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Teekay LNG Partners (NYSE: TGP) Investor Day Presentation, Sep 30, 2014
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TEEKAYTEEKAY
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
of 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
owners and
operators
$11 billion
of forward
fee-based
revenues
Gas is the
fastest growing
fossil fuel
$2.5 billion
of 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 TeekayLNG
MaranGas
GasLog Golar BWMaritime
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
o Reduced fuel consumption - savings of
over $25,000/day* over DFDE vessels
o Reduced boil off gas – reliquefaction
prevents LNG loss
o Optimized vessel size – largest capacity
to fit through new Panama Canal
• Evaluating every component to find
efficiencies
o Propeller, hull form, reliquefaction
• Reduced engine complexity lowers
operational 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
operators 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
0
10
20
30
40
No. V
esse
ls
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
0
20
40
60
80
100
120
2016 2017 2018 2019 2020N
o. V
essels
U.S. Exports – Cumulative Vessel Demand
3 TGP LNG
deliveries
(uncommitted)
3 TGP LNG
options
(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
0
5
10
15
20
25
Cu
mu
lative
MT
PA
Canada
Source: Internal Estimates
0
10
20
30
40
50
60
70
Cu
mu
lative
MT
PA
Australia
0
5
10
15
20
25
Cu
mu
lative
MT
PA
Russia
0
5
10
15
20
25
Cu
mu
lative
M
TP
A
East Africa
0
5
10
15
20
25
Cu
mu
lative
MT
PA
Rest of World
18
0
10
20
30
40
50
60
70
Asia
Euro
pe
Mid
dle
Ea
st
Am
ericas
Latin
Am
er
Afr
ica
MT
PA
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
0
20
40
60
80
100
120
140
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
MT
PA
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
0
100
200
300
400
500
600
2014 2015 2016 2017 2018 2019 2020 2021 2022
MT
PA
LNG Export Capacity Additions by Region
Existing Africa Australia Russia North America Others
Current Orderbook
Net of Scrapping
109
Required Orders
150
0
25
50
75
100
125
150
175
200
225
250
275
2014 2015 2016 2017 2018 2019 2020 2021 2022
No
. V
essels
Additional LNG Vessel Demand
Vessel Demand
Required Orders
Current Orderbook Net of Scrapping
Cumulative Fleet AdditionsSource: 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
0
2
4
6
8
10
12
14
16
18
20
No. V
esse
ls
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
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 0
5
10
15
20
25
Low Case Base Case High Case
No
. U
nit
s
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%
$2.5B Total Known
Growth Projects
LNG Carriers LPG Carriers
Growth Projects by Segment Growth Project Deliveries
Strong LPG Outlook Strong LNG Outlook
2 3 3
1
2
4
4
3 2
25
-
500
1,000
1,500
2,000
2,500
3,000
2015 2016 2017 2018
An
nu
al
Cap
ital
Inv
estm
en
t ($
millio
ns
)
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
0
50
100
150
200
250
300
LNG Carrier Demand Through2020
Current Orderbook Net ofScrapping
Through 2020
No. V
esse
ls
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
orderbook 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
$ m
illio
ns /
mo
nth
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
on 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
ownership
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