Höegh LNG Partners LP Reports Financial Results for the Quarter Ended September 30, 2021
Höegh LNG Partners LP (NYSE: HMLP) reported its third-quarter 2021 results, revealing total time charter revenues of $35.6 million, a slight decline from $35.9 million in Q3 2020. Operating income decreased to $27.1 million from $28.1 million year-over-year, while net income fell to $17.4 million compared to $19.5 million in the prior year. Cash distribution remained steady at $0.01 per common unit. Key developments include a ten-year charter agreement with New Fortress Energy and a pending refinancing of the commercial tranche of the Lampung facility.
- Generated operating income of $27.1 million for Q3 2021.
- Achieved 100% availability of FSRUs for Q3 2021.
- Entered into a ten-year charter agreement with New Fortress Energy, expected to commence in December 2021.
- Net income decreased by $2.1 million year-over-year to $17.4 million.
- Operating income declined from $28.1 million in Q3 2020 to $27.1 million in Q3 2021.
- Deferred maturity date of the Lampung facility commercial tranche exposes cash flow risks.
HAMILTON, Bermuda, Nov. 18, 2021 /PRNewswire/ -- Höegh LNG Partners LP (NYSE: HMLP) (the "Partnership") today reported its financial results for the quarter ended September 30, 2021.
Highlights
- Continued measures to mitigate the risks from the COVID–19 pandemic and ensure health and safety of crews and staff, whose wellbeing is the Partnership's highest priority
- No reported cases of COVID–19;
100% availability of FSRUs for the third quarter of 2021 - Reported total time charter revenues of
$35.6 million for the third quarter of 2021, compared to$35.9 million of time charter revenues for the third quarter of 2020 - Generated operating income of
$27.1 million , net income of$17.4 million and limited partners' interest in net income of$13.5 million for the third quarter of 2021, compared to operating income of$28.1 million , net income of$19.5 million and limited partners' interest in net income of$15.8 million for the third quarter of 2020 - Operating income, net income and limited partners' interest in net income were impacted by unrealized gains on derivative instruments for the third quarter of 2021 and 2020, mainly on the Partnership's share of equity in earnings of joint ventures
- On November 15, 2021, paid a cash distribution of
$0.01 per common unit with respect to the third quarter of 2021, which was the same as in the second quarter of 2021 - On November 15, 2021, paid a cash distribution of
$0.54 6875 per8.75% Series A cumulative redeemable preferred unit ("Series A preferred unit"), for the period commencing on August 15, 2021 to November 14, 2021 - On September 23, 2021, entered into agreements with subsidiaries of New Fortress Energy Inc ("NFE") to charter the Höegh Gallant primarily for FSRU operations for a period of ten years, with an expected commencement during December 2021 (the "New Charter"). The Partnership has also entered into an agreement to suspend the existing charter for the Höegh Gallant with a subsidiary of Höegh LNG, with effect from the commencement of the New Charter (the "Suspension Agreement"). The charter rate under the New Charter, in line with the current market, will be lower than under the existing charter for the Höegh Gallant. However, under the Suspension Agreement, Höegh LNG's subsidiary will compensate the Partnership monthly for the difference between the charter rate earned under the New Charter and the charter rate earned under the existing charter with the addition of a modest increase until July 31, 2025, the original expiration date of the existing charter. Afterwards, the Partnership will continue to receive the charter rate agreed with NFE for the remaining term of the New Charter. In addition, pursuant to the Suspension Agreement, certain capital expenditures incurred to prepare and relocate the Höegh Gallant for performance under the New Charter will be shared 50/50 between Höegh LNG and the Partnership, subject to a cap on the obligations of the Partnership.
- On September 29, 2021, the Partnership entered into an agreement with its lenders to defer the maturity date of the commercial tranche of its Lampung facility to allow for more time to conclude a refinancing of this tranche. The lenders agreed to defer the maturity date of the commercial tranche from September 29, 2021 until January 14, 2022. Subject to commitment letters and a term sheet for a refinancing of the commercial tranche being in place by December 29, 2021, the maturity date will automatically be further deferred to March 29, 2022.
- The charterer under the lease and maintenance agreement for the PGN FSRU Lampung ("LOM") served a notice of arbitration ("NOA") on August 2, 2021 to declare the LOM null and void, and/or to terminate the LOM, and/or seek damages. PT Hoegh LNG Lampung ("PT HLNG") has 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. PT HLNG will take all necessary steps and will vigorously defend against the charterer's claims in the legal process. Notwithstanding the NOA, both parties have continued to perform their respective obligations under the LOM.
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. | ||
Financial Results Overview
For the three months ended September 30, 2021, each of the Partnership's FSRUs have had
The Partnership reported net income of
Excluding all of the unrealized gains (losses) on derivative instruments, net income for the three months ended September 30, 2021 would have been
Preferred unitholders' interest in net income was
Equity in earnings of joint ventures for the three months ended September 30, 2021 was
Operating income for the three months ended September 30, 2021 was
Segment EBITDA1 for the three months ended September 30, 2021 was
Total operating expenses for the three months ended September 30, 2021 were
Total financial expense, net for the three months ended September 30, 2021 was
Financing and Liquidity
As of September 30, 2021, the Partnership had cash and cash equivalents of
The Partnership is continuously working on its financing and liquidity needs. The commercial tranche of the Lampung facility was initially due on September 29, 2021. During the third quarter of 2021, the maturity date was deferred to January 14, 2022 and will be further deferred to March 29, 2022 if commitment letters and a term sheet for an Approved Refinancing (as defined in the Lampung facility agreement) are in place by December 29, 2021. The export credit tranche of the Lampung facility can be called if the commercial tranche is not refinanced. The ongoing refinancing of the Lampung credit facility, which had been scheduled to close by the end of the second quarter of 2021, is not yet completed due to the failure by the charterer to countersign certain customary documents related to the new credit facility. These circumstances left the Partnership exposed to having to arrange alternative refinancing. Such alternative refinancing is in progress. In November, the Partnership received commitment letters and a term sheet for an Approved Refinancing from a group of lenders. The Partnership expects to complete this refinancing before the deferred maturity date, subject to certain required approvals by export credit tranche lenders, completing documentation and customary closing conditions. However, the Partnership is also continuing to pursue other potential alternative debt structures. The terms of the alternative refinancing, if the Partnership is successful in finalizing such refinancing, are likely to be less favourable than the terms of the originally agreed refinancing and the existing Lampung facility.
As of September 30, 2021, the Partnership has no material commitments for capital expenditures.
During the third quarter of 2021, the Partnership made quarterly repayments of
The Partnership's book value and outstanding principal of total long-term debt was
On July 27, 2021, the Partnership's board of directors announced a reduction in the quarterly cash distribution on its common units to
As of September 30, 2021, the Partnership's total current liabilities exceeded total current assets by
As of September 30, 2021, 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 above.
In August 2021, the Partnership paid a distribution of
In August 2021 the Partnership paid a distribution of
On September 3, 2021, the Partnership drew the remaining
On November 15, 2021, the Partnership paid a cash distribution of
On November 15, 2021, the Partnership paid a cash distribution of
For the period from July 1, 2021 to November 18, 2021, no Series A preferred units or common units were sold under the Partnership's ATM program.
Management Transition
On November 1, 2021, Mr. Sveinung J. S. Støhle stepped down from his position as the Partnership's Chief Executive Officer in order to pursue an alternative career opportunity. The Board of Directors of the Partnership is undertaking a process to select a successor for the CEO position, and has appointed Håvard Furu, the Partnership's Chief Financial Officer, to also act as the Partnership's interim Chief Executive Officer while the board conducts its search.
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 18, 2021, 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 indemnified the Partnership for the joint ventures' boil-off settlement, leased the Höegh Gallant under lease and maintenance agreement with a subsidiary of Höegh LNG (the "Subsequent Charter") and provided the Partnership the
Höegh LNG's ability to make payments to the Partnership under the Subsequent Charter, the Suspension Agreement and funding requests under the
If financial institutions providing the Partnership's interest rate swaps or lenders under the revolving credit facilities are unable to meet their obligations, the Partnership could experience a higher interest expense or be unable to obtain funding. 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 LOM for the PGN FSRU Lampung raised certain issues with PT HLNG 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 HLNG. On August 2, 2021 the charterer served a notice of arbitration to declare the LOM null and void, and/or to terminate the LOM, and/or seek damages. PT HLNG has 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. PT HLNG will take all necessary steps and will vigorously defend against the charterer's claims in the legal process.
The commercial tranche of the Lampung facility was initially due on September 29, 2021. During the third quarter of 2021, the maturity date was deferred to January 14, 2022 and will be further deferred to March 29, 2022 if commitment letters and a term sheet for an Approved Refinancing (as defined in the Lampung facility agreement) are in place by December 29, 2021. The export credit tranche of the Lampung facility can be called if the commercial tranche is not refinanced. The ongoing refinancing of the Lampung credit facility, which had been scheduled to close by the end of the second quarter of 2021, is not yet completed due to the failure by the charterer to countersign certain customary documents related to the new credit facility. These circumstances left the Partnership exposed to having to arrange alternative refinancing. Such alternative refinancing is in progress. In November the Partnership received commitment letters and a term sheet for an Approved Refinancing from a group of lenders. The Partnership expects to complete this refinancing before the deferred maturity date, subject to certain required approvals by export credit tranche lenders, completing documentation and customary closing conditions. However, the Partnership is also continuing to pursue other potential alternative debt structures. The terms of the alternative refinancing, if the Partnership is successful in finalizing such refinancing, is likely to be less favourable than the terms of the originally agreed refinancing and the existing Lampung facility.
No assurance can be given at this time as to the outcome of the dispute with the charterer of the PGN FSRU Lampung, or of the ongoing refinancing of the Lampung facility. Notwithstanding the NOA, both parties have continued to perform their respective obligations under the LOM. In the event that the Partnership is unable to refinance the Lampung facility or if the outcome of such dispute is unfavorable to it, it could have a material adverse impact on its business, results of operations, financial condition and ability to pay distributions to unitholders.
In addition, the Partnership is at an advanced stage for the refinancing of the Neptune facility and the Cape Ann facility which mature and become payable by its Joint Ventures on November 30, 2021 and June 1, 2022, respectively. The loan agreement for the Neptune has been executed and it is expected that the loan agreement for the Cape Ann will be executed in December 2021 for this refinancing. Subject to customary closing conditions the refinancing of each of the Neptune and the Cape Ann is expected to be completed on or about the respective maturity dates of the existing debt facilities. Should the Partnership be unable to complete a refinancing of the Lampung facility, the Neptune and Cape Ann facilities or its other debt maturities on a timely basis or at all, the Partnership may not have sufficient funds or other assets to satisfy all its obligations, which would have a material adverse effect on its business, results of operations, financial condition and ability to make distributions to unitholders.
On September 23, 2021, the Partnership entered into the New Charter with subsidiaries of NFE to charter the Höegh Gallant primarily for FSRU operations for a period of ten years, with an expected commencement during December 2021. The Partnership has also entered into an agreement to suspend the existing charter for the Höegh Gallant with a subsidiary of Höegh LNG, with effect from the commencement of the New Charter (the "Suspension Agreement"). The charter rate under the New Charter, in line with the current market, will be lower than under the Subsequent Charter for the Höegh Gallant. However, under the Suspension Agreement, Höegh LNG's subsidiary will compensate the Partnership monthly for the difference between the charter rate earned under the New Charter and the charter rate earned under the Subsequent Charter plus a modest increase, mainly to cover higher operating expenses and taxes under the New Charter ("Suspension Payments"). The Suspension Payments will continue until July 31, 2025, the original expiration date of the Subsequent Charter. Afterwards, the Partnership will continue to receive the charter rate agreed with NFE for the remaining term of the New Charter. In addition, pursuant to the Suspension Agreement, certain capital expenditures and maintenance expenses incurred to prepare and relocate the Höegh Gallant for performance under the New Charter will be shared 50/50 between Höegh LNG and the Partnership, subject to a cap on the obligations of the Partnership. The Board of Directors of the Partnership and the Conflicts Committees (the "Conflicts Committee") approved the New Charter and the Suspension Agreement. The Conflicts Committee retained an outside financial advisor and outside legal advisor to assist with its evaluation of the agreements.
The outbreak of Coronavirus (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 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. As a result, the Partnership expects that it will incur somewhat higher crewing expenses to ensure appropriate mitigating actions are in place to minimize the risk of outbreaks. To date, the Partnership has not had service interruptions on the Partnership's FSRUs. 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.
Presentation of Third Quarter 2021 Results
A presentation will be held today, Thursday, November 18, 2021, at 8:30 A.M. (EST) to discuss financial results for the third quarter of 2021. The results and presentation material will be available for download at http://www.hoeghlngpartners.com.
The presentation will be immediately followed by a Q&A session. Participants will be able to join this presentation using the following details:
a. | Webcast |
b. | Teleconference |
International call: | +1–412–542–4123 |
US Toll Free call: | +1–855–239–1375 |
Canada Toll Free call: | +1–855–669–9657 |
Participants should ask to be joined into the Höegh LNG Partners LP call.
There will be a Q&A session after the presentation. Information on how to ask questions will be given at the beginning of the Q&A session.
For those unable to participate in the conference call, a replay will be available from one hour after the end of the conference call until November 25, 2021.
The replay dial-in numbers are as follows:
International call: | +1–412–317–0088 |
US Toll Free call: | +1–877–344–7529 |
Canada Toll Free call: | +1–855–669–9658 |
Replay passcode: | 10162077 |
Financial Results on Form 6–K
The Partnership has filed a Form 6–K with the SEC with detailed information on the Partnership's results of operations for the three and nine months ended September 30, 2021, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and unaudited condensed interim consolidated financial statements. The Form 6–K can be viewed on the SEC's website: http://www.sec.gov and at HMLP's website: http://www.hoeghlngpartners.com.
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," "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 units or any changes in the quarterly distributions on the 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 Subsequent Charter, the Suspension Agreement and the
$85 million revolving credit facility and its guarantee and indemnification obligations; - the change in the ability of Höegh LNG to compete with the Partnership as a result of its completion of the Amalgamation;
- the Partnership's ability to compete successfully for future chartering and newbuilding opportunities;
- demand in the FSRU sector or the LNG shipping sector, including demand for the Partnership's vessels;
- the Partnership's ability to purchase additional vessels from Höegh LNG in the future;
- the Partnership's ability to integrate and realize the anticipated benefits from acquisitions;
- the Partnership's anticipated growth strategies, including the acquisition of 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 (including the Lampung facility, the Joint Venture facilities and the
$85 million revolving credit facility), 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 Total S.A., 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 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 common units, Series A preferred units and other securities in the public market;
- the Partnership's business strategy and other plans and objectives for future operations;
- the Partnership's ability to maintain effective internal control over financial reporting and effective disclosure controls and procedures; 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, 2020 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 | ||||||||||||
UNAUDITED CONDENSED INTERIM CONSOLIDATED | ||||||||||||
STATEMENTS OF INCOME | ||||||||||||
(in thousands of U.S. dollars, except per unit amounts) | ||||||||||||
Three months ended | Nine months ended | |||||||||||
September 30, | September 30, | |||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||
REVENUES | ||||||||||||
Time charter revenues | $ | 35,596 | $ | 35,913 | $ | 105,068 | $ | 107,036 | ||||
Total revenues | 35,596 | 35,913 | 105,068 | 107,036 | ||||||||
OPERATING EXPENSES | ||||||||||||
Vessel operating expenses | (5,927) | (5,963) | (18,213) | (17,246) | ||||||||
Administrative expenses | (3,491) | (2,455) | (9,005) | (7,037) | ||||||||
Depreciation and amortization | (5,096) | (5,210) | (15,318) | (15,727) | ||||||||
Total operating expenses | (14,514) | (13,628) | (42,536) | (40,010) | ||||||||
Equity in earnings (losses) of joint ventures | 6,056 | 5,774 | 20,397 | 2,202 | ||||||||
Operating income (loss) | 27,138 | 28,059 | 82,929 | 69,228 | ||||||||
FINANCIAL INCOME (EXPENSE), NET | ||||||||||||
Interest income | 166 | 135 | 397 | 470 | ||||||||
Interest expense | (6,146) | (6,014) | (21,440) | (18,847) | ||||||||
Other items, net | (982) | (846) | (2,293) | (1,980) | ||||||||
Total financial income (expense), net | (6,962) | (6,725) | (23,336) | (20,357) | ||||||||
Income (loss) before tax | 20,176 | 21,334 | 59,593 | 48,871 | ||||||||
Income tax expense | (2,817) | (1,859) | (15,757) | (4,240) | ||||||||
Net income (loss) | $ | 17,359 | $ | 19,475 | $ | 43,836 | $ | 44,631 | ||||
Preferred unitholders' interest in net income | 3,877 | 3,681 | 11,631 | 11,017 | ||||||||
Limited partners' interest in net income (loss) | $ | 13,482 | $ | 15,794 | $ | 32,205 | $ | 33,614 | ||||
Earnings per unit | ||||||||||||
Common unit public (basic and diluted) | $ | 0.40 | $ | 0.46 | $ | 0.95 | $ | 0.97 | ||||
Common unit Höegh LNG (basic and diluted) | $ | 0.40 | $ | 0.49 | $ | 0.98 | $ | 1.05 | ||||
HÖEGH LNG PARTNERS LP | ||||||
UNAUDITED CONDENSED INTERIM CONSOLIDATED | ||||||
BALANCE SHEETS | ||||||
(in thousands of U.S. dollars) | ||||||
As of | ||||||
September 30, | December 31, | |||||
2021 | 2020 | |||||
ASSETS | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 45,373 | $ | 31,770 | ||
Restricted cash | 6,215 | 7,198 | ||||
Trade receivables | 4,430 | 415 | ||||
Amounts due from affiliates | 3,880 | 3,639 | ||||
Advances to joint ventures | 4,410 | 3,284 | ||||
Inventory | 20 | — | ||||
Current portion of net investment in financing lease | 5,308 | 4,969 | ||||
Prepaid expenses and other receivables | 3,220 | 3,883 | ||||
Total current assets | 72,856 | 55,158 | ||||
Long-term assets | ||||||
Restricted cash | 9,143 | 12,095 | ||||
Accumulated earnings of joint ventures | 30,086 | 9,690 | ||||
Advances to joint ventures | — | 869 | ||||
Vessels, net of accumulated depreciation | 605,911 | 619,620 | ||||
Other equipment | 122 | 109 | ||||
Intangibles and goodwill | 11,995 | 14,056 | ||||
Net investment in financing lease | 265,264 | 269,288 | ||||
Long-term deferred tax asset | 207 | 102 | ||||
Other long-term assets | 822 | 823 | ||||
Total long-term assets | 923,550 | 926,652 | ||||
Total assets | $ | 996,406 | $ | 981,810 | ||
HÖEGH LNG PARTNERS LP | ||||||
UNAUDITED CONDENSED INTERIM CONSOLIDATED | ||||||
BALANCE SHEETS | ||||||
(in thousands of U.S. dollars) | ||||||
As of | ||||||
September 30, | December 31, | |||||
2021 | 2020 | |||||
LIABILITIES AND EQUITY | ||||||
Current liabilities | ||||||
Current portion of long-term debt | $ | 55,987 | $ | 59,119 | ||
Trade payables | 1,222 | 467 | ||||
Amounts due to owners and affiliates | 3,291 | 2,600 | ||||
Value added and withholding tax liability | 573 | 1,445 | ||||
Derivative instruments | 6,092 | 6,945 | ||||
Accrued liabilities and other payables | 12,724 | 7,232 | ||||
Total current liabilities | 79,889 | 77,808 | ||||
Long-term liabilities | ||||||
Long-term debt | 341,394 | 355,470 | ||||
Revolving credit facility due to owners and affiliates | 24,681 | 18,465 | ||||
Derivative instruments | 11,136 | 19,530 | ||||
Long-term tax liability | 8,459 | 2,668 | ||||
Long-term deferred tax liability | 16,755 | 14,430 | ||||
Other long-term liabilities | 131 | 124 | ||||
Total long-term liabilities | 402,556 | 410,687 | ||||
Total liabilities | 482,445 | 488,495 | ||||
EQUITY | ||||||
176,078 | 167,760 | |||||
Common units public | 311,029 | 308,850 | ||||
Common units Höegh LNG | 47,170 | 46,277 | ||||
Accumulated other comprehensive income (loss) | (20,316) | (29,572) | ||||
Total partners' capital | 513,961 | 493,315 | ||||
Total equity | 513,961 | 493,315 | ||||
Total liabilities and equity | $ | 996,406 | $ | 981,810 | ||
HÖEGH LNG PARTNERS LP | ||||||
UNAUDITED CONDENSED INTERIM CONSOLIDATED | ||||||
STATEMENTS OF CASH FLOWS | ||||||
(in thousands of U.S. dollars) | ||||||
Three months ended | ||||||
September 30, | ||||||
2021 | 2020 | |||||
OPERATING ACTIVITIES | ||||||
Net income (loss) | $ | 17,359 | $ | 19,475 | ||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||
Depreciation and amortization | 5,096 | 5,210 | ||||
Equity in (earnings) losses of joint ventures | (6,056) | (5,774) | ||||
Changes in accrued interest income on advances to joint ventures | (124) | (82) | ||||
Amortization of deferred debt issuance cost | 572 | 567 | ||||
Amortization in revenue for above market contract | 694 | 694 | ||||
Expenditure for drydocking | — | — | ||||
Changes in accrued interest expense | (120) | (147) | ||||
Receipts from repayment of principal on financing lease | 1,256 | 1,150 | ||||
Unrealized foreign exchange losses (gains) | 25 | 90 | ||||
Unrealized loss (gain) on derivative instruments | 67 | 24 | ||||
Non-cash revenue: tax paid directly by charterer | (225) | (215) | ||||
Non-cash income tax expense: tax paid directly by charterer | 225 | 215 | ||||
Deferred tax expense and provision for tax uncertainty | (849) | 809 | ||||
Issuance of units for Board of Directors' fees | 84 | 128 | ||||
Other adjustments | (4) | (85) | ||||
Changes in working capital: | ||||||
Trade receivables | 2 | (261) | ||||
Inventory | 5 | — | ||||
Prepaid expenses and other receivables | 3,131 | 174 | ||||
Trade payables | (190) | (136) | ||||
Amounts due to owners and affiliates | (579) | 843 | ||||
Value added and withholding tax liability | (96) | (250) | ||||
Accrued liabilities and other payables | 1,585 | 379 | ||||
Net cash provided by (used in) operating activities | 21,858 | 22,808 | ||||
INVESTING ACTIVITIES | ||||||
Expenditure for vessel and other equipment | — | — | ||||
Net cash provided by (used in) investing activities | $ | — | $ | — | ||
HÖEGH LNG PARTNERS LP | ||||||
UNAUDITED CONDENSED INTERIM CONSOLIDATED | ||||||
STATEMENTS OF CASH FLOWS | ||||||
(in thousands of U.S. dollars) | ||||||
Three months ended | ||||||
September 30, | ||||||
2021 | 2020 | |||||
FINANCING ACTIVITIES | ||||||
Proceeds from long-term debt | $ | 14,750 | $ | — | ||
Proceeds from revolving credit facility due to owners and affiliates | — | 6,600 | ||||
Repayment of long-term debt | (11,165) | (11,165) | ||||
Payment of debt issuance costs | (3,677) | — | ||||
Net proceeds from issuance of common units | — | — | ||||
Net proceeds from issuance of Series A preferred units | — | 268 | ||||
Cash distributions to limited partners and preferred unitholders | (4,211) | (18,713) | ||||
Net cash provided by (used in) financing activities | (4,303) | (23,010) | ||||
Increase (decrease) in cash, cash equivalents and restricted cash | 17,555 | (202) | ||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 2 | (29) | ||||
Cash, cash equivalents and restricted cash, beginning of period | 43,174 | 44,013 | ||||
Cash, cash equivalents and restricted cash, end of period | $ | 60,731 | $ | 43,782 | ||
HÖEGH LNG PARTNERS LP
UNAUDITED SEGMENT INFORMATION FOR THE QUARTER ENDED SEPTEMBER 30, 2021 AND 2020
(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 and 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, 2021 and 2020, 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, 2021 and 2020, Joint Venture FSRUs include two
The accounting policies applied to the segments are the same as those applied in the 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 | |||||||||||||||
UNAUDITED SEGMENT INFORMATION FOR THE QUARTER ENDED SEPTEMBER 30, 2021 | |||||||||||||||
(in thousands of U.S. dollars) | |||||||||||||||
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 | |||||||||||||||
UNAUDITED SEGMENT INFORMATION FOR THE QUARTER ENDED SEPTEMBER 30, 2020 | |||||||||||||||
(in thousands of U.S. dollars) | |||||||||||||||
Three months ended September 30, 2020 | |||||||||||||||
Joint venture | |||||||||||||||
Majority | FSRUs | Total | |||||||||||||
held | (proportional | Segment | Consolidated | ||||||||||||
(in thousands of U.S. dollars) | FSRUs | consolidation) | Other | reporting | Eliminations | reporting | |||||||||
Time charter revenues | $ | 35,913 | 10,896 | — | 46,809 | (10,896) | (1) | $ | 35,913 | ||||||
Total revenues | 35,913 | 10,896 | — | 46,809 | 35,913 | ||||||||||
Operating expenses | (6,831) | (1,957) | (1,587) | (10,375) | 1,957 | (1) | (8,418) | ||||||||
Equity in earnings (losses) of joint ventures | — | — | — | — | 5,774 | (1) | 5,774 | ||||||||
Segment EBITDA | 29,082 | 8,939 | (1,587) | 36,434 | |||||||||||
Depreciation and amortization | (5,210) | (2,490) | — | (7,700) | 2,490 | (1) | (5,210) | ||||||||
Operating income (loss) | 23,872 | 6,449 | (1,587) | 28,734 | 28,059 | ||||||||||
Gain (loss) on derivative instruments | — | 2,226 | — | 2,226 | (2,226) | (1) | — | ||||||||
Other financial income (expense), net | (2,415) | (2,901) | (4,310) | (9,626) | 2,901 | (1) | (6,725) | ||||||||
Income (loss) before tax | 21,457 | 5,774 | (5,897) | 21,334 | 21,334 | ||||||||||
Income tax expense | (1,859) | — | — | (1,859) | — | (1,859) | |||||||||
Net income (loss) | $ | 19,598 | 5,774 | (5,897) | 19,475 | — | $ | 19,475 | |||||||
Preferred unitholders' interest in net income | — | — | — | — | 3,681 | (2) | 3,681 | ||||||||
Limited partners' interest in net income (loss) | $ | 19,598 | 5,774 | (5,897) | 19,475 | (3,681) | (2) | $ | 15,794 | ||||||
(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
UNAUDITED SCHEDULE OF FINANCIAL INCOME AND EXPENSE
(in thousands of U.S. dollars)
The following table includes the financial income (expense), net for the three months ended September 30, 2021 and 2020.
Three months ended | ||||||
September 30, | ||||||
(in thousands of U.S. dollars) | 2021 | 2020 | ||||
Interest income | $ | 166 | $ | 135 | ||
Interest expense: | ||||||
Interest expense | (5,001) | (5,388) | ||||
Amortization and gain (loss) on cash flow hedge | (67) | (24) | ||||
Commitment fees | (506) | (35) | ||||
Amortization of debt issuance cost | (572) | (567) | ||||
Total interest expense | (6,146) | (6,014) | ||||
Other items, net: | ||||||
Foreign exchange gain (loss) | (18) | (157) | ||||
Bank charges, fees and other | (391) | (93) | ||||
Withholding tax on interest expense and other | (573) | (596) | ||||
Total other items, net | (982) | (846) | ||||
Total financial income (expense), net | $ | (6,962) | $ | (6,725) | ||
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, 2021 | ||||||||||||||||
Joint venture | ||||||||||||||||
Majority | FSRUs | Total | ||||||||||||||
held | (proportional | Segment | Eliminations(1) | Consolidated | ||||||||||||
(in thousands of U.S. dollars) | FSRUs | consolidation) | Other | reporting | 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, net | — | — | — | — | 2,641 | (4) | 2,641 | |||||||||
Equity in earnings of JVs: Depreciation and amortization | — | — | — | — | 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 | |||||||||
Three months ended September 30, 2020 | ||||||||||||||||
Joint venture | ||||||||||||||||
Majority | FSRUs | Total | ||||||||||||||
held | (proportional | Segment | Eliminations (1) | Consolidated | ||||||||||||
(in thousands of U.S. dollars) | FSRUs | consolidation) | Other | reporting | reporting | |||||||||||
Reconciliation to net income (loss) | ||||||||||||||||
Net income (loss) | $ | 19,598 | 5,774 | (5,897) | 19,475 | $ | 19,475 | (3) | ||||||||
Interest income | (52) | — | (83) | (135) | — | (4) | (135) | |||||||||
Interest expense | 1,807 | 2,895 | 4,207 | 8,909 | (2,895) | (4) | 6,014 | |||||||||
Depreciation and amortization | 5,210 | 2,490 | — | 7,700 | (2,490) | (5) | 5,210 | |||||||||
Other financial items (2) | 660 | (2,220) | 186 | (1,374) | 2,220 | (6) | 846 | |||||||||
Income tax (benefit) expense | 1,859 | — | — | 1,859 | — | (7) | 1,859 | |||||||||
Equity in earnings of JVs: Interest (income) expense, net | — | — | — | — | 2,895 | (4) | 2,895 | |||||||||
Equity in earnings of JVs: Depreciation and amortization | — | — | — | — | 2,490 | (5) | 2,490 | |||||||||
Equity in earnings of JVs: Other financial items (2) | — | — | — | — | (2,220) | (6) | (2,220) | |||||||||
Segment EBITDA | $ | 29,082 | 8,939 | (1,587) | 36,434 | $ | 36,434 | |||||||||
(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 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. | ||||
Media contact:
The IGB Group, Bryan Degnan, +1 (646) 673–9701 / Leon Berman, +1 (212) 477–8438
www.hoeghlngpartners.com
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SOURCE Hoegh LNG Partners LP
FAQ
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