applied against Golar Spirit's
proportion of the $800 million facility quarterly repayment. The security deposit will be fully utilized in 2021 on the final repayment of the $800 million facility. The security deposit may be released if we are able to enter into a suitable
charter for the Golar Spirit.
(3) As of December 31, 2020 and 2019, the value of collateral deposits required to secure performance guarantees issued to charterers
on our behalf by banks was $12.3 million and $18.1 million, respectively.
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Other non-current assets
|
746
|
1,494
|
||||||
|
Non-current prepayment (note 26)
|
3,443
|
—
|
||||||
|
Mark-to-market interest rate swaps valuation (note 24)
|
—
|
1,285
|
||||||
|
4,189
|
2,779
|
|||||||
Other non-current assets consist of capitalized commission expenses and lease incentives incurred in connection with the NR Satu time charter amounting to $0.7 million and
$1.5 million as of December 31, 2020 and 2019, respectively. These costs are amortized over the term of the NR Satu time charter. Amortization expense for each of the years ended December 31, 2020, 2019
and 2018 was $0.7 million, which are recognized mainly under “Voyage and commission expenses” in the consolidated statement of operations.
F-41
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Current tax payable
|
10,790
|
9,134
|
||||||
|
Interest expense
|
7,099
|
7,036
|
||||||
|
Vessel operating and drydocking expenses
|
5,678
|
6,503
|
||||||
|
Administrative expenses
|
1,590
|
778
|
||||||
|
25,157
|
23,451
|
|||||||
Current tax payable includes provision for interest and penalties of $0.3 million and $0.2 million for the years ended December 31, 2020 and 2019, respectively. Within current tax payable, $1.2 million and $0.6
million of tax payable for the years ended December 31, 2020 and 2019, respectively, is expected to be recovered through indemnity clauses relating to past performance of a bareboat charter and operating and services agreement with a charterer.
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Mark-to-market interest rate swaps valuation (note 24)
|
70,188
|
36,167
|
||||||
|
Other creditors
|
16,064
|
7,910
|
||||||
|
Deferred revenue
|
9,949
|
7,720
|
||||||
|
Partnership Guarantee (note 25)
|
1,502
|
1,772
|
||||||
|
Preferred units dividend payable (note 28)
|
1,543
|
1,509
|
||||||
|
Deferred credits from finance lease transactions (note 23)
|
625
|
625
|
||||||
|
99,871
|
55,703
|
|||||||
Other creditors for the years ended December 31, 2020 and 2019 includes $16.1 million and $7.6 million, respectively, of withholding and payroll taxes that is expected to be recovered through indemnity clauses
relating to past performance of a bareboat charter and operating and services agreement with a charterer.
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Total debt, net of deferred finance charges
|
1,119,708
|
1,216,933
|
||||||
|
Less: Current portion of long-term debt, net of deferred finance charges
|
(702,962
|
)
|
(225,254
|
)
|
||||
|
Long-term debt, net of deferred finance charges
|
416,746
|
991,679
|
||||||
F-42
Our outstanding debt as of December 31, 2020 is repayable as follows:
|
Year Ending December 31,
(in thousands of $)
|
||||
|
2021
|
706,885
|
|||
|
2022
|
277,434
|
|||
|
2023
|
12,819
|
|||
|
2024
|
12,836
|
|||
|
2025
|
114,910
|
|||
|
Total debt
|
1,124,884
|
|||
|
Less: deferred finance charges
|
(5,176
|
)
|
||
|
Total debt, net deferred finance charges
|
1,119,708
|
|||
As of December 31, 2020 and 2019, the maturity dates for our total debt were as follows:
|
(in thousands of $)
|
2020
|
2019
|
Maturity date
|
|||||||||
|
2015 Norwegian Bonds (1)
|
142,552
|
150,000
|
2021
|
|||||||||
|
$800 million credit facility
|
516,000
|
568,000
|
2021
|
|||||||||
|
2017 Norwegian Bonds (1)
|
242,503
|
250,000
|
2022
|
|||||||||
|
NR Satu Facility
|
59,362
|
74,113
|
2022
|
|||||||||
|
Eskimo SPV debt (2)
|
164,467
|
180,831
|
2025
|
|||||||||
|
Total debt
|
1,124,884
|
1,222,944
|
||||||||||
(1) Includes the premium payable at maturity accreted using the effective interest rate method over the instrument term.
(2) This represents the total loan facility drawn down by the subsidiary of CMBL, which we consider to be a VIE. We determined that we are the primary beneficiary of this VIE as we are expected to absorb the
majority of the VIE's losses and residual gains associated with the vessel sold and leased backed from the subsidiary of CMBL. Accordingly, the VIE and its related loan facilities are consolidated in our results. See note 2 and note 5.
$800 million credit facility
In April 2016, we entered into an $800.0 million senior secured credit facility (the “$800 million credit facility”) with a syndicate of banks to refinance existing financing arrangements secured by seven of our
existing vessels. The vessels included in this facility are the Golar Freeze, the Golar Grand, the Golar Igloo, the Golar Maria, the Golar Spirit, the Golar Winter and the Methane Princess.
The $800 million credit facility has a five-year term and the initial credit facility consisted of a $650.0 million term loan facility and a $150.0 million revolving credit facility. The revolving credit facility
was reduced by $25.0 million on September 30, 2017. The requirement for the revolving credit facility to be reduced by a further $50.0 million in September 2018 was waived until maturity. As of December 31, 2020, we had drawn down $125.0 million
on the revolving credit facility. The term loan facility is repayable in quarterly installments with a total final balloon payment of $378.0 million together with any amounts outstanding under the revolving facility repayable in April 2021. The
$800 million credit facility bears interest at a rate of LIBOR plus a margin of 2.5%. As of December 31, 2020, the balance outstanding under the $800 million credit facility amounted to $516 million.
The facility requires a security deposit to be held for the period of the loan, unless certain conditions are met. These balances are referred to in these consolidated financial statements as restricted cash. As of
December 31, 2020, the value of the restricted cash deposit secured against the loan was $16.5 million. See note 17.
F-43
2015 Norwegian Bonds and 2017 Norwegian Bonds
In May 2015, we completed the issuance and sale of $150 million aggregate principal amount of five years non-amortizing bonds in Norway (the “2015 Norwegian Bonds”). The 2015 Norwegian Bonds were due to mature on
May 22, 2020 and bore interest at a rate of LIBOR plus 4.4%. We also entered into economic hedges that convert the floating rate of the interest obligation under the 2015 Norwegian Bonds to an all-in fixed rate of 6.275%.
On February 15, 2017, we completed the issuance and sale of $250.0 million aggregate principal amount of our 2017 Norwegian Bonds (the “2017 Norwegian Bonds” and, together with the 2015 Norwegian Bonds, the
“Norwegian Bonds”) which were due to mature in May 2021 and bore interest at a rate of 3-month LIBOR plus 6.25%. The 2017 Norwegian Bonds were listed on the Oslo Bors in July 2017. In connection with the issuance of the 2017 Norwegian Bonds, we
entered into economic hedge interest rate swaps to reduce the risk associated with fluctuations in interest rates by converting the floating rate of the interest obligation under the 2017 Norwegian Bonds to an all-in interest rate of 8.194%.
On May 5, 2020, bondholders approved amendments (the “Norwegian Bond Amendments”) to our Norwegian Bonds as follows:
2015 Norwegian Bonds: The maturity date has been extended to November 22, 2021. The interest rate increased by 185 basis points to LIBOR plus 6.25% per annum. The repayment
profile of the 2015 Norwegian Bonds changed from a bullet repayment on the original maturity date to amortization as follows:
| • |
Equal installments of $5.0 million (at 100% of par value), commencing on September 30, 2020 and thereafter quarterly on each interest payment date up to and including the interest payment date in May 2021;
|
| • |
Equal installments of $3.8 million (at 100% of the par value) on each quarterly interest payment date thereafter; and
|
| • |
Repayment of the remaining amount at a price of 105% of the par value on November 22, 2021.
|
We may redeem the 2015 Norwegian Bonds (in whole or in part) together with accrued and unpaid interest thereon any time (i) from and including the interest payment date in May 2020 until (but excluding) the
interest payment date in May 2021 at 100% of the par value of the 2015 Norwegian Bonds redeemed; and (ii) from and including the interest payment date in May 2021 to (but excluding) November 22, 2021, at 105% of the par value of the 2015
Norwegian Bonds redeemed.
2017 Norwegian Bonds: The maturity date has been extended to November 15, 2022. The interest rate increased by 185 basis points to LIBOR plus 8.1% per annum. The repayment
profile of the 2017 Norwegian Bonds changed from a bullet repayment upon the original maturity date to amortization as follows:
| a. |
Equal installments of $5.0 million (at 100% of par value), commencing on September 30, 2020 and thereafter quarterly on each interest payment date up to and including the interest payment date in May 2021;
|
| b. |
Equal installments of $6.3 million (at 100% of the par value) on the interest payment dates in August 2021 and November 2021;
|
| c. |
Equal installments of $10.0 million (at 100% of the par value) from and including the interest payment date in February 2022 after the 2015 Norwegian Bonds have been redeemed in full and on each interest payment date thereafter; and
|
| d. |
Repayment of the remaining amount at a price of 105% of the par value on November 15, 2022.
|
We may redeem the 2017 Norwegian Bonds (in whole or in part) together with accrued and unpaid interest thereon at any time (i) from and including the interest payment date in May 2020 until (but excluding) the
interest payment date in May 2021 at 100% of the par value of the 2017 Norwegian Bonds redeemed; and
(ii) from and including the interest payment date in May 2021 to (but excluding) November 15, 2022, at 105% of the par value of the 2017 Norwegian Bonds redeemed.
Under the Norwegian Bond Amendments, we may incur no additional financial indebtedness without applying the proceeds received therefrom to redeem the Norwegian Bonds on a pro rata basis, other than certain
permitted financial indebtedness incurred: (i) to repay existing financial indebtedness, (ii) by way of secured debt from financial institutions incurred in the ordinary course of business in connection with acquisitions of assets or (iii) an
amount up to $25.0 million in aggregate, provided that the proceeds in the case of each of (i) to (iii) above are not applied for redemption of any or all of the 2017 Norwegian Bonds prior to the redemption of the 2015 Norwegian Bonds in full. In
addition, the Norwegian Bond Amendments contain a provision prohibiting us from paying distributions to our common unitholders in an amount greater than (i) $0.0808 per common unit per annum or (ii) the aggregate amount of cash equity raised.
Additionally, under the Norwegian Bond Amendments, we are not permitted to repurchase any of our common or preferred units.
F-44
NR Satu Facility
In December 2012, PTGI, the company that owns and operates the NR Satu, entered into a seven year $175.0 million secured loan facility (or the NR Satu Facility). The NR
Satu Facility was split into two tranches, a $155.0 million term loan facility and a $20.0 million revolving facility. The facility was with a syndicate of banks and bore interest at LIBOR plus a margin of 3.5%. The loan was payable on a
quarterly basis with a final balloon payment of $52.5 million due in November 2019.
In March 2018, the NR Satu facility was extinguished and subsequently refinanced with Sumitomo Mitsui Banking Corporation ("SMBC") under a new loan facility (the "New NR Satu Facility") which bears interest at
LIBOR plus margin of 2.35%. The New NR Satu Facility is split into two tranches, a $155.0 million term loan facility and a $20.0 million revolving facility. The maturity of the New NR Satu Facility was extended to the earliest to occur of (i)
November 30, 2022; (ii) the expiration date of the NR Satu Charter; or (iii) when all the amounts outstanding under the New NR Satu Facility have been repaid. The New NR Satu facility is payable on a quarterly basis with a final balloon payment
upon maturity.
As of December 31, 2020, the balance outstanding under the New NR Satu facility was $59.4 million. The facility requires certain cash balances to be held on deposit during the period of the loan. These balances are
referred to in these Consolidated Financial Statements as restricted cash. As of December 31, 2020, the value of the restricted cash deposit secured against the loan was $8.7 million. See note 17.
F-45
Eskimo SPV Debt
In November 2015, we entered into a sale and leaseback transaction pursuant to which we sold the Golar Eskimo to Eskimo SPV, a subsidiary of CMBL, and leased back the
vessel under a bareboat charter for a monthly hire rate. In November 2015, Eskimo SPV, which is the legal owner of the Golar Eskimo, entered into a long-term loan facility (the “Eskimo SPV Debt”). The
facility bears interest at a rate of LIBOR plus a margin. See note 5.
Debt and lease restrictions
As of December 31, 2020, we were in compliance with all covenants under our existing debt and lease agreements.
Our debt arrangements contain certain operating and financing restrictions and covenants that require: (a) the Partnership to maintain a minimum level of liquidity of $30 million and consolidated net worth between
ranges $123.95 million and $250 million, (b) the Partnership to maintain a minimum EBITDA to debt service ratio of 1.15:1, (c) the Partnership to not exceed a maximum net debt to EBITDA ratio of 6.5:1, (d) the Partnership to maintain a minimum
percentage of the vessel values over the relevant outstanding loan facility balances of 110%, (e) certain of the Partnership’s subsidiary to maintain a minimum debt service coverage of 1.10:1, (f) the Partnership to maintain the listing and
quotation of the 2015 and 2017 Norwegian bonds on the Oslo Bors and (g) ensure the common units remain listed on the NASDAQ or other recognized stock exchange.
For the refinancing of our $800 million credit facility and 2015 Norwegian Bond, see note 30.
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Total obligation under finance lease
|
124,550
|
122,779
|
||||||
|
Less: current portion of obligation under finance lease
|
(2,521
|
)
|
(1,990
|
)
|
||||
|
Non-current portion of obligation under finance lease
|
122,029
|
120,789
|
||||||
As of December 31, 2020 and 2019, we operated one vessel under a finance lease.
The leasing transaction, which occurred in August 2003, was in relation to the Methane Princess. We novated the Methane Princess
contract prior to completion of construction and leased the vessel from the same financial institution in the United Kingdom (the “Methane Princess Lease”). The lessor of the Methane Princess has a second
priority security interest in the Methane Princess, the Golar Spirit, Golar Grand and Golar's vessel, the Golar Tundra. Our
obligation to the lessor under the Methane Princess Lease is secured by a letter of credit (“LC”) provided by other banks. Details of the security deposit provided by us to the bank providing the LC are given in note 17.
As of December 31, 2020, we are committed to make quarterly minimum finance lease payments (including interest), as follows:
|
Year ending December 31,
(in thousands of $)
|
Methane
Princess Lease
|
|||
|
2021
|
8,949
|
|||
|
2022
|
9,288
|
|||
|
2023
|
9,634
|
|||
|
2024
|
10,008
|
|||
|
2025 and thereafter
|
150,090
|
|||
|
Total minimum lease payments
|
187,969
|
|||
|
Less: Imputed interest
|
(63,419
|
)
|
||
|
Present value of minimum lease payments
|
124,550
|
|||
F-46
The interest element of the lease rentals is accrued at a floating rate based upon Pound Sterling LIBOR.
We determined that the entity that owned the Methane Princess was a variable interest entity in which we have a variable interest and are the primary beneficiary. Upon the
initial transfer of the Methane Princess to the financial institution, we measured the subsequently leased vessel at the same amount as if the transfer had not occurred, which was cost less accumulated
depreciation at the time of transfer.
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Deferred tax liability (note 8)
|
12,757
|
10,643
|
||||||
|
Partnership Guarantee (note 25)
|
5,001
|
6,504
|
||||||
|
Deferred credits from finance lease transactions
|
13,530
|
14,149
|
||||||
|
31,288
|
31,296
|
|||||||
Deferred credits from finance lease transactions
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Deferred credits from finance lease transactions
|
24,691
|
24,691
|
||||||
|
Less: Accumulated amortization
|
(10,536
|
)
|
(9,917
|
)
|
||||
|
14,155
|
14,774
|
|||||||
|
Current
|
625
|
625
|
||||||
|
Non-current
|
13,530
|
14,149
|
||||||
|
14,155
|
14,774
|
|||||||
In connection with the Methane Princess Lease (note 22), we recorded an amount representing the difference between the net cash proceeds received upon sale of the vessel and the present value of the minimum lease
payments. The amortization of the deferred credit for the year is offset against depreciation and amortization expense in the consolidated statement of operations. The deferred credits represent the upfront benefits derived from undertaking
finance in the form of a UK lease. The deferred credits are amortized over the remaining estimated useful economic life of the Methane Princess on a straight-line basis.
Interest rate risk management
In certain situations, we may enter into financial instruments to reduce the risk associated with fluctuations in interest rates. We have entered into swaps that convert floating rate interest obligations to fixed
rates, which from an economic perspective hedge the interest rate exposure. We do not hold or issue instruments for speculative or trading purposes. The counterparties to such contracts are major banking and financial institutions. Credit risk
exists to the extent that the counterparties are unable to perform under the contracts; however, we do not anticipate non-performance by any of our counterparties.
We manage our debt and finance lease portfolio with interest rate swap agreements in U.S. dollars to achieve an overall desired position of fixed and floating interest rates. Historically, we hedge accounted for
certain of our interest rate swap arrangements designated as cash flow hedges. The net gains and losses had been reported in a separate component of accumulated other comprehensive income to the extent the hedges were effective. The amount
recorded in accumulated other comprehensive income would have subsequently been reclassified into earnings in the same period as the hedged items affected earnings. However, since 2018, we have ceased hedge accounting for any of our derivatives.
F-47
We have entered into the following interest rate swap transactions involving the payment of fixed rates in exchange for LIBOR:
|
Instrument
(in thousands of $)
|
Year Ended
|
Notional Amount
|
Maturity
Dates
|
Fixed Interest
Rate
|
||||||||||
|
Interest rate swaps:
|
||||||||||||||
|
Receiving floating, pay fixed
|
December 31, 2020
|
1,233,771
|
2021
|
to
|
2026
|
1.12
|
%
|
to
|
2.90%
|
|||||
|
Receiving floating, pay fixed
|
December 31, 2019
|
1,557,834
|
2020
|
to
|
2026
|
1.12
|
%
|
to
|
2.90%
|
|||||
Interest rate swaps with a notional value of $250.0 million matured during the year ended December 31, 2020.
Foreign currency risk
For the periods reported, the majority of our vessels’ gross earnings were receivable in U.S. dollars and the majority of our transactions, assets and liabilities were denominated in U.S. dollars, our functional
currency. However, we incur expenditures in other currencies. We recognized a net foreign exchange loss on operations and other cost of $0.3 million, gain of $0.1 million and loss of $0.8 million in the years ended December 31, 2020, 2019 and
2018, respectively.
Our finance lease obligation and related restricted cash deposit are denominated in Pound Sterling. There is a risk that currency fluctuations will have a negative effect on the value of our cash flows. A net
foreign exchange loss of $0.1 million, loss of $0.9 million and gain of $1.1 million arose in the years ended December 31, 2020, 2019 and 2018, respectively, as a result of the retranslation of our finance lease obligations and the cash deposits
securing those obligations.
Fair values
We recognize our fair value estimates using a fair value hierarchy based on the inputs used to measure fair value. The fair value hierarchy has three levels based on reliability of inputs used to determine fair
value as follows:
Level 1: Quoted market prices in active markets for identical assets and liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
There have been no transfers between different levels in the fair value hierarchy during the year. We do not have any level 3 financial instruments.
F-48
The carrying value and estimated fair value of our financial instruments at December 31, 2020 and 2019 are as follows:
|
(in thousands of $)
|
Fair Value
Hierarchy
|
2020 Carrying
Value
|
2020 Fair
Value
|
2019 Carrying
Value
|
2019 Fair
Value
|
|||||||||
|
Non-Derivatives:
|
||||||||||||||
|
Cash and cash equivalents
|
Level 1
|
48,783
|
48,783
|
47,661
|
47,661
|
|||||||||
|
Restricted cash and short-term deposits
|
Level 1
|
185,385
|
185,385
|
182,261
|
182,261
|
|||||||||
|
2015 and 2017 Norwegian Bonds(1)
|
Level 1
|
385,055
|
309,032
|
400,000
|
394,715
|
|||||||||
|
Long-term debt—floating(2)
|
Level 2
|
739,829
|
739,829
|
822,944
|
822,944
|
|||||||||
|
Obligation under finance lease(2)
|
Level 2
|
124,550
|
124,550
|
122,779
|
122,779
|
|||||||||
|
Derivatives:
|
||||||||||||||
|
Interest rate swaps asset(3)(4)
|
Level 2
|
—
|
—
|
1,285
|
1,285
|
|||||||||
|
Interest rate swaps liability(3)(4)
|
Level 2
|
70,188
|
70,188
|
36,167
|
36,167
|
|||||||||
| 1. |
This pertains to the 2015 Norwegian Bonds and 2017 Norwegian Bonds with a carrying value of $385.1 million as of December 31, 2020 (2019: $400.0 million), which includes the premium payable at maturity accreted up to balance sheet date
using the effective interest method over the instrument term of $5.0 million. This is included under long-term debt on our consolidated balance sheets. The fair value of the bonds as of December 31, 2020 was $309.0 million (2019: $394.7
million), which represents 80.3% of their face value (2019: 98.7%).
|
| 2. |
Our short-term and long-term debt and finance lease obligation are recorded at amortized cost in the consolidated balance sheets. Debt is presented in the above table, gross of deferred financing cost of $5.2 million as of December 31,
2020 (2019: $6.0 million).
|
| 3. |
Derivative liabilities are presented within other current liabilities and derivative assets are presented within other current and non-current assets on the consolidated balance sheets.
|
| 4. |
The fair value of certain derivative instruments is the estimated amount that we would receive or pay to terminate the agreements at the reporting date, taking into account current interest rates, foreign exchange rates, closing quoted
market prices and our creditworthiness and that of our counterparties.
|
The following methods and assumptions were used to estimate the fair value of each class of financial instrument.
| • |
the carrying values of trade accounts receivable, accounts payable, accrued liabilities and working capital facilities approximate fair values because of the short-term maturity of these instruments.
|
| • |
the carrying value of cash and cash equivalents, which are highly liquid, is a reasonable estimate of fair value.
|
| • |
the estimated fair value for restricted cash and short-term deposits is considered to be equal to the carrying value since they are placed for periods of less than six months. The estimated fair value for long-term restricted cash is
considered to be equal to the carrying value since it bears variable interest rates which are reset on a quarterly basis.
|
| • |
the estimated fair value of our 2015 Norwegian Bonds and 2017 Norwegian Bonds, are based on the quoted market price as of the balance sheet date.
|
| • |
the estimated fair value of our floating long-term debt is considered to be equal to the carrying value since it bears variable interest rates, which are reset on a quarterly basis.
|
| • |
the estimated fair value of long-term obligations under finance lease is considered to be equal to the carrying value since it bears interest at a variable interest rate, which is reset on a quarterly basis.
|
The fair value of our derivative instruments is the estimated amount that we would receive or pay to terminate the agreements at the reporting date, taking into account current interest rates, foreign exchange
rates, and our credit worthiness and of our swap counterparty. The mark-to-market gain or loss on our interest rate and foreign currency swaps that are not designated as hedges for accounting purposes for the period is reported in the statement
of operations caption “(Losses)/gains on derivative instruments, net” (note 7).
F-49
The credit exposure of interest rate swap agreements is represented by the fair value of contracts with a positive fair value at the end of each period, reduced by the effects of master netting agreements. It is
our policy to enter into master netting agreements with the counterparties to derivative financial instrument contracts, which give us the legal right to discharge all or a portion of amounts owed to that counterparty by offsetting them against
amounts that the counterparty owes to us.
We have elected not to offset the fair values of derivative assets and liabilities executed with the same counterparty that are generally subject to enforceable master netting arrangements. However, if we were to
offset and record the asset and liability balance of derivatives on a net basis, the amounts presented in our consolidated balance sheets as of December 31, 2020 and 2019 would be adjusted as detailed in the following table:
|
December 31, 2020
|
December 31, 2019
|
|||||||||||||||||||||||
|
(in thousands of $)
|
Gross amounts
presented in the
consolidated
balance sheets
|
Gross amounts
not offset in the
consolidated
balance sheets
subject to netting agreements
|
Net amount
|
Gross amounts
presented in the
consolidated
balance sheets
|
Gross amounts
not offset in the
consolidated
balance sheets
subject to
netting agreements
|
Net amount
|
||||||||||||||||||
|
Total asset derivatives
|
—
|
—
|
—
|
1,285
|
(1,029
|
)
|
256
|
|||||||||||||||||
|
Total liability derivatives
|
70,188
|
—
|
70,188
|
36,167
|
(1,029
|
)
|
35,138
|
|||||||||||||||||
Under one of our interest rate swaps we were required to provide initial cash collateral of $2.5 million and to subsequently post additional cash collateral that corresponds to any further unrealized loss. As of
December 31, 2020, cash collateral amounting to $29.4 million has been provided (note 17).
The cash flows from economic hedges are classified in the same category as the cash flows from the items subject to the economic hedging relationship.
Concentrations of credit risk
The maximum exposure to credit risk is the carrying value of cash and cash equivalents, restricted cash and short-term deposits, trade accounts receivable, investment in leased vessel, net, other receivables and
amounts due from related parties. In respect of cash and cash equivalents, restricted cash and short-term deposits, credit risk lies with Nordea Bank Finland plc, Citibank, DNB Bank ASA, Santander UK plc, Sumitomo Mitsui Banking Corporation,
Standard Chartered plc, Skandinaviska Enskilda Banken AB (publ), and China Merchants Bank Co. Ltd. However, we believe this risk is remote, as they are established and reputable establishments with no prior history of default.
As of December 31, 2020, we had one customer (2019: one customer) that accounted for approximately 96% (2019: 94%) of all trade receivables. In relation to our investment in leased vessel - net, the concentration
risk relates to one counterparty only. We hold certain guarantees as security, which reduces our credit exposure. We consider the credit risk of our counterparties to these financial assets to be low.
F-50
Transactions with related parties:
|
(in thousands of $)
|
2020
|
2019
|
2018
|
|||||||||
|
Transactions with Golar and affiliates:
|
||||||||||||
|
Management and administrative services fees (a)
|
(8,525
|
)
|
(9,645
|
)
|
(9,809
|
)
|
||||||
|
Ship management fees (b)
|
(5,263
|
)
|
(4,460
|
)
|
(5,200
|
)
|
||||||
|
Interest expense on short-term loans (c)
|
(317
|
)
|
(109
|
)
|
—
|
|||||||
|
Income on deposits paid to Golar (d)
|
—
|
—
|
4,779
|
|||||||||
|
Distributions from/(to) Golar, net (e)
|
8,897
|
(19,291
|
)
|
(42,842
|
)
|
|||||||
Amounts due from/(to) related parties:
As of December 31, 2020 and 2019, balances with related parties consisted of the following:
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Balances due from Golar and its affiliates (c)
|
1,164
|
2,845
|
||||||
|
Methane Princess lease security deposit due (to)/from Golar (f)
|
(360
|
)
|
2,253
|
|||||
|
804
|
5,098
|
|||||||
(a) Management and administrative services fees - We are party to a management and administrative services agreement with Golar Management Limited (“Golar Management”), a
wholly-owned subsidiary of Golar, pursuant to which Golar Management will provide to us certain management and administrative services. The services provided by Golar Management are charged at cost plus a management fee equal to 5% of Golar
Management’s costs and expenses incurred in connection with providing these services. Where external service provider costs are incurred by Golar Management on our behalf, these expenses are recharged to us at cost. We may terminate the agreement
by providing 120 days’ written notice.
(b) Ship management fees - Golar and certain of its subsidiaries charged ship management fees to us for the provision of technical and commercial management of the vessels.
Each of our vessels is subject to management agreements pursuant to which certain commercial and technical management services are provided by certain subsidiaries of Golar, including Golar Management. We may terminate these agreements by
providing 30 days’ written notice.
(c) Interest expense on short-term loan, balances due from/(to)Golar and its affiliates - Receivables and payables with Golar and its affiliates primarily comprise of
unpaid fees and expenses for management and administrative services and vessel management services performed by Golar and its affiliates, dividends due in respect of the Hilli Common Units, and other related party arrangements, including short
term loan balances. In addition, certain receivables and payables arise when we pay an invoice on behalf of a related party and vice versa. Receivables and payables are generally settled quarterly in arrears. Balances due from and to Golar and
its subsidiaries are unsecured, interest-free and intended to be settled in the ordinary course of business.
During the year ended December 31, 2020, we borrowed a total of $45.0 million with interest at a rate of LIBOR plus a margin of 5.0% from Golar. We repaid the loans in full, including interest of $0.3 million
during the year ended December 31, 2020.
In November 2019, we borrowed $15.0 million from Golar, with the loan bearing interest at a rate of LIBOR plus 5.0%. We repaid the loan in full, including interest of $0.1 million, on December 30, 2019.
(d) Income on deposits paid to Golar - On August 15, 2017, Golar Partners Operating LLC, our wholly owned subsidiary, entered into a purchase and sale agreement (the “Hilli
Purchase Agreement”) for the Hilli Acquisition. Concurrently with the execution of the Hilli Purchase Agreement, we paid a $70 million deposit to Golar, upon which we received interest at a rate of 5% per annum. We have accounted for $4.8 million
as interest income for the year ended December 31, 2018 on the Deferred Purchase Price and $70 million deposit. We applied the deposit and interest accrued to the net purchase price on July 12, 2018, upon completion of the Hilli Acquisition.
F-51
(e) Distributions from/(to) Golar, net - We have declared and paid quarterly distributions totaling $10.5 million, $36.8 million, and $48.4 million to Golar for each of the
years ended December 31, 2020, 2019 and 2018, respectively, in respect of the common units and General Partner units owned by it.
During the years ended December 31, 2020, 2019 and 2018, Hilli LLC declared distributions totaling $19.4 million, $17.5 million and $5.6 million, respectively, in respect of the Hilli Common Units owned by us.
These amounts include reimbursements for Operating Expenses, as set forth below.
(f) Methane Princess Lease security deposit due (to)/from Golar - This represents net advances to or from Golar since the IPO, which correspond with the net release of
funds from the security deposits held relating to the Methane Princess Lease. This is in connection with the Methane Princess tax lease indemnity provided by Golar under the Omnibus Agreement (see below). Accordingly, these amounts held with
Golar will be settled as part of the eventual termination of the Methane Princess Lease.
Other transactions
Agency agreement with PT Pesona Sentra Utama (or PT Pesona) - PT Pesona, an Indonesian company owns 51% of the issued share capital
in our subsidiary, PTGI, the owner and operator of NR Satu, and provides agency and local representation services for us with respect to NR Satu. During the years
ended December 31, 2020, 2019, and 2018, PT Pesona received an agency fee of $0.5 million, $0.5 million and $0.9 million, respectively. PT Pesona and certain of its subsidiaries also charged vessel management fees to us for the provision of
technical and commercial management of the vessels amounting to $0.3 million, $0.2 million and $0.2 million for each of the years ended December 31, 2020, 2019, and 2018.
Omnibus Agreement
In connection with our IPO in April 2011, we entered into an Omnibus Agreement with Golar, Golar GP LLC (our “General Partner”) and others governing, among others:
| • |
to what extent we and Golar may compete with each other;
|
| • |
certain rights of first offer on certain FSRUs and LNG carriers operating under charters for five or more years; and
|
| • |
the provision of certain indemnities to us by Golar.
|
Indemnifications and guarantees
Tax lease indemnifications
Under the Omnibus Agreement, Golar has agreed to indemnify us in the event of any liabilities in excess of scheduled or final settlement amounts arising from the Methane Princess
leasing arrangement and the termination thereof.
In addition, Golar has agreed to indemnify us against any liabilities incurred as a consequence of a successful challenge by the UK Tax Authority with regard to the initial tax basis of the transactions in respect
of the Methane Princess and other vessels previously financed by UK tax leases or in relation to the restructuring terminations in 2010. See note 26.
Golar Tundra financing related guarantees
In November 2015, Tundra Corp sold the Golar Tundra to a subsidiary of CMBL (“Tundra SPV”) for $254.6 million and subsequently leased back the vessel under a bareboat
charter (the “Tundra Lease”). In connection with the Tundra Lease, Golar is a party to a guarantee in favor of Tundra SPV, pursuant to which, in the event that Tundra Corp (a subsidiary of Golar) is in default of its obligations under the Tundra
Lease, Golar, as the primary guarantor, will settle any liabilities due within five business days. In addition, we are also party to a further guarantee (the "Tundra Guarantee"), pursuant to which, in the event Golar is unable to satisfy its
obligations as the primary guarantor, Tundra SPV may recover from us, as the deficiency guarantor. Under a separate side agreement, Golar has agreed to indemnify us for any costs incurred in our capacity as the deficiency guarantor.
F-52
Hilli guarantees (in connection with the Hilli Acquisition)
(i) Debt
Hilli Corp is a party to a Memorandum of Agreement, dated September 9, 2015, with Fortune Lianjiang Shipping S.A., a subsidiary of China State Shipbuilding Corporation (“Fortune”), pursuant to which Hilli Corp has
sold to and leased back from Fortune the Hilli under a 10-year bareboat charter agreement (the “Hilli Facility”). The Hilli Facility provided for post-construction financing for the Hilli in the amount of $960 million. Under the Hilli Facility, Hilli Corp will pay to Fortune forty consecutive equal quarterly repayments of 1.375% of the construction cost, plus interest based on LIBOR plus
a margin of 3.95%. In connection with the closing of the Hilli Acquisition, we agreed to provide a several guarantee (the “Partnership Guarantee”) of 50% of the outstanding principal and interest amounts payable by Hilli Corp under the Hilli
Facility pursuant to a Deed of Amendment, Restatement and Accession relating to a guarantee between Golar, Fortune and us dated July 12, 2018. We entered into a $480.0 million interest rate swap in relation to our proportionate share of the
obligation under the Hilli Facility.
F-53
(ii) Letter of credit
On November 28, 2018, we entered into an agreement to guarantee (the "LOC Guarantee") the letter of credit issued by a financial institution in the event of Hilli Corp’s underperformance or non-performance under
the LTA. Under the LOC Guarantee, we are severally liable for any outstanding amounts that are payable, based on the percentage ownership that Golar holds in us, multiplied by our percentage ownership in Hilli Common Units.
Pursuant to the Partnership Guarantee and the LOC Guarantee, we are required to comply with the following covenants and ratios:
| • |
free liquid assets of at least $30 million throughout the Hilli Facility period;
|
| • |
a maximum net debt to EBITDA ratio for the previous 12 months of 6.5:1; and
|
| • |
a consolidated tangible net worth of $123.95 million.
|
As of December 31, 2020, the amount we have guaranteed under the Partnership Guarantee and the LOC Guarantee is $389.3 million (2019: $422.3 million), and the fair value of debt guarantee after amortization,
presented under “Other current liabilities” and “Other non-current liabilities” in our consolidated balance sheets, amounted to $1.5 million and $5.0 million, respectively. As of December 31, 2020, we were in compliance with the covenants and
ratios for both Hilli guarantees.
Operating expense reimbursement
Pursuant to the Hilli Purchase Agreement, we agreed to reimburse Golar, Keppel and B&V for (a) 50% of the amount, if any, by which Operating Expenses (as defined below) are less than $32.4 million per year and
(b) 50% of the amount, if any, by which withholding taxes on Operating Expense payments are less than $4.2 million per year, for a period of eight years commencing on the Closing Date, up to a maximum amount of $20 million in the aggregate.
Golar, Keppel and B&V have agreed, for a period of eight years commencing on the closing date of the Hilli Acquisition, to reimburse us for (a) 50% of the amount, if any, by which Operating Expenses are greater than $39.5 million per year and
(b) 50% of the amount, if any, by which withholding taxes on Operating Expense payments are greater than $5.2 million per year, up to a maximum amount of $20 million in the aggregate. “Operating Expenses” means, all expenditures made by Hilli LLC
and its subsidiaries, including vessel operating expenses, taxes, maintenance expenses and employee compensation and benefits, and capital expenditures, but exclude withholding taxes thereon. Included within the Hilli LLC declared distributions
for the years ended December 31, 2020 and 2019 is $0.4 million and $2.2 million, respectively, of reimbursements from Golar, Keppel and B&V for Operating Expenses.
Exchange of Incentive Distribution Rights ("IDRs")
Pursuant to the terms of the Exchange Agreement by and between the Partnership, Golar and our General Partner, Golar and our General Partner exchanged all of their IDRs in the Partnership (see note 28).
Assets pledged
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Carrying value of vessels and equipment secured against long-term loans and finance leases
|
1,290,769
|
1,350,301
|
||||||
|
Carrying value of investment in leased vessel, net secured against long-term loans and finance leases
|
111,786
|
114,137
|
||||||
|
1,402,555
|
1,464,438
|
|||||||
F-54
Other contractual commitments and contingencies
Insurance
We insure the legal liability risks for our shipping activities with Gard and Skuld, which are mutual protection and indemnity associations. As a member of a mutual association, we are subject to calls for
additional premiums based on the clubs' claims record, in addition to the claims records of all other members of the association. A contingent liability exists to the extent that the claims records of the members of the association in the
aggregate show significant deterioration, which results in additional premium on the members.
Tax lease benefits
As of December 31, 2020, we have one UK tax lease (relating to the Methane Princess). A termination of this lease would realize the accrued currency gain or loss recorded
against the lease liability, net of the restricted cash. As of December 31, 2020, there was a net accrued gain of approximately $1.1 million (2019: $1.2 million).
Under the terms of the leasing arrangement, the benefits are derived primarily from the tax depreciation assumed to be available to the lessor as a result of their investment in the vessel. As is typical in these
leasing arrangements, as the lessee we are obligated to maintain the lessor’s after-tax margin. Accordingly, in the event of any adverse tax changes or a successful challenge by the Her Majesty's Revenue and Customs (the “HMRC”), the UK tax
authority, with regard to the initial tax basis of the transactions, or in the event of an early termination of the Methane Princess lease or in relation to the other vessels previously financed by UK tax
leases, we may be required to make additional payments principally to the applicable UK vessel lessor. We would be required to return all, or a portion of, or in certain circumstances significantly more than the upfront cash benefits that Golar
received in respect of the applicable lease financing transaction. Furthermore, the lessor of the Methane Princess has a second priority security interest in the Methane
Princess, the Golar Spirit, Golar Grand and the Golar Tundra. Our obligation to the lessor under the Methane Princess Lease is secured by a letter of
credit (“LC”) provided by other banks. Details of the security deposit provided by us to the bank providing the LC are given in Note 17 “Restricted Cash” to our consolidated financial statements.
HMRC has been challenging the use of similar tax lease structures and has been engaged in litigation of a test case for some years. In August 2015, following an appeal to the Court of Appeal by the HMRC which set
aside previous judgments in favor of the tax payer, the First Tier Tribunal (UK court) ruled in favor of HMRC. The judgments of the First Tier Tribunal do not create binding precedent for other UK court decisions and therefore the ruling in favor
of HMRC is not binding in the context of our structures. Further, we consider there are differences in the fact pattern and structure between this case and our leasing arrangements and therefore is not necessarily indicative of any outcome should
HMRC challenge us, and we believe that our fact pattern is sufficiently different to succeed if we are challenged by HMRC. HMRC have written to our lessor to indicate that they believe the Methane Princess
lease may be similar to the case noted above. We have reviewed the details of the case and the basis of the judgment with our legal and tax advisers to ascertain what impact, if any, the judgment may have on us and the possible range of exposure
has been estimated at approximately $nil to $34.2 million (£25.0 million). In December 2019, in conjunction with the lessor, Golar obtained supplementary legal advice confirming Golar's position. Golar's discussions with HMRC on this matter have
concluded without agreement and, in January 2020, Golar received a closure notice to the inquiry, which states the basis of HMRC’s position. Consequently, a notice of appeal against the closure notice was submitted to HMRC. In December 2020,
notice of appeal was submitted to the First Tier Tribunal. We remain confident of our position, however given the complexity of these discussions it is impossible to quantify the reasonably possible loss, and we continue to estimate the possible
range of exposures as set out above. However, under the indemnity provisions of the Omnibus Agreement, Golar has agreed to indemnify us against any liabilities incurred as a consequence of a successful challenge by the UK Revenue Authorities with
regard to the initial tax basis of the Methane Princess lease and in relation to other vessels previously financed by UK tax leases.
Legal proceedings and claims
We may, from time to time, be involved in legal proceedings and claims that arise in the ordinary course of business. A provision will be recognized in the financial statements only where we believe that a
liability will be probable and for which the amounts are reasonably estimable, based upon the facts known prior to the issuance of the financial statements.
F-55
In November and December 2015, the Indonesian tax authorities issued letters to our subsidiary, PTGI (see note 5), to, among other things, revoke a previously granted VAT importation waiver in the approximate
amount of $24.0 million for the NR Satu. In April 2016, PTGI initiated an action in the Indonesian tax court to dispute the waiver cancellation. The final hearing took place in June 2016 and we received
the verdict of the Tax Court in November 2017, which rejected PTGI’s claim. In February 2018, PTGI filed a Judicial Review with the Supreme Court of Indonesia, but in December 2018, the Supreme Court of Indonesia ruled against PTGI with regards
the validity of waiver cancellation. However, we do not believe it probable that a liability exists as a result of this ruling, as no Tax Underpayment Assessment Notice has been received within the statute of limitations period. Should we receive
such notice from the tax authorities, we intend to challenge the legality of the assessment. In any event, we believe PTGI will be indemnified by PTNR for any VAT liability as well as related interest and penalties under our time charter party
agreement entered into with them.
In December 2019, the Indonesian tax authorities issued tax assessments for land and buildings tax to our subsidiary, PTGI for the years 2015 to 2019 inclusive in relation to the NR
Satu, for the amount of $3.4 million ( IDR48,378.3 million ). We paid the assessed tax in January 2020 to avoid further penalties. This is presented in "Other non-current assets" of our consolidated balance sheets. We intend to appeal
against the assessments for the land and buildings tax as the tax authorities have not accepted our initial objection letter. We believe we have reasonable grounds for success on the basis of no precedent set from past case law and the new
legislation effective prospectively from January 1, 2020, that now specifically lists FSRUs as being an object liable to land and buildings tax, when it previously did not.
In February 2021, we received a tax notice from the Jordan tax authorities following the conclusion of their tax audit into our Jordan branch for the years 2015 and 2016 assessing our Jordan branch for additional
tax of $1.6 million (JOD 1.10 million) and $3.1 million (JOD 2.20 million), respectively. We have submitted an appeal to the tax notice. A provision has not been recognized for this as we do not believe that the tax inspector has followed the
correct tax audit process and the claim by the tax authorities to not allow tax depreciation is contrary to Jordan's tax legislation.
The Golar LNG Partners LP Long Term Incentive Plan (the “GMLP LTIP”) was adopted by our board of directors, effective as of May 30, 2016. The maximum aggregate number of common units that may be delivered pursuant
to any and all awards under the GMLP LTIP shall not exceed 500,000 common units, subject to adjustment due to recapitalization or reorganization as provided under the GMLP LTIP. The GMLP LTIP allows for grants of (i) unit options, (ii) unit
appreciation rights, (iii) restricted unit awards, which may include tandem unit distribution rights, (iv) phantom units, (v) unit awards, (vi) other unit-based awards, (vii) cash awards, (viii) distribution equivalent rights (whether granted
alone or in tandem with another award, other than a restricted Unit or Unit award), (ix) substitute awards and (x) performance-based awards. Either authorized unissued shares or treasury shares (if there are any) in the Partnership may be used to
satisfy exercised options.
Unit options
In November 2016 and January 2017, a total of 99,000 options to purchase common units were awarded to our directors and management under the GMLP LTIP. The options had an exercise price of $20.55 per unit,
representing the closing price of the common units on November 17, 2016, the grant date, and a contractual term of five years. The exercise price will be adjusted for each time we pay distributions. One third of the options vested in November
2017, the second third vested in November 2018 and the final third vested in November 2019.
There were no options awarded in the years ended December 31, 2020 or 2019.
F-56
The fair value of each option award is estimated on the grant date or modification date using the Black-Scholes option pricing model based on the following assumptions as of the grant date.
|
2017
|
||||
|
Risk free interest rate
|
1.5
|
%
|
||
|
Expected volatility of common units(1)
|
44.8
|
%
|
||
|
Expected dividend yield(2)
|
0.0
|
%
|
||
|
Expected life of options (in years)
|
5.0 years
|
|||
(1) The assumption for expected future volatility is based primarily on an analysis of historical volatility of our common units.
(2) The dividend yield has been estimated at 0.0% as the exercise price of the options are reduced by the value of distributions,
declared and paid on a per unit basis.
F-57
A summary of option activity for the years ended December 31, 2020, 2019 and 2018 is presented below:
|
(in thousands of $, except per unit data)
|
Units
(in '000s)
|
Weighted average
exercise price
|
Weighted average remaining contractual term
(years)
|
|||||||||
|
Options outstanding at December 31, 2019 and 2018
|
99
|
$
|
14.49
|
1.9
|
||||||||
|
Forfeited during the year
|
(79
|
)
|
14.49
|
|||||||||
|
Options outstanding at December 31, 2020
|
20
|
$
|
14.49
|
0.9
|
||||||||
|
Options exercisable at:
|
||||||||||||
|
December 31, 2020
|
20
|
14.49
|
0.9
|
|||||||||
|
December 31, 2019
|
99
|
$
|
14.49
|
1.9
|
||||||||
|
Year ended December 31
|
||||||||||||
|
(in thousands of $)
|
2020
|
2019
|
2018
|
|||||||||
|
Fair value of unit options which fully vested in the year
|
—
|
233
|
233
|
|||||||||
|
Compensation cost recognized in the consolidated statement of operations
|
—
|
207
|
234
|
|||||||||
As of December 31, 2020, the intrinsic value of unit options that were both outstanding and exercisable was $nil, as the exercise price was higher than the market value of the common units underlying the options at
year end (2019: $nil).
As of December 31, 2020, there is no unrecognized compensation cost relating to unit options outstanding.
Phantom units
Pursuant to the LTIP, we granted to the members of the Board 70,752 phantom units in the year ended December 31, 2020. The phantom units vest equally over a period of 3.0 years. Under the Phantom Unit Award
Agreement, all phantom units shall immediately vest upon the occurrence of a change of control in the Partnership.
The fair value of the phantom unit award is estimated using the market price of our common units at grant date with expense recognized over the three-year vesting period.
A summary of phantom units activity for the year ended December 31, 2020 is presented below:
|
Units
(in '000s)
|
Weighted average grant date fair value per unit
|
Weighted average remaining contractual term
(years)
|
||||||||||
|
Granted during the year
|
71
|
$
|
3.36
|
|||||||||
|
Forfeited during the year
|
(12
|
)
|
3.36
|
|||||||||
|
Options outstanding at December 31, 2020
|
59
|
$
|
3.36
|
2.2
|
||||||||
Compensation cost of $0.1 million related to the phantom units has been recognized in the consolidated statement of operations for the year ended December 31, 2020.
F-58
At December 31, 2020, a total of 69.2% (2019: 69.4%) of the Partnership's common units outstanding were held by the public. The remaining common units were held by Golar and the 2.0% general partner interest was
held by our General Partner. All of the Partnership's outstanding Series A Cumulative Redeemable Preferred Units (the “Series A Preferred Units”) are held by the public.
Rights and Obligations of Partnership Units
| • |
Common units. Common units represent limited partner interests in us. Each outstanding common unit is entitled to one vote on matters subject to a vote of common unitholders. However, if at any
time, any person or group owns beneficially more than 4.9% or more of any class of units outstanding, any such units owned by that person or group in excess of 4.9% may not be voted (except for purposes of nominating a person for election
to our Board). The voting rights of any such common unitholder in excess of 4.9% will effectively be redistributed pro rata among the other common unitholders holding less than 4.9% of the voting power of such class of units. The General
Partner, its affiliates and persons who acquired common units with the prior approval of the Board will not be subject to this 4.9% limit except with respect to voting their common units in the election of the four elected directors.
|
| • |
General partner units. There is a limitation on the transferability of the general partner interest such that the General Partner may not transfer all or any part of its general partner
interest to another person (except to an affiliate of the General Partner or another entity as part of the merger or consolidation of the General Partner with or into another entity or the transfer by the General Partner of all or
substantially all of its assets to another entity) prior to March 31, 2021 without the approval of the holders of at least a majority of the outstanding common units, excluding common units held by the General Partner and its affiliates.
The general partner units are not entitled to vote in the election of the four elected directors. However, subject to the rights of the holders of Series A Preferred Units in certain instances, the General Partner in its sole discretion
appoints three of the seven members of the Board.
|
| • |
IDRs. The IDRs are non-voting and represent rights to receive an increasing percentage of quarterly distributions of available cash from operating surplus after the minimum quarterly
distribution and the target distribution levels have been achieved (see note 29). Pursuant to the partnership agreement, the IDRs are transferable without unitholder approval.
|
| • |
Series A Preferred Units. The Series A Preferred Units represent perpetual equity interests in us and, unlike our indebtedness, will not give rise to a claim for payment of a principal amount at
a particular date. Series A Preferred Units have the voting rights described below under “Series A Preferred Units”. The Series A Preferred Units have preferential distribution rights to our common units and rank junior to all of our
indebtedness as set forth below.
|
For additional information regarding the common units, general partner units, IDRs and Series A Preferred Units, please see our Registration Statement on Form 8-A/A filed on November 13, 2017.
F-59
Equity Issuances
The following table shows the movement in the number of preferred units, common units, and general partner units during the years ended December 31, 2020, 2019 and 2018:
|
(in units)
|
Preferred Units
|
Common Units
|
GP Units
|
|||||||||
|
December 31, 2017
|
5,520,000
|
69,768,261
|
1,423,843
|
|||||||||
|
January 2018 Common Unit ATM Program
|
—
|
617,969
|
12,548
|
|||||||||
|
During 2018 unit repurchase program
|
—
|
(930,866
|
)
|
—
|
||||||||
|
December 31, 2018
|
5,520,000
|
69,455,364
|
1,436,391
|
|||||||||
|
August 2019 unit repurchase program
|
—
|
(153,728
|
)
|
—
|
||||||||
|
December 31, 2019 and 2020
|
5,520,000
|
69,301,636
|
1,436,391
|
|||||||||
In March 2018, our Board approved a common unit repurchase program of up to $25.0 million of our outstanding common units in the open market over a two-year period and subsequently increased the common unit
repurchase program to $50 million in December 2018. During 2019, we repurchased a total of 153,728 common units (2018: 930,866 common units) under the common unit repurchase program for an aggregate cost of $1.6 million (2018: $14.0 million). In
accordance with the provisions of the partnership agreement, all common units repurchased are deemed canceled and not outstanding, with immediate effect.
In September 2017, we entered into an equity distribution agreement with a sales agent pursuant to which we may, from time to time issue common units with an aggregate offering price of up to $150 million (the
“Common Unit ATM Program”). During 2018, we sold 617,969 common units under the Common Unit ATM program, at an average gross sales price of $23.15 per unit, for which we received $14.2 million of net proceeds. In connection with such sales, our
General Partner purchased 12,548 general partner units at an average price of $23.15 per unit, for which we received an additional $0.3 million of proceeds.
Exchange of Incentive Distribution Rights
On October 19, 2016 (the “IDR Exchange Closing Date”), pursuant to the terms of an Exchange Agreement (the “Exchange Agreement”), dated as of October 13, 2016, by and between the Partnership, Golar and our General
Partner. Golar and our General Partner exchanged all of their incentive distribution rights in the Partnership (“Old IDRs”) for (i) the issuance by us on the IDR Exchange Closing Date of a new class of incentive distribution rights in the
Partnership (“New IDRs”), (ii) an aggregate of 2,994,364 additional common units and an aggregate of 61,109 additional general partner units and (iii) the issuance in the future of an aggregate of up to 748,592 additional common units and up to
15,278 additional general partner units (collectively, the “Earn-Out Units”) that may be issued subject to certain conditions described below. The new IDRs result in the minimum distribution level increasing from $0.3850 per common unit to
$0.5775 per common unit. The fair value of the Old IDRs was not materially different to the fair value of all of the newly issued instruments.
On the IDR Exchange Closing Date (i) the Old IDRs were exchanged by Golar and the General Partner and canceled by us, (ii) 100% of the New IDRs were issued to the General Partner and Golar, (iii) 2,425,435 and
568,929 additional common units were issued to the General Partner and Golar, respectively, and (iv) 61,109 general partner units were issued to the General Partner.
As of November 14, 2017 we had paid a distribution of available cash from operating surplus pursuant to the terms of our Second Amended and Restated Partnership Agreement, on each of the outstanding common units
equal to or greater than $0.5775 per common unit in respect of each of the quarterly periods ended December 31, 2016, March 31, 2017, June 30, 2017 and September 30, 2017. Accordingly, we issued 50% of the Earn-Out Units - 374,295 common units
and 7,639 general partner units to Golar and the General Partner, respectively.
On October 24, 2018, we declared a reduced quarterly distribution of $0.4042 per common unit in respect of the quarterly period ended September 30, 2018. Consequently, we did not meet the requirement to pay a
distribution of available cash from operating surplus on each of the outstanding common units equal to or greater than $0.5775 per common unit in respect of each of the quarterly periods ended December 31, 2017, March 31, 2018, June 30, 2018 and
September 30, 2018. The remaining 50% of the Earn-Out Units were not issued.
F-60
In relation to our IDR reset transaction, we accounted for this as a modification of the Old IDRs and determined that the earn-out units met the definition of a derivative. Accordingly, the overall effect of the
transaction was (i) reclassification of the initial fair value of the derivative from equity to current liabilities of $15.0 million; (ii) reallocation between unitholders within equity due to the recognition of the incremental fair value of the
modification and fair values of newly issued instruments and resulting deemed distribution.
Series A Preferred Units
Our 8.75% Series A Cumulative Redeemable Preferred Units are listed on the Nasdaq Global Market under the symbol “GMLPP”.
On October 31, 2017 we sold in a registered public offering 5,520,000 of our Series A Preferred Units, liquidation preference $25.00 per unit. We raised proceeds, net of the underwriters discounts and offering
fees, of $133.0 million.
The Series A Preferred Units rank:
| • |
senior to our common units and to each other class or series of limited partner interests or other equity securities established after the original issue date of the Series A Preferred Units that is not expressly made senior to or on
parity with the Series A Preferred Units as to the payment of distributions and amounts payable upon liquidation, dissolution or winding up, whether voluntary or involuntary (“Junior Securities”);
|
| • |
pari passu with any class or series of limited partner interests or other equity securities established after the original issue date of the Series A Preferred Units with terms expressly providing that such class or series ranks on a
parity with the Series A Preferred Units as to the payment of distributions and amounts payable upon liquidation, dissolution or winding up, whether voluntary or involuntary (“Parity Securities”);
|
| • |
junior to all of our indebtedness and other liabilities with respect to assets available to satisfy claims against us; and
|
| • |
junior to each other class or series of limited partner interests or other equity securities expressly made senior to the Series A Preferred Units as to the payment of distributions and amounts payable upon liquidation, dissolution or
winding up, whether voluntary or involuntary (“Senior Securities”). The Series A Preferred Units have no conversion or exchange rights and are not subject to any pre-emptive rights.
|
Distributions on the Series A Preferred Units are payable out of amounts legally available therefor at a rate equal to 8.75% per annum of the stated liquidation preference. Distributions are payable quarterly in
arrears on the 15th day of February, May, August and November of each year, when, as and if declared by our Board. The first distribution on the Series A Preferred
Units was paid on February 15, 2018 in an amount equal to $0.63802 per unit, representing accumulated distributions from October 31, 2017, the original issuance date of the Series A Preferred Units, through February 14, 2018.
The Series A Preferred Units generally have no voting rights. However, if and whenever distributions payable on the Series A Preferred Units are in arrears for six or more quarterly periods, whether or not
consecutive, holders of Series A Preferred Units, voting as a class together with the holders of any Parity Securities upon which like voting rights have been conferred and are exercisable, will have the right to replace one of the members of our
Board appointed by our General Partner with a person nominated by such holders (unless the holders of Series A Preferred Units and Parity Securities upon which like voting rights have been conferred voting as a class, have previously elected a
member of our Board, and such director continues then to serve on the Board). Distributions payable on the Series A Preferred Units will be considered to be in arrears for any quarterly period for which full cumulative distributions through the
most recent distribution payment date have not been paid on all outstanding Series A Preferred Units. The right of such holders of Series A Preferred Units to elect a member of our Board will continue until such time as all accumulated and unpaid
distributions on the Series A Preferred Units have been paid in full. In addition, unless we have received the affirmative vote or consent of the holders of at least two-thirds of the outstanding Series A Preferred Units, voting as a single
class, our Board may not adopt any amendment to our partnership agreement that would have a material adverse effect on the existing terms of the Series A Preferred Units. In addition, unless we have received the affirmative vote or consent of the
holders of at least two-thirds of the outstanding Series A Preferred Units, voting as a class together with holders of any other Parity Securities upon which like voting rights have been conferred and are exercisable, we may not (i) issue any
Parity Securities if the cumulative distributions on Series A Preferred Units are in arrears or (ii) create or issue any Senior Securities.
F-61
In the event of a liquidation, dissolution or winding up of our affairs, whether voluntary or involuntary, holders of Series A Preferred Units will have the right to receive a liquidation preference of $25.00 per
unit plus an amount equal to all accumulated and unpaid distributions thereon to the date of payment, whether declared or not. These payments will be paid before any payments are paid to our common unitholders.
At any time on or after October 31, 2022, we may redeem, in whole or in part, the Series A Preferred Units at a redemption price of $25.00 per unit plus an amount equal to all accumulated and unpaid distributions
thereon on the date of redemption, whether declared or not. Any such redemption will be effected from funds legally available for such purpose. We must provide not less than 30 days’ and not more than 60 days’ written notice of any such
redemption.
F-62
29. EARNINGS PER UNIT AND CASH DISTRIBUTIONS
Earnings per unit have been calculated in accordance with the distribution guidelines set forth in the partnership agreement and are determined by adjusting net income for the period by distributions made or to be
made in relation to the period irrespective of the declaration and payment dates. The calculations of basic and diluted earnings per common unit are presented below:
|
(in thousands of $ except unit and per unit data)
|
2020
|
2019
|
2018
|
|||||||||
|
Common unitholders’ interest in net income
|
6,945
|
5,648
|
59,925
|
|||||||||
|
Less: distributions paid (1)
|
(5,600
|
)
|
(112,201
|
)
|
(137,335
|
)
|
||||||
|
Under/(over) distributed earnings
|
1,345
|
(106,553
|
)
|
(77,410
|
)
|
|||||||
|
Basic and diluted:
|
||||||||||||
|
Weighted average common units outstanding (in thousands)
|
69,302
|
69,397
|
69,944
|
|||||||||
|
Earnings per unit - Common unitholders:
|
||||||||||||
|
Basic and diluted
|
$
|
0.10
|
$
|
0.08
|
$
|
0.86
|
||||||
|
Cash distributions declared and paid in the period per common unit (2)
|
0.46
|
1.62
|
1.96
|
|||||||||
|
Subsequent event: Cash distributions declared and paid per common unit relating to the period (3)
|
0.02
|
0.40
|
0.40
|
|||||||||
(1) Refers to distributions made or to be made to the common unitholders in relation to the period irrespective of the declaration
and payment dates, and is based on the weighted average number of units outstanding in the period.
(2) Refers to cash distributions declared and paid during the period.
(3) Refers to cash distributions relating to the period, declared and paid subsequent to the period end.
As of December 31, 2020, of our total number of common units outstanding, 69.2% (2019: 69.4%) were held by the public and the remaining common units were held by Golar.
Earnings per common unit is calculated using the two class method. Basic earnings per common unit is determined by adjusting net income for the period by distributions made or to be made in relation to the period.
Any undistributed earnings for the period are allocated to the various unitholders based on the distribution waterfall for cash available for distribution as specified in the partnership agreement. Any distributions in excess of earnings are
allocated to partnership units based upon the allocation and distribution of amounts from partners’ capital accounts. The resulting earnings figure is divided by the weighted average number of units outstanding during the period. Diluted earnings
per common unit reflect the potential dilution that occur if securities or other contracts to issue common units were exercised.
The various partnership interests in net income were calculated as if all net income was distributed according to the terms of the partnership agreement, regardless of whether those earnings would or could be
distributed. The partnership agreement does not provide for the distribution of net income; rather, it provides for the distribution of available cash, which is a contractually defined term that generally means all cash on hand at the end of the
quarter after establishment of cash reserves determined by our Board to (i) provide for the proper conduct of our business, among other things, including reserves for maintenance and replacement capital expenditure and anticipated credit needs;
(ii) comply with applicable law and our debt and other agreements; (iii) provide funds for payments on the Series A Preferred Units and (iv) provide funds for distributions to unitholders for any one or more of the next four quarters. In
addition, the holders of the incentive distribution rights are currently entitled to incentive distributions if the amount we distribute to unitholders with respect to any quarter exceeds specified target levels. Unlike available cash, net income
is affected by non-cash items, such as depreciation and amortization, unrealized gains or losses on non-designated derivative instruments and foreign currency translation gains/(losses).
F-63
Under our partnership agreement, we make distributions of available cash from operating surplus for any quarter as set forth in the following table. The following table illustrates the percentage allocations of the
additional available cash from operating surplus among the common unitholders, our General Partner and the holders of the IDRs up to the various target distribution levels. The amounts set forth under “Marginal Percentage Interest in
Distributions” are the percentage interests of the common unitholders, our General Partner and the holders of the IDRs in any available cash from operating surplus we distribute up to and including the corresponding amount in the column “Total
Quarterly Distribution Target Amount,” until available cash from operating surplus we distribute reaches the next target distribution level, if any. The percentage interests shown for the common unitholders, our General Partner and the holders of
the IDRs for the minimum quarterly distribution are also applicable to quarterly distribution amounts that are less than the minimum quarterly distribution. The percentage interests shown for our General Partner include its 2.0% general partner
interest only and assume that our General Partner has contributed any capital necessary to maintain its 2.0% general partner interest.
|
Marginal Percentage Interest in Distributions
|
||||||||||||||||
|
Quarterly
Distribution Target
Amount (per unit)
|
Common
Unitholders
|
General
Partner
|
Holders of
IDRs
|
|||||||||||||
|
Minimum Quarterly Distribution
|
$
|
0.5775
|
98
|
%
|
2
|
%
|
—
|
|||||||||
|
First Target Distribution
|
up to $0.6641
|
98
|
%
|
2
|
%
|
—
|
||||||||||
|
Second Target Distribution
|
above $0.6641
up to $0.7219
|
85
|
%
|
2
|
%
|
13
|
%
|
|||||||||
|
Third Target Distribution
|
above $0.7219
up to $0.8663
|
75
|
%
|
2
|
%
|
23
|
%
|
|||||||||
|
Thereafter
|
above $0.8663
|
50
|
%
|
2
|
%
|
48
|
%
|
|||||||||
The percentage interests set forth above assume that our General Partner maintains its 2.0% general partner interest and that we do not issue additional classes of equity securities.
The Series A Preferred Units rank senior to our common units as to the payment of distributions and amounts payable upon liquidation, dissolution or winding up, whether voluntary or involuntary. See note 28.
The NFE Merger
On January 13, 2021, we entered into the Merger Agreement with NFE, our general partner, Lobos Acquisition LLC, a Marshall Islands limited liability company and an indirect subsidiary of NFE (“Merger Sub”), and NFE
International Holdings Limited, a private limited company incorporated under the laws of England and Wales and an indirect subsidiary of NFE (“GP Buyer”), pursuant to which Merger Sub will merge with and into the Partnership, with the Partnership
surviving the Merger as an indirect subsidiary of NFE.
At the effective time of the Merger (the "Effective Time"), pursuant to the Merger Agreement:
| • |
each common unit that is issued and outstanding as of immediately prior to the Effective Time will (i) be converted into the right to receive $3.55 in cash (the "Common Unit Consideration"), (ii) no longer be outstanding and (iii)
automatically be cancelled and cease to exist;
|
| • |
each of the incentive distribution rights of the Partnership will be cancelled and cease to exist, and no consideration shall be delivered in respect thereof;
|
F-64
| • |
each Series A Preferred Unit of the Partnership issued and outstanding immediately prior to the Effective Time will be unchanged and will remain outstanding, and no consideration shall be delivered in respect thereof;
|
| • |
each outstanding unit representing a general partner interest in the Partnership that is issued and outstanding immediately prior to the Effective Time will remain issued and outstanding immediately following the Effective Time;
|
| • |
each outstanding option to purchase common units granted pursuant to the Partnership’s long-term incentive plan (each, a “Partnership Option”), whether or not vested, will automatically be vested, cancelled and converted into the right
to receive an amount in cash equal to the product of (i) the excess, if any, of the Common Unit Consideration over the applicable exercise price per common unit of such Partnership Option and (ii) the number of common units subject to
such Partnership Option. Any Partnership Option which has a per common unit exercise price that is greater than or equal to the Common Unit Consideration will be cancelled at the Effective Time for no consideration or payment; and
|
| • |
each award of notional common units granted pursuant to the Partnership’s long-term incentive plan (each a "Partnership Phantom Unit"), whether or not vested, will automatically be vested, cancelled and converted into the right to
receive an amount in cash equal to the product of (i) the Common Unit Consideration and (ii) the number of common units subject to such Partnership Phantom Unit.
|
Concurrently with the consummation of the Merger, GP Buyer will purchase from Golar, and Golar will transfer to GP Buyer (the "GP Transfer"), all of the outstanding membership interests in our general partner
pursuant to a Transfer Agreement dated as of January 13, 2021 (the “Transfer Agreement”) for a purchase price of $5.1 million, which is equivalent to $3.55 per general partner unit of the Partnership. The Transfer Agreement also provides for the
parties to enter into, among other things, an Omnibus Agreement relating to the provision of certain management services related to the vessels the Partnership owns.
The obligation of the parties to the Transfer Agreement to consummate the GP Transfer is subject to certain closing conditions, including: (1) the accuracy of the other party's representations and warranties,
subject to certain materiality qualifiers; (2) performance in all material respects by the other party; (3) the delivery of certain deliverables under the Transfer Agreement by both parties; and (4) the conditions to the Partnership’s or NFE’s
(as applicable) obligations to close the Merger pursuant to the terms of the Merger Agreement must have been waived or satisfied.
The required majority of the common unitholders of record as of the close of business on January 25, 2021 voted on and approved the Merger Agreement at a Special Meeting held on February 24, 2021. The closing of
the Merger is subject to satisfaction or waiver (if applicable) of certain conditions, including: (i) the receipt of certain regulatory approvals; (ii) the receipt of certain specified material third-party consents; (iii) the absence of any legal
restraint issued by any court or governmental entity of competent jurisdiction preventing consummation of the Merger; (iv) the absence of a material adverse effect on either party; (v) the accuracy of each party’s representations and warranties,
subject in most cases to materiality or material adverse effect qualifications; (vi) material compliance with each party’s covenants; and (vii) all conditions to Golar’s or NFE’s (as applicable) obligation to close the GP Transfer under the
Transfer Agreement having been satisfied or waived.
It is currently anticipated that upon consummation of the Merger, NFE will refinance certain of our existing debt facilities including the $800 million credit facility and 2015 Norwegian Bonds, which are repayable
in April 2021 and November 2021 respectively.
The Merger Agreement may be terminated by NFE or Partnership (which, in the case of Partnership, must be approved by the Conflicts Committee) under certain circumstances, including, among others, by either NFE or
the Partnership if the closing of the Merger has not occurred on or before July 13, 2021, and further provides that, upon termination of the Merger Agreement under certain circumstances, GMLP may be required to pay NFE a termination fee equal to
$9.4 million.
F-65
Cash Distributions
In February 2021, we paid a cash distribution of $0.0202 per common unit in respect of the three months ended December 31, 2020 to unitholders of record as of February 5, 2021. We also paid a cash distribution of
$0.546875 per Series A Preferred Unit for the period from November 15, 2020 through to February 14, 2021 to our Series A Preferred unitholders of record as of February 8, 2021.
In accordance with the Merger Agreement, we are prohibited from payment of further distributions on the common units without permission from NFE. However, we are permitted to continue to pay quarterly distributions
on the Series A Preference Units.
F-66
HYGO ENERGY TRANSITION LTD.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
Page
|
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
2
|
|
CONSOLIDATED STATEMENTS OF INCOME (LOSS) FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
|
3
|
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
|
4
|
|
CONSOLIDATED BALANCE SHEETS AS AT DECEMBER 31, 2020 AND 2019
|
5
|
|
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
|
6
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
|
7 - 8
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
9 - 48
|
1
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Hygo Energy Transition Ltd.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Hygo Energy Transition Ltd. (and subsidiaries ) (the Company) as of December 31, 2020 and 2019, the related consolidated statements of income (loss), comprehensive loss, consolidated statements of
changes in equity and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31,
2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on
our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no
such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2016.
London, United Kingdom
March 15, 2021
2
Consolidated Statements of Income (Loss) for the years ended December 31, 2020 and 2019
|
(in thousands of $)
|
Notes
|
2020
|
2019
|
|||||||||
|
Time charter revenues(1)
|
6, 7
|
47,295
|
35,601
|
|||||||||
|
Time charter revenues - collaborative arrangement
|
|
7
|
—
|
9,622
|
||||||||
|
Total operating revenues
|
47,295
|
45,223
|
||||||||||
|
Vessel operating expenses
|
16,825
|
12,638
|
||||||||||
|
Voyage, charter-hire and commission expenses
|
7
|
3,624
|
5,912
|
|||||||||
|
Voyage, charter-hire and commission expenses - collaborative arrangement
|
7
|
—
|
9,825
|
|||||||||
|
Administrative expenses(1)
|
29,244
|
16,126
|
||||||||||
|
Depreciation and amortization
|
19
|
11,262
|
11,212
|
|||||||||
|
Total operating expenses
|
60,955
|
55,713
|
||||||||||
|
Other operating income
|
8
|
3,714
|
1,100
|
|||||||||
|
Operating loss
|
(9,946
|
)
|
(9,390
|
)
|
||||||||
|
Other non-operating income
|
||||||||||||
|
Gain on energy derivative instrument
|
5
|
5,292
|
9,990
|
|||||||||
|
Loss on disposal of asset under development
|
17
|
(25,981
|
)
|
—
|
||||||||
|
Loss on disposal of subsidiary
|
5
|
(2,482
|
)
|
—
|
||||||||
|
Total other non-operating income (loss)
|
(23,171
|
)
|
9,990
|
|||||||||
|
Financial income (expense)
|
||||||||||||
|
Interest income(1)
|
35,872
|
795
|
||||||||||
|
Interest expense
|
(13,268
|
)
|
(2
|
)
|
||||||||
|
Gain on derivative instrument
|
9
|
1,180
|
—
|
|||||||||
|
Other financial items, net
|
9
|
(1,884
|
)
|
(1,659
|
)
|
|||||||
|
Net financial income (expense)
|
21,900
|
(866
|
)
|
|||||||||
|
Losses before equity in net losses of affiliates, income taxes and non-controlling interest
|
(11,217
|
)
|
(266
|
)
|
||||||||
|
Income taxes
|
10
|
(4,762
|
)
|
(4,152
|
)
|
|||||||
|
Equity in net loss of affiliates
|
16
|
(45,880
|
)
|
(2,510
|
)
|
|||||||
|
Net loss
|
(61,859
|
)
|
(6,928
|
)
|
||||||||
|
Net income attributable to non-controlling interest
|
(6,467
|
)
|
(5,549
|
)
|
||||||||
|
Preferred dividends
|
26
|
(11,306
|
)
|
(11,875
|
)
|
|||||||
|
Net loss attributable to common stockholders
|
(79,632
|
)
|
(24,352
|
)
|
||||||||
|
Loss per share attributable to common stockholders:
|
||||||||||||
|
Basic and diluted loss per share
|
11
|
$
|
(1.70
|
)
|
$
|
(0.52
|
)
|
|||||
(1) This includes amounts arising from transactions with related parties (see note 14)
The accompanying notes are an integral part of these consolidated financial statements.
3
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2020 and 2019
(in thousands of $)
|
2020
|
2019
|
|||||||
|
COMPREHENSIVE LOSS
|
||||||||
|
Net loss
|
(61,859
|
)
|
(6,928
|
)
|
||||
|
Other comprehensive loss:
|
||||||||
|
Foreign exchange loss on currency translation (1)
|
(34,547
|
)
|
(6,524
|
)
|
||||
|
Comprehensive loss
|
(96,406
|
)
|
(13,452
|
)
|
||||
|
Comprehensive loss attributable to:
|
||||||||
|
Stockholders of Hygo Energy Transition Ltd.
|
(102,873
|
)
|
(19,001
|
)
|
||||
|
Non-controlling interests
|
6,467
|
5,549
|
||||||
|
Comprehensive loss
|
(96,406
|
)
|
(13,452
|
)
|
||||
(1) No tax impact for the years ended December 31, 2020 and 2019.
The accompanying notes are an integral part of these consolidated financial statements.
4
Consolidated Balance Sheets as at December 31, 2020 and 2019
(in thousands of $)
|
Notes
|
2020
|
2019
|
||||||||||
|
ASSETS
|
||||||||||||
|
Current assets
|
||||||||||||
|
Cash and cash equivalents
|
48,777
|
49,949
|
||||||||||
|
Restricted cash and short-term deposits
|
12
|
37,830
|
22,861
|
|||||||||
|
Trade accounts receivable (1)
|
13
|
8,017
|
30,479
|
|||||||||
|
Amounts due from related parties
|
14
|
11,577
|
9,335
|
|||||||||
|
Derivative asset
|
5
|
—
|
10,200
|
|||||||||
|
Other current assets
|
15
|
3,395
|
3,582
|
|||||||||
|
Total current assets
|
109,596
|
126,406
|
||||||||||
|
Non-current assets
|
||||||||||||
|
Restricted cash
|
12
|
32
|
41
|
|||||||||
|
Investments in affiliates
|
16
|
224,747
|
311,105
|
|||||||||
|
Net investment in leased asset
|
17
|
307,660
|
—
|
|||||||||
|
Assets under development
|
18
|
—
|
327,754
|
|||||||||
|
Vessels and equipment, net
|
19
|
355,605
|
360,143
|
|||||||||
|
Other non-current assets
|
21
|
29,412
|
29,343
|
|||||||||
|
Total assets
|
1,027,052
|
1,154,792
|
||||||||||
|
LIABILITIES AND EQUITY
|
||||||||||||
|
Current liabilities
|
||||||||||||
|
Current portion of long-term debt and short-term debt
|
22
|
35,254
|
127,056
|
|||||||||
|
Trade accounts payable
|
1,551
|
2,583
|
||||||||||
|
Accrued expenses (1)
|
23
|
55,258
|
46,053
|
|||||||||
|
Other current liabilities (1)
|
24
|
5,178
|
54,324
|
|||||||||
|
Amount due to related parties
|
14
|
4
|
2,184
|
|||||||||
|
Total current liabilities
|
97,245
|
232,200
|
||||||||||
|
Non-current liabilities
|
||||||||||||
|
Long-term debt
|
22
|
444,531
|
337,686
|
|||||||||
|
Other non-current liabilities
|
25
|
8,747
|
665
|
|||||||||
|
Total liabilities
|
550,523
|
570,551
|
||||||||||
|
Mezzanine equity
|
26
|
|||||||||||
|
Preferred capital 20,000,000 preferred shares of $5.00 each issued and outstanding
|
100,000
|
100,000
|
||||||||||
|
Convertible share capital 23,475,077 common shares of $1.00 each issued and outstanding (2)
|
23,475
|
23,475
|
||||||||||
|
Total mezzanine equity
|
123,475
|
123,475
|
||||||||||
|
Stockholder's equity
|
26
|
|||||||||||
|
Share capital 23,475,077 common shares of $1.00 each issued and outstanding (2)
|
23,475
|
23,475
|
||||||||||
|
Additional paid-in capital
|
527,324
|
527,324
|
||||||||||
|
Accumulated other comprehensive loss
|
(79,733
|
)
|
(45,186
|
)
|
||||||||
|
Retained losses
|
(131,569
|
)
|
(51,937
|
)
|
||||||||
|
Non-controlling interest
|
13,557
|
7,090
|
||||||||||
|
Total stockholder's equity
|
353,054
|
460,766
|
||||||||||
|
Total liabilities, mezzanine equity and stockholder's equity
|
1,027,052
|
1,154,792
|
||||||||||
(1)These include amounts arising from transactions with related parties (see note 14).
(2) The Stockholder's equity as at December 31, 2019 reflects the retrospective
adjustment of the reduction in the par value of the common shares from $5 to $1, passed by a resolution of the Board of Directors on August 21, 2020 (see note 26).
The accompanying notes are an integral part of these consolidated financial statements.
5
Consolidated Statements of Changes in Equity for the years ended December 31, 2020 and 2019
(in thousands of $)
|
Notes
|
Preference Shares (Mezzanine)
|
Convertible
Common
Share
Capital
(Mezzanine) (2)
|
Common
Share
Capital (2)
|
Additional Paid-in Capital (2)
|
Accumulated Other Comprehensive Loss
|
Retained losses
|
Non-
controlling Interest
|
Total Stockholder's
Equity |
||||||||||||||||||||||||||||
|
Balance at December 31, 2018
|
100,000
|
23,475
|
23,475
|
517,324
|
(38,662
|
)
|
(27,585
|
)
|
1,541
|
476,093
|
||||||||||||||||||||||||||
|
Net (loss) / income
|
—
|
—
|
—
|
—
|
—
|
(12,477
|
)
|
5,549
|
(6,928
|
)
|
||||||||||||||||||||||||||
|
Dividends (1)
|
26
|
—
|
—
|
—
|
—
|
—
|
(11,875
|
)
|
—
|
(11,875
|
)
|
|||||||||||||||||||||||||
|
Capital contributions
|
26
|
—
|
—
|
—
|
10,000
|
—
|
—
|
—
|
10,000
|
|||||||||||||||||||||||||||
|
Foreign currency translation adjustments
|
—
|
—
|
—
|
—
|
(6,524
|
)
|
—
|
—
|
(6,524
|
)
|
||||||||||||||||||||||||||
|
Balance at December 31, 2019
|
100,000
|
23,475
|
23,475
|
527,324
|
(45,186
|
)
|
(51,937
|
)
|
7,090
|
460,766
|
||||||||||||||||||||||||||
|
Net (loss) / income
|
—
|
—
|
—
|
—
|
—
|
(68,326
|
)
|
6,467
|
(61,859
|
)
|
||||||||||||||||||||||||||
|
Dividends (1)
|
26
|
—
|
—
|
—
|
—
|
—
|
(11,306
|
)
|
—
|
(11,306
|
)
|
|||||||||||||||||||||||||
|
Foreign currency translation adjustments
|
—
|
—
|
—
|
—
|
(34,547
|
)
|
—
|
—
|
(34,547
|
)
|
||||||||||||||||||||||||||
|
Balance at December 31, 2020
|
100,000
|
23,475
|
23,475
|
527,324
|
(79,733
|
)
|
(131,569
|
)
|
13,557
|
353,054
|
||||||||||||||||||||||||||
(1) This relates to accrued dividends to Preference Shareholders (see note 26).
(2) The Stockholder's equity as at December 31, 2019 and December 31, 2018, reflects
the retrospective adjustment of the reduction in the par value of the common shares from $5 to $1, passed by a resolution of the Board of Directors on August 21, 2020 (see note 26). The decrease in par value was recorded as a decrease in
Convertible Share Capital (Mezzanine Equity) and Share Capital with a corresponding increase in Additional paid-in Capital in Stockholders’ Equity.
The accompanying notes are an integral part of these consolidated financial statements.
6
Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019
(in thousands of $)
|
Operating activities
|
Notes
|
2020
|
2019
|
|||||||||
|
Net loss
|
(61,859
|
)
|
(6,928
|
)
|
||||||||
|
Adjustments to reconcile net loss to net cash provided by / (used in) operating activities:
|
||||||||||||
|
Equity in net losses of affiliates
|
16
|
45,881
|
2,510
|
|||||||||
|
Net foreign exchange loss / (gain)
|
2,950
|
(1,844
|
)
|
|||||||||
|
Depreciation and amortization
|
19
|
11,262
|
11,212
|
|||||||||
|
Loss on sale of subsidiary
|
2,482
|
—
|
||||||||||
|
Loss on recognition of net investment in leased vessel
|
25,981
|
—
|
||||||||||
|
Movement in credit loss allowance
|
2,000
|
—
|
||||||||||
|
Cash receipts from sales-type finance lease
|
26,137
|
—
|
||||||||||
|
Interest income from sales-type finance lease
|
(37,438
|
)
|
—
|
|||||||||
|
Change in fair value of investment, net of unwind of discount
|
9
|
719
|
1,553
|
|||||||||
|
Change in fair value of energy derivative instrument
|
5
|
115
|
(9,990
|
)
|
||||||||
|
Change in fair value of cross currency interest rate swap derivative
|
9
|
(1,098
|
)
|
—
|
||||||||
|
Recognition of guarantee net of amortization
|
(575
|
)
|
(1,122
|
)
|
||||||||
|
Amortization of deferred charges
|
1,341
|
1,336
|
||||||||||
|
Drydock expenditure
|
—
|
(1,314
|
)
|
|||||||||
|
Change in assets and liabilities:
|
||||||||||||
|
Deferred revenue
|
24
|
3,127
|
38,730
|
|||||||||
|
Trade accounts receivable
|
2,092
|
(20,277
|
)
|
|||||||||
|
Inventories
|
424
|
1,909
|
||||||||||
|
Energy derivative asset
|
7,654
|
—
|
||||||||||
|
Prepaid expenses, accrued income and other assets
|
274
|
3,471
|
||||||||||
|
Other non-current assets
|
28
|
(673
|
)
|
|||||||||
|
Amounts due (to)/from related companies
|
(4,421
|
)
|
312
|
|||||||||
|
Trade accounts payable
|
(893
|
)
|
331
|
|||||||||
|
Accrued expenses
|
2,551
|
(10,384
|
)
|
|||||||||
|
Other current and non-current liabilities (1)
|
(9,785
|
)
|
4,923
|
|||||||||
|
Net cash provided by operating activities
|
18,949
|
13,755
|
||||||||||
|
Investing activities
|
||||||||||||
|
Additions to investments in affiliates
|
16
|
(19,720
|
)
|
(48,652
|
)
|
|||||||
|
Additions to vessels and equipment
|
19
|
(6,833
|
)
|
(3,389
|
)
|
|||||||
|
Additions to assets under development
|
(6,902
|
)
|
(19,406
|
)
|
||||||||
|
Proceeds from sale of subsidiary, net of cash disposed
|
(298
|
)
|
—
|
|||||||||
|
Net cash used in investing activities
|
(33,753
|
)
|
(71,447
|
)
|
||||||||
|
Financing activities
|
||||||||||||
|
Proceeds from equity contributions from shareholders
|
26
|
—
|
10,000
|
|||||||||
|
Proceeds from short-term and long-term debt (including related parties)
|
393,986
|
194,834
|
||||||||||
|
Repayments of short-term and long-term debt (including related parties)
|
(362,752
|
)
|
(122,325
|
)
|
||||||||
|
Proceeds from derivative instrument premium
|
28
|
1,422
|
—
|
|||||||||
|
Financing fees
|
(1,877
|
)
|
(2,479
|
)
|
||||||||
|
Net cash provided by financing activities
|
30,779
|
80,030
|
||||||||||
|
Foreign exchange in cash
|
(2,187
|
)
|
—
|
|||||||||
|
Net increase in cash, cash equivalents and restricted cash
|
13,788
|
22,338
|
||||||||||
|
Cash, cash equivalents and restricted cash at beginning of period
|
72,851
|
50,513
|
||||||||||
|
Cash, cash equivalents and restricted cash at end of period
|
86,639
|
72,851
|
||||||||||
7
|
Supplemental disclosure of cash flow information:
|
||||||||
|
Cash paid during the year for:
|
||||||||
|
Interest paid, net of capitalized interest
|
5,177
|
—
|
||||||
|
Income taxes paid
|
5,872
|
756
|
||||||
(1) For the year ended December 31, 2019, $3.5 million relates to the deferred tax
liability (see note 10).
Supplemental note to the consolidated statements of cash flows
The following table identifies the balance sheet line-items included in cash, cash equivalents and restricted cash presented in the consolidated statements of cash
flows:
|
Year ended
|
Year ended
|
|||||||
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Cash and cash equivalents
|
48,777
|
49,949
|
||||||
|
Restricted cash and short-term deposits (current portion)
|
37,830
|
22,861
|
||||||
|
Restricted cash (non-current portion)
|
32
|
41
|
||||||
|
86,639
|
72,851
|
|||||||
8
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 1. |
GENERAL
|
Hygo Energy Transition Ltd., (the "Company" or "Hygo") was incorporated in Hamilton, Bermuda on May 19, 2016. The Company is a 50/50 joint venture partnership between
Golar LNG Limited ("Golar LNG"), an owner and operator of marine based liquefied natural gas ("LNG") midstream infrastructure and who is active in liquefaction, transportation and regasification of natural gas and Stonepeak Infrastructure Fund II
Cayman (G) Ltd ("Stonepeak"), a private equity firm. Hygo's purpose is to develop projects that encourage the use of natural gas as a more sustainable source of fossil energy generation, replacing oil-derived liquid fuels. This objective is
achieved through owning and operating natural gas storage transportation vessels and regasification units and their associated energy infrastructure. As part of this strategy, Hygo may construct or acquire the necessary infrastructure.
The Company, through its equity method investment in Centrais Elétricas de Sergipe Participações S.A. ("CELSEPAR"), has constructed and is operating, a combined cycle
power plant in Aracaju, the state capital of Sergipe in Brazil, with investment partner Ebrasil Energia Ltda. (“Ebrasil”), an affiliate of Eletricidade do Brasil S.A. The 1.5GW power station is the largest thermal power station in South America and
supplements hydropower during dry seasons and helps to meet the growing demand for electricity in the region. The power plant commenced commercial operations in March 2020 and will continue to deliver power to 26 committed off-takers for 25 years,
in accordance with Power Purchase Agreement (“PPA”) contracts awarded by the Brazilian Government in 2015.
The Company, through its investment in equity method investee project company Centrais Elétricas Barcarena S.A. ("CELBA"), additionally plans to construct and operate
a 605MW combined cycle power plant in the city of Barcarena in the State of Pará, Brazil. The power plant will utilize imported LNG for the generation of electricity which will be distributed to the Brazilian national electricity grid through the
existing Vila do Conde Substation located nearby. The power project is scheduled to deliver power to 9 committed off-takers for 25 years from 2025 in accordance with the PPA contracts awarded by the Brazilian Government in October 2019.
As of December 31, 2020, the Hygo fleet consists of two LNG carriers, Golar Celsius
and Golar Penguin and one Floating Storage Regasification Unit ("FSRU"), Golar
Nanook. The Golar Nanook commenced its 25-year charter with Centrais Elétricas de Sergipe S.A. (“CELSE”) under a sales-type lease in March 2020. Golar Celsius and Golar Penguin are currently operating in the spot
market as part of the Cool Pool.
The Company is also pursuing multiple gas to power opportunities that have been identified elsewhere across Latin America, the Indian Subcontinent, the Caribbean, West
Africa, South East Asia and Europe.
As used herein and unless otherwise required by the context, the terms "Hygo", the "Company", "we", "our" refer to Hygo Energy Transition Ltd. or any one or more of its
consolidated subsidiaries, or to all such entities.
9
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 2. |
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
|
Basis of accounting and presentation
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP").
The accounting policies set out below have been applied consistently to all periods in these consolidated financial statements, except for accounting policies that
changed as a result of adopting the requirements of Accounting Standards Updates ("ASU") 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendments (Topic 326). The impact of
these changes in accounting policies on the consolidated financial statements are disclosed in note 3.
Use of estimates
The preparation of financial statements in accordance with US GAAP and in the application of our accounting policies below requires management to make estimates and
assumptions affecting the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. The areas requiring the most significant judgement are the recoverability of asset carrying values.
In assessing the recoverability of our vessels’ carrying amounts, we make assumptions regarding estimated future cash flows and estimates in respect of residual or
scrap value, charter rates, ship operating expenses, utilization and drydocking requirements.
In assessing the recoverability of our equity accounted investments, we make assumptions regarding estimated future cash flows.
Principles of consolidation
The consolidated financial statements of Hygo include the results of other entities in which we have a controlling financial interest. All material intercompany
balances and transactions have been eliminated.
Voting interest entities are entities that have sufficient equity and provide the equity investors with voting rights that enable them to make significant decisions
relating to the entity’s operations. For these types of entities, the determination on whether we have a controlling financial interest is primarily based on the amount of voting equity interests held.
Variable interest entities (“VIEs”) are entities that by design, either (1) lack sufficient equity to allow the Company to finance its activities without additional
subordinated financial support from other parties, or (2) have equity investors that do not have the ability to make significant decisions relating to the entity’s operations through voting rights, or do not have the obligation to absorb the
expected losses or do not have the right to receive residual returns of the entity. The primary beneficiary of a VIE (i.e. the party with the controlling financial interest) is required to consolidate the assets and liabilities of the VIE. The
primary beneficiary is the party that has both (1) the power to direct the economic activities of the VIE that most significantly impact the VIE’s economic performance; and (2) through its interest in the VIE, the obligation to absorb the losses or
the right to receive the benefits from the VIE that could potentially be significant to the VIE.
10
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 2. |
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
|
The most common type of VIE for Hygo is the sale and leaseback financings for LNG carriers and FSRU. As part of these financings, Hygo sells the asset to a single
asset entity of the lending bank and then leases the asset back. While we do not hold an equity investment in these entities, we have determined that these entities are a VIE and that we have a variable interest in them due to the guarantees and
fixed price repurchase options that absorb the losses of the VIE that could potentially be significant to the entity. We have concluded that we have the power to direct the economic activities that most impact the economic performance as we control
the significant decisions relating to the assets and we have the obligation to absorb losses or the right to receive the residual returns from the leased asset.
The accompanying consolidated financial statements include the financial statements of the entities listed in note 4 and note 5.
Business combinations
When the assets acquired, and liabilities assumed constitute a business then the acquisition is a business combination. If substantially all of the fair value of the
gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not considered a business. An input and a substantive process together must significantly contribute to the creation of the
output to constitute a business.
Business combinations of subsidiaries are accounted for under the acquisition method. On acquisition, the identifiable assets, liabilities and contingent liabilities
of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognized as goodwill. Any deficiency of the cost of acquisition
below the fair values of the identifiable net assets acquired (i.e. bargain purchase) is credited to the consolidated statement of income (loss) in the period of acquisition. The consideration transferred for an acquisition is measured at fair
value of the consideration given. Acquisition related costs are expensed as incurred. The results of subsidiary undertakings are included from the date of acquisition.
If the assets acquired are not a business, goodwill is not recognized in an asset acquisition. For such transactions, any excess consideration transferred over the
fair value of the net assets acquired is reallocated to the identifiable assets acquired on a relative fair value basis.
Loss of control of subsidiary
When there is a loss of control over a subsidiary, we de-consolidate as of the date we cease to have a controlling financial interest. We account for the
deconsolidation of a subsidiary by recognizing a gain or loss in the consolidated statement of income (loss), measured by the difference between the aggregate of the fair value of the consideration received, fair value of any retained
non-controlling interest in the former subsidiary and the carrying amount of any non-controlling interest in the former subsidiary with the carrying amount of the former subsidiary's assets and liabilities.
If a change of ownership interest causes a loss of control of a foreign entity, in addition to de-recognising the assets and liabilities, we also de-recognise any
amounts previously recorded in other comprehensive income.
Investments in affiliates
Many of our development projects are carried out through specific entities jointly owned and managed with other third parties. Where these entities are set up for the
purpose of sharing the risks and rewards of developing an asset and each party has the ability to participate equally and directly in the overall management of the Company plus the operation of the entity is for the mutual benefit of the members
then we class these investments as Joint Ventures.
11
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 2. |
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
|
The results, assets and liabilities of joint ventures are incorporated into the financial statements using the equity method of accounting. Income / (losses) from
equity method investments represents our proportionate share of net income / (losses) generated by the equity method investees. When our share of losses in an affiliate equals or exceeds its interest, we do not recognize further losses, unless the
Company has incurred obligations or made payments on behalf of the affiliate. Intra-entity profits are eliminated until realized by the investee, this includes unrealized gains and losses on physical power purchase contracts between Hygo and its
equity accounted investments. Equity method investments are assessed for impairment whenever there are changes in the facts and circumstances which indicate a loss in value has occurred.
Reporting currency
In individual subsidiaries and joint ventures, transactions in foreign currencies are initially recorded in the functional currency of those entities at the spot
exchange rate on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated into the functional currency at the spot exchange rate on the balance sheet date. Any resulting exchange gain / (loss)
is included in the consolidated statement of income (loss). Non-monetary assets and liabilities are not retranslated after recognition.
The consolidated financial statements are reported in U.S dollars. The assets and liabilities of non-US dollar functional currency subsidiaries or joint ventures are
translated into US dollars at the spot exchange rate on the balance sheet date. The statements of consolidated statement of income (loss) and the consolidated statements of cash flows of non-US dollar subsidiaries and joint ventures are translated
into US dollars using the average rates of exchange for the period. Exchange adjustments arising from translating non-US dollar subsidiaries and joint ventures into US dollars are recorded in equity and reported in the consolidated statements of
comprehensive loss and the consolidated statements of changes in equity.
Fair value measurements
We measure assets and liabilities requiring fair value presentation or disclosure using an exit price (i.e. the price that would be received to sell an asset or paid
to transfer a liability) and disclose these amounts according to the source of the inputs into the valuation exercise under the following hierarchy:
Level 1: Quoted prices in an active market for identical assets and liabilities;
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data; and
Level 3: Unobservable inputs that are significant to the fair value of the assets and liabilities.
Lease accounting
For lease contracts, we make an assessment on whether the contract is an operating or sales-type lease. An agreement will be a sales-type lease is any of the following
conditions are met:
| • |
ownership of the asset is transferred at the end of the lease term;
|
| • |
the contract contains an option to purchase the asset which is reasonably certain to be exercised;
|
| • |
the lease term is for a major part of the remaining useful life of the contract, although contracts entered into the last 25% of the asset's useful life are not subject to this
criterion;
|
| • |
the discounted value of the fixed payments under the lease represent substantially all of the fair value of the asset; or
|
| • |
the asset is heavily customized such that it could not be used for another charter at the end of the term.
|
12
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 2. |
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Lessor accounting
In making the classification assessment, we estimate the residual value of the underlying asset at the end of the lease term with reference to broker valuations. None
of our lease contracts contain residual value guarantees and any purchase options are disclosed in note 5. Agreements with renewal and termination options in the control of the lessee are included together with the non-cancellable contract period
in the lease term when “reasonably certain” to be exercised or if controlled by the lessor. The determination of reasonably certain depends on whether the lessee has an economic incentive to exercise the option.
Generally, lease accounting commences when the asset is made available to the customer, however, where the contract contains specific customer acceptance testing
conditions, lease accounting will not commence until the asset has successfully passed the acceptance test or it becomes a formality. We assess a lease under the modification guidance when there is a change to the terms and conditions of the
contract that results in a change in the scope or the consideration of the lease.
Costs directly associated with the execution of the lease or costs incurred after lease inception or the execution of the contract but prior to the commencement of the
lease that directly relate to preparing the asset for the lease (i.e. bunker costs), are capitalized and amortized to the consolidated statement of income (loss) over the lease term. We also defer upfront revenue payments (i.e. repositioning fees)
to the consolidated balance sheet and amortize to the consolidated statement of income (loss) over the lease term.
Fixed revenue from operating leases is accounted for on a straight-line basis over the life of the lease; while variable revenue is accounted for as incurred in the
relevant period. Fixed revenue includes fixed payments and variable payments based on a rate or index. For our operating leases, we have elected the practical expedient to combine our service revenue and operating lease income as both the timing
and the pattern of transfer of the components are the same. The predominant assessment is lease revenue.
Time charter sales-type leases
On inception of a sales-type lease for which we are the lessor, we de-recognize the related asset and record “Net investment in leased asset” on our consolidated
balance sheet. The day one gain or loss is presented in “Other non-operating income/(loss)” in our consolidated statement of income (loss). The net investment in leased asset represents the fixed payments due from the lessee, discounted at the rate
implicit in the lease. We allocate sales-type lease income to the consolidated statements of operations in the “Interest income” line item to reflect a constant periodic rate of return on our sales-type lease investment (see note 17).
For sales-type leases, non-lease revenue and operating and service agreements in connection with the time charters are recorded over the term of the charter as the
service is provided. The transaction price is based on the standalone selling price for the service.
Amounts are presented net of allowances for credit losses, which are assessed at the individual lease level, reflecting the risk profile for each vessel unique to each
project. The allowance is calculated by multiplying the balance exposed upon default by the probability of default and loss given default over the term of the lease. The exposure at default is net of the vessel collateral that is returned on
default. With forecasts for counterparty probability of default and loss given default not readily available or supportable for the life of the instrument, annualized rates have been applied based on a forecast 5-year period. A probability
weighting has been applied to each period of default over the remaining instrument life.
13
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 2. |
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Collaborative arrangements
Our LNG carriers participate in an LNG carrier pool arrangement with Golar LNG Limited and Gaslog Limited (up to July 2019), referred to as the Cool Pool. The Cool
Pool allows the Pool Participants to optimize the operation of the pool vessels through improved scheduling ability, cost efficiencies and common marketing. Under the Pool Agreement, the Pool Manager is responsible, as agent, for the marketing and
chartering of the participating vessels and paying other voyage costs such as port call expenses and brokers' commissions in relation to employment contracts, but each of the Pool Participants continues to be fully responsible for the financing,
insurance, manning and technical management of their respective vessels.
Up until July 2019, the Cool Pool arrangement was accounted for in accordance with the guidance on collaborative arrangements as through the Cool Pool steering
committee the members actively participated in managing the pool and were exposed to the significant risks and rewards of the commercial success of the pool. The guidance on collaborative arrangements requires a company to assess whether they are
the agent or principal in the arrangement and to account for the underlying transactions based on that determination.
We concluded that we were the principal for the Hygo vessels operating in the Cool Pool and presented the income and expenses relating to our vessels gross on the face
of the consolidated statement of income (loss) in the line items “Time charter revenues” and “Voyage, charter-hire and commission expenses.” For Cool Pool net revenues generated by the other participants in the pooling arrangement, these were
presented separately in revenue and expenses from collaborative arrangements. Each participants’ share of the net Cool Pool revenues is based on the number of days such vessels participated in the pool.
Upon exit of Gaslog from the Cool Pool in July 2019, we ceased applying collaborative arrangement accounting. This has had no impact for the accounting treatment
relating to our own vessels, however, for Cool Pool net revenues and expenses generated by the other participant we analogize to the cost of obtaining a contract and present the net balance within the line item “Voyage, charter hire and commission
expenses.”
Trade accounts receivables
Trade receivables are presented net of allowances for doubtful debt based on observable events and expected credit losses. At each balance sheet date, all potentially
uncollectible accounts are assessed individually for purposes of determining the appropriate provision for doubtful accounts. The expected credit loss allowance is calculated using a loss rate applied against an aging matrix, with assets pooled
based on the segment that generated the underlying revenue (LNG vessel operations) and individual FSRU, which reflects similar credit risk characteristics. Our trade receivables have short maturities so we have considered that forecasted changes to
economic conditions will have an insignificant effect on the estimate of the allowance, except in extraordinary circumstances.
Allowance for credit losses
Financial assets recorded at amortized cost and off-balance sheet credit exposures not accounted for as insurance (including financial guarantees) reflect an allowance
for current expected credit losses (“credit losses”) over the lifetime of the instrument. The allowance for credit losses reflects a deduction to the net amount expected to be collected on the financial asset. Amounts are written off against the
allowance when management believes the un-collectability of a balance is confirmed or certain. Expected recoveries will not exceed the aggregate of amounts previously written-off or current credit loss allowance by financial asset category. We
estimate expected credit losses based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. We have elected to
calculate expected credit losses on the combined balance of both the amortized cost and accrued interest from the unpaid principal balance. Specific calculation of our credit allowances are included in the respective accounting policies included
herein; all other financial assets are assessed on an individual basis calculated using the method we consider most appropriate for each asset.
14
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 2. |
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Cash and cash equivalents
We consider all demand and time deposits and highly liquid investments with original maturities of three months or less to be equivalent to cash. Amounts are presented
net of allowances for credit losses, which are assessed based on consideration of whether the balances have short-term maturities and whether the counterparty has an investment grade credit rating, limiting any credit exposure.
Restricted cash and short-term deposits
Restricted cash consists of cash collateral required to satisfy certain covenants outlined in the Company's debt facilities.
We also present short-term deposits and cash balances relating to our consolidated VIEs within restricted cash as we do not have the ability to use that cash freely
for Company purposes.
Inventories
Inventories, which are comprised principally of fuel, lubricating oils and ship spares, are stated at the lower of cost or net realizable value. Cost is determined on
a first-in, first-out basis and inventories are included in "Other current assets" in the consolidated balance sheets.
Assets under development
An asset is classified as asset under development when there is a firm commitment from us to proceed with the construction of the asset and the likelihood of
conversion is virtually certain to occur. Vessels that are under development are stated at cost. All pre-delivery costs incurred during the construction of the vessels, including purchase installments, interest, supervision and technical costs, are
capitalized. Capitalization ceases and depreciation commences when the vessel is available for its intended use.
Vessels and equipment
Vessels and equipment are stated at cost less accumulated depreciation. The cost of vessels and equipment less the estimated residual value is depreciated on a
straight-line basis over the assets' remaining useful economic lives. Management estimates the residual values of our vessels based on a scrap value determined by broker valuations. Residual values are periodically reviewed and revised to recognize
changes in conditions, new regulations or other reasons.
Refurbishment costs incurred during the period are capitalized as part of vessels and equipment and depreciated over the vessels' remaining useful economic lives.
Refurbishment costs are costs that appreciably increase the capacity, or improve the efficiency or safety of vessels and equipment. Expenditures of a routine repairs and maintenance nature that do not improve the operating efficiency or extend the
useful lives of the vessels are expensed as incurred.
15
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 2. |
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Drydocking expenditures are capitalized when incurred and amortized over the period until the next anticipated drydocking, which is generally five years. We have
adopted the "built-in overhaul" method of accounting. The built-in overhaul method is based on the segregation of vessel costs into those that should be depreciated over the useful life of the vessel and those that require drydocking at periodic
intervals to reflect the different useful lives of the components of the assets. The estimated cost of the drydocking component is amortized until the date of the first drydocking following acquisition, upon which the cost is capitalized and the
process is repeated. Any historical drydocking expenditure which has not been fully depreciated at the point of drydocking is immediately written off in the consolidated statement of income (loss). When a vessel is disposed, any unamortized
drydocking expenditure is charged against income in the period of disposal.
Useful lives applied in depreciation are as follows:
|
Vessels
|
40 years
|
|
Drydocking expenditure
|
5 years
|
|
ISO containers and associated equipment
|
10 years
|
|
Office equipment
|
5 - 10 years
|
Impairment of long-lived assets
We continually monitor events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. In assessing the
recoverability of our vessels’ carrying amounts, we make assumptions regarding estimated future cash flows and estimates in respect of residual scrap value. Management performs an annual impairment assessment and when such events or changes in
circumstances are present, we assess the recoverability of long-term assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less
than the carrying amount of those assets, an impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value.
Interest costs capitalized
Interest is capitalized on all qualifying assets that require a period of time to get them ready for their intended use. Qualifying assets consist of vessels under
construction. In addition, certain equity method investments may be considered qualifying assets prior to commencement of their planned principal operation.
The interest capitalized is calculated using the rate of interest on the loan to fund the expenditure or our weighted average cost of borrowings where appropriate,
from commencement of the asset development until substantially all the activities necessary to prepare the assets for its intended use are complete.
If our financing plans associate a specific borrowing with a qualifying asset, we use the rate on that borrowing as the capitalization rate to be applied to that portion of the average accumulated expenditures for the asset provided that does not exceed the amount of that borrowing. We do not capitalize amounts beyond the actual interest expense incurred in the period.
Deferred financing charges
Costs associated with long-term financing, including debt arrangement fees are deferred and amortized over the term of the relevant loan, using the effective interest
method. Amortisation of debt issuance costs are included in interest expense. These costs are presented as a deduction from the corresponding liability, consistent with debt discounts.
16
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 2. |
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Derivatives
We use derivatives to reduce market risks associated with our operations. We use interest rate swaps for the management of interest rate risk exposure. The interest
rate swaps effectively convert a portion of our debt from a floating to a fixed rate over the life of the transactions without an exchange of underlying principal. We seek to reduce our exposure to fluctuations in foreign exchange rates through the
use of foreign currency forward contracts. We use electricity forward purchase contracts for the management of price fluctuations in the energy spot market.
All derivative instruments are initially recorded at fair value as either assets or liabilities in the accompanying consolidated balance sheets and subsequently
remeasured to fair value, regardless of the purpose or intent for holding the derivative. We may use derivatives to partially offset our business exposure to foreign currency, commodity prices and/or interest rate risks. The fair value of these
derivative instruments is determined using forward curves. Significant inputs used in their valuation include management's estimate of forward energy prices, forward foreign exchange rates and forward interest rates.
Where the fair value of a derivative instrument is a net liability, the derivative instrument is classified in "Other current liabilities" or “Other non-current
liabilities” in the consolidated balance sheets depending on timing of settlement. Where the fair value of a derivative instrument is a net asset, the derivative instrument is classified in “Other current assets” or “Other non-current assets” in
the consolidated balance sheet, depending on timeframe of unwinding.
The changes in fair value of derivative financial instruments related to interest rates and foreign exchange derivatives aiming at fixing borrowing currencies in the
entity's functional currency are shown amongst “Net financial income / (expenses)” as “Gains/(losses) on derivative instruments” (whether unrealized or realized) in the consolidated statement of income (loss). The changes in fair value of energy
derivative financial instruments are shown as “Gains/(losses) on energy derivative instruments” (whether realized or unrealized) in the consolidated statements of income (loss). At the balance sheet date, we do not apply hedge accounting but enter
into economic hedging transactions.
Provisions
In the ordinary course of business, we are subject to various claims, law suits and complaints. Management, in consultation with internal and external advisers, will
provide for a contingent loss in the consolidated financial statements if the contingency had occurred at the date of the financial statements and the likelihood of loss was probable and the amount can be reasonably estimated. If we determine that
the reasonable estimate of the loss is a range and there is no best estimate within the range, we will provide the lower amount within the range.
Guarantees
Guarantees issued by us, excluding those that are guaranteeing our own performance, are recognized at fair value at the time that the guarantees are issued and
reported in "Other current liabilities." and "Other non-current liabilities". A liability for the fair value of the obligation undertaken in issuing the guarantee is recognized. If it becomes probable that we will have to perform under a
guarantee, we will recognize an additional liability if the amount of the loss can be reasonably estimated. The recognition of fair value is not required for certain guarantees where they are a guarantee over our own performance (such as the
parent's guarantee of a subsidiary's debt to a third party).
Financial guarantees are assessed for credit losses and any allowance is presented as a liability for off-balance sheet credit exposures where the balance exceeds the
collateral provided over the remaining instrument life. The allowance is assessed at the individual guarantee level, calculated by multiplying the balance exposed on default by the probability of default and loss given default over the term of the
guarantee.
17
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 2. |
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Segment reporting
A segment is a distinguishable component of the business that is engaged in business activities from which we earn revenues and incur expenses whose operating results
are regularly reviewed by the chief operating decision maker, and which are subject to risks and rewards that are different from those of other segments. We have identified four reportable industry segments: LNG carriers, FSRU and terminals, power
and downstream distribution.
Earnings per share
Basic earnings per share ("EPS") is computed based on the income available to common stockholders and the weighted average number of shares outstanding for basic EPS.
Diluted EPS includes the effect of the assumed conversion of potentially dilutive instruments. Such potentially dilutive common shares are excluded when the effect would be to increase earnings per share or reduce a loss per share.
Income taxes
The guidance on "Income Taxes" prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return.
Penalties and interest related to uncertain tax positions are recognized in “Income taxes” in the consolidated statements of income (loss).
Deferred taxes
Deferred tax assets and liabilities are recognized principally for the expected tax consequences of temporary differences between the tax bases of assets and
liabilities and their reported amounts. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Realization of
the deferred income tax asset is dependent on generating sufficient taxable income in future years.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based
on the tax rates and tax laws that have been enacted at the balance sheet date. Income tax relating to items recognized directly in the statement of comprehensive income is recognized in the statement of changes in equity and not in the
consolidated statements of income (loss).
Related Parties
Parties are related if one party has the ability, directly or indirectly, to control the other party or can significantly influence the management or operating
policies. Parties are also related if they are subject to common control or significant influence. Amounts due from related parties are presented net of allowances for credit losses, which are calculated using a loss rate applied against an aging
matrix.
Share options
We recognize compensation expense for a share-based award over an employee’s requisite service period based on the award’s grant date fair value, subject to
adjustment. Our share-based awards are settled in cash and or shares and are accounted for as liability-based awards. As such liabilities are required to be measured at fair value at each reporting date until the date of settlement. Where an
Initial Public Offering (IPO) is a vesting event, we do not recognize any value until the event has occurred.
18
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 2. |
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Mezzanine equity
Where ordinary shares or preference shares are determined to be conditionally redeemable upon the occurrence of certain events that are not solely within the control
of the issuer, and upon such event, the shares would become redeemable at the option of the holders, they are classified as 'mezzanine equity' (temporary equity). The purpose of this classification is to convey that such a security may not be
permanently part of equity and could result in a demand for cash, securities or other assets of the entity in the future.
| 3. |
RECENTLY ISSUED ACCOUNTING STANDARDS
|
Adoption of new accounting standards
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments and subsequent amendments, including ASU 2018-19, ASU 2019-04 and ASU 2019-11: Codification Improvements to Topic 326 “Financial Instruments-Credit Losses”. Topic 326 replaces the incurred loss impairment methodology with a
requirement to recognize lifetime expected credit losses (measured over the contractual life of the instrument) immediately, based on information about past events, current conditions and forecasts of future economic conditions. This will reflect
the net amount expected to be collected from the financial asset and is referred to as the current expected credit loss “CECL” methodology, with measurement applicable to financial assets measured at amortized cost as well as off-balance sheet
credit exposures not accounted for as insurance (including financial guarantees). Topic 326 also makes changes to the accounting for available-for-sale debt securities and purchased credit deteriorated financial assets, however, no such financial
assets existed on date of adoption or in the reporting periods covered by these consolidated financial statements.
Using the modified retrospective method, reporting periods beginning after January 1, 2020 are presented under Topic 326 while comparative periods continue to be
reported in accordance with previously applicable GAAP and have not been restated. The adoption of Topic 326 did not have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.
The amendments in this ASU remove some disclosure requirements relating to transfers between Level 1 and Level 2 of the fair value hierarchy and introduces new disclosure requirements for Level 3 measurements. We adopted the disclosure improvements
prospectively on January 1, 2020, but this amendment has not had a material impact on our disclosure requirements as we have no Level 3 measurements.
In October 2018, the FASB issued ASU 2018-17 Consolidation (Topic 810) - Targeted Improvements to Related Party Guidance for Variable Interest Entities. The amendments
in this ASU specify that for the purposes of determining whether a decision-making fee is a variable interest, a company is now required to consider indirect interests held through related parties under common control on a proportionate basis as
opposed to as a direct investment. We are required to adopt the codification improvements retrospectively using a cumulative-effect method to retained earnings of the earliest period presented herein, but the amendment had no impact on historic
consolidation assessments or retained earnings.
In March 2020, the FASB issued ASU 2020-03 Financial Instruments (Topic 825) - Codification Improvements. The amendments in this ASU propose seven clarifications to
improve the understandability of existing guidance, including that fees between debtor and creditor and third-party costs directly related to exchanges or modifications of debt instruments include line-of-credit or revolving debt arrangements. We
adopted the codification improvements that were effective on issuance from January 1, 2020 under the specified transition approach connected with each of the codification improvements. This amendment has not had a material impact on our
consolidated financial statements or related disclosures, including retained earnings, as of January 1, 2020.
Accounting pronouncements that have been issued but not adopted
19
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 3. |
RECENTLY ISSUED ACCOUNTING STANDARDS (continued)
|
Accounting pronouncements that have been issued but not adopted
The following table provides a brief description of recent accounting standards that have been issued but not yet adopted:
|
Standard
|
Description
|
Date of Adoption
|
Expected Effect on our Consolidated Financial Statements or Other Significant Matters
|
|
ASU 2019-12 Income Taxes
(Topic 740) - Simplifying the Accounting for Income Taxes.
|
The amendment removes certain exceptions previously available and provides some additional calculation rules to help simplify the accounting for
income taxes.
|
January 1, 2021
|
No impacts are expected as a result of the adoption of this ASU.
|
|
ASU 2020-04 Reference Rate Reform (Topic 848) - Facilitation of the Effects of
Reference Rate Reform on Financial Reporting and ASU 2021-01 Reference Rate Reform (Topic 848): Scope.
|
The amendments provide temporary optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other
transactions affected by reference rate reform if certain criteria are met. The applicable expedients for us are in relation to modifications of contracts within the scope of Topics 310, Receivables, 470, Debt, and Topic 842, Leases. This
optional guidance may be applied prospectively from any date beginning March 12, 2020 and cannot be applied to modifications that occur after December 31, 2022.
|
Under evaluation
|
Under evaluation
|
|
ASU 2020-06 Debt with equity and other options (Topic 470) and contracts in
Entity’s Own Equity
(Topic 815)
|
The amendments simplify the issuer’s accounting for convertible instruments and its application of the equity classification guidance. Under the
new guidance, only features that are accounted for as derivatives (ASC 815-15) or under the substantial premium model (ASC 470-20) will be accounted for separately. More instruments will be recognised as a single unit of account, and more
contracts in own equity will be classified as equity items. EPS guidance in ASC 260 is also amended by this ASU, to simplify and improve consistency of the diluted EPS calculation.
|
Under evaluation
|
Under evaluation
|
20
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 4. |
SUBSIDIARIES
|
The following table lists our significant subsidiaries and their purpose as at December 31, 2020. Unless otherwise indicated, we own a 100% controlling interest in
each of the following subsidiaries.
|
Name
|
Jurisdiction of Incorporation
|
Purpose
|
||
|
LNG Power Limited
|
United Kingdom
|
Holding company (1)
|
||
|
Golar Power Brasil Participações S.A
|
Brazil
|
Holds investment in the Sergipe Power Plant
|
||
|
Golar Power Penguin Corp.
|
Marshall Islands
|
Holding company of company which leases and operates Golar Penguin
|
||
|
Golar Hull 2023 Corp.
|
Marshall Islands
|
Leases and operates Golar Penguin (2)
|
||
|
Golar Hull 2026 Corp.
|
Marshall Islands
|
Leases and operates Golar Celsius (2)
|
||
|
Golar FSRU 8 Corp.
|
Marshall Islands
|
Leases Golar Nanook (2)
|
||
|
Golar Nanook UK Limited
|
UK
|
Operates Golar Nanook
|
||
|
Golar Power Latam Serviços Marítimos Ltda
|
Brazil
|
Operates Golar Nanook
|
(1) LNG Power Limited is the holding company of various of our wholly owned Brazilian
domiciled subsidiaries.
(2) The above table excludes mention of the lessor variable entities ("lessor VIEs")
whereby we have leased vessels under finance leases. The lessor VIEs are wholly owned, newly formed special purpose vehicles ("SPVs") of financial institutions. While we do not hold any equity investments in these SPVs, we have concluded that we
are the primary beneficiary of the lessor VIEs and accordingly have consolidated these entities into our financial results. Refer to note 5 for additional detail.
| 5. |
VARIABLE INTEREST ENTITIES ("VIEs")
|
5.1 Lessor VIEs
As of December 31, 2020, we leased three vessels (December 31, 2019: two vessels) from VIEs as part of sale and leaseback arrangements, one with a CCB Financial
Leasing Corporation Limited (“CCBFL”) entity, one with a COSCO Shipping Leasing Company Limited (“COSCO”) entity and one with an AVIC International Leasing Company Limited (“AVIC”) entity.
CCBFL Lessor VIE
In September 2018, we sold the Golar Nanook to a CCBFL entity and
subsequently leased back the vessel on a bareboat charter for a term of twelve years. We have options to repurchase the vessel throughout the charter term at fixed pre-determined amounts, commencing from the third year anniversary of the
commencement of the bareboat charter, with an obligation to repurchase the vessel at the end of the twelve year lease period.
Oriental Shipping Company Lessor VIE
In December 2019, we sold the Golar Penguin to Oriental Fleet LNG 02
Limited, a wholly-owned subsidiary of COSCO, and subsequently leased back the vessel on a bareboat charter for a term of six years. We have options to repurchase the vessel throughout the charter term at fixed pre-determined amounts, commencing
from the first year anniversary of the commencement of the bareboat charter, with an obligation to repurchase the vessel at the end of the six year lease period.
AVIC Lessor VIE
In March 2020, we sold the Golar Celsius to an SPV owned by AVIC and
subsequently leased back the vessel on a bareboat charter for a term of seven years. We have options to repurchase the vessel throughout the charter term at fixed predetermined amounts, commencing from the first anniversary of the commencement of
the bareboat charter, with an obligation to repurchase the vessel at the end of the seven-year lease period.
21
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 5. |
VARIABLE INTEREST ENTITY ("VIE") (continued)
|
While we do not hold an equity investment in the above SPVs, we have determined that we have a variable interest in these SPVs and that the lessor entities, that own
the vessels, are VIEs. Based on our evaluation of the agreements, we have concluded that we are the primary beneficiary of these VIEs and, accordingly, these VIEs are consolidated into our financial results. We did not record any gains or losses
from the sale of these vessels as they continued to be reported as vessels at their original costs in our consolidated financial statements at the time of each transaction. Similarly, the effect of the bareboat charter arrangements are eliminated
upon consolidation of the SPV. The equity attributable to CCBFL, COSCO and AVIC in their respective VIEs are included in non-controlling interests in our consolidated financial statements. As of December 31, 2020 the Golar Penguin and Golar Celsius are reported under "Vessels and equipment, net" in our
consolidated balance sheet. Following the commencement of operations of the Sergipe Power Plant by CELSE, the Golar Nanook was recognized as a sales-type
lease and the vessel carrying value of the Golar Nanook was de-recognized from “Asset under development” and recognized in “Net investment in leased asset”
(see note 17).
The following table gives a summary of the sale and leaseback arrangements, including repurchase options and obligations as of December 31, 2020:
|
Vessel
|
Effective from
|
Sales value (in $ millions)
|
First repurchase option (in $ millions)
|
Date of first repurchase option
|
Repurchase obligation at end of lease term
(in $ millions) |
End of lease term
|
|||||||||
|
Golar Nanook
|
September 2018
|
277.0
|
247.7
|
September 2021
|
94.2
|
September 2030
|
|||||||||
|
Golar Penguin
|
December 2019
|
162.0
|
105.8
|
December 2020*
|
69.9
|
December 2025
|
|||||||||
|
Golar Celsius
|
March 2020
|
160.0
|
109.3
|
March 2021
|
45
|
March 2027
|
|||||||||
*This option was not exercised as of December 31, 2020.
A summary of our payment obligations (excluding repurchase options and repurchase obligations) under the bareboat charter with the lessor VIEs as of December 31, 2020,
are shown below:
|
(in $ thousands)
|
2021
|
2022
|
2023
|
2024
|
2025
|
2026
|
+
|
|||||||||||||||||
|
Golar Nanook
|
23,878
|
23,181
|
22,484
|
21,816
|
21,091
|
90,690
|
||||||||||||||||||
|
Golar Penguin
|
13,200
|
12,778
|
12,369
|
11,935
|
8,688
|
—
|
||||||||||||||||||
|
Golar Celsius
|
16,683
|
16,075
|
15,468
|
14,872
|
14,253
|
12,964
|
||||||||||||||||||
The assets and liabilities of the lessor VIEs that most significantly impact our consolidated balance sheet as of December 31, 2020 and 2019 are as follows:
|
(in $ thousands)
|
Golar Nanook
|
Golar Penguin
|
Golar Celsius
|
2020
|
2019
|
|||||||||||||||
|
Assets
|
Total
|
Total
|
||||||||||||||||||
|
Restricted cash
|
4,945
|
5,668
|
21,467
|
32,080
|
11,072
|
|||||||||||||||
|
Liabilities
|
||||||||||||||||||||
|
Long-term interest bearing debt - current portion, gross of deferred finance charges
|
—
|
19,877
|
6,085
|
25,962
|
113,400
|
|||||||||||||||
|
Long-term interest bearing debt - non-current portion, gross of deferred finance charges
|
202,249
|
84,564
|
116,815
|
403,628
|
217,178
|
|||||||||||||||
The most significant impact of the lessor VIEs operations on our consolidated statements of income (loss) is interest expense of $12.8 million and $8.4 million for the
years ended December 31, 2020 and 2019, respectively. The most significant impact of the lessor VIEs cash flows on our consolidated statements of cash flows is net cash received in financing activities of $99.1 million and $113.4 million for the
years ended December 31, 2020 and 2019, respectively.
22
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 5. |
VARIABLE INTEREST ENTITY ("VIE") (continued)
|
5.2 Mercurio VIE
On October 9, 2019, we acquired 100% of the equity interest in Mercurio Comercializadora de Energia Ltda. ("Mercurio"), a variable interest entity, for purchase
consideration of $0.5 million (BRL 2 million). The entity was purchased in order for us to fulfill our obligation to purchase replacement power in the market for the Sergipe Project in January and February 2020. We have determined that the entity
is a VIE as although we own 100% of the equity, some of the profits related to the trades were not executed on our behalf. However, we have determined that we have control over the most significant activities and the greatest exposure to
variability in residual returns and expected losses of the entity. Accordingly, we have consolidated Mercurio as we are the primary beneficiary of the VIE.
The acquisition agreement between us and the original partners of Mercurio ("Mercurio Partners") included a put option which gives us an irrevocable option to sell the
shares in Mercurio back to the Mercurio Partners once the above obligation was fulfilled. The agreement also included a call option which gives the Mercurio Partners an irrevocable option to buy back the Mercurio shares once the above obligation
was fulfilled.
On December 18, 2020, the Mercurio Partners exercised the call option and the Mercurio shares were sold back to the Mercurio Partners at the call option exercise price
of BRL 2.0 million. Accordingly, Mercurio was deconsolidated at the date of sale and a loss on deconsolidation of $2.5 million was recognized in our consolidated statement of income (loss) for the year ended December 31, 2020.
The loss on deconsolidation was calculated as follows:
|
(in thousands)
|
BRL
|
USD
|
||||||
|
Consideration received
|
2,000
|
373
|
||||||
|
Carrying value of net assets sold
|
(2,241
|
)
|
(418
|
)
|
||||
|
Reclassification of foreign currency translation adjustment
|
(2,437
|
)
|
||||||
|
Loss on deconsolidation
|
(241
|
)
|
(2,482
|
)
|
||||
The assets and liabilities of Mercurio that most significantly impact our consolidated balance sheets as of December 31, 2020 and 2019 are as follows:
|
(in $ thousands)
|
2020
|
2019
|
||||||
|
Assets
|
||||||||
|
Energy derivative asset
|
—
|
10,200
|
||||||
|
Liabilities
|
||||||||
|
Deferred tax liability
|
—
|
(3,468
|
)
|
|||||
The most significant impact of Mercurio's operations on our consolidated statements of income (loss) for the years ended December 31, 2020 and 2019 are as follows:
|
(in $ thousands)
|
2020
|
2019
|
||||||
|
Statement of income (loss)
|
||||||||
|
Gain on energy derivative instrument
|
5,292
|
9,990
|
||||||
|
Tax expense
|
(1,623
|
)
|
(3,396
|
)
|
||||
The most significant impact of Mercurio’s cash flows on our consolidated statements of cash flows is net cash received in operating activities of $7.2 million for the
year ended December 31, 2020 (year ended December 31, 2019: $nil).
23
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 6. |
SEGMENT INFORMATION
|
We provide integrated downstream LNG solutions to underserved markets by delivering less expensive, more environmentally sustainable energy alternatives to customers
around the world. Our reportable segments consist of the primary services that each provides. Although our segments are generally influenced by the same economic factors, each represents a distinct product in the LNG downstream industry. Segment
results are evaluated based on operating income. The accounting principles for the segments are the same as for our consolidated financial statements. Indirect general and administrative expenses are allocated to each segment based on estimated
use.
The split of the organization of the business into four reportable segments is based on differences in management structure and reporting, economic characteristics,
customer base, asset class and contract structure. As of December 31, 2020, we operate in the following four reportable segments:
| • |
LNG Carriers – LNG carriers are vessels that transport LNG and are compatible with many LNG
offloading and receiving terminals globally. We have two LNG carriers which are currently operating through the Cool Pool in the spot/short-term charter market. These vessels will continue to operate through the Cool Pool until their
conversion to FSRUs.
|
| • |
FSRU and Terminals – FSRUs are vessels that are permanently moored offshore and used to
store and regasify LNG. We have one FSRU and terminal offshore Sergipe, Brazil, which is in service to CELSE pursuant to a 25-year charter.
|
| • |
Power – We have contracted with local partners to build cleaner and economically
advantageous natural gas-fired power generation assets backed by long-term power purchase agreements in our core operating areas.
|
| • |
Downstream Distribution - Our downstream distribution business is focused on the
procurement of LNG or natural gas from our terminals and other sources to be able to deliver to our downstream customers under medium to long-term contracts.
|
|
Year Ended December 31, 2020
|
||||||||||||||||||||||||
|
(in thousands of $)
|
LNG Carriers
|
FSRU and Terminals
|
Power
|
Downstream Distribution
|
Other Business and Corporate(1)
|
Total
|
||||||||||||||||||
|
Statement of Operations:
|
||||||||||||||||||||||||
|
Total operating revenues
|
41,952
|
5,343
|
—
|
—
|
—
|
47,295
|
||||||||||||||||||
|
Vessel operating expenses
|
(14,815
|
)
|
(5,634
|
)
|
—
|
—
|
—
|
(20,449
|
)
|
|||||||||||||||
|
Depreciation
|
(11,075
|
)
|
—
|
—
|
(144
|
)
|
(43
|
)
|
(11,262
|
)
|
||||||||||||||
|
Administrative expenses
|
(1,465
|
)
|
(2,133
|
)
|
(2,805
|
)
|
(4,738
|
)
|
(18,103
|
)
|
(29,244
|
)
|
||||||||||||
|
Other operating income
|
3,714
|
—
|
—
|
—
|
—
|
3,714
|
||||||||||||||||||
|
Segment operating income (loss)
|
18,311
|
(2,424
|
)
|
(2,805
|
)
|
(4,882
|
)
|
(18,146
|
)
|
(9,946
|
)
|
|||||||||||||
|
Equity in net loss of affiliates
|
—
|
—
|
(45,880
|
)
|
—
|
—
|
(45,880
|
)
|
||||||||||||||||
24
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
|
6.
|
SEGMENT INFORMATION (continued)
|
|
Year Ended December 31, 2019
|
||||||||||||||||||||||||
|
(in thousands of $)
|
LNG Carriers
|
FSRU and Terminals
|
Power
|
Downstream Distribution
|
Other Business and Corporate(1)
|
Total
|
||||||||||||||||||
|
Statement of Operations:
|
||||||||||||||||||||||||
|
Total operating revenues
|
45,223
|
—
|
—
|
—
|
45,223
|
|||||||||||||||||||
|
Vessel operating expenses
|
(28,375
|
)
|
—
|
—
|
—
|
—
|
(28,375
|
)
|
||||||||||||||||
|
Depreciation
|
(11,168
|
)
|
—
|
—
|
(10
|
)
|
(34
|
)
|
(11,212
|
)
|
||||||||||||||
|
Administrative expenses
|
(869
|
)
|
(3,053
|
)
|
(1,730
|
)
|
(2,671
|
)
|
(7,803
|
)
|
(16,126
|
)
|
||||||||||||
|
Segment operating income (loss)
|
4,811
|
(3,053
|
)
|
(1,730
|
)
|
(2,681
|
)
|
(7,837
|
)
|
(10,490
|
)
|
|||||||||||||
|
Equity in net loss of affiliates
|
—
|
—
|
(2,510
|
)
|
—
|
—
|
(2,510
|
)
|
||||||||||||||||
(1) Relates to corporate overheads not allocated to a segment but included to reflect
total depreciation and administrative expenses in the consolidated statement of income (loss).
|
Year Ended December 31, 2020
|
||||||||||||||||||||||||
|
(in thousands of $)
|
LNG Carriers
|
FSRU and Terminals
|
Power
|
Downstream Distribution
|
Other Business and Corporate(1)
|
Total
|
||||||||||||||||||
|
Balance Sheet:
|
||||||||||||||||||||||||
|
Total assets
|
416,984
|
361,703
|
230,304
|
8,917
|
9,144
|
1,027,052
|
||||||||||||||||||
|
Investments in affiliates
|
—
|
—
|
224,747
|
224,747
|
||||||||||||||||||||
|
Net investment in leased asset
|
—
|
307,660
|
—
|
—
|
—
|
307,660
|
||||||||||||||||||
|
Vessels and equipment, net
|
347,421
|
2
|
—
|
8,067
|
115
|
355,605
|
||||||||||||||||||
|
Other assets
|
69,563
|
54,041
|
5,557
|
850
|
9,029
|
139,040
|
||||||||||||||||||
|
Year Ended December 31, 2019
|
||||||||||||||||||||||||
|
(in thousands of $)
|
LNG Carriers
|
FSRU and Terminals
|
Power
|
Downstream Distribution
|
Other Business and Corporate(1)
|
Total
|
||||||||||||||||||
|
Balance Sheet:
|
||||||||||||||||||||||||
|
Total assets
|
410,930
|
369,902
|
332,363
|
1,662
|
39,935
|
1,154,792
|
||||||||||||||||||
|
Investments in affiliates
|
—
|
—
|
311,105
|
—
|
—
|
311,105
|
||||||||||||||||||
|
Assets under development
|
—
|
327,754
|
—
|
—
|
327,754
|
|||||||||||||||||||
|
Vessels and equipment, net
|
358,489
|
3
|
—
|
1,489
|
162
|
360,143
|
||||||||||||||||||
|
Other assets
|
52,441
|
42,145
|
21,258
|
173
|
39,773
|
155,790
|
||||||||||||||||||
(1) Relates to assets not allocated to a segment but included to reflect the total assets
in the consolidated balance sheet.
Geographic Data and Revenue from External Customers
During the year ended December 31, 2020 and 2019, our vessels predominantly operated within the Cool Pool, with the exception of Golar Nanook, who is under long-term
charter with CELSE in Brazil. In time and voyage charters for LNG carriers operating in the Cool Pool, the charterer, not us, controls the routes of our vessels. These routes can be worldwide as determined by the charterers. Accordingly, our
management, including the chief operating decision maker, do not evaluate our performance either according to customer or geographical region.
25
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 6. |
SEGMENT INFORMATION (continued)
|
During the years ended December 31, 2020 and 2019, revenues from the following customers accounted for over 10% of our consolidated time charter revenues.
|
(in thousands of $)
|
2020
|
2019
|
||||||||||||||
|
The Cool Pool (1)
|
41,952
|
89
|
%
|
45,223
|
100
|
%
|
||||||||||
|
CELSE
|
5,343
|
11
|
%
|
—
|
—
|
%
|
||||||||||
(1) The 2019 Cool Pool revenue of $45.2 million includes revenue of $9.6 million that
is separately disclosed in the consolidated statements of income (loss) as from a collaborative arrangement (see note 14).
| 7. |
THE COOL POOL
|
The table below summarizes our net earnings (impacting each line item in our consolidated statement of income (loss)) generated from our participation in the Cool
Pool:
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Time charter revenues
|
41,952
|
35,601
|
||||||
|
Time charter revenues - collaborative arrangement
|
—
|
9,622
|
||||||
|
Voyage, charter-hire and commission expenses
|
(3,624
|
)
|
(5,912
|
)
|
||||
|
Voyage, charter-hire and commission expenses - collaborative arrangement
|
—
|
(9,825
|
)
|
|||||
|
Net income from the Cool Pool
|
38,328
|
29,486
|
||||||
On July 8, 2019, following the withdrawal of GasLog Ltd.'s vessels from the Cool Pool, we ceased applying the collaborative accounting guidance to the Cool Pool. This
had no impact on how we account for revenues and expenses that were attributable to our own vessels, however, net revenue and expenses relating to the other pool participants are now presented net within “Voyage, charterhire and commission
expenses” as opposed to being presented gross within “Time charter revenues - collaborative arrangement” and “Voyage, charter-hire and commission expenses - collaborative arrangement” under the previously adopted collaborative arrangement
accounting principles (see note 14).
| 8. |
OTHER OPERATING INCOME
|
For the year ended December 31, 2020 and December 31 2019, $3.7 million and $1.1 million, respectively, were recognized in the consolidated statement of income (loss)
for proceeds received relating to a successful insurance claim.
| 9. |
GAINS (LOSSES) ON DERIVATIVE INSTRUMENTS AND OTHER FINANCIAL ITEMS, NET
|
Gains (losses) on derivative instruments comprise the following:
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Mark-to-market adjustment for cross currency interest rate swap derivatives (see note 28)
|
1,098
|
—
|
||||||
|
Interest income on cross currency interest rate swap (see note 28)
|
82
|
—
|
||||||
|
Total
|
1,180
|
—
|
||||||
26
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 9. |
GAINS (LOSSES) ON DERIVATIVE INSTRUMENTS AND OTHER FINANCIAL ITEMS, NET (continued)
|
Other financial items, net comprise the following:
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Deferred consideration (i)
|
(719
|
)
|
(1,553
|
)
|
||||
|
Foreign exchange (gain) / loss
|
2,949
|
(327
|
)
|
|||||
|
Debt guarantee net of amortization (ii)
|
(3,251
|
)
|
574
|
|||||
|
Others
|
(863
|
)
|
(353
|
)
|
||||
|
Total
|
(1,884
|
)
|
(1,659
|
)
|
||||
(i) Deferred consideration relates to the revaluation of the consideration payable to
the project developer as part of the step-acquisition on the investment in CELSEPAR in 2016. The impact is inclusive of the unwinding of the discount with the total paid in Q1 2020.
(ii) In March 2020, the Golar Celsius facility was re-financed prior to maturity. This
accelerated the amortization of the cost of the counter guarantee provided to Golar LNG that had been recognized at fair value upon our formation ($0.5 million). In addition, we made payments to Golar LNG totaling $2.5 million in respect of the
guarantee on the Golar Nanook facility covering the period from inception of the Golar Nanook facility to December 31, 2020.
In December 2019, we completed the refinancing of the Golar Penguin. This
accelerated the amortization of the cost of the counter guarantee provided to Golar LNG that had been recognized at fair value upon our formation ($0.6 million).
| 10. |
INCOME TAXES
|
The components of income tax expense are as follows:
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Current tax expense:
|
||||||||
|
Brazil
|
6,015
|
515
|
||||||
|
Other
|
1,625
|
241
|
||||||
|
Total current tax expense
|
7,640
|
756
|
||||||
|
Deferred tax (credit) expense
|
(2,878
|
)
|
3,396
|
|||||
|
Total tax expense
|
4,762
|
4,152
|
||||||
The income taxes for the years ended December 31, 2020 and 2019 differed from the amount computed by applying the Bermuda statutory income tax rate of 0% as follows:
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Effect of taxable income in various countries
|
7,640
|
756
|
||||||
|
Effect of movement in deferred tax balance
|
(2,878
|
)
|
3,396
|
|||||
|
Total tax expense
|
4,762
|
4,152
|
||||||
27
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 10. |
INCOME TAXES (continued)
|
Bermuda
The Minister of Finance in Bermuda has granted the Company a tax exempt status until March 31, 2035, under which no income taxes or other taxes (other than duty on
goods imported into Bermuda and payroll tax in respect of any Bermuda-resident employees) are payable by the Company in Bermuda. If the Minister of Finance in Bermuda does not grant a new exemption or extension of the current tax exemption, and if
the Bermudian Parliament passes legislation imposing taxes on exempted companies, the Company may be subject to taxation in Bermuda after March 31, 2035.
Brazil
The current tax expense of $6.0 million (2019: $0.5 million) relates to taxation levied on our Brazilian subsidiaries.
As of December 31, 2020, the Company recognized a deferred tax liability of $0.4 million (2019: 3.5 million) with respect to mark to market movements on financial
instruments in Brazil. This item represents the only temporary difference on the Company's consolidated balance sheet as of December 31, 2020.
Other jurisdictions
The current tax expenses of $1.6 million includes $1.5 million in withholding tax incurred in Brazil by a UK subsidiary and $0.1 million relates to United States
taxation levied on our two LNG carrier vessel owning entities on income earned for transportation that began in the United States. No tax has been levied on income derived from our subsidiaries registered in the Marshall Islands. There are no
potential deferred tax liabilities arising on undistributed earnings within the Group as no tax would arise on distribution.
Jurisdictions open to examination
The earliest tax years that remain subject to examination by the major taxable jurisdictions in which we operate are UK (2019) and Brazil (2017).
| 11. |
LOSS PER SHARE
|
Basic loss per share ("EPS") is calculated with reference to the weighted average number of common shares outstanding during the year.
The components of the numerator for the calculation of basic and diluted EPS are as follows:
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Numerator - net loss available to common stockholders
|
(79,632
|
)
|
(24,352
|
)
|
||||
The components of the denominator for the calculation of the basic and diluted EPS are as follows:
|
(in thousands of $, except per share data)
|
2020
|
2019
|
||||||
|
Basic and diluted loss per share:
|
||||||||
|
Weighted average number of common shares outstanding (1)
|
46,950,154
|
46,950,154
|
||||||
(1) Includes the common shares included in the mezzanine classification
28
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 11. |
LOSS PER SHARE (continued)
|
Loss per share are as follows:
|
(in thousands of $, except per share data)
|
2020
|
2019
|
||||||
|
Basic and diluted ($)
|
(1.70
|
)
|
(0.52
|
)
|
||||
The effects of the convertible ordinary and preference shares have been excluded from the calculation of diluted EPS for each of the years ended December 31, 2020 and
2019 as these are contingent on an Initial Public Offering ("IPO") or other redemption event and therefore the effects were anti-dilutive.
| 12. |
RESTRICTED CASH AND SHORT-TERM DEPOSITS
|
Our restricted cash and short-term deposits balances are as follows:
|
(in thousands of $)
|
Notes
|
2020
|
2019
|
|||||||||
|
Restricted cash and short-term deposits held by lessor VIEs (i)
|
5
|
32,080
|
11,072
|
|||||||||
|
Restricted cash relating to the Golar Celsius (ii)
|
—
|
6,039
|
||||||||||
|
Restricted cash relating to LC (iii)
|
5,750
|
5,750
|
||||||||||
|
Restricted cash relating to Brazil office lease
|
32
|
41
|
||||||||||
|
Total restricted cash
|
37,862
|
22,902
|
||||||||||
|
Less: Amounts included in current restricted cash
|
37,830
|
22,861
|
||||||||||
|
Non-current restricted cash
|
32
|
41
|
||||||||||
(i) These are amounts held by our lessor VIE entities that we are required to consolidate under U.S. GAAP into our financial statements as VIEs (see note 5).
(ii) Restricted cash relating to the Golar Celsius refers to cash deposits
required in connection with the financial covenant compliance related to the previous Golar Celsius facility. This facility was extinguished in March 2020 and replaced with a new facility (see note 22).
(iii) This amount relates to an irrevocable stand-by letter of credit ("LC") required in connection with the financing of the CELSE project.
Restricted cash does not include $6.8 million and $3.9 million which is the minimum cash position that we are required to maintain as part of the financial covenants
for our sale and leaseback financing. These are included in "cash and cash equivalents" in the consolidated balance sheet as at December 31, 2020 and 2019 respectively.
| 13. |
TRADE ACCOUNTS RECEIVABLE
|
As of December 31, 2020 and 2019, there was no provision for doubtful accounts.
29
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 14. |
RELATED PARTY TRANSACTIONS
|
a) Transactions with CELSE:
Income (expenses): The transactions with CELSE for the years ended December 31, 2020 and 2019 consisted of the following:
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Interest income (i)
|
37,545
|
—
|
||||||
|
Time charter revenues (i)
|
5,343
|
—
|
||||||
|
Total
|
42,888
|
—
|
||||||
Receivables (payables): The balances with CELSE as of December 31, 2020 and 2019 consisted of the following:
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Deferred revenue (ii)
|
(9,057
|
)
|
(37,568
|
)
|
||||
|
Trade receivable
|
7,972
|
28,601
|
||||||
|
Total
|
(1,085
|
)
|
(8,967
|
)
|
||||
(i) On March 31, 2020, following the commencement of the Sergipe power plant operations by CELSE, the Golar Nanook commenced its sales-type finance lease. All charter hire revenue from the bareboat charter is recognized as interest income whereas charter hire revenue from the operation and services agreement is
recognized as time charter revenue.
(ii) As at December 31, 2020, balances with CELSE include $3.6 million of pre-commissioning revenue under Golar Nanook's charter agreement with CELSE (December 31, 2019: $32.6 million) as well as $5.4 million of pre-commissioning revenue under its operation and services agreement with CELSE (December 31, 2019: $5.0
million).
b) Transactions with Golar LNG and subsidiaries:
Income (expenses): The transactions with Golar LNG for the years ended December 31, 2020 and 2019 consisted of the following:
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Management and administrative services expense (i)
|
(5,326
|
)
|
(5,904
|
)
|
||||
|
Ship management fees expense (ii)
|
(1,780
|
)
|
(1,210
|
)
|
||||
|
Debt guarantee fee expense (iii)
|
(3,826
|
)
|
(693
|
)
|
||||
|
Other (iv)
|
—
|
(2
|
)
|
|||||
|
Time charter revenues - Cool Pool (v)
|
41,952
|
—
|
||||||
|
Voyage, charter-hire and commission expenses - Cool Pool (v)
|
(3,626
|
)
|
—
|
|||||
|
Total
|
27,394
|
(7,809
|
)
|
|||||
Receivables: The balances with Golar LNG and subsidiaries as of December 31, 2020 and 2019 consisted of the following:
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Trading balances due from Golar LNG and subsidiaries (v)(vi)
|
11,223
|
6,829
|
||||||
|
Total
|
11,223
|
6,829
|
||||||
30
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 14. |
RELATED PARTY TRANSACTIONS (continued)
|
(i) Management and administrative services agreement - We entered into a management and administrative services agreement with Golar Management Ltd ("Golar Management"),
a wholly-owned subsidiary of Golar LNG, pursuant to which Golar Management will provide to us certain management and administrative services. The services provided by Golar Management are charged at cost plus a management fee equal to 5% of
Golar Management’s costs and expenses incurred in connection with providing these services. We may terminate the agreement by providing 6 months written notice.
(ii) Ship management fees - Golar LNG and certain of its affiliates charge ship management fees to us for the provision of technical and commercial management of our
vessels. Each of our vessels is subject to management agreements pursuant to which certain commercial and technical management services are provided by Golar Management. We may terminate these agreements by providing 30 days written notice.
(iii) Debt guarantee fee expense - Golar LNG have provided financial guarantees in relation to the debt financing of Golar Celsius,
Golar Penguin and Golar Nanook. We entered into agreements to compensate Golar LNG in relation to certain debt guarantees. This compensation amounted to $3.8
million and $0.7 million for the years ended December 31, 2020 and 2019, respectively.
(iv) Other - In December 2019, we borrowed $7.0 million from Golar LNG at interest of LIBOR plus 5.0%. The loan was fully repaid, including USD two thousand of interest
expense, in December 2019.
(v) The Cool Pool - Following Gaslog's departure in July 2019, Golar LNG assumed sole responsibility for the management of the Cool Pool and consolidated the Cool Pool.
Net revenue relating to the other pool participants presented on our consolidated statement of income (loss) under “Voyage, charterhire and commission expenses” for the year ended December 31, 2020 amounted to $2.1 million (net expenses of $1.6
million for the year ended December 31, 2019).
Amounts due from the Cool Pool as of December 31, 2020 included in trade accounts receivable amounted to $41,000 (December 31, 2019: $1.8 million), trading balances due from Golar LNG and subsidiaries of $6.0
million (December 31, 2019: $3.3 million) and deferred revenue of $2.6 million (December 31, 2019: $1.2 million).
(vi) Trading balances - Receivables and payables with Golar LNG and its subsidiaries are comprised primarily of unpaid management fees, advisory and administrative
services and may include working capital adjustments in connection with the initial formation of the joint venture and transaction with Stonepeak. In addition, certain receivables and payables arise when Golar LNG pays an invoice on our behalf.
Receivables and payables are generally settled quarterly in arrears. Trading balances owing to or due from us and our subsidiaries are unsecured, interest-free and intended to be settled in the ordinary course of business.
Other transactions:
Cooperation Agreement and termination of Omnibus Agreement
In connection with our JV partnership in 2016, we entered into an Omnibus Agreement with Golar LNG and Golar LNG Partners LP and its subsidiaries ("Partnership Group"), governing, amongst other things, the
business opportunities that Hygo will not pursue during the term of the Omnibus Agreement as well as the procedures whereby such business opportunities are to be offered to the Partnership Group. This includes the Partnership Group's right of
first offer to any of Hygo's vessels which is employed under a charter agreement exceeding five years at its fair market value.
31
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 14. |
RELATED PARTY TRANSACTIONS (continued)
|
In August 2020, we entered into a Cooperation Agreement with Golar Partners where we intend to work together to develop hub-spoke LNG terminal solutions utilizing Golar Partners' available asset portfolio, where
their assets are technically suitable. The terms and structure of the commercial cooperation will be worked on a project by project basis given the customized nature of each potential terminal. As part of the agreement, we have agreed to
terminate our existing Omnibus agreement.
Golar Partners, an affiliate of Golar LNG, is an owner and operator of FSRUs and LNG carrier under long-term charters. As at December 31, 2020 and 2019 Golar LNG's ownership in Golar Partners was 32.8% and 32.0%,
respectively.
Guarantees and other:
a) Debt guarantees - These debt guarantees were previously issued by Golar LNG to third party banks in respect of certain
secured debt facilities relating to us and our subsidiaries. In connection with our formation, we entered into a counter guarantee with Golar LNG to indemnify Golar LNG in the event they are required to pay out any monies due under the debt
guarantee. The liability for this counter guarantee was recorded in "Other current liabilities" and "Other non-current liabilities" and was amortized over the remaining term of the respective debt facilities associated with Golar Penguin and Golar Celsius. In December 2019 and March 2020, the Golar Penguin and Golar
Celsius, respectively, were refinanced and simultaneously the guarantees terminated. Subsequently, debt guarantees were provided on the Golar Penguin and Golar
Celsius in connection with their new financing arrangements. A debt guarantee was also provided by Golar LNG on the financing arrangement for the Golar Nanook.
As described in (iii) above we pay Golar LNG a guarantee fee in relation to the provision of the guarantees. The debt facilities are secured against specific vessels.
b) Golar Power purchase option - Under the shareholders' agreement (as agreed between the shareholders of the Company at formation), we had the right for 18 months from July 6, 2016 to purchase
another two vessels from Golar LNG at their respective fair values. In connection with any such transaction, Ordinary Shares would have been issued based on the fair market value of the vessel(s) at the time of their respective contribution.
The purchase option expired in January 2019.
c) Golar LNG and Stonepeak contributions - under our shareholders' agreement, Golar LNG and Stonepeak have agreed to contribute additional funding as may be required by
us, subject to the approval of the board of directors.
c) Transaction with other related parties:
Expenses: The transactions with other related parties for the years ended December 31, 2020 and 2019 consisted
of the following:
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Magni Partners (i)
|
(1,591
|
)
|
(1,416
|
)
|
||||
|
Borr Management Mexico (ii)
|
(1,018
|
)
|
—
|
|||||
|
Yorktown Management Services (iii)
|
(97
|
)
|
—
|
|||||
|
Total
|
(2,706
|
)
|
(1,416
|
)
|
||||
32
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 14. |
RELATED PARTY TRANSACTIONS (continued)
|
Receivables (Payables): The balances with other related parties as of December 31, 2020 and 2019 consisted of the following:
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Borr Management Mexico (ii)
|
(350
|
)
|
—
|
|||||
|
CELBA (iv)
|
112
|
407
|
||||||
|
Golar Power Brasil 2 Participações S.A. ("GPB2") (iv)
|
242
|
32
|
||||||
|
Magni Partners (i)
|
—
|
(141
|
)
|
|||||
|
Total
|
4
|
298
|
||||||
(i) Magni Partners - Tor Olav Trøim, a Director of Hygo Energy Transition Ltd, is the founder of, and partner in, Magni Partners Limited ("Magni Partners"), a privately
held UK company, as well as Magni Partners Bermuda Limited ("Magni Bermuda"), a Bermudan domiciled company. In his role, he is the ultimate beneficial owner of these two companies. Pursuant to management agreements between Magni Partners, Magni
Bermuda and us, we were recharged $1.6 million and $1.4 million for salary and consulting expenses for all individuals working for Magni Partners and Magni Bermuda for the year ended December 31, 2020 and 2019, respectively. Of the aggregate
amount re-charged, $nil and $0.1 million remains to be settled as at December 31, 2020 and 2019, respectively. This amount is included in "Trade accounts payables" in the consolidated balance sheet.
(ii) Borr Management Mexico - We compensated Borr Management Mexico $1.1 million for business development services in Latin America for the year ended December 31, 2020.
Tor Olav Trøim is also a Director of Borr Drilling.
(iii) Yorktown Management Services - We appointed Paul Hanrahan as Chief Executive Officer on October 19, 2020. Mr. Hanrahan is employed and compensated by Yorktown
Management Services LLC and provides services to us pursuant to a services agreement.
(iv) As of December 31, 2020 and 2019, $0.4 million and $0.4 million, respectively, in receivables from other related parties are short-term in nature.
| 15. |
OTHER CURRENT ASSETS
|
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Prepayments (i)
|
1,969
|
2,747
|
||||||
|
Other receivables (ii)
|
1,424
|
410
|
||||||
|
Inventories
|
2
|
425
|
||||||
|
Total
|
3,395
|
3,582
|
||||||
(i) For the year ended December 31, 2020, "Prepayments" includes $1.0 million for the advance payment of ISO containers as well as $0.8 million (2019: $2.2 million) of pre-paid withholding tax in relation to Golar Nanook's operation and services agreement, the majority of which have been repaid from CELSE when payments under the agreement began in 2020.
(ii) For the year ended December 31, 2020, "Other receivables" includes $0.9 million of loan and interest receivable. In June 2020, the company entered into a loan agreement with Alliance GNLOG Transported Ltda.
to lend a maximum amount of $1.5 million (BRL 8 million) at an interest rate of 6%, repayable in 12 months from the date of draw down. As of December 31, 2020, the borrower has drawn down $0.9 million (BRL 4.8 million).
33
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
|
16.
|
INVESTMENTS IN AFFILIATES
|
At December 31, 2020 and 2019, we have the following participation in investments that are recorded using the equity method:
|
2020
|
2019
|
|||||||
|
CELSEPAR
|
50
|
%
|
50
|
%
|
||||
|
CELBA
|
50
|
%
|
50
|
%
|
||||
|
GPB2 (1)
|
50
|
%
|
50
|
%
|
||||
|
Centrais Elétricas Barra dos Coqueiros S.A. ("CEBARRA") (1)
|
37.5
|
%
|
37.5
|
%
|
||||
|
Centrais Termelétricas São Marcos S.A. ("São Marcos")
|
50
|
%
|
50
|
%
|
||||
|
Centrais Elétricas Barcarena S.A. 2 ("CELBA 2") (2)
|
50
|
%
|
—
|
%
|
||||
(1) GPB2 is a 50/50 joint venture between us and Evolution Power Partners S.A ("Evolution"). GPB2 owns 75% of the common shares of
CEBARRA. As such, we have a 37.5% interest in the CEBARRA project.
(2) Refers to our joint venture with CELBA, BEP - Brazilian Energy Participações S.A. (“BEP”) and OAK Participações Ltda. (“OAK”), which was incorporated in
January 2020 solely to comply with specific requirements of the related power auction in Brazil, and therefore is expected to be party to the Barcarena PPAs. Hygo currently indirectly owns a 50.0% interest in CELBA 2, and BEP, OAK and Evolution
own an aggregate indirect 50.0%.
The carrying amounts of our investments in our equity method investments as at December 31, 2020 and 2019 are as follows:
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
CELSEPAR
|
222,855
|
310,368
|
||||||
|
CELBA 2
|
1,091
|
—
|
||||||
|
CELBA
|
414
|
165
|
||||||
|
São Marcos
|
387
|
572
|
||||||
|
Equity in net assets of affiliates
|
224,747
|
311,105
|
||||||
The components of equity in net assets of non-consolidated affiliates are as follows:
|
(in thousands of $)
|
||||
|
Equity in net assets of affiliates as at January 1, 2019
|
265,072
|
|||
|
Capital contributions
|
48,652
|
|||
|
Equity in net loss of affiliates
|
(2,510
|
)
|
||
|
Capitalized interest
|
4,731
|
|||
|
Foreign currency translation adjustment
|
(4,840
|
)
|
||
|
Equity in net assets of affiliates as at December 31, 2019
|
311,105
|
|||
|
Equity in net assets of affiliates as at January 1, 2020
|
311,105
|
|||
|
Capital contributions
|
4,004
|
|||
|
Equity in net loss of affiliates
|
(45,880
|
)
|
||
|
Capitalized interest
|
2,185
|
|||
|
Foreign currency translation adjustment
|
(46,667
|
)
|
||
|
Equity in net assets of affiliates as at December 31, 2020
|
224,747
|
|||
34
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 16. |
INVESTMENTS IN AFFILIATES (continued)
|
The components of equity loss from affiliates are as follows:
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
CELSEPAR
|
(45,324
|
)
|
(1,483
|
)
|
||||
|
CELBA
|
(447
|
)
|
(853
|
)
|
||||
|
São Marcos
|
(57
|
)
|
(174
|
)
|
||||
|
CELBA 2
|
(52
|
)
|
—
|
|||||
|
Equity in net loss in affiliates
|
(45,880
|
)
|
(2,510
|
)
|
||||
The Company has capitalized interest of $2.2 million and $4.7 million for the years ended December 31, 2020 and 2019, respectively, on its investment in CELSEPAR as the equity method investment was deemed a
qualifying asset from the date of our Final Investment Decision until the commencement of its planned principal operation in March 2020, upon which the capitalization of interest ceased.
CELSEPAR
On incorporation of Hygo Energy Transition Ltd., the Company through its wholly owned subsidiary, LNG Power Limited ("LNG Power") and consequently 50% equity interest in Golar Brasil, held a 25% indirect
investment in project company CELSE. On October 14, 2016, in a step-acquisition, the Company acquired the remaining 50% equity in Golar Brasil, resulting in a 50% investment in project company CELSE.The power project will deliver power to 26
committed off-takers for 25 years from March 2020 in accordance with previously executed Power Purchase Agreement ("PPA") contracts awarded by the Brazilian Government in 2015.
In March 2018, CELSEPAR was incorporated as a holding company of CELSE and the shares of CELSE were transferred to CELSEPAR. As CELSEPAR is jointly owned and operated with Ebrasil, we have adopted the equity
method of accounting for our 50% investment.
On April 5, 2018 CELSE priced and closed financing of $1.4 billion for the power plant and LNG receiving terminal. The initial tranche of funding was disbursed on April 19, 2018. The financing comprises:
| • |
Brazilian Reais - BRL 3,370 million 9.85% Senior Secured Notes due 2032 (net proceeds of $874 million);
|
| • |
$288 million loan from Inter-American Development Bank due 2032 which comprises three tranches; and
|
| • |
$200 million loan from International Finance Company due 2032.
|
CELSE also secured a $120 million contingent equity facility from GE Capital to be drawn down in the event of cost overruns which is available to be borrowed under until April 2021 and matures in November 2024.
As at December 31, 2020, there was BRL 689.4 million or $132 million outstanding under the GE Credit Facility.
Summarized consolidated financial information of CELSEPAR are shown on a 100% basis as follows:
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Balance Sheet
|
||||||||
|
Current assets
|
206,232
|
184,681
|
||||||
|
Non-current assets
|
1,755,602
|
1,364,619
|
||||||
|
Current liabilities
|
216,310
|
128,286
|
||||||
|
Non-current liabilities
|
1,487,755
|
1,002,331
|
||||||
|
Statement of Operations
|
||||||||
|
Net loss
|
(45,324
|
)
|
(3,039
|
)
|
||||
35
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 16. |
INVESTMENTS IN AFFILIATES (continued)
|
CELBA
On March 14, 2017, the Company through its wholly owned subsidiary LNG Power, and its wholly owned subsidiary Golar Brasil, entered into an agreement with Evolution Power Partners S.A. to establish a jointly
owned company CELBA. CELBA's purpose is the production of electricity and development of an integrated LNG import terminal in the city of Barcarena in the State of Para.
The Company acquired 5,000 common shares in CELBA at a subscription price of $BRL 1 per share, representing a 50% interest in the voting rights of CELBA.
On January 17, 2018 Golar Power Latam Participações e Comércio Ltda, a wholly owned subsidiary of LNG Power, acquired 5,000 common shares in CELBA at nominal value from Golar Brasil.
Following the sale of the 50% interest, we have adopted the equity method of accounting for our 50% investment in CELBA , as we consider we have joint control. There was no gain or loss on the sale of the 50%
interest.
GPB2 and CEBARRA
In November 2016, we and our subsidiary, GPB2, entered into an agreement with Ebrasil to establish CEBARRA and acquired an aggregate of 7,500 common shares at a subscription price of R$1.00 per share,
representing a 75% interest in CEBARRA.
In July 2018, we sold 750 common shares in GPB2 at a subscription price of R$1.00 per share, representing a 50% interest in GPB2, to Evolution, an unrelated third party. Following such sale, we owned a 50%
interest in GPB2 and a 37.5% indirect interest in CEBARRA.
CEBARRA's purposes is the generation and marketing of electricity, the implementation of thermoelectrical generating units from combustible natural gas and the import, export and vaporization of liquified natural
gas and natural gas and holds the Sergipe power plant expansion rights.
Since July 19, 2018 with the sale of 50% of the interest in GPB2, we have adopted the equity method of accounting for both our 50% investment in GPB2, as we consider we have joint control, and our 37.5%
investment in CEBARRA, as we do not exercise control.
CELBA 2
In January 2020, our subsidiary, Golar Brasil, established CELBA 2, a joint venture with CELBA, BEP and OAK, and acquired an aggregate of 6,000,000 common shares, 5,940,000 directly and 120,000 indirectly through
our 50% ownership in CELBA, at a subscription price of R$1.00 per share, representing a 50% interest in CELBA 2. CELBA 2 was incorporated solely to comply with specific requirements of the related power auction in Brazil, and therefore is
expected to be party to the Barcarena PPAs. Since inception, we have adopted the equity method of accounting for our 50% investment in CELBA 2, as we consider we have joint control.
SÃO MARCOS
On March 14, 2019, the Company through its wholly owned subsidiary LNG Power, and its wholly owned subsidiary Golar Power Maranhão Participações S.A., entered into an agreement with Eneva S.A. to establish a
jointly owned company São Marcos. São Marcos' purpose is the development of an integrated LNG import terminal as well as power plant in the city of São Luis in the State of Maranhão, Brazil.
36
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 16. |
INVESTMENTS IN AFFILIATES (continued)
|
The Company acquired 3,000,500 common shares in São Marcos at a subscription price of $BRL 1 per share, representing a 50% interest in the voting rights of São Marcos.
We have adopted the equity method of accounting for our 50% investment in São Marcos, as we consider we have joint control.
| 17. |
NET INVESTMENT IN LEASED ASSET
|
On March 31, 2020, following the commencement of the Sergipe power plant operations by the charterer, the Golar Nanook commenced its sales-type finance lease. The
commencement of the lease resulted in the de-recognition of the asset under development carrying value, the recognition of net investment in leased asset (consisting of present value of the future lease receivables and unguaranteed residual
value), and a loss on disposal of $26.0 million which is presented in "Other non-operating loss" of our consolidated statement of income (loss). Subsequent to the recognition of the sales-type lease, all charter hire revenue from the Golar
Nanook Finance Lease is to be recognized as interest income. We recognized interest income of $35.5 million and $nil for the years ended December 31, 2020 and 2019, respectively, which is presented under "Interest income" in the consolidated
statement of income (loss).
The following table list the components of our net investment in leased vessel and the maturity profile of the undiscounted lease receivables:
|
Year ending December 31
|
||||
|
(in thousands of $)
|
||||
|
2021
|
47,132
|
|||
|
2022
|
47,802
|
|||
|
2023
|
48,482
|
|||
|
2024
|
49,307
|
|||
|
2025
|
49,875
|
|||
|
2026 and thereafter
|
1,097,134
|
|||
|
Total minimum lease receivable
|
1,339,732
|
|||
|
Unguaranteed residual value
|
134,940
|
|||
|
Gross investment in sales-type lease
|
1,474,672
|
|||
|
Less: Unearned interest income
|
(1,165,012
|
)
|
||
|
Less: Current expected credit losses (1)
|
(2,000
|
)
|
||
|
Net investment in leased vessel
|
307,660
|
|||
|
Less: Current portion of net investment in leased asset
|
—
|
|||
|
Non-current portion of net investment in leased asset
|
307,660
|
|||
(1) A corresponding charge of $2.0 million was recognized in "Interest income" in the consolidated statement of income (loss).
37
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 18. |
ASSETS UNDER DEVELOPMENT
|
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Opening asset under development balance
|
327,754
|
302,410
|
||||||
|
Interest costs capitalized
|
3,530
|
14,006
|
||||||
|
Other costs capitalized(1)
|
1,890
|
11,338
|
||||||
|
Transfer out of asset under development
|
(333,174
|
)
|
—
|
|||||
|
Closing asset under development balance
|
—
|
327,754
|
||||||
(1) Other capitalized costs include voyage
charter, site supervision and other miscellaneous construction costs.
Following the commencement of the Sergipe power plant operations by the charterer in March 2020, the Golar Nanook commenced its sales-type lease. The vessel carrying
value of the Golar Nanook was de-recognized from “Asset under development” and a “Net investment in leased asset” was recognized (see note 17).
| 19. |
VESSELS AND EQUIPMENT, NET
|
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Cost
|
||||||||
|
As of Jan 1
|
394,306
|
388,788
|
||||||
|
Additions
|
6,724
|
7,462
|
||||||
|
Write-off of fully depreciated costs
|
(1,424
|
)
|
(1,944
|
)
|
||||
|
As of December 31
|
399,606
|
394,306
|
||||||
|
Depreciation and amortization
|
||||||||
|
As of Jan 1
|
(34,163
|
)
|
(24,895
|
)
|
||||
|
Charge for the year
|
(11,262
|
)
|
(11,212
|
)
|
||||
|
Write-off of fully depreciated costs
|
1,424
|
1,944
|
||||||
|
As of December 31
|
(44,001
|
)
|
(34,163
|
)
|
||||
|
Net book value as of December 31
|
355,605
|
360,143
|
||||||
38
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 20. |
IMPAIRMENT OF VESSELS
|
Vessels
In assessing indicators of impairment, management compare the market value of our vessels with the carrying value. The market values are based on third party broker reports and reflect an amount that a willing
buyer and seller would transact at an arms-length basis. The following table presents the vessels where their market value was less than their carrying value as of December 31, 2020. However, when we tested for recoverability based on a “held
and used” approach, the estimated future undiscounted cash flows of these vessels were significantly greater than their respective carrying values, and therefore, no impairment was recognized.
(in thousands of $)
|
Vessel
|
2020 Market value(1)
|
2020 Carrying value
|
Deficit
|
|||||||||
|
Golar Celsius
|
147,000
|
169,000
|
(22,000
|
)
|
||||||||
|
Golar Penguin
|
151,000
|
178,000
|
(27,000
|
)
|
||||||||
(1) Market values are determined using reference to average broker values provided by independent brokers. Broker value is
considered an estimate of the market value for the purpose of determining whether an impairment trigger exists. Broker value is commonly used and accepted by our lenders in relation to determining compliance with relevant covenants in
applicable credit facilities for the purpose of assessing security quality.
Since vessel value can be volatile, our estimate of market value may not be indicative of either the current or future price we could obtain if we sold any of our vessels. In addition, the determination of
estimated market value may involve considerable judgment, given the illiquidity of the second-hand markets for these types of vessel.
| 21. |
OTHER NON-CURRENT ASSETS
|
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Other
|
29,208
|
28,905
|
||||||
|
Right of use lease asset
|
204
|
438
|
||||||
|
Total
|
29,412
|
29,343
|
||||||
As at December 31, 2020, $27.7 million (2019: $27.6 million) of "Other" relates to payments made relating to long lead items ordered in preparation for the expected conversion of one of our vessels. We do not
depreciate these items as they are not yet ready for their intended use. $1.0 million (2019: $1.3 million) relates to the prepayment for the purchase of land from Companhia de Desenvolvimento Econômico de Sergipe, a Brazilian state government
controlled company.
| 22. |
DEBT
|
|
(in thousands of $)
|
2020
|
2019
|
||||||||
|
Total debt, net of deferred financing costs
|
479,785
|
464,742
|
||||||||
|
Less: current portion of long-term debt and short-term debt, net of deferred financing costs
|
(35,254
|
)
|
(127,056
|
)
|
||||||
|
Long-term debt, net of deferred financing costs
|
444,531
|
337,686
|
||||||||
39
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 22. |
DEBT (continued)
|
The outstanding debt as of December 31, 2020 is repayable as follows:
|
Year ending December 31
|
Hygo debt
|
Debt held in
VIEs (1)
|
Total debt
|
|||||||||
|
(in thousands of $)
|
||||||||||||
|
2021
|
9,810
|
25,962
|
35,772
|
|||||||||
|
2022
|
12,119
|
15,195
|
27,314
|
|||||||||
|
2023
|
14,716
|
61,538
|
76,254
|
|||||||||
|
2024
|
17,428
|
14,595
|
32,023
|
|||||||||
|
2025
|
—
|
61,804
|
61,804
|
|||||||||
|
2026 and thereafter
|
—
|
250,497
|
250,497
|
|||||||||
|
Total
|
54,073
|
429,591
|
483,664
|
|||||||||
|
Deferred financing costs
|
(3,120
|
)
|
(759
|
)
|
(3,879
|
)
|
||||||
|
Total
|
50,953
|
428,832
|
479,785
|
|||||||||
(1) These amounts relate to certain lessor entities (for which legal ownership resides with financial institutions) that we are
required to consolidate under U.S. GAAP into our financial statements as variable interest entities (see note 5).
At December 31, 2020 and 2019 our debt was as follows:
|
(in thousands of $)
|
2020
|
2019
|
Maturity
date
|
|||||||||
|
Golar Celsius facility(1)
|
—
|
64,212
|
NA
|
|||||||||
|
Debenture Loan
|
54,074
|
74,434
|
2024
|
|||||||||
|
Subtotal (excluding lessor VIE loan)
|
54,074
|
138,646
|
||||||||||
|
CCBFL VIE loan:
|
||||||||||||
|
-Golar Nanook SPV facility
|
202,249
|
217,178
|
2030
|
|||||||||
|
COSCO VIE loan:
|
||||||||||||
|
-Golar Penguin SPV facility
|
104,441
|
113,400
|
2025
|
|||||||||
|
AVIC VIE loan:
|
||||||||||||
|
-Golar Celsius SPV facility
|
122,900
|
—
|
2023/2027
|
|||||||||
|
Total debt (gross)
|
483,664
|
469,224
|
||||||||||
|
Deferred finance charges
|
(3,879
|
)
|
(4,482
|
)
|
||||||||
|
Total debt
|
479,785
|
464,742
|
||||||||||
(1) In March 2020, the Golar Celsius facility was extinguished prior to maturity.
Debenture Loan
In September 2019, Golar Brasil, a wholly owned subsidiary of LNG Power, issued a simple, non-convertible Brazilian debenture in the amount of BRL 300 million. The debenture has a term of 5 years and bears
interest at certificado de deposito interbancário plus a margin of 2.65%, with repayment commencing in September 2020 and due semi-annually thereafter. The Brazilian debentures are fully and unconditionally guaranteed by various factors,
including 100% of the shares issued by Golar Brasil owned by our wholly owned subsidiary, LNG Power Ltd.
40
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 22. |
DEBT (continued)
|
Lessor VIE debt
The following loans relate to our lessor VIE entities, including CCBFL, COSCO and AVIC, that we consolidate as VIEs. Although we have no control over the funding arrangements of these entities, we consider
ourselves the primary beneficiary of these VIEs and we are therefore required to consolidate the loan facilities into our financial statements.
CCBFL - Golar Nanook SPV facility
In September 2018, the SPV, Compass Shipping 23 Corporation Limited, the owner of the Golar Nanook, entered into a long-term loan facility for $277.0 million. The loan
facility is denominated in USD, has a loan term of 12 years, bears interest at a fixed rate of 3.15% (decreasing to 2.69% commencing December 2020). As the loan facility in nature is repayable at the end of maturity, the Company has classified
the debt as non-current in the consolidated balance sheet as at December 31, 2020. See note 5 for additional information.
COSCO - Golar Penguin SPV facility
In December 2019, the SPV, Oriental Fleet LNG 02 Limited, the owner of the Golar Penguin, entered into a short-term financing agreement for $113.4 million. The loan
facility, denominated in USD, bore interest at LIBOR plus a margin of 1.7%.
In June 2020, Oriental Fleet LNG 02 Limited repaid the existing loan facility of $113.4 million following a loan from its parent of $104.1 million. Further, in October 2020, a new loan facility for $94.0 million
was obtained, of which $90.7 million was used to repay the loan to its parent. The new loan facility, denominated in USD, bears interest at LIBOR plus a margin of 1.7% and is repayable in quarterly installments over a term of approximately 6
years. Following the refinancing, amount payable to its parent as of December 31, 2020 is $10.5 million.
AVIC - Golar Celsius SPV facility
In March 2020, the AVIC owned SPV, Noble Celsius Shipping Limited, the owner of the Golar Celsius, entered into a three-year facility for $118.2 million. The loan
facility, denominated in USD, bears interest at 4.0% per annum.
In November 2020, a new loan facility for $77.7 million was obtained, of which $73.0 million was used to repay the existing loan facility to its parent. The new loan facility, denominated in USD, bears interest
at LIBOR plus a margin of 1.8% and is repayable in quarterly installments over a term of approximately 7 years. Following the refinancing, amount payable to its parent as of December 31, 2020 is $45.2 million.
Debt restrictions
The existing financing agreement imposes operating and financing restrictions which may significantly limit or prohibit, among other things, our ability to incur additional indebtedness, create liens, sell
capital shares of subsidiaries, make certain investments, engage in mergers and acquisitions, purchase and sell vessels, enter into time or consecutive voyage charters or pay dividends without the consent of the lenders. In addition, lenders
may accelerate the maturity of indebtedness under financing agreements and foreclose upon the collateral securing the indebtedness upon the occurrence of certain events of default, including a failure to comply with any of the covenants
contained in the financing agreements. Many of our debt agreements contain certain covenants, which require compliance with certain financial ratios. Such ratios include current assets: current liabilities and equity ratio covenants.
As of December 31, 2020, we were in compliance with all our covenants under various loan agreements.
41
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 23. |
ACCRUED EXPENSES
|
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Preferred dividends (see note 26)
|
44,315
|
33,009
|
||||||
|
Accrued interest expense
|
5,398
|
3,409
|
||||||
|
Vessel operating and drydocking expenses
|
1,567
|
3,855
|
||||||
|
Other
|
3,978
|
5,780
|
||||||
|
Total
|
55,258
|
46,053
|
||||||
Vessel operating and drydocking expense related accruals relate to vessel operating expenses including direct vessel operating costs associated with operating a vessel, such as crew wages, vessel supplies,
routine repairs, maintenance, drydocking, lubricating oils, insurances and management fees for the provision of commercial and technical management services.
As of December 31, 2019, $5.2 million of "Other" relates to accrued expenses relating to long lead items ordered in preparation for the expected conversion of one of our vessels. …
| 24. |
OTHER CURRENT LIABILITIES
|
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Deferred revenue (i)
|
3,001
|
38,730
|
||||||
|
Other (ii)
|
1,365
|
1,200
|
||||||
|
Cross currency interest rate swap liability (see note 28)
|
438
|
—
|
||||||
|
Deferred tax (iii)
|
374
|
3,468
|
||||||
|
Deferred consideration (iv)
|
—
|
10,754
|
||||||
|
Guarantees issued to Golar LNG (see note 14)
|
—
|
172
|
||||||
|
Total
|
5,178
|
54,324
|
||||||
(i) On March 31, 2020, following the commencement of the Sergipe power plant operations by the charterer, the Golar Nanook commenced its sales-type finance lease and
deferred revenue of $40 million was derecognized, forming part of the loss on disposal of the asset (see note 18).
(ii) $0.1 million (2019: $0.2 million) of "Other" corresponds to our current portion of our lessee related liability for the future lease payments associated with our office lease in Brazil.
(iii) Deferred tax of $0.4 million as of December 31, 2020 relates to the tax expense on the mark-to-market gain on our cross currency interest rate swap. Deferred tax of $3.5 million as of December 31, 2019
related to the tax expense on the unrealized gain on the forward purchase energy contracts (see note 5).
(iv) Deferred consideration of $11.5 million was paid on the Sergipe power plant Commercial Operation Date of March 21, 2020 for which the outstanding amount as of December 31, 2019 was $10.8 million. Deferred
consideration related to the purchase of the additional investment in CELSEPAR. Pursuant to the Second Amendment to the Sale and Purchase Agreement, dated July 2018, $21.6 million was paid on October 2, 2018, with the final payment being due
upon the Commercial Operation Date.
42
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 25. |
OTHER NON-CURRENT LIABILITIES
|
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
Deferred revenue (i)
|
8,679
|
—
|
||||||
|
Other (ii)
|
68
|
665
|
||||||
|
Total
|
8,747
|
665
|
||||||
(i) Deferred revenue includes $5.2 million of pre-commissioning revenue under its operation and services agreement with CELSE and $3.5 million of pre-commissioning revenue on Golar
Nanook's charter agreement with CELSE.
(ii) $0.1 million (2019: $0.3 million) of "Other" corresponds to the non-current portion of our lessee related liability for the future lease payments associated with our office lease in Brazil.
| 26. |
EQUITY
|
In July 2016, the Company closed a subscription of 20 million preference shares to Stonepeak for net proceeds of $95.7 million. The preference shares have no voting rights, have priority over the dividend rights
of any other class of shares and contain the following significant features:
(i) each preference share holder has the right to, in cash, an annual fixed cumulative preferential dividend out of the profits of the Company available for distribution at a rate of 8.5% of
the par value of the share payable semi-annually commencing six months after the subscription by Stonepeak of the preferred shares;
(ii) the preference shares may be redeemed at the Company's option, any time prior to the date of an IPO at the Redemption Price1;
(iii) in the event on an IPO, and assuming no prior redemption of the preference shares, the preference shares will be converted automatically into fully paid ordinary shares of the same par
value at the Mandatory Conversion Rate2 upon the date of such IPO;
(iv) in the event that an IPO has not been consummated by after the fifth anniversary date of the completion of the subscription for the preference shares:
(a) the rate of the preferential dividend will increase from 8.5% to 11.5% per annum; and
(b) at Stonepeak's option, the preference shares will convert into fully paid ordinary shares of the same par value as the Mandatory Conversion Rate.
In June 2016, the Company issued 23,475,077 common shares to Stonepeak. At any time after the fifth anniversary of the completion of the subscription for the common shares, if an IPO has not occurred and if
certain EBITDA requirements are met, Stonepeak has the right to convert such common shares into preference shares such that the aggregate value of all such preference shares equals the Conversion Value. The Conversion Value is equal to (i) the
sum of all amounts paid by Stonepeak to acquire the common shares, increased by a compounded annual rate of 8.5%, (ii) less any distributions in cash or in kind on the common shares held by Stonepeak. Upon IPO, the conversion right of the
common shares held by Stonepeak will terminate, such that none of the common shares will have such conversion right.
43
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 26. |
EQUITY (continued)
|
On September 11, 2020, the Company changed the par value of its ordinary shares from $5.00 to $1.00 each, which has been retrospectively adjusted. The decrease in par value was recorded as a decrease in
Convertible Share Capital (Mezzanine Equity) and Share Capital with a corresponding increase to Additional Paid-in Capital in Stockholders' Equity.
As at December 31, 2020 and 2019, authorized share capital is as follows:
Authorized share capital:
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
23,475,077 ordinary shares of $1.00 each
|
23,475
|
23,475
|
||||||
|
23,475,077 convertible ordinary shares of $1.00 each
|
23,475
|
23,475
|
||||||
|
100,000,000 preference shares of $5.00 each
|
500,000
|
500,000
|
||||||
(1) Redemption Price is defined as the Required Return Amount3 per preference
share, less the aggregate amount of dividends paid on such preference share, calculated up to the date on which such preference shares are redeemed.
(2) Mandatory Conversion Rate is defined as 1.00 fully paid Ordinary Share for 1.20 Preference Shares.
(3) Required Return Amount is defined as, if the redemption date is (i) any date prior to the 4th anniversary of the Effective Date (June 30, 2016), US$8.00,
(ii) any date beginning on the 4th anniversary of the Effective Date and prior to the 5th anniversary of the Effective Date, US$9.00 and (iii) any date beginning on the 5th anniversary of the Effective Date, US$10.00.
As at December 31, 2020 and 2019, issued share capital is as follows:
Issued share capital:
|
(in thousands of $)
|
2020
|
2019
|
||||||
|
23,475,077 ordinary shares of $1.00 each
|
23,475
|
23,475
|
||||||
|
23,475,077 convertible ordinary shares of $1.00 each (1)
|
23,475
|
23,475
|
||||||
|
20,000,000 preference shares of $5.00 each, net of transaction costs
|
95,660
|
95,660
|
||||||
For the years ended December 31, 2020 and 2019, additional paid in capital of nil and $10.0 million respectively were contributed to the Company by joint venture partners.
For the years ended December 31, 2020 and 2019, preferred stock dividends of $11.3 million and $11.9 million respectively were declared and accrued by the Company.
For the years ended December 31, 2020 and 2019, other comprehensive loss of $34.5 million and $6.5 million, respectively, relates to foreign currency translation adjustments.
| 27. |
SHARE OPTIONS
|
In June 2018, our board of directors approved a Management Incentive Scheme (MIS) which granted 1,824,014 units to certain
employees which entitled them to receive cash distributions on realization of value by the Shareholders from their investment in the Company from the proceeds of a liquidity event such as an IPO of the Company or
sale (the “performance condition”), provided that the proceeds from such liquidity event exceeds a target hurdle rate and the employees continue to be employed by the Company.
44
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 27. |
SHARE OPTIONS (continued)
|
A waterfall calculation is used to determine the pay out with proceeds allocated to the MIS only after an internal rate of return and a return on Stonepeak’s outstanding investment in the Company as specified by
the MIS is achieved. The MIS was approved by the shareholders in August 2018. The entire cost of the MIS will be funded by Stonepeak upon settlement which will be recorded as a capital contribution by the Company. The Company will not incur any
cash outflow upon settlement. The grant date fair value of the MIS was determined using a Monte Carlo simulation model. The assumptions used in the Monte Carlo simulation model are described below:
| • |
Volatility factor - The volatility factor represents the extent to which the market price of a share of the Company's ordinary shares is expected to fluctuate between the grant date and the end of the performance period.
|
| • |
Dividend yield - The dividend yield on the Company's ordinary shares was assumed to be zero since the Company does not anticipate paying dividends within the requisite service period of the MIS.
|
| • |
Risk-free interest rate - The risk-free interest rate is based upon the yield of 2.53% with a 3 year term.
|
| • |
Expected term - The expected term represents the period of time that the MIS will be outstanding, which is the grant date to the end of the performance condition.
|
The grant date fair value of each MIS as determined by the Monte Carlo simulation model was $16.4, which was based on the following assumptions:
|
Number of simulations
|
50,000
|
|||
|
Ordinary share price
|
$
|
12.00
|
||
|
Volatility factor
|
30.5
|
%
|
||
|
Dividend yield
|
—
|
|||
|
Risk-free interest rate
|
2.53
|
%
|
||
|
Expected term in year
|
3
|
The following table presents the MIS activity:
|
Units
|
Weighted average grant
date fair value per unit
|
|||||||
|
Awards at December 31, 2019
|
1,824,014
|
$
|
16.40
|
|||||
|
Granted
|
—
|
|||||||
|
Forfeited
|
—
|
|||||||
|
Awards at December 31, 2020
|
1,824,014
|
$
|
16.40
|
|||||
We account for the MIS grants to employees that are paid out in cash upon vesting, throughout the requisite service period (the requisite service period is determined on the basis of the expected date of the
liquidity event), by revaluing the MIS units outstanding at the end of each reporting period and recording a charge to the consolidated statement of income (loss) if it is probable that the performance condition will be met. No charge has been
recognized in the consolidated statement of income (loss) for the years ended December 31, 2020 or 2019, respectively, as the occurrence of the liquidity event which is related to an IPO or sale and related target hurdle rate is not considered
probable until the event has occurred.
45
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 28. |
FINANCIAL INSTRUMENTS
|
Foreign currency risk
Our three vessels' gross earnings are mainly receivable in U.S. dollars. The majority of our transactions, assets and liabilities are denominated in U.S. dollars, our functional currency. However, we incur
expenditures in other currencies primarily from our Brazilian subsidiaries, most significantly, the Company's investment in equity method investee, CELSEPAR. There is a risk that currency fluctuations will have a negative effect on the value of
our cash flows.
Interest rate risk
Debt that we incur under our credit facilities bear interest at variable rates and exposes us to interest rate risk. Interest is calculated under the terms of each facility based on one of the index rates
available to us plus an applicable margin that varies based on certain factors.
Our interest rate risk management policy permits economic hedge relationships in order to reduce the risk associated with adverse fluctuations in interest rates. We use interest rate swaps and fixed rate debt to
manage the exposure to adverse movements in interest rates. Interest rate swaps are used to convert variable rate debt obligations to a fixed rate in order to achieve an overall desired position of fixed and variable rate debt. Credit exposures
are monitored on a counterparty basis, with all new transactions subject to senior management approval.
On August 7, 2020, we entered into a cross currency interest rate swap to manage our interest rate exposure on our Debenture loan and our foreign exchange rate exposure on the US dollar cash flows from the
charter of our FSRU to CELSE that guarantees the repayments of the Debenture loan. The exposure to foreign exchange rate fluctuations is due to the cash inflows from Golar Nanook's charter to CELSE being in US dollars, whereas the debt service
on our BRL denominated debenture is in Brazilian Reais. The following are the terms of the swap:
|
Notional amount (BRL'000)
|
||||
|
December 31, 2020
|
August 2020
|
Fixed interest rate
|
Forward foreign exchange rate
|
Maturity date
|
|
281,100
|
317,919
|
5.9%
|
5.424
|
September 2024
|
Upon entering into the swap agreement, the counterparty paid us $1.4 million (BRL 8.0 million) as a premium due to the off-market terms of the swap reflected in the interest rate differential and expected changes
in relation to forward foreign exchange rate fluctuations between the US dollar and Brazilian Reais. The net liability position of this cross currency interest rate swap is presented under "Other current liabilities" in the consolidated balance
sheet.
Commodity price risk
A derivative asset, representing the fair value of the gain on our forward contract was recognised in December 31, 2019. There is a risk that commodity price fluctuations will have a negative effect on the value
of our cash flows.
Fair values of financial instruments
We recognize our fair value estimates using a fair value hierarchy based on the inputs used to measure fair value. The fair value hierarchy has three levels based on reliability of inputs used to determine fair
value as follows:
Level 1: Quoted market prices in active markets for identical assets and liabilities;
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data; and
Level 3: Unobservable inputs that are not corroborated by market data.
There have been no transfers between different levels in the fair value hierarchy during the year.
46
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 28. |
FINANCIAL INSTRUMENTS (continued)
|
The carrying value and fair value of our financial instruments, excluding short-term receivables and payables, at December 31, 2020 and 2019 are as follows:
|
Fair value
|
2020
|
2020
|
2019
|
2019
|
|||||||||||||
|
(in thousands of $)
|
Hierarchy
|
Carrying
Value |
Fair
Value
|
Carrying
Value
|
Fair Value
|
||||||||||||
|
Cash and cash equivalents
|
Level 1
|
48,777
|
48,777
|
49,949
|
49,949
|
||||||||||||
|
Restricted cash
|
Level 1
|
37,862
|
37,862
|
22,902
|
22,902
|
||||||||||||
|
Derivative energy asset
|
Level 2
|
—
|
—
|
10,200
|
10,200
|
||||||||||||
|
Cross currency interest rate swap liability
|
Level 2
|
(438
|
)
|
(438
|
)
|
—
|
—
|
||||||||||
|
Deferred consideration
|
Level 2
|
—
|
—
|
10,754
|
10,754
|
||||||||||||
|
Current portion of long-term debt and short term debt (1) (2)
|
Level 2
|
35,773
|
35,773
|
127,056
|
127,056
|
||||||||||||
|
Long-term debt (2)
|
Level 2
|
447,891
|
447,891
|
337,686
|
337,686
|
||||||||||||
(1) The carrying amounts of our short-term debt
approximate their fair values because of the near term maturity of these instruments.
(2) The amounts presented in the table, are gross of the deferred finance costs amounting to $3.9 million and $4.5 million as of
December 31, 2020 and 2019, respectively.
The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
| • |
The carrying values of trade accounts receivable, trade accounts payable, accrued liabilities and working capital facilities approximate fair values because of the near term maturity of these instruments.
|
| • |
The carrying value of cash and cash equivalents, which are highly liquid, is a reasonable estimate of fair value.
|
| • |
The carrying value for restricted cash is considered to be equal to the estimated fair value because of their near term maturity.
|
| • |
We classify our electricity forward purchase contracts and cross currency interest rate swap as Level 2 as they are valued using observable market inputs such as energy prices, interest rates and foreign exchange rates in
geographically appropriate markets. The impact of the credit valuation adjustment and time value of money is not significant due to the short-term nature of the contracts.
|
| • |
The estimated fair value of the deferred consideration was derived by using a discounted cashflow model. The most significant input into this valuation is the discount rate which takes into account, amongst other things, the equity
and country risk.
|
| • |
The estimated fair value for the floating long-term debt are considered to approximate the carrying values since they bear variable interest rates, which are adjusted on a quarterly or six-monthly basis
|
47
Hygo Energy Transition Ltd.
Notes to Consolidated Financial Statements
| 28. |
FINANCIAL INSTRUMENTS (continued)
|
Concentrations of risk
There is a concentration of credit risk with respect to cash and cash equivalents and restricted cash to the extent that substantially all of the amounts are carried with Nordea Bank of Finland PLC, Citibank,
Santander, Itaú and Banco Bradesco. However, we believe this risk is remote, as they are established and reputable establishments with no prior history of default.
There is also a concentration of credit risk with respect to trade accounts receivable in relation to the amount due from CELSE as at December 31, 2020 and 2019, however, we believe this risk is remote given the
support provided to CELSE by their jointly owned ultimate parent undertaking who are established and have no prior history of default.
| 29. |
SUBSEQUENT EVENTS
|
On December 21, 2020, the Company through its wholly owned subsidiary, Golar Maranhão, entered into a sale and purchase agreement with ENEVA S.A. for the purchase of 50% of the share capital of Centrais Termelétricas São Marcos S.A. for
purchase consideration of two thousand dollars. Finalization of the sale is subject to various conditions precedent of which one, the approval by CADE, the Brazilian anti-trust authority, is outstanding. Upon closing of the transaction, the
Company will own 100% of the outstanding shares of São Marcos.
On October 12, 2020, Eduardo Antonello resigned as our Chief Executive Officer. Prior to the date of his resignation, Mr. Antonello was employed and compensated by Magni Partners and Magni Bermuda and provided
services to us pursuant to secondment agreements that we entered into with Magni Partners and Magni Bermuda. As a result of Mr. Antonello’s resignation, On January 4, 2021 we entered into an agreement to terminate the secondment agreements with
Magni Partners and Magni Bermuda (the ‘‘Termination Agreement’’). Pursuant to the Termination Agreement, we will pay $1 million to Magni Partners and Magni Bermuda, combined, related to the termination of services provided by Mr. Antonello,
which amount is subject to potential forfeiture or clawback in accordance with the terms of the Termination Agreement.
On January 12, 2021, the Company entered into a sale and purchase agreement with Evolution, OAK, and BEP, for the purchase of 50% of the share capital of GPB2 from Evolution, the purchase of 50% of the share capital of CELBA from Evolution,
the purchase of 24.75% of the share capital of CELBA 2 from OAK, and the purchase of 24.75% of the share capital of CELBA 2 from BEP for total consideration of $38 million, to paid over the next 14 months, or sooner in the event of an
acceleration event or successful completion of the merger transaction noted below. Finalization of the sale is subject to various conditions precedent of which one, the approval by CADE, the Brazilian anti-trust authority, is outstanding. Upon
closing of the transaction, the Company will own 100% of the outstanding shares of GPB2, which in turn will own 100% of the outstanding shares in the CEBARRA as well as the Company will own 100% of the outstanding shares of CELBA which in turn
will own 100% of the outstanding shares in CELBA 2.
On January 13, 2021, Golar LNG ("GLNG") and Stonepeak entered into a definitive agreement and plan of merger to sell 100% of Hygo to New Fortress Energy Inc. ("NFE"). Under the terms of the merger agreement, NFE
will acquire all of the outstanding shares of Hygo for 31.4 million shares of NFE Class A common stock and $580 million in cash. The transaction values Hygo at an enterprise value of $3.1 billion and an equity value of $2.18 billion. Pursuant
to the transaction, GLNG will receive 18.6 million shares of NFE Class A common stock and $50 million in cash, and Stonepeak will receive 12.7 million shares of NFE Class A common stock and $530 million in cash, which includes a cash settlement
of its preferred equity tranche of $180 million. As part of the transaction, GLNG and Stonepeak have entered into customary lock-up provisions in relation to the stock consideration they will receive. Completion of the transaction is subject to
the receipt of certain approvals and third-party consents and the satisfaction of other customary closing conditions, and is expected to occur in the first half of 2021.
48
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On January 13, 2021, New Fortress Energy Inc., a Delaware corporation ("NFE"), Hygo Energy Transition Ltd., a Bermuda exempted company (“Hygo”), Golar LNG Limited, a
Bermuda exempted company (“GLNG”), Stonepeak Infrastructure Fund II Cayman (G) Ltd. (“Stonepeak”), and Lobos Acquisition Ltd., a Bermuda exempted company and an indirect, wholly-owned subsidiary of NFE (“Hygo Merger Sub”), entered into an Agreement
and Plan of Merger (the “Hygo Merger Agreement”), pursuant to which Hygo Merger Sub will merge with and into Hygo (the “Hygo Merger”), with Hygo surviving the Hygo Merger as a wholly owned subsidiary of NFE. As of the date of the Hygo Merger
Agreement, each of GLNG and Stonepeak owned 50% of the outstanding common shares, par value $1.00 per share, of Hygo (each, a “Hygo Common Share”), and Stonepeak owned all of Hygo’s outstanding redeemable preferred shares, par value $5.00 per share
(each, a “Hygo Preferred Share”).
At the effective time of the Hygo Merger (the “Hygo Effective Time”), pursuant to the Hygo Merger Agreement: (i) GLNG will receive 18.6 million shares of Class A Common
Stock, par value $0.01 per share, of NFE (“Common Stock”) and an aggregate of $50 million in cash and (ii) Stonepeak will receive 12.7 million shares of Common Stock and an aggregate of $530 million in cash.
On January 13, 2021, NFE entered into an Agreement and Plan of Merger (the “GMLP Merger Agreement” and together with the Hygo Merger Agreement, the “Merger Agreements”)
with Golar LNG Partners LP, a Marshall Islands limited partnership (“GMLP”), Golar GP LLC, a Marshall Islands limited liability company and the general partner of GMLP (the “General Partner”), Lobos Acquisition LLC, a Marshall Islands limited
liability company and an indirect subsidiary of NFE (“GMLP Merger Sub”), and NFE International Holdings Limited, a private limited company incorporated under the laws of England and Wales and an indirect subsidiary of NFE (“GP Buyer”), pursuant to
which GMLP Merger Sub will merge with and into GMLP, with GMLP surviving the merger as an indirect subsidiary of NFE (the “GMLP Merger”, together with the Hygo Merger, the “Mergers”).
At the effective time of the GMLP Merger (the “GMLP Effective Time”), pursuant to the GMLP Merger Agreement, each common unit representing a limited partner interest in
GMLP (each, a “Common Unit”) that is issued and outstanding as of immediately prior to the GMLP Effective Time will automatically be converted into the right to receive $3.55 in cash. Concurrently with the consummation of the GMLP Merger, GP Buyer
will purchase from GLNG, and GLNG will transfer to GP Buyer, all of the outstanding membership interests of the General Partner pursuant to a Transfer Agreement dated as of January 13, 2021 for a purchase price of approximately $5 million, which is
equivalent to $3.55 per general partner unit of GMLP. At the GMLP Effective Time, each of the incentive distribution rights of GMLP will be canceled and cease to exist, and no consideration shall be delivered in respect thereof. Each 8.75% Series A
Cumulative Redeemable Preferred Unit of GMLP issued and outstanding immediately prior to the GMLP Effective Time will be unaffected by the GMLP Merger and will remain outstanding, and no consideration shall be delivered in respect thereof. Each
outstanding unit representing a general partner interest of GMLP that is issued and outstanding immediately prior to the GMLP Effective Time will remain issued and outstanding immediately following the GMLP Effective Time.
The following unaudited pro forma condensed combined financial statements (which we refer to as the "pro forma financial statements") have been prepared from the
respective historical consolidated financial statements of NFE, Hygo and GMLP, adjusted to give effect to the Mergers, which will be accounted for using the acquisition method of accounting with NFE identified as the acquiror. Under the acquisition
method of accounting, NFE will record assets acquired and liabilities assumed from Hygo and GMLP at their respective acquisition date fair values. The unaudited pro forma condensed combined income statement for the year ended December 31, 2020
combine the historical consolidated income statements of NFE, Hygo and GMLP, giving effect to the Mergers as if they had been consummated on January 1, 2020. The unaudited pro forma condensed combined balance sheet combines the historical
consolidated balance sheets of NFE, Hygo and GMLP as of December 31, 2020, giving effect to the Mergers as if they had been consummated on December 31, 2020. The pro forma
financial statements contain certain reclassification adjustments to conform the historical Hygo and GMLP financial statement presentation to NFE’s financial statement presentation.
1
The pro forma financial statements are presented to reflect the Mergers and do not represent what NFE’s financial position or results of operations would have been had
the Mergers occurred on the dates noted above, nor do they project the financial position or results of operations of the combined company following the Mergers. The pro forma adjustments are based on available information and certain assumptions
that management believes are reasonable, as further described below. In the opinion of
management, all adjustments necessary to present fairly the pro forma financial statements have been made.
The final determination of the fair value of Hygo’s and GMLP’s assets and liabilities will be based on the actual net tangible and intangible assets and liabilities of
the companies that exist as of the closing dates of the Mergers and therefore cannot be made prior to the completion of the Mergers. In addition, the value of the consideration to be paid by NFE upon the consummation of the Hygo Merger will be
determined based on the closing price of NFE common stock on the closing date of the Hygo Merger.
As a result of the foregoing, the pro forma adjustments are preliminary and subject to change as additional information becomes available and additional analysis is
performed. The preliminary pro forma adjustments have been made solely for the purpose of providing the unaudited pro forma financial statements presented below. Any increases or decreases in the fair value of assets acquired and liabilities
assumed upon completion of the final valuation will result in adjustments to the pro forma balance sheet and if applicable, the pro forma income statements. The final purchase price allocation may be materially different than that reflected in the
preliminary purchase price allocation presented herein.
NFE, Hygo and GMLP anticipate that certain non-recurring charges will be incurred in connection with the Mergers, the substantial majority of which consist of transaction
costs related to financial advisors, legal services and professional accounting services. Any such charges could affect the future results of the post-acquisition company in the period in which such charges are incurred; however, these transaction
costs are not expected to be incurred in any period beyond twelve months from the closing dates of the Mergers. Accordingly, the pro forma income statement for the year ended December 31, 2020 reflects the effects of these non-recurring transaction
charges as the pro forma income statement has been prepared giving effect to the Mergers as if they had been consummated on January 1, 2020.
The pro forma financial statements have been developed from and should be read in conjunction with the following historical consolidated financial statements and related
notes of NFE, Hygo and GMLP:
| • |
audited consolidated financial statements of NFE as of and for the year ended December 31, 2020 and the related notes included in NFE’s Annual Report on Form 10-K for the year
ended December 31, 2020;
|
| • |
audited consolidated financial statements of Hygo as of and for the year ended December 31, 2020 and the related notes included in Exhibit 99.2 to this Current Report;
|
| • |
audited consolidated financial statements of GMLP as of and for the year ended December 31, 2020 and the related notes included in Exhibit 99.1 to this Current Report;
|
2
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of December 31, 2020
(in thousands of U.S. dollars)
|
Transaction Accounting Adjustments
|
||||||||||||||||||||||||||||||||||||||||
|
Historical NFE
|
Historical Hygo as Adjusted (2(a))
|
Historical GMLP as Adjusted (2(b))
|
Acquisition
Adjustments
Hygo
|
FN
|
Acquisition
Adjustments
GMLP
|
FN
|
Financing Adjustments
|
FN
|
Pro Forma
|
|||||||||||||||||||||||||||||||
|
Assets
|
||||||||||||||||||||||||||||||||||||||||
|
Current assets
|
||||||||||||||||||||||||||||||||||||||||
|
Cash and cash equivalents
|
$
|
601,522
|
$
|
48,777
|
$
|
48,783
|
$
|
(580,000
|
)
|
4a
|
$
|
(251,000
|
)
|
4a
|
$
|
198,000
|
4e
|
$
|
361,387
|
|||||||||||||||||||||
|
|
(5,099
|
)
|
4a
|
1,467,065
|
4e
|
|||||||||||||||||||||||||||||||||||
|
|
(1,152,000
|
)
|
4e
|
|||||||||||||||||||||||||||||||||||||
|
|
(14,661
|
)
|
4n
|
|||||||||||||||||||||||||||||||||||||
|
Restricted cash
|
12,814
|
37,830
|
55,547
|
-
|
(3,433
|
)
|
4b
|
-
|
85,818
|
|||||||||||||||||||||||||||||||
|
|
(16,940
|
)
|
4n
|
|||||||||||||||||||||||||||||||||||||
|
Receivables, net of allowances
|
76,544
|
19,239
|
36,392
|
-
|
(16,100
|
)
|
4b
|
-
|
116,075
|
|||||||||||||||||||||||||||||||
|
Inventory
|
22,860
|
-
|
1,719
|
-
|
-
|
-
|
24,579
|
|||||||||||||||||||||||||||||||||
|
Prepaid expenses and other current assets, net
|
48,270
|
3,750
|
4,380
|
-
|
(2,570
|
)
|
4b
|
-
|
53,830
|
|||||||||||||||||||||||||||||||
|
Total current assets
|
762,010
|
109,596
|
146,821
|
(580,000
|
)
|
(1,461,803
|
)
|
1,665,065
|
641,689
|
|||||||||||||||||||||||||||||||
|
Restricted cash
|
15,000
|
32
|
129,838
|
-
|
(115,022
|
)
|
4b
|
-
|
29,848
|
|||||||||||||||||||||||||||||||
|
Construction in progress
|
234,037
|
-
|
-
|
72,190
|
4b
|
-
|
-
|
306,227
|
||||||||||||||||||||||||||||||||
|
Property, plant and equipment, net
|
614,206
|
355,605
|
1,308,206
|
41,915
|
4b
|
(100,076
|
)
|
4b
|
-
|
2,219,856
|
||||||||||||||||||||||||||||||
|
Right-of-use assets
|
141,347
|
-
|
102,534
|
-
|
(124,017
|
)
|
4b
|
-
|
119,864
|
|||||||||||||||||||||||||||||||
|
Intangible assets, net
|
46,102
|
-
|
41,295
|
-
|
15,305
|
4b
|
-
|
102,702
|
||||||||||||||||||||||||||||||||
|
Finance leases, net
|
7,044
|
307,660
|
109,216
|
68,340
|
4b
|
(109,216
|
)
|
4b
|
-
|
383,044
|
||||||||||||||||||||||||||||||
|
Equity method investments
|
-
|
224,747
|
185,562
|
585,233
|
4b
|
164,002
|
4b
|
-
|
1,159,544
|
|||||||||||||||||||||||||||||||
|
Deferred tax assets, net
|
2,315
|
-
|
-
|
-
|
-
|
-
|
2,315
|
|||||||||||||||||||||||||||||||||
|
Other non-current assets, net
|
86,030
|
29,412
|
4,189
|
1,249
|
4b
|
(745
|
)
|
4b
|
2,000
|
4e
|
122,135
|
|||||||||||||||||||||||||||||
|
Goodwill
|
-
|
-
|
-
|
747,132
|
4b
|
-
|
-
|
747,132
|
||||||||||||||||||||||||||||||||
|
Total assets
|
$
|
1,908,091
|
$
|
1,027,052
|
$
|
2,027,661
|
$
|
936,059
|
$
|
(1,731,572
|
)
|
$
|
1,667,065
|
$
|
5,834,356
|
|||||||||||||||||||||||||
|
Liabilities
|
||||||||||||||||||||||||||||||||||||||||
|
Current liabilities
|
||||||||||||||||||||||||||||||||||||||||
|
Accounts payable
|
$
|
21,331
|
$
|
1,555
|
$
|
17,830
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
40,716
|
||||||||||||||||||||||||||
|
Accrued liabilities
|
90,352
|
55,258
|
25,157
|
(44,315
|
)
|
4c
|
4,209
|
4h
|
-
|
134,870
|
||||||||||||||||||||||||||||||
|
|
4,209
|
4h
|
||||||||||||||||||||||||||||||||||||||
|
Current portion of long-term debt and short-term debt
|
-
|
35,254
|
702,962
|
1,394
|
4b
|
(702,962
|
)
|
4e
|
-
|
36,648
|
||||||||||||||||||||||||||||||
|
Current lease liabilities
|
35,481
|
-
|
2,521
|
-
|
(19,902
|
)
|
4b
|
-
|
18,100
|
|||||||||||||||||||||||||||||||
|
Due to affiliates
|
8,980
|
-
|
-
|
-
|
-
|
-
|
8,980
|
|||||||||||||||||||||||||||||||||
|
Other current liabilities
|
35,006
|
5,178
|
83,807
|
(378
|
)
|
4b
|
5,428
|
4b
|
-
|
97,440
|
||||||||||||||||||||||||||||||
|
|
(31,601
|
)
|
4n
|
|||||||||||||||||||||||||||||||||||||
|
Total current liabilities
|
191,150
|
97,245
|
832,277
|
(39,090
|
)
|
(744,828
|
)
|
-
|
336,754
|
|||||||||||||||||||||||||||||||
|
Long-term debt
|
1,239,561
|
444,531
|
416,746
|
11,287
|
4b
|
(416,746
|
)
|
4e
|
1,467,065
|
4e
|
3,362,444
|
|||||||||||||||||||||||||||||
|
|
200,000
|
4e
|
||||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
|
Non-current lease liabilities
|
84,323
|
-
|
122,029
|
-
|
(126,503
|
)
|
4b
|
-
|
79,849
|
|||||||||||||||||||||||||||||||
|
Deferred tax liabilities, net
|
2,330
|
-
|
12,759
|
84,428
|
4b, 4g
|
-
|
-
|
99,517
|
||||||||||||||||||||||||||||||||
|
Other long-term liabilities
|
15,641
|
8,747
|
18,529
|
(8,679
|
)
|
4b
|
22,120
|
4b
|
-
|
56,358
|
||||||||||||||||||||||||||||||
|
Total liabilities
|
1,533,005
|
550,523
|
1,402,340
|
47,946
|
(1,265,957
|
)
|
1,667,065
|
3,934,922
|
||||||||||||||||||||||||||||||||
|
Mezzanine equity
|
||||||||||||||||||||||||||||||||||||||||
|
Preferred capital
|
-
|
100,000
|
-
|
(100,000
|
)
|
4c
|
-
|
-
|
-
|
|||||||||||||||||||||||||||||||
|
Convertible share capital
|
-
|
23,475
|
-
|
(23,475
|
)
|
4c
|
-
|
-
|
-
|
|||||||||||||||||||||||||||||||
|
Total mezzanine equity
|
-
|
123,475
|
-
|
(123,475
|
)
|
-
|
-
|
-
|
||||||||||||||||||||||||||||||||
|
Stockholders' equity
|
||||||||||||||||||||||||||||||||||||||||
|
Share capital (common shares)
|
-
|
23,475
|
-
|
(23,475
|
)
|
4c
|
-
|
-
|
-
|
|||||||||||||||||||||||||||||||
|
Retained losses
|
-
|
(131,569
|
)
|
-
|
131,569
|
4c
|
-
|
-
|
-
|
|||||||||||||||||||||||||||||||
|
Common unitholders
|
-
|
-
|
361,912
|
-
|
(361,912
|
)
|
4c
|
-
|
-
|
|||||||||||||||||||||||||||||||
|
Preferred unitholders
|
-
|
-
|
132,991
|
-
|
(132,991
|
)
|
4c
|
-
|
-
|
|||||||||||||||||||||||||||||||
|
General partner interest
|
-
|
-
|
48,306
|
-
|
(48,306
|
)
|
4c
|
-
|
-
|
|||||||||||||||||||||||||||||||
|
Class A common stock
|
1,746
|
-
|
-
|
314
|
4d
|
-
|
-
|
2,060
|
||||||||||||||||||||||||||||||||
3
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of December 31, 2020
(in thousands of U.S. dollars)
|
Additional paid-in capital
|
594,534
|
527,324
|
-
|
(527,324
|
)
|
4c
|
-
|
-
|
1,949,514
|
|||||||||||||||||||||||||||||||
|
|
1,354,980
|
4d
|
||||||||||||||||||||||||||||||||||||||
|
Accumulated deficit
|
(229,503
|
)
|
-
|
-
|
(4,209 | ) |
4h
|
372
|
4b
|
|
-
|
(237,549
|
)
|
|||||||||||||||||||||||||||
|
|
|
|
(4,209
|
)
|
4h
|
|
||||||||||||||||||||||||||||||||||
|
Accumulated other comprehensive income (loss)
|
182
|
(79,733
|
)
|
-
|
79,733
|
4c
|
-
|
-
|
182
|
|||||||||||||||||||||||||||||||
|
Total stockholders' equity attributable to NFE
|
366,959
|
339,497
|
543,209
|
1,011,588
|
(547,046
|
)
|
-
|
1,714,207
|
||||||||||||||||||||||||||||||||
|
Non-controlling interest
|
8,127
|
13,557
|
82,112
|
-
|
81,431
|
4b
|
|
-
|
185,227
|
|||||||||||||||||||||||||||||||
|
Total stockholders’ equity
|
375,086
|
353,054
|
625,321
|
1,011,588
|
(465,615
|
)
|
-
|
1,899,434
|
||||||||||||||||||||||||||||||||
|
Total liabilities and stockholders' equity
|
$
|
1,908,091
|
$
|
1,027,052
|
$
|
2,027,661
|
$
|
936,059
|
$
|
(1,731,572
|
)
|
$
|
1,667,065
|
$
|
5,834,356
|
|||||||||||||||||||||||||
4
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
(in thousands of U.S. dollars)
|
Transaction Accounting Adjustments
|
||||||||||||||||||||||||||||||||||||||||
|
Historical NFE
|
Historical Hygo as Adjusted (2(a))
|
Historical GMLP as Adjusted (2(b))
|
Acquisition Adjustments
Hygo
|
Acquisition Adjustments
GMLP
|
Financing Adjustments
|
|||||||||||||||||||||||||||||||||||
|
FN
|
FN
|
FN
|
Pro Forma
|
|||||||||||||||||||||||||||||||||||||
|
Revenues
|
||||||||||||||||||||||||||||||||||||||||
|
Time charter revenues
|
$
|
-
|
$
|
47,295
|
$
|
284,734
|
$
|
-
|
$
|
(8,145
|
)
|
4k
|
$
|
-
|
$
|
323,884
|
||||||||||||||||||||||||
|
Operating revenue
|
318,311
|
-
|
-
|
-
|
-
|
-
|
318,311
|
|||||||||||||||||||||||||||||||||
|
Other revenue
|
133,339
|
37,545
|
15,992
|
-
|
(15,992
|
)
|
4k
|
-
|
170,884
|
|||||||||||||||||||||||||||||||
|
Total revenues
|
451,650
|
84,840
|
300,726
|
-
|
(24,137
|
)
|
-
|
813,079
|
||||||||||||||||||||||||||||||||
|
Operating expenses
|
||||||||||||||||||||||||||||||||||||||||
|
Cost of sales
|
278,767
|
-
|
-
|
-
|
(17,902
|
)
|
4k
|
-
|
260,865
|
|||||||||||||||||||||||||||||||
|
Vessel operating expenses
|
-
|
16,825
|
56,509
|
-
|
-
|
-
|
73,334
|
|||||||||||||||||||||||||||||||||
|
Voyage, charter-hire and commission expenses
|
-
|
3,624
|
7,986
|
-
|
-
|
-
|
11,610
|
|||||||||||||||||||||||||||||||||
|
Operations and maintenance
|
47,581
|
-
|
-
|
-
|
(8,158
|
)
|
4k
|
-
|
39,423
|
|||||||||||||||||||||||||||||||
|
Selling, general and administrative
|
124,170
|
31,244
|
15,173
|
4,209
|
4h
|
|
4,209
|
4h
|
-
|
179,199
|
||||||||||||||||||||||||||||||
|
|
194
|
4k
|
||||||||||||||||||||||||||||||||||||||
|
Contract termination charges and loss on mitigation sales
|
124,114
|
-
|
-
|
-
|
-
|
-
|
124,114
|
|||||||||||||||||||||||||||||||||
|
Depreciation and amortization
|
32,376
|
11,262
|
79,996
|
1,695
|
4i
|
|
(7,670
|
)
|
4i
|
-
|
117,659
|
|||||||||||||||||||||||||||||
|
Total operating expenses
|
607,008
|
62,955
|
159,664
|
5,904
|
(29,327
|
)
|
-
|
806,204
|
||||||||||||||||||||||||||||||||
|
Operating income (loss)
|
(155,358
|
)
|
21,885
|
141,062
|
(5,904
|
)
|
5,190
|
-
|
6,875
|
|||||||||||||||||||||||||||||||
|
Loss on disposal
|
-
|
28,463
|
-
|
-
|
-
|
-
|
28,463
|
|||||||||||||||||||||||||||||||||
|
Interest expense
|
65,723
|
13,268
|
68,855
|
(2,496
|
)
|
4j
|
|
(1,164
|
)
|
4j
|
79,705
|
4j
|
|
162,944
|
||||||||||||||||||||||||||
|
(67,374
|
)
|
4j
|
6,427
|
4j
|
|
|||||||||||||||||||||||||||||||||||
|
Other expense (income), net
|
5,005
|
(8,629
|
)
|
49,093
|
-
|
(8,358
|
)
|
4m
|
-
|
9,759
|
||||||||||||||||||||||||||||||
|
(27,352
|
)
|
4n
|
||||||||||||||||||||||||||||||||||||||
|
Loss on extinguishment of debt, net
|
33,062
|
-
|
-
|
-
|
-
|
-
|
33,062
|
|||||||||||||||||||||||||||||||||
|
Income (loss) before taxes
|
(259,148
|
)
|
(11,217
|
)
|
23,114
|
(3,408
|
)
|
109,438
|
(86,132
|
)
|
(227,353
|
)
|
||||||||||||||||||||||||||||
|
Equity in net earnings (losses) of affiliates
|
- |
(45,880
|
)
|
11,730
|
(16,456
|
)
|
41
|
|
-
|
-
|
(50,606
|
)
|
||||||||||||||||||||||||||||
|
Tax expense (benefit)
|
4,817
|
4,762
|
16,767
|
-
|
4g
|
|
-
|
4g
|
-
|
26,346
|
||||||||||||||||||||||||||||||
|
Net income (loss)
|
(263,965
|
)
|
(61,859
|
)
|
18,077
|
(19,864
|
)
|
109,438
|
(86,132
|
)
|
(304,305
|
)
|
||||||||||||||||||||||||||||
|
Net (income) loss attributable to non-controlling interest
|
81,818
|
(6,467
|
)
|
1,119
|
-
|
(10,154
|
)
|
4o
|
-
|
66,316
|
||||||||||||||||||||||||||||||
|
Preferred dividends
|
-
|
(11,306
|
)
|
-
|
11,306
|
4f
|
|
-
|
-
|
-
|
||||||||||||||||||||||||||||||
|
Net income (loss) attributable to stockholders
|
$
|
(182,147
|
)
|
$
|
(79,632
|
)
|
$
|
19,196
|
$
|
(8,558
|
)
|
$
|
99,284
|
$
|
(86,132
|
)
|
$
|
(237,989
|
)
|
|||||||||||||||||||||
|
Net loss per share – basic and diluted
|
$
|
(1.71
|
)
|
4p
|
|
$
|
(1.72
|
)
|
||||||||||||||||||||||||||||||||
|
Weighted average number of shares outstanding – basic and diluted
|
106,654,918
|
4p
|
|
138,027,467
|
||||||||||||||||||||||||||||||||||||
5
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1 – Basis of Presentation
The NFE, Hygo and GMLP historical information have been derived from NFE’s, Hygo’s and GMLP’s audited historical financial statements. Certain of Hygo’s and GMLP’s
historical amounts have been reclassified to conform to NFE’s financial statement presentation, as discussed further in Note 2. The pro forma financial statements should be read in conjunction with the separate historical consolidated financial
statements and related notes thereto of NFE, Hygo and GMLP. The pro forma balance sheet gives effect to the Mergers as if they had been completed on December 31, 2020. The pro
forma income statement give effect to the Mergers as if they had been completed on January 1, 2020.
The Mergers and the related adjustments are described in the accompanying notes to the pro forma financial statements. In the opinion of NFE’s management, all material
adjustments have been made that are necessary to present fairly, in accordance with Regulation S-X Article 11, Pro Forma Financial Information, as amended by the final rule, Amendments to Financial Disclosures About Acquired and Disposed
Businesses, as adopted by the SEC on May 21, 2020 (“Article 11”). The pro forma financial statements do not purport to be indicative of the financial position or results of operations of the combined company that would have occurred if the Mergers
had occurred on the dates indicated, nor are they indicative of NFE’s future financial position or results of operations.
6
Transaction Accounting Adjustments
Note 2 – Reclassification Adjustments
The pro forma financial statements have been adjusted to reflect reclassifications of Hygo’s and GMLP’s financial statements to conform to NFE’s financial statement
presentation. These adjustments include the following:
| (a) |
|
As of December 31, 2020
(in thousands of U.S. dollars) |
||||||||||||
|
Hygo Historical
|
Reclassification Adjustments
|
Hygo Amounts as Reclassified
|
||||||||||
|
Assets
|
||||||||||||
|
Current assets
|
||||||||||||
|
Cash and cash equivalents
|
$
|
48,777
|
$
|
-
|
$
|
48,777
|
||||||
|
Restricted cash
|
-
|
37,830
|
37,830
|
|||||||||
|
Restricted cash and short-term deposits
|
37,830
|
(37,830
|
)
|
-
|
||||||||
|
Receivables, net of allowances
|
-
|
19,239
|
19,239
|
|||||||||
|
Trade accounts receivable
|
8,017
|
(8,017
|
)
|
-
|
||||||||
|
Prepaid expenses and other current assets, net
|
-
|
3,750
|
3,750
|
|||||||||
|
Amounts due from related parties
|
11,577
|
(11,577
|
)
|
-
|
||||||||
|
Other current assets
|
3,395
|
(3,395
|
)
|
-
|
||||||||
|
Total current assets
|
109,596
|
-
|
109,596
|
|||||||||
|
Restricted cash
|
32
|
-
|
32
|
|||||||||
|
Equity method investments
|
-
|
224,747
|
224,747
|
|||||||||
|
Investment in affiliates
|
224,747
|
(224,747
|
)
|
-
|
||||||||
|
Finance leases, net
|
-
|
307,660
|
307,660
|
|||||||||
|
Net investment in leased asset
|
307,660
|
(307,660
|
)
|
-
|
||||||||
|
Property, plant and equipment, net
|
-
|
355,605
|
355,605
|
|||||||||
|
Vessels and equipment, net
|
355,605
|
(355,605
|
)
|
-
|
||||||||
|
Other non-current assets, net
|
29,412
|
-
|
29,412
|
|||||||||
|
Total assets
|
$
|
1,027,052
|
$
|
-
|
$
|
1,027,052
|
||||||
|
Liabilities
|
||||||||||||
|
Current liabilities
|
||||||||||||
|
Current portion of long-term debt and short-term debt
|
$
|
35,254
|
$
|
-
|
$
|
35,254
|
||||||
|
Accounts payable
|
-
|
1,555
|
1,555
|
|||||||||
|
Trade accounts payable
|
1,551
|
(1,551
|
)
|
-
|
||||||||
|
Amounts due to related parties
|
4
|
(4
|
)
|
-
|
||||||||
|
Accrued liabilities
|
-
|
55,258
|
55,258
|
|||||||||
|
Accrued expenses
|
55,258
|
(55,258
|
)
|
-
|
||||||||
|
Other current liabilities
|
5,178
|
-
|
5,178
|
|||||||||
|
Total current liabilities
|
97,245
|
-
|
97,245
|
|||||||||
|
Long-term debt
|
444,531
|
-
|
444,531
|
|||||||||
|
Other long-term liabilities
|
-
|
8,747
|
8,747
|
|||||||||
|
Other non-current liabilities
|
8,747
|
(8,747
|
)
|
-
|
||||||||
|
Total liabilities
|
550,523
|
-
|
550,523
|
|||||||||
|
Mezzanine equity
|
||||||||||||
|
Preferred capital
|
100,000
|
-
|
100,000
|
|||||||||
|
Convertible share capital
|
23,475
|
-
|
23,475
|
|||||||||
|
Total mezzanine equity
|
123,475
|
-
|
123,475
|
|||||||||
|
Stockholders' equity
|
||||||||||||
|
Share capital (common shares)
|
23,475
|
-
|
23,475
|
|||||||||
|
Additional paid-in capital
|
527,324
|
-
|
527,324
|
|||||||||
|
Retained losses
|
(131,569
|
)
|
-
|
(131,569
|
)
|
|||||||
|
Accumulated other comprehensive income (loss)
|
(79,733
|
)
|
-
|
(79,733
|
)
|
|||||||
|
Total stockholders' equity attributable to Hygo
|
339,497
|
-
|
339,497
|
|||||||||
|
Non-controlling interest
|
13,557
|
-
|
13,557
|
|||||||||
|
Total stockholders’ equity
|
353,054
|
-
|
353,054
|
|||||||||
|
Total liabilities, mezzanine equity and stockholders' equity
|
$
|
1,027,052
|
$
|
-
|
$
|
1,027,052
|
||||||
7
|
Year Ended December 31, 2020
(in thousands of U.S. dollars) |
|||||||||||||
|
Hygo Historical
|
Reclassification Adjustments
|
Hygo Amounts as Reclassified
|
|||||||||||
|
Revenues
|
|||||||||||||
|
Time charter revenues
|
$
|
47,295
|
$
|
-
|
$
|
47,295
|
|||||||
|
Other revenue
|
-
|
37,545
|
(1
|
)
|
37,545
|
||||||||
|
Total revenues
|
47,295
|
37,545
|
84,840
|
||||||||||
|
Operating expenses
|
|||||||||||||
|
Vessel operating expenses
|
16,825
|
-
|
16,825
|
||||||||||
|
Voyage, charter-hire and commission expenses
|
3,624
|
-
|
3,624
|
||||||||||
|
Administrative expenses
|
29,244
|
(29,244
|
)
|
-
|
|||||||||
|
Selling, general and administrative
|
-
|
31,244
|
(1
|
)
|
31,244
|
||||||||
|
Depreciation and amortization
|
11,262
|
-
|
11,262
|
||||||||||
|
Total operating expenses
|
60,955
|
2,000
|
62,955
|
||||||||||
|
Other operating income
|
3,714
|
(3,714
|
)
|
-
|
|||||||||
|
Operating income (loss)
|
(9,946
|
)
|
31,831
|
21,885
|
|||||||||
|
Non-operating income
|
|||||||||||||
|
Gain on energy derivative instrument
|
(5,292
|
)
|
5,292
|
-
|
|||||||||
|
Loss on disposal of asset under development
|
25,981
|
(25,981
|
)
|
-
|
|||||||||
|
Loss on disposal of subsidiary
|
2,482
|
(2,482
|
)
|
-
|
|||||||||
|
Loss on disposal
|
-
|
28,463
|
28,463
|
||||||||||
|
Financial expense (income)
|
|||||||||||||
|
Interest income
|
(35,872
|
)
|
35,872
|
(1
|
)
|
-
|
|||||||
|
Gain on derivative instrument
|
(1,180
|
)
|
1,180
|
-
|
|||||||||
|
Other financial items, net
|
1,884
|
(1,884
|
)
|
-
|
|||||||||
|
Interest expense
|
13,268
|
-
|
13,268
|
||||||||||
|
Other expense (income), net
|
-
|
(8,629
|
)
|
(1
|
)
|
(8,629
|
)
|
||||||
|
Income (loss) before taxes
|
(11,217
|
)
|
-
|
(11,217
|
)
|
||||||||
|
Equity in net earnings (losses) of affiliate
|
(45,880
|
)
|
-
|
(45,880
|
)
|
||||||||
|
Tax expense (benefit)
|
4,762
|
-
|
4,762
|
||||||||||
|
Net income (loss)
|
(61,859
|
)
|
-
|
(61,859
|
)
|
||||||||
|
Net (income) loss attributable to non-controlling interest
|
(6,467
|
)
|
-
|
(6,467
|
)
|
||||||||
|
Preferred dividends
|
(11,306
|
)
|
-
|
(11,306
|
)
|
||||||||
|
Net income (loss) attributable to stockholders
|
$
|
(79,632
|
)
|
$
|
-
|
$
|
(79,632
|
)
|
|||||
8
| (b) |
The following reclassifications were made to conform GMLP’s historical financial information to NFE’s presentation
|
|
As of December 31, 2020
(in thousands of U.S. dollars) |
|||||||||||||
|
GMLP Historical
|
Reclassification Adjustments
|
GMLP Amounts as Reclassified
|
|||||||||||
|
Assets
|
|||||||||||||
|
Current assets
|
|||||||||||||
|
Cash and cash equivalents
|
$
|
48,783
|
$
|
-
|
$
|
48,783
|
|||||||
|
Restricted cash
|
-
|
55,547
|
55,547
|
||||||||||
|
Restricted cash and short-term deposits
|
55,547
|
(55,547
|
)
|
-
|
|||||||||
|
Trade accounts receivable
|
16,466
|
(16,466
|
)
|
-
|
|||||||||
|
Receivables, net of allowances
|
-
|
36,392
|
(1
|
)
|
36,392
|
||||||||
|
Current portion of investment in leased vessel, net
|
2,570
|
(2,570
|
)
|
-
|
|||||||||
|
Amounts due from related parties
|
804
|
(804
|
)
|
-
|
|||||||||
|
Inventory
|
1,719
|
-
|
1,719
|
||||||||||
|
Other current assets
|
20,932
|
(20,932
|
)
|
(1
|
)
|
-
|
|||||||
|
Prepaid expenses and other current assets, net
|
-
|
4,380
|
(1
|
)
|
4,380
|
||||||||
|
Total current assets
|
146,821
|
-
|
146,821
|
||||||||||
|
Restricted cash
|
129,838
|
-
|
129,838
|
||||||||||
|
Equity method investments
|
-
|
185,562
|
185,562
|
||||||||||
|
Investment in affiliates
|
185,562
|
(185,562
|
)
|
-
|
|||||||||
|
Right-of-use assets
|
-
|
102,534
|
102,534
|
||||||||||
|
Vessel under finance lease, net
|
102,534
|
(102,534
|
)
|
-
|
|||||||||
|
Finance leases, net
|
-
|
109,216
|
109,216
|
||||||||||
|
Investment in leased vessel, net
|
109,216
|
(109,216
|
)
|
-
|
|||||||||
|
Property, plant and equipment, net
|
-
|
1,308,206
|
1,308,206
|
||||||||||
|
Vessels and equipment, net
|
1,308,206
|
(1,308,206
|
)
|
-
|
|||||||||
|
Intangible assets, net
|
41,295
|
-
|
41,295
|
||||||||||
|
Other non-current assets, net
|
4,189
|
-
|
4,189
|
||||||||||
|
Total assets
|
$
|
2,027,661
|
$
|
-
|
$
|
2,027,661
|
|||||||
|
Liabilities
|
|||||||||||||
|
Current liabilities
|
|||||||||||||
|
Current portion of long-term debt and short-term debt
|
$
|
-
|
$
|
702,962
|
$
|
702,962
|
|||||||
|
Current portion of long-term debt
|
702,962
|
(702,962
|
)
|
-
|
|||||||||
|
Current lease liabilities
|
-
|
2,521
|
2,521
|
||||||||||
|
Current portion of obligation under finance lease
|
2,521
|
(2,521
|
)
|
-
|
|||||||||
|
Trade accounts payable
|
1,766
|
(1,766
|
)
|
-
|
|||||||||
|
Accounts payable
|
-
|
17,830
|
17,830
|
||||||||||
|
Accrued liabilities
|
-
|
25,157
|
25,157
|
||||||||||
|
Accrued expenses
|
25,157
|
(25,157
|
)
|
-
|
|||||||||
|
Other current liabilities
|
99,871
|
(16,064
|
)
|
83,807
|
|||||||||
|
Total current liabilities
|
832,277
|
-
|
832,277
|
||||||||||
|
Long-term debt
|
416,746
|
-
|
416,746
|
||||||||||
|
Non-current lease liabilities
|
-
|
122,029
|
122,029
|
||||||||||
|
Obligation under finance lease
|
122,029
|
(122,029
|
)
|
-
|
|||||||||
|
Deferred tax liabilities, net
|
-
|
12,759
|
12,759
|
||||||||||
|
Other non-current liabilities
|
31,288
|
(31,288
|
)
|
-
|
|||||||||
|
Other long-term liabilities
|
-
|
18,529
|
18,529
|
||||||||||
|
Total liabilities
|
1,402,340
|
-
|
1,402,340
|
||||||||||
|
Stockholders' equity
|
|||||||||||||
|
Partners' capital
|
-
|
-
|
-
|
||||||||||
|
Common unitholders
|
361,912
|
-
|
361,912
|
||||||||||
|
Preferred unitholders
|
132,991
|
-
|
132,991
|
||||||||||
|
General partner interest
|
48,306
|
-
|
48,306
|
||||||||||
|
Total partners' capital
|
543,209
|
-
|
543,209
|
||||||||||
|
Non-controlling interest
|
82,112
|
-
|
82,112
|
||||||||||
|
Total equity
|
625,321
|
-
|
625,321
|
||||||||||
|
Total liabilities and equity
|
$
|
2,027,661
|
$
|
-
|
$
|
2,027,661
|
|||||||
| (1) |
Indemnity amount receivables and other receivables of $19,122 were reclassified from Other current assets to Receivables, net of allowances. The remaining portion of Other current assets, consisting of prepaid expenses of $1,810, was reclassified to Prepaid expenses and other current assets, net.
|
9
|
Year Ended December 31, 2020
(in thousands of U.S. dollars) |
|||||||||||||
|
GMLP Historical
|
Reclassification Adjustments
|
GMLP Amounts as Reclassified
|
|||||||||||
|
Revenues
|
|||||||||||||
|
Time charter revenues
|
$
|
284,734
|
$
|
-
|
$
|
284,734
|
|||||||
|
Other revenue
|
-
|
15,992
|
(1
|
)
|
15,992
|
||||||||
|
Total revenues
|
284,734
|
15,992
|
300,726
|
||||||||||
|
Operating expenses
|
|||||||||||||
|
Vessel operating expenses
|
56,509
|
-
|
56,509
|
||||||||||
|
Voyage, charter-hire and commission expenses
|
-
|
7,986
|
7,986
|
||||||||||
|
Voyage and commission expenses
|
7,986
|
(7,986
|
)
|
-
|
|||||||||
|
Administrative expenses
|
15,367
|
(15,367
|
)
|
-
|
|||||||||
|
Selling, general and administrative
|
-
|
15,173
|
(1
|
)
|
15,173
|
||||||||
|
Depreciation and amortization
|
79,996
|
-
|
79,996
|
||||||||||
|
Total operating expenses
|
159,858
|
(194
|
)
|
159,664
|
|||||||||
|
Operating income (loss)
|
124,876
|
16,186
|
141,062
|
||||||||||
|
Other non-operating income
|
(661
|
)
|
661
|
-
|
|||||||||
|
Financial expense
|
|||||||||||||
|
Interest income
|
(17,354
|
)
|
17,354
|
(1
|
)
|
-
|
|||||||
|
Interest expense
|
68,855
|
-
|
68,855
|
||||||||||
|
Losses on derivative instruments, net
|
51,922
|
(51,922
|
)
|
-
|
|||||||||
|
Other financial items, net
|
(1,000
|
)
|
1,000
|
-
|
|||||||||
|
Other expense (income), net
|
-
|
49,093
|
(1
|
)
|
49,093
|
||||||||
|
Income (loss) before taxes
|
23,114
|
-
|
23,114
|
||||||||||
|
Equity in net earnings (losses) of affiliate
|
11,730
|
-
|
11,730
|
||||||||||
|
Tax expense (benefit)
|
16,767
|
-
|
16,767
|
||||||||||
|
Net income (loss)
|
18,077
|
-
|
18,077
|
||||||||||
|
Net (income) loss attributable to non-controlling interest
|
1,119
|
-
|
1,119
|
||||||||||
|
Net income (loss) attributable to stockholders
|
$
|
19,196
|
$
|
-
|
$
|
19,196
|
|||||||
| (1) |
GMLP has historically recorded interest income from finance leases and the current expected credit losses for finance leases in Interest income, whereas NFE records all income from
leases within Other revenue as such interest income is part of NFE’s ongoing central operations; current expected credit losses are recognized within Selling, general and administrative. NFE has reclassified interest income of $15,992
attributable to finance leases to Other revenue, the adjustment to reduce current expected credit losses of $194 to Selling, general and administrative, and the remaining interest income of $1,168 to Other expense (income), net.
|
10
Note 3 — Preliminary Acquisition Accounting
NFE has determined it is the accounting acquirer for both the Hygo Merger and the GMLP Merger, both of which will be accounted for under the acquisition method of
accounting for business combinations in accordance with Accounting Standards Codification 805, Business Combinations ("ASC 805"). The allocation of the preliminary estimated purchase price with respect to the Mergers is based upon management's
estimates of and assumptions related to the fair values of assets to be acquired and liabilities to be assumed as of December 31, 2020. The pro forma financial statements have
been prepared based on these preliminary estimates, and as such, the final purchase price allocation and the resulting effect on NFE’s financial position and results of operations may differ significantly from the pro forma amounts included herein.
The final purchase price allocation for the business combinations will be performed subsequent to closing and adjustments to estimated amounts or recognition of
additional assets acquired or liabilities assumed may occur as more detailed analyses are completed and additional information is obtained about the facts and circumstances that existed as of the closing dates of the Mergers. NFE expects to
finalize the purchase price allocation no later than 12 months after completing the Mergers.
The following tables presents the preliminary merger consideration and preliminary purchase price allocation of the assets acquired and the liabilities assumed in the
Hygo Merger:
|
Hygo
Preliminary
calculation of estimated merger consideration (in thousands of U.S. dollars, except share and per share amounts)
|
||||||||
|
Cash consideration for Hygo Preferred Shares
|
$
|
180,000
|
||||||
|
Cash consideration for Hygo Common Shares
|
400,000
|
|||||||
|
Total cash consideration
|
$
|
580,000
|
||||||
|
Shares of NFE Common Stock to be issued to GLNG
|
18,627,451
|
|||||||
|
Shares of NFE Common Stock to be issued to Stonepeak
|
12,745,098
|
|||||||
|
Shares of NFE Common Stock to be issued to existing Hygo Common Shareholders
|
31,372,549
|
|||||||
|
Price per share of NFE Common Stock1
|
$
|
43.20
|
||||||
|
Merger consideration to be paid in shares of NFE Common Stock
|
1,355,294
|
|||||||
|
Preliminary fair value of estimated total Hygo Merger consideration
|
$
|
1,935,294
|
||||||
11
|
Hygo (in
thousands of U.S. dollars)
|
As of
December 31, 2020 |
|||
|
Assets Acquired
|
||||
|
Cash and cash equivalents
|
$
|
48,777
|
||
|
Restricted cash
|
37,862
|
|||
|
Receivables, net of allowances
|
19,239
|
|||
|
Prepaid expenses and other current assets, net
|
3,750
|
|||
|
Property, plant and equipment, net
|
397,520
|
|||
|
Finance leases, net
|
376,000
|
|||
|
Equity method investments
|
809,980
|
|||
|
Construction in progress
|
72,190
|
|||
|
Other non-current assets, net
|
30,661
|
|||
|
Total assets to be acquired:
|
$
|
1,795,979
|
||
|
Liabilities Assumed
|
||||
|
Accounts payable
|
$
|
1,555
|
||
|
Accrued liabilities
|
10,943
|
|||
|
Current portion of long-term debt and short-term debt
|
36,648
|
|||
|
Other current liabilities
|
4,800
|
|||
|
Long-term debt
|
455,818
|
|||
|
Deferred tax liabilities, net
|
84,428
|
|||
|
Other long-term liabilities
|
68
|
|||
|
Total liabilities to be assumed:
|
594,260
|
|||
|
Non-controlling interest
|
13,557
|
|||
|
Net assets to be acquired:
|
1,188,162
|
|||
|
Goodwill
|
$
|
747,132
|
||
The following tables presents the preliminary merger consideration and preliminary purchase price allocation of the assets acquired and the
liabilities assumed in the GMLP Merger:
|
GMLP
|
||||
|
Preliminary calculation of GMLP Merger consideration (in
thousands of U.S. dollars, except share and per share amounts)
|
||||
|
Cash consideration for GMLP Common Units
|
$
|
251,000
|
||
|
Cash consideration for GMLP General Partner
|
5,099
|
|||
|
Estimated repayment of GMLP's debt (including prepayment penalties and accrued interest)
|
1,152,000
|
|||
|
Preliminary fair value of estimated total GMLP Merger consideration
|
$
|
1,408,099
|
||
|
GMLP (in
thousands of U.S. dollars)
|
As of
December 31, 2020
|
|||
|
Assets Acquired
|
||||
|
Cash and cash equivalents
|
$
|
48,783
|
||
|
Restricted cash
|
66,930
|
|||
|
Receivables, net of allowances
|
20,292
|
|||
|
Inventory
|
1,719
|
|||
|
Prepaid expenses and other current assets, net
|
1,810
|
|||
|
Property, plant and equipment, net
|
1,208,130
|
|||
|
Intangible assets, net
|
56,600
|
|||
|
Equity method investments
|
349,564
|
|||
|
Other non-current assets, net
|
3,444
|
|||
|
Total assets to be acquired:
|
$
|
1,757,272
|
||
|
Liabilities Assumed
|
||||
|
Accounts payable
|
$
|
17,830
|
||
|
Accrued liabilities
|
25,157
|
|||
|
Other current liabilities
|
89,235
|
|||
|
Deferred tax liabilities, net
|
12,759
|
|||
|
Other long-term liabilities
|
40,649
|
|||
|
Total liabilities to be assumed:
|
185,630
|
|||
|
Non-controlling interest
|
163,543
|
|||
|
Net assets to be acquired:
|
1,408,099
|
|||
|
Goodwill
|
$
|
-
|
||
12
Note 4 — Transaction
Accounting Adjustments – Acquisition and Financing
In addition to the reclassification adjustments in Note 2, the pro forma financial statements reflect adjustments to the historical book
values of Hygo and GMLP including: adjustments to their preliminary estimated fair values in accordance with the acquisition method of accounting, the estimated closing price to be paid by NFE for the Hygo Common Shares, Hygo Preferred Shares and
Common Units of GMLP, the assumption of Hygo’s debt, the refinancing of GMLP’s debt as a result of change of control provisions associated with the Merger and estimated direct transaction costs. These pro forma adjustments are presented below.
| (a) |
Adjustment to recognize the cash paid as part of the merger consideration to acquire outstanding interests of Hygo and GMLP.
|
|
Description (in thousands of U.S. dollars)
|
As of
December 31, 2020
|
|||
|
Cash paid to Hygo Shareholders
|
$
|
580,000
|
||
|
Cash paid to GMLP Shareholders
|
251,000
|
|||
|
Cash paid to acquire GMLP General Partner
|
5,099
|
|||
| (b) |
The adjustments to fair value as a result of purchase price allocation and elimination of assets and liabilities resulting from transactions in connection with the
Mergers, including transactions between GMLP and NFE (the amounts below represent changes; refer to Note 3 for preliminary fair values).
|
|
As of December 31, 2020
|
||||||||
|
Description (in thousands of U.S. dollars)
|
Hygo
|
GMLP
|
||||||
|
Receivables, net of allowances
|
$
|
-
|
$
|
(16,100
|
)
|
|||
|
Restricted cash
|
-
|
(118,455
|
)
|
|||||
|
Prepaid expenses and other current assets, net
|
-
|
(2,570
|
)
|
|||||
|
Property, plant and equipment, net1
|
41,915
|
(100,076
|
)
|
|||||
|
Intangibles, net2
|
-
|
15,305
|
||||||
|
Equity method investments3
|
585,233
|
164,002
|
||||||
|
Right-of-use assets4
|
-
|
(124,017
|
)
|
|||||
|
Finance leases, net4, 5
|
68,340
|
(109,216
|
)
|
|||||
|
Construction in progress6
|
72,190
|
-
|
||||||
|
Other non-current assets, net
|
1,249
|
(745
|
)
|
|||||
|
Goodwill
|
747,132
|
-
|
||||||
|
Current portion of long-term debt and short-term debt
|
1,394
|
-
|
||||||
|
Current lease liabilities
|
-
|
(19,902
|
)
|
|||||
|
Other current liabilities
|
(378
|
)
|
5,428
|
|||||
|
Non-current lease liabilities
|
-
|
(126,503
|
)
|
|||||
|
Deferred tax liabilities, net
|
84,428
|
-
|
||||||
|
Long-term debt
|
11,287
|
-
|
||||||
|
Other long-term liabilities
|
(8,679
|
)
|
22,120
|
|||||
|
Non-controlling interest
|
-
|
81,431
|
||||||
|
Accumulated deficit
|
-
|
372
|
||||||
13
NFE obtained a third-party independent valuation to assist in determination of preliminary fair values of assets acquired and liabilities assumed in the
Mergers, including property, plant and equipment, intangible assets, equity method investments, finance leases and construction in progress. The following estimated fair values are determined using standard generally accepted appraisal practices
and valuation procedures:
| (1) |
The property, plant and equipment acquired in both the Hygo Merger and the GMLP Merger primarily
consists of vessels, with estimated fair values of $1,589,000. The fair value of vessels is determined using a combination of cost and income approaches. Vessels have estimated remaining useful lives of 10
to 34 years.
|
| (2) |
| (3) |
The equity method investments acquired consist of Hygo’s and GMLP’s existing interest in certain
entities which are accounted for under the equity method of accounting with total estimated fair values of $1,159,544. The fair values of equity method
investments acquired are determined by applying the income approach.
|
| (4) |
Adjustments to Right-of-use assets and Finance Leases, net include eliminations of lease transactions between GMLP and NFE and other transactions as a result of the
GMLP Merger.
|
| (5) |
Finance leases, net acquired consist of a Hygo bareboat charter agreement which is accounted for by
Hygo as a sales-type lease with an estimated fair value of $376,000. The fair value of Finance leases, net is determined using a combination of income and cost approaches.
|
| (6) |
The construction in progress assets acquired consist of project development costs with estimated fair
values of $72,190. The fair value of project development costs is
determined using the income approach. Project development costs are not amortized while in the development phase.
|
| (c) |
Reflects the elimination of Hygo’s and GMLP’s historical equity balances and related balances in accordance with the acquisition method of accounting.
|
| (d) |
Reflects the issuance of NFE Common Stock to Hygo Shareholders as consideration for the Hygo Merger.
|
|
As of
December 31, 2020 |
||||
|
Description (in thousands of U.S. dollars)
|
Hygo
|
|||
|
Shares of NFE to be issued to Hygo Shareholders (Class A Common Stock)
|
$
|
314
|
||
|
Shares of NFE to be issued to Hygo Shareholders (APIC)
|
1,354,980
|
|||
|
Pro forma adjustment for shares issued and to be issued1
|
$
|
1,355,294
|
||
| (1) |
Reflects the value of 31,372,549 shares of NFE Common Stock to be issued to Hygo Shareholders based on the closing stock price on March 12, 2021.
|
14
| (e) |
In connection with its entry into the GMLP Merger Agreement and the Hygo Merger Agreement, NFE obtained financing commitments to pay a portion of the cash purchase price in
connection with the GMLP Merger, to refinance certain debt of GMLP and its subsidiaries and to pay fees and expenses. The proceeds from this committed financing are expected to be made available under a senior secured bridge term loan
facility in an aggregate principal amount of $1.5 billion (“Bridge Loan”). If NFE utilizes this financing, the Bridge Loan will bear a fixed interest rate of 6.25%, subject to a step-up of 50 basis points every three months. The Bridge Loan
will have a one-year term and will be pre-payable without penalty. The Bridge Loan shall automatically be converted into a seven-year term loan if it is not repaid in full by maturity.
|
NFE expects to issue senior secured notes (“Senior Secured Notes”) in the amount of $1.5 billion pursuant to Rule 144A and/or Regulation S prior to
closing the GMLP Merger, and as such, NFE is not expected to draw upon the Bridge Loan. Based on the market for NFE’s current senior secured notes, NFE expects to issue such notes at a rate of approximately 5% per annum. NFE expects to incur
financing fees of $32,935, including 1% of the aggregated principal amount of the Senior Secured Notes, 1% of the aggregated principal amount of the Bridge Loan, and other fees. The pro forma adjustment assumes the redemption of certain GMLP debt
from an expected issuance of long-term Senior Secured Notes at this rate, and as such, all financing has been considered as long-term debt for transaction adjustment purposes
NFE has also obtained a commitment for a revolving credit facility (“Revolving Credit Facility”) consisting of up to $200 million in
financing that bears an interest rate based on 3 month London Interbank Offered Rate (“LIBOR”) plus certain margins. NFE will be charged with a 1% commitment fee based on the $200 million committed financing amount.
| (f) |
Pro forma adjustment to eliminate the income statement impact of Hygo’s preferred dividends of $11,306 for the year ended December 31, 2020.
|
| (g) |
Given Hygo’s and GMLP’s history of net losses, both Hygo and GMLP have recorded valuation allowances to reduce deferred tax assets, net to the amount that is more likely than not
to be realized. As a result, a statutory tax rate of 0% was assumed, and the pro forma adjustments to the pro forma income statement included no additional income tax adjustments.
|
The adjustment to reflect the pro forma impact on Deferred tax liabilities, net is included in Note 4(b). The adjustment reflects the preliminary
estimate of deferred income taxes resulting from the fair value adjustments related to certain assets and liabilities of a foreign equity method investment, based on the estimated statutory tax rate of 15.25%.
| (h) |
Reflects the accrual of estimated transaction costs related to the Mergers that have not been reflected in the historical financial statements including, among others, fees paid
for financial advisors, legal services and professional accounting services. The costs are reflected in the condensed combined pro forma balance sheet as of December 31, 2020 as an increase to Accrued liabilities and an increase to
Accumulated deficit, and in the condensed combined pro forma income statement for the year ended December 31, 2020, within Selling, general and administrative, as the pro forma income statement has been prepared giving effect to the Mergers
as if they had been consummated on January 1, 2020.
|
15
|
As of December 31, 2020
|
||||||||
|
Description (in thousands of U.S. dollars)
|
Hygo
|
GMLP
|
||||||
|
Transaction costs associated with the Merger
|
$
|
4,209
|
$
|
4,209
|
||||
| (i) |
Reflects the pro forma adjustments to Depreciation and amortization based on the preliminary purchase price allocation of estimated fair value of the property, plant and equipment
and intangible assets acquired, as described in Note 4(b).
|
|
Year ended December 31, 2020
|
||||||||
|
Description (in thousands of U.S. dollars)
|
Hygo
|
GMLP
|
||||||
|
Pro forma depreciation
|
$
|
12,957
|
$
|
61,533
|
||||
|
Pro forma amortization
|
-
|
10,793
|
||||||
|
Less historical Depreciation and amortization
|
(11,262
|
)
|
(79,996
|
)
|
||||
|
Pro forma adjustment to Depreciation and amortization
|
$
|
1,695
|
$
|
(7,670
|
)
|
|||
| (j) |
Reflects the following pro forma adjustments related to interest expense for the year ended December 31, 2020.
|
|
Year ended December 31, 2020
|
||||||||||||
|
Description (in thousands of U.S. dollars)
|
Hygo
|
GMLP
|
Financing
|
|||||||||
|
Elimination of historical interest expense of GMLP debt repaid in the Mergers
|
$
|
-
|
$
|
(67,374
|
)
|
$
|
-
|
|||||
|
Interest expense of Senior Secured Notes1
|
-
|
-
|
79,705
|
|||||||||
|
Interest expense of Revolving Credit Facility2
|
- | - |
6,427
|
|||||||||
|
Change in interest expense resulting from the preliminary allocation of purchase price
|
(2,496
|
)
|
-
|
-
|
||||||||
|
Elimination of finance lease
|
-
|
(1,164
|
)
|
-
|
||||||||
| (1) |
The Bridge Loan will bear an initial fixed interest rate of 6.25% per annum. The interest rate increases over time based on a predetermined schedule and is capped at 7.75% per
annum. NFE plans to issue Senior Secured Notes prior to the closing of the GMLP Merger at a rate of approximately 5% per annum and do not require financing under the Bridge Loan. Therefore, for the purpose of this pro forma adjustment, an
interest rate of 5% per annum is applied. Expected financing costs are amortized over the expected term of the financing.
|
A 1/8 of a percentage point change in the 5% per annum interest rate assumed in a future debt issuance in the near term would result in a change in
interest expense of approximately $1,875 for the year ended December 31, 2020.
| (2) |
Represents the net increase to interest expense resulting from interest on the Revolving Credit Facility that bears an interest rate based on the 3 month LIBOR plus certain
margins, and the amortization of the commitment fee over the expected life of the Revolving Credit Facility.
|
A 1/8 of a percentage point increase or decrease in the benchmark rate would result in a change in interest expense of approximately $250 for the year
ended December 31, 2020.
16
| (k) |
Adjustments to eliminate the revenues and expenses related to transactions between NFE and GMLP.
|
| (l) |
Reflects the adjustments to Equity in net earnings (losses) of affiliate due to the basis adjustment of the debt, property, plant and equipment, and intangibles held by the equity
method investments.
|
| (m) |
Reflects the pro forma adjustments to Other expense (income), net due to the amortization of the fair value adjustment of a financial guarantee assumed by NFE. The fair value of such financial guarantee is determined using the expected losses approach.
|
| (n) |
|
Year ended
December 31, 2020 |
||||
|
Description (in thousands of U.S. dollars)
|
GMLP
|
|||
|
Other expense (income), net
|
$
|
(27,352
|
)
|
|
|
As of
December 31, 2020 |
||||
|
Description (in thousands of U.S. dollars)
|
GMLP
|
|||
|
Cash
|
$
|
(14,661
|
)
|
|
|
Restricted cash (current)
|
(16,940
|
)
|
||
|
Other current liabilities
|
(31,601
|
)
|
||
| (o) |
Reflects the adjustments to the Net (income) loss attributable to non-controlling interest due to: changes to the values of assets held by one of GMLP’s consolidated variable
interest entities, the extinguishment of a sales leaseback financing arrangement with another of GMLP’s variable interest entities as part of the GMLP Merger (refer to FN 4(e)), and the income attributable to GMLP Preferred Units, which
will not be acquired by NFE .
|
|
Year ended
December 31, 2020 |
||||
|
Description (in thousands of U.S. dollars)
|
GMLP
|
|||
|
Non-controlling interest income resulting from change in basis
|
$
|
(1,599
|
)
|
|
|
Elimination of a non-controlling interest
|
3,554
|
|||
|
Income attributable to GMLP Preferred Units
|
(12,109
|
)
|
||
|
Net (income) loss attributable to non-controlling interest
|
$
|
(10,154
|
)
|
|
17
| (p) |
|
Description (in thousands of U.S. dollars, except share and per share amounts)
|
Year ended
December 31, 2020 |
|||
|
Numerator
|
||||
|
Basic and diluted combined pro forma net income (loss) attributable to stockholders
|
$
|
(237,989
|
)
|
|
|
Denominator
|
||||
|
Historical basic and diluted weighted average NFE shares outstanding
|
106,654,918
|
|||
|
Shares of NFE Common Stock issued and to be issued1
|
31,372,549
|
|||
|
Pro forma basic and diluted weighted average NFE shares outstanding
|
138,027,467
|
|||
|
Pro forma basic and diluted net income (loss) per share attributable to NFE common shareholders
|
$
|
(1.72
|
)
|
|
| (1) |
Includes 31,372,549 shares of NFE Common Stock to be issued to Hygo Shareholders as consideration, as if the issuances had occurred on January 1, 2020.
|
18