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Höegh LNG Partners LP Reports Financial Results for the Quarter Ended June 30, 2019

HAMILTON, Bermuda, Aug. 22, 2019 /PRNewswire/ -- Höegh LNG Partners LP (HMLP) (the "Partnership") today reported its financial results for the quarter ended June 30, 2019.

Highlights

  • Reported total time charter revenues of $33.8 million for the second quarter of 2019 compared to $35.5 million of time charter revenues for the second quarter of 2018
  • Generated operating income of $15.3 million, net income of $6.2 million and limited partners' interest in net income of $2.8 million for the second quarter of 2019 compared to operating income of $28.9 million, net income of $19.9 million and limited partners' interest in net income of $16.9 million for the second quarter of 2018
  • Planned off-hire for the Höegh Gallant and maintenance with accelerated timing to allow completion during the scheduled drydock impacted operating income, net income and limited partners' interest in net income in the second quarter of 2019
  • Operating income, net income and limited partners' interest in net income were impacted by unrealized losses on derivative instruments for the second quarter of 2019, compared with unrealized gains on derivative instruments for the second quarter of 2018, mainly on the Partnership's share of equity in earnings (losses) of joint ventures in the second quarter of 2019 and 2018
  • Excluding the impact of the unrealized gains (losses) on derivative instruments for the second quarter of 2019 and 2018 impacting the equity in earnings (losses) of joint ventures, operating income for the three months ended June 30, 2019 would have been $19.9 million, a decrease of $6.0 million from $25.9 million for the three months ended June 30, 2018
  • Generated Segment EBITDA 1 of $31.0 million for the second quarter of 2019 compared to $36.9 million for the second quarter of 2018
  • On August 14, 2019, paid a $0.44 per unit distribution on common and subordinated units with respect to the second quarter of 2019, equivalent to $1.76 per unit on an annualized basis
  • On August 15, 2019, paid a cash distribution of $0.546875 per 8.75% Series A cumulative redeemable preferred unit (the "Series A preferred unit"), for the period commencing on May 15, 2019 to August 14, 2019

Steffen Føreid, Chief Executive Officer and Chief Financial Officer stated: "In the second quarter, the Partnership's modern assets continued to perform according to contract, underpinning its stable distribution, however, the planned off-hire and maintenance during the scheduled dry-docking of two of the vessels weighed on the result. More broadly, global trade in LNG continues to increase year-on-year, driven by fuel-switching and new LNG production facilities coming on stream, which is fueling demand for more LNG import terminals. With an established platform of long-term contracts generating stable and predictable cash flows, Höegh LNG Partners is in a strong position to maintain its leadership position in the FSRU sector and grow as new opportunities crystalize."

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

Effective January 1, 2019, the Partnership adopted the new accounting standard, Leases, which did not change the timing or amount of revenue recognized for the Partnership.

The Partnership reported net income of $6.2 million for the three months ended June 30, 2019, a decrease of $13.7 million from net income of $19.9 million for the three months ended June 30, 2018. The net income for both periods was significantly impacted by unrealized gains and losses on derivative instruments mainly on the Partnership's share of equity in earnings (losses) of joint ventures.

Excluding all of the unrealized gains (losses) on derivative instruments, net income for the three months ended June 30, 2019 would have been $10.8 million, a decrease of $5.6 million from $16.4 million for the three months ended June 30, 2018. Excluding the impact of the unrealized gains (losses) on derivatives, the decrease for the three months ended June 30, 2019 is primarily due to lower time charter revenue as a result of off-hire related to the drydock for the Höegh Gallant, lower other revenue related to the receipt of insurance proceeds associated with prior periods expenses and higher vessel operating expenses as a result of maintenance, principally for the Höegh Gallant but also for the PGN FSRU Lampung. These items were also the main drivers for the lower limited partners' interest in net income, operating income and Segment EBITDA for the three months ended June 30, 2019 compared with the three months ended June 30, 2018.

Preferred unitholders' interest in net income was $3.4 million for the three months ended June 30, 2019, an increase of $0.4 million from $3.0 million due to additional preferred units issued as part of the at-the-market offering program ("ATM program"). Limited partners' interest in net income, for the three months ended June 30, 2019 was $2.8 million, a decrease of $14.1 million from limited partners' interest in net income of $16.9 million for the three months ended June 30, 2018. Excluding all of the unrealized gains (losses) on derivative instruments, limited partners' interest in net income for the three months ended June 30, 2019 would have been $7.4 million, a decrease of $6.0 million from $13.4 million for the three months ended June 30, 2018.

The Höegh Gallant had the equivalent of 16 days of off-hire due to the scheduled drydock for the three months ended June 30, 2019 compared with no days off-hire for the three months ended June 30, 2018. The PGN FSRU Lampung and the Höegh Grace were both on-hire for the full three months periods ended June 30, 2019 and 2018.

During the second quarter of 2019, the drydock was completed for the Höegh Gallant and the on-water class renewal survey commenced for the PGN FSRU Lampung. The opportunity was utilized to accelerate the timing of as many maintenance procedures as possible resulting in an increase in maintenance expenses of approximately $3.0 million for the three months ended June 30, 2019 compared with the three months ended June 30, 2018. Performing routine maintenance during the drydock reduces the risk of service interruption or off-hire in subsequent periods.

Equity in losses of joint ventures for the three months ended June 30, 2019 was $1.6 million, a decrease of $6.7 million from equity in earnings of joint ventures of $5.1 million for the three months ended June 30, 2018. The joint ventures own the Neptune and the Cape Ann. Unrealized gains (losses) on derivative instruments in the joint ventures significantly impacted the equity in earnings (losses) of joint ventures for the three months ended June 30, 2019 and 2018. The joint ventures do not apply hedge accounting for interest rate swaps and all changes in fair value are included in equity in earnings (losses) of joint ventures. Excluding the unrealized loss on derivative instruments for the three months ended June 30, 2019 and the unrealized gain on derivative instruments for the three months ended June 30, 2018, the equity in earnings (losses) of joint ventures would have been $3.1 million for the three months ended June 30, 2019, an increase of $1.0 million from $2.1 million for the three months ended June 30, 2018. Excluding the unrealized gains (losses) on derivative instruments, the increase was mainly due to higher time charter revenues related to the reimbursement of project costs in the three months ended June 30, 2019 and additional expenses for the three months ended June 30, 2018 in relation to a new project for the charterer related to the Cape Ann and higher maintenance expenses.

Operating income for the three months ended June 30, 2019 was $15.3 million, a decrease of $13.6 million from operating income of $28.9 million for the three months ended June 30, 2018. Excluding the impact of the unrealized gains (losses) on derivatives impacting the equity in earnings (losses) of joint ventures for the three months ended June 30, 2019 and 2018, operating income for the three months ended June 30, 2019 would have been $19.9 million, a decrease of $6.0 million from $25.9 million for the three months ended June 30, 2018.

Segment EBITDA 1 was $31.0 million for the three months ended June 30, 2019, a decrease of $5.9 million from $36.9 million for the three months ended June 30, 2018.

Financing and Liquidity

As of June 30, 2019, the Partnership had cash and cash equivalents of $27.1 million, an undrawn portion of $42.2 million of the $85 million revolving credit facility from Höegh LNG Holdings Ltd. ("Höegh LNG") and an undrawn $63 million revolving credit facility under the $385 million facility. On August 12, 2019, the Partnership drew $48.3 million on the $63 million revolving credit facility under the $385 million facility. On August 13, 2019, the Partnership repaid $34.0 million on the $85 million revolving credit facility. As a result, the Partnership currently has undrawn balances of $76.2 million and $14.7 million on the $85 million revolving credit facility and $63 million revolving credit facility, respectively. Current restricted cash for operating obligations of the PGN FSRU Lampung was $8.0 million and long-term restricted cash required under the Lampung facility was $12.9 million as of June 30, 2019. 

During the second quarter of 2019, the Partnership made quarterly repayments of $4.8 million on the Lampung facility and $6.4 million on the $385 million facility.

The Partnership's book value and outstanding principal of total long-term debt was $472.5 million and $482.9 million, respectively, as of June 30, 2019, including long-term debt financing of the FSRUs and $42.8 million on the $85 million revolving credit facility. As of June 30, 2019, the Partnership's total current liabilities exceeded total current assets by $12.4 million. This is partly a result of the current portion of long-term debt of $44.7 million being classified as current while restricted cash of $12.9 million associated with the Lampung facility is classified as long-term. The current portion of long-term debt reflects principal payments for the next twelve months which will be funded, for the most part, by future cash flows from operations. The Partnership does not intend to maintain a cash balance to fund the next twelve months' net liabilities.

The Partnership believes its current resources, including the undrawn balances under the $85 million revolving credit facility and the $63 million revolving credit facility, are sufficient to meet the Partnership's working capital requirements for its business for the next twelve months.

As of June 30, 2019, the Partnership did not have material commitments for capital or other expenditures for its current business. However, during the third quarter of 2019, the PGN FSRU Lampung will complete its on-water class renewal survey that commenced in the second quarter of 2019. Additional maintenance expenses for the PGN FSRU Lampung are expected to be incurred during the third quarter of 2019.

For the joint ventures, the Neptune will have an on-water class renewal survey during the third quarter of 2019. The majority of the survey expenditures are expected to be compensated by the charterer and the Neptune will remain on-hire. During the class survey of the Neptune, the joint venture expects to incur costs for certain capital improvements that will not be reimbursed by the charterer for which the Partnership's 50% share is expected to be approximately $0.2 million for the year ended December 31, 2019. As discussed in note 14 under "Joint ventures claims and accruals" in the Partnership's unaudited condensed interim consolidated financial statements for the period ended June 30, 2019, the joint ventures have a probable liability for a boil-off claim under the time charters. The Partnership's 50% share of the accrual was approximately $11.9 million as of June 30, 2019. The joint ventures will continue to monitor this issue and adjust accruals, as might be required, based upon additional information and further developments. The claim may be resolved through negotiation or arbitration. To the extent that excess boil-off claims result in a settlement, the Partnership would be indemnified by Höegh LNG for its share of the cash impact of any settlement. However, other concessions, if any, would not be expected to be indemnified.

As of June 30, 2019, the Partnership had outstanding interest rate swap agreements for a total notional amount of $381.9 million to hedge against the interest rate risks of its long-term debt under the Lampung facility and the $385 million facility. The Partnership applies hedge accounting for derivative instruments related to those facilities. The Partnership receives interest based on three month US dollar LIBOR and pays fixed rates of 2.8% for the Lampung facility. The Partnership receives interest based on the three month US dollar LIBOR and pays a fixed rate of an average of approximately 2.8% for the $385 million facility. The carrying value of the liability for derivative instruments was a net liability of $15.6 million as of June 30, 2019. The Partnership adopted the revised guidance for Derivatives and Hedging, Targeted Improvements to Accounting for Hedging Activities on January 1, 2019 on a prospective basis. Amortization amounts reclassified or recorded to earnings for the Partnership's interest rate swaps for the three months ended June 30, 2019 are presented as a component of interest expense compared with the presentation in previous periods in the gain (loss) on derivatives instruments line item in the consolidated statements of income.

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 line "accumulated losses in joint ventures" on the consolidated balance sheet and are not included in the balance sheet figures disclosed above.

On May 13, 2019, the Partnership drew $3.5 million under the $85 million revolving credit facility.

On May 15, 2019, the Partnership paid a quarterly cash distribution of $15.0 million, or $0.44 per common and subordinated unit, with respect to the first quarter of 2019.

On May 15, 2019, the Partnership paid a cash distribution of $3.4 million, or $0.546875 per Series A preferred unit, for the period commencing on February 15, 2019 to May 14, 2019.

On August 12, 2019, the Partnership drew $48.3 million on the revolving credit facility under the $385 million facility. On August 13, 2019, the Partnership repaid $34.0 million on the $85 million revolving credit facility.

On August 14, 2019, the Partnership paid a cash distribution of $15.0 million, or $0.44 per common and subordinated unit, with respect to the second quarter of 2019, equivalent to $1.76 per unit on an annual basis.

On August 15, 2019, the Partnership paid a cash distribution of $3.4 million, or $0.546875 per Series A preferred unit, for the period commencing on May 15, 2019 to August 14, 2019.

Outlook

As discussed under "Financing and Liquidity" above, there is additional maintenance expense expected during the on-water renewal class survey for the PGN FSRU Lampung during the third quarter of 2019.

A subsidiary of the Partnership, as the owner of the Höegh Gallant, has a lease and maintenance agreement with EgyptCo until April 2020. To date, the Partnership has not entered a new contract for the Höegh Gallant from April 2020. Pursuant to an option agreement, the Partnership has the right to cause Höegh LNG to charter the Höegh Gallant from the expiration or termination of the EgyptCo charter until July 2025, at a rate equal to 90% of the rate payable pursuant to the current charter with EgyptCo, plus any incremental taxes or operating expenses as a result of the new charter. Höegh LNG's ability to make payments to the Partnership with respect to an exercise of the option by the Partnership may be affected by events beyond either of the control of Höegh LNG or the Partnership, including opportunities to obtain new employment for the vessel, prevailing economic, financial and industry conditions. If market or other economic conditions deteriorate, Höegh LNG's ability to meet its obligations to the Partnership may be impaired. If Höegh LNG is unable to meet its obligations to the Partnership for the option, the Partnership's financial condition, results of operations and ability to make cash distributions to unitholders could be materially adversely affected.

Pursuant to the omnibus agreement that the Partnership entered into with Höegh LNG at the time of the initial public offering, Höegh LNG is obligated to offer to the Partnership any floating storage and regasification unit ("FSRU") or LNG carrier operating under a charter of five or more years.

Höegh LNG is actively pursuing the following projects that are subject to a number of conditions, outside its control, impacting the timing and the ability of such projects to go forward. The Partnership may have the opportunity in the future to acquire the FSRUs listed below, when operating under a charter of five years or more, if one of the following projects is fulfilled:

  • On December 21, 2018, Höegh LNG announced that it had entered a contract with AGL Shipping Pty Ltd. ("AGL"), a subsidiary of AGL Energy Ltd., to provide an FSRU to service AGL's proposed import facility in Victoria, Australia. The contract is for a period of 10 years and is subject to AGL's final investment decision by the board of directors of AGL Energy Ltd. for the project and obtaining necessary regulatory and environmental approvals.
  • Höegh LNG has also won exclusivity to provide an FSRU for potential projects for Australian Industrial Energy ("AIE") at Port Kembla, Australia and for another company in the Asian market. Both projects are dependent on a variety of regulatory approvals or permits as well as final investment decisions.

Höegh LNG has two operating FSRUs, the Höegh Giant (HHI Hull No. 2552), which was delivered from the shipyard on April 27, 2017, and the Höegh Esperanza (HHI Hull No. 2865), which was delivered from the shipyard on April 5, 2018. The Höegh Giant is operating on a three-year contract that commenced on February 7, 2018 with Gas Natural SGD, SA ("Gas Natural Fenosa"). The Höegh Esperanza is operating on a three-year contract that commenced on June 7, 2018 with CNOOC Gas & Power Trading and Marketing Ltd. ("CNOOC") which has an option for a one-year extension. Höegh LNG took delivery of the Höegh Gannet (HHI Hull No. 2909) on December 6, 2018, which serves on a 15 month LNGC contract with Naturgy. Höegh LNG has one additional FSRU, named Höegh Galleon, on order (SHI Hull No. 2220). The Höegh Galleon will operate on an interim LNGC contract with Cheniere Marketing International LLP ("Cheniere") commencing in September 2019 following its delivery from the shipyard.

Pursuant to the terms of the omnibus agreement, the Partnership will have the right to purchase the Höegh Giant, the Höegh Esperanza, the Höegh Gannet and the Höegh Galleon following acceptance by the respective charterer of the related FSRU under a contract of five years or more, subject to reaching an agreement with Höegh LNG regarding the purchase price.

There can be no assurance that the Partnership will acquire any vessels from Höegh LNG or of the terms upon which any such acquisition may be made.

Presentation of Second Quarter 2019 Results

A presentation will be held today, Thursday, August 22, 2019, at 8:30 A.M. (EST) to discuss financial results for the second quarter of 2019. 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/942/31402

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 August 29, 2019.

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:

10134367

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, 2019, "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," "future," "project," "will be," "will continue," "will likely result," "plan," "intend" or words or phrases of similar meanings. These statements involve known and unknown risks and are based upon a number of assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which are beyond the Partnership's control. Actual results may differ materially from those expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially include, but are not limited to:

  • market conditions and trends for FSRUs and 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 the Partnership's units or any increases in the quarterly distributions on the Partnership's common 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 Partnership's ability to settle or resolve the boil-off claim for the joint ventures, including the estimated amount thereof;
  • the ability of Höegh LNG to satisfy its indemnification obligations to the Partnership, including in relation to the boil-off claim;
  • the Partnership's ability to compete successfully for future chartering opportunities;
  • demand in the FSRU sector or the LNG shipping sector; including demand for the Partnership's vessels;
  • the Partnership's 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, 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. 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 Partnership's ability to compete successfully for future chartering and newbuilding opportunities;
  • 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 of skilled labor, vessel crews and management;
  • the ability of Höegh LNG to meet its financial obligations to the Partnership, including its indemnity, guarantee and option obligations;
  • 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 incremental general and administrative expenses as a publicly traded limited partnership and the Partnership's 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 its unitholders;
  • estimated future maintenance and replacement capital expenditures;
  • the Partnership's ability to 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 and Series A preferred units 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, 2018 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 press 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



Six months ended




June 30,



June 30,




2019



2018



2019



2018


REVENUES

















Time charter revenues


$

33,777



$

35,510



$

69,852



$

70,395


Other revenue






1,100




64




1,100


Total revenues



33,777




36,610




69,916




71,495


OPERATING EXPENSES

















Vessel operating expenses



(9,064)




(5,462)




(14,957)




(11,215)


Administrative expenses



(2,272)




(2,101)




(4,848)




(4,888)


Depreciation and amortization



(5,589)




(5,268)




(10,912)




(10,536)


Total operating expenses



(16,925)




(12,831)




(30,717)




(26,639)


Equity in earnings (losses) of joint ventures



(1,575)




5,111




(1,223)




14,481


Operating income (loss)



15,277




28,890




37,976




59,337


FINANCIAL INCOME (EXPENSE), NET

















Interest income



297




174




496




361


Interest expense



(7,148)




(6,918)




(13,984)




(13,782)


Gain (loss) on debt extinguishment









1,030





Gain (loss) on derivative instruments






544







1,175


Other items, net



(759)




(880)




(1,806)




(1,486)


Total financial income (expense), net



(7,610)




(7,080)




(14,264)




(13,732)


Income (loss) before tax



7,667




21,810




23,712




45,605


Income tax expense



(1,511)




(1,866)




(3,421)




(3,975)


Net income (loss)


$

6,156



$

19,944



$

20,291



$

41,630


Preferred unitholders' interest in net income



3,378




3,003




6,742




5,663


Limited partners' interest in net income (loss)


$

2,778



$

16,941



$

13,549



$

35,967



















Earnings per unit

















Common unit public (basic and diluted)


$

0.07



$

0.50



$

0.38



$

1.07


Common unit Höegh LNG (basic and diluted)


$

0.10



$

0.53



$

0.44



$

1.11


Subordinated unit (basic and diluted)


$

0.10



$

0.53



$

0.44



$

1.11


 

 

HÖEGH LNG PARTNERS LP

UNAUDITED CONDENSED INTERIM CONSOLIDATED

BALANCE SHEETS

(in thousands of U.S. dollars)




As of




June 30,



December 31,




2019



2018


ASSETS









Current assets









Cash and cash equivalents


$

27,137



$

26,326


Restricted cash



8,011




6,003


Trade receivables



4,485




1,228


Amounts due from affiliates



2,481




4,328


Inventory



461




646


Current portion of net investment in direct financing lease



4,356




4,168


Derivative instruments






1,199


Prepaid expenses and other receivables



4,357




2,967


Total current assets



51,288




46,865


Long-term assets









Restricted cash



12,887




13,125


Vessels, net of accumulated depreciation



650,596




658,311


Other equipment



419




445


Intangibles and goodwill



18,939




20,739


Advances to joint ventures



3,679




3,536


Net investment in direct financing lease



276,679




278,905


Long-term deferred tax asset



199




174


Other long-term assets



936




940


Total long-term assets



964,334




976,175


Total assets


$

1,015,622



$

1,023,040


 

HÖEGH LNG PARTNERS LP

UNAUDITED CONDENSED INTERIM CONSOLIDATED

BALANCE SHEETS

(in thousands of U.S. dollars)




As of




June 30,



December 31,




2019



2018


LIABILITIES AND EQUITY









Current liabilities









Current portion of long-term debt


$

44,660



$

45,458


Trade payables



490




529


Amounts due to owners and affiliates



3,691




2,301


Value added and withholding tax liability



722




1,175


Derivative instruments



2,199




259


Accrued liabilities and other payables



11,952




7,458


Total current liabilities



63,714




57,180


Long-term liabilities









Accumulated losses of joint ventures



4,031




2,808


Long-term debt



385,085




390,087


Revolving credit facility due to owners and affiliates



42,792




39,292


Derivative instruments



13,438




2,438


Long-term tax liability



1,936




1,725


Long-term deferred tax liability



10,878




8,974


Other long-term liabilities



137




99


Total long-term liabilities



458,297




445,423


Total liabilities



522,011




502,603


EQUITY









8.75% Series A Preferred Units



152,590




151,259


Common units public



317,626




325,250


Common units Höegh LNG



5,813




6,844


Subordinated units



35,970




42,421


Accumulated other comprehensive income (loss)



(18,388)




(5,337)


Total partners' capital



493,611




520,437


Total equity



493,611




520,437


Total liabilities and equity


$

1,015,622



$

1,023,040


 

HÖEGH LNG PARTNERS LP

UNAUDITED CONDENSED INTERIM CONSOLIDATED

STATEMENTS OF CASH FLOWS

(in thousands of U.S. dollars)




Three months ended

June 30,




2019



2018


OPERATING ACTIVITIES









Net income (loss)


$

6,156



$

19,944


Adjustments to reconcile net income to net cash provided by (used in) operating activities:









     Depreciation and amortization



5,589




5,268


     Equity in losses (earnings) of joint ventures



1,575




(5,111)


     Changes in accrued interest income on advances to joint ventures



(73)




(63)


     Amortization of deferred debt issuance cost and fair value of debt assumed



639




176


     Amortization in revenue for above market contract



905




905


     Expenditure for drydocking



(2,862)





     Changes in accrued interest expense



(628)




(982)


     Receipts from repayment of principal on direct financing lease



1,030





     Unrealized foreign exchange losses (gains)



52




201


     Unrealized loss (gain) on derivative instruments



24




(544)


     Non-cash revenue: tax paid directly by charterer



(220)




(214)


     Non-cash income tax expense: tax paid directly by charterer



220




214


     Deferred tax expense and provision for tax uncertainty



910




1,426


     Issuance of units for Board of Directors' fees



155




160


     Other adjustments



159




114


Changes in working capital:









     Trade receivables



973




2,089


     Inventory



185




9


     Prepaid expenses and other receivables



1,179




(492)


     Trade payables



(130)




(218)


     Amounts due to owners and affiliates



1,862




(2,222)


     Value added and withholding tax liability



760




961


     Accrued liabilities and other payables



(754)




(974)


Net cash provided by (used in) operating activities



17,706




20,647











INVESTING ACTIVITIES









Expenditure for vessel and other equipment



(140)





Receipts from repayment of principal on direct financing lease






943


Net cash provided by (used in) investing activities


$

(140)



$

943


 

HÖEGH LNG PARTNERS LP

UNAUDITED CONDENSED INTERIM CONSOLIDATED

STATEMENTS OF CASH FLOWS

(in thousands of U.S. dollars)




Three months ended

June 30,




2019



2018


FINANCING ACTIVITIES









Proceeds from long-term debt


$



$


Proceeds from loans and promissory notes due to owners and affiliates



3,500





Repayment of long-term debt



(11,165)




(11,364)


Repayment of amounts due to owners and affiliates






(11,500)


Repayment of customer loan for funding of value added liability on import






(1,194)


Net proceeds from issuance of common units



1,029




104


Net proceeds from issuance of 8.75% Series A Preferred Units



1,316




11,681


Cash distributions to limited partners and preferred unitholders



(18,407)




(17,737)


Repayment of indemnifications received from Höegh LNG



(64)





Net cash provided by (used in) financing activities



(23,791)




(30,010)











Increase (decrease) in cash, cash equivalents and restricted cash



(6,225)




(8,420)


Effect of exchange rate changes on cash, cash equivalents and restricted cash



(13)




(54)


Cash, cash equivalents and restricted cash, beginning of period



54,273




48,816


Cash, cash equivalents and restricted cash, end of period


$

48,035



$

40,342


 

HÖEGH LNG PARTNERS LP
UNAUDITED SEGMENT INFORMATION FOR THE QUARTER ENDED JUNE 30, 2019 AND 2018
(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 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 $85 million revolving credit facility and the $385 million facility are included in "Other."

For the three months ended June 30, 2019 and 2018, Majority held FSRUs includes the direct 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, 2019 and 2018, Joint venture FSRUs includes two 50% owned FSRUs, the Neptune and the Cape Ann, that operate under long term time charters with one charterer.

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, 50% of the Joint venture FSRUs' revenues, expenses and assets are reflected in the segment note. Management monitors the results of operations of joint ventures under the proportional consolidation method and not the equity method of accounting.

HÖEGH LNG PARTNERS LP

UNAUDITED SEGMENT INFORMATION FOR THE QUARTER ENDED JUNE 30, 2019

(in thousands of U.S. dollars)




Three months ended June 30, 2019







Joint venture
















Majority



FSRUs






Total










held



(proportional






Segment






Consolidated


(in thousands of U.S. dollars)


FSRUs



consolidation)



Other



reporting



Eliminations



reporting


Time charter revenues


$

33,777




10,752







44,529




(10,752)


(1)


$

33,777


Total revenues



33,777




10,752







44,529








33,777


Operating expenses



(9,885)




(2,233)




(1,451)




(13,569)




2,233


(1)



(11,336)


Equity in earnings (losses) of joint ventures















(1,575)


(1)



(1,575)


Segment EBITDA



23,892




8,519




(1,451)




30,960










Depreciation and amortization



(5,589)




(2,452)







(8,041)




2,452


(1)



(5,589)


Operating income (loss)



18,303




6,067




(1,451)




22,919








15,277


Gain (loss) on derivative instruments






(4,649)







(4,649)




4,649


(1)




Other financial income (expense), net



(2,689)




(2,993)




(4,921)




(10,603)




2,993


(1)



(7,610)


Income (loss) before tax



15,614




(1,575)




(6,372)




7,667







7,667


Income tax benefit (expense)



(1,511)










(1,511)







(1,511)


Net income (loss)


$

14,103




(1,575)




(6,372)




6,156






$

6,156


Preferred unitholders' interest in net income















3,378


(2)



3,378


Limited partners' interest in net income (loss)


$

14,103




(1,575)




(6,372)




6,156




(3,378)


(2)


$

2,778



(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 (loss) 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 JUNE 30, 2018

(in thousands of U.S. dollars)




Three months ended June 30, 2018







Joint venture
















Majority



FSRUs






Total










held



(proportional






Segment






Consolidated


(in thousands of U.S. dollars)


FSRUs



consolidation)



Other



reporting



Eliminations



reporting


Time charter revenues


$

35,510




10,576







46,086




(10,576)


(1)


$

35,510


Other revenue



1,100

(3)









1,100





(1)



1,100


Total revenues



36,610




10,576







47,186








36,610


Operating expenses



(6,383)




(2,709)




(1,180)




(10,272)




2,709


(1)



(7,563)


Equity in earnings (losses) of joint ventures















5,111


(1)



5,111


Segment EBITDA



30,227




7,867




(1,180)




36,914










Depreciation and amortization



(5,268)




(2,399)







(7,667)




2,399


(1)



(5,268)


Operating income (loss)



24,959




5,468




(1,180)




29,247








28,890


Gain (loss) on derivative instruments



544




2,967







3,511




(2,967)


(1)



544


Other financial income (expense), net



(6,839)




(3,324)




(785)




(10,948)




3,324


(1)



(7,624)


Income (loss) before tax



18,664




5,111




(1,965)




21,810







21,810


Income tax expense



(1,845)







(21)




(1,866)







(1,866)


Net income (loss)


$

16,819




5,111




(1,986)




19,944






$

19,944


Preferred unitholders' interest in net income















3,003


(2)



3,003


Limited partners' interest in net income (loss)


$

16,819




5,111




(1,986)




19,944




(3,003)


(2)


$

16,941



(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 (loss) of joint ventures.



(2)

Allocates the preferred unitholders' interest in net income to the preferred unitholders.



(3)

Other revenue consists of insurance proceeds received for claims related to repairs under the Mooring warranty. The Partnership was indemnified by Höegh LNG for the cost of the repairs related to the Mooring, subject to repayment to the extent recovered from insurance proceeds. The amount was refunded to Höegh LNG during the third quarter of 2018.

 

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 June 30, 2019 and 2018.




Three months ended




June 30,


(in thousands of U.S. dollars)


2019



2018


Interest income


$

297



$

174


Interest expense:









Interest expense



(6,361)




(6,742)


Commitment fees



(148)





Amortization of debt issuance cost and fair value of debt assumed



(639)




(176)


Total interest expense



(7,148)




(6,918)


Gain (loss) on derivative instruments






544


Other items, net:









Unrealized foreign exchange gain (loss)



(30)




(212)


Realized foreign exchange gain (loss)



(6)




14


Bank charges, fees and other



(85)




(37)


Withholding tax on interest expense and other



(638)




(645)


Total other items, net



(759)




(880)


Total financial income (expense), net


$

(7,610)



$

(7,080)


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, depreciation and amortization, taxes 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 expense). 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 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. 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, 2019







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)


$

14,103




(1,575)




(6,372)




6,156







$

6,156

(3)

Interest income



(181)




(108)




(116)




(405)




108


(4)



(297)


Interest expense



2,169




3,098




4,979




10,246




(3,098)


(4)



7,148


Depreciation and amortization



5,589




2,452







8,041




(2,452)


(5)



5,589


Other financial items (2)



701




4,652




58




5,411




(4,652)


(6)



759


Income tax (benefit) expense



1,511










1,511








1,511


Equity in earnings of JVs:

Interest (income) expense, net















2,990


(4)



2,990


Equity in earnings of JVs:

Depreciation and amortization















2,452


(5)



2,452


Equity in earnings of JVs:

Other financial items (2)















4,652


(6)



4,652


Segment EBITDA


$

23,892




8,519




(1,451)




30,960







$

30,960








Three months ended June 30, 2018







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)


$

16,819




5,111




(1,986)




19,944







$

19,944

(3)

Interest income



(76)




(59)




(98)




(233)




59


(4)



(174)


Interest expense



6,075




3,383




843




10,301




(3,383)


(4)



6,918


Depreciation and amortization



5,268




2,399







7,667




(2,399)


(5)



5,268


Other financial items (2)



296




(2,967)




40




(2,631)




2,967


(6)



336


Income tax (benefit) expense



1,845







21




1,866








1,866


Equity in earnings of JVs:

Interest (income) expense, net















3,324


(4)



3,324


Equity in earnings of JVs:

Depreciation and amortization















2,399


(5)



2,399


Equity in earnings of JVs:

Other financial items (2)















(2,967)


(6)



(2,967)


Segment EBITDA


$

30,227




7,867




(1,180)




36,914







$

36,914



(1)

Eliminations reverse each of the income statement reconciling line items of the proportional amounts for Joint venture FSRUs that are reflected in the consolidated net income for the Partnership's share of the Joint venture FSRUs net income (loss) on the Equity in earnings (loss) of joint ventures line item in the consolidated income statement. 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 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 line Equity in earnings of JVs: Depreciation and amortization for the Consolidated reporting.



(6)

Other financial items for the Joint venture FSRUs are 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 50% interests in the joint ventures as shown in Appendix A. Therefore, the adjustments to Segment EBITDA include the Partnership's share of the joint venture's adjustments. The Partnership believes distributable cash flow is an important liquidity measure used by management and investors in publicly traded partnerships to compare cash generating performance of the Partnership' cash generating assets from period to period by adjusting for cash and non-cash items that could potentially have a disparate effect between periods, and to compare the cash generating performance for specific periods to the cash distributions (if any) that are expected to be paid to limited partners. The Partnership also believes distributable cash flow benefits investors in comparing its cash generating performance to other companies that account for time charters as operating leases rather than financial leases, or that do not have non-cash amortization of intangibles or deferred revenue. Distributable cash flow is a non-GAAP liquidity measure and should not be considered as an alternative to net cash provided by operating activities, or any other measure of the Partnership's liquidity or cash flows calculated in accordance with GAAP. Distributable cash flow excludes some, but not all, items that affect net cash provided by operating activities and the measures may vary among companies. For example, distributable cash flow does not reflect changes in working capital balances. Distributable cash flow also includes some items that do not affect net cash provided by operating activities. Therefore, distributable cash flow may not be comparable to similarly titled measures of other companies. Distributable cash flow is not the same measure as available cash or operating surplus, both of which are defined by the Partnership's partnership agreement. The first table below reconciles distributable cash flow to Segment EBITDA, which is reconciled to net income, the most directly comparable GAAP measure for Segment EBITDA, in Appendix A. Refer to Appendix A for the definition of Segment EBITDA. The second table below reconciles distributable cash flow to net cash provided by operating activities, the most directly comparable GAAP measure for liquidity. 

(in thousands of U.S. dollars)


Three months ended

June 30, 2019


Segment EBITDA


$

30,960


Cash collection/Principal payment on direct financing lease



1,030


Amortization in revenues for above market contracts



905


Non-cash revenue: Tax paid directly by charterer



(220)


Equity in earnings of JVs: Amortization of deferred revenue



(634)


Interest income (1)



405


Interest expense (1)



(10,246)


Amortization of debt issuance cost



681


Amortization and gain on cash flow hedges included in interest expense



24


Other items, net (1)



(761)


Unrealized foreign exchange losses (gains)



30


Current income tax benefit (expense), net of uncertain tax position



(601)


Non-cash income tax: Tax paid directly by charterer



220


Other adjustments:





Distributions relating to Series A preferred units (2)



(3,378)


Estimated maintenance and replacement capital expenditures



(5,175)


Distributable cash flow


$

13,240



(1)

The Partnership's interest in the joint ventures' interest income, interest expense and amortization of debt issuance cost is $108, $3,098 and $42, respectively

(2)

Represents distributions payable on the Series A preferred units related to the three months ended June 30, 2019

Reconciliation of distributable cash flows to net cash provided by (used in) operating activities

(in thousands of U.S. dollars)


Three months ended

June 30, 2019


Distributable cash flow


$

13,240


Estimated maintenance and replacement capital expenditures



5,175


Distributions relating to Series A preferred units (2)



3,378


Equity in earnings of JVs: Amortization of deferred revenue



634


Equity in earnings of JVs: Amortization of debt issuance cost



(42)


Equity in earnings of JVs: Depreciation and amortization



(2,452)


Equity in earnings of JVs: Gain (loss) on derivative instruments



(4,649)


Equity in losses (earnings) of joint ventures



1,575


Expenditure for drydocking



(2,862)


Changes in accrued interest expense and interest income



(701)


Other adjustments



335


Changes in working capital



4,075


Net cash provided by (used in) operating activities


$

17,706


 

Media contact: Steffen Føreid
Chief Executive Officer and Chief Financial Officer
+47 975 57 406
www.hoeghlngpartners.com

 

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