Global leader in offshore wind Ørsted A/S has signed an agreement to divest its liquefied natural gas (LNG) business to the leading global natural resources company Glencore.
According to the Denmark's largest energy company, Ørsted entered into a long-term agreement with the Dutch LNG regasification terminal Gate in Rotterdam regarding the right to use 3 billion cubic meters of annual regasification capacity from 2011 to 2031, in December 2007.
Today, Ørsted’s LNG business consists of the long-term regasification capacity agreement with the Gate terminal in Rotterdam and five LNG purchase agreements.
Even though Ørsted’s LNG team has performed well during the last few years, the business has been loss-making and is projected to remain so for years to come. Further financial improvements would require further contractual commitments. With Ørsted’s global expansion in renewable energy, it is clear that LNG trading will not be a part of Ørsted’s future core business, and it is therefore being divested.
The transaction entails a payment from Ørsted to Glencore and will result in a loss that exceeds our current provision related to the LNG activities. We will therefore increase the provision in 2019. The transaction will have a positive impact on EBITDA from 2020 onwards. EBITDA guidance for 2019 remains unchanged.
The agreement will involve Glencore novating a number of contracts, including the right to use 3bcm of annual regasification capacity at the Gate terminal in Rotterdam until 2031. The agreement also includes a number of LNG supply contracts.
Completion of the transaction is dependent on the fulfillment of a number of conditions and is expected to take place in the summer of 2020.