20-F 1 tgp201820-fdoc.htm 20-F Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 _______________________________ 
FORM 20-F
  _______________________________  
(Mark One)
¨
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
ý
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2018
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
¨
SHELL COMPANY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report                 
For the transition period from                      to                     
Commission file number 1- 32479
  _______________________________ 
TEEKAY LNG PARTNERS L.P.
(Exact name of Registrant as specified in its charter)
  _______________________________ 
Republic of The Marshall Islands
(Jurisdiction of incorporation or organization)
4th Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton, HM 08, Bermuda
Telephone: (441) 298-2530
(Address and telephone number of principal executive offices)
Edith Robinson
4th Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton, HM 08, Bermuda
Telephone: (441) 298-2530
Fax: (441) 292-3931
(Contact information for company contact person)





Securities registered, or to be registered, pursuant to Section 12(b) of the Act.
Title of each class
 
Name of each exchange on which registered
Common Units
 
New York Stock Exchange
Series A Preferred Units
 
New York Stock Exchange
Series B Preferred Units
 
New York Stock Exchange
Securities registered, or to be registered, pursuant to Section 12(g) of the Act.
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
  _______________________________ 
Indicate the number of outstanding shares of each issuer’s classes of capital or common stock as of the close of the period covered by the annual report.    
79,360,719 Common Units
5,000,000 Series A Preferred Units
6,800,000 Series B Preferred Units


Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    Yes   ý    No   ¨
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ¨    No  ý
Indicate by check mark if the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark if the registrant (1) has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
ý
Accelerated Filer
¨
Non-Accelerated Filer
¨
Emerging growth company
¨
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ 
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP
ý
International Financial Reporting Standards
as issued by the International Accounting
Standards Board
¨
Other
¨
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:
Item 17  ¨        Item 18   ¨




If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  ¨        No  ý
 




TEEKAY LNG PARTNERS L.P.
INDEX TO REPORT ON FORM 20-F
 
 
Page
 
 
Item 1.
Item 2.
Item 3.
 
 
Item 4.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 4A.
Item 5.
 
 
 
 
 
 
 
 
 
 
 
Item 6.
 
 
 
 
 
 
 
 
 
Item 7.
 

1



 
Item 8.
 
 
 
 
 
Item 9.
Item 10.
 
 
 
 
 
 
 
Item 11.
Item 12.
 
 
 
 
 
Item 13.
Item 14.
Item 15.
Item 16A.
Item 16B.
Item 16C.
Item 16D.
Item 16E.
Item 16F.
Item 16G.
Item 16H.
 
 
 
 
 
Item 17.
Item 18.
Item 19.
 

2



PART I
This Annual Report should be read in conjunction with the consolidated financial statements and accompanying notes included in this report.

Unless otherwise indicated, references in this prospectus to “Teekay LNG Partners,” “we,” “us” and “our” and similar terms refer to Teekay LNG Partners L.P. and/or one or more of its subsidiaries, except that those terms, when used in this Annual Report in connection with the common or preferred units described herein, shall mean specifically Teekay LNG Partners L.P. References in this Annual Report to “Teekay Corporation” refer to Teekay Corporation and/or any one or more of its subsidiaries.

In addition to historical information, this Annual Report contains forward-looking statements that involve risks and uncertainties. Such forward-looking statements relate to future events and our operations, objectives, expectations, performance, financial condition and intentions. When used in this Annual Report, the words “expect,” “intend,” “plan,” “believe,” “anticipate,” “estimate” and variations of such words and similar expressions are intended to identify forward-looking statements. Forward-looking statements in this Annual Report include, in particular, statements regarding:
 
our distribution policy and our ability to make cash distributions on our units or any increases in quarterly distributions, and the impact of cash distribution reductions on our financial position;
our future financial condition and results of operations and our future revenues, expenses and capital expenditures, and our expected financial flexibility to pursue capital expenditures, acquisitions and other expansion opportunities, including vessel acquisitions;
our liquidity needs and meeting our going concern requirements, including our anticipated funds and sources of financing for liquidity and working capital needs and the sufficiency of cash flows, and our estimation that we will have sufficient liquidity for at least a one-year period;
our ability to obtain financing, including new bank financings, and to refinance existing indebtedness;
the expected timing, amounts and methods of financing for new projects;
growth prospects and future trends of the markets in which we operate;
our expectations regarding demand in the oil and gas industry;
liquefied natural gas (or LNG), liquefied petroleum gas (or LPG) and tanker market fundamentals, including the balance of supply and demand in the LNG, LPG and tanker markets, estimated growth in size of the world LNG and LPG fleets and spot LNG, LPG and tanker charter rates;
our expectations as to the useful lives of our vessels;
our expectations and estimates regarding future charter business, including with respect to minimum charter hire payments, revenues and our vessels’ ability to perform to specifications and maintain their hire rates in the future;
our expectations regarding the ability of Awilco LNG ASA (or Awilco), and our other customers to make charter payments to us, and the ability of our customers to fulfill purchase obligations at the end of charter contracts, including obligations relating to two of our LNG carriers completing charters with Awilco in 2019;
our ability to maximize the use of our vessels, including the redeployment or disposition of vessels no longer under long-term charter or whose charter contract is expiring in 2019 and 2020;
the adequacy of our insurance coverage, less an applicable deductible;
the future resumption of an LNG plant in Yemen operated by Yemen LNG Company Limited (or YLNG), the expected expiration of the current deferral arrangement with YLNG, the expected further agreement with YLNG to suspend the charter contracts, the expected repayment of deferred hire amounts on our two 52%-owned vessels, the Marib Spirit and Arwa Spirit, on charter to YLNG, and the expected reduction to our equity income in 2019 as a result of the charter payment deferral;
expected purchases and deliveries of newbuilding vessels, the newbuildings’ commencement of service under charter contracts, and estimated costs for newbuilding vessels;
expected deliveries of the LNG newbuilding vessels in connection with our joint venture with China LNG Shipping (Holdings) Limited;
expected funding of our proportionate share of the remaining shipyard installment payments for our joint venture with China LNG, CETS Investment Management (HK) Co. Ltd. and BW LNG Investments Pte. Ltd. (or the Pan Union Joint Venture);
the expected technical and operational capabilities of newbuildings, including the benefits of the M-type, Electronically Controlled, Gas Injection (or MEGI) twin engines in certain LNG carrier newbuildings;
our ability to continue to derive a significant portion of our revenues and cash flow from a limited number of customers;
our ability to maintain long-term relationships with major LNG and LPG importers and exporters and major crude oil companies;
our ability to leverage to our advantage Teekay Corporation’s relationships and reputation in the shipping industry;
our continued ability to enter into long-term, fixed-rate time-charters with our LNG and LPG customers;

3



obtaining LNG and LPG projects that we or Teekay Corporation bid on;
our expectations regarding the schedule and performance of the receiving and regasification terminal in Bahrain, which will be owned and operated by a new joint venture, Bahrain LNG W.L.L., owned by us (30%), National Oil & Gas Authority (or Nogaholding) (30%), Gulf Investment Corporation (or GIC) (24%) and Samsung C&T (or Samsung) (16%) (or the Bahrain LNG Joint Venture), and our expectations regarding the charter of a floating storage unit (or FSU) vessel for the project;
our ability to obtain all permits, licenses, and certificates with respect to the conduct of our operations;
the impact and expected cost of, and our ability to comply with, new and existing governmental regulations and maritime self-regulatory organization standards applicable to our business, including the expected cost to install ballast water treatment systems on our vessels and the switch to burning low sulphur fuel in compliance with the International Marine Organization (or IMO) proposals and the effect of IMO 2020, a new regulation for a 0.50% global sulphur cap for marine fuels effective January 1, 2020;
the expected impact of heightened environmental and quality concerns of insurance underwriters, regulators and charterers;
the future valuation or impairment of our assets, including goodwill;
our hedging activities relating to foreign exchange, interest rate and spot market risks, and the effects of fluctuations in foreign exchange, interest rate and spot market rates on our business and results of operations;
the potential impact of new accounting standards guidance;
our and Teekay Corporation’s ability to maintain good relationships with the labor unions who work with us;
anticipated taxation of our partnership and its subsidiaries; and
our business strategy and other plans and objectives for future operations.

Forward-looking statements involve known and unknown risks and are based upon a number of assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which are beyond our control. Actual results may differ materially from those expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially include, but are not limited to, those factors discussed in “Item 3 – Key Information: Risk Factors,” and other factors detailed from time to time in other reports we file with or furnish to the U.S. Securities and Exchange Commission (or the SEC).

We do not intend to revise any forward-looking statements in order to reflect any change in our expectations or events or circumstances that may subsequently arise. You should carefully review and consider the various disclosures included in this Annual Report and in our other filings made with the SEC that attempt to advise interested parties of the risks and factors that may affect our business prospects and results of operations.
Item 1.
Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2.Offer Statistics and Expected Timetable
Not applicable.
Item 3.Key Information
Selected Financial Data
Set forth below is selected consolidated financial and other data of Teekay LNG Partners and its subsidiaries for the fiscal years 2014 through 2018, which have been derived from our consolidated financial statements. The following table should be read together with, and is qualified in its entirety by reference to, (a) “Item 5 – Operating and Financial Review and Prospects,” included herein, and (b) the historical consolidated financial statements and the accompanying notes and the Report of Independent Registered Public Accounting Firm therein (which are included herein), with respect to the consolidated financial statements for the years ended December 31, 2018, 2017 and 2016.

Our consolidated financial statements are prepared in accordance with United States generally accepted accounting principles (or GAAP).

(in thousands of U.S. Dollars, except unit, per unit and fleet data)
 
Year Ended
December 31,
2018
$
 
Year Ended
December 31,
2017
$
 
Year Ended
December 31,
2016
$
 
Year Ended
December 31,
2015
$
 
Year Ended
December 31,
2014
$
Income Statement Data:
 
 
 
 
 
 
 
 
 
 
Voyage revenues
 
510,762

 
432,676

 
396,444

 
397,991

 
402,928

Income from vessel operations(1)
 
147,809


148,649


153,181


181,372

 
183,823

Equity income(2)
 
53,546

 
9,789

 
62,307

 
84,171

 
115,478


4



Interest expense
 
(128,303
)
 
(80,937
)
 
(58,844
)
 
(43,259
)
 
(60,414
)
Interest income
 
3,760

 
2,915

 
2,583

 
2,501

 
3,052

Realized and unrealized gain (loss) on non-designated derivative instruments(3)
 
3,278

 
(5,309
)
 
(7,161
)
 
(20,022
)
 
(44,682
)
Foreign currency exchange gain (loss)(4)
 
1,371

 
(26,933
)
 
5,335

 
13,943

 
28,401

Other (expense) income(5)
 
(51,373
)
 
1,561

 
1,537

 
1,526

 
836

Income tax expense
 
(3,213
)
 
(824
)
 
(973
)
 
(2,722
)
 
(7,567
)
Net income
 
26,875


48,911


157,965


217,510

 
218,927

Non-controlling and other interests in net income
 
24,260

 
29,325

 
22,988

 
42,903

 
44,676

Limited partners’ interest in net income
 
2,615

 
19,586

 
134,977

 
174,607

 
174,251

Limited partners’ interest in net income per:
 
 
 
 
 
 
 
 
 
 
Common unit - basic
 
0.03

 
0.25

 
1.70

 
2.21

 
2.30

Common unit - diluted
 
0.03

 
0.25

 
1.69

 
2.21

 
2.30

Cash distributions declared per common unit
 
0.5600

 
0.5600

 
0.5600

 
2.8000

 
2.7672

Balance Sheet Data (at end of period):
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
149,014

 
244,241

 
126,146

 
102,481

 
159,639

Restricted cash
 
73,850

 
95,194

 
117,027

 
111,519

 
45,997

Vessels and equipment(6)
 
3,329,523

 
2,905,712

 
2,215,983

 
2,108,160

 
1,989,230

Investment in and advances to equity-accounted joint ventures
 
1,116,133

 
1,094,596

 
1,037,726

 
883,731

 
891,478

Net investments in direct financing leases(7)
 
575,163

 
495,990

 
643,008

 
666,658

 
682,495

Total assets
 
5,384,781

 
5,019,299

 
4,315,474

 
4,052,980

 
3,947,275

Total debt and obligations related to capital leases
 
3,268,332

 
2,809,541

 
2,184,065

 
2,058,336

 
1,970,531

Partners’ equity
 
1,833,254

 
1,879,038

 
1,738,506

 
1,519,062

 
1,537,752

Total equity
 
1,882,597

 
1,931,423

 
1,777,412

 
1,543,679

 
1,547,371

Common units outstanding
 
79,360,719

 
79,626,819

 
79,571,820

 
79,551,012

 
78,353,354

Preferred units outstanding
 
11,800,000

 
11,800,000

 
5,000,000

 

 

Other Financial Data:
 
 
 
 
 
 
 
 
 
 
Net voyage revenues(8)
 
482,525

 
424,474

 
394,788

 
396,845

 
399,607

EBITDA(9)
 
279,009

 
233,302

 
310,741

 
353,243

 
377,983

Adjusted EBITDA(9)
 
492,275

 
424,436

 
445,341

 
442,463

 
466,965

Capital expenditures:
 
 
 
 
 
 
 
 
 
 
Expenditures for vessels and equipment(10)
 
686,305

 
714,529

 
344,987

 
191,969

 
194,255

Liquefied Natural Gas Fleet Data:
 
 
 
 
 
 
 
 
 
 
Consolidated:
 
 
 
 
 
 
 
 
 
 
Calendar-ship-days(11)
 
7,570

 
5,912

 
5,244

 
4,745

 
4,745

Average age of our fleet (in years at end of year)
 
7.8

 
8.9

 
9.7

 
10.2

 
9.2

Vessels at end of year(12)
 
23

 
18

 
15

 
13

 
13

Equity-Accounted:(13)
 
 
 
 
 
 
 
 
 
 
Calendar-ship-days(11)
 
6,912

 
5,920

 
5,840

 
5,840

 
5,840

Average age of our fleet (in years at end of year)
 
7.0

 
8.0

 
7.5

 
6.5

 
5.5

Vessels at end of year(12)
 
20

 
17

 
16

 
16

 
16

Liquefied Petroleum Gas Fleet Data:
 
 
 
 
 
 
 
 
 
 
Consolidated:
 
 
 
 
 
 
 
 
 
 
Calendar-ship-days(11)
 
2,555

 
2,445

 
2,196

 
2,190

 
1,874

Average age of our fleet (in years at end of year)
 
9.9

 
8.9

 
7.0

 
6.0

 
5.0

Vessels at end of year(12)
 
7

 
7

 
6

 
6

 
6

Equity-Accounted:(13)
 
 
 
 
 
 
 
 
 
 
Calendar-ship-days(11)
 
7,645

 
7,001

 
6,395

 
5,880

 
5,498

Average age of our fleet (in years at end of year)
 
7.9

 
9.1

 
9.6

 
10.4

 
10.8

Vessels at end of year(12)
 
22

 
20

 
19

 
16

 
15

Conventional Fleet Data:
 
 
 
 
 
 
 
 
 
 
Calendar-ship-days(11)
 
1,389

 
1,904

 
2,439

 
2,920

 
3,202

Average age of our fleet (in years at end of year)
 
12.0

 
12.6

 
11.7

 
9.5

 
8.5

Vessels at end of year
 
2

 
5

 
6

 
8

 
8

(1)
Income from vessel operations includes write-down of goodwill and write-down and loss on sale of vessels of $54.7 million, $50.6 million and $39.0 million for the years ended December 31, 2018, 2017 and 2016, respectively.

5



(2)
Equity income includes unrealized gains on non-designated derivative instruments, and any ineffectiveness of derivative instruments designated as hedges for accounting purposes of $9.4 million, $2.4 million, $7.3 million, $10.2 million and $1.6 million for the years ended December 31, 2018, 2017, 2016, 2015 and 2014, respectively. In addition, equity income for the year ended December 31, 2018 includes a gain of $5.6 million on our sale of our 50% ownership interest in our joint venture with Exmar NV (or Exmar) (or the Excelsior Joint Venture), which owned one LNG carrier, the Excelsior.
(3)
We entered into interest rate swap and swaption agreements to mitigate our interest rate risk from our floating-rate debt. We also have entered into an agreement with Teekay Corporation relating to the Toledo Spirit time-charter contract under which Teekay Corporation paid us any amounts payable to the charterer as a result of spot rates being below the fixed rate, and we paid Teekay Corporation any amounts payable to us as a result of spot rates being in excess of the fixed rate. The Toledo Spirit was sold in early 2019, and as a result, the derivative agreement ended at that time. With the exception of the interest rate swaps in our consolidated joint venture, Teekay Nakilat Corporation (or the Teekay Nakilat Joint Venture), and for several interest rate swaps in certain of our equity-accounted joint ventures where we have applied hedge accounting, changes in the fair value of our derivatives are recognized immediately into income and are presented as realized and unrealized gain (loss) on derivative instruments in the consolidated statements of income. Please see “Item 18 – Financial Statements: Note 13 – Derivative Instruments and Hedging Activities.”
(4)
Under GAAP, all foreign currency-denominated monetary assets and liabilities, such as cash and cash equivalents, accounts receivable, restricted cash, accounts payable, accrued liabilities, advances from affiliates and long-term debt, are revalued and reported based on the prevailing exchange rate at the end of the period. Foreign exchange gains and losses include realized and unrealized gains and losses on our cross currency swaps. We entered into cross currency swaps concurrently with the issuance of our Norwegian Kroner (or NOK) denominated bonds to economically hedge the foreign currency exposure on the payment of interest and principal of our NOK-denominated bonds. Our primary sources of foreign currency exchange gains and losses are our Euro-denominated term loans and NOK-denominated bonds. Euro-denominated term loans totaled, 169.0 million Euros ($193.8 million) at December 31, 2018, 194.1 million Euros ($233.0 million) at December 31, 2017, 208.9 million Euros ($219.7 million) at December 31, 2016, 227.7 million Euros ($241.8 million) at December 31, 2015 and 235.6 million Euros ($285.0 million) at December 31, 2014. Our NOK-denominated bonds totaled 3.1 billion NOK ($353.0 million) at December 31, 2018, 3.1 billion NOK ($377.9 million) at December 31, 2017, 3.2 billion NOK ($371.3 million) at December 31, 2016, 2.6 billion NOK ($294.0 million) at December 31, 2015 and 1.6 billion NOK ($214.7 million) at December 31, 2014.
(5)
Other (expense) income for the year ended December 31, 2018 includes a $53.0 million expense relating to the Teekay Nakilat Joint Venture recognizing an additional tax indemnification liability. Please see "Item 5 – Operating and Financial Review and Prospects: Significant Developments in 2018 and Early 2019 – Teekay Nakilat Capital Lease."
(6)
Vessels and equipment consist of (a) our vessels, at cost less accumulated depreciation, (b) vessels related to capital leases, at cost less accumulated depreciation and (c) advances on our newbuildings.
(7)
Certain of our external charters have been accounted for as direct financing leases. As a result, the vessels associated with the external charters accounted for as direct financing leases are not included as part of vessels and equipment. Please see "Item 18 – Financial Statements: Note 6 – Revenue – Net Investments in Direct Financing Leases."
(8)
Net voyage revenues is a non-GAAP financial measure. Consistent with general practice in the shipping industry, we use net voyage revenues (defined as voyage revenues less voyage expenses) as a measure of equating revenues generated from voyage charters to revenues generated from time-charters, which assists us in making operating decisions about the deployment of our vessels and their performance. Under time-charters the charterer pays the voyage expenses, whereas under voyage charter contracts the ship owner pays these expenses. Some voyage expenses are fixed, and the remainder can be estimated. If we, as the ship owner, pay the voyage expenses, we typically pass the approximate amount of these expenses on to our customers by charging higher rates under the contract or billing the expenses to them. As a result, although voyage revenues from different types of contracts may vary, the net voyage revenues are comparable across the different types of contracts. We principally use net voyage revenues because it provides more meaningful information to us than voyage revenues, the most directly comparable GAAP financial measure. Net voyage revenues are also widely used by investors and analysts in the shipping industry for comparing financial performance between companies and to industry averages. The following table reconciles net voyage revenues with voyage revenues:
(in thousands of U.S. Dollars)
 
Year Ended
December 31,
2018
 
Year Ended
December 31,
2017
 
Year Ended
December 31,
2016
 
Year Ended
December 31,
2015
 
Year Ended
December 31,
2014
Voyage revenues
 
510,762

 
432,676

 
396,444

 
397,991

 
402,928

Voyage expenses
 
(28,237
)
 
(8,202
)
 
(1,656
)
 
(1,146
)
 
(3,321
)
Net voyage revenues
 
482,525


424,474


394,788


396,845

 
399,607

(9)
EBITDA and Adjusted EBITDA are non-GAAP financial measures. EBITDA represents net income before interest, taxes, depreciation and amortization. Adjusted EBITDA represents EBITDA before write-down of goodwill and write-down and loss on sales of vessels, foreign currency exchange (gain) loss, amortization of in-process contracts included in voyage revenues net of offsetting vessel operating expenses, unrealized (gain) loss on non-designated derivative instruments, realized loss on interest rate swaps and Adjustments to Equity-Accounted EBITDA. EBITDA and Adjusted EBITDA are used as a supplemental financial performance measure by management and by external users of our financial statements, such as investors. EBITDA and Adjusted EBITDA assist our management and security holders by increasing the comparability of our fundamental performance from period to period and against the fundamental performance of other companies in our industry that provide EBITDA and Adjusted EBITDA information. This increased comparability is achieved by excluding the potentially disparate effects between periods or companies of interest expense, taxes, depreciation or amortization, amortization of in-process revenue contracts and realized and unrealized loss on derivative instruments relating to interest rate swaps, interest rate swaptions, and cross currency swaps, which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which items may significantly affect net income between periods. We believe that including EBITDA and Adjusted EBITDA benefits investors in (a) selecting between investing in us and other investment alternatives and (b) monitoring our ongoing financial and operational strength and health in assessing whether to continue to hold our equity or debt securities, as applicable.
Neither EBITDA nor adjusted EBITDA should be considered as an alternative to net income, operating income, or any other measure of financial performance presented in accordance with GAAP. EBITDA and Adjusted EBITDA exclude certain items that affect net income and these measures may vary among other companies. Therefore, EBITDA and Adjusted EBITDA as presented in this Annual Report may not be comparable to similarly titled measures of other companies.
The following table reconciles our historical consolidated EBITDA and Adjusted EBITDA to net income.

6



(in thousands of U.S. Dollars)
 
Year Ended
December 31,
2018
 
Year Ended
December 31,
2017
 
Year Ended
December 31,
2016
 
Year Ended
December 31,
2015
 
Year Ended
December 31,
2014
Reconciliation of “EBITDA” and “Adjusted EBITDA” to “Net income”:
 
 
 
 
 
 
 
 
 
 
Net income
 
26,875

 
48,911

 
157,965

 
217,510

 
218,927

Depreciation and amortization
 
124,378

 
105,545

 
95,542

 
92,253

 
94,127

Interest expense, net of interest income
 
124,543

 
78,022

 
56,261

 
40,758

 
57,362

Income tax expense
 
3,213

 
824

 
973

 
2,722

 
7,567

EBITDA
 
279,009


233,302


310,741


353,243

 
377,983

Write-down of goodwill and write-down and loss on sale of vessels
 
54,653

 
50,600

 
38,976

 

 

Foreign currency exchange (gain) loss
 
(1,371
)
 
26,933

 
(5,335
)
 
(13,943
)
 
(28,401
)
Amortization of in-process contracts included in voyage revenues, net of offsetting vessel operating expenses
 
(326
)
 
(1,113
)
 
(1,113
)
 
(1,113
)
 
(1,113
)
Unrealized (gain) loss on non-designated derivative instruments
 
(30,133
)
 
(13,448
)
 
(19,433
)
 
(12,375
)
 
2,096

Realized loss on interest rate swaps and swaptions
 
28,335

 
19,435

 
25,940

 
28,968

 
41,725

Adjustments to Equity-Accounted EBITDA(14)(15)
 
109,108

 
108,727

 
95,565

 
87,683

 
74,675

Other expense(5)
 
53,000

 

 

 

 

Adjusted EBITDA
 
492,275


424,436


445,341


442,463

 
466,965

(10)
Excludes expenditures for vessels and equipment from our equity-accounted joint ventures.
(11)
Calendar-ship-days are equal to the aggregate number of calendar days in a period that our vessels were in our possession during that period. In addition, the calendar-ship-days for our consolidated LNG fleet includes 119 days relating to the charter-in contract of the Magellan Spirit from our 52%-owned joint venture with Marubeni Corporation (or the Teekay LNG-Marubeni Joint Venture).
(12)
Liquefied Natural Gas
For 2018, 2017, 2016 and 2015, the number of vessels indicated does not include one, six, nine and 11 LNG carrier newbuilding(s), respectively, in our consolidated LNG fleet and five, nine, 10 and 10 LNG carrier newbuildings, respectively, in our equity-accounted LNG fleet.
Liquefied Petroleum Gas
For 2017, 2016 and 2015, the number of vessels indicated does not include three, four and seven LPG carrier newbuildings, respectively, in our equity-accounted LPG fleet.
(13)
Equity-accounted vessels in our LNG fleet include (i) six LNG carriers (or the MALT LNG Carriers) relating to the Teekay LNG-Marubeni Joint Venture, (ii) four LNG carriers (or the RasGas 3 LNG Carriers) relating to our joint venture with QGTC Nakilat (1643-6) Holdings Corporation, (iii) four LNG carriers relating to the Angola Project (or the Angola LNG Carriers) in our joint venture with Mitsui & Co. Ltd. and NYK Energy Transport (Atlantic) Ltd., (iv) one LNG carrier at December 31, 2018 and two LNG carriers from 2017 to 2014 (or the Exmar LNG Carriers) relating to our LNG joint venture with Exmar, (v) three and one LNG carrier(s) (or the Pan Union LNG Carriers) relating to the Pan Union Joint Venture from 2018 and 2017, respectively, and (vi) two ARC7 LNG carriers relating to our 50/50 joint venture with China LNG (Holdings) Limited (or the Yamal LNG Joint Venture) in 2018. Equity-accounted vessels in our LPG fleet include 22, 20, 19, 16, and 15 LPG carriers (or the Exmar LPG Carriers) from 2018, 2017, 2016, 2015, and 2014, respectively, relating to our LPG joint venture with Exmar. The figures in the selected financial data for our equity-accounted vessels are at 100% and not based on our ownership percentages.
(14)
Adjusted Equity-Accounted EBITDA is a non-GAAP financial measure. Adjusted Equity-Accounted EBITDA represents equity income after Adjustments to Equity Income. Adjustments to Equity Income consist of depreciation and amortization, interest expense net of interest income, income tax (recovery) expense, amortization of in-process revenue contracts, foreign currency exchange (gain) loss, write-down and loss (gain) on sales of vessels, gain on sale of equity-accounted investment, unrealized gain on non-designated derivative instruments and realized loss on interest rate swaps, in each case related to our equity-accounted entities, on the basis of our ownership percentages of such entities. Neither Adjusted Equity-Accounted EBITDA nor Adjustments to Equity-Accounted EBITDA should be considered as an alternative to equity income or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjustments to Equity-Accounted EBITDA exclude some, but not all, items that affect equity income and these measures may vary among other companies. Therefore, Adjustments to Equity-Accounted EBITDA as presented in this Annual Report may not be comparable to similarly titled measures of the other companies.
(15)
Adjustments relating to equity income from our equity-accounted joint ventures are as follows:

7



(in thousands of U.S. Dollars)
 
Year Ended
December 31,
2018
 
Year Ended
December 31,
2017
 
Year Ended
December 31,
2016
 
Year Ended
December 31,
2015
 
Year Ended
December 31,
2014
Reconciliation of “Adjusted Equity-Accounted EBITDA” to “Equity Income”:
 
 
 
 
 
 
 
 
 
 
Equity income
 
53,546

 
9,789

 
62,307

 
84,171

 
115,478

Depreciation and amortization
 
52,883

 
54,453

 
52,095

 
48,702

 
45,885

Interest expense, net of interest income
 
69,186

 
51,442

 
39,849

 
37,376

 
36,916

Income tax (recovery) expense
 
(261
)
 
504

 
352

 
315

 
(155
)
Amortization of in-process revenue contracts
 
(3,847
)
 
(4,307
)
 
(5,482
)
 
(7,153
)
 
(8,295
)
Foreign currency exchange (gain) loss
 
(391
)
 
369

 
125

 
(527
)
 
(441
)
Write-down and loss (gain) on sales of vessels
 
257

 
5,500

 
4,861

 
1,228

 
(16,923
)
Gain on sale of equity-accounted investment(2)
 
(5,563
)
 

 

 

 

Unrealized gain on non-designated derivative instruments
 
(9,076
)
 
(7,491
)
 
(6,963
)
 
(10,945
)
 
(1,563
)
Realized loss on interest rate swaps
 
5,920

 
8,257

 
10,728

 
18,687

 
19,251

Adjustments to Equity-Accounted EBITDA
 
109,108


108,727


95,565


87,683

 
74,675

Adjusted Equity-Accounted EBITDA
 
162,654


118,516


157,872


171,854

 
190,153




8



RISK FACTORS
Some of the following risks relate principally to the industry in which we operate and to our business in general. Other risks relate principally to the securities market and to ownership of our common or preferred units. The occurrence of any of the events described in this section could materially and adversely affect our business, financial condition, operating results and ability to pay distributions on, and the trading price of, our common and preferred units.
We may not have sufficient cash from operations to enable us to pay distributions on our common and preferred units.
The amount of cash we can distribute on our common and preferred units principally depends upon the amount of cash we generate from our operations, which may fluctuate based on, among other things:

the rates we obtain from our charters;
the expiration of charter contracts;
the charterers' options to terminate charter contracts or repurchase vessels;
the level of our operating costs, such as the cost of crews and insurance;
the continued availability of LNG and LPG production, liquefaction and regasification facilities;
the number of unscheduled off-hire days for our fleet and the timing of, and number of days required for, scheduled dry docking of our vessels;
delays in the delivery of newbuildings and the beginning of payments under charters relating to those vessels;
prevailing global and regional economic and political conditions;
currency exchange rate fluctuations;
the effect of governmental regulations and maritime self-regulatory organization standards on the conduct of our business; and
limitation of obtaining cash distributions from joint venture entities due to similar restrictions within the joint venture entities.

The actual amount of cash we will have available for distribution also will depend on factors such as:

the level of capital expenditures we make, including for maintaining vessels, building new vessels, acquiring existing vessels and complying with regulations;
our debt service requirements and restrictions on distributions contained in our debt instruments;
fluctuations in our working capital needs;
our ability to make working capital borrowings, including to pay distributions to unitholders; and
the amount of any cash reserves, including reserves for future capital expenditures, anticipated future credit needs and other matters, established by Teekay GP L.L.C., our general partner (or our General Partner), in its discretion.

The amount of cash we generate from our operations may differ materially from our profit or loss for the period, which will be affected by non-cash items. As a result of this and the other factors mentioned above, we may make cash distributions during periods when we record losses and may not make cash distributions during periods when we record net income.
Our ability to grow may be adversely affected by our cash distribution policy.
Our cash distribution policy, which is consistent with our partnership agreement, requires us to distribute each quarter all of our Available Cash (as defined in our partnership agreement, which takes into account cash reserves for, among other things, future capital expenditures and credit needs). Accordingly, our growth may not be as fast as businesses that reinvest their Available Cash to expand ongoing operations.

In determining the amount of cash available for distribution, the Board of Directors of our General Partner, which makes the determination on our behalf, approves the amount of cash reserves to set aside, including reserves for future maintenance capital expenditures, anticipated future credit needs, working capital and other matters. We also rely upon external financing sources, including commercial borrowings and proceeds from debt and equity offerings, to fund our capital expenditures. Accordingly, to the extent we do not have sufficient cash reserves or are unable to obtain financing, our cash distribution policy may significantly impair our ability to meet our financial needs or to grow.

Although global crude oil prices have experienced moderate recovery since falling from the highs reached in mid-2014, prices have not returned to those same highs. The decline in oil prices also contributed to depressed natural gas prices. Lower oil prices may negatively affect both the competitiveness of natural gas as a fuel for power generation and the market price of natural gas, to the extent that natural gas prices are benchmarked to the price of crude oil. These declines in energy prices, combined with other factors beyond our control, have adversely affected energy and master limited partnership capital markets and available sources of financing for our capital expenditures and debt repayment obligations. On November 13, 2018, our General Partner announced that quarterly common unit distributions would increase by

9



36 percent to $0.19 per unit, commencing with the first quarter of 2019 distribution to be paid in May 2019 as part of a balanced capital allocation strategy, however, our distribution policy is subject to certain restrictions and may be changed by the Board of Directors of our General Partner.
Our ability to repay or refinance our debt obligations and to fund our capital expenditures will depend on certain financial, business and other factors, many of which are beyond our control. To the extent we are unable to finance these obligations and expenditures with cash from operations or by issuing debt or equity securities, our ability to make cash distributions may be diminished or our financial leverage may increase, or our unitholders may be diluted. Our business may be adversely affected if we need to access other sources of funding.
To fund our existing and future debt obligations and capital expenditures, we will be required to use cash from operations, incur borrowings, and/or seek to access other financing sources. Our access to potential funding sources and our future financial and operating performance will be affected by prevailing economic conditions and financial, business, regulatory and other factors, many of which are beyond our control. If we are unable to access additional bank financing and generate sufficient cash flow to meet our debt, capital expenditure and other business requirements, we may be forced to take actions such as:

restructuring our debt;
seeking additional debt or equity capital;
selling assets;
reducing distributions;
reducing, delaying or cancelling our business activities, acquisitions, investments or capital expenditures; or
seeking bankruptcy protection.

Such measures might not be successful, available on acceptable terms or enable us to meet our debt, capital expenditure and other obligations. Some of such measures may adversely affect our business and reputation. In addition, our financing agreements may restrict our ability to implement some of these measures.

Use of cash from operations and possible future sale of certain assets will reduce cash available for distribution to unitholders. Our ability to obtain bank financing or to access the capital markets for future offerings may be limited by our financial condition at the time of any such financing or offering as well as by adverse market conditions. Even if we are successful in obtaining necessary funds, the terms of such financings could limit our ability to pay cash distributions to unitholders or operate our business as currently conducted. In addition, incurring additional debt may significantly increase our interest expense and financial leverage, and issuing additional equity securities may result in significant unitholder dilution and would increase the aggregate amount of cash required to maintain our quarterly distributions to unitholders.
We make substantial capital expenditures to maintain the operating capacity of our fleet, which reduce our cash available for distribution. In addition, each quarter our General Partner is required to deduct estimated maintenance capital expenditures from operating surplus, which may result in less cash available for distribution to unitholders than if actual maintenance capital expenditures were deducted.
We must make substantial capital expenditures to maintain, over the long term, the operating capacity of our fleet. These maintenance capital expenditures include capital expenditures associated with dry docking a vessel, modifying an existing vessel or acquiring a new vessel to the extent these expenditures are incurred to maintain the operating capacity of our fleet. These expenditures could increase as a result of changes in:

the cost of labor and materials;
customer requirements;
increases in the size of our fleet;
governmental regulations and maritime self-regulatory organization standards relating to safety, security or the environment; and
competitive standards.

In addition, our actual maintenance capital expenditures vary significantly from quarter-to-quarter based on, among other things, the number of vessels dry docked during that quarter. Certain repair and maintenance items are more efficient to complete while a vessel is in dry dock. Consequently, maintenance capital expenditures will typically increase in periods when there is an increase in the number of vessels dry docked. Our significant maintenance capital expenditures reduce the amount of cash we have available for distribution to our unitholders.

Our partnership agreement requires our General Partner to deduct estimated, rather than actual, maintenance capital expenditures from operating surplus (as defined in our partnership agreement) each quarter in an effort to reduce fluctuations in operating surplus. The amount of estimated maintenance capital expenditures deducted from operating surplus is subject to review and change by the conflicts committee of our General Partner’s Board of Directors at least once a year. In years when estimated maintenance capital expenditures are higher than actual maintenance capital expenditures – as we expect will be the case in the years we are not required to make expenditures for mandatory dry dockings – the amount of cash available for distribution to unitholders will be lower than if actual maintenance capital expenditures were

10



deducted from operating surplus. If our General Partner underestimates the appropriate level of estimated maintenance capital expenditures, we may have less cash available for distribution in future periods when actual capital expenditures begin to exceed our previous estimates.
We make substantial capital expenditures to expand the size of our fleet or gas business and generally are required to make significant installment payments for acquisitions of newbuilding vessels or for construction of receiving and regasification terminals prior to their delivery or completion and generation of revenue.
We make substantial capital expenditures to increase the size of our fleet or gas business. Please read “Item 5 Operating and Financial Review and Prospects,” for additional information about our newbuilding acquisitions. As at December 31, 2018, we had six LNG carrier newbuildings scheduled for delivery during 2019, and one LNG receiving and regasification terminal under construction scheduled for completion in 2019. The obligations of us and our equity-accounted joint ventures to purchase the newbuilding vessels is not conditional upon our or their ability to obtain financing for such purchases. In January 2019, we had $636 million of financing in place, including the sale-leaseback financing completed on the Yamal Spirit in January 2019 and our proportionate share of financings in our equity-accounted joint ventures, against $652 million related to our proportionate share of the estimated remaining cost for our newbuilding vessels and our LNG receiving and regasification terminal under construction as of December 31, 2018. Please read "Item 5 – Contractual Obligations and Contingencies."
Our substantial capital expenditures may reduce our cash available for distribution to our unitholders. Funding of any capital expenditures with debt may significantly increase our interest expense and financial leverage, and funding of capital expenditures by issuing additional equity securities may result in significant unitholder dilution. Our failure to obtain the funds for necessary future capital expenditures could have a material adverse effect on our business, results of operations and financial condition and on our ability to make cash distributions to unitholders.

We and Teekay Corporation regularly evaluate and pursue opportunities to provide the marine transportation requirements for new or expanding LNG and LPG projects. The award process relating to LNG transportation opportunities typically involves various stages and takes several months to complete. Neither we nor Teekay Corporation may be awarded charters relating to any of the projects we or it pursues. If any LNG project charters are awarded to Teekay Corporation, it must offer them to us pursuant to the terms of an omnibus agreement entered into in connection with our initial public offering. If we elect pursuant to the omnibus agreement to obtain Teekay Corporation’s interests in any projects Teekay Corporation may be awarded, or if we bid on and are awarded contracts relating to any LNG and LPG project, we will need to incur significant capital expenditures to buy Teekay Corporation’s interest in these LNG and LPG projects or to build the LNG and LPG carriers.

To fund the remaining portion of existing or future capital expenditures, we will be required to use cash from operations or incur borrowings or raise capital through the sale of debt or additional equity securities. Use of cash from operations will reduce cash available for distributions to unitholders. Our ability to obtain bank financing or to access the capital markets for future offerings may be limited by our financial condition at the time of any such financing or offering as well as by adverse market conditions resulting from, among other things, general economic conditions and contingencies and uncertainties that are beyond our control. Our failure to obtain the funds for future capital expenditures could have a material adverse effect on our business, results of operations and financial condition and on our ability to make cash distributions. Even if we are successful in obtaining necessary funds, the terms of such financings could limit our ability to pay distributions to our unitholders. In addition, incurring additional debt may significantly increase our interest expense and financial leverage, and issuing additional equity securities may result in significant unitholder dilution and would increase the aggregate amount of cash required to maintain our current level of quarterly distributions to unitholders, which could have a material adverse effect on our ability to make cash distributions.

In addition, although delivery of the completed vessel will not occur until much later (approximately two to three years from the time the order is placed), we typically must pay an initial installment up-front upon signing the purchase contract. During the construction period, we generally are required to make installment payments on newbuildings prior to their delivery, in addition to incurring financing, miscellaneous construction and project management costs, but we do not derive any income from the vessel until after its delivery. If we finance these payments by issuing debt or equity securities, we will increase the aggregate amount of interest or cash required to maintain our current level of quarterly distributions to unitholders prior to generating cash from the operation of the newbuilding.
Our substantial debt levels may limit our flexibility in obtaining additional financing, refinancing credit facilities upon maturity, pursuing other business opportunities and paying distributions.
As at December 31, 2018, our consolidated debt, obligations related to capital leases and advances from affiliates totaled $3.3 billion and we had the capacity to borrow an additional $175.6 million under our revolving credit facilities. These facilities may be used by us for general partnership purposes. If we obtain debt financing for existing newbuilding orders or we are awarded contracts for new LNG or LPG projects, our consolidated debt and obligations related to capital leases will increase, perhaps significantly. We will continue to have the ability to incur additional debt, subject to limitations in our credit facilities. Our level of debt could have important consequences to us, including the following:

our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be impaired, or such financing may not be available on favorable terms, if at all;
we will need a substantial portion of our cash flow to make principal and interest payments on our debt, reducing the funds that would otherwise be available for operations, future business opportunities and distributions to unitholders;
our debt level may make us more vulnerable than our competitors with less debt to competitive pressures or a downturn in our industry or the economy generally; and

11



our debt level may limit our flexibility in responding to changing business and economic conditions.

Our ability to service our debt and obligations related to capital leases depends upon, among other things, our future financial and operating performance, which is affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond our control. If our operating results are not sufficient to service our current or future indebtedness or obligations related to capital leases, we will be forced to take actions such as further reducing distributions, reducing, canceling or delaying our business activities, acquisitions, investments or capital expenditures, selling assets, seeking to restructure or refinance our debt, seeking additional debt or equity capital or seeking bankruptcy protection. We may not be able to effect any of these remedies on satisfactory terms, or at all.
Financing agreements containing operating and financial restrictions may restrict our business and financing activities.
The operating and financial restrictions and covenants in our financing arrangements and any future financing agreements could adversely affect our ability to finance future operations or capital needs or to pursue and expand or pursue our business activities. For example, these financing arrangements may restrict our ability to:

incur or guarantee indebtedness;
change ownership or structure, including mergers, consolidations, liquidations and dissolutions;
make dividends or distributions when in default of the relevant loans;
make certain negative pledges and grant certain liens;
sell, transfer, assign or convey assets;
make certain investments; and
enter into new lines of business.

Some of our financing arrangements require us to maintain a minimum level of tangible net worth, to maintain certain ratios of vessel values as it relates to the relevant outstanding principal balance, to maintain a minimum level of aggregate liquidity, to maintain leverage below a maximum level and require certain of our subsidiaries to maintain restricted cash deposits. Please read "Item 5 – Operating and Financial Review and Prospects: Credit Facilities." Our ability to comply with covenants and restrictions contained in debt instruments may be affected by events beyond our control, including prevailing economic, financial and industry conditions. If market or other economic conditions deteriorate, compliance with these covenants may be impaired. If restrictions, covenants, ratios or tests in the financing agreements are breached, a significant portion or all of the obligations may become immediately due and payable, and the lenders’ commitment to make further loans may terminate. This could lead to cross-defaults under other financing agreements and result in obligations becoming due and commitments being terminated under such agreements. A default under financing agreements could also result in foreclosure on any of our vessels and other assets securing related loans.

Furthermore, the termination of any of our charter contracts by our customers could result in the repayment of the debt facilities to which the chartered vessels relate.

Restrictions in our debt agreements may prevent us from paying distributions.

The payment of principal and interest on our debt and obligations related to capital leases reduces cash available for distribution on our units. In addition, our financing agreements prohibit the payment of distributions upon the occurrence of the following events, among others:

failure to pay any principal, interest, fees, expenses or other amounts when due;
failure to notify the lenders of any material oil spill or discharge of hazardous material, or of any action or claim related thereto;
breach or lapse of any insurance with respect to vessels securing the facility;
breach of certain financial covenants;
failure to observe any other agreement, security instrument, obligation or covenant beyond specified cure periods in certain cases;
default under other indebtedness;
bankruptcy or insolvency events;
failure of any representation or warranty to be materially correct;
a change of control, as defined in the applicable agreement; or
a material adverse effect, as defined in the applicable agreement.
We derive a substantial majority of our revenues from a limited number of customers, and the loss of any customer, charter or vessel, or any adjustment to our charter contracts could result in a significant loss of revenues and cash flow.

12



We have derived, and believe that we will continue to derive, a significant portion of our revenues and cash flow from a limited number of customers. Please read “Item 18 – Financial Statements: Note 4 – Segment Reporting.”

We could lose a customer or the benefits of a time-charter if:

the customer fails to make charter payments because of its financial inability, disagreements with us or otherwise;
we agree to reduce the charter payments due to us under a charter because of the customer’s inability to continue making the original payments;
the customer exercises certain rights to terminate the charter, purchase or cause the sale of the vessel or, under some of our charters, convert the time-charter to a bareboat charter (some of which rights are exercisable at any time);
the customer terminates the charter because we fail to deliver the vessel within a fixed period of time, the vessel is lost or damaged beyond repair, there are serious deficiencies in the vessel or prolonged periods of off-hire, or we default under the charter; or
under some of our time-charters, the customer terminates the charter because of the termination of the charterer’s sales agreement or a prolonged force majeure event affecting the customer, including damage to or destruction of relevant facilities, war or political unrest preventing us from performing services for that customer.

In June 2017, we reached an agreement with Awilco to defer a portion of charter hire and extend the two LNG carrier bareboat charter contracts that were originally due to expire in November 2017 and August 2018 to December 2019, which would also include related purchase obligations on both vessels due at that time. However, there is no assurance that Awilco will be able to generate enough operating cash flows or have the ability to raise enough equity to pay for the charter hire deferrals and associated purchase obligations for the two LNG carriers. Further, two of the six MALT LNG Carriers in the Teekay LNG-Marubeni Joint Venture, the Marib Spirit and Arwa Spirit, are currently under long-term charter contracts with YLNG. Due to the political unrest in Yemen, YLNG decided to temporarily close operation of its LNG plant in Yemen in 2015. As a result, commencing January 1, 2016, the Teekay LNG-Marubeni Joint Venture agreed to successive deferral arrangements with YLNG pursuant to which a portion of the charter payments were deferred. Concurrent with the anticipated expiry of the most current deferral arrangement, which is expected to occur within the first half of 2019, the Teekay LNG-Marubeni Joint Venture intends to enter into a further agreement with YLNG pursuant to which the Teekay-LNG Marubeni Joint Venture and YLNG will suspend the two charter contracts for a period of up to three years. Should the LNG plant in Yemen resume operations during such suspended term, it is intended that YLNG will be required to repay the deferred amounts plus interest over a period of installments. However, there is no assurance if or when the LNG plant will resume operations and, accordingly, if YLNG will be able to repay all or any portion of the deferred amounts.

If we lose a key LNG time-charter, we may be unable to redeploy the related vessel on terms as favorable to us due to the long-term nature of most LNG time-charters and the lack of an established LNG spot market. If we are unable to redeploy a LNG carrier, we will not receive any revenues from that vessel, but we may be required to pay expenses necessary to maintain the vessel in proper operating condition. In addition, if a customer exercises its right to purchase a vessel, we would not receive any further revenue from the vessel and may be unable to obtain a substitute vessel and charter. This may cause us to receive decreased revenue and cash flows from having fewer vessels operating in our fleet. Any compensation under our charters for a purchase of the vessels may not adequately compensate us for the loss of the vessel and related time-charter.

If we lose a key conventional tanker customer, we may be unable to obtain other long-term conventional charters and may become subject to the volatile spot market, which is highly competitive and subject to significant price fluctuations. If a customer exercises its right under some charters to purchase or force a sale of the vessel, we may be unable to acquire an adequate replacement vessel or may be forced to construct a new vessel. Any replacement newbuilding would not generate revenues during its construction and we may be unable to charter any replacement vessel on terms as favorable to us as those of the terminated charter.

The loss of certain of our customers, time-charters or vessels, or a decline in payments under our charters, could have a material adverse effect on our business, results of operations and financial condition and our ability to make cash distributions to unitholders.
We depend on Teekay Corporation and certain of our joint venture partners to assist us in operating our business and competing in our markets.
Pursuant to certain services agreements between us and certain of our operating subsidiaries, on the one hand, and certain direct and indirect subsidiaries of Teekay Corporation and certain of our joint venture partners, on the other hand, the Teekay Corporation subsidiaries and certain of our joint venture partners provide to us various services including, in the case of operating subsidiaries, substantially all of their managerial, operational and administrative services (including vessel maintenance, crewing for some of our vessels, purchasing, shipyard supervision, insurance and financial services) and other technical and advisory services, and in the case of Teekay LNG Partners L.P., various administrative services. Our operational success and ability to execute our growth strategy depend significantly upon Teekay Corporation’s and certain of our joint venture partners’ satisfactory performance of these services. Our business will be harmed if Teekay Corporation or certain of our joint venture partners fail to perform these services satisfactorily or if Teekay Corporation or certain of our joint venture partners stop providing these services to us.

Our ability to compete for the transportation requirements of certain LNG and LPG projects, enter into new charter contracts, secure financings and expand our customer relationships depends in part on our ability to leverage our relationships with Teekay Corporation, our joint venture partners and their respective reputation and relationships in the shipping industry. If Teekay Corporation or certain of our joint venture partners suffer material damage to their reputation or relationships it may harm our ability to:

13




renew existing charters upon their expiration;
obtain new charters;
successfully interact with shipyards during periods of shipyard construction constraints;
obtain financing on commercially acceptable terms; or
maintain satisfactory relationships with our employees and suppliers.

If our ability to do any of the things described above is impaired, it could have a material adverse effect on our business, results of operations and financial condition and our ability to make cash distributions to unitholders.

Our operating subsidiaries may also contract with certain subsidiaries of Teekay Corporation and certain of our joint venture partners to have newbuildings constructed on behalf of our operating subsidiaries and to incur the construction-related financing. Our operating subsidiaries would purchase the vessels on or after delivery based on an agreed-upon price. None of our operating subsidiaries currently has this type of arrangement with Teekay Corporation or any of its affiliates or any joint venture partners.
Significant declines in natural gas and oil prices may adversely affect our growth prospects and results of operations.
Although global crude oil and gas prices have experienced moderate recovery since the highs of mid-2014, prices have not returned to those same highs and remain volatile due to global and regional geopolitical, economic and strategic risks and changes. A further decline in oil prices may adversely affect our business, results of operations and financial condition and our ability to make cash distributions, as a result of, among other things:

a reduction in exploration for or development of new natural gas reserves or projects, or the delay or cancellation of existing projects as energy companies lower their capital expenditures budgets, which may reduce our growth opportunities;
a reduction in both the competitiveness of natural gas as a fuel for power generation and the market price of natural gas, to the extent that natural gas prices are benchmarked to the price of crude oil;
lower demand for vessels of the types we own and operate, which may reduce available charter rates and revenue to us upon redeployment of our vessels following expiration or termination of existing contracts or upon the initial chartering of vessels, or which may result in extended periods of our vessels being idle between contracts;
customers potentially seeking to renegotiate or terminate existing vessel contracts, or failing to extend or renew contracts upon expiration, or seeking to negotiate cancelable contracts;
the inability or refusal of customers to make charter payments to us or to our joint ventures, due to financial constraints or otherwise; or
declines in vessel values, which may result in losses to us upon vessel sales or impairment charges against our earnings.
Our growth depends on continued growth in demand for LNG and LPG shipping.
Our growth strategy focuses on expansion in the LNG and LPG shipping sectors. Accordingly, our growth depends on continued growth in world and regional demand for LNG and LPG and marine transportation of LNG and LPG, as well as the supply of LNG and LPG. Demand for LNG and LPG and for the marine transportation of LNG and LPG could be negatively affected by a number of factors, such as:

increases in the cost of natural gas derived from LNG relative to the cost of natural gas generally;
increase in the cost of LPG relative to the cost of naphtha and other competing petrochemicals;
increases in the production of natural gas in areas linked by pipelines to consuming areas, the extension of existing, or the development of new, pipeline systems in markets we may serve, or the conversion of existing non-natural gas pipelines to natural gas pipelines in those markets;
decreases in the consumption of natural gas due to increases in its price relative to other energy sources or other factors making consumption of natural gas less attractive;
additional sources of natural gas, including shale gas;
availability of alternative energy sources; and
negative global or regional economic or political conditions, particularly in LNG and LPG consuming regions, which could reduce energy consumption or its growth.

Reduced demand for LNG and LPG shipping would have a material adverse effect on our future growth and could harm our business, results of operations and financial condition.
Changes in the LPG markets could result in decreased demand for our LPG vessels operating in the spot market.

14



We have several LPG carriers that operate in the LPG spot market and are either owned by us or owned or chartered-in by Exmar LPG BVBA (or the Exmar LPG Joint Venture), a joint venture entity formed pursuant to a joint venture agreement made in February 2013 between us and Belgium-based Exmar to own and charter-in LPG carriers with a primary focus on the mid-size gas carrier segment. The charters in the spot market operate for short durations and are priced on a current, or “spot,” market rate. The LPG spot market is volatile and fluctuates based upon the many conditions and events that affect the price, production and transport of LPG, including competition from alternative energy sources and negative global or regional economic or political conditions. Any adverse changes in the LPG markets may impact our ability to enter into economically beneficial charters when our LPG carriers complete their existing short-term charters in the LPG spot market, which may reduce vessel earnings and impact our operating results.
Future adverse economic conditions, including disruptions in the global credit markets, could adversely affect our business, financial condition, and results of operations.
Economic downturns and financial crises in the global markets could produce illiquidity in the capital markets, market volatility, increased exposure to interest rate and credit risks and reduced access to capital markets. If global financial markets and economic conditions significantly deteriorate in the future, we may face restricted access to the capital markets or bank lending, which may make it more difficult and costly to fund future growth. Decreased access to such resources could have a material adverse effect on our business, financial condition and results of operations.
Future adverse economic conditions or other developments may affect our customers’ ability to charter our vessels and pay for our services and may adversely affect our business and results of operations.
Future adverse economic conditions or other developments relating directly to our customers may lead to a decline in our customers’ operations or ability to pay for our services, which could result in decreased demand for our vessels and services. Our customers’ inability to pay for any reason could also result in their default on our current contracts and charters. The decline in the amount of services requested by our customers or their default on our contracts with them could have a material adverse effect on our business, financial condition and results of operations.
Growth of the LNG market may be limited by infrastructure constraints and community environmental group resistance to new LNG infrastructure over concerns about the environment, safety and terrorism.
A complete LNG project includes production, liquefaction, regasification, storage and distribution facilities and LNG carriers. Existing LNG projects and infrastructure are limited, and new or expanded LNG projects are highly complex and capital-intensive, with new projects often costing several billion dollars. Many factors could negatively affect continued development of LNG infrastructure or disrupt the supply of LNG, including:

increases in interest rates or other events that may affect the availability of sufficient financing for LNG projects on commercially reasonable terms;
decreases in the price of LNG, which might decrease the expected returns relating to investments in LNG projects;
the inability of project owners or operators to obtain governmental approvals to construct or operate LNG facilities;
local community resistance to proposed or existing LNG facilities based on safety, environmental or security concerns;
any significant explosion, spill or similar incident involving an LNG facility or LNG carrier; and
labor or political unrest affecting existing or proposed areas of LNG production.

If the LNG supply chain is disrupted or does not continue to grow, or if a significant LNG explosion, spill or similar incident occurs, it could have a material adverse effect on our business, results of operations and financial condition and our ability to make cash distributions to unitholders.
Our growth depends on our ability to expand relationships with existing customers and obtain new customers, for which we will face substantial competition.
One of our principal objectives is to enter into additional long-term, fixed-rate LNG and LPG charters. The process of obtaining new long-term charters is highly competitive and generally involves an intensive screening process and competitive bids, and often extends for several months. Shipping contracts are awarded based upon a variety of factors relating to the vessel operator, including:

shipping industry relationships and reputation for customer service and safety;
shipping experience and quality of ship operations (including cost effectiveness);
quality and experience of seafaring crew;
the ability to finance carriers at competitive rates and financial stability generally;
relationships with shipyards and the ability to get suitable berths;
construction management experience, including the ability to obtain on-time delivery of new vessels according to customer specifications;

15



willingness to accept operational risks pursuant to the charter, such as allowing termination of the charter for force majeure events; and
competitiveness of the bid in terms of overall price.

We compete for providing marine transportation services for potential energy projects with a number of experienced companies, including state-sponsored entities and major energy companies affiliated with the energy project requiring energy shipping services. Many of these competitors have significantly greater financial resources than we do or Teekay Corporation does. We anticipate that an increasing number of marine transportation companies – including many with strong reputations and extensive resources and experience – will enter the energy transportation sector. This increased competition may cause greater price competition for time-charters. As a result of these factors, we may be unable to expand our relationships with existing customers or to obtain new customers on a profitable basis, if at all, which would have a material adverse effect on our business, results of operations and financial condition and our ability to make cash distributions to unitholders.
Delays in deliveries of newbuildings, or in conversions or upgrades of existing vessels, or construction of LNG receiving and regasification terminals could harm our operating results and lead to the termination of related contracts.
As at April 1, 2019, we had a total of four newbuilding vessels under construction and an LNG receiving and regasification terminal under construction. The delivery of newbuildings or vessel conversions or upgrades or construction of receiving and regasification terminals we may order or undertake or otherwise acquire, could be delayed, which would delay our receipt of revenues under the contracts for these assets. In addition, under some of our charters if delivery of a vessel to our customer is delayed, we may be required to pay liquidated damages in amounts equal to or, under some charters, almost double, the hire rate during the delay. For prolonged delays, the customer may terminate the time-charter and, in addition to the resulting loss of revenues, we may be responsible for additional, substantial liquidated damages.

Our receipt of newbuildings or of vessel conversions or upgrades, or completion of the construction of LNG receiving and regasification terminals could be delayed because of:

quality or engineering problems;
changes in governmental regulations or maritime self-regulatory organization standards;
work stoppages or other labor disturbances at the shipyard or construction site;
bankruptcy or other financial crisis of the builder;
a backlog of orders at the shipyard;
political or economic disturbances where our vessels or terminals are being or may be built;
weather interference or catastrophic event, such as a major earthquake or fire;
our requests for changes to the original vessel specifications;
shortages of or delays in the receipt of necessary construction materials, such as steel;
our inability to finance the purchase or construction of the vessels or terminals; or
our inability to obtain requisite permits or approvals.

If delivery of a vessel or the completion of an LNG receiving and regasification terminal is materially delayed, it could adversely affect our results or operations and financial condition and our ability to make cash distributions to unitholders.
We may be unable to charter or recharter vessels at attractive rates, which may lead to reduced revenues and profitability.
Our ability to charter or recharter our LNG and LPG carriers upon the expiration or termination of their current time charters and the charter rates payable under any renewal or replacement charters depend upon, among other things, the then current states of the LNG and LPG carrier markets. As of December 31, 2018, in our liquefied natural gas and liquified petroleum gas operating fleet, including the Magellan Spirit chartered-in from the Teekay LNG-Marubeni Joint Venture, we had zero and eight vessels, respectively, that were unchartered or trading in the spot market; we had four and 11 vessels, respectively, with charters scheduled to expire in 2019, excluding extension options; and two and five vessels, respectively, with charters scheduled to expire in 2020, excluding extension options. If charter rates are low when existing time charters expire, we may be required to recharter our vessels at reduced rates or even possibly at a rate whereby we incur a loss, which would harm our results of operations. Alternatively, we may determine to leave such vessels off-charter. The size of the current orderbooks for LNG carriers and LPG carriers is expected to result in the increase in the size of the world LNG and LPG fleets over the next few years. An over-supply of vessel capacity, combined with stability or any decline in the demand for LNG or LPG carriers, may result in a reduction of charter hire rates.
We may have more difficulty entering into long-term, fixed-rate LNG time-charters if the active short-term, medium-term or spot LNG shipping markets continue to develop.
LNG shipping historically has been transacted with long-term, fixed-rate time-charters, usually with terms ranging from 20 to 25 years. One of our principal strategies is to enter into additional long-term, fixed-rate LNG time-charters. In recent years, the amount of LNG traded on a

16



spot and short-term basis (defined as contracts with a duration of 4 years or less) has been increasing. In 2018, spot and short-term trades accounted for approximately 30% of global LNG trade.

If the active spot, short-term or medium-term markets continue to develop, we may have increased difficulty entering into long-term, fixed-rate time-charters for our LNG carriers and, as a result, our cash flow may decrease and be less stable. In addition, an active short-term, medium-term or spot LNG market may require us to enter into charters based on changing market prices, as opposed to contracts based on a fixed rate, which could result in a decrease in our cash flow in periods when the market price for shipping LNG is depressed.
Over time, the value of our vessels may decline, which could adversely affect our operating results.
Vessel values for LNG and LPG carriers and conventional tankers can fluctuate substantially over time due to a number of different factors, including:

prevailing economic conditions in natural gas, oil and energy markets;
a substantial or extended decline in demand for natural gas, LNG, LPG or oil;
competition from more technologically advanced vessels;
increases in the supply of vessel capacity; and
the cost of retrofitting or modifying existing vessels, as a result of technological advances in vessel design or equipment, changes in applicable environmental or other regulation or standards, or otherwise.

Vessel values may decline from existing levels. If the operation of a vessel is not profitable, or if we cannot redeploy a chartered vessel at attractive rates upon charter termination, rather than continue to incur costs to maintain and finance the vessel, we may seek to dispose of it. Our inability to dispose of the vessel at a fair market value or the disposal of the vessel at a fair market value that is lower than its book value could result in a loss on its sale and adversely affect our results of operations and financial condition. Further, if we determine at any time that a vessel’s future useful life and earnings require us to impair its value on our financial statements, we may need to recognize a significant charge against our earnings.
We have recognized vessel and goodwill write-downs in the past and we may recognize additional write-downs in the future, which will reduce our earnings and net assets.
If we determine at any time that a vessel’s value or goodwill has been impaired, we may need to recognize an impairment charge that will reduce our earnings and net assets. We review our vessels for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable, which occurs when an asset's carrying value is greater than the estimated undiscounted future cash flows the asset is expected to generate over its remaining useful life. We review our goodwill for impairment annually and if a reporting unit's goodwill carrying value is greater than the estimated fair value, the goodwill attributable to that reporting unit is impaired.

A reduction in our net assets could result in a breach of certain financial covenants contained in our credit agreements, which could limit our ability to borrow additional funds under our credit facilities or require us to repay outstanding amounts. This could harm our business, results of operations, financial condition, ability to raise capital or ability to pay distributions.

For the write-downs that occurred during 2018, please read "Item 5 – Operating and Financial Review and Prospects: Management's Discussion and Analysis of Financial Condition and Results of Operations – Year Ended December 31, 2018 versus Year Ended December 31, 2017", "Item 18 – Financial Statements: Note 8 – Intangible Assets and Goodwill" and "Note 19 – Write-Down and Loss on Sales of Vessels."
Increased technological innovation in vessel design or equipment could reduce our charter hire rates and the value of our vessels.
The charter hire rates and the value and operational life of a vessel are determined by a number of factors, including the vessel’s efficiency, operational flexibility and physical life. Efficiency includes speed, fuel economy and the ability for LNG or LPG to be loaded and unloaded quickly. More efficient vessel designs, engines or other features may increase overall vessel efficiency. Flexibility includes the ability to access LNG and LPG storage facilities, utilize related docking facilities and pass through canals and straits. Physical life is related to the original design and construction, maintenance and the impact of the stress of operations. If new LNG or LPG carriers are built that are more efficient or flexible or have longer physical lives than our vessels, competition from these more technologically advanced LNG or LPG carriers could reduce recharter rates available to our vessels and the resale value of the vessels. As a result, our business, results of operations and financial condition could be harmed.
Actual results of new technologies or technologies upgrades may differ from expected results and affect our results of operations.
We have invested and are investing in technology upgrades such as MEGI twin engines and other equipment and designs for certain LNG carrier newbuildings, including, among other things, to improve fuel efficiency and vessel performance. These new engine designs and other equipment may not perform to expectations, which may result in performance issues or claims based on failure to achieve specification included in charter party agreements. Actual fuel consumption for our MEGI LNG carriers exceeds specified levels in certain charter party agreements, which may result in reimbursement by us to the charterer for the cost of the excess fuel consumed. The amount of the reimbursements generally will increase to the extent fuel prices increase, including as a result of the IMO 2020 regulations that will take effect

17



January 1, 2020 and limit Sulphur content in vessel fuel oils. We are considering installing additional equipment to lower fuel consumption on these vessels and taking action against the shipbuilders for failure to deliver vessels that meet anticipated levels of fuel efficiency. Continued reimbursement obligations or unrecovered capital expenditures could harm our results of operations or financial condition.
We or our joint venture partners may be unable to deliver or operate an LNG receiving and regasification terminal.
We have contracted the construction of an LNG regasification and receiving terminal in Bahrain in which we will have a 30% ownership interest (please read “Item 18 – Financial Statements: Note 7a(i) – Equity-Accounted Investments”). We or our joint venture partners may be unable to operate a LNG receiving and regasification terminal properly, which could reduce the expected output of this terminal. As a result, our business, results of operations and financial condition could be harmed.
Climate change and greenhouse gas restrictions may adversely impact our operations and markets.
Due to concern over the risk of climate change, a number of countries have adopted, or are considering the adoption of, regulatory frameworks to reduce greenhouse gas emissions. These regulatory measures include, among others, adoption of cap and trade regimes, carbon taxes, increased efficiency standards, and incentives or mandates for renewable energy. Compliance with changes in laws, regulations and obligations relating to climate change could increase our costs related to operating and maintaining our vessels and require us to install new emission controls, acquire allowances or pay taxes related to our greenhouse gas emissions, or administer and manage a greenhouse gas emissions program. Revenue generation and strategic growth opportunities may also be adversely affected.
Adverse effects upon the oil and gas industry relating to climate change may also adversely affect demand for our services. Although we do not expect that demand for oil and gas will lessen dramatically over the short term, in the long term, climate change may reduce the demand for oil and gas or increased regulation of greenhouse gases may create greater incentives for use of alternative energy sources. Any long-term material adverse effect on the oil and gas industry could have a significant financial and operational adverse impact on our business that we cannot predict with certainty at this time.
We may be unable to make or realize expected benefits from acquisitions, and implementing our growth strategy through acquisitions may harm our business, financial condition and operating results.
Our growth strategy includes acquiring existing LNG and LPG carriers or LNG and LPG shipping businesses as the opportunities arise. Historically, there have been very few purchases of existing vessels and businesses in the LNG and LPG shipping industries. Factors that may contribute to a limited number of acquisition opportunities in the LNG and LPG shipping industries in the near term include the relatively small number of independent LNG and LPG fleet owners and the limited number of LNG and LPG carriers not subject to existing long-term charter contracts. In addition, competition from other companies could reduce our acquisition opportunities or cause us to pay higher prices.

Any acquisition of a vessel or business may not be profitable to us at or after the time we acquire it and may not generate cash flow sufficient to justify our investment. In addition, our acquisition growth strategy exposes us to risks that may harm our business, financial condition and operating results, including risks that we may:

fail to realize anticipated benefits, such as new customer relationships, cost-savings or cash flow enhancements;
be unable to hire, train or retain qualified shore and seafaring personnel to manage and operate our growing business and fleet;
decrease our liquidity by using a significant portion of our available cash or borrowing capacity to finance acquisitions;
significantly increase our interest expense or financial leverage if we incur additional debt to finance acquisitions;
incur or assume unanticipated liabilities, losses or costs associated with the business or vessels acquired; or
incur other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges.

Unlike newbuildings, existing vessels typically do not carry warranties as to their condition. While we generally inspect existing vessels prior to purchase, such an inspection would normally not provide us with as much knowledge of a vessel’s condition as we would possess if it had been built for us and operated by us during its life. Repairs and maintenance costs for existing vessels are difficult to predict and may be substantially higher than for vessels we have operated since they were built. These costs could decrease our cash flow and reduce our liquidity.
Marine transportation is inherently risky, and an incident involving significant loss of or environmental contamination by any of our vessels could harm our reputation and business.
Our vessels, crew and cargoes are at risk of being damaged, injured or lost because of events such as:

marine disasters;
bad weather or natural disasters;
mechanical failures;
grounding, fire, explosions and collisions;

18



piracy (hijacking and kidnapping);
cyber attack;
human error; and
war and terrorism.

An accident involving any of our vessels could result in any of the following:

death or injury to persons, loss of property or environmental damage;
delays in the delivery of cargo;
loss of revenues from or termination of charter contracts;
governmental fines, penalties or restrictions on conducting business;
higher insurance rates; and
damage to our reputation and customer relationships generally.
Any of these results could have a material adverse effect on our business, financial condition and operating results. In addition, any damage to, or environmental contamination involving, oil production facilities serviced by our vessels could result in the suspension or curtailment of operations by our customer, which would in turn result in loss of revenues.
Our insurance may be insufficient to cover losses that may occur to our property or result from our operations.
The operation of LNG and LPG carriers and oil tankers is inherently risky. Although we carry hull and machinery (marine and war risks) and protection and indemnity insurance, all risks may not be adequately insured against, and any particular claim may not be paid. In addition, only certain of our LNG and LPG carriers carry insurance covering the loss of revenues resulting from vessel off-hire time based on its cost compared to our off-hire experience. Any significant off-hire time of our vessels could harm our business, operating results and financial condition. Any claims covered by insurance would be subject to deductibles, and since it is possible that a large number of claims may be brought, the aggregate amount of these deductibles could be material. Certain of our insurance coverage is maintained through mutual protection and indemnity associations, and as a member of such associations we may be required to make additional payments over and above budgeted premiums if member claims exceed association reserves.

We may be unable to procure adequate insurance coverage at commercially reasonable rates in the future. For example, more stringent environmental regulations have led in the past to increased costs for, and in the future may result in the lack of availability of, insurance against risks of environmental damage or pollution. A catastrophic oil spill, marine disaster or natural disasters could result in losses that exceed our insurance coverage, which could harm our business, financial condition and operating results. Any uninsured or underinsured loss could harm our business and financial condition. In addition, our insurance may be voidable by the insurers as a result of certain of our actions, such as our ships failing to maintain certification with applicable maritime regulatory organizations.

Changes in the insurance markets attributable to terrorist attacks or political change may also make certain types of insurance more difficult for us to obtain. In addition, the insurance that may be available may be significantly more expensive than our existing coverage.
Our and many of our customers’ substantial operations outside the United States expose us and them to political, governmental and economic instability, which could harm our operations.
Because our operations, and the operations of certain of our customers, are primarily conducted outside of the United States, they may be affected by economic, political and governmental conditions in the countries where we and they engage in business. Any disruption caused by these factors could harm our business or the business of these customers, including by reducing the levels of oil and gas exploration, development and production activities in these areas. We derive some of our revenues from shipping oil, LNG and LPG from politically and economically unstable regions, such as Angola and Yemen. Hostilities, strikes, or other political or economic instability in regions where we or these customers operate or where we or they may operate could have a material adverse effect on the growth of our business, results of operations and financial condition and ability to make cash distributions, or on the ability of these customers to make payments or otherwise perform their obligations to us. In addition, tariffs, trade embargoes and other economic sanctions by the United States or other countries against countries in which we operate or to which we trade may harm our business and ability to make cash distributions and a government could requisition one or more of our vessels, which is most likely during war or national emergency. Any such requisition would cause a loss of the vessel and could harm our cash flow and financial results. Please see above relating to our two vessels chartered out to YLNG “Item 3 Risk Factors: We derive a substantial majority of our revenues from a limited number of customers, and the loss of any customer, charter or vessel, or any adjustment to our charter contracts could result in a significant loss of revenues and cash flow.”
Terrorist attacks, increased hostilities, political change or war could lead to further economic instability, increased costs and disruption of our business.
Terrorist attacks, the current conflicts in the Middle East, South East Asia, West Africa (Nigeria), Libya and elsewhere, and political change, may adversely affect our business, operating results, financial condition, ability to raise capital and future growth. Continuing hostilities in the

19



Middle East, especially among Qatar, Saudi Arabia, UAE, Yemen and elsewhere may lead to additional armed conflicts or to further acts of terrorism and civil disturbance in the United States, or elsewhere, which may contribute to economic instability and disruption of LNG, LPG and oil production and distribution, which could result in reduced demand for our services or impact on our operations and or our ability to conduct business.

In addition, LNG, LPG and oil facilities, shipyards, vessels, pipelines and oil and gas fields could be targets of future terrorist attacks and warlike operations and our vessels could be targets of hijackers, terrorists or warlike operations. Any such attacks could lead to, among other things, bodily injury or loss of life, vessel or other property damage, increased vessel operational costs, including insurance costs, and the inability to transport LNG, LPG and oil to or from certain locations. Terrorist attacks, war, hijacking or other events beyond our control that adversely affect the distribution, production or transportation of LNG, LPG or oil to be shipped by us could entitle our customers to terminate our charter contracts, which would harm our cash flow and our business.

Terrorist attacks, or the perception that LNG or LPG facilities and carriers are potential terrorist targets, could materially and adversely affect expansion of LNG and LPG infrastructure and the continued supply and export of LNG and LPG involving the United States and other countries. Concern that LNG or LPG facilities may be targeted for attack by terrorists, as well as environmental concerns, has contributed to significant community resistance to the construction of a number of LNG or LPG facilities, primarily in North America. If a terrorist incident involving a LNG or LPG facility or LNG or LPG carrier did occur, in addition to the possible effects identified in the previous paragraph, the incident may adversely affect construction of additional LNG or LPG facilities in the United States and other countries or lead to the temporary or permanent closing of various LNG or LPG facilities currently in operation.
Acts of piracy on ocean-going vessels continue to be a risk, which could adversely affect our business.
Acts of piracy have historically affected ocean-going vessels trading in regions of the world such as the South China Sea, Gulf of Guinea and the Indian Ocean off the coast of Somalia. While there continues to be a significant risk of piracy in the Gulf of Aden and Indian Ocean, recently there have been increases in the frequency and severity of piracy incidents off the coast of West Africa and a resurgent piracy risk in the Straits of Malacca, Sulu and Celebes Sea and surrounding waters. If these piracy attacks result in regions in which our vessels are deployed being named on the Joint War Committee Listed Areas, war risk insurance premiums payable for such coverage may increase significantly and such insurance coverage may be more difficult to obtain. In addition, crew costs, including costs which may be incurred to the extent we employ on-board armed security guards and escort vessels, could increase in such circumstances. We may not be adequately insured to cover losses from these incidents, which could have a material adverse effect on us. In addition, hijacking as a result of an act of piracy against our vessels, or an increase in cost or unavailability of insurance for our vessels, could have a material adverse impact on our business, financial condition and results of operations.
A cyber-attack could materially disrupt our business
We rely on information technology systems and networks in our operations and the administration of our business. Cyber-attacks have increased in number and sophistication in recent years. Our operations could be targeted by individuals or groups seeking to sabotage or disrupt our information technology systems and networks, or to steal data. A successful cyber-attack could materially disrupt our operations, including the safety of our operations, or lead to unauthorized release of information or alteration of information on our systems. Any such attack or other breach of our information technology systems could have a material adverse effect on our business and results of operations.
Our failure to comply with data privacy laws could damage our customer relationships and expose us to litigation risks and potential fines.
Data privacy is subject to frequently changing rules and regulations, which sometimes conflict among the various jurisdictions and countries in which we provide services and continue to develop in ways which we cannot predict, including with respect to evolving technologies such as cloud computing. The European Union has adopted the General Data Privacy Regulation (or GDPR), a comprehensive legal framework to govern data collection, use and sharing and related consumer privacy rights which took effect in May 2018. The GDPR includes significant penalties for non-compliance. Our failure to adhere to or successfully implement processes in response to changing regulatory requirements in this area could result in legal liability or impairment to our reputation in the marketplace, which could have a material adverse effect on our business, financial condition and results of operations.
The ARC7 LNG carrier newbuildings for the Yamal LNG Project are customized vessels and our financial condition, results of operations and ability to make distributions on our units could be substantially affected if the Yamal LNG Project is abandoned.
On July 9, 2014, the Yamal LNG Joint Venture ordered six internationally-flagged icebreaker LNG carriers for a project located on the Yamal Peninsula in Northern Russia (or the Yamal LNG Project), two of which newbuilding carriers delivered in 2018. The Yamal LNG Project is a joint venture between Russia-based Novatek OAO (or Novatek) (50.1%), France-based Total S.A. (20%), China-based China National Petroleum Corporation (20%) and Silk Road Fund (9.9%).

The four remaining ARC7 LNG carrier newbuildings ordered by the Yamal LNG Joint Venture, which are scheduled for delivery during the remainder of 2019, are being specifically built for the Arctic requirements of the Yamal LNG Project and will have limited redeployment opportunities to operate as conventional trading LNG carriers if the project is abandoned or cancelled. If the project is abandoned or cancelled after commencement of operations, the Yamal LNG Joint Venture may be unable to reach an agreement with the shipyard allowing for the termination of the shipbuilding contracts (since no such optional termination right exists under these contracts), change the vessel specifications

20



to reflect those applicable to more conventional LNG carriers and which do not incorporate ice-breaking capabilities, or find suitable alternative employment for the newbuilding vessels on a long-term basis with other LNG projects or otherwise.

The Yamal LNG Project may be abandoned for various reasons, including, among others:

failure to achieve expected operating results;
changes in demand for LNG;
adverse changes in Russian regulations or governmental policy relating to the project or the export of LNG;
technical challenges of completing and operating the complex project, particularly in extreme Arctic conditions;
labor disputes; or
environmental regulations or potential claims.

If the project is abandoned, proceeds if any, received from limited Yamal LNG project sponsor guarantees and potential alternative employment, if any, of the vessels and from potential sales of components and scrapping of the vessels likely would fall substantially short of the cost of the vessels to the Yamal LNG Joint Venture. Any such shortfall could have a material adverse effect on our financial condition, results of operations and ability to make cash distributions to unitholders.
Sanctions against key participants in the Yamal LNG Project could impede completion or performance of the Yamal LNG Project, which could have a material adverse effect on us.
The U.S. Treasury Department’s Office of Foreign Assets Control (or OFAC) placed Russia-based Novatek, a 50.1% owner of the Yamal LNG Project, on the Sectoral Sanctions Identifications List. OFAC also previously imposed sanctions on an investor in Novatek and these sanctions also remain in effect. The current restrictions on Novatek prohibit U.S. persons (and their subsidiaries) from participating in debt financing transactions of greater than 60 days maturity with Novatek and, by virtue of Novatek’s 50.1% ownership interest, the Yamal LNG Project. The European Union also imposed certain sanctions on Russia. These sanctions require a European Union license or authorization before a party can provide certain technologies or technical assistance, financing, financial assistance, or brokering with regard to these technologies. However, the technologies being currently sanctioned by the EU appear to focus on oil exploration projects, not gas projects. In addition, OFAC and other governments or organizations may impose additional sanctions on Novatek, the Yamal LNG Project or other project participants, which may further hinder the ability of the Yamal LNG Project to receive necessary financing. Although we believe that we are in compliance with all applicable sanctions, laws and regulations, and intend to maintain such compliance, the scope of these sanctions laws may be subject to change. Future sanctions may prohibit the Yamal LNG Joint Venture from performing under its contracts with the Yamal LNG Project, which could have a material adverse effect on our financial condition, results of operations and ability to make cash distributions on our units.
Failure of the Yamal LNG Project to achieve expected results could lead to a default under the time-charter contracts by the charter party.
The charter party under the Yamal LNG Joint Venture’s time-charter contracts for the Yamal LNG Project is Yamal Trade Pte. Ltd., a wholly-owned subsidiary of Yamal LNG, the project’s sponsor. If the Yamal LNG Project does not achieve expected results, the risk of charter party default may increase. Any such default could adversely affect our results of operations and ability to make cash distributions on our units. If the charter party defaults on the time-charter contracts, we may be unable to redeploy the vessels under other time-charter contracts or may be forced to scrap the vessels.

We assume credit risk by entering into agreements with unrated entities.
Some of our vessels are chartered to unrated entities and some of these unrated entities will use revenue generated from the sale of the shipped gas to pay their shipping and other operating expenses, including the charter fees. The price of the gas may be subject to market fluctuations and the LNG supply may be curtailed by start-up delays and stoppages. If the revenue generated by the charterer is insufficient to pay the charter fees, we may be unable to realize the expected economic benefit from these charter agreements. In addition, some of our financing related to certain of our LNG carrier newbuildings are with unrated entities. Any inability of these entities to meet their obligations under the financing arrangements, could have an adverse effect on our liquidity and potentially delay the deliveries of certain of our LNG carrier newbuildings.

The marine energy transportation industry is subject to substantial environmental and other regulations, which may significantly limit our operations or increase our expenses.
Our operations are affected by extensive and changing international, national and local environmental protection laws, regulations, treaties and conventions in force in international waters, the jurisdictional waters of the countries in which our vessels operate, as well as the countries of our vessels’ registration, including those governing oil spills, discharges to air and water, and the handling and disposal of hazardous substances and wastes. Many of these requirements are designed to reduce the risk of oil spills and other pollution. In addition, we believe that the heightened environmental, quality and security concerns of insurance underwriters, regulators and charterers will lead to additional regulatory requirements, including enhanced risk assessment and security requirements and greater inspection and safety requirements on

21



vessels. We expect to incur substantial expenses in complying with these laws and regulations, including expenses for vessel modifications and changes in operating procedures.

These requirements can affect the resale value or useful lives of our vessels, require a reduction in cargo capacity, ship modifications or operational changes or restrictions, lead to decreased availability of insurance coverage for environmental matters or result in the denial of access to certain jurisdictional waters or ports, or detention in certain ports. Under local, national and foreign laws, as well as international treaties and conventions, we could incur material liabilities, including cleanup obligations, in the event that there is a release of petroleum or other hazardous substances from our vessels or otherwise in connection with our operations. We could also become subject to personal injury or property damage claims relating to the release of or exposure to hazardous materials associated with our operations. In addition, failure to comply with applicable laws and regulations may result in administrative and civil penalties, criminal sanctions or the suspension or termination of our operations, including, in certain instances, seizure or detention of our vessels. For further information about regulations affecting our business and related requirements on us, please read “Item 4 – Information on the Partnership: B. Operations - Regulations.”

Exposure to currency exchange rate fluctuations will result in fluctuations in our cash flows and operating results.
We are paid in Euros under some of our charters, and certain of our vessel operating expenses and general and administrative expenses currently are denominated in Euros, which is primarily a function of the nationality of our crew and administrative staff. We also make payments under two Euro-denominated term loans. If the amount of our Euro-denominated obligations exceeds our Euro-denominated revenues, we must convert other currencies, primarily the U.S. Dollar, into Euros. An increase in the strength of the Euro relative to the U.S. Dollar would require us to convert more U.S. Dollars to Euros to satisfy those obligations, which would cause us to have less cash available for distribution to unitholders. In addition, if we do not have sufficient U.S. Dollars, we may be required to convert Euros into U.S. Dollars for distributions to unitholders. An increase in the strength of the U.S. Dollar relative to the Euro could cause us to have less cash available for distribution in this circumstance. We have not entered into currency swaps or forward contracts or similar derivatives to mitigate this risk.

Because we report our operating results in U.S. Dollars, changes in the value of the U.S. Dollar relative to the Euro and Norwegian Kroner also result in fluctuations in our reported revenues and earnings. In addition, under U.S. accounting guidelines, all foreign currency-denominated monetary assets and liabilities such as cash and cash equivalents, accounts receivable, restricted cash, accounts payable, accrued liabilities, advances from affiliates and long-term debt, are revalued and reported based on the prevailing exchange rate at the end of the period. This revaluation historically has caused us to report significant unrealized foreign currency exchange gains or losses each period. The primary source for these gains and losses is our Euro-denominated term loans and our Norwegian Kroner-denominated (or NOK) bonds.
Exposure to interest rate fluctuations will result in fluctuations in our cash flows and operating results.
We are exposed to the impact of interest rate changes primarily through our borrowings that require us to make interest payments based on LIBOR, EURIBOR or NIBOR. Significant increases in interest rates could adversely affect our operating margins, results of operations and our ability to service our debt. In addition, there is uncertainty as to the continued use of LIBOR in the future. LIBOR is the subject of recent national, international and other regulatory guidance and proposals for reform. These reforms and other pressures may cause LIBOR to be eliminated or to perform differently than in the past. The consequences of these developments cannot be entirely predicted but could include an increase in the cost of our variable rate indebtedness and obligations. In accordance with our risk management policy, we use interest rate swaps to reduce our exposure to market risk from changes in interest rates. The principal objective of these contracts is to minimize the risks and costs associated with our floating-rate debt.

In addition, we are exposed to credit loss in the event of non-performance by the counterparties to the interest rate swap agreements. For further information about our financial instruments at December 31, 2018, that are sensitive to changes in interest rates, please read "Item 11 – Quantitative and Qualitative Disclosures About Market Risk."
Many of our seafaring employees are covered by collective bargaining agreements and the failure to renew those agreements or any future labor agreements may disrupt our operations and adversely affect our cash flows.
A significant portion of our seafarers, and the seafarers employed by Teekay Corporation and its other affiliates that crew some of our vessels, are employed under collective bargaining agreements. While some of our labor agreements have recently been renewed, crew compensation levels under future collective bargaining agreements may exceed existing compensation levels, which would adversely affect our results of operations and cash flows. We may be subject to labor disruptions in the future if our relationships deteriorate with our seafarers or the unions that represent them. Our collective bargaining agreements may not prevent labor disruptions, particularly when the agreements are being renegotiated. Any labor disruptions could harm our operations and could have a material adverse effect on our business, results of operations and financial condition and our ability to make cash distributions to unitholders.
Teekay Corporation and certain of our joint venture partners may be unable to attract and retain qualified, skilled employees or crew necessary to operate our business, or may have to pay substantially increased costs for its employees and crew.
Our success depends in large part on Teekay Corporation’s and certain of our joint venture partners’ ability to attract and retain highly skilled and qualified personnel. In crewing our vessels, we require technically skilled employees with specialized training who can perform physically demanding work. The ability to attract and retain qualified crew members under a competitive industry environment continues to put upward pressure on crew manning costs.


22



If we are not able to increase our charter rates to compensate for any crew cost increases, our financial condition and results of operations may be adversely affected. Any inability we experience in the future to hire, train and retain a sufficient number of qualified employees could impair our ability to manage, maintain and grow our business.
Due to our lack of diversification, adverse developments in our LNG or LPG marine transportation businesses could reduce our ability to make distributions to our unitholders.
We rely exclusively on the cash flow generated from our LNG and LPG carriers that operate in the LNG or LPG transportation businesses. Due to our lack of diversification, an adverse development in the LNG or LPG shipping industry would have a significantly greater impact on our financial condition and results of operations than if we maintained more diverse assets or lines of business.
Teekay Corporation and its affiliates may engage in competition with us.
Teekay Corporation and its affiliates and joint ventures, including its equity-accounted investee, Teekay Offshore Partners L.P. (or Teekay Offshore), may engage in competition with us. Pursuant to an omnibus agreement between Teekay Corporation, Teekay Offshore, us and other related parties, Teekay Corporation, Teekay Offshore and their respective controlled affiliates (other than us and our subsidiaries) generally have agreed not to own, operate or charter LNG carriers without the consent of our General Partner. The omnibus agreement, however, allows Teekay Corporation, Teekay Offshore or any of such controlled affiliates to:
 
acquire LNG carriers and related time-charters as part of a business if a majority of the value of the total assets or business acquired is not attributable to the LNG carriers and time-charters, as determined in good faith by the Board of Directors of Teekay Corporation or the Board of Directors of Teekay Offshore’s general partner; however, if at any time Teekay Corporation or Teekay Offshore completes such an acquisition, it must offer to sell the LNG carriers and related time-charters to us for their fair market value plus any additional tax or other similar costs to Teekay Corporation or Teekay Offshore that would be required to transfer the LNG carriers and time-charters to us separately from the acquired business; or
own, operate and charter LNG carriers that relate to a bid or award for an LNG project that Teekay Corporation or any of its subsidiaries submits or receives; however, at least 180 days prior to the scheduled delivery date of any such LNG carrier, Teekay Corporation must offer to sell the LNG carrier and related time-charter to us, with the vessel valued at its “fully-built-up cost,” which represents the aggregate expenditures incurred (or to be incurred prior to delivery to us) by Teekay Corporation to acquire or construct and bring such LNG carrier to the condition and location necessary for our intended use, plus a reasonable allocation of overhead costs related to the development of such a project and other projects that would have been subject to the offer rights set forth in the omnibus agreement but were not completed.

If we decline the offer to purchase the LNG carriers and time-charters described above, Teekay Corporation or Teekay Offshore may own and operate the LNG carriers, but may not expand that portion of its business.

In addition, pursuant to the omnibus agreement, Teekay Corporation, Teekay Offshore or any of their respective controlled affiliates (other than us and our subsidiaries) may:

acquire, operate or charter LNG carriers if our General Partner has previously advised Teekay Corporation or Teekay Offshore that the Board of Directors of our General Partner has elected, with the approval of its conflicts committee, not to cause us or our subsidiaries to acquire or operate the carriers;
acquire up to a 9.9% equity ownership, voting or profit participation interest in any publicly traded company that owns or operates LNG carriers; and
provide ship management services relating to LNG carriers.

During 2018, there was a change in control of Teekay Offshore, which gives Teekay Offshore the right to elect to terminate the omnibus agreement. Termination of the omnibus agreement could have an adverse effect on our business, results of operations and financial condition and our ability to make cash distributions to unitholders. We have not received any indication from Teekay Offshore that it intends to terminate the omnibus agreement.
Our General Partner and its other affiliates own a controlling interest in us and have conflicts of interest and limited fiduciary duties, which may permit them to favor their own interests to those of unitholders.
Teekay Corporation, which owns and controls our General Partner, indirectly owns our 2% general partner interest and as at December 31, 2018 owned 31.8% of our common units. The directors and officers of our General Partner have a fiduciary duty to manage our General Partner in a manner beneficial to Teekay Corporation. Furthermore, certain directors and officers of our General Partner are directors or officers of affiliates of our General Partner. Conflicts of interest may arise between Teekay Corporation and its affiliates, including our General Partner, on the one hand, and us and our unitholders, on the other hand. As a result of these conflicts, our General Partner may favor its own interests and the interests of its affiliates over the interests of our unitholders. These conflicts include, among others, the following situations:

neither our partnership agreement nor any other agreement requires our General Partner or Teekay Corporation to pursue a business strategy that favors us or utilizes our assets, and Teekay Corporation’s officers and directors have a fiduciary duty to make decisions in the best interests of the shareholders of Teekay Corporation, which may be contrary to our interests;

23



executive officers of Teekay Gas Group Ltd., our recently formed subsidiary, and three of the directors of our General Partner also currently serve as officers or directors of Teekay Corporation;
our General Partner is allowed to take into account the interests of parties other than us, such as Teekay Corporation, in resolving conflicts of interest, which has the effect of limiting its fiduciary duty to our unitholders;
our General Partner has limited its liability and restricted its fiduciary duties under the laws of the Republic of the Marshall Islands, while also restricting the remedies available to our unitholders, and as a result of purchasing units, unitholders are treated as having agreed to the modified standard of fiduciary duties and to certain actions that may be taken by our General Partner, all as set forth in our partnership agreement;
our General Partner determines the amount and timing of our asset purchases and sales, capital expenditures, borrowings, issuances of additional partnership securities and reserves, each of which can affect the amount of cash that is available for distribution to our unitholders;
in some instances, our General Partner may cause us to borrow funds in order to permit the payment of cash distributions, even if the purpose or effect of the borrowing is to make incentive distributions to affiliates to Teekay Corporation;
our General Partner determines which costs incurred by it and its affiliates are reimbursable by us;
our partnership agreement does not restrict our General Partner from causing us to pay it or its affiliates for any services rendered to us on terms that are fair and reasonable or entering into additional contractual arrangements with any of these entities on our behalf;
our General Partner controls the enforcement of obligations owed to us by it and its affiliates; and
our General Partner decides whether to retain separate counsel, accountants or others to perform services for us.
The fiduciary duties of the officers and directors of our General Partner may conflict with those of the officers and directors of Teekay Corporation.
Our General Partner has limited fiduciary duties to manage our business in a manner beneficial to us and our partners. Our General Partner has a Corporate Secretary but does not have a Chief Executive Officer or a Chief Financial Officer. The Corporate Secretary and the non-independent director of our General Partner also serve as officers or directors of Teekay Corporation and/or other affiliates of Teekay Corporation. Consequently, these officers and directors may encounter situations in which their fiduciary obligations to Teekay Corporation or its other affiliates, on one hand, and us, on the other hand, are in conflict. The resolution of these conflicts may not always be in the best interest of us or our unitholders.
Because we are organized under the laws of the Marshall Islands, it may be difficult to serve us with legal process or enforce judgments against us, our directors or our management.
We are organized under the laws of the Marshall Islands, and all of our assets are located outside of the United States. In addition, certain of our General Partner's directors and officers are non-residents of the United States, and all or a substantial portion of the assets of these non-residents are located outside the United States. As a result, it may be difficult or impossible to bring an action against us or against these individuals in the United States. Even if successful in bringing an action of this kind, the laws of the Marshall Islands and of other jurisdictions may prevent or restrict the enforcement of a judgment against our assets or the assets of our general partner or its directors and officers.
As a Marshall Islands entity with our headquarters in Bermuda, and with a majority of our subsidiaries being Marshall Islands entities and also having subsidiaries in other offshore jurisdictions, our operations may be subject to economic substance requirements of the European Union, which could harm our business.
Finance ministers of the EU rate jurisdictions for tax transparency, governance, real economic activity and corporate tax rate. Countries that do not adequately cooperate with the finance ministers are put on a “grey list” or a “blacklist”. Various countries, including the Republic of the Marshall Islands and Bermuda, are currently on the blacklist.

EU member states have agreed upon a set of measures, which they can choose to apply against the listed countries, including increased monitoring and audits, withholding taxes, special documentation requirements and anti-abuse provisions. The European Commission has stated it will continue to support member states' efforts to develop a more coordinated approach to sanctions for the listed countries in 2019. EU legislation prohibits EU funds from being channelled or transited through entities in countries on the blacklist.

We are a Marshall Islands limited partnership with our headquarters in Bermuda. A majority of our subsidiaries are Marshall Islands entities and many of our subsidiaries are either organized or registered in Bermuda. It is difficult to determine how the EU blacklisting of these jurisdictions will affect our business. These jurisdictions have enacted or may enact economic substance laws and regulations with which we may be obligated to comply. We understand that recently-adopted Bermudian legislation requires each Bermudian-registered entity to maintain a substantial economic presence in Bermuda and provides that a registered entity that carries on a relevant activity may comply with the economic substance requirements if (i) it is directed and managed in Bermuda, (ii) its core income-generating activities are undertaken in Bermuda with respect to the relevant activity, (iii) it maintains adequate physical presence in Bermuda, (iv) it has adequate full-time employees in Bermuda with suitable qualifications and (v) it incurs adequate operating expenditures in Bermuda in relation to the relevant activity. We do not know what actions the Marshall Islands may take, if any, to remove itself from the list; whether the EU will remove the Marshall Islands or Bermuda from the list; how quickly the EU would react to any changes in legislation of the Marshall Islands, Bermuda or other applicable

24



jurisdictions; or how EU banks or other counterparties will react while we or any of our subsidiaries remain as entities organized and existing or registered under the laws of blacklisted countries. The effect of the EU blacklist, and any noncompliance by us with any legislation adopted by applicable countries to achieve removal from the list, could have a material adverse effect on our business, financial condition and operating results.
Our joint venture arrangements impose obligations upon us but limit our control of the joint ventures, which may affect our ability to achieve our joint venture objectives.
For financial or strategic reasons, we conduct a portion of our business through joint ventures. Generally, we are obligated to provide proportionate financial support for the joint ventures although our control of the business entity may be substantially limited. Due to this limited control, we generally have less flexibility to pursue our own objectives through joint ventures or to access available cash of the joint ventures than we would with our own subsidiaries. There is no assurance that our joint venture partners will continue their relationships with us in the future or that we will be able to achieve our financial or strategic objectives relating to the joint ventures and the markets in which they operate. In addition, our joint venture partners may have business objectives that are inconsistent with ours, experience financial and other difficulties that may affect the success of the joint venture or be unable or unwilling to fulfill their obligations under the joint ventures, which may affect our financial condition or results of operations.
Tax Risks
In addition to the following risk factors, you should read “Item 10 – Additional Information: Taxation” for a more complete discussion of the expected material U.S. federal and non-U.S. income tax considerations relating to us and the ownership and disposition of our units.
U.S. tax authorities could treat us as a “passive foreign investment company,” which could have adverse U.S. federal income tax consequences to U.S. holders.
A non-U.S. entity treated as a corporation for U.S. federal income tax purposes will be treated as a “passive foreign investment company” (or PFIC), for such purposes in any taxable year for which either (a) at least 75% of its gross income consists of “passive income,” or (b) at least 50% of the average value of the entity’s assets is attributable to assets that produce or are held for the production of “passive income.” For purposes of these tests, “passive income” includes dividends, interest, gains from the sale or exchange of investment property and rents and royalties (other than rents and royalties that are received from unrelated parties in connection with the active conduct of a trade or business). By contrast, income derived from the performance of services does not constitute “passive income.”

There are legal uncertainties involved in determining whether the income derived from our time-chartering activities constitutes rental income or income derived from the performance of services, including the decision in Tidewater Inc. v. United States, 565 F.3d 299 (5th Cir. 2009), which held that income derived from certain time-chartering activities should be treated as rental income rather than services income for purposes of a foreign sales corporation provision of the Internal Revenue Code of 1986, as amended (or the Code). However, the Internal Revenue Service (or IRS) stated in an Action on Decision (AOD 2010-01) that it disagrees with, and will not acquiesce to, the way that the rental versus services framework was applied to the facts in the Tidewater decision, and in its discussion stated that the time charters at issue in Tidewater would be treated as producing services income for PFIC purposes. The IRS’s statement with respect to Tidewater cannot be relied upon or otherwise cited as precedent by taxpayers. Consequently, in the absence of any binding legal authority specifically relating to the statutory provisions governing PFICs, there can be no assurance that the IRS or a court would not follow the Tidewater decision in interpreting the PFIC provisions of the Code. Nevertheless, based on our and our subsidiaries’ current assets and operations, we intend to take the position that we are not now and have never been a PFIC. No assurance can be given, however, that this position would be sustained by a court if contested by the IRS, or that we would not constitute a PFIC for any future taxable year if there were to be changes in our assets, income or operations.

If the IRS were to determine that we are or have been a PFIC for any taxable year during which a U.S. Holder (as defined below under "Item 10 Additional Information: Material U.S. Federal Income Tax Considerations") held units, such U.S. Holder would face adverse tax consequences. For a more comprehensive discussion regarding the tax consequences to U.S. Holders if we are treated as a PFIC, please read "Item 10 Additional Information: Material U.S. Federal Income Tax Considerations United States Federal Income Taxation of U.S. Holders Consequences of Possible PFIC Classification."
We are subject to taxes, which reduces our cash available for distribution to partners.
We or our subsidiaries are subject to tax in certain jurisdictions in which we or our subsidiaries are organized, own assets or have operations, which reduces the amount of our cash available for distribution. In computing our tax obligations in these jurisdictions, we are required to take various tax accounting and reporting positions on matters that are not entirely free from doubt and for which we have not received rulings from the governing authorities. We cannot assure you that upon review of these positions, the applicable authorities will agree with our positions. A successful challenge by a tax authority could result in additional tax imposed on us or our subsidiaries, further reducing the cash available for distribution. We have established reserves in our financial statements that we believe are adequate to cover our liability for any such additional taxes. We cannot assure you, however, that such reserves will be sufficient to cover any additional tax liability that may be imposed on our subsidiaries. In addition, changes in our operations or ownership could result in additional tax being imposed on us or on our subsidiaries in jurisdictions in which operations are conducted. For example, Teekay Corporation indirectly owns less than 50% of the value of our outstanding units but has voting control of us and therefore we believe that we do not satisfy the requirements of the exemption from U.S. taxation under Section 883 of the Code and our U.S. source income is subject to taxation under Section 887 of the Code. The amount

25



of such tax will depend upon the amount of income we earn from voyages into or out of the United States, which is not within our complete control.
Unitholders may be subject to income tax in one or more non-U.S. countries, including Canada, as a result of owning our units if, under the laws of any such country, we are considered to be carrying on business there. Such laws may require unitholders to file a tax return with, and pay taxes to, those countries.
Unitholders may be subject to tax in one or more countries, including Canada, as a result of owning our units if, under the laws of any such country, we are considered to be carrying on business there. If unitholders are subject to tax in any such country, unitholders may be required to file a tax return with, and pay taxes to, that country based on their allocable share of our income. We may be required to reduce distributions to unitholders on account of any withholding obligations imposed upon us by that country in respect of such allocation to unitholders. The United States may not allow a tax credit for any foreign income taxes that unitholders directly or indirectly incur.

Item 4.Information on the Partnership
A.
Overview, History and Development
Overview and History
Teekay LNG Partners L.P. is an international provider of marine transportation services for LNG, LPG and crude oil. We were formed in 2004 by Teekay Corporation (NYSE: TK), a portfolio manager of marine services to the global oil and natural gas industries, to expand its operations in the LNG shipping sector. Our primary strategy focuses on servicing our customers through our fleet of LNG and LPG carriers under medium to long-term, fixed-rate charters. In executing our strategy, we may engage in vessel or business acquisitions or enter into joint ventures and partnerships with companies that provide increased access to emerging opportunities from global expansion of the LNG and LPG sectors. We seek to leverage the expertise, relationships and reputation of Teekay Corporation and its affiliates to pursue these opportunities in the LNG and LPG sectors and may consider other opportunities to which our competitive strengths are well suited, including entering into the LNG receiving and regasification terminal business.

Please see “Item 5 – Operating and Financial Review and Prospects: Management’s Discussion and Analysis of Financial Condition and Results of Operations – Significant Developments in 2018 and Early 2019.”

As of December 31, 2018, our fleet, excluding newbuildings, consisted of 43 LNG carriers (including the six MALT LNG Carriers, four RasGas 3 LNG Carriers, four Angola LNG Carriers, three Pan Union LNG Carriers, one Exmar LNG Carrier and two ARC7 LNG carriers (or the Yamal LNG Carriers) that are all accounted for under the equity method), 29 LPG and multi-gas carriers (including the 22 Exmar LPG Carriers that are accounted for under the equity method), one Suezmax-class crude oil tanker, and one Handymax product tanker, all of which are double-hulled. Our fleet is relatively young and has an average age of approximately eight years for our LNG carriers, approximately eight years for our LPG and multi-gas carriers and approximately 12 years for our conventional tankers (Suezmax and Handymax), compared to world averages of 10, 15 and 10 years, respectively, as of December 31, 2018. As at December 31, 2018, we had six LNG carrier newbuildings scheduled for delivery in 2019, and one LNG receiving and regasification terminal under construction scheduled for completion in 2019.

Our fleets of LNG and LPG carriers (excluding newbuildings but including equity-accounted vessels) currently have approximately 7.2 million and 0.9 million cubic meters of total capacity, respectively. The aggregate capacity of our conventional tanker fleet is approximately 0.2 million deadweight tonnes (or dwt).

We were formed under the laws of the Republic of The Marshall Islands as a limited partnership, Teekay LNG Partners L.P., on November 3, 2004, and maintain our principal executive offices at 4th Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton, HM 08, Bermuda. Our telephone number at such address is (441) 298-2530.
B.
Operations
Our Fleet and Our Charters
We generate revenues by charging customers for the transportation of their LNG, LPG and crude oil using our vessels. The majority of these services are provided through either a time-charter or bareboat charter contract, where vessels are chartered to customers for a fixed period of time at rates that are generally fixed but may contain a variable component based on inflation, interest rates or current market rates.

Our vessels and our regasification terminal under construction in Bahrain primarily operate under fixed-rate contracts with major energy and utility companies. As of December 31, 2018, the average remaining term for these contracts, including assets under construction, was approximately 10 years for our LNG carriers and regasification terminal, approximately two years for our LPG carriers and approximately half a year for our conventional tanker (Handymax), subject, in certain circumstances, to termination or vessel purchase rights.

“Hire” rate refers to the basic payment from the customer for the use of a vessel. Hire is payable monthly, in advance, in U.S. Dollars or Euros, as specified in the charter. The hire rate generally includes two components – a capital cost component and an operating expense component. The capital cost component typically approximates the amount we are required to pay under vessel financing obligations and, for two of our conventional tankers, adjusts for changes in the floating interest rates relating to the underlying vessel financing. The operating expense

26



component, which adjusts annually for inflation, is intended to compensate us for vessel operating expenses. In addition, we may receive additional revenues beyond the fixed hire rate when current market rates exceed specified amounts under our time-charter contracts for two of our Suezmax tankers.

Hire payments may be reduced or, under some charters, we must pay liquidated damages, if the vessel does not perform to certain of its specifications, such as if the average vessel speed falls below a guaranteed speed or the amount of fuel consumed to power the vessel under normal circumstances exceeds a guaranteed amount.

When a vessel is “off-hire” – or not available for service – the customer generally is not required to pay the hire rate and we are responsible for all costs. Prolonged off-hire may lead to vessel substitution or termination of the time-charter. A vessel will typically be deemed to be off-hire if it is in dry dock unless our contract specifies drydocking is not considered off-hire. We must periodically dry dock each of our vessels for inspection, repairs and maintenance and any modifications to comply with industry certification or governmental requirements. In addition, a vessel generally will be deemed off-hire if there is a loss of time due to, among other things: operational deficiencies; equipment breakdowns; delays due to accidents, crewing strikes, certain vessel detentions or similar problems; or our failure to maintain the vessel in compliance with its specifications and contractual standards or to provide the required crew.
Liquefied Natural Gas Segment
LNG Carriers
The LNG carriers in our liquefied natural gas segment compete in the LNG market. LNG carriers are usually chartered to carry LNG pursuant to time-charter contracts, where a vessel is hired for a fixed period of time and the charter rate is payable to the owner on a monthly basis. LNG shipping historically has been transacted with long-term, fixed-rate time-charter contracts. LNG projects require significant capital expenditures and typically involve an integrated chain of dedicated facilities and cooperative activities. Accordingly, the overall success of an LNG project depends heavily on long-range planning and coordination of project activities, including marine transportation. Most shipping requirements for new LNG projects continue to be provided on a long-term basis, though the levels of spot voyages (typically consisting of a single voyage), short-term time-charters and medium-term time-charters have grown in the past few years. The amount of LNG traded on a spot and short-term basis (defined as contracts with a duration of 4 years or less) has increased from approximately 10% of total LNG supply in 2010 to approximately 30% in 2018.

In the LNG market, we compete principally with other private and state-controlled energy and utilities companies that generally operate captive fleets, and independent ship owners and operators. Many major energy companies compete directly with independent owners by transporting LNG for third parties in addition to their own LNG. Given the complex, long-term nature of LNG projects, major energy companies historically have transported LNG through their captive fleets. However, independent fleet operators have been obtaining an increasing percentage of charters for new or expanded LNG projects as some major energy companies have continued to divest non-core businesses.

LNG carriers transport LNG internationally between liquefaction facilities and import terminals. After natural gas is transported by pipeline from production fields to a liquefaction facility, it is supercooled to a temperature of approximately negative 260 degrees Fahrenheit. This process reduces its volume to approximately 1/600th of its volume in a gaseous state. The reduced volume facilitates economical storage and transportation by ship over long distances, enabling countries with limited natural gas reserves or limited access to long-distance transmission pipelines to import natural gas. LNG carriers include a sophisticated containment system that holds the LNG and provides insulation to reduce the amount of LNG that boils off naturally. The natural boil off is either used as fuel to power the engines on the ship or it can be reliquefied and put back into the tanks. LNG is transported overseas in specially built tanks in double-hulled ships to a receiving terminal, where it is offloaded and stored in insulated tanks. In regasification facilities at the receiving terminal, the LNG is returned to its gaseous state (or regasified) and then shipped by pipeline for distribution to natural gas customers.

With the exception of the Arctic Spirit and Polar Spirit, which are the only two ships in the world that utilize the Ishikawajima Harima Heavy Industries Self Supporting Prismatic Tank IMO Type B (or IHI SPB) independent tank technology, our fleet uses two of the Gaz Transport and Technigaz (or GTT) membrane containment systems. The GTT membrane systems are used in the majority of LNG tankers now being constructed. New LNG carriers generally have an expected lifespan of approximately 35 to 40 years. Unlike the oil tanker industry, there are currently no regulations that require the phase-out from trading of LNG carriers after they reach a certain age. As at December 31, 2018, our LNG carriers, excluding newbuilding vessels but including equity-accounted vessels, had an average age of approximately eight years, compared to the world LNG carrier fleet average age of approximately 10 years. In addition, as at that date, there were approximately 555 vessels in the world LNG fleet and approximately 136 additional LNG carriers under construction or on order for delivery through 2022.

The following table provides additional information about the LNG carriers in our operating fleet as of December 31, 2018.
 
Vessel
 
Capacity
 
Delivery
 
Our 
Ownership
 
 Contract Type
 
Charterer
 
Expiration of
Charter(1)
 
 
(cubic meters)
 
 
 
 
 
 
 
 
 
 
Operating LNG carriers:
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 

27



Hispania Spirit
 
137,814

 
2002
 
100%
 
Time-charter
 
Shell Spain LNG S.A.U.
 
Sep. 2022(2)
Catalunya Spirit
 
135,423

 
2003
 
100%
 
Time-charter
 
Gas Natural SDG
 
Aug. 2023(2)
Galicia Spirit
 
137,814

 
2004
 
100%
 
Time-charter
 
Uniòn Fenosa Gas
 
Jul. 2029(3)
Madrid Spirit
 
135,423

 
2004
 
100%
 
Time-charter
 
Shell Spain LNG S.A.U.
 
Dec. 2024(2)
Al Marrouna
 
149,539

 
2006
 
70%
 
Time-charter
 
Ras Laffan Liquefied
Natural Gas Company Ltd.
 
Oct. 2026(4)
Al Areesh
 
148,786

 
2007
 
70%
 
Time-charter
 
Ras Laffan Liquefied
Natural Gas Company Ltd.
 
Jan. 2027(4)
Al Daayen
 
148,853

 
2007
 
70%
 
Time-charter
 
Ras Laffan Liquefied
Natural Gas Company Ltd.
 
Feb. 2027(4)
Tangguh Hiri
 
151,885

 
2008
 
69%
 
Time-charter
 
The Tangguh Production
Sharing Contractors
 
Jan. 2029
Tangguh Sago
 
155,000

 
2009
 
69%
 
Time-charter
 
The Tangguh Production
Sharing Contractors
 
May 2029
Arctic Spirit
 
87,305

 
1993
 
99%
 
Time-charter
 
Petrobras LNG Ltd.
 
May 2022
Polar Spirit
 
87,305

 
1993
 
99%
 
Time-charter
 
Petrobras LNG Ltd.
 
Apr. 2019
Wilforce
 
155,900

 
2013
 
99%
 
Bareboat
 
Awilco LNG ASA
 
Dec. 2019(5)
Wilpride
 
155,900

 
2013
 
99%
 
Bareboat
 
Awilco LNG ASA
 
Dec. 2019(5)
Creole Spirit
 
173,000

 
2016
 
100% –
Capital lease(6)
 
Time-charter
 
Cheniere Marketing, LLC
 
Feb. 2021
Oak Spirit
 
173,000

 
2016
 
100% –
Capital lease(6)
 
Time-charter
 
Cheniere Marketing, LLC 
 
Aug. 2021
Torben Spirit
 
173,400

 
2017
 
100% –
Capital lease(6)
 
Time-charter
 
Gas Natural SDG
 
Dec. 2021
Magellan Spirit
 
165,700

 
2009
 
100% –
 Chartered-in(13)
 
Time-charter
 
Trafigure Maritime Logistics Pte Ltd.
 
Mar. 2019
Macoma
 
173,000

 
2017
 
99% –
Capital lease(6)
 
Time-charter
 
Shell Tankers (Singapore) Private Ltd.
 
Oct. 2023(8)
Murex
 
173,000

 
2017
 
99% –
Capital lease(6)
 
Time-charter
 
Shell Tankers (Singapore) Private Ltd.
 
Oct. 2024(8)
Magdala
 
173,000

 
2018
 
99% –
Capital lease
(6)
 
Time-charter
 
Shell Tankers (Singapore) Private Ltd.
 
Jan. 2026(8)
Myrina
 
173,000

 
2018
 
99% –
Capital lease
(6)
 
Time-charter
 
Shell Tankers (Singapore) Private Ltd.
 
May 2024(8)
Megara
 
173,000

 
2018
 
99% –
Capital lease
(6)
 
Time-charter
 
Shell Tankers (Singapore) Private Ltd.
 
Jul. 2026(8)
Bahrain Spirit
 
173,000

 
2018
 
100%
 
Time-charter
 
Bahrain LNG W.L.L.
 
Jul. 2039
Sean Spirit
 
174,000

 
2018
 
100%
 
Time-charter
 
BP Gas Marketing Limited
 
Dec. 2025(15)
Equity-Accounted
 
 
 
 
 
 
 
 
 
 
 
 
Al Huwaila
 
214,176

 
2008
 
40%
 
Time-charter
 
Ras Laffan Liquefied
Natural Gas Company Ltd.
 
May 2033(2)
Al Kharsaah
 
214,198

 
2008
 
40%
 
Time-charter
 
Ras Laffan Liquefied
Natural Gas Company Ltd.
 
Jun. 2033(2)
Al Shamal
 
213,536

 
2008
 
40%
 
Time-charter
 
Ras Laffan Liquefied
Natural Gas Company Ltd.
 
May 2033(2)

28



Al Khuwair
 
213,101

 
2008
 
40%
 
Time-charter
 
Ras Laffan Liquefied
Natural Gas Company Ltd.
 
Jul. 2033(2)
Excalibur
 
138,034

 
2002
 
49%
 
Time-charter
 
Excelerate Energy LP
 
Mar. 2022
Soyo
 
160,400

 
2011
 
33%
 
Time-charter
 
Angola LNG Supply Services LLC
 
Aug. 2031(2)
Malanje
 
160,400

 
2011
 
33%
 
Time-charter
 
Angola LNG Supply Services LLC
 
Sep. 2031(2)
Lobito
 
160,400

 
2011
 
33%
 
Time-charter
 
Angola LNG Supply Services LLC
 
Oct. 2031(2)
Cubal
 
160,400

 
2012
 
33%
 
Time-charter
 
Angola LNG Supply Services LLC
 
Jan. 2032(2)
Meridian Spirit
 
165,700

 
2010
 
52%
 
Time-charter
 
Total E&P Norge AS Mansel Limited
 
Nov. 2030(9)
Magellan Spirit
 
165,700

 
2009
 
52%
 
Time-charter
 
Teekay LNG Partners L.P.(13)
 
Sep. 2020
Marib Spirit
 
165,500

 
2008
 
52%
 
Time-charter
 
Yemen LNG Company Limited(10)
 
Mar. 2029(9)
Arwa Spirit
 
165,500

 
2008
 
52%
 
Time-charter
 
Yemen LNG Company Limited(10)
 
Apr. 2029(9)
Methane Spirit
 
165,500

 
2008
 
52%
 
Time-charter
 
Osaka Gas
 
Jul. 2020(14)
Woodside Donaldson
 
165,500

 
2009
 
52%
 
Time-charter
 
Pluto LNG Party Limited
 
Jun. 2026(11)
Pan Asia
 
174,000

 
2017
 
30%
 
Time-charter
 
Methane Services Limited
 
Oct. 2037(12)
Pan Americas
 
174,000

 
2018
 
30%
 
Time-charter
 
Methane Services Limited
 
Jan. 2038(12)
Pan Europe
 
174,000

 
2018
 
20%
 
Time-charter
 
Methane Services Limited
 
Jul. 2038(12)
Eduard Toll
 
172,600

 
2018
 
50%
 
Time-charter
 
Yamal Trade PTE Ltd.
 
Dec. 2045(2)
Rudolf Samoylovich
 
172,600

 
2018
 
50%
 
Time-charter
 
Yamal Trade PTE Ltd.
 
Dec. 2045(2)
 
 
7,179,292

 
 
 
 
 
 
 
 
 
 
(1)
Each of our time-charters are subject to certain termination and purchase provisions.
(2)
The charterer has two options to extend the term for an additional five years each.
(3)
The charterer has one option to extend the term for an additional five years.
(4)
The charterer has three options to extend the term for an additional five years each.
(5)
The charterer has an option to extend or decrease the term for 60 days and to purchase the vessel on any purchase option date. If no purchase option has been exercised by the charterer during the charter period, the charterer has an obligation to purchase each vessel at a fixed price at the end of the charter period.
(6)
We are the lessee for these obligations related to capital leases and will be required to purchase the vessel after the end of the lease terms for a fixed price.
(7)
The charterer has four options to extend the term for an additional 180 days, 180 days, one year and one year, respectively.
(8)
The charterer has four options to extend the term for an additional three years each.
(9)
The charterer has three options to extend the term for one, five and five additional years, respectively.
(10)
Please see "Item 5 Operating and Financial Review and Prospects: Management's Discussion and Analysis of Financial Condition and Results of Operations Significant Developments in 2018 and early 2019: Charter Contracts for MALT LNG Carriers" relating to the status of this charter contract.
(11)
The charterer has four options to extend the term for an additional five years each.
(12)
The charterer has five options to extend the term for an additional two years each.
(13)
The Magellan Spirit is chartered-in from the Teekay LNG-Marubeni Joint Venture, until September 2020.
(14)
The charterer has one option to extend the term for an additional one year.
(15)
The charterer has the right to terminate the charter contract after seven years.

The following table provides information about our LNG carrier newbuildings as of December 31, 2018. Charters for these vessels typically commence upon delivery of the vessels.


29



Vessel
 
Capacity
 
Scheduled Delivery Date
 
Shipyard
 
Our Ownership
 
Charterer
 
Length of Charter
 
 
 
(cubic meters)
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
 
Yamal Spirit
 
174,000

 
Jan. 2019(1)
 
HHI Sambo(2)
 
100%
 
Yamal Trade PTE. Ltd.
 
15 years
 
Equity-Accounted
 
 
 
 
 
 
 
 
 
 
 
 
 
Pan Africa
 
174,000

 
Jan. 2019(1)
 
Hudong(3)
 
20%
 
Methane Services Limited
 
20 years(5)
 
Nikolay Yevgenov
 
172,600

 
Jun. 2019
 
DSME(4)
 
50%
 
Yamal Trade PTE Ltd.
 
26 years(6)
 
Vladimir Voronin
 
172,600

 
Aug. 2019
 
DSME(4)
 
50%
 
Yamal Trade PTE Ltd.
 
26 years(6)
 
Georgiy Ushakov
 
172,600

 
Oct. 2019
 
DSME(4)
 
50%
 
Yamal Trade PTE Ltd.
 
26 years(6)
 
Yakov Gakkel
 
172,600

 
Nov. 2019
 
DSME(4)
 
50%
 
Yamal Trade PTE Ltd.
 
26 years(6)
 
 
 
1,038,400

 
 
 
 
 
 
 
 
 
 
 

(1)
The Yamal Spirit and the Pan Africa delivered in January 2019.
(2)
Hyundai Samho Heavy Industries Co.
(3)
Hudong-Zhongua Shipbuilding (Group) Co. Ltd.
(4)
Daewoo Shipbuilding & Marine Engineering Co. Ltd.
(5)
The charterer has five options to extend the term for an additional two years each.
(6)
The charterer has two options to extend the term for an additional five years each.

The following table presents the percentage of our consolidated voyage revenues from LNG customers that accounted for more than 10% of our consolidated voyage revenues during 2018, 2017 and 2016.

 
 
Year Ended December 31,
 
 
2018
 
2017
 
2016
Royal Dutch Shell Plc(1)
 
23
%
 
12%
 
12%
Ras Laffan Liquefied Natural Gas Company Ltd.
 
14
%
 
16%
 
18%
Cheniere Marketing International LLP
 
12
%
 
14%
 
Less than 10%
The Tangguh Production Sharing Contractors
 
Less than 10%

 
11%
 
11%
(1)
Includes its subsidiaries Shell Spain LNG S.A.U. and Shell Tankers (Singapore) Private Ltd.

No other LNG customer accounted for 10% or more of our consolidated voyage revenues during any of these periods. The loss of any significant customer or a substantial decline in the amount of services requested by a significant customer could harm our business, financial condition and results of operations.
Other Assets
We have a 30% ownership interest in an LNG receiving and regasification terminal under construction in Bahrain. The construction of this terminal is expected to be completed in mid-2019 and will be operated under a 20-year agreement with National Oil & Gas Authority (or Nogaholding).

Liquefied Petroleum Gas Segment
LPG and Multi-gas Carriers
LPG shipping involves the transportation of three main categories of cargo: liquid petroleum gases, including propane, butane and ethane; petrochemical gases, including ethylene, propylene and butadiene; and ammonia.

In the LPG market, we compete principally with independent ship owners and operators, and other private and state-controlled energy and chemical companies that generally operate captive fleets.

As of December 31, 2018, our LPG and multi-gas carriers (including equity-accounted vessels) had an average age of approximately eight years, compared to the world LPG carrier fleet average age of approximately 15 years. As of that date, the worldwide LPG tanker fleet consisted of approximately 1,451 vessels and approximately 74 additional LPG vessels were on order for delivery through 2022. LPG carriers range in

30



size from approximately 100 to approximately 88,000 cubic meters. Approximately 47% of the vessels in the worldwide fleet are less than 5,000 cubic meters in size. New LPG carriers generally have an expected lifespan of approximately 30 to 35 years.

LPG carriers are mainly chartered to carry LPG on time-charters, contracts of affreightment or spot voyage charters. The two largest consumers of LPG are residential users and the petrochemical industry. Residential users, particularly in developing regions where electricity and gas pipelines are not developed, do not have fuel switching alternatives and generally are not LPG price sensitive. The petrochemical industry, however, has the ability to switch between LPG and other feedstock fuels depending on price and availability of alternatives.

The following table provides information about our LPG and multi-gas carriers in our operating fleet as of December 31, 2018.
Vessel
 
Capacity
 
Delivery
 
Our Ownership
 
Contract Type
 
Charterer
 
Expiration of
Charter
 
 
(cubic meters)
 
 
 
 
 
 
 
 
 
 
Operating LPG carriers:
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
Pan Spirit
 
10,000

 
2009
 
99%
 
Spot
 
Spot market
 
Cathinka Spirit
 
10,000

 
2009
 
99%
 
Spot
 
Spot market
 
Camilla Spirit
 
10,000

 
2011
 
99%
 
Spot
 
Spot market
 
Unikum Spirit
 
12,000

 
2011
 
99%
 
Spot
 
Spot market
 
Vision Spirit
 
12,000

 
2011
 
99%
 
Spot
 
Spot market
 
Napa Spirit
 
10,200

 
2003
 
99%
 
Spot
 
Spot market
 
Sonoma Spirit
 
8,000

 
2003
 
99%
 
Spot
 
Spot market
 
Equity-Accounted
 
 
 
 
 
 
 
 
 
 
 
 
Temse
 
12,030

 
1995
 
50% –
Capital lease
 
Time-charter
 
An international fertilizer company
 
Jan. 2020
Libramont
 
38,455

 
2006
 
50%
 
Time-charter
 
An international fertilizer company
 
May 2026
Sombeke
 
38,447

 
2006
 
50%
 
Time-charter
 
An international fertilizer company
 
Jun. 2027
Touraine
 
39,270

 
1996
 
50%
 
Time-charter
 
An international energy company
 
Nov. 2019(2)
Bastogne
 
35,229

 
2002
 
50%
 
Time-charter