Golar LNG said it is in negotiations with Brazilian power suppliers to provide a floating storage and regasification unit to a combined cycle power station.
The company has in recent months been negotiating with Brazilian power partners to participate in up to 25% of this power project and has the exclusive right to provide the FSRU, Golar LNG said in its first-half report on Wednesday.
These partners have been awarded a 25 year PPA contract with Brazilian authorities to build and operate a 1.5 GWha LNG fuelled combined cycle power station in Sergipe, Northern Brazil.
In addition to supplying the power station with gas, the FSRU would also have excess capacity to deliver gas to the Brazilian grid, Golar LNG said.
The partners are currently working through the permitting process and are in negotiations with LNG providers, contractors and financiers.
According to Golar, the capacity payment achieved in the PPA contract was awarded at a historically high level.
If Golar proceeds, it would do so on the basis of an expected unleveraged project return in excess of 15 %. Further upside is available based on usage, it added.
Golar is planning to establish a stand-alone, non-recourse subsidiary, Golar Power Ltd. to hold this investment.
The company’s total commitment to this subsidiary will initially be $5 million in liquidity lines and $24 million in non-performance guarantees, effective from 2020.
Further equity investments would be needed if the project gets a final go-ahead.
According to Golar, the company’s intention would be to bring additional partners into Golar Power.
Golar said it has approached several leading trading companies with this idea and has received encouraging feedback.
A final clarification around this structure should be expected before year-end.