Big catch: Keppel’s ship conversion deal worth $750m, says DMG

Golar’s funds are finally in place.

A big fish has returned to Keppel’s nets after the company clinched a ship conversion contract with Golar Hilli. According to OSK DMG, the deal is estimated to be worth a whopping $750m.

The report further noted that Golar LNG now has the financing in place,after successfully pricing its 110m share placement at USD54.00/share and raising c.USD6bn to fund this and other potential projects.

“With financing now in place, the lights have turned green for the converting of two additional vessels – the Gimi and the Gandria, which appear to be sister vessels to the Hilli – into FLNGVs,” stated OSK DMG.

Here’s more from the report:

Keppel has signed a conditional contract with Golar LNG (GLNG US, NR) to perform the world’s first conversion of an existing Moss liquefied natural gas (LNG) carrier, the Hilli, into a floating liquefaction vessel (FLNGV).

We expect this conversion to be worth c.SGD750m, according to media sources. Golar LNG expects the construction period to be 31 months. Thus, this unit could be delivered as early as Dec 2016. Payment terms appear to be in line with past conversion projects.

According to Golar LNG’s management, the payment terms include “two larger payments on the front and back ends [with] progress payments as well”.

Golar LNG is a repeat customer. Keppel has successfully worked on three floating storage regasification units (FSRUs) for Golar LNG in the past, making it a repeat customer for floating natural gas vessels.

This gives us confidence that the next two units might go to Keppel as well. Keppel has won SGD1.9bn in
contracts YTD, and these three FLNGVs could be worth another SGD2.25bn.

Its offshore & marine division should maintain operational strength, although headwinds persist for its property and infrastructure arms.