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DECONSOLIDATION OF GOLAR POWER ENTITIES DECONSOLIDATION OF GOLAR POWER ENTITIES | 12 Months Ended
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Dec. 31, 2016
Equity Method Investments and Joint Ventures [Abstract] |
DECONSOLIDATION OF GOLAR POWER ENTITIES |
7. | DECONSOLIDATION OF GOLAR POWER ENTITIES
In June 2016, we entered into certain agreements forming a 50/50 joint venture, Golar Power Ltd ("Golar Power"), with investment vehicles affiliated with the private equity firm Stonepeak Infrastructure Partners ("Stonepeak"). The purpose of Golar Power is to offer integrated LNG based downstream solutions through the ownership and operation of FSRUs and associated terminal and power generation infrastructure. The transaction closed on July 6, 2016 with the receipt of net proceeds of $113 million from the disposal of 50% of our holding in the ordinary share capital of Golar Power to Stonepeak. Accordingly, effective from this date, we deconsolidated the results and net assets relating to the two vessels; the Penguin and the Celsius, the newbuild FSRU 8 and LNG Power Limited which holds the rights to participate in the Sergipe Power Plant project. On the same date, we commenced equity accounting for our residual interest in Golar Power and we recorded an investment in Golar Power of $116 million, which represents the fair value of our remaining 50% holding in Golar Power's ordinary share capital. We calculated a loss on disposal of $8.5 million, which is based on estimates and thus subject to change, including finalization of certain post-closing adjustments relating to working capital. The table below illustrates how the loss on loss of control has been calculated:
(in thousands of $) | As of July 6, 2016 |
Net proceeds (a) | 113,000 |
Fair value of 50% retained investment in Golar Power (b) | 116,000 |
Fair value of counter guarantees from Golar Power (c) | 3,701 |
Total fair value of Golar Power | 232,701 |
Less: |
Carrying value of Golar Power’s net assets (d) | 236,713 |
Guarantees issued by Golar to Golar Power (e) | 4,471 |
Loss on loss of control of Golar Power | (8,483 | )
(a) Net proceeds received for the disposal of 50% in Golar Power The table below shows the purchase consideration we received for the disposal of a 50% interest in the ordinary share capital in Golar Power that was acquired by Stonepeak:
(in thousands of $) | As of July 6, 2016 |
Consideration received from Stonepeak | 116,000 |
Less: Fee paid in relation to the transaction (see note 31) | (3,000 | )
Net proceeds | 113,000 |
(b) Fair value of the retained investment in Golar Power The fair value of our retained investment, being the 50% interest in the ordinary share capital in Golar Power has been recorded at $116 million. The fair value was determined with reference to the consideration of $116 million we received from Stonepeak pertaining to the 50% ordinary share capital interest they acquired. Thus given that this was negotiated between third parties, this is representative of fair value. (c) Fair value of counter guarantees from Golar Power A number of counter guarantees were entered into by Golar Power for the benefit of Golar LNG, specifically to reimburse Golar for the historic legacy debt guarantees discussed in (e) below. In aggregate, based on the agreed premiums the fair value of these counter guarantees were calculated as $3.7 million. (d) Carrying value of Golar Power's net assets The table below shows the underlying carrying value of Golar Powers' net assets at the deconsolidation date:
(in thousands of $) | As at July 6, 2016
ASSETS |
Current |
Cash and cash equivalents | 10,992 |
Restricted cash | 15,463 |
Trade accounts receivable | 1,474 |
Other receivables, prepaid expenses and accrued income | 178 |
Short term amounts due from related parties | 3,000 |
Inventory | 952 |
Total current assets | 32,059 |
Non-current |
Newbuildings | 50,436 |
Vessels, net | 387,261 |
Total assets | 469,756 |
LIABILITIES AND STOCKHOLDERS' EQUITY |
Current |
Current portion of long-term debt | 20,032 |
Trade accounts payable | 969 |
Accrued expenses | 21,357 |
Total current liabilities | 42,358 |
Non-current |
Long-term debt | 190,685 |
Total liabilities | 233,043 |
Equity |
Stockholders’ equity | 236,713 |
Total liabilities and stockholders' equity | 469,756 |
(e) Guarantees issued by Golar to Golar Power In accordance with ASC 460, the guarantees issued by us in respect of Golar Power and its subsidiaries (previously not recognized) were fair valued as of the deconsolidation date which amounted to a liability of $4.5 million. This comprises of the following items:
(in thousands of $) |  | As of July 6, 2016 |
Debt guarantees |  | 3,283 |
Shipyard guarantee |  | 1,188 |
Total guarantees |  | 4,471 |
Debt guarantees - The debt guarantees were previously issued by Golar to third party banks in respect of certain secured debt facilities relating to Golar Power and subsidiaries. The liability which is recorded in "Other long-term liabilities" is being amortized over the remaining term of the respective debt facilities with the credit being recognized in "Other financial items". See "Transactions with Golar Power and subsidiaries" in note 31. Shipyard guarantee - Golar has provided Samsung with a guarantee of settlement in relation to the shipbuilding contract of Golar FSRU 8, which now forms part of Golar Power's asset base. The liability which is recorded in "Other current liabilities" is being amortized on a straight line basis until delivery of the vessel with the credit being recognized in "Other financial items". See "Transactions with Golar Power and subsidiaries" in note 31.

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