Höegh LNG Partners LP Reports Financial Results for the Quarter Ended June 30, 2021
Höegh LNG Partners LP (HMLP) reported Q2 2021 results, achieving 100% operational availability of its fleet. Total time charter revenues were $34.7 million, slightly up from $34.4 million in Q2 2020. However, net income fell to $2.6 million from $19.7 million a year prior, mainly due to unrealized gains on derivatives. Segment EBITDA decreased to $34.3 million from $36.0 million. A significant tax provision of $10.9 million was recorded, pending dispute with Indonesian tax authorities. The company faces refinancing challenges for its Lampung facility, with obligations due on September 29, 2021.
- 100% availability of FSRUs for Q2 2021, ensuring operational stability.
- Time charter revenues increased to $34.7 million.
- Preferred unitholders' interest in net income rose to $3.9 million.
- Net income decreased significantly from $19.7 million to $2.6 million.
- Operating income fell to $24.1 million from $27.7 million.
- A tax provision of $10.9 million may impact future cash flow.
- Refinancing of the Lampung facility is pending, with obligations maturing soon.
HAMILTON, Bermuda, Aug. 26, 2021 /PRNewswire/ -- Höegh LNG Partners LP (NYSE: HMLP) (the "Partnership") today reported its financial results for the quarter ended June 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 second quarter of 2021 - Reported total time charter revenues of
$34.7 million for the second quarter of 2021 compared to$34.4 million of time charter revenues for the second quarter of 2020 - Generated operating income of
$24.1 million , net income of$2.6 million and limited partners' interest in net loss of$1.2 million for the second quarter of 2021 compared to operating income of$27.7 million , net income of$19.7 million and limited partners' interest in net income of$16.0 million for the second quarter of 2020 - Operating income, net income and limited partners' interest in net income were impacted by unrealized gains on derivative instruments for the second quarter of 2021 and 2020, mainly on the Partnership's share of equity in earnings of joint ventures in the second quarter of 2021 and 2020
- Excluding the impact of unrealized gains on derivative instruments for the second quarter of 2021 and 2020 impacting the equity in earnings of joint ventures, operating income would have been
$24.0 million for the three months ended June 30, 2021 compared with$25.5 million for the three months ended June 30, 2020 - A tax provision of
$10.9 million was recorded for a tax uncertainty for the potentially disallowed interest deduction following the conclusion by the Indonesian tax authority's 2019 tax audit.$2.7 million of the amount became payable in July 2021. We disagree with the conclusion of the tax audit and intend to contest the tax authority's position - Generated Segment EBITDA1 of
$34.3 million and$36.0 million for the second quarter of 2021 and 2020, respectively - On August 13 and 25, 2021, paid a
$0.01 per unit distribution on common units with respect to the second quarter of 2021 - On August 16, 2021, paid a cash distribution of
$0.54 6875 per8.75% Series A cumulative redeemable preferred unit (the "Series A preferred unit"), for the period commencing on May 15, 2021 to August 14, 2021 - 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 are continuing to perform their respective obligations under the LOM
Sveinung Støhle, Chief Executive Officer stated: "Höegh LNG Partners' fleet of modern, full-size FSRUs once again achieved
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 June 30, 2021, each of the Partnership's FSRUs have had
The Partnership reported net income of
Excluding all of the unrealized gains on derivative instruments, net income for the three months ended June 30, 2021 would have been
Preferred unitholders' interest in net income was
Equity in earnings of joint ventures for the three months ended June 30, 2021 was
Operating income for the three months ended June 30, 2021 was
Segment EBITDA1 for the three months ended June 30, 2021 was
Total operating expenses for the three months ended June 30, 2021 were
Total financial expense, net for the three months ended June 30, 2021 was
Financing and Liquidity
As of June 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 becomes due on September 29, 2021 and the export credit tranche can be called if the commercial tranche is not refinanced. The ongoing refinancing of the Lampung credit facility that 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 have left the Partnership exposed to having to arrange alternative refinancing, or rearrange the existing refinancing, in the short term in advance of the commercial tranche of the Lampung facility's maturity on September 29, 2021. The Partnership has asked the existing lenders to approve a six-months extension to the maturity date to allow for more time to complete a refinancing and has commenced discussions with existing lenders and certain other potential lenders about this. The Partnership expects that the terms of any alternative refinancing, if the Partnership is successful in finalizing such refinancing, are likely to be less favorable than the terms of the originally agreed refinancing. In addition, progress is being made for the refinancing of the Neptune facility and Cape Ann facility which mature and become payable by the Partnership's Joint Ventures in November 2021 and June 2022, respectively. However, should the Partnership be unable to secure an extension to the maturity date of the Lampung facility, or to refinance this facility, or to obtain refinancing for 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.
As of June 30, 2021, the Partnership has no material commitments for capital expenditures. However, during the second quarter of 2021, the on-water renewal survey for the Höegh Grace was completed. There was no off-hire in relation to this during the second quarter of 2021. Incurred expenditures of
During the second 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 June 30, 2021, the Partnership's total current liabilities exceeded total current assets by
As of June 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.
On May 7, 2021, the Partnership drew
On May 14, 2021, the Partnership paid a distribution of
On May 17, 2021 the Partnership paid a distribution of
On August 13 and 25, 2021, the Partnership paid a cash distribution of
On August 16, 2021, the Partnership paid a cash distribution of
For the period from April 1, 2021 to August 26, 2021, no Series A preferred units or common units were sold under the Partnership's ATM program.
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 August 26, 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 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 becomes due on September 29, 2021 and the export credit tranche 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 have left the Partnership exposed to having to arrange alternative refinancing, or rearrange the existing refinancing, in the short term in advance of the commercial tranche of the Lampung facility's maturity on September 29, 2021. The Partnership has asked the existing lenders to approve a six-month extension to the maturity date to allow for more time to complete a refinancing and has commenced discussions with existing lenders and certain other potential lenders about this. The Partnership expects that the terms of any alternative refinancing, if the Partnership is successful in finalizing such refinancing, are likely to be less favorable than the terms of the originally agreed refinancing.
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 aforementioned discussions with lenders. Notwithstanding the NOA, both parties are continuing to perform their respective obligations under the LOM. In the event that the Partnership is unable to amend or refinance the Lampung facility or if 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.
In addition, progress is being made for the refinancing of the Neptune facility and Cape Ann facility which mature and become payable by the Partnership's Joint Ventures in November 2021 and June 2022, respectively. However, should the Partnership be unable to secure an extension to the maturity date of the Lampung facility, or to refinance this facility, or to obtain refinancing for 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.
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 Coronavirus 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 the 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 the 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 may incur somewhat higher crewing expenses to ensure appropriate mitigation actions are in place to minimize the risk of outbreaks. To date, the Partnership had 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.
On March 8, 2021, Höegh LNG announced a recommended offer by Leif Höegh & Co. Ltd. ("LHC") and funds managed by Morgan Stanley Infrastructure Partners ("MSIP") through a 50/50 joint venture, Larus Holding Limited ("JVCo"), to acquire the remaining issued and outstanding shares of Höegh LNG not currently owned by LHC or its affiliates (the "Amalgamation"). The Amalgamation was approved by Höegh LNG's shareholders and bondholders and closed on May 4, 2021. Höegh LNG is now wholly owned by JVCo, and the common shares of Höegh LNG were delisted from the Oslo Stock Exchange. Following the consummation of the Amalgamation, some provisions of the omnibus agreement entered into in connection with the IPO (the "omnibus agreement") terminated by their terms, including (i) the prohibition on Höegh LNG from acquiring, owning, operating or chartering any Five-Year Vessels (as defined in the omnibus agreement), (ii) the prohibition on the Partnership from acquiring, owning, operating or chartering any Non-Five-Year Vessels (as defined in the omnibus agreement), and (iii) the rights of first offer associated with those rights. As a consequence, following the consummation of the Amalgamation, Höegh LNG is not required to offer the Partnership Five-Year Vessels and is permitted to compete with it.
Presentation of Second Quarter 2021 Results
A presentation will be held today, Thursday, August 26, 2021, at 8:30 A.M. (EST) to discuss financial results for the second 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
https://www.webcaster4.com/Webcast/Page/942/42467
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 September 2, 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: | 10159535 |
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 six months ended June 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 the subsidiaries' ability to make distributions;
- the ability of Höegh LNG to meet its financial obligations to the Partnership pursuant to the Subsequent Charter 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 agreements;
- 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 Partnership's common units, Series A preferred units and other securities in the public market;
- Partnership's business strategy and other plans and objectives for future operations;
- 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 | ||||||||||||||||
Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
REVENUES | ||||||||||||||||
Time charter revenues | $ | 34,696 | $ | 34,436 | $ | 69,472 | $ | 71,122 | ||||||||
Total revenues | 34,696 | 34,436 | 69,472 | 71,122 | ||||||||||||
OPERATING EXPENSES | ||||||||||||||||
Vessel operating expenses | (6,114) | (5,776) | (12,286) | (11,283) | ||||||||||||
Administrative expenses | (2,779) | (2,155) | (5,514) | (4,583) | ||||||||||||
Depreciation and amortization | (5,012) | (5,234) | (10,223) | (10,516) | ||||||||||||
Total operating expenses | (13,905) | (13,165) | (28,023) | (26,382) | ||||||||||||
Equity in earnings (losses) of joint ventures | 3,267 | 6,475 | 14,341 | (3,572) | ||||||||||||
Operating income (loss) | 24,058 | 27,746 | 55,790 | 41,168 | ||||||||||||
FINANCIAL INCOME (EXPENSE), NET | ||||||||||||||||
Interest income | 98 | 163 | 231 | 335 | ||||||||||||
Interest expense | (9,635) | (6,322) | (15,293) | (12,833) | ||||||||||||
Other items, net | (658) | (487) | (1,311) | (1,134) | ||||||||||||
Total financial income (expense), net | (10,195) | (6,646) | (16,373) | (13,632) | ||||||||||||
Income (loss) before tax | 13,863 | 21,100 | 39,417 | 27,536 | ||||||||||||
Income tax expense | (11,225) | (1,419) | (12,939) | (2,381) | ||||||||||||
Net income (loss) | $ | 2,638 | $ | 19,681 | $ | 26,478 | $ | 25,155 | ||||||||
Preferred unitholders' interest in net income | 3,877 | 3,668 | 7,754 | 7,337 | ||||||||||||
Limited partners' interest in net income (loss) | $ | (1,239) | $ | 16,013 | $ | 18,724 | $ | 17,818 | ||||||||
Earnings per unit | ||||||||||||||||
Common unit public (basic and diluted) | $ | (0.04) | $ | 0.47 | $ | 0.55 | $ | 0.51 | ||||||||
Common unit Höegh LNG (basic and diluted) | $ | (0.04) | $ | 0.50 | $ | 0.58 | $ | 0.56 | ||||||||
HÖEGH LNG PARTNERS LP | ||||||||
As of | ||||||||
June 30, | December 31, | |||||||
2021 | 2020 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 23,838 | $ | 31,770 | ||||
Restricted cash | 8,771 | 7,198 | ||||||
Trade receivables | 4,432 | 415 | ||||||
Amounts due from affiliates | 3,877 | 3,639 | ||||||
Advances to joint ventures | 4,285 | 3,284 | ||||||
Inventory | 25 | — | ||||||
Current portion of net investment in financing lease | 5,193 | 4,969 | ||||||
Prepaid expenses and other receivables | 2,808 | 3,883 | ||||||
Total current assets | 53,229 | 55,158 | ||||||
Long-term assets | ||||||||
Restricted cash | 10,565 | 12,095 | ||||||
Accumulated earnings of joint ventures | 24,030 | 9,690 | ||||||
Advances to joint ventures | — | 869 | ||||||
Vessels, net of accumulated depreciation | 611,000 | 619,620 | ||||||
Other equipment | 144 | 109 | ||||||
Intangibles and goodwill | 12,690 | 14,056 | ||||||
Net investment in financing lease | 266,635 | 269,288 | ||||||
Long-term deferred tax asset | 210 | 102 | ||||||
Other long-term assets | 822 | 823 | ||||||
Total long-term assets | 926,096 | 926,652 | ||||||
Total assets | $ | 979,325 | $ | 981,810 | ||||
HÖEGH LNG PARTNERS LP | ||||||||
As of | ||||||||
June 30, | December 31, | |||||||
2021 | 2020 | |||||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities | ||||||||
Current portion of long-term debt | $ | 57,031 | $ | 59,119 | ||||
Trade payables | 1,413 | 467 | ||||||
Amounts due to owners and affiliates | 3,860 | 2,600 | ||||||
Value added and withholding tax liability | 442 | 1,445 | ||||||
Derivative instruments | 6,373 | 6,945 | ||||||
Accrued liabilities and other payables | 14,583 | 7,232 | ||||||
Total current liabilities | 83,702 | 77,808 | ||||||
Long-term liabilities | ||||||||
Long-term debt | 336,264 | 355,470 | ||||||
Revolving credit facility due to owners and affiliates | 24,423 | 18,465 | ||||||
Derivative instruments | 12,836 | 19,530 | ||||||
Long-term tax liability | 7,929 | 2,668 | ||||||
Long-term deferred tax liability | 15,304 | 14,430 | ||||||
Other long-term liabilities | 144 | 124 | ||||||
Total long-term liabilities | 396,900 | 410,687 | ||||||
Total liabilities | 480,602 | 488,495 | ||||||
EQUITY | ||||||||
176,078 | 167,760 | |||||||
Common units public | 303,808 | 308,850 | ||||||
Common units Höegh LNG | 41,159 | 46,277 | ||||||
Accumulated other comprehensive income (loss) | (22,322) | (29,572) | ||||||
Total partners' capital | 498,723 | 493,315 | ||||||
Total equity | 498,723 | 493,315 | ||||||
Total liabilities and equity | $ | 979,325 | $ | 981,810 | ||||
HÖEGH LNG PARTNERS LP | ||||||||
Three months ended | ||||||||
2021 | 2020 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income (loss) | $ | 2,638 | $ | 19,681 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 5,012 | 5,234 | ||||||
Equity in losses (earnings) of joint ventures | (3,267) | (6,475) | ||||||
Changes in accrued interest income on advances to joint ventures | (50) | (79) | ||||||
Amortization of deferred debt issuance cost | 4,119 | 578 | ||||||
Amortization in revenue for above market contract and extension | 687 | 759 | ||||||
Expenditure for drydocking | (1,590) | — | ||||||
Changes in accrued interest expense | 560 | (102) | ||||||
Receipts from repayment of principal on financing lease | 1,228 | 1,125 | ||||||
Unrealized foreign exchange losses (gains) | (19) | (41) | ||||||
Unrealized loss (gain) on derivative instruments | 57 | 21 | ||||||
Non-cash revenue: tax paid directly by charterer | (224) | (218) | ||||||
Non-cash income tax expense: tax paid directly by charterer | 224 | 218 | ||||||
Deferred tax expense and provision for tax uncertainty | 10,675 | 940 | ||||||
Issuance of units for Board of Directors' fees | 127 | — | ||||||
Other adjustments | 17 | 120 | ||||||
Changes in working capital: | ||||||||
Trade receivables | 184 | 764 | ||||||
Inventory | (25) | 463 | ||||||
Prepaid expenses and other receivables | (1,439) | (164) | ||||||
Trade payables | 989 | (241) | ||||||
Amounts due to owners and affiliates | 1,174 | 238 | ||||||
Value added and withholding tax liability | (418) | 148 | ||||||
Accrued liabilities and other payables | 407 | 356 | ||||||
Net cash provided by (used in) operating activities | 21,066 | 23,325 | ||||||
INVESTING ACTIVITIES | ||||||||
Expenditure for vessel and other equipment | — | (8) | ||||||
Net cash provided by (used in) investing activities | $ | — | $ | (8) | ||||
HÖEGH LNG PARTNERS LP | ||||||||
Three months ended | ||||||||
2021 | 2020 | |||||||
FINANCING ACTIVITIES | ||||||||
Proceeds from loans due to owners and affiliates | $ | 6,000 | $ | 4,500 | ||||
Repayment of long-term debt | (11,165) | (11,166) | ||||||
Cash distributions to limited partners and preferred unitholders | (18,956) | (18,714) | ||||||
Net cash provided by (used in) financing activities | (24,121) | (25,380) | ||||||
Increase (decrease) in cash, cash equivalents and restricted cash | (3,055) | (2,063) | ||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 49 | 102 | ||||||
Cash, cash equivalents and restricted cash, beginning of period | 46,180 | 45,974 | ||||||
Cash, cash equivalents and restricted cash, end of period | $ | 43,174 | $ | 44,013 | ||||
HÖEGH LNG PARTNERS LP
UNAUDITED SEGMENT INFORMATION FOR THE QUARTER ENDED JUNE 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 June 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 June 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 | |||||||||||||||||||||||||
Three months ended June 30, 2021 | |||||||||||||||||||||||||
(in thousands of U.S. dollars) | Majority | Joint venture | Other | Total | Eliminations | Consolidated | |||||||||||||||||||
Time charter revenues | $ | 34,696 | 10,285 | — | 44,981 | (10,285) | (1) | $ | 34,696 | ||||||||||||||||
Total revenues | 34,696 | 10,285 | — | 44,981 | (1) | 34,696 | |||||||||||||||||||
Operating expenses | (7,272) | (1,804) | (1,621) | (10,697) | 1,804 | (1) | (8,893) | ||||||||||||||||||
Equity in earnings (losses) of joint ventures | — | — | — | — | 3,267 | 3,267 | |||||||||||||||||||
Segment EBITDA | 27,424 | 8,481 | (1,621) | 34,284 | |||||||||||||||||||||
Depreciation and amortization | (5,012) | (2,489) | — | (7,501) | 2,489 | (1) | (5,012) | ||||||||||||||||||
Operating income (loss) | 22,412 | 5,992 | (1,621) | 26,783 | 24,058 | ||||||||||||||||||||
Gain (loss) on derivative instruments | — | 34 | — | 34 | (34) | (1) | — | ||||||||||||||||||
Other financial income (expense), net | (6,090) | (2,759) | (4,105) | (12,954) | 2,759 | (1) | (10,195) | ||||||||||||||||||
Income (loss) before tax | 16,322 | 3,267 | (5,726) | 13,863 | 13,863 | ||||||||||||||||||||
Income tax benefit (expense) | (11,225) | — | — | (11,225) | — | (11,225) | |||||||||||||||||||
Net income (loss) | $ | 5,097 | 3,267 | (5,726) | 2,638 | — | $ | 2,638 | |||||||||||||||||
Preferred unitholders' interest in net income | — | — | — | — | 3,877 | (2) | 3,877 | ||||||||||||||||||
Limited partners' interest in net income (loss) | $ | 5,097 | 3,267 | (5,726) | 2,638 | (3,877) | (2) | $ | (1,239) | ||||||||||||||||
(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 June 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 | $ | 34,436 | 12,139 | — | 46,575 | (12,139) | (1) | $ | 34,436 | ||||||||||||||||
Total revenues | 34,436 | 12,139 | — | 46,575 | 34,436 | ||||||||||||||||||||
Operating expenses | (6,616) | (2,660) | (1,315) | (10,591) | 2,660 | (1) | (7,931) | ||||||||||||||||||
Equity in earnings (losses) of joint ventures | — | — | — | — | 6,475 | (1) | 6,475 | ||||||||||||||||||
Segment EBITDA | 27,820 | 9,479 | (1,315) | 35,984 | |||||||||||||||||||||
Depreciation and amortization | (5,234) | (2,490) | — | (7,724) | 2,490 | (1) | (5,234) | ||||||||||||||||||
Operating income (loss) | 22,586 | 6,989 | (1,315) | 28,260 | 27,746 | ||||||||||||||||||||
Gain (loss) on derivative instruments | — | 2,295 | — | 2,295 | (2,295) | (1) | — | ||||||||||||||||||
Other financial income (expense), net | (2,236) | (2,921) | (4,410) | (9,567) | 2,921 | (1) | (6,646) | ||||||||||||||||||
Income (loss) before tax | 20,350 | 6,363 | (5,725) | 20,988 | 21,100 | ||||||||||||||||||||
Income tax benefit (expense) | (1,419) | 112 | — | (1,307) | (112) | (1,419) | |||||||||||||||||||
Net income (loss) | $ | 18,931 | 6,475 | (5,725) | 19,681 | — | $ | 19,681 | |||||||||||||||||
Preferred unitholders' interest in net income | — | — | — | — | 3,668 | (2) | 3,668 | ||||||||||||||||||
Limited partners' interest in net income (loss) | $ | 18,931 | 6,475 | (5,725) | 19,681 | (3,668) | (2) | $ | 16,013 | ||||||||||||||||
(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 June 30, 2021 and 2020. | ||||||||
Three months ended | ||||||||
June 30, | ||||||||
(in thousands of U.S. dollars) | 2021 | 2020 | ||||||
Interest income | $ | 98 | $ | 163 | ||||
Interest expense: | ||||||||
Interest expense incurred | (5,023) | (5,689) | ||||||
Amortization and gain (loss) on cash flow hedge | (57) | (21) | ||||||
Commitment fees | (436) | (34) | ||||||
Amortization of debt issuance cost and fair value of debt assumed | (4,119) | (578) | ||||||
Total interest expense | (9,635) | (6,322) | ||||||
Other items, net: | ||||||||
Unrealized foreign exchange gain (loss) | 19 | 41 | ||||||
Realized foreign exchange gain (loss) | (22) | 125 | ||||||
Bank charges, fees and other | (54) | (41) | ||||||
Withholding tax on interest expense and other | (601) | (612) | ||||||
Total other items, net | (658) | (487) | ||||||
Total financial income (expense), net | $ | (10,195) | $ | (6,646) | ||||
Appendix A: Segment EBITDA
Non-GAAP Financial Measures
Segment EBITDA. EBITDA is defined as earnings before interest, depreciation and amortization and taxes. 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 and amortization, 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 investor 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 June 30, 2021 | |||||||||||||||||||||||||||
Joint venture | |||||||||||||||||||||||||||
Majority | FSRUs | Total | |||||||||||||||||||||||||
held | (proportional | Segment | Consolidated | ||||||||||||||||||||||||
(in thousands of U.S. dollars) | FSRUs | consolidation) | Other | reporting | Eliminations(1) | reporting | |||||||||||||||||||||
Reconciliation to net income (loss) | |||||||||||||||||||||||||||
Net income (loss) | $ | 5,097 | 3,267 | (5,726) | 2,638 | $ | 2,638 | (3) | |||||||||||||||||||
Interest income | (49) | — | (49) | (98) | — | (4) | (98) | ||||||||||||||||||||
Interest expense | 5,529 | 2,756 | 4,106 | 12,391 | (2,756) | (4) | 9,635 | ||||||||||||||||||||
Depreciation and amortization | 5,012 | 2,489 | — | 7,501 | (2,489) | (5) | 5,012 | ||||||||||||||||||||
Other financial items (2) | 610 | (31) | 48 | 627 | 31 | (6) | 658 | ||||||||||||||||||||
Income tax (benefit) expense | 11,225 | — | — | 11,225 | — | 11,225 | |||||||||||||||||||||
Equity in earnings of JVs: | — | — | — | — | 2,756 | (4) | 2,756 | ||||||||||||||||||||
Equity in earnings of JVs: | — | — | — | — | 2,489 | (5) | 2,489 | ||||||||||||||||||||
Equity in earnings of JVs: | — | — | — | — | (31) | (6) | (31) | ||||||||||||||||||||
Segment EBITDA | $ | 27,424 | 8,481 | (1,621) | 34,284 | $ | 34,284 | ||||||||||||||||||||
Three months ended June 30, 2020 | |||||||||||||||||||||||||||
Joint venture | |||||||||||||||||||||||||||
Majority | FSRUs | Total | |||||||||||||||||||||||||
held | (proportional | Segment | Consolidated | ||||||||||||||||||||||||
(in thousands of U.S. dollars) | FSRUs | consolidation) | Other | reporting | Eliminations(1) | reporting | |||||||||||||||||||||
Reconciliation to net income (loss) | |||||||||||||||||||||||||||
Net income (loss) | $ | 18,931 | 6,475 | (5,725) | 19,681 | $ | 19,681 | (3) | |||||||||||||||||||
Interest income | (83) | — | (80) | (163) | — | (4) | (163) | ||||||||||||||||||||
Interest expense | 1,883 | 2,918 | 4,439 | 9,240 | (2,918) | (4) | 6,322 | ||||||||||||||||||||
Depreciation and amortization | 5,234 | 2,490 | — | 7,724 | (2,490) | (5) | 5,234 | ||||||||||||||||||||
Other financial items (2) | 436 | (2,292) | 51 | (1,805) | 2,292 | (6) | 487 | ||||||||||||||||||||
Income tax (benefit) expense | 1,419 | (112) | — | 1,307 | 112 | (7) | 1,419 | ||||||||||||||||||||
Equity in earnings of JVs: | — | — | — | — | 2,918 | (4) | 2,918 | ||||||||||||||||||||
Equity in earnings of JVs: | — | — | — | — | 2,490 | (5) | 2,490 | ||||||||||||||||||||
Equity in earnings of JVs: | — | — | — | — | (2,292) | (6) | (2,292) | ||||||||||||||||||||
Equity in earnings of JVs: | — | — | — | — | (112) | (7) | (112) | ||||||||||||||||||||
Segment EBITDA | $ | 27,820 | 9,479 | (1,315) | 35,984 | $ | 35,984 | ||||||||||||||||||||
(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. |
(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. |
Appendix B: Distributable Cash Flow
Distributable cash flow represents Segment EBITDA adjusted for cash collections on principal payments on the direct financing lease, amortization in revenues for above market contracts less non-cash revenue: tax paid directly by charterer, amortization of deferred revenues for the joint ventures, interest income, interest expense less amortization of debt issuance cost, amortization and gain on cash flow hedges included in interest expense and proceeds from settlement of derivatives, other items (net), unrealized foreign exchange losses (gains), current income tax benefit (expense), net of uncertain tax position less non-cash income tax: tax paid directly by charterer, and other adjustments such as indemnification paid or to be paid by Höegh LNG for legal expenses related to the boil-off claim, non-budgeted expenses or losses, or prior period indemnifications refunded to, or to be refunded to, Höegh LNG for amounts recovered from insurance or the charterer, distributions on the Series A preferred units and estimated maintenance and replacement capital expenditures. Cash collections on the direct financing lease investment with respect to the PGN FSRU Lampung consist of the difference between the payments under time charter and the revenues recognized as a financing lease (representing the payment of the principal recorded as a receivable). Amortization in revenues for above market contracts consist of the non-cash amortization of the intangible for the above market time charter contract related to the acquisitions of the Höegh Gallant and Höegh Grace. Amortization of deferred revenues for the joint ventures accounted for under the equity method consist of non-cash amortization to revenues of charterer payments for modifications and drydocking to the vessels. Non-cash revenue: tax paid directly by charterer and non-cash income tax: tax paid directly by charterer consists of certain taxes paid by the charterer directly to the Colombian tax authorities on behalf of the Partnership's subsidiaries which is recorded as a component of time charter revenues and current income tax expenses. Estimated maintenance and replacement capital expenditures, including estimated expenditures for drydocking, represent capital expenditures required to maintain over the long-term the operating capacity of, or the revenue generated by, the Partnership's capital assets.
Distributable cash flow is presented starting with Segment EBITDA taken from the total segment reporting using the proportional consolidation method for the Partnership's
Three months ended | ||||
(in thousands of U.S. dollars) | June 30, 2021 | |||
Segment EBITDA | $ | 34,284 | ||
Cash collection/Principal payment on financing lease | 1,228 | |||
Amortization in revenues for above market contracts | 687 | |||
Non-cash revenue: Tax paid directly by charterer | (224) | |||
Equity in earnings of JVs: Amortization of deferred revenue | (685) | |||
Interest income (1) | 98 | |||
Interest expense (1) | (12,391) | |||
Amortization of debt issuance cost (1) | 4,158 | |||
Amortization and gain on cash flow hedges included in interest expense | 57 | |||
Other items, net | (661) | |||
Unrealized foreign exchange losses (gains) | (19) | |||
Current income tax benefit (expense), net of uncertain tax position | (550) | |||
Non-cash income tax: Tax paid directly by charterer | 224 | |||
Other adjustments: | ||||
Distributions relating to Series A preferred units (2) | (3,877) | |||
Estimated maintenance and replacement capital expenditures | (5,350) | |||
Distributable cash flow | $ | 16,979 | ||
Reconciliation of distributable cash flows to net cash provided by (used in) operating activities | ||||
Three months ended | ||||
(in thousands of U.S. dollars) | June 30, 2021 | |||
Distributable cash flow | $ | 16,979 | ||
Estimated maintenance and replacement capital expenditures | 5,350 | |||
Distributions relating to Series A preferred units (2) | 3,877 | |||
Equity in earnings of JVs: Amortization of deferred revenue | 685 | |||
Equity in earnings of JVs: Amortization of debt issuance cost | (39) | |||
Equity in earnings of JVs: Depreciation and amortization | (2,489) | |||
Equity in earnings of JVs: Gain (loss) on derivative instruments | 34 | |||
Equity in losses (earnings) of joint ventures | (3,267) | |||
Expenditures for drydocking | (1,590) | |||
Changes in accrued interest expense and interest income | 510 | |||
Other adjustments | 144 | |||
Changes in working capital | 872 | |||
Net cash provided by (used in) operating activities | $ | 21,066 | ||
(1) | The Partnership's interest in the joint ventures' interest expense and amortization of debt issuance cost is |
(2) | Represents distributions payable on the Series A preferred units related to the three months ended June 30, 2021 |
Media contact:
The IGB Group, Bryan Degnan, +1 (646) 673-9701 / Leon Berman, +1 (212) 477-8438
Knut Johan Arnholdt, VP IR and Strategy, +47 922 59 131
www.hoeghlngpartners.com
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SOURCE Hoegh LNG Partners LP
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