Teekay LNG Partners to Increase 2019 Distributions by 36 Percent and Eliminate K-1 Reporting for Unitholders
HAMILTON, Bermuda, Nov. 14, 2018 (GLOBE NEWSWIRE) — Teekay GP LLC, the general partner of Teekay LNG Partners L.P. (Teekay LNG or the Partnership) (NYSE:TGP), has today announced the following actions affecting its unitholders:
- Common unit distributions expected to increase by 36 percent in 2019 as part of a balanced capital allocation strategy; and
- A recommendation that unitholders vote in favor of amending Teekay LNG’s tax status to be treated as a corporation, instead of a partnership, for U.S. federal income tax purposes, which would result in common and preferred unitholders receiving Form 1099s, instead of K-1s, in the future.
“With roughly half of our newbuilding program delivered and the remaining vessels set to deliver throughout 2019, the Partnership’s cash flows and net income are expected to grow significantly while our balance sheet is anticipated to naturally delever over time,” commented Mark Kremin, President and Chief Executive Officer of Teekay Gas Group Ltd. “Our Board has carefully assessed our future capital allocation strategy and has concluded that a balanced approach that, in the near-term, focuses on both delevering the balance sheet, which creates significant equity value and builds financial strength, and returning more capital to unitholders from its free cash flow after debt amortization payments, is prudent and will create the most long-term value for our unitholders. As a result, with the recent completion of our 2018 refinancings and nearly all of our newbuild program financings, our Board has decided to increase Teekay LNG’s quarterly common unit cash distribution in 2019 by 36 percent to $0.19 per unit, commencing with the first quarter of 2019 distribution to be paid in May 2019.”
Mr. Kremin added, “With almost $11 billion of forward fixed-rate revenues, we believe that our capital allocation strategy provides a clear path to delever our balance sheet towards our target of 5.5 times on a net debt to cash flow from vessel operations basis over the next few years, while also providing an enhanced ability for the Partnership to fund future growth at a lower cost of capital. As we approach our targeted leverage level, we believe a stronger balance sheet will enable us to consider returning additional capital to unitholders through distribution increases and/or common unit repurchases, which we intend to evaluate at least annually.”
Mr. Kremin continued, “In addition, Teekay LNG intends to change its tax status to be treated as a corporation for US tax purposes, which we anticipate will broaden our investor base by making Teekay LNG a more attractive investment for new investors.”
Special Meeting of Unitholders
The Board of Directors of Teekay GP L.L.C. has called a special meeting of common unitholders of Teekay LNG to be held on December 18, 2018. A Notice of Special Meeting and Proxy Statement has today been filed with the U.S. Securities and Exchange Commission and will be mailed to common unitholders, which describes the business to be transacted at the special meeting, namely proposals which will allow Teekay LNG to elect to be treated as a corporation, instead of a partnership, for U.S. federal income tax purposes and to amend Teekay LNG’s partnership agreement accordingly. The Board has unanimously determined that these proposals are in the best interests of Teekay LNG and its unitholders, and recommends that the common unitholders vote in favor for each of the proposals, which are conditional on approval of each other.
This proposed change to Teekay LNG’s status for U.S. federal income tax purposes, which is subject to common unitholder approval, should not result in Teekay LNG recognizing a gain or loss. While some investors may incur a tax gain on conversion, any gain recognized for U.S. tax purposes is expected to result in tax benefits that are expected to reduce the taxable portion of cash distributions paid by Teekay LNG in the future.
Teekay LNG intends to hold a conference call on Thursday, November 15, 2018 at 11:00 a.m. (ET) to discuss its third quarter of 2018 results and to provide additional information on the unitholder actions announced today. All unitholders and interested parties are invited to listen to the live conference call by choosing from the following options:
- By dialing (888) 204-4368 or (647) 484-0478, if outside North America, and quoting conference ID code 7444729.
- By accessing the webcast, which will be available on Teekay LNG’s website at www.teekay.com (the archive will remain on the website for a period of one year).
An accompanying Third Quarter 2018 Earnings Presentation will also be available at www.teekay.com in advance of the conference call start time.
About Teekay LNG
Teekay LNG Partners is one of the world’s largest independent owners and operators of LNG carriers, primarily providing LNG and LPG marine transportation services largely under long-term, fee-based charter contracts through its interests in 49 LNG carriers (including seven newbuildings), 22 mid-size LPG carriers, seven multigas carriers and three conventional tankers. The Partnership’s interests in these vessels range from 20 to 100 percent. In addition, the Partnership owns a 30 percent interest in a regasification facility, which is currently under construction. Teekay LNG Partners was formed by Teekay Corporation (NYSE: TK) as part of its strategy to expand its operations in the LNG and LPG marine transportation sectors.
Teekay LNG Partners’ common units and preferred units trade on the New York Stock Exchange under the symbols “TGP”, “TGP PR A” and “TGP PR B”, respectively.
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Forward Looking Statement
This release 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, including statements, among other things, regarding: the future operating results of the Partnership, including expected significant increases to cash flows and net income; delevering of the Partnership’s balance sheet; the Partnership’s financial strength and ability to fund growth, return capital to unitholders and expand its fleet; the effects of Teekay LNG’s proposed election to be classified as a corporation for U.S. federal income tax purposes, including greater appeal to certain investors, and the tax effect on and treatment applicable to Teekay LNG and certain unitholders upon any such reclassification and in the future; and proposed increases in 2019 and in the future to Teekay LNG’s quarterly distributions on its common units and the impact of Teekay LNG’s distribution policy and capital allocation strategy on Teekay LNG and its ability to achieve its targeted leverage. 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 and project construction delays, newbuilding specification changes or cost overruns; 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; changes in applicable industry laws and regulations and the timing of implementation of new laws and regulations; the impact of IMO 2020; the potential for early termination of long-term contracts of existing vessels in the Partnership’s fleet; higher than expected costs and expenses; the inability to secure new charters at higher rates; the outcome of the common unitholder vote at the special meeting to approve the proposed classification of the Partnership as a corporation for U.S. federal income tax purposes and related amendments to its partnership agreement, and the actual tax implications of any such reclassification and amendments on the Partnership and unitholders; the level of income of the Partnership that is U.S. source gross transportation income subject to tax under Section 887 of the U.S. tax code; actual levels of quarterly distributions approved by the Board of Directors of the Partnership’s general partner; 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 or the Partnership’s joint ventures’ ability to secure or draw on financings for their vessels; 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, 2017. 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.