Höegh LNG Partners LP Reports Financial Results for the Quarter Ended September 30, 2022
Höegh LNG Partners LP (NYSE: HMLP-PA) reported a Q3 2022 net income of $16.6 million, down from $17.4 million in Q3 2021. Operating income also declined to $18.2 million from $27.1 million a year earlier, impacted by increased operating and administrative expenses. Total time charter revenues rose to $36.9 million, compared to $35.6 million in Q3 2021. The Partnership's equity in earnings from joint ventures decreased significantly, reflecting maintenance costs for the Neptune. Höegh LNG acquired all common units of the Partnership, resulting in delisting from NYSE. Cash distribution of $0.546875 per Series A preferred unit was paid on November 15, 2022.
- Total time charter revenues increased to $36.9 million from $35.6 million year-over-year.
- Cash distribution of $0.546875 per Series A preferred unit paid on November 15, 2022.
- Operating income decreased from $27.1 million to $18.2 million year-over-year.
- Net income dropped from $17.4 million to $16.6 million, reflecting reduced operational performance.
- Equity in earnings from joint ventures fell significantly to $2.5 million compared to $6.1 million in Q3 2021.
- Total operating expenses rose from $14.5 million to $21.2 million, highlighting increased costs.
HAMILTON, Bermuda, Nov. 17, 2022 /PRNewswire/ -- Höegh LNG Partners LP (NYSE: HMLP-PA) (the "Partnership") today reported its financial results for the quarter ended September 30, 2022.
Highlights
- Reported for the third quarter of 2022 total time charter revenues of
$36.9 million (Q3 2021:$35.6 million ). - Generated for the third quarter of 2022 operating income of
$18.2 million (Q3 2021:$27.1 million ), net income of$16.6 million (Q3 2021:$17.4 million ) and limited partners' interest in net income of$12.7 million (Q3 2021:$13.5 million ). - Reported equity in earnings of joint ventures for the third quarter of 2022 of
$2.5 million (Q3 2021:$6.1 million ) which includes two50% owned FSRUs, the Neptune and the Cape Ann. During the third quarter of 2022, the Neptune completed a class renewal which impacted the equity in earnings due to certain expenses incurred which were not reimbursed by the charterer and due to the yard stay exceeding the contractual allowance which resulted in reduced charter hire for the off-hire period. - On September 23, 2022 (the "Effective Time"), Höegh LNG Holdings Ltd. ("Höegh LNG") completed its acquisition of the Partnership's publicly held common units pursuant to the Agreement and Plan of Merger dated as of May 25, 2022 (the "Merger Agreement"). Under the Merger Agreement Höegh LNG acquired, for cash, all of the outstanding publicly held common units of the Partnership, at a price of
$9.25 per common unit for a total purchase price of approximately$167.6 million . Pursuant to the Merger Agreement, the Partnership's incentive distribution rights were cancelled. - Following the Effective Time, Höegh LNG owns
100% of the common units in the Partnership, and the common units have been delisted from the New York Stock Exchange ("NYSE"). The Partnership's Series A cumulative redeemable preferred units ("Series A preferred units") remain outstanding. - On November 15, 2022, paid a cash distribution of
$0.54 6875 per8.75% Series A preferred unit, for the period commencing on August 16, 2022 to November 14, 2022.
Financial Results Overview
The Partnership has mitigated the risk of an outbreak of COVID‑19 on board its vessels by extending time between crew rotations on the vessels and developing mitigating actions for crew rotations. The Partnership has fulfilled its obligations under its time charter contracts, and except for 22 days of off-hire incurred for the planned maintenance and class renewal for the Neptune, did not experience any off-hire for its FSRUs for the three months ended September 30, 2022.
Total time charter revenues for the three months ended September 30, 2022 were
Total operating expenses for the three months ended September 30, 2022 were
Equity in earnings of joint ventures for the three months ended September 30, 2022 was
Excluding the unrealized gains on derivative instruments for the three months ended September 30, 2022 and 2021, the equity in earnings of joint ventures for the three months ended September 30, 2022 would have been
The Partnership's share of its joint ventures' operating income for the three months ended September 30, 2022 was
Segment EBITDA1 for the three months ended September 30, 2022 was
Operating income for the three months ended September 30, 2022 was
Excluding the impact of the unrealized gains on derivatives impacting the equity in earnings of joint ventures, operating income for the three months ended September 30, 2022 would have been
Total financial expense, net for the three months ended September 30, 2022 was
Interest expense consists of the interest incurred, amortization and gain (loss) on cash flow hedges, commitment fees and amortization of debt issuance costs for the period. The decrease of
The Partnership reported net income is
Net income was impacted by unrealized gains on derivative instruments for the third quarter of 2021, mainly included in the Partnership's share of equity in earnings of joint ventures.
Excluding all of the unrealized gains on derivative instruments, net income for the three months ended September 30, 2022 would have been
Preferred unitholders' interest in net income for the three months ended September 30, 2022 and 2021 was
Excluding all of the unrealized gains on derivative instruments, limited partners' interest in net income for the three months ended September 30, 2022 would have been
_____________________________ | |
1 | Segment EBITDA is a non-GAAP financial measure used by investors to measure financial and operating performance. Please see Appendix A for a reconciliation of Segment EBITDA to net income, the most directly comparable GAAP financial measure. |
Segment Information
The Partnership has two operating segments. The segment profit measure is Segment EBITDA, which is defined as earnings before interest, taxes, depreciation, amortization, impairment, and other financial items (gain (loss) on debt extinguishment, gain (loss) on derivative instruments and other items, net). The two segments are "Majority held FSRUs" and "Joint venture FSRUs." In addition, unallocated corporate costs, interest income from advances to joint ventures, and interest expense related to the outstanding balances on the
Segment EBITDA for Majority held FSRUs for the three months ended September 30, 2022 was
Segment EBITDA for the Joint venture FSRUs for the three months ended September 30, 2022 was
Other, Segment EBITDA consists of administrative expenses. Administrative expenses for the three months ended September 30, 2022 were
Financing and Liquidity
As of September 30, 2022, the Partnership had cash and cash equivalents of
As of September 30, 2022, the Partnership has no material commitments for capital expenditures.
During the third quarter of 2022, the Partnership made quarterly repayments of
The Partnership's book value and outstanding principal of total long-term debt were
As of September 30, 2022, the Partnership's total current liabilities exceeded total current assets by
The current liabilities are expected to be funded, for the most part, by future cash flows from operations. The Partnership does not intend to maintain a cash balance to fund the next twelve months' net liabilities. The Partnership believes its cash flows from operations, including distributions to it from Höegh LNG Cyprus Limited, and Höegh LNG FSRU IV Ltd as payment of intercompany interest and/or intercompany debt or dividends and payments under the Suspension and Make-Whole Agreements (as defined below), will be sufficient to meet its debt amortization and working capital needs and maintain cash reserves against fluctuations in operating cash flows and pay distributions to its unitholders at its current level of distributions, for the next twelve months assuming continuing compliance with covenants under its credit facilities and assuming that the Partnership's vessels remain fully operational and that revenues are generated as per existing contractual terms.
As of September 30, 2022, the Partnership had outstanding interest rate swap agreements for a total notional amount of
The Partnership's share of the joint ventures is accounted for using the equity method. As a result, the Partnership's share of the joint ventures' cash, restricted cash, outstanding debt, interest rate swaps and other balance sheet items are reflected net on the lines "accumulated earnings in joint ventures" and "accumulated losses in joint ventures" on the consolidated balance sheet and are not included in the balance sheet figures disclosed below.
In August 2022, the Partnership paid a cash distribution of
In August 2022, the Partnership paid a cash distribution of
On November 15, 2022, the Partnership paid a cash distribution of
Outlook
The Partnership believes its primary risk and exposure related to uncertainty of cash flows from its long-term time charter contracts is due to the credit risk and counterparty risk associated with the individual charterers. Payments are due under time charter contracts regardless of the demand for the charterer's gas output or the utilization of the FSRU. It is therefore possible that charterers may not make payments for time charter services in times of reduced demand. While there is a pending arbitration as further discussed below, as of November 17, 2022, the Partnership has not experienced any reduced or non-payments for obligations under the Partnership's time charter contracts. In addition, the Partnership has not provided concessions or made changes to the terms of payment for its customers.
Höegh LNG has entered into the Suspension and Make-Whole Agreements and provided the Partnership the
Höegh LNG's ability to make payments to the Partnership under the Suspension and Make-Whole Agreements and any funding requests under the
If financial institutions providing the Partnership's interest rate swaps are unable to meet their obligations, the Partnership could experience a higher interest expense or be unable to obtain funding. Furthermore, if the Partnership's charterers or lenders are unable to meet their obligations under their respective contracts or if the Partnership is unable to fulfill its obligations under time charters, its financial condition, results of operations and ability to make cash distributions to unitholders could be materially adversely affected.
As previously reported, by letter dated July 13, 2021, the charterer under the lease and maintenance agreement for the PGN FSRU Lampung ("LOM") raised certain issues with PT Hoegh LNG Lampung in relation to the operations of the PGN FSRU Lampung and the LOM and by further letter dated July 27, 2021, stated that it would commence arbitration against PT Hoegh LNG Lampung. On August 2, 2021, the charterer served a notice of arbitration ("NOA") to declare the LOM null and void, and/or to terminate the LOM, and/or seek damages. On June 13, 2022, the charterer filed a statement of claim with a request for a primary relief and three alternative reliefs. The charterer's claim of restitution if the LOM is declared null and void is
PT Hoegh LNG Lampung has previously served a reply refuting the claims as baseless and without legal merit and has also served a counterclaim against the charterer for multiple breaches of the LOM and a claim against the parent company of the charterer for the fulfilment of the charterer's obligations under the LOM as stated in a guarantee provided by the parent company, with a claim for damages. On June 13, 2022, PT Hoegh LNG Lampung filed its statement of claim.
PT Hoegh LNG Lampung will take all necessary steps and will vigorously contest the charterer's claims in the legal process.
No assurance can be given at this time as to the outcome of the dispute with the charterer of the PGN FSRU Lampung. Notwithstanding the NOA, both parties have continued to perform their respective obligations under the LOM. In the event that the outcome of such dispute is unfavorable to the Partnership, it could have a material adverse impact on its business, results of operations, financial condition and ability to pay distributions to unitholders.
On March 20, 2022, the Partnership commenced FSRU operations under agreements with subsidiaries of New Fortress Energy Inc. ("New Fortress") to charter the Höegh Gallant for a period of ten years (the "NFE Charter"). The charter rate under the NFE Charter is lower than under the prior charter for the Höegh Gallant (the "Suspended Gallant Charter"). The Partnership has entered into an agreement to suspend the Suspended Gallant Charter, with effect from the commencement of the NFE Charter, and a make-whole agreement (together, the "Suspension and Make-Whole Agreements"), pursuant to which Höegh LNG's subsidiary will compensate the Partnership monthly for the difference between the charter rate earned under the NFE Charter and the charter rate earned under the Suspended Gallant Charter with the addition of a modest increase until July 31, 2025, the original expiration date of the Suspended Gallant Charter. Afterwards, the Partnership will continue to receive the charter rate agreed with New Fortress for the remaining term of the NFE Charter. In addition, pursuant to the Suspension and Make-Whole Agreements, certain capital expenditures incurred to ready and relocate the Höegh Gallant for performance under the NFE Charter will be shared 50/50 between Höegh LNG and the Partnership, subject to a maximum obligation of the Partnership. As of November 17, 2022, Höegh LNG has paid an aggregate of
The outbreak of COVID‑19 has negatively affected economic conditions in many parts of the world which may impact the Partnership's operations and the operations of its customers and suppliers. Although the Partnership's operations have not been materially affected by the COVID-19 outbreak to date, the ultimate length and severity of the COVID‑19 outbreak and its potential impact on the Partnership's operations and financial condition is uncertain at this time. Furthermore, should there be an outbreak of COVID‑19 on board one of the Partnership's FSRUs or an inability to replace critical supplies or replacement parts due to disruptions to third-party suppliers, adequate crewing or supplies may not be available to fulfill the Partnership's obligations under its time charter contracts. This could result in off-hire or warranty payments under performance guarantees which would reduce revenues for the impacted period. To date, the Partnership has extended the time between crew rotations on the vessels and developed other mitigating actions to reduce the risk of a COVID-19 outbreak. As a result, the Partnership expects that it will incur somewhat higher crewing expenses. To date, the Partnership has not had material service interruptions on the Partnership's vessels. Management and administrative staffs have largely transitioned to working remotely from home to address the specific COVID‑19 situation in the applicable geographic location. The Partnership has supported staffs by supplying needed internet boosters and office equipment to facilitate an effective work environment.
In February 2022, the Russian attack on Ukraine started. It may lead to further regional and international conflicts or armed action. It is possible that such conflict could disrupt supply chains and cause instability in the global economy. Additionally, the ongoing conflict could result in the imposition of further economic sanctions by the United States and the European Union against Russia. While much uncertainty remains regarding the global impact of the invasion, it is possible that such tensions could adversely affect the Partnership's business, financial condition, results of operation and cash flows. Furthermore, it is possible that third parties with whom the Partnership has charter contracts may be impacted by events in Russia and Ukraine, which could adversely affect its operations. The invasion has among other things, led to a significantly increased attention to security of energy supply in Europe. Several European countries are looking to reduce their reliance on pipeline gas from Russia, and are planning to increase the import capacity for LNG through the application of FSRUs and/or landbased import facilities in combination with increased use of renewable energy sources in the energy mix. Over time, this could accelerate the energy transition to renewable energy.
On April 1, 2022, the Partnership's Colombian subsidiary received a notification from the Tax Administration of Cartagena assessing a penalty of approximately
FORWARD-LOOKING STATEMENTS
This press release contains certain forward-looking statements concerning future events and the Partnership's operations, performance and financial condition. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words "believe," "anticipate," "expect," "estimate," "future," "project," "will be," "will continue," "will likely result," "plan," "intend" or words or phrases of similar meanings. These 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 the Partnership's 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:
- the effects of outbreaks of pandemic or contagious diseases, including the length and severity of the recent worldwide outbreak of COVID‑19, including its impact on the Partnership's business liquidity, cash flows and operations as well as operations of our customers, suppliers and lenders;
- market conditions and trends for floating storage and regasification units ("FSRUs") and liquefied natural gas ("LNG") carriers, including hire rates, vessel valuations, technological advancements, market preferences and factors affecting supply and demand of LNG, LNG carriers, and FSRUs;
- the Partnership's distribution policy and ability to make cash distributions on its preferred units;
- restrictions in the Partnership's debt agreements and pursuant to local laws on the Partnership's joint ventures' and subsidiaries' ability to make distributions;
- the ability of Höegh LNG to meet its financial obligations to the Partnership pursuant to the Suspension and Make-Whole Agreements, the Suspended Gallant Charter, any funding requests under the
$85 million revolving credit facility and its guarantee and indemnification obligations; - the Partnership's ability to compete successfully for future chartering opportunities;
- demand in the FSRU sector or the LNG shipping sector, including demand for the Partnership's vessels;
- the Partnership's anticipated receipt of dividends and repayment of indebtedness from subsidiaries and joint ventures;
- effects of volatility in global prices for crude oil and natural gas;
- the effect of the worldwide economic environment;
- turmoil in the global financial markets;
- fluctuations in currencies and interest rates;
- general market conditions, including fluctuations in hire rates and vessel values;
- changes in the Partnership's operating expenses, including drydocking, on-water class surveys, insurance costs and bunker costs;
- the Partnership's ability to comply with financing agreements and the expected effect of restrictions and covenants in such agreements;
- the financial condition, liquidity and creditworthiness of the Partnership's existing or future customers and their ability to satisfy their obligations under the Partnership's contracts;
- the Partnership's ability to replace existing borrowings, make additional borrowings and to access public equity and debt capital markets;
- planned capital expenditures and availability of capital resources to fund capital expenditures;
- the exercise of purchase options by the Partnership's customers;
- the Partnership's ability to perform under its contracts and maintain long-term relationships with its customers;
- the Partnership's ability to leverage Höegh LNG's relationships and reputation in the shipping industry;
- the Partnership's continued ability to enter into long-term, fixed-rate charters and the hire rate thereof;
- the operating performance of the Partnership's vessels and any related claims by TotalEnergies SE, PGN LNG or other customers;
- the Partnership's ability to maximize the use of its vessels, including the redeployment or disposition of vessels no longer under long-term charters;
- the results of the arbitration with the charterer of PGN FSRU Lampung;
- timely acceptance of the Partnership's vessels by their charterers;
- termination dates and extensions of charters;
- the impact of the Russian invasion of Ukraine;
- the Partnership's ability to successfully remediate the material weakness in its internal control over financial reporting and disclosure controls and procedures;
- the cost of, and the Partnership's ability to comply with, governmental regulations and maritime self-regulatory organization standards, as well as standard regulations imposed by its charterers applicable to its business;
- economic substance laws and regulations adopted or considered by various jurisdictions of formation or incorporation of the Partnership and certain of its subsidiaries;
- availability and cost of skilled labor, vessel crews and management, including possible disruptions, including but not limited to the supply chain of spare parts and service engineers, caused by the COVID‑19 outbreak;
- the number of offhire days and drydocking requirements, including the Partnership's ability to complete scheduled drydocking on time and within budget;
- the Partnership's general and administrative expenses as a publicly traded limited partnership and fees and expenses payable under the Partnership's ship management agreements, the technical information and services agreement and the administrative services agreement;
- the anticipated taxation of the Partnership, its subsidiaries and affiliates and distributions to unitholders;
- estimated future maintenance and replacement capital expenditures;
- the Partnership's ability to hire or retain key employees;
- customers' increasing emphasis on environmental and safety concerns;
- potential liability from any pending or future litigation;
- risks inherent in the operation of the Partnership's vessels including potential disruption due to accidents, political events, piracy or acts by terrorists;
- future sales of the Partnership's securities in the public market;
- interruption or failure of the Partnership's information technology and communication systems;
- the Partnership's business strategy and other plans and objectives for future operations; and
- other factors listed from time to time in the reports and other documents that the Partnership files with the SEC, including the Partnership's Annual Report on Form 20‑F for the year ended December 31, 2021 and subsequent quarterly reports on Form 6‑K.
All forward-looking statements included in this press release are made only as of the date of this release. New factors emerge from time to time, and it is not possible for the Partnership to predict all of these factors. Further, the Partnership cannot assess the impact of each such factor on its business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement. The Partnership does not intend to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.
HÖEGH LNG PARTNERS LP | ||||||||||||
Three months ended | Nine months ended | |||||||||||
September 30, | September 30, | |||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||
REVENUES | ||||||||||||
Time charter revenues | $ | 36,947 | $ | 35,596 | $ | 109,198 | $ | 105,068 | ||||
Total revenues | 36,947 | 35,596 | 109,198 | 105,068 | ||||||||
OPERATING EXPENSES | ||||||||||||
Vessel operating expenses | (7,673) | (5,927) | (21,430) | (18,213) | ||||||||
Administrative expenses | (8,392) | (3,491) | (19,021) | (9,005) | ||||||||
Depreciation and amortization | (5,131) | (5,096) | (15,376) | (15,318) | ||||||||
Total operating expenses | (21,196) | (14,514) | (55,827) | (42,536) | ||||||||
Equity in earnings (losses) of joint ventures | 2,451 | 6,056 | 15,605 | 20,397 | ||||||||
Operating income (loss) | 18,202 | 27,138 | 68,976 | 82,929 | ||||||||
FINANCIAL INCOME (EXPENSE), NET | ||||||||||||
Interest income | 426 | 166 | 815 | 397 | ||||||||
Interest expense | (5,532) | (6,146) | (16,039) | (21,440) | ||||||||
Other items, net | (679) | (982) | (1,883) | (2,293) | ||||||||
Total financial income (expense), net | (5,785) | (6,962) | (17,107) | (23,336) | ||||||||
Income (loss) before tax | 12,417 | 20,176 | 51,869 | 59,593 | ||||||||
Income tax expense | 4,201 | (2,817) | (2,034) | (15,757) | ||||||||
Net income (loss) | $ | 16,618 | $ | 17,359 | $ | 49,835 | $ | 43,836 | ||||
Preferred unitholders' interest in net income | 3,877 | 3,877 | 11,631 | 11,631 | ||||||||
Limited partners' interest in net income (loss) | $ | 12,741 | $ | 13,482 | $ | 38,204 | $ | 32,205 | ||||
HÖEGH LNG PARTNERS LP | ||||||
As of | ||||||
September 30, | December 31, | |||||
2022 | 2021 | |||||
ASSETS | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 45,265 | $ | 42,519 | ||
Restricted cash | 9,324 | 8,410 | ||||
Trade receivables | 7,088 | 3,653 | ||||
Amounts due from affiliates | 3,282 | 7,500 | ||||
Current portion of net investment in financing lease | 5,795 | 5,426 | ||||
Derivative instruments | 3,075 | — | ||||
Prepaid expenses and other receivables | 4,828 | 3,772 | ||||
Total current assets | 78,657 | 71,280 | ||||
Long-term assets | ||||||
Restricted cash | 10,991 | 10,991 | ||||
Accumulated earnings of joint ventures | 61,678 | 35,708 | ||||
Advances to joint ventures | 10,411 | 7,511 | ||||
Vessels, net of accumulated depreciation | 586,928 | 602,289 | ||||
Other equipment | 37 | 100 | ||||
Intangibles and goodwill | 9,241 | 11,301 | ||||
Net investment in financing lease | 259,468 | 263,862 | ||||
Long-term derivative instruments | 5,439 | — | ||||
Long-term deferred tax asset | 151 | 144 | ||||
Other long-term assets | 821 | 822 | ||||
Total long-term assets | 945,165 | 932,728 | ||||
Total assets | $ | 1,023,822 | $ | 1,004,008 | ||
HÖEGH LNG PARTNERS LP | ||||||
As of | ||||||
September 30, | December 31, | |||||
2022 | 2021 | |||||
LIABILITIES AND EQUITY | ||||||
Current liabilities | ||||||
Current portion of long-term debt | $ | 43,747 | $ | 46,385 | ||
Revolving credit facility due to owners and affiliates | 24,545 | — | ||||
Trade payables | 635 | 3,890 | ||||
Amounts due to owners and affiliates | 1,592 | 3,655 | ||||
Value added and withholding tax liability | 694 | 935 | ||||
Derivative instruments | — | 5,239 | ||||
Accrued liabilities and other payables | 18,490 | 16,105 | ||||
Total current liabilities | 89,703 | 76,209 | ||||
Long-term liabilities | ||||||
Long-term debt | 305,902 | 339,687 | ||||
Revolving credit facility due to owners and affiliates | — | 24,942 | ||||
Derivative instruments | — | 7,631 | ||||
Long-term tax liability | 3,382 | 6,391 | ||||
Long-term deferred tax liability | 21,780 | 18,462 | ||||
Other long-term liabilities | 141 | 166 | ||||
Total long-term liabilities | 331,205 | 397,279 | ||||
Total liabilities | 420,908 | 473,488 | ||||
EQUITY | ||||||
176,078 | 176,078 | |||||
Common units public | — | 317,515 | ||||
Common units Höegh LNG | 410,373 | 52,626 | ||||
Accumulated other comprehensive income (loss) | 16,463 | (15,699) | ||||
Total partners' capital | 602,914 | 530,520 | ||||
Total equity | 602,914 | 530,520 | ||||
Total liabilities and equity | $ | 1,023,822 | $ | 1,004,008 | ||
HÖEGH LNG PARTNERS LP | ||||||
Three months ended | ||||||
September 30, | ||||||
2022 | 2021 | |||||
OPERATING ACTIVITIES | ||||||
Net income (loss) | $ | 16,618 | $ | 17,359 | ||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||
Depreciation and amortization | 5,131 | 5,096 | ||||
Equity in (earnings) losses of joint ventures | (2,451) | (6,056) | ||||
Changes in accrued interest income on advances to joint ventures | (209) | (124) | ||||
Amortization of deferred debt issuance cost | 474 | 572 | ||||
Amortization in revenue for above market contract | 694 | 694 | ||||
Changes in accrued interest expense | 140 | (120) | ||||
Receipts from repayment of principal on financing lease | 1,371 | 1,256 | ||||
Unrealized foreign exchange losses (gains) | (9) | 25 | ||||
Unrealized loss (gain) on derivative instruments | 125 | 67 | ||||
Non-cash revenue: tax paid directly by charterer | (227) | (225) | ||||
Non-cash income tax expense: tax paid directly by charterer | 227 | 225 | ||||
Deferred tax expense and provision for tax uncertainty | (2,927) | (849) | ||||
Issuance of units for Board of Directors' fees | — | 84 | ||||
Other adjustments | — | (4) | ||||
Changes in working capital: | ||||||
Trade receivables | 500 | 2 | ||||
Inventory | — | 5 | ||||
Prepaid expenses and other receivables | 5,062 | 3,131 | ||||
Trade payables | (431) | (190) | ||||
Amounts due to owners and affiliates | 80 | (579) | ||||
Value added and withholding tax liability | 273 | (96) | ||||
Accrued liabilities and other payables | (2,716) | 1,585 | ||||
Net cash provided by (used in) operating activities | 21,725 | 21,858 | ||||
INVESTING ACTIVITIES | ||||||
Net cash provided by (used in) investing activities | $ | — | $ | — | ||
HÖEGH LNG PARTNERS LP | ||||||
Three months ended | ||||||
September 30, | ||||||
2022 | 2021 | |||||
FINANCING ACTIVITIES | ||||||
Proceeds from long-term debt | $ | — | $ | 14,750 | ||
Repayment of long-term debt | (11,822) | (11,165) | ||||
Cash distributions to limited partners and preferred unitholders | (4,209) | (4,211) | ||||
Net cash provided by (used in) financing activities | (16,031) | (4,303) | ||||
Increase (decrease) in cash, cash equivalents and restricted cash | 5,694 | 17,555 | ||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (29) | 2 | ||||
Cash, cash equivalents and restricted cash, beginning of period | 59,915 | 43,174 | ||||
Cash, cash equivalents and restricted cash, end of period | $ | 65,580 | $ | 60,731 | ||
HÖEGH LNG PARTNERS LP
UNAUDITED SEGMENT INFORMATION FOR THE QUARTERS ENDED SEPTEMBER 30, 2022 and 2021
(in thousands of U.S. dollars)
Segment information
There are two operating segments. The segment profit measure is Segment EBITDA, which is defined as earnings before interest, taxes, depreciation, amortization, impairment and other financial items (gain (loss) on debt extinguishment, gain (loss) on derivative instruments and other items, net). Segment EBITDA is reconciled to operating income and net income in the segment presentation below. The two segments are "Majority held FSRUs" and "Joint venture FSRUs." In addition, unallocated corporate costs, interest income from advances to joint ventures and interest expense related to the outstanding balances on the
For the three months ended September 30, 2022 and 2021, Majority held FSRUs includes the financing lease related to the PGN FSRU Lampung and the operating leases related to the Höegh Gallant and the Höegh Grace.
For the three months ended September 30, 2022 and 2021, Joint Venture FSRUs include two
The accounting policies applied to the segments are the same as those applied in the consolidated financial statements, except that i) Joint venture FSRUs is presented under the proportional consolidation method for the segment note to the Partnership's financial statements and in the tables below, and under equity accounting for the consolidated financial statements and ii) internal interest income and interest expense between the Partnership's subsidiaries that eliminate in consolidation are not included in the segment columns for the other financial income (expense), net line. Under the proportional consolidation method,
HÖEGH LNG PARTNERS LP | |||||||||||||||
Three months ended September 30, 2022 | |||||||||||||||
Joint venture | |||||||||||||||
Majority | FSRUs | Total | |||||||||||||
held | (proportional | Segment | Consolidated | ||||||||||||
(in thousands of U.S. dollars) | FSRUs | consolidation) | Other | reporting | Eliminations | reporting | |||||||||
Time charter revenues | $ | 36,947 | 10,600 | — | 47,547 | (10,600) | (1) | $ | 36,947 | ||||||
Total revenues | 36,947 | 10,600 | — | 47,547 | 36,947 | ||||||||||
Operating expenses | (10,089) | (3,957) | (5,976) | (20,022) | 3,957 | (1) | (16,065) | ||||||||
Equity in earnings (losses) of joint ventures | — | — | — | — | 2,451 | (1) | 2,451 | ||||||||
Segment EBITDA | 26,858 | 6,643 | (5,976) | 27,525 | |||||||||||
Depreciation and amortization | (5,131) | (2,489) | — | (7,620) | 2,489 | (1) | (5,131) | ||||||||
Operating income (loss) | 21,727 | 4,154 | (5,976) | 19,905 | 18,202 | ||||||||||
Gain (loss) on derivative instruments | — | — | — | — | — | (1) | — | ||||||||
Other financial income (expense), net | (1,758) | (1,703) | (4,027) | (7,488) | 1,703 | (1) | (5,785) | ||||||||
Income (loss) before tax | 19,969 | 2,451 | (10,003) | 12,417 | 12,417 | ||||||||||
Income tax expense | 4,201 | — | — | 4,201 | — | 4,201 | |||||||||
Net income (loss) | $ | 24,170 | 2,451 | (10,003) | 16,618 | — | $ | 16,618 | |||||||
Preferred unitholders' interest in net income | — | — | — | — | 3,877 | (2) | 3,877 | ||||||||
Limited partners' interest in net income (loss) | $ | 24,170 | 2,451 | (10,003) | 16,618 | (3,877) | (2) | $ | 12,741 | ||||||
____________________________ | |
(1) | Eliminations reverse each of the income statement line items of the proportional amounts for Joint venture FSRUs and record the Partnership's share of the Joint venture FSRUs net income (loss) to Equity in earnings (losses) of joint ventures. |
(2) | Allocates the preferred unitholders' interest in net income to the preferred unitholders. |
HÖEGH LNG PARTNERS LP | |||||||||||||||
Three months ended September 30, 2021 | |||||||||||||||
Joint venture | |||||||||||||||
Majority | FSRUs | Total | |||||||||||||
held | (proportional | Segment | Consolidated | ||||||||||||
(in thousands of U.S. dollars) | FSRUs | consolidation) | Other | reporting | Eliminations | reporting | |||||||||
Time charter revenues | $ | 35,596 | 10,835 | — | 46,431 | (10,835) | (1) | $ | 35,596 | ||||||
Total revenues | 35,596 | 10,835 | — | 46,431 | 35,596 | ||||||||||
Operating expenses | (7,332) | (1,932) | (2,086) | (11,350) | 1,932 | (1) | (9,418) | ||||||||
Equity in earnings (losses) of joint ventures | — | — | — | — | 6,056 | (1) | 6,056 | ||||||||
Segment EBITDA | 28,264 | 8,903 | (2,086) | 35,081 | |||||||||||
Depreciation and amortization | (5,096) | (2,489) | — | (7,585) | 2,489 | (1) | (5,096) | ||||||||
Operating income (loss) | 23,168 | 6,414 | (2,086) | 27,496 | 27,138 | ||||||||||
Gain (loss) on derivative instruments | — | 2,287 | — | 2,287 | (2,287) | (1) | — | ||||||||
Other financial income (expense), net | (2,935) | (2,645) | (4,027) | (9,607) | 2,645 | (1) | (6,962) | ||||||||
Income (loss) before tax | 20,233 | 6,056 | (6,113) | 20,176 | 20,176 | ||||||||||
Income tax expense | (2,817) | — | — | (2,817) | — | (2,817) | |||||||||
Net income (loss) | $ | 17,416 | 6,056 | (6,113) | 17,359 | — | $ | 17,359 | |||||||
Preferred unitholders' interest in net income | — | — | — | — | 3,877 | (2) | 3,877 | ||||||||
Limited partners' interest in net income (loss) | $ | 17,416 | 6,056 | (6,113) | 17,359 | (3,877) | (2) | $ | 13,482 | ||||||
___________________________ | |
(1) | Eliminations reverse each of the income statement line items of the proportional amounts for Joint venture FSRUs and record the Partnership's share of the Joint venture FSRUs net income (loss) to Equity in earnings (losses) of joint ventures. |
(2) | Allocates the preferred unitholders' interest in net income to the preferred unitholders. |
HÖEGH LNG PARTNERS LP | ||||||
The following table includes the financial income (expense), net for the three months ended September 30, 2022 and 2021. | ||||||
Three months ended | ||||||
September 30, | ||||||
(in thousands of U.S. dollars) | 2022 | 2021 | ||||
Interest income | $ | 426 | $ | 166 | ||
Interest expense: | ||||||
Interest expense | (4,933) | (5,001) | ||||
Amortization and gain (loss) on cash flow hedge | (125) | (67) | ||||
Commitment fees | — | (506) | ||||
Amortization of debt issuance cost | (474) | (572) | ||||
Total interest expense | (5,532) | (6,146) | ||||
Other items, net: | ||||||
Foreign exchange gain (loss) | 42 | (18) | ||||
Bank charges, fees and other | (68) | (391) | ||||
Withholding tax on interest expense and other | (653) | (573) | ||||
Total other items, net | (679) | (982) | ||||
Total financial income (expense), net | $ | (5,785) | $ | (6,962) | ||
Appendix A: Segment EBITDA
Non-GAAP Financial Measures
Segment EBITDA. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Segment EBITDA is defined as earnings before interest, taxes depreciation, amortization, impairment and other financial items. Other financial items consist of gain (loss) on debt extinguishment, gain (loss) on derivative instruments and other items, net (including foreign exchange gains and losses and withholding tax on interest expenses). Segment EBITDA is used as a supplemental financial measure by management and external users of financial statements, such as the Partnership's lenders, to assess its financial and operating performance. The Partnership believes that Segment EBITDA assists its management and investors by increasing the comparability of its performance from period to period and against the performance of other companies in the industry that provide Segment EBITDA information. This increased comparability is achieved by excluding the potentially disparate effects between periods or companies of interest, depreciation, amortization, impairment, taxes, and other financial items, 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. The Partnership believes that including Segment EBITDA as a financial and operating measure benefits investors in (a) selecting between investing in it and other investment alternatives and (b) monitoring its ongoing financial and operational strength in assessing whether to continue to hold common units or preferred units. Segment EBITDA is a non-GAAP financial measure and should not be considered an alternative to net income, operating income or any other measure of financial performance presented in accordance with U.S. GAAP. Segment EBITDA excludes some, but not all, items that affect net income, and these measures may vary among other companies. Therefore, Segment EBITDA as presented below may not be comparable to similarly titled measures of other companies. The following tables reconcile Segment EBITDA for each of the segments and the Partnership as a whole to net income (loss), the comparable U.S. GAAP financial measure, for the periods presented:
Three months ended September 30, 2022 | ||||||||||||||||
Joint venture | ||||||||||||||||
Majority | FSRUs | Total | ||||||||||||||
held | (proportional | Segment | Elimin- | Consolidated | ||||||||||||
(in thousands of U.S. dollars) | FSRUs | consolidation) | Other | reporting | ations(1) | reporting | ||||||||||
Reconciliation to net income (loss) | ||||||||||||||||
Net income (loss) | $ | 24,170 | 2,451 | (10,003) | 16,618 | $ | 16,618 | (3) | ||||||||
Interest income | (119) | (115) | (307) | (541) | 115 | (4) | (426) | |||||||||
Interest expense | 1,235 | 1,890 | 4,297 | 7,422 | (1,890) | (4) | 5,532 | |||||||||
Depreciation and amortization | 5,131 | 2,489 | — | 7,620 | (2,489) | (5) | 5,131 | |||||||||
Other financial items (2) | 642 | (72) | 37 | 607 | 72 | (6) | 679 | |||||||||
Income tax (benefit) expense | (4,201) | — | — | (4,201) | — | (4,201) | ||||||||||
Equity in earnings of JVs: Interest (income) expense, | — | — | — | — | 1,775 | (4) | 1,775 | |||||||||
Equity in earnings of JVs: Depreciation and | — | — | — | — | 2,489 | (5) | 2,489 | |||||||||
Equity in earnings of JVs: Other financial items (2) | — | — | — | — | (72) | (6) | (72) | |||||||||
Segment EBITDA | $ | 26,858 | 6,643 | (5,976) | 27,525 | $ | 27,525 | |||||||||
Three months ended September 30, 2021 | ||||||||||||||||
Joint venture | ||||||||||||||||
Majority | FSRUs | Total | ||||||||||||||
held | (proportional | Segment | Elimin- | Consolidated | ||||||||||||
(in thousands of U.S. dollars) | FSRUs | consolidation) | Other | reporting | ations (1) | reporting | ||||||||||
Reconciliation to net income (loss) | ||||||||||||||||
Net income (loss) | $ | 17,416 | 6,056 | (6,113) | 17,359 | $ | 17,359 | (3) | ||||||||
Interest income | (42) | — | (124) | (166) | — | (4) | (166) | |||||||||
Interest expense | 2,043 | 2,641 | 4,103 | 8,787 | (2,641) | (4) | 6,146 | |||||||||
Depreciation and amortization | 5,096 | 2,489 | — | 7,585 | (2,489) | (5) | 5,096 | |||||||||
Other financial items (2) | 934 | (2,283) | 48 | (1,301) | 2,283 | (6) | 982 | |||||||||
Income tax (benefit) expense | 2,817 | — | — | 2,817 | — | 2,817 | ||||||||||
Equity in earnings of JVs: Interest (income) expense, | — | — | — | — | 2,641 | (4) | 2,641 | |||||||||
Equity in earnings of JVs: Depreciation and | — | — | — | — | 2,489 | (5) | 2,489 | |||||||||
Equity in earnings of JVs: Other financial items (2) | — | — | — | — | (2,283) | (6) | (2,283) | |||||||||
Segment EBITDA | $ | 28,264 | 8,903 | (2,086) | 35,081 | $ | 35,081 | |||||||||
_____________________ | |
(1) | Eliminations reverse each of the income statement reconciling line items of the proportional amounts for Joint venture FSRUs and record the Partnership's share of the Joint venture FSRUs net income (loss) to Equity in earnings (loss) of joint ventures. Separate adjustments from the consolidated net income to Segment EBITDA for the Partnership's share of the Joint venture FSRUs are included in the reconciliation lines starting with "Equity in earnings of JVs". |
(2) | Other financial items consist of gain and loss on debt extinguishment, gains and losses on derivative instruments and other items, net including foreign exchange gains or losses and withholding tax on interest expense. |
(3) | There is no adjustment between net income for Total Segment reporting and the Consolidated reporting because the net income under the proportional consolidation and equity method of accounting is the same. |
(4) | Interest income and interest expense for the Joint venture FSRUs is eliminated from the Total Segment reporting to agree to the interest income and interest expense in the Consolidated reporting and reflected as a separate adjustment to the equity accounting on the line Equity in earnings of JVs: Interest (income) expense for the Consolidated reporting. |
(5) | Depreciation and amortization for the Joint venture FSRUs is eliminated from the Total Segment reporting to agree to the depreciation and amortization in the Consolidated reporting and reflected as a separate adjustment to the equity accounting on the line Equity in earnings of JVs: Depreciation and amortization for the Consolidated reporting. |
(6) | Other financial items for the Joint venture FSRUs is eliminated from the Segment reporting to agree to the Other financial items in the Consolidated reporting and reflected as a separate adjustment to the equity accounting on the line Equity in earnings of JVs: Other financial items for the Consolidated reporting. |
_________________________
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SOURCE Hoegh LNG Partners LP
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