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Teekay LNG Partners (NYSE: TGP) Investor Day Presentation, Sep 30, 2014
This document provides an overview of Teekay LNG Partners' investor day presentation. It highlights the company's $11 billion in forward fee-based revenues from its LNG and LPG shipping businesses. It also discusses growth opportunities from new LNG export projects in the US and other regions, underpinned by strong Asian demand. The presentation outlines Teekay LNG's competitive advantages including its scale, innovative MEGI LNG carriers, strategic partnerships, and reliable operational performance.
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Teekay LNG Partners (NYSE: TGP) Investor Day Presentation, Sep 30, 2014
- 1. TTEEEEKKAYAY TEEKAY LNG PARTNERS INVESTOR DAY September 30, 2014
- 2. 2 DAVID GLENDINNING President, Teekay Gas Services
- 3. 3 Forward LookingStatements This presentation contains forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended) which reflect management's current views with respect to certain future events and performance. All statements included in or accompanying this presentation, other than statements of historical fact, are forward-looking statements. Forward-looking statements are not guarantees and actual results could differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements in this presentation include, among others, statements regarding: future growth opportunities and expectations and the effect of any growth on the Partnership’s results of operations; the expected delivery dates for the Partnership’s newbuilding vessels and commencement of related time charter contracts; the Partnership’s agreement to provide, through a new 50/50 joint venture with China LNG, six icebreaker LNG carriers for the Yamal LNG project including the timing of delivery and total cost to construct the vessels; the timing of the start-up of the Yamal LNG project and the expected total LNG production capacity of the project, if completed; the impact of the transactions with Yamal LNG and BG on the Partnership’s future cash flows; the delivery and cost to construct the four LNG carrier newbuildings for BG; the total amount of the Partnership’s forward fee-rate revenues and the average remaining contract length on the Partnership’s LNG fleet; future growth opportunities and expectations relating to our interest in the Exmar LPG JV and its ability to secure newbuildings at competitive prices; LNG/LPG shipping market fundamentals and projects; LNG and LPG market fundamentals and trends; the Partnership’s growth strategy and initiatives, including project bidding and expansion into adjacent markets such as ethane projects; illustrative annual distribution growth; and the estimated amount and timing of capital expenditures relating to existing projects. The following factors are among those that could cause actual results to differ materially from the forward-looking statements, which involve risks and uncertainties, and that should be considered in evaluating any such statement: potential shipyard construction delays, newbuilding specification changes or cost overruns; availability of suitable LNG shipping, LPG shipping, floating storage and regasification and other growth project opportunities; changes in production of LNG or LPG, either generally or in particular regions; changes in trading patterns or timing of start-up of new LNG liquefaction and regasification projects significantly affecting overall vessel tonnage requirements; competitive dynamics in bidding for potential LNG, LPG or floating regasification projects; potential failure of the Yamal LNG Project to be completed for any reason, including due to lack of funding as a result of existing or future sanctions against Russian entities and individuals, which may affect partners in the project; potential delays or cancellation of the Yamal LNG project; potential delays in constructing and delivering the four LNG carrier newbuildings for BG; changes in applicable industry laws and regulations and the timing of implementation of new laws and regulations; the potential for early termination of long-term contracts of existing vessels in the Teekay LNG fleet; the inability of charterers to make future charter payments; the inability of the Partnership to renew or replace long-term contracts on existing vessels; the Partnership’s ability to raise financing for its existing newbuildings or to purchase additional vessels or to pursue other projects; anticipated benefits of partnering with third parties; expected performance of MEGI newbuildings; and other factors discussed in Teekay LNG Partners’ filings from time to time with the SEC, including its Report on Form 20-F for the fiscal year ended December 31, 2013. The Partnership expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Partnership’s expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.
- 4. 4 Stable Operating Model Leading Market Position Strong Industry Fundamentals One of the world’s largest LNG carrier owners and operators $11 billion of forward fee-based revenues Gas is the fastest growing fossil fuel $2.5 billion of built-in growth INVESTMENT HIGHLIGHTS Visible Growth
- 5. 5 TEEKAY LNGAT A GLANCE $3.3B Market Cap 6% Distribution CAGR Since IPO in 2005 2005 $11B Forward fee-based revenues 83 Vessels 13 years Avg. contract duration 2014 15% per annum Total Shareholder Return Since IPO ZERO Pollution events >99.5% Fleet Availability since 2008
- 6. 6 Teekay LNG’sEvolution Multiple LNG contract awards First LNG contracts with Ras Gas (Ras Gas JV partner ExxonMobil) Gas Naviera Tapias Entry into LNG 2004 Teekay LNG Partners IPO (NYSE:TGP) 2005 Maersk LNG Exmar LPG JV Expanded into LPG 2012 Partnership with Exmar, LPG industry leader Exmar LNG JV Teekay LNG’s Core Businesses MEGI LNG Yamal LNG BG LNG Photo Credit: Dmitrijs Jemelins
- 7. 7 Teekay LNG’sGlobal Footprint Global Trade Routes Current LNG Trade routes Future Teekay LNG routes Teekay LNG Office
- 8. 8 Major IndependentLNG Operator One of the world’s largest independent owners of LNG carriers 67 64 64 53 47 43 44 29 26 26 11 Existing On Order 16 15 14 8 8 3 11 4 15 15 10 5 4 2 2 NYK MOL K Line Teekay LNG Maran Gas GasLog Golar BW Maritime Knutsen Dynagas Note: Excludes state & oil company fleets . Source: Clarksons and Company websites 20 18 10 10
- 9. 9 $11B ofForward-Fee Based Revenues With Strong Customer Base Forward Fee-Based Revenues by Segment 92% LNG Carriers LPG Carriers Conventional * 4 Years 5% * $11.0B Total Forward 3% Average Remaining Contract Length by Segment 14 Years 7 Years* Fee-Based Revenues Tankers * The average remaining contract life and forward fee-based revenues relate to 13 of our 30 LPG carriers currently on fixed-rate charters.
- 10. 10 Reliable Track Record of Operational Excellence • Approaching 1,000 days without an LTI • >99.5% fleet availability since 2008 • Zero pollution events since inception LTIF: Loss Time Injury Frequency
- 11. 11 Innovative MEGINewbuildings Leading edge of LNG carriers • “Best Mouse Trap” for growing LNG demand o Reduced fuel consumption - savings of over $25,000/day* over DFDE vessels o Reduced boil off gas – reliquefaction prevents LNG loss o Optimized vessel size – largest capacity to fit through new Panama Canal • Evaluating every component to find efficiencies o Propeller, hull form, reliquefaction • Reduced engine complexity lowers operational cost Lower total unit freight cost to customers (e.g. reduces US to China cost by $0.45 per mmbtu* compared to DFDE vessels) * Assumes 19.5 knots, $650 per tonne fuel equivalent
- 12. 12 Partnerships EnhanceGrowth Partnering allows Teekay LNG to expand its business footprint more quickly and at a lower cost Access to new lines of business Access to new markets Risk diversification Financing China LNG
- 13. 13 Teekay LNG’sCompetitive Advantages Significant Scale One of the largest independent owners and operators of LNG carriers Technology First mover to embrace innovative fuel-efficient MEGI LNG carriers Strategic Partnerships Strong joint venture and shipyard relationships Reliable Operations Excellent HSEQ KPIs Large pool of seafarers Access to Capital Since IPO, raised $1.9B of equity and bonds Strong relationships with over 30 banks / ECAs
- 14. 14 STRONG GASMARKET FUNDAMENTALS
- 15. 15 LNG FleetUtilization Improves After 2016 LNG liquefaction export growth mostly driven by U.S. and Australia 40 30 20 10 0 -10 -20 No. Vessels Deliveries Scrap Incremental Demand Cumulative Surplus / Deficit Source: Clarksons and internal estimates 3 TGP LNG deliveries (uncommitted) ▼ ▲ ▲ Only 2 TGP LNG carriers roll-off contracts (52% owned)
- 16. U.S. Projects CreateDemand for LNG Carriers Over 100 LNG carriers needed for U.S. projects from 2016 U.S. Exports – Cumulative Vessel Demand 16 PROJECT START UP FID VESSEL REQUIREMENTS* Sabine Pass Trains 1 - 4 2016 / 2017 2012 / 2013 20 Sabine Pass Train 5 2018 2015 5 Cameron 2018 2014 14 Freeport 2018 2014 14 Corpus 2018 2015 16 Christi Lake Charles 2019 2015 17 Golden Pass 2020 2015 17 Total 103 Source: Company Websites and Clarksons 120 100 80 60 40 20 0 2016 2017 2018 2019 2020 No. Vessels 3 TGP LNG deliveries (uncommitted) 3 TGP LNG options (undeclared) TGP’s MEGI LNG newbuildings are ideally suited for U.S. LNG exports
- 17. 17 Over 100MTPA Growth Outside U.S. by 2020 Export volume growth in Australia, Russia, Canada and East Africa Canada 25 20 15 10 5 0 Cumulative MTPA Rest of World 25 20 15 10 5 Source: Internal Estimates Australia 70 60 50 40 30 20 10 0 Cumulative MTPA Russia 25 20 15 10 5 0 Cumulative MTPA East Africa 25 20 15 10 5 0 Cumulative MTPA 0 Cumulative MTPA
- 18. 18 Future LNGDemand Driven by Asia Asia will account for almost 70% of the future increase in LNG imports Increase in LNG Imports in next 5 years 70 60 50 40 30 20 10 0 Asia Europe Middle East Americas Latin Amer Africa MTPA Source: IEA China and India Import Terminal Capacity 140 120 100 80 60 40 20 0 Proposed Under Construction Existing 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 MTPA Source: Clarksons China and India import capacity set to triple by 2018 ~70%
- 19. 150 New LNGCarrier Orders Required by 2020 Required Orders 150 19 In addition to current orderbook LNG Export Capacity Additions by Region 600 500 400 300 200 100 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 MTPA Additional LNG Vessel Demand 275 250 225 200 175 150 125 100 75 50 25 Existing Africa Australia Russia North America Others Current Orderbook Net of Scrapping 109 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 No. Vessels Vessel Demand Required Orders Current Orderbook Net of Scrapping Source: Internal Estimates Cumulative Fleet Additions
- 20. 20 Leading MarketPosition in Growing MGC Trade LPG trade on Midsize Gas Carriers forecast to grow by 4 MTPA by 2016 Largest MGC Owners (25 – 40k cbm) 20 18 16 14 12 10 8 6 4 2 0 No. Vessels Source: Clarksons Existing On Order Growing Medium-Haul LPG Trade Routes Source: Internal Estimates • Increasing medium-distance LPG trade from the U.S., Middle East and North Africa to Latin America, Europe, and India ○ European LPG imports increasing as refinery closures reduce local LPG supply ○ Indian and Latin American imports increasing to meet growing domestic retail demand • Approximately 50% of the MGC fleet trading ammonia, which offers stable vessel demand
- 21. Ethane Carrier Demandvs. Supply ORDER BOOK 21 Emerging Ethane Shipping Demand U.S. ethane exports create demand for 50 ethane carriers DEMAND Very Large Ethane Carriers (VLEC) 24 6 Midsize Ethane Carriers (MEC) 25 13 Source: Clarksons, Internal Estimates U.S. Ethane Export Forecast 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 Mean Wells Fargo Credit Suisse 2013 2014 2015 2016 2017 2018 mb/d Source: Wells Fargo, Credit Suisse • Growing supply of low-cost ethane encouraging a switch to ethane feedstock in the petrochemical industry • Natural fit for MLPs due to length of contracts
- 22. 22 Strong DemandGrowth for Floating Regasification Forecast $3-5B of FSRU projects in next 5 years • FSRU is the technology of choice in developing countries • Provides a quicker, lower-capital cost access to natural gas compared to land-based regasification terminals • Can be relocated if demand is short term and / or seasonal FSRU 5-year Order Forecast 25 20 15 10 5 0 Low Case Base Case High Case No. Units Source: EMA
- 23. 23 TEEKAY LNG’S GROWTH STRATEGY
- 24. 24 TGP’s FleetExpansion Matches Demand Outlook Growth Projects by Segment Growth Project Deliveries Strong LPG Outlook Strong LNG Outlook 2 3 3 2015 2016 2017 2018 2019 2020 92% $2.5B Total Known Growth Projects 8% LNG Carriers LPG Carriers 1 2 4 4 3 2
- 25. 25 Over 90%of Growth Capex Already Booked to Achieve Illustrative Growth Through 2017 Aiming to exceed illustrative growth assumptions TGP Growth Capex - Committed vs. Illustrative Target 3,000 2,500 2,000 1,500 1,000 500 - 2015 2016 2017 2018 Annual Capital Investment ($millions) Cumulative Capital Investments (Known) TGP Known Asset Deliveries Cumulative Capex Required for Illustrative Distribution Growth Note: Illustrative distribution growth assumptions of 0%, 2.5%, 4% and 4% in 2015, 2016, 2017 and 2018, respectively 91% of Capex to achieve illustrative distribution growth already committed Cumulative Capital Investments (Known) TGP Known Annual Asset Deliveries Cumulative Capex Required for Illustrative Distribution Growth
- 26. 26 Well-Positioned toCapture Significant Share of LNG Market Growth Over $30 billion* of new LNG carrier Capex required by 2020 259 109 300 250 200 150 100 50 0 LNG Carrier Demand Through 2020 Current Orderbook Net of Scrapping Through 2020 No. Vessels Demand for 150 new LNG carrier orders above current orderbook by 2020 Source: Internal estimates * Based on demand for 150 new LNG carrier orders at an average Capex of $210 million per vessel.
- 27. 27 Successful ExmarLPG JV Transaction Well-timed acquisition • Strengthening market has delivered upside to fleet earnings • Significant scale and customer relationships • Newbuildings secured at competitive prices for fleet renewal and growth Short-term LPG Freight Rates 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 $ millions / month MGC 1-year TC rate VLGC spot rate • Recent market strength has generated gains on sales of older tonnage • JV has experience required to capitalize on ethane opportunities JV continues to exceed expectations supported by market strength and new growth opportunities
- 28. 28 Business AdjacenciesTargeted for Additional Growth Core LNG Carriers LPG Carriers FSRU Ethane FSU Leverage Existing Platform and Customer Relationships
- 29.
- 30. Summer route (NSR) Russia to China – 18 days 30 Yamal LNG Project • TGP, through a new 50/50 joint venture with China LNG Shipping, will provide six ARC 7 icebreaker LNG carriers for the Yamal LNG Project ○ Capex $2.1 billion (100% basis) − Higher IRR than regular conventional LNG charters ○ Scheduled to deliver in 2018 through 2020 ○ Fee-based contracts through to 2045 • All the LNG from the project already sold on long-term contracts • Strong contractual protection from sanctions and project delays • Established new strategic partnership with China LNG Shipping Russia to China – 53 days Yamal LNG Sabetta Winter route Transshipment Zeebrugge Vessel requirements: • 15 ARC 7 icebreaker LNG carriers • Up to 15 conventional LNG carriers for transshipment (to be tendered)
- 31. 31 BG LNGProject Leveraged Teekay Group’s relationship with BG to secure new gas business 2012 2013 2014 Awarded construction supervision and technical management for 4 LNG newbuildings Acquired ownership interest in these vessels Award led to ownership • TGP acquired ownership interest in four LNG carrier newbuildings from BG (30% of first two vessels and 20% of second two vessels) ○ Capex of $1.0 billion (100% basis) ○ Scheduled to deliver in 2017 through 2019 ○ 20 year fee-based contracts • The vessels will be constructed by Hudong shipyard, a top-tier shipyard in China • Together with Yamal project, further strengthens relationship with China-based partners
- 32. 32 Preparing Organizationfor Growth • Established a state-of-the-art training facility • Draw from Teekay Group’s large pool of trained seafarers • Employer of choice
- 33. 33 TGP Growth Strategy Primary goal: to increase distributable cash flow per unit • Execute on $2.5 billion of committed projects • Bid on several new point-to-point LNG projects • Grow our Exmar LPG JV • Expand into adjacent areas on a build-to-suit basis • Pursue accretive on-the-water acquisitions
- 34.
Editor's Notes
- #8 Show LNG & Tanker Routes
- #17 - U.S. export opportunities opening up due to (i) new liquefaction and (ii) expanded Panama Canal - Russia – Yamal and other projects - Australia – significant LNG liquefaction coming on line from 2017 onwards (but, shipping mostly already contracted)
- #18 ** Most of the vessel requirements have already been ordered for Australian projects Rest of World includes: Malaysia (Petronas FLNGs, Bintulu expansion) Indonesia (Donggi Senoro, Tangguh expansion) Papua New Guinea (Exxon’s PNG LNG expansion) Colombia (Exmar FLNG)
- #19 - Natural gas and LNG is a cornerstone of China’s energy mix - Domestic gas shortfall prompting India to turn to LNG - Regasification capacity in China and India will double by 2016; triple by 2018
- #31 How we got comfortable with the project: The world will normalize The world is reliant on Russian gas Financing Little reliance on the west Next payment not due until 2016 We have appropriate contractual protection from sanctions and project delay / abandonment Asia gas diversification Sovcomflot to take delivery of first vessel which will be tested Returns EV/EBITDA multiple (verbal)
- #32 Why we are comfortable with the China shipyard