TEEKAY LNG PARTNERS INVESTOR DAY September 30, 2014 DAVID - - PowerPoint PPT Presentation

TEEKAY LNG PARTNERS INVESTOR DAY

September 30, 2014

2

DAVID GLENDINNING

President, Teekay Gas Services

2

3

Forward Looking Statements

This presentation 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. All statements included in or accompanying this presentation, other than statements of historical fact, are forward-looking statements. Forward-looking statements are not guarantees and actual results could differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements in this presentation include, among others, statements regarding: future growth opportunities and expectations and the effect of any growth on the Partnership’s results

• f operations; the expected delivery dates for the Partnership’s newbuilding vessels and commencement of related time charter contracts; the

Partnership’s agreement to provide, through a new 50/50 joint venture with China LNG, six icebreaker LNG carriers for the Yamal LNG project including the timing of delivery and total cost to construct the vessels; the timing of the start-up of the Yamal LNG project and the expected total LNG production capacity of the project, if completed; the impact of the transactions with Yamal LNG and BG on the Partnership’s future cash flows; the delivery and cost to construct the four LNG carrier newbuildings for BG; the total amount of the Partnership’s forward fee-rate revenues and the average remaining contract length on the Partnership’s LNG fleet; future growth opportunities and expectations relating to our interest in the Exmar LPG JV and its ability to secure newbuildings at competitive prices; LNG/LPG shipping market fundamentals and projects; LNG and LPG market fundamentals and trends; the Partnership’s growth strategy and initiatives, including project bidding and expansion into adjacent markets such as ethane projects; illustrative annual distribution growth; and the estimated amount and timing of capital expenditures relating to existing projects. 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 construction delays, newbuilding specification changes or cost overruns; availability of suitable LNG shipping, LPG shipping, floating storage and regasification and other growth project opportunities; 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; competitive dynamics in bidding for potential LNG, LPG or floating regasification projects; potential failure of the Yamal LNG Project to be completed for any reason, including due to lack of funding as a result of existing or future sanctions against Russian entities and individuals, which may affect partners in the project; potential delays or cancellation of the Yamal LNG project; potential delays in constructing and delivering the four LNG carrier newbuildings for BG; changes in applicable industry laws and regulations and the timing of implementation of new laws and regulations; the potential for early termination of long-term contracts of existing vessels in the Teekay LNG fleet; 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 ability to raise financing for its existing newbuildings or to purchase additional vessels or to pursue other projects; anticipated benefits of partnering with third parties; expected performance of MEGI newbuildings; 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, 2013. 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.

4

Stable Operating Model Leading Market Position Strong Industry Fundamentals One of the world’s largest LNG carrier

• wners and
• perators

$11 billion

• f forward

fee-based revenues Gas is the fastest growing fossil fuel $2.5 billion

• f built-in

growth

INVESTMENT HIGHLIGHTS

Visible Growth

5

$3.3B Market Cap

6%

Distribution CAGR Since IPO in 2005

2005

$11B

Forward fee-based revenues

83 Vessels

TEEKAY LNG AT A GLANCE

13 years

• Avg. contract

duration

>99.5%

Fleet Availability since 2008

ZERO

Pollution events

15% per annum

Total Shareholder Return Since IPO

2014

6

First LNG contracts with Ras Gas (Ras Gas JV partner ExxonMobil)

Multiple LNG contract awards

Teekay LNG’s Evolution

Gas Naviera Tapias

Entry into LNG 2004

Teekay LNG Partners IPO (NYSE:TGP) 2005

Maersk LNG Exmar LPG JV Expanded into LPG 2012

Partnership with Exmar, LPG industry leader

Exmar LNG JV

Teekay LNG’s Core Businesses

MEGI LNG Yamal LNG BG LNG

Photo Credit: Dmitrijs Jemelins

6

7

Global Trade Routes

Teekay LNG’s Global Footprint

Current LNG Trade routes Future Teekay LNG routes Teekay LNG Office

8 64 53 43 29 11 16 15 14 8 8 3 11 4 15 15 10 5 4 2 2

NYK MOL K Line Teekay LNG Maran Gas GasLog Golar BW Maritime Knutsen Dynagas Existing On Order

Major Independent LNG Operator

One of the world’s largest independent owners of LNG carriers

Note: Excludes state & oil company fleets . Source: Clarksons and Company websites

67 64 47 44 26 26 20 18 10 10

9

92% 5% 3%

$11B of Forward-Fee Based Revenues With Strong Customer Base

* The average remaining contract life and forward fee-based revenues relate to 13 of our 30 LPG carriers currently on fixed-rate charters.

Forward Fee-Based Revenues by Segment Average Remaining Contract Length by Segment

14 Years 7 Years* 4 Years *

$11.0B

Total Forward Fee-Based Revenues

*

LNG Carriers LPG Carriers Conventional Tankers

10

Reliable Track Record of Operational Excellence

• Approaching 1,000 days

without an LTI

• >99.5% fleet availability

since 2008

• Zero pollution events since

inception

LTIF: Loss Time Injury Frequency

10

11

Innovative MEGI Newbuildings

Leading edge of LNG carriers

• “Best Mouse Trap” for growing LNG

demand

• Reduced fuel consumption - savings of
• ver $25,000/day* over DFDE vessels
• Reduced boil off gas – reliquefaction

prevents LNG loss

• Optimized vessel size – largest capacity

to fit through new Panama Canal

• Evaluating every component to find

efficiencies

• Propeller, hull form, reliquefaction
• Reduced engine complexity lowers
• perational cost

Lower total unit freight cost to customers

(e.g. reduces US to China cost by $0.45 per mmbtu* compared to DFDE vessels)

* Assumes 19.5 knots, $650 per tonne fuel equivalent

12

Partnerships Enhance Growth

Partnering allows Teekay LNG to expand its business footprint more quickly and at a lower cost

Access to new lines of business Financing Risk diversification Access to new markets

China LNG

13

Teekay LNG’s Competitive Advantages

Significant Scale

One of the largest independent owners and

• perators of

LNG carriers

Technology

First mover to embrace innovative fuel-efficient MEGI LNG carriers

Strategic Partnerships

Strong joint venture and shipyard relationships

Access to Capital

Since IPO, raised $1.9B of equity and bonds Strong relationships with over 30 banks / ECAs

Reliable Operations

Excellent HSEQ KPIs Large pool of seafarers

14

STRONG GAS MARKET FUNDAMENTALS

14

15

LNG Fleet Utilization Improves After 2016

LNG liquefaction export growth mostly driven by U.S. and Australia

• 20
• 10

10 20 30 40

• No. Vessels

Source: Clarksons and internal estimates

Deliveries Scrap Incremental Demand Cumulative Surplus / Deficit

3 TGP LNG deliveries (uncommitted) ▼ ▲ ▲ Only 2 TGP LNG carriers roll-off contracts (52% owned)

16

U.S. Projects Create Demand for LNG Carriers

Over 100 LNG carriers needed for U.S. projects from 2016

PROJECT START UP FID VESSEL REQUIREMENTS* Sabine Pass Trains 1 - 4 2016 / 2017 2012 / 2013 20 Sabine Pass Train 5 2018 2015 5 Cameron 2018 2014 14 Freeport 2018 2014 14 Corpus Christi 2018 2015 16 Lake Charles 2019 2015 17 Golden Pass 2020 2015 17 Total 103

Source: Company Websites and Clarksons

20 40 60 80 100 120 2016 2017 2018 2019 2020

• No. Vessels

U.S. Exports – Cumulative Vessel Demand

3 TGP LNG deliveries (uncommitted)  3 TGP LNG

• ptions

(undeclared) 

TGP’s MEGI LNG newbuildings are ideally suited for U.S. LNG exports

17

Over 100 MTPA Growth Outside U.S. by 2020

Export volume growth in Australia, Russia, Canada and East Africa

5 10 15 20 25 Cumulative MTPA

Canada

Source: Internal Estimates

10 20 30 40 50 60 70 Cumulative MTPA

Australia

5 10 15 20 25 Cumulative MTPA

Russia

5 10 15 20 25 Cumulative MTPA

East Africa

5 10 15 20 25 Cumulative MTPA

Rest of World

18

10 20 30 40 50 60 70 Asia Europe Middle East Americas Latin Amer Africa MTPA

Source: IEA

Increase in LNG Imports in next 5 years

Future LNG Demand Driven by Asia

Asia will account for almost 70% of the future increase in LNG imports

20 40 60 80 100 120 140 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 MTPA

Source: Clarksons

China and India Import Terminal Capacity

Proposed Under Construction Existing

China and India import capacity set to triple by 2018

~70%

19

150 New LNG Carrier Orders Required by 2020

100 200 300 400 500 600 2014 2015 2016 2017 2018 2019 2020 2021 2022 MTPA

LNG Export Capacity Additions by Region

Existing Africa Australia Russia North America Others

Current Orderbook Net of Scrapping 109 Required Orders 150

25 50 75 100 125 150 175 200 225 250 275 2014 2015 2016 2017 2018 2019 2020 2021 2022

• No. Vessels

Additional LNG Vessel Demand

Vessel Demand Required Orders Current Orderbook Net of Scrapping Cumulative Fleet Additions

Source: Internal Estimates

In addition to current orderbook

20

Leading Market Position in Growing MGC Trade

LPG trade on Midsize Gas Carriers forecast to grow by 4 MTPA by 2016

2 4 6 8 10 12 14 16 18 20

• No. Vessels

Source: Clarksons

Largest MGC Owners (25 – 40k cbm)

Existing On Order

Source: Internal Estimates

• Increasing medium-distance LPG trade from the U.S., Middle East and North Africa to Latin America,

Europe, and India

○

European LPG imports increasing as refinery closures reduce local LPG supply

○

Indian and Latin American imports increasing to meet growing domestic retail demand

• Approximately 50% of the MGC fleet trading ammonia, which offers stable vessel demand

Growing Medium-Haul LPG Trade Routes

21

Emerging Ethane Shipping Demand

U.S. ethane exports create demand for 50 ethane carriers

• Growing supply of low-cost ethane encouraging a switch to ethane

feedstock in the petrochemical industry

• Natural fit for MLPs due to length of contracts

DEMAND ORDER BOOK Very Large Ethane Carriers (VLEC) 24 6 Midsize Ethane Carriers (MEC) 25 13 Ethane Carrier Demand vs. Supply

Source: Clarksons, Internal Estimates 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4 2013 2014 2015 2016 2017 2018

mb/d

Source: Wells Fargo, Credit Suisse

U.S. Ethane Export Forecast

Mean Wells Fargo Credit Suisse

22

Strong Demand Growth for Floating Regasification

Forecast $3-5B of FSRU projects in next 5 years

• FSRU is the technology of

choice in developing countries

• Provides a quicker, lower-

capital cost access to natural gas compared to land-based regasification terminals

• Can be relocated if demand is

short term and / or seasonal

5 10 15 20 25 Low Case Base Case High Case

• No. Units

Source: EMA

FSRU 5-year Order Forecast

23

TEEKAY LNG’S GROWTH STRATEGY

23

24

2015 2016 2017 2018 2019 2020

TGP’s Fleet Expansion Matches Demand Outlook

8% 92%

$2.5B

Total Known Growth Projects

LNG Carriers LPG Carriers Growth Projects by Segment Growth Project Deliveries

Strong LPG Outlook Strong LNG Outlook

2 3 3 1 2 4 4 3 2

25

• 500

1,000 1,500 2,000 2,500 3,000 2015 2016 2017 2018 Annual Capital Investment ($millions)

TGP Growth Capex - Committed vs. Illustrative Target

Cumulative Capital Investments (Known) TGP Known Annual Asset Deliveries Cumulative Capex Required for Illustrative Distribution Growth

Over 90% of Growth Capex Already Booked to Achieve Illustrative Growth Through 2017

Aiming to exceed illustrative growth assumptions

Note: Illustrative distribution growth assumptions of 0%, 2.5%, 4% and 4% in 2015, 2016, 2017 and 2018, respectively

91% of Capex to achieve illustrative distribution growth already committed

Cumulative Capital Investments (Known) TGP Known Annual Asset Deliveries Cumulative Capex Required for Illustrative Distribution Growth

26

259 109

50 100 150 200 250 300

LNG Carrier Demand Through 2020 Current Orderbook Net of Scrapping Through 2020

• No. Vessels

Well-Positioned to Capture Significant Share of LNG Market Growth

Over $30 billion* of new LNG carrier Capex required by 2020

Demand for 150 new LNG carrier orders above current

• rderbook by 2020

Source: Internal estimates * Based on demand for 150 new LNG carrier orders at an average Capex of $210 million per vessel.

27

Successful Exmar LPG JV Transaction

Well-timed acquisition

• Strengthening market has

delivered upside to fleet earnings

• Significant scale and customer

relationships

• Newbuildings secured at

competitive prices for fleet renewal and growth

Short-term LPG Freight Rates

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 $ millions / month MGC 1-year TC rate VLGC spot rate

• Recent market strength has generated gains on sales of older tonnage
• JV has experience required to capitalize on ethane opportunities

JV continues to exceed expectations supported by market strength and new growth opportunities

28

Business Adjacencies Targeted for Additional Growth

Leverage Existing Platform and Customer Relationships

LNG Carriers LPG Carriers FSRU Ethane FSU

Core

29

NEAR-TERM FOCUS

29

30

Yamal LNG Project

• TGP, through a new 50/50 joint venture

with China LNG Shipping, will provide six ARC 7 icebreaker LNG carriers for the Yamal LNG Project

○ Capex $2.1 billion (100% basis)

−

Higher IRR than regular conventional LNG charters

○ Scheduled to deliver in 2018 through 2020 ○ Fee-based contracts through to 2045

• All the LNG from the project already sold
• n long-term contracts
• Strong contractual protection from

sanctions and project delays

• Established new strategic partnership with

China LNG Shipping

Vessel requirements:

• 15 ARC 7 icebreaker LNG carriers
• Up to 15 conventional LNG carriers for transshipment (to be

tendered) Summer route (NSR) Russia to China – 18 days Transshipment Zeebrugge Yamal LNG

Sabetta Winter route Russia to China – 53 days

31

BG LNG Project

Leveraged Teekay Group’s relationship with BG to secure new gas business

• TGP acquired ownership interest in four LNG carrier newbuildings from BG (30% of first

two vessels and 20% of second two vessels)

○ Capex of $1.0 billion (100% basis) ○ Scheduled to deliver in 2017 through 2019 ○ 20 year fee-based contracts

• The vessels will be constructed by Hudong shipyard, a top-tier shipyard in China
• Together with Yamal project, further strengthens relationship with China-based partners

Awarded construction supervision and technical management for 4 LNG newbuildings

2012 2013 2014

Acquired

• wnership

interest in these vessels Award led to ownership

32

Preparing Organization for Growth

• Established a

state-of-the-art training facility

• Draw from Teekay

Group’s large pool of trained seafarers

• Employer of choice

32

33

• Execute on $2.5 billion of

committed projects

• Bid on several new point-to-point

LNG projects

• Grow our Exmar LPG JV
• Expand into adjacent areas on a

build-to-suit basis

• Pursue accretive on-the-water

acquisitions

TGP Growth Strategy

Primary goal: to increase distributable cash flow per unit

33

34