Teekay LNG Partners said it intends to cut quarterly cash distributions in order to use the portion of its internally generated cash flow to fund equity capital requirements.
The company’s Wednesday statement reveals cash distributions are to be cut to US$0.14 per common unit from third quarter’s US$0.70.
Peter Evensen, Chief Executive Officer of Teekay said that Teekay LNG businesses “ remain strong ” despite the weakness in the global energy and capital markets.
However, Evensen added that “ as a growing MLP, Teekay LNG does require capital and there is currently a dislocation in the capital markets relative to the stability of our businesses such that the partnership’s cost of equity has increased to the point where it is currently not an economically attractive source of capita l.”
The partnership’s board considered numerous options, including selling existing assets and future growth projects and evaluating potential alternative sources of capital, which could have resulted in permanent dilution to existing unitholders. It was instead decided to temporarily reduce cash distributions, a move regarded as the “safest way to fund future growth projects “.
LNG World News Staff