August 23, 2018 - 6:35 AM EDT
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Hoegh LNG Partners LP Reports Preliminary Financial Results for the Quarter Ended June 30, 2018

HAMILTON, Bermuda, Aug. 23, 2018 /PRNewswire/ -- Höegh LNG Partners LP (NYSE: HMLP) (the "Partnership") today reported its financial results for the quarter ended June 30, 2018.

Highlights

  • Reported total time charter revenues of $35.5 million for the second quarter of 2018 compared to $35.0 million of time charter revenues for the second quarter of 2017
  • Generated operating income of $28.9 million and net income of $19.9 million for the second quarter of 2018 compared to operating income of $23.1 million and net income of $12.2 million for the second quarter of 2017; operating income and net income were impacted by unrealized gains on derivative instruments on the Partnership's share of equity in earnings of joint ventures for the second quarter of 2018 and 2017
  • Excluding the impact of the unrealized gains on derivative instruments for the second quarter of 2018 and 2017 impacting the equity in earnings of joint ventures, operating income for the three months ended June 30, 2018 would have been $25.9 million, an increase of $2.0 million from $23.9 million for the three months ended June 30, 2017
  • Generated Segment EBITDA 1 of $36.9 million for the second quarter of 2018 compared to $29.6 million for the second quarter of 2017
  • On August 14, 2018, paid a $0.44 per unit distribution on the common and subordinated units with respect to the second quarter of 2018, equivalent to $1.76 per unit on an annualized basis
  • On August 15, 2018, paid a $0.546875 per unit distribution on the Series A preferred units for the period commencing on May 15, 2018 to August 14, 2018, equivalent to $2.1875 per unit on an annual basis

Richard Tyrrell, Chief Executive Officer and Chief Financial Officer stated: "Höegh LNG Partners' assets all performed according to contract and at 100% availability in the second quarter, generating the highest quarterly Segment EBITDA and distributable cash flow achieved to date.

Our balance sheet strength puts the Partnership in a strong position to fund future growth following a period to rebuild the dropdown pipeline. Although competitive, FSRU tendering activity is high and the long-term, contracted nature of FSRU cash flows is attractive to the Partnership.

As new LNG volumes enter the market, customers are benefiting from the diverse sources of supply, attractive economics, the environmental benefits of gas and substantially reduced barriers to entry. Projects are developing accordingly and, with FSRUs being the fastest and most cost effective way to bring LNG to new markets, the Höegh LNG group is in a leading position to provide such critical energy infrastructure."

1 Segment EBITDA is a non-GAAP financial measure used by investors to measure financial and operating performance. Please see Appendix A for a reconciliation of Segment EBITDA to net income, the most directly comparable GAAP financial measure. Segment EBITDA does not include adjustments for (i) principal payment of direct financing lease of $0.9 million and $0.9 million for the three months ended June 30, 2018 and 2017, respectively, (ii) amortization in revenues for above market contracts of $0.9 million and $0.9 million for the three months ended June 30, 2018 and 2017, respectively, (iii) non-controlling interest: amortization in revenues for above market contracts of $0.2 million for the three months ended June 30, 2017, (iv) non-cash revenue: tax paid directly by charterer of $(0.2) million and $(0.4) million for the three months ended June 30, 2018 and 2017, respectively, or (v) equity in earnings of JVs: amortization for deferred revenue of $(0.6) million and $(0.6) million for the three months ended June 30, 2018 and 2017, respectively.

Financial Results Overview

Effective January 1, 2018, the Partnership adopted the new accounting standard, Revenue from Contracts with Customers, which did not change the timing or amount of revenue recognized for the Partnership.

The Partnership reported net income of $19.9 million for the three months ended June 30, 2018, an increase of $7.7 million from net income of $12.2 million for the three months ended June 30, 2017. The net income for both periods was significantly impacted by unrealized gains on derivative instruments mainly on the Partnership's share of equity in earnings of joint ventures.

Excluding all of the unrealized gains on derivative instruments, net income for the three months ended June 30, 2018 would have been $16.4 million, an increase of $3.6 million from $12.8 million for the three months ended June 30, 2017. Excluding the unrealized gains on derivative instruments, the increase for the three months ended June 30, 2018 was primarily due to lower total financial expense, net, the one-off receipt of insurance proceeds related to prior periods expenses and lower total operating expenses for the three months ended June 30, 2018 compared with the three months ended June 30, 2017. The reduction in interest expense was due to the quarterly repayments of principal on the loan facilities financing the vessels and the repayment of the sellers' credit note, issued in connection with the acquisition of Höegh Gallant, between periods. The positive impact on interest expense of the repayment of the seller's credit note was partially offset by the increased outstanding balance on the revolving credit facility.

Preferred unitholders' interest in net income was $3.0 million for the three months ended June 30, 2018 due the issuance of Series A preferred units on October 5, 2017 and subsequently as part of our at-the-market ("ATM") program. Limited partners' interest in net income, which includes the Partnership's 100% interest in Höegh LNG Colombia Holding Ltd., the owner of the entities that own and operate the Höegh Grace (the "Höegh Grace entities") for the three months ended June 30, 2018, was $16.9 million. Limited partners' interest in net income for the three months ended June 30, 2017, which included the Partnership's 51% interest in the Höegh Grace entities, was $9.4 million for the three months ended June 30, 2017. Non-controlling interest in net income was $2.8 million for the three months ended June 30, 2017 for the 49% interest in the Höegh Grace entities not owned by the Partnership. On December 1, 2017, the Partnership acquired the remaining 49% ownership interest in the Höegh Grace entities and, as of that date, there was no longer a non-controlling interest in the Höegh Grace entities.

The PGN FSRU Lampung, the Höegh Gallant and the Höegh Grace were on-hire for the entire second quarter of 2018. During the three months ended June 30, 2017, the Höegh Gallant incurred 8 days of off-hire for scheduled maintenance and several days of reduced hire.

Equity in earnings of joint ventures was $5.1 million for the three months ended June 30, 2018, an increase of $3.5 million from equity in earnings of joint ventures of $1.6 million for the three months ended June 30, 2017. The joint ventures own the Neptune and the GDF Suez Cape Ann. Unrealized gains on derivative instruments in the joint ventures significantly impacted the equity in earnings of joint ventures for the three months ended June 30, 2018 and 2017. 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 gains for the three months ended June 30, 2018 and 2017, the equity in earnings would have been $2.1 million for the three months ended June 30, 2018, a decrease of $0.2 million compared to equity in earnings of $2.3 million for the three months ended June 30, 2017. Excluding the unrealized gains, the decrease was mainly due to increased costs incurred in relation to a new project for the charterer related to the GDF Suez Cape Ann and higher maintenance expenses.

Operating income for the three months ended June 30, 2018 was $28.9 million, an increase of $5.8 million from $23.1 million for the three months ended June 30, 2017. Excluding the impact of the unrealized gain on derivative instruments for the three months ended June 30, 2018 and 2017 impacting the equity in earnings of joint ventures, operating income for the three months ended June 30, 2018 would have been $25.9 million, an increase of $2.0 million from $23.9 million for the three months ended June 30, 2017.

Segment EBITDA1 was $36.9 million for the three months ended June 30, 2018, an increase of $7.3 million from $29.6 million for the three months ended June 30, 2017 mainly due to no longer having a non-controlling interest in Segment EBITDA because of the acquisition of the remaining 49% interest in the Höegh Grace entities, which closed on December 1, 2017, the one-off receipt of insurance proceeds of $1.1 million related to prior periods expenses and the impact of no off-hire for the Höegh Gallant in the second quarter of 2018.

Financing and Liquidity

As of June 30, 2018, the Partnership had cash and cash equivalents of $21.0 million and an undrawn portion of the $85 million revolving credit facility of $39.7 million. Current restricted cash for operating obligations of the PGN FSRU Lampung was $6.0 million, and long-term restricted cash required under the Lampung facility was $13.4 million as of June 30, 2018. During the second quarter of 2018, the Partnership made quarterly repayments of $4.8 million on the Lampung facility, $3.3 million on the Gallant facility and $3.3 million on the Grace facility.

The Partnership's book value and outstanding principal of total long-term debt was $503.2 million and $508.3 million, respectively, as of June 30, 2018, including long-term debt financing of the FSRUs and $45.3 million on the revolving credit facility due to owners and affiliates. As of June 30, 2018, the Partnership's total current liabilities exceeded total current assets by $13.7 million. This is partly a result of the current portion of long-term debt of $45.5 million being classified current while the restricted cash of $13.4 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 balance under the revolving credit facility, are sufficient to meet the Partnership's working capital requirements for its current business for the next twelve months. In addition, liquidity can also be supplemented, from time to time, by net proceeds of the ATM program, depending on the market conditions. Further, the Partnership is working to refinance the Gallant/ Grace facility well in advance of its first maturity in November 2019.

As of June 30, 2018, the Partnership did not have material commitments for capital or other expenditures for its current business. For the joint ventures, the charterer plans to use the GDF Suez Cape Ann for a project expected to commence in second half of 2018. The vessel will be drydocked and fitted with certain modifications prior to the project start which will be compensated by the charterer. The joint ventures also have a probable liability for exceeding historical minimum performance standards 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, 2018. The joint ventures will continue to monitor this issue and adjust accruals, as might be required, based upon additional information and further developments. It is estimated that the Partnership's 50% share of the excess boil-off claim could range from zero or negligible amounts to approximately $29 million. To the extent that the 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 or capital improvements, if any, would not be expected to be indemnified. In addition, the joint ventures expect to incur costs for certain capital improvements and maintenance that will not be reimbursed by the charterer or Hoegh LNG for which the Partnership's 50% share is approximately $1.7 million and $1.2 million for the years ended December 31, 2018 and 2019, respectively. Pending resolution of the boil-off claims, the joint ventures have suspended payment on their shareholder loans.

As of June 30, 2018, the Partnership had outstanding interest rate swap agreements for a total notional amount of $395.7 million to hedge against the interest rate risks of its long-term debt under the Lampung, Gallant and Grace facilities. 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 a fixed rate of 2.8% for the Lampung facility. The Partnership receives interest based on three month US dollar LIBOR and pays a fixed rate of approximately 1.9% for the Gallant facility. The Partnership receives interest based on three month US dollar LIBOR and pays a fixed rate of approximately 2.3% for the Grace facility. The carrying values of the derivative instruments was a net asset of $1.9 million as of June 30, 2018. The effective portion of the changes in fair value of the interest rate swaps are recorded in other comprehensive income. Gain on derivative instruments for the three months ended June 30, 2018 was $0.5 million, an increase of $0.3 million from $0.2 million for the three months ended June 30, 2017. Gain on derivative instruments for the three months ended June 30, 2018 and 2017 related to the interest rate swaps for the Lampung, Gallant and Grace facilities. The increase is mainly due to a lower loss on the ineffective portion of the cash flow hedges for the three months ended June 30, 2018 compared with the three months ended June 30, 2017. 

On January 26, 2018, the Partnership entered into a sales agreement with B. Riley FBR Inc. (the "Agent"). Under the terms of the sales agreement, the Partnership may offer and sell up to $120 million aggregate offering amount of "at-the-market" common and Series A preferred units, from time to time, through the Agent. During the three months ended June 30, 2018, the Partnership had sold Series A preferred units and common units, and received total net proceeds, after sales commissions, of $12.4 million.

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 15, 2018, 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 2018.

On May 15, 2018, the Partnership paid a cash distribution of $2.8 million, or $0.546875 per Series A preferred unit, for the period commencing on February 15, 2018 to May 14, 2018.

On August 14, 2018, the Partnership paid a quarterly cash distribution of $15.0 million, or $0.44 per common and subordinated unit, with respect to the second quarter of 2018.

On August 15, 2018, the Partnership paid a cash distribution of $3.2 million, or $0.546875 per Series A preferred unit, for the period commencing on May 15, 2018 to August 14, 2018.

On August 21, 2018, the Partnership repaid $6.0 million on the revolving credit facility from the net proceeds of the ATM program.

Outlook

The Höegh Gallant operates under a long-term time charter which started in April 2015 with an expiration date in April 2020 with Hoegh LNG Egypt LLC ("EgyptCo"), a subsidiary of Höegh LNG Holdings Ltd. ("Höegh LNG"),. EgyptCo has a charter with the government-owned Egyptian Natural Gas Holding Company ("EGAS"). The charter between EgyptCo and EGAS allows for early termination only with the mutual consent of both parties. In the first quarter of 2018, EGAS initiated a meeting with EgyptCo to seek mutually agreed terms for an early termination of the charter. Such an agreement would require consent of EgyptCo. 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 us with respect to an exercise of the option by us may be affected by events beyond our and its control, 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 us may be impaired. If Höegh LNG is unable to meet its obligations to us for the option, our financial condition, results of operations and ability to make cash distributions to our 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 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. (CNNOC) which has an option for a one-year extension. Höegh LNG has two additional FSRUs on order.

Pursuant to the terms of the omnibus agreement, the Partnership will have the right to purchase the Höegh Giant, the Höegh Esperanza, HHI Hull No. 2909 and SHI Hull No.2220 (under a shipbuilding contract with Samsung Heavy Industries ("SHI")) 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. Höegh LNG had an agreement, subject to environmental approval, for an FSRU with Penco LNG. As a result of further delays in environmental approvals, Höegh LNG announced that it had decided to let the contract lapse.

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 2018 Results

A presentation will be held today, Thursday, August 23, 2018, at 8:30 A.M. (EDT) to discuss financial results for the second quarter of 2018. 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/942/27138

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 30, 2018.

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:

10123421

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, 2018, "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," "future," "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 trends for FSRUs and LNG carriers, including hire rates and factors affecting supply and demand;
  • 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 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 and insurance 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 Gallant/Grace 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 the Partnership's 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;
  • demand in the FSRU sector or the LNG shipping sector in general and the demand for the Partnership's vessels in particular;
  • 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 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;
  • potential disruption of shipping routes 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 successfully remediate any material weaknesses in its internal control over financial reporting and its disclosure controls and procedures; and
  • other factors listed from time to time in the reports and other documents that we file with the SEC, including the Partnership's Annual Report on Form 20-F for the year ended December 31, 2017 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,




2018



2017



2018



2017


REVENUES













Time charter revenues


$

35,510




35,024




70,395



$

70,101


Other revenue



1,100







1,100





Total revenues



36,610




35,024




71,495




70,101


OPERATING EXPENSES

















Vessel operating expenses



(5,462)




(5,628)




(11,215)




(11,805)


Construction contract expenses






(151)







(151)


Administrative expenses



(2,101)




(2,465)




(4,888)




(5,222)


Depreciation and amortization



(5,268)




(5,263)




(10,536)




(10,526)


Total operating expenses



(12,831)




(13,507)




(26,639)




(27,704)


Equity in earnings (losses) of joint ventures



5,111




1,551




14,481




6,360


Operating income (loss)



28,890




23,068




59,337




48,757


FINANCIAL INCOME (EXPENSE), NET

















Interest income



174




113




361




243


Interest expense



(6,918)




(7,752)




(13,782)




(15,488)


Gain (loss) on derivative instruments



544




247




1,175




910


Other items, net



(880)




(1,422)




(1,486)




(2,224)


Total financial income (expense), net



(7,080)




(8,814)




(13,732)




(16,559)


Income (loss) before tax



21,810




14,254




45,605




32,198


Income tax expense



(1,866)




(2,042)




(3,975)




(3,797)


Net income (loss)


$

19,944




12,212




41,630



$

28,401


Non-controlling interest in net income






2,812







5,556


Preferred unitholders' interest in net income



3,003







5,663





Limited partners' interest in net income (loss)


$

16,941




9,400




35,967



$

22,845



















Earnings per unit

















Common unit public (basic and diluted)


$

0.50



$

0.28



$

1.07



$

0.68


Common unit Höegh LNG (basic and diluted)


$

0.53



$

0.30



$

1.11



$

0.71


Subordinated unit (basic and diluted)


$

0.53



$

0.30



$

1.11



$

0.71


 

 

HÖEGH LNG PARTNERS LP

UNAUDITED CONDENSED INTERIM CONSOLIDATED

BALANCE SHEETS

(in thousands of U.S. dollars)




As of




June 30,



December 31,




2018



2017


ASSETS









Current assets









Cash and cash equivalents


$

20,980



$

22,679


Restricted cash



5,958




6,962


Trade receivables



4,425




7,563


Amounts due from affiliates



4,235




4,286


Inventory



649




668


Current portion of net investment in direct financing lease



3,986




3,806


Derivative instruments



973





Prepaid expenses and other receivables



2,131




462


Total current assets



43,337




46,426


Long-term assets









Restricted cash



13,404




13,640


Vessels, net of accumulated depreciation



668,648




679,041


Other equipment



561




604


Intangibles and goodwill



22,570




24,370


Advances to joint ventures



3,397




3,263


Net investment in direct financing lease



280,976




282,820


Long-term deferred tax asset



139




204


Derivative instruments



1,217




228


Other long-term assets



5,838




8,363


Total long-term assets



996,750




1,012,533


Total assets


$

1,040,087



$

1,058,959


 

 

HÖEGH LNG PARTNERS LP

UNAUDITED CONDENSED INTERIM CONSOLIDATED

BALANCE SHEETS

(in thousands of U.S. dollars)




As of




June 30,



December 31,




2018



2017


LIABILITIES AND EQUITY









Current liabilities









Current portion of long-term debt


$

45,458



$

45,458


Trade payables



622




381


Amounts due to owners and affiliates



559




1,417


Value added and withholding tax liability



1,013




1,511


Derivative instruments



331




2,015


Accrued liabilities and other payables



9,037




13,042


Total current liabilities



57,020




63,824


Long-term liabilities









Accumulated losses of joint ventures



6,265




20,746


Long-term debt



412,479




434,845


Revolving credit facility due to owners and affiliates



45,292




51,832


Long-term tax liability



786





Long-term deferred tax liability



7,403




5,158


Other long-term liabilities



2,673




5,793


Total long-term liabilities



474,898




520,476


Total liabilities



531,918




584,300


EQUITY









8.75% Series A Preferred Units



132,532




113,404


Common units public



323,989




317,149


Common units Höegh LNG



6,945




6,513


Subordinated units



43,044




40,341


Accumulated other comprehensive income (loss)



1,659




(2,748)


Total partners' capital



508,169




474,659


Total equity



508,169




474,659


Total liabilities and equity


$

1,040,087



$

1,058,959


 

 

HÖEGH LNG PARTNERS LP

UNAUDITED CONDENSED INTERIM CONSOLIDATED

STATEMENTS OF CASH FLOWS

(in thousands of U.S. dollars)




Three months ended
June 30,




2018



2017


OPERATING ACTIVITIES









Net income (loss)


$

19,944



$

12,212


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









     Depreciation and amortization



5,268




5,263


     Equity in losses (earnings) of joint ventures



(5,111)




(1,551)


     Changes in accrued interest income on advances to joint ventures



(63)




1,398


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



176




210


     Amortization in revenue for above market contract



905




906


     Changes in accrued interest expense



(982)




93


     Net currency exchange losses (gains)



201




787


     Unrealized loss (gain) on derivative instruments



(544)




(247)


     Non-cash revenue: tax paid directly by charterer



(214)




(432)


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



214




432


     Deferred tax expense and provision for tax uncertainty



1,426




924


     Issuance of units for Board of Directors' fees



160




189


     Other adjustments



114




151


Changes in working capital:









     Trade receivables



2,089




182


     Inventory



9




17


     Prepaid expenses and other receivables



(492)




690


     Trade payables



(218)




(625)


     Amounts due to owners and affiliates



(2,222)




(2,437)


     Value added and withholding tax liability



961




652


     Accrued liabilities and other payables



(974)




(558)


Net cash provided by (used in) operating activities



20,647




18,256











INVESTING ACTIVITIES









Expenditure for purchase of Höegh Grace entities






(407)


Expenditure for vessel and other equipment






(8)


Receipts from repayment of principal on direct financing lease



943




861


Net cash provided by (used in) investing activities


$

943



$

446


 

 

HÖEGH LNG PARTNERS LP

UNAUDITED CONDENSED INTERIM CONSOLIDATED

STATEMENTS OF CASH FLOWS

(in thousands of U.S. dollars)




Three months ended
June 30,




2018



2017


FINANCING ACTIVITIES









Proceeds from loans and promissory notes due to owners and affiliates


$



$

10,100


Repayment of long-term debt



(11,364)




(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



104





Net proceeds from issuance of 8.75% Series A Preferred Units



11,681





Cash distributions to limited partners and preferred unitholders



(17,737)




(14,438)


Cash distributions to non-controlling interest






(3,920)


Proceeds from indemnifications received from Höegh LNG






605


Net cash provided by (used in) financing activities



(30,010)




(19,017)











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



(8,420)




(315)


Effect of exchange rate changes on cash and cash equivalents



(54)





Cash, cash equivalents and restricted cash, beginning of period



48,816




41,761


Cash, cash equivalents and restricted cash, end of period


$

40,342



$

41,446


 

HÖEGH LNG PARTNERS LP
UNAUDITED SEGMENT INFORMATION FOR THE QUARTER ENDED JUNE 30, 2018 AND 2017
(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 (gains and losses on derivative instruments and other items, net) less the non-controlling interest in Segment EBITDA. 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 that are considered to benefit the entire organization, interest income from advances to joint ventures and interest expense related to the seller's credit note and the outstanding balance on the $85 million revolving credit facility are included in "Other."

For the three months ended June 30, 2018 and 2017, 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, 2018 and 2017, Joint venture FSRUs include two 50% owned FSRUs, the Neptune and the GDF Suez 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 are 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) non-controlling interest in Segment EBITDA is subtracted in the segment note and the tables below to reflect the Partnership's interest in Segment EBITDA as the Partnership's segment profit measure, Segment EBITDA. 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. On January 1, 2017, the Partnership began consolidating its acquired 51% interest in the Höegh Grace entities. Since the Partnership obtained control of the Höegh Grace entities, it consolidated 100% of the revenues, expenses, assets and liabilities of the Höegh Grace entities and the interest not owned by the Partnership was reflected as non-controlling interest in net income and non-controlling interest in total equity under US GAAP. Management monitored the results of operations of the Höegh Grace entities based on the Partnership's 51% interest in Segment EBITDA of such entities and, therefore, subtracted the non-controlling interest in Segment EBITDA to present Segment EBITDA. The adjustment to non-controlling interest in Segment EBITDA is reversed to reconcile to operating income and net income in the segment presentation. On December 1, 2017, the Partnership acquired the remaining 49% ownership interest in the Höegh Grace entities and, as of that date, there was no longer a non-controlling interest in the Höegh Grace entities. The following tables include the results for the segments for the three months ended June 30, 2018 and 2017.

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



Elimin-



Consolidated


(in thousands of U.S. dollars)


FSRUs



consolidation)



Other



reporting



ations



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 benefit (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, subsequent to June 30, 2018, for claims related to repairs under the Mooring warranty. The Partnership was indemnified by Höegh LNG for the cost of the repairs, subject to repayment to the extent recovered from insurance proceeds. The amount is expected to be refunded to Höegh LNG during the third quarter of 2018.

 

 

HÖEGH LNG PARTNERS LP

UNAUDITED SEGMENT INFORMATION FOR THE QUARTER ENDED JUNE 30, 2017

(in thousands of U.S. dollars)




Three months ended June 30, 2017










Joint venture

















Majority



FSRUs






Total











held



(proportional






Segment



Elimin-




Consolidated


(in thousands of U.S. dollars)


FSRUs



consolidation)



Other



reporting



ations




reporting


Time charter revenues


$

35,024




10,225







45,249




(10,225)


(1)


$

35,024


Total revenues



35,024




10,225







45,249









35,024


Operating expenses



(6,693)




(1,984)




(1,400)




(10,077)




1,984


(1)



(8,093)


Construction contract expenses



(151)










(151)









(151)


Equity in earnings (losses) of joint
ventures















1,551


(1)



1,551


Less: Non-controlling interest in
Segment EBITDA



(5,423)










(5,423)




5,423


(2)




Segment EBITDA



22,757




8,241




(1,400)




29,598











Add: Non-controlling interest in
Segment EBITDA



5,423










5,423




(5,423)


(2)




Depreciation and amortization



(5,263)




(2,476)







(7,739)




2,476


(1)



(5,263)


Operating income (loss)



22,917




5,765




(1,400)




27,282









23,068


Gain (loss) on derivative instruments



247




(785)







(538)




785


(1)



247


Other financial income (expense), net



(8,028)




(3,429)




(1,033)




(12,490)




3,429


(1)



(9,061)


Income (loss) before tax



15,136




1,551




(2,433)




14,254








14,254


Income tax expense



(2,042)










(2,042)








(2,042)


Net income (loss)


$

13,094




1,551




(2,433)




12,212







$

12,212


Non-controlling interest in net income



2,812










2,812









2,812


Limited partners' interest in net income
(loss)


$

10,282




1,551




(2,433)




9,400







$

9,400




(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)

Eliminations reverse the adjustment to Non-controlling interest in Segment EBITDA included for Segment EBITDA and the adjustment to reverse the Non-controlling interest in Segment EBITDA to reconcile to operating income and net income.

 

 

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, 2018 and 2017.




Three months ended




June 30,


(in thousands of U.S. dollars)


2018



2017


Interest income


$

174



$

113


Interest expense:









Interest expense



(6,742)




(7,301)


Commitment fees






(241)


Amortization of debt issuance cost and fair value of debt assumed



(176)




(210)


Total interest expense



(6,918)




(7,752)


Gain (loss) on derivative instruments



544




247


Other items, net:









Unrealized foreign exchange gain (loss)



(212)




(804)


Realized foreign exchange gain (loss)



14




(7)


Bank charges, fees and other



(37)




(29)


Withholding tax on interest expense and other



(645)




(582)


Total other items, net



(880)




(1,422)


Total financial income (expense), net


$

(7,080)



$

(8,814)


 

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 less non-controlling interest in Segment EBITDA. Other financial items consist of gains and losses 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, other financial items, depreciation and amortization and taxes, 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, 2018








Joint venture

















Majority



FSRUs






Total











held



(proportional






Segment



Elimin-



Consolidated



(in thousands of U.S. dollars)


FSRUs



consolidation)



Other



reporting



ations(1)



reporting



Reconciliation to net income (loss)


























Net income (loss)


$

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














Three months ended June 30, 2017








Joint venture

















Majority



FSRUs






Total











held



(proportional






Segment



Elimin-



Consolidated



(in thousands of U.S. dollars)


FSRUs



consolidation)



Other



reporting



ations(1)



reporting



Reconciliation to net income (loss)


























Net income (loss)


$

13,094




1,551




(2,433)




12,212







 

$

12,212


(3)

Interest income






(13)




(113)




(126)




13


(4)


(113)



Interest expense



6,615




3,442




1,137




11,194




(3,442)


(4)


7,752



Depreciation and amortization



5,263




2,476







7,739




(2,476)


(5)


5,263



Other financial items(2)



1,166




785




9




1,960




(785)


(6)


1,175



Income tax (benefit) expense



2,042










2,042








2,042



Equity in earnings of JVs:
Interest (income) expense, net















3,429


(4)


3,429



Equity in earnings of JVs:
Depreciation and amortization















2,476


(5)


2,476



Equity in earnings of JVs:
Other financial items(2)















785


(6)


785



Non-controlling interest in segment
EBITDA



(5,423)












(5,423)








(5,423)



Segment EBITDA


$

22,757




8,241




(1,400)




29,598







$

29,598





(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 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 and fair value of debt assumed, other items (net), unrealized foreign exchange losses (gains), current income tax 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 the non-cash boil-off accrual, non-budgeted expenses, losses and estimated maintenance indemnified by, or refunded to, Höegh LNG, distributions on the Series A preferred units 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. 



Three months ended


(in thousands of U.S. dollars)


June 30, 2018


Segment EBITDA


$

36,914


Cash collection/Principal payment on direct financing lease



943


Amortization in revenues for above market contracts



905


Non-cash revenue: Tax paid directly by charterer



(214)


Equity in earnings of JVs: Amortization of deferred revenue



(573)


Interest income (1)



233


Interest expense (1)



(10,301)


Amortization of debt issuance cost (1) and fair value of debt assumed



219


Other items, net (1)



(880)


Unrealized foreign exchange losses (gains)



212


Current income tax expense, net of uncertain tax position



(439)


Non-cash income tax: Tax paid directly by charterer



214


Other adjustments:





Insurance proceeds to be refunded to Höegh LNG for previous indemnifications



(1,100)


Distributions relating to Series A preferred units



(3,003)


Estimated maintenance and replacement capital expenditures



(5,175)


Distributable cash flow


$

17,955




(1)

The Partnership's interest in the joint ventures' interest income, interest expense and amortization of debt issuance cost is $59, $3,383 and $43, respectively



(2)

Represents distributions payable on the Series A preferred units related to the three months ended June 30, 2018

 

 

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, 2018


Distributable cash flow


$

17,955


Estimated maintenance and replacement capital expenditures



5,175


Indemnification paid by Höegh LNG after quarter end for non-budgeted expenses & losses



1,100


Distributions relating to Series A preferred units



3,003


Equity in earnings of JVs: Amortization of deferred revenue



573


Equity in earnings of JVs: Amortization of debt issuance cost



(43)


Equity in earnings of JVs: Depreciation and amortization



(2,399)


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



2,967


Equity in losses (earnings) of joint ventures



(5,111)


Cash collection/Principal payment on direct financing lease



(943)


Changes in accrued interest expense and interest income



(1,045)


Other adjustments



262


Changes in working capital



(847)


Net cash provided by (used in) operating activities


$

20,647


 

Media contact:
Richard Tyrrell
Chief Executive Officer and Chief Financial Officer
+44 7919 058830
www.hoeghlngpartners.com

Cision View original content:http://www.prnewswire.com/news-releases/hoegh-lng-partners-lp-reports-preliminary-financial-results-for-the-quarter-ended-june-30-2018-300701301.html

SOURCE Hoegh LNG Partners LP


Source: PR Newswire (August 23, 2018 - 6:35 AM EDT)

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