Golar LNG Partners LP (GMLP) CEO Karl Staubo on Q1 2020 Results - Earnings Call Transcript
by SA Transcripts, https://seekingalpha.com/author/sa-transcriptsGolar LNG Partners LP (NASDAQ:GMLP) Q4 2020 Earnings Conference Call May 28, 2020 11:30 AM ET
Corporate Participants
Tor Troim - Chairman
Karl Staubo - CEO
Brian Tienzo - CFO
Conference Call Participants
Jon Chappell - Evercore ISI
Randy Giveans - Jefferies
Ben Nolan - Stifel
Sanjay Ramaswamy - Bank of America Merrill Lynch
Jay Mesmer - Value Investors
Operator
Ladies and gentlemen, thank you for standing by and welcome to the Golar LNG Partners LP 1Q 2020 Results Presentation. [Operator Instructions]
And I would now like to hand over the conference to your speaker, Chairman, Tor Troim. Please go ahead.
Tor Troim
Thank you. Welcome to the first quarter call for Golar Partners. I just want to give a quick introduction before I give the words to our new Chief Executive, Karl Staubo. Q1 has been a challenging quarter for the company, we were well on the way to secure an attractive refinancing of the company, including the presentation on a structural transaction opportunity when the pandemic hit us and also the bond market. We were then forced to go into discussion with bond owners in order to amend and extend the existing $150 million and $350 million bond financing. Thanks to the solid EBITDA generation in the company and the $2 billion in order backlog and a good dialog with the bond owners, we managed to reach a constructive solution which purchased the debt at reasonable terms, including some amortization of the bond debt. The rearrangement of the debt including the increased amortization led to a decision by the board to cut the dividend by 5%. It's been painful period for the shareholder as you all understand and I kind of apologize for the lack of performance.
However, we also need to look forward, where do we stand as of today. With the solid operation we have and with $2 billion dollars in order backlog and an EBITDA net debt to leverage ratio of approximately 5, we are on solid footing. There itself, for the next two years, we're more or less secured through the fixed charges we have with some upside if we can find employment for Golar Spirit and Golar Mazo. We'll naturally reduce our debt significantly through the close to $300 million in EBITDA. And I think it's a pretty good sign of a better future beneficial from Cameroon State Oil Company yesterday stated to the press that they would like to keep Hilli in Cameroon, after the current contract expire in 2026. It tells us that we have happy customer, which will add backlog and coverage to our order backlog.
The reduction in gas and LNG prices over the last year has led to a movement of profitability from the upstream side over to the downstream side. We are today in a situation where coal to gas lift is highly profitable, both from an environmental and financial point of view. The assets Golar Partners have are important enabler in this transformation. Through the use of FSRUs combined with ISO-containers and small-scale power station, we can significantly reduce energy and transportation cost for consumers and we can do it quickly. And our evolution have started and the economics are attractive for energy consumers and we see that from the activity levels we see in Golar Power these days where we now do small scale LNG distribution with enterprise value to EBITDA factor of less than 2. This is a rapid development and I personally think it's likely that over the next year, we'll see things like floating power plants and floating datacenters fired with LNG through use of the FSRU technology.
The lower the LNG prices are, the more compelling the cases are for our counterparties due to switch and then more valuable Golar Partner will be when the existing contracts are up for termination or renewal. Sadly enough, it's the poorest countries in the world who pays most for power and energy, partly because of the political risk in building infrastructure in these countries. Power is in many ways the way of the poverty for these countries and I think the use of floating technology can reduce the risk significantly for going ahead, particularly on the African continent.
I got inspiration when we, several months ago, sat with the President of one of the Latin American countries and presented the numbers to use in FSRU to anchor up these LNG conversion in his country. After five minutes, he said that, this is music in my ears, and he concluded the meeting by saying to the Energy Ministry, let's go. That's the kind of encouragement we didn't get five years ago. Prices and the proof of the concept, including the small-scale development through ISO-containers is in the process of changing the slow speed of the LNG downstream.
Golar Group as the only truly integrated energy company has shown the way and they've given us credibility going forward. I'm not in anyway proud of the performance of this company, but I'm proud of the platform, the employees have built, the consistency of the operation and the credibility we have with existing and potential new customers. Hopefully we can convert that to create a better return to our shareholders in the years to come. Enough about the fundamentals in our business. I want to leave the words to Karl Staubo to take you through the Q1 numbers. Karl has taken over from Graham Robjohns, who I think performed something like 66 quarterly calls. Karl has a big task to follow up on, but he has a very solid background from the industry as well as from Golar, where he has worked, obviously, with the company over the last 18 months. I'll leave it to Karl.
Karl Staubo
Thank you, Tor Olav. It's certainly big shoes to fill taking over this role from Graham with his more than 20 years of experience in the Golar Group. But I'll certainly do my best. So with that, I'll take your opportunity to welcome you to the Golar LNG Partners first quarter 2020 results. Please note the forward-looking statements on Page 2.
Turning to Page 3. I will quickly run through the recent highlights. We reported operating income of $27.7 million excluding the ownership of the FLNG Hilli. We have a quarterly net loss of $33.1 million after accounting for $46.8 million of non-cash mark-to-market loss on interest rate swaps as an effect by the significant decline of LIBOR over the quarter. Distributable cash flow for the quarter is reported at $25.4 million, distribution coverage ratio of 17.79 times versus 1.21 in the previous quarter. That's obviously due to the mentioned 95% cut in the quarterly distribution to unitholders that Tor Olav mentioned. Golar Grand extended for another year under its existing charter party from May 2020. Golar Maria secured coverage for the majority of available days in the gap period between its existing charter coming off in April 2020 and the start of its next long-term charter or two-year charter in Q2 of 2020.
With the expansion of Grand and filling the gap on Maria, we now have three or four LNG carriers fully covered for the full year. Bond holders approved an 18-month extension of the May 2020 and the May 2021 unsecured bond maturities. It was announced that I would replace Graham as CEO, as already discussed and lastly, we declared a distribution for the first quarter of $2.02 again down 95% as previously announced.
Turning to Slide 4, these are our first quarter 2020 financial results. Total operating revenue for the quarter was $69.8 million, a decrease from Q4 '19 due to scheduled off hire for Golar Igloo, by idling of Golar Mazo and partly offset by chartering revenue on Golar Maria. Total operating expenses came in at $42 million up around $2 million from the last quarter due to maintenance work on the FSRU Igloo and for the scheduled maintenance period in the two first months of the year. We also had a slightly higher opex due to a delay in reducing the crew on Golar Mazo in its layup. Due to COVID-19 it's proving slightly more cumbersome than normal to get the crew off the ship at its current location.
As mentioned, we had losses on derivative financial instruments of $46.835 million. It's important to note that this is a non-cash mark-to-market loss on our interest rate swaps following a LIBOR decline of between 112 and 115 bps over the quarter. The total adjusted EBITDA of $72 million include including Hilli. As discussed, the decline in the Group EBITDA quarter-over-quarter is due to Igloo's scheduled off hire and increased OpEx. We expect this EBITDA trend to reverse in the next quarter as Igloo will have a full quarter of operation in Q2 2020.
Turning then to segment information. There are no -- sorry, on Slide 5 we've broken down our financial performance of the quarter across our three vessel segments, FSRU LNG carriers and FLNG, there are no significant unexpected deviations in any of the business segments, other than the mentioned seasonality of the FSRU Igloo's earnings.
Turning to the balance sheet on Page 6, we are reporting a cash position of $212 million split between restricted cash of $177 million and free cash flow of $35. At the very bottom of the page, you can see that we have an adjusted net debt to annualized EBITDA of 5.2 for the quarter. Again this is expected to be improved in the next quarter due to a combination of increased EBITDA with Igloo on a full quarter of operations and reduced interest rates on the back of that amortization through the quarter.
Turning to Page 7. We maintain a very solid revenue backlog for the Group with the Golar Grand extension for one year and filling the gap on Golar Maria. We have an earnings backlog still of $2 billion.
Turning to Page 8. We have a diversified backlog our $2 billion earnings backlog is with 60% on our FSRUs, 33% on the FLNG Hilli and 8% on the LNG carriers that typically have shorter charter duration and lower rates than the other two segments. Golar Partners, as you can see on the right hand side, have been successful in obtaining the earnings backlog and obtain charter extension of the end of our firm contracts. As you can see, this remains fairly stable over the period. The recent successful redeployment of the assets demonstrate the underlying value of the existing assets, that you can see by the various recent awards summarized on the text box on the bottom right.
Turning to Slide 9. This is showing the operational utilization on a per segment basis. As alluded to, on the GLNG call earlier on today, the FLNG Hilli has operated almost 100% economic utilization since delivery. It's just about to offload its 39th cargo more than any other floating liquefaction vessel in the world. Similarly, we have shown a very stable operation for our FSRU fleet. Last quarter, it came in at 88% for economic utilization. Again, this is due to the Igloo scheduled maintenance season and we expect that to revert to full utilization in Q2. Keep in mind that these utilization graphs exclude the two idle vessels, FSRU Spirit and the LNG Carrier Mazo. For the ships, by nature, it's more lumpy utilization, because they do have waiting base in between charters and downtime for maintenance, but still we are filled with a 74% utilization and again expect that to increase as we now fill the gap on the open available days for 2020 for the three operating vessels.
Turning to Slide 10. As Tor said, we contemplated to do a transaction that included a large refinancing. Due to the outbreak of the epidemic, that transaction is put on hold and we had to approach the bondholders with an amend and extend. We successfully extended the duration of our two unsecured bonds maturing in May 2020 and May 2021 by 18 months. With a net to EBITDA ratio of around 5 times and earnings backlog of $2 billion and a 95% distribution cut deleveraging the balance sheet, we are confident in a successful refinancing of the upcoming bank and bond maturities. Our target is to increase a bank refinancing facility, replacing the facility maturing in April next year, collateralized by the FSRUs Spirit, Freeze, Winter, Igloo and the carriers, Methane Princess, Grand and Maria in order to lower the amount needed for bond refinancing of both the $150 million GOLP02 bond and the $250 million GOLP03 bond. We've already engaged in discussions with the lending group behind the existing 800 facility and expect to revert with more feedback on that in the second half of the year.
Turning to the market on Slide 11. We have witnessed a steep drop in LNG prices through the first five months of 2020 with cargoes confirmed sold as low as a $1 per mmbtu. As you can see on the top left graph, LNG is now the cheapest fossil fuel in Asia. It's priced at 75% of coal on a $1 per mmbtu equivalent. This is clearly underpinning the competitive advantage that any gas-fired power plants or industrial consumer has in the current environment switching from coal, diesel, heavy fuel oil to LNG and that's before considering the superior environmental benefits of natural gas over coal.
Turning to the right -- top right graph, a similar situation is seen in Europe where TTF has dropped below coal in early May. A forceful metric to pay attention to is the so-called Spark Dark Spread. It's essentially the difference between generating electricity from coal compared to natural gas. The dark spread in Central Europe is today negative $25 to $30 per megawatt hour, suggesting a significant cost and environmental saving in switching from coal to gas-fired power. Coincidentally, we've seen in the FSRU market, over the past 10 years, an average around six contract awards per year. Year-to-date, we've only seen one, we find that slightly strange, given the very clear incentives to switch to LNG. But we are also seeing some fatigue in the market due to COVID-19 to do significant changes to energy sources at the moment. So hopefully this will increase and we do expect it to increase with hopefully COVID easing up as it certainly is apparent in the North.
Turning to Slide 12. The FSRU market remains highly active with more than 60 projects referenced by IHS, as proposed in addition to some 30 currently in operation and eight under construction. There is nothing wrong with the depth of the market and as we pointed out, the economics of LNG as a fuel source are cheaper and cleaner than the alternatives. On the chartering side, we are actively working to secure employment for the FSRU fleet through participating in tenders, working with clients on a bilateral basis to help them list projects and obviously working with existing charter counterparts for charter extension or modifications to the existing FSRU locations that we have in place.
The last point I want to emphasize on the market is how FSRUs remain and will continue to be an integral part of the LNG value chain that provides flexibility and opportunity to grow the global LNG markets. Financing all coal-fired power plants are increasingly difficult and FSRUs are the fastest way to access LNG for anyone looking to get access to the cheaper and cleaner LNG cost and environmental benefit.
Turning to Slide 13. Whilst the principles of ESG has always been an integral part of Golar's operations, we are just embarking on reporting on our ESG performance. Golar recently launched their ESG report on their website and Golar Partners intend to follow along the same framework in the near future. We have focused on five key areas that we also see as vital key performance indicators: one, health safety and security; two, environmental impact; three, energy efficiency and innovation; four, people and community; and five, governance and business ethics. In light of the times we're living in, ESG is more important than ever. We've spent considerable time and effort to ensure our employees are safe, because safe and healthy employees are our most important assets to deliver services to the highest standards. Getting crew on and off vessels, organizing of storing, maintenance, drydocking and generally operating a large fleet of assets has been and still is more challenging under COVID-19 than in a normal environment. Therefore, I would like to take the opportunity to thank all of our people onshore and offshore for the dedication they are putting in to make sure we maintain our high operating standards and economic utilization across our fleet that we touched upon earlier in the presentation.
I'd like to conclude on -- turning to Slide 14, summarizing the presentation and the quarter. The highlights include the charter extension for Golar Grand and filling the gap base for Golar Maria, making sure that three of our four LNG Carriers are fixed or fully fixed for the remainder of the year. The coming three quarters, we expect full contribution from Golar Igloo which will improve run rate, revenue and EBITDA and also the adjusted net debt to EBITDA multiples accordingly. Our revenue backlog remains at $2 billion before any extension options. We have successfully extended the maturity of both of our unsecured bonds by 18 months. The announced distribution cut will allow the Partnership to delever and ease refinancing of upcoming maturities. With a net debt to EBITDA ratio of 5 times, earnings backlog of $2 billion and a 95% distribution cut deleveraging the balance sheet, we are confident in a successful refinancing of upcoming bank and bond maturities. Record low gas prices favors LNG as the cheaper and cleaner source of energy versus alternatives with new markets opening for potential FSRU contracts seeking access to LNG fuel and environment environmental benefit arbitrage and also frontier markets, as Tor Olav mentioned, in potential floating datacenters fueled by LNG and similar.
Golar MLP continues our strategic review of the company in order to maximize the value of our asset portfolio and strong earning backlog to all of our stakeholders. That concludes GMLP's Q1 earnings presentation. I'd like to thank you all for dialing into the call. And with that, I'll turn it over to the operator for any questions.
Question-and-Answer Session
Operator
[Operator Instructions] And our first question comes from the line of Jon Chappell from Evercore ISI. Please go ahead, your line is now open.
Jon Chappell
Thank you. Good afternoon, Karl. I don't know if Tor Olav is still around. Karl, my two questions are both strategic in nature and I know that you're relatively new but you've been associated through the Magni Partners. So first, if we could talk about the debt maturity profile. I know the bonds are different than syndicated debt. But you had mentioned the difficulty with the epidemic getting refinancing for the bonds. And with that big balloon payment due for next year, what gives you the confidence that you can get that refinancing done in this environment? And is there anything else that you may have to give up, whether it's ability to grow when you think about that refinancing?
Karl Staubo
Yeah, sure. So when it comes to the bonds, as both Tor Olav and I mentioned, we were embarking on a transaction that looked to both refinance the bank facility and do a strategic transaction that we think would enhance the credit quality of the Group. Our intent was therefore to address the bonds following such transaction. Because of COVID-19, that transaction was put on hold and the debt capital markets collapsed or at least came to a significant halt, together with the banking market. The way we look at the future, even without any strategic transactions, is that we have a strong support from our existing lenders to extend the so-called 800 facility, which will be $500 million when it comes for maturity in April next year. We do think that it's possible to increase the size of that bank facility beyond $500 million, reducing the need for a new bond -- reducing the size of a new bond. So, the plan will be, number-one, address the bank financing and increase leverage somewhat; and number-two, address the bonds thereafter.
All of this needs to be seen in light of a strategic review of the company. But we're obviously planning both for a strategic review and for a going concern on a generic basis, and we're very confident that the banks are there to support the company on the refinancing of the 500. We have expressed confidence letters from the banks and we also think it's likely that we can increase the size and therefore enable a smaller refinancing than the maturing bonds.
Jon Chappell
Got you. So that is my follow-up, you noted in the press release the review could include sale of assets for which you've had unsolicited offers thus far. When we think about the partnership going forward, should we think about the transition right now, I mean, from the smaller capital structure potentially shrinking the fleet? So, this just be focusing on or are you thinking about just focusing on by the better assets with the longer duration contracts and becoming more of a bond because of the prohibitive cost of capital maybe growth is just kind of off the table for the foreseeable future?
Karl Staubo
I think you touched upon part of it by saying that prohibitive cost of capital in the company, that's obviously part of what's triggered a strategic review. I would say right now, everything is sort of on the table and part of the discussion, and we haven't concluded one way or the other.
When it comes to opportunistic vessel disposals of non-core assets, that would be potentially looking to dispose of assets that are not viewed as significant cash generating pieces in the business. And, for example, the two idle assets that could be interesting to monetize in order to raise cash to potentially reduce the size of a refinancing. But we're certainly having ambitions for the company -- as part of the strategic review, we certainly have ambitions for the company going forward. And we don't view this as any run-off scenario, to put it that way.
Jon Chappell
Okay. I appreciate your thoughts. Thank you, Karl. And welcome to the new role.
Operator
Our following question comes from the line of Randy Giveans from Jefferies. Please go ahead.
Randy Giveans
Gentlemen, welcome to Cowen & Co. How are you?
Karl Staubo
Thank you.
Randy Giveans
So first on the distribution, I'm just kind of curious how you came up with that annual payment of $0.08, I guess, how the math behind that and why cut it 95%, right? And then secondly, with the cap on the distribution, how long does that cap last? And are unit repurchases and option under these new terms or is it just de-levering?
Karl Staubo
Okay. So, the reason why the number is exactly what it is, is that it was a 95% cut. For us, it was important to maintain some dividends. As we understand that, that's a requirement from certain of our unitholders. At the same time, we saw the implied yield we traded on pre the dividend cut didn't really suggest that investors fully appreciated the cash flow stream from the company. We, therefore, found it more -- better value to the company to cut the dividend and redeploy that capital for deleveraging, given that we have a large amount of refinancing upcoming in the first half of next year.
When it comes to unit repurchases, again, this is part of the strategic review, everything's on the table and it's part of what we're considering, but again no conclusion has been derived thus far.
Randy Giveans
Okay. And then, how long is that cap in place for distribution increases?
Karl Staubo
So, what we put in place now is the 95% cut. That's something that's under the existing bonds, which are extended for 18 months. If they refinance, there's nothing sitting a cap on distributions.
Randy Giveans
So at least for the next 18 months the distribution, as you said, $0.08?
Karl Staubo
Unless they refinance earlier, yes.
Randy Giveans
Yes. All right. And then any updates on the Golar Spirit? Do you think it will be used possibly for a Golar power project in Brazil?
Karl Staubo
I'd say Golar Spirit has been, our view for about two years as highlighted in this presentation and the current gas price environment suggests that the likelihood of activating her has increased from what we have in a higher price environment. Also, the attractiveness of entering into the LNG fuel arbitrage for frontier markets, including certain hubs in Brazil could certainly be of interest. Of course, that needs to be weighed against the fact that there has been one FSRU award year-to-date. But we are experiencing increased interest for her.
But I don't think we want to guide on anything, because these are very binary in nature, all of these discussions. So, I don't think we want to probability weight or anything, but we have an increased interest at this point.
Randy Giveans
Got it. And then lastly, you mentioned on the refinancing for 2021, do you expect that to possibly increase in liquidity or just maybe an extension with a more aggressive AMAT profile?
Karl Staubo
Well, the way the company is set up right now, we don't have a need for any significant increased liquidity. So, adding debt just to have cash sitting on the balance sheet, obviously we want to have a comfortable balance sheet and cash position. But then again, we have quite good earnings visibility given our earnings backlog. So, our focus would primarily be on reducing the average cost of debt or at least reducing the mix between bank and bonds, as we all know from an interest point of view, bank debt is cheaper than bond debt. And if we can change the mix more in the favor of bank, that's a benefit to company over time.
Randy Giveans
Yes. Great. Well, hey, great job on the call. Thanks so much. And I'll keep in touch.
Karl Staubo
Thank you.
Operator
Our following question comes from the line of Ben Nolan from Stifel. Please go ahead.
Karl Staubo
You might still be on mute, sir.
Ben Nolan
Sorry, yes, I was on mute. Sorry about that. Hopefully you can hear me. Yes, hi. So, my question relates again to the financing and refinancing. Obviously, there is the -- the bonds that you've already done and the fact that that comes due next year, but the other big part of the financial leverage is the Hilli debt, or your portion of the Hilli debt, collectively, with GLNG. Is there any thinking around possibly being able to refinance that or any ability to refinance that? Maybe accelerate the release of the restricted cash would enable you to maybe take out portion of the bonds or something like that, or is that not something that can be done now?
Karl Staubo
I think on the call with me today, we also have the financial -- financial Director of the Golar Group, Brian TM, who is also the former CEO of Golar Partners. Given that the Hilli financing is dealt with sort of in the Golar Group, I think I'll hand that question over to Brian.
Brian Tienzo
No problem, Karl. Hi, Ben. Good to hear from you. Just to tackle the easy of the two. So, on the LC, so as you know, we've been reducing the LC over a period of time. There remains some balances in there and there is a program step down of the LC that's related to production of the Hilli. So, the next step-down is in May 2021 next year, where the balance steps down a bit more to $200 million and that because a big chunk is already been released, that will release a little bit, but not a lot.
As it relates to the refinancing of the Hilli, I think we've guided previously that to the extent that we have positive progress on discussions with Perenco and SNH on either the expansion or extension of the employment of the Hilli, I think that would be the best time to try and do it. I think certainly, in the current environment is probably not something that you would want to attempt to do and we're very happy with the facility that we have, the cooperation we have with the lenders. But to the extent that the economics of the project improves even further than that would be the time that we would look to try and make that financing more efficient and economical.
Ben Nolan
Okay, very helpful. And then for my follow-up, as it relates to sort of new ideas and you mentioned the possibility of maybe floating power, which you've seen a little of, or floating data centers, those are a little bit more farther out. I'm curious, are discussions on that front, either of those cases, are those really ongoing or is that a little bit further down the path in the near term we should really just be thinking about assets as FSRUs or maybe floating storage?
Karl Staubo
Well, there's certainly being developed lot of projects for floating data centers issued by LNG and so forth. But I think more and more people are catching on to the LNG fuel arbitrage. Obviously, that's increasing by the day as LNG is now cheaper than even coal, and obviously way more financeable and more environmental-friendly.
So, we do see that occurring. And we do see it occurring now. And on the -- our assets, we will obviously continue to monitor and try to develop that situation. But we do see given the size and capacities of at least the older assets in the fleet, we do believe frontier markets and that type of projects are the most likely for longer-term employment beyond their existing charterers or existing FSRU locations.
Ben Nolan
Okay. Well, that's helpful. I appreciate it. Thank you.
Tor Troim
Maybe I can add on here, I think it's -- maybe I can just add on a little bit on that. I think what you have seen lately now, for instance, the Company's Group, which have effectively I think delivered more than 10 of the floating power stations, they are no trying to convert those Power Station from the best use and heavy fuel over to LNG. So, that's a market which is up already. When it comes to the development of data centers, there is a significant work done by the capital shipyard which we're working with, which are now trying to deliver these kind of 100, 200 megawatt datacenters on a floating basis.
It's out there a little bit, but I think as a feeder for both kind of cover and data centers or assets are there already. And of course, we don't have any FSRU which are off for the next 2, 3 years, so you need to take out a little bit and that's what we're doing right now. But the market for these assets are increasing every day. It's hard to get deals done. I think it's easier now when the prices are low, when people see the benefit of it from an economical point of view as well.
Ben Nolan
Okay. That's helpful. Thank you.
Operator
Our following question comes from the line of Sanjay Ramaswamy from Bank of America. Please go ahead, your line is now open.
Sanjay Ramaswamy
Great. So maybe -- we've talked a lot about the strategic review here, but just maybe elaborating on that a little bit. So, in a scenario where the parent GLNG commitment toward the MLP slowly diminishes, are you guys, I mean, how are you guys really thinking about preparing for life on your own? Like, we're hearing that the continued strategic review of your company and the parent continues to go through the same process. But just remind us of the timeline of that strategic review and how you guys are really preparing for all kind of scenario? Thanks.
Karl Staubo
Yes, sure. So, the strategic review is obviously ongoing. What you are discussing is again part of the discussion items, given that pretty much everything is on the table at the moment. We do expect to be able to have more of a direction in terms of what we want to achieve and do with the company during the second half of 2020.
We do expect a conclusion to a strategic review to be ahead or at least concurrent with the refinancing, because if you are going to do strategic things it's, obviously there is no point refinancing if you're just about to do something straight after or straight before. So that's how we think about this.
And if there is a life -- or if we are thinking about sort of breaking loose, then there is -- we obviously need to start up in terms of the chartering. We are relying on Golar for doing that. But I don't think neither us nor Golar have given any signals that that's the direction.
And again from the Board and especially from the Independent Committee's point of view, all of these alternatives need to be taken into consideration and the focus of the strategic review is very much to maximize the value for all stakeholders.
And I think we will look at this in terms of how we can maximize value and then we'll go in that direction.
Sanjay Ramaswamy
So, that's really helpful. So, I mean just moving on with the Hilli here, would there be any kind of scenario where you'd be willing to monetize the interest, the interest there, just given the environment, given the circumstances here? Or maybe you can just talk about the potential scenarios with the Hilli?
Karl Staubo
I think in the GLNG calls prior to this one, there was obviously a strategic or a discussion with [Indiscernible] on the potential for both increased utilization and expansion of the contract.
I think there's no hiding that -- well, first of GMLP obviously on strain 1 and 2 that are fully contracted through 2026. But the real value trigger, if one were to monetize these units, would be if there is an increase in utilization and of course duration. Duration for us in the GMLP is more important than expansion, given that what we're exposed to is already fully utilized.
But for us, closely monitoring that situation and any potential extensions will be critical in terms of determining the value of the units and we were encouraged to see the SNH article yesterday that suggests that there are conversation between Cameron SNH and Grenco us for an extension of the units.
So, we're monitoring that closely. Obviously, the Hilli is a very important part of our cash flow generation and we need to, as part of the strategic review, weight run rate EBITDA generation versus a one-off potential disposal of the unit with the restrictions the units have in terms of charter approvals for disposals and so forth.
Sanjay Ramaswamy
Great, that's really helpful. Maybe just a last one from me. Just coming in with fresh view into the strategic review, kind of, what have you found as the most kind of glaring opportunity for GLNG from your perspective? And in terms of over the next 6 months, what you can actually visibly or what you can actually change?
Karl Staubo
That's a very good question. I'm not sure if I want to elaborate too much in detail on that on this call. One thing is obviously, financial structure and dealing with a near-term maturities, that's a fairly obvious one in terms of both bond pricing and hopefully also equity pricing.
And when we have such a large amount of debt coming up for maturity next year, addressing that isn't sort of you want to see. Obviously, anything you can do in terms of extensions, adding cash flow, adding visibility, adding value to the fleet would be helpful.
I wouldn't say that that's a discovery I've made, but obviously reactivation or disposals of idle assets is another fairly straightforward way of creating value and assets that are currently sitting still and have very small negative carry in terms of idle opex.
When it comes to the specific strategic discussions, I think I'll refrain from commenting on that on this call. I think, again as we alluded to earlier on the call, I would like to get back to that in the second half.
Sanjay Ramaswamy
Yes, that's really helpful. Thanks a lot. Thanks for that, Karl.
Operator
Our following question comes from the line of Jay Mesmer from Value Investors. Please go ahead, your line is now open.
Jay Mesmer
Good afternoon, gentlemen. So, a great discussion earlier on the liquidity and financing challenges. So, nothing bad there. Just look at the Spirit FSRU, really the clear ask that you have that could potentially provide some value, it's been in layup, as you said for two years. On the Golar call earlier, they mentioned, right, there's three more terminals in Brazil that are getting developed, there's 15 potential global contracts you're looking into.
Has there been a specific project, either in Brazil or globally that has been identified as a good fit right for the Spirit, the smaller, older units? Or is it still kind of up in the air?
Karl Staubo
I can only comment on behalf of Golar Partners, of course. But when it comes to Golar Power, there, they have been developing the terminal in Suape. The have won the Power Plant award in Barcarena, not yet taken FID on the terminal, and there's several other terminal projects both in Brazil and outside of Brazil.
It's natural that as part of their toolbox they would consider among other FSRUs within both Golar LNG, Golar MLP and potentially, internationally FSRUs available to them. Given that they're in the Golar Group, they obviously have extensive knowledge to Spirit, both in terms of our specifications, what's the possible upgrades and what would the cost of those upgrades be. Most likely, they would have a better view on that versus other potential chartering candidates. And we've proven with a very similar vessel in Golar Freeze that it's certainly possible to upgrade a vessel of this specification and this vintage and still get long-term contracts like 15-year contract in the market.
So, the sort of showcase in there, it's part of the toolbox and it's certainly something we as Golar Partners do encourage. But at the end of the day that development on the terminal side that you're referring to is done in Golar Power. But we as Golar Partners is obviously actively marketing the vessel both for Golar Power, for other parties trying to do the same, and also looking into whether we could actually do some of this terminal projects ourselves, taking -- instead of just looking at long-term TCEs, also taking a view on potential partial utilization or even spreads where you buy LNG in at a price per $1 MMBTU and then we charge out another price and then we do all the operations. So that's, I guess, the general comment to that question.
Jay Mesmer
Yes. Certainly, I know it's hard to give exact answer on that. I know New Fortress, your partner in Jamaica already is still doing other terminals as well. So maybe there is potentially something there.
Just a final, I think that was a good segue, final question, what would the CapEx be for that sort of thing? I guess part one would be just getting it out of layup with that cost, and then part two, if we looked at the Golar Freeze as sort of a mirror and you want to do the same thing with the Spirit, what would the total CapEx will be for that?
Karl Staubo
Again, a good question. So obviously, if she are to be activated, she needs to go through docking. That would most likely be around $10 million, and then there is potential upgrades dependent on the charter. So for Freeze, I think the total CapEx docking and upgrades was around $16 million, and I think $5 million to $10 million is a fair estimate some incremental CapEx over and beyond the $10 million in docking cost dependent on the contract and the exact specification of the contract.
Jay Mesmer
It sounds like about $15 million to $20 million in total. Excellent. Thank you.
Karl Staubo
Well, it could be slightly less if she is to be used just as FSU, as a storage unit. But if you also want to use to regas, yes, then that's a fair estimate.
Jay Mesmer
Makes sense. Thanks.
Operator
There are no further questions at this time. Please go ahead.
Karl Staubo
Thank you all for dialing in to listen to our first quarter presentation and for good questions, and we look forward to catching up. Tor, did you have any final remarks?
Tor Troim
I think I'll leave it to you.
Karl Staubo
Thank you all. We look forward to connecting both -- between the next quarter and certainly on the next quarterly call. So, thank you all for your interest. Thank you.
Operator
That does conclude our conference for today. Thank you for participation. And you may all disconnect.