LNG carrier owner and operator Teekay LNG Partners has unveiled plans to amend its US tax status to be treated as a corporation instead of a partnership.
This would provide access to a larger investor base and should not result in Teekay LNG recognizing a gain or loss or change its taxes payable going forward, according to Kenneth Hvid, Teekay’s President and Chief Executive Officer.
“The Board is recommending that Teekay LNG elect to be treated as a corporation, instead of a partnership, for US federal income tax purposes, which we believe is in the best interests of our current and future unitholders because, by eliminating the burdensome K-1 reporting, we anticipate that Teekay LNG will be a more attractive investment for larger, institutional investors,” Mark Kremin, President and Chief Executive Officer of Teekay Gas Group, said.
A proxy statement has been filed and is subject to common unitholder approval, the company said.
Teekay LNG closed the quarter ended September 30, 2018, with a GAAP net income attributable to the partners and preferred unitholders of 25.9 million, compared to a net loss of USD 18.9 million seen in the same quarter last year.
Adjusted net income attributable to the partners and preferred unitholders stood at USD 19.5 million in Q3 2018, against USD 13.5 million in Q2 2018 and USD 20.9 million in Q3 2017.
“Teekay LNG’s results for the third quarter of 2018 improved substantially, with adjusted net income up 44 percent compared with the second quarter of 2018,” Kremin commented.
“The earnings and cash flow from the delivery and contract start-up of our recent LNG carrier newbuildings are beginning to have a positive impact on our financial results, with eight newbuilds having now delivered since the start of 2018 and an additional seven LNG carriers, and the Bahrain regasification facility, expected to commence their fixed-rate contracts during 2019,” Kremin added.
“Importantly, the vessels that have delivered to-date during 2018 only represent approximately 50 percent of the total USD 310 million of expected incremental cash flow from vessel operations relating to our existing LNG newbuilding program and therefore, we expect our fixed-rate cash flows will continue to increase through 2019 as the remaining projects deliver,” he further said.
In September, the partnership agreed to charter-in Magellan Spirit LNG carrier from its 52%-owned Teekay LNG-Marubeni joint venture for a period of two years.
“We have now fixed that ship (Magellan Spirit) on a five-month charter contract to the end of March 2019, which we expect will add approximately USD 8 million in incremental profit to Teekay LNG over the length of this charter alone. In addition, the Torben Spirit LNG carrier and two Teekay LNG-Marubeni joint venture LNG carriers are scheduled to come off-charter between December 2018 and May 2019 and we are currently in discussions to secure employment for these vessels at significantly higher rates,” as informed by Kremin.
The partnership also sold two 2003-built Suezmax tankers, African Spirit and European Spirit.
Teekay LNG has interests in 49 LNG carriers — including seven newbuildings –, 22 mid-size LPG carriers, seven multi-gas carriers, and three conventional tankers. In addition, the partnership owns a 30 percent interest in a regasification terminal, which is currently under construction.