Le Lézard
Classified in: Transportation, Business, Covid-19 virus
Subjects: ERN, CCA, ERP

Höegh LNG Partners LP Reports Financial Results for the Quarter Ended June 30, 2020


HAMILTON, Bermuda, Aug. 20, 2020 /PRNewswire/ -- Höegh LNG Partners LP (NYSE: HMLP) (the "Partnership") today reported its financial results for the quarter ended June 30, 2020.

Highlights

Steffen Føreid, Chief Executive Officer and Chief Financial Officer stated: "Thanks to the hard work of all our crew and staff, we have continued to provide safe and reliable services through these unprecedented times caused by the COVID-19 pandemic. The consistent operational excellence has resulted in stable cash flows and strong distribution coverage for the quarter from the Partnership's portfolio of fixed-rate contracts. With the completion of the Subsequent Charter for the Höegh Gallant during the quarter, the average remaining contract length of the Partnership's long term contract portfolio stands at more than 9 years, ensuring that Höegh LNG Partners is well-positioned to continue generating stable and predictable cash flows."

1 Segment EBITDA is a non-GAAP financial measure used by investors to measure financial and operating performance. Please see Appendix A for a reconciliation of Segment EBITDA to net income, the most directly comparable GAAP financial measure. 

Financial Results Overview

For the three months ended June 30, 2020, each of the Partnership's FSRUs have had 100% availability due to the diligent efforts of the crew and staff to ensure all aspects of operations continued to function smoothly in spite of challenges as a result of the COVID-19 pandemic. The Partnership has mitigated the risk of an outbreak of the Coronavirus on board its vessels by extending time between crew rotations on the vessels and developing mitigating actions for crew rotations. Management and administrative staffs have transitioned to working remotely from home to address the specific COVID-19 situation in the applicable geographic location. The Partnership has been fulfilling its obligations under the time charter contracts and not experienced any off-hire for its FSRUs for the three months ended June 30, 2020.

The Partnership reported net income of $19.7 million for the three months ended June 30, 2020, an increase of $13.5 million from net income of $6.2 million for the three months ended June 30, 2019. Net income was impacted by unrealized gains on derivative instruments for the second quarter of 2020 compared with unrealized losses for the second quarter of 2019, mainly included in 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, 2020 would have been $17.4 million, an increase of $6.6 million from $10.8 million for the three months ended June 30, 2019. Excluding the impact of the unrealized gains (losses) on derivatives, the increase for the three months ended June 30, 2020 is primarily due to higher time charter revenue as a result of off-hire related to the drydock for the Höegh Gallant during the second quarter of 2019, and lower vessel operating expenses as a result of maintenance, principally for the Höegh Gallant but also for the PGN FSRU Lampung, during the second quarter of 2019. For the three months ended June 30, 2019, higher maintenance expenses were approximately $3.0 million. These items were also the main drivers for the higher limited partners' interest in net income and operating income, excluding the impact of the unrealized gains (losses) on derivatives, as well as Segment EBITDA for the three months ended June 30, 2020 compared with the three months ended June 30, 2019.

Preferred unitholders' interest in net income was $3.7 million for the three months ended June 30, 2020, an increase of $0.3 million from $3.4 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, 2020 was $16.0 million, an increase of $13.2 million from limited partners' interest in net income of $2.8 million for the three months ended June 30, 2019. Excluding all of the unrealized gains (losses) on derivative instruments, limited partners' interest in net income for the three months ended June 30, 2020 would have been $13.7 million, an increase of $6.3 million from $7.4 million for the three months ended June 30, 2019.

The PGN FSRU Lampung and the Höegh Grace were both on-hire for the full three months periods ended June 30, 2020 and 2019. The Höegh Gallant was on-hire during the full three months ended June 30, 2020 compared with the equivalent of 16 off-hire days due to the scheduled drydock for the three months ended June 30, 2019.

Equity in earnings of joint ventures for the three months ended June 30, 2020 was $6.5 million, an increase of $8.1 million from equity in losses of joint ventures of $1.6 million for the three months ended June 30, 2019. Unrealized gains and losses on derivative instruments in the Partnership's joint ventures significantly impacted the equity in earnings (losses) of joint ventures for the three months ended June 30, 2020 and 2019. Excluding the unrealized gain on derivative instruments for the three months ended June 30, 2020 and the unrealized loss on derivative instruments for the three months ended June 30, 2019, the equity in earnings of joint ventures would have been $4.2 million for the three months ended June 30, 2020, an increase of $1.1 million from $3.1 million for the three months ended June 30, 2019. Excluding the unrealized gain on derivative instruments for the three months ended June 30, 2020 and the unrealized loss on derivative instruments for the three months ended June 30, 2019, the increase was mainly due to higher time charter revenues related to the reimbursement of maintenance and project costs which more than offset the increase in vessel operating expenses related to increased maintenance for the three months ended June 30, 2020 compared with the three months ended June 30, 2019. The Partnership's share of its joint ventures' operating income was $7.0 million for the three months ended June 30, 2020, compared with $6.1 million for the three months ended June 30, 2019.

Operating income for the three months ended June 30, 2020 was $27.7 million, an increase of $12.4 million from operating income of $15.3 million for the three months ended June 30, 2019. 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, 2020 and 2019, operating income for the three months ended June 30, 2020 would have been $25.5 million, an increase of $5.6 million from $19.9 million for the three months ended June 30, 2019.

Segment EBITDA1 for the three months ended June 30, 2020 was $36.0 million, an increase of $5.0 million from $31.0 million for the three months ended June 30, 2019.

Effective January 1, 2020, the Partnership adopted the new accounting standard, Financial Instruments ? Credit Losses: Measurement of Credit Losses on Financial Instruments, with recognition of a net decrease to retained earnings of $0.16 million as of January 1, 2020 for the cumulative effect of adopting the new standard. The cumulative effect includes allowances for expected credit losses related to the net investment in financing lease and trade receivables. For the three months ended June 30, 2020, there was no change in the allowance for expected credit losses.

Financing and Liquidity

As of June 30, 2020, the Partnership had cash and cash equivalents of $25.6 million. Current restricted cash for operating obligations of the PGN FSRU Lampung was $6.0 million and long-term restricted cash required under the long-term debt for the PGN FSRU Lampung (the "Lampung facility") was $12.4 million as of June 30, 2020. As of August 20, 2020, the Partnership had an undrawn balance of $14.7 million on the $63 million revolving credit tranche of the $385 million facility and an undrawn balance of $73.6 million on the $85 million revolving credit facility from Höegh LNG, respectively.

As of June 30, 2020, the Partnership has no material commitments for capital expenditures. However, the joint ventures have a liability for a boil-off claim under the time charters totaling $6.5 million as of June 30, 2020. The Partnership's 50% share of the liability is $3.3 million as of June 30, 2020. In February 2020, each of the joint ventures and the charterer reached a commercial settlement addressing all the past and future claims. The final settlement and release agreements were signed on and had an effective date of April 1, 2020. Among other things, the settlement provides that 1) the boil-off claim, up to the signature date of the settlement agreements, will be settled for an aggregate amount of $23.7 million, paid in instalments during 2020, 2) the costs of the arbitration tribunal will be equally split between the two parties and each party will settle its legal and other costs, 3) the joint ventures have or will implement technical upgrades on the vessels at their own cost to minimize boil-off, and 4) the relevant provisions of the time charters were amended regarding the computation and settlement of prospective boil-off claims. The first instalment of the settlement of $17.2 million was paid by the joint ventures in April 2020. The Partnership's 50% share was $8.6 million. The joint ventures expect to pay the remaining instalment with accumulated cash balances on the joint ventures' respective balance sheets as of June 30, 2020 and with cash from operations in 2020.

The Partnership is indemnified by Höegh LNG for its share of the cash impact of the settlement, the arbitration costs and any legal expenses, the technical modifications of the vessels and any prospective boil-off claims or other direct impacts of the settlement agreement. On April 8, 2020, the Partnership was indemnified by Höegh LNG for its share of the joint ventures boil-off settlement payments by a reduction of $8.6 million on its outstanding balance on the $85 million revolving credit facility from Höegh LNG. The remaining amount of the indemnification for the boil-off claim will be settled when the amount is paid to the charterer.

On April 24, 2020, the Partnership drew $4.5 million on the $85 million revolving credit facility from Höegh LNG. On August 7, 2020, the Partnership drew $6.6 million on the $85 million revolving credit facility from Höegh LNG.

During the second quarter of 2020, 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 $440.6 million and $448.5 million, respectively, as of June 30, 2020, including the Lampung facility, the $385 million facility and the $85 million revolving credit facility.

As of June 30, 2020, the Partnership's total current liabilities exceeded total current assets by $15.0 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 $12.4 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 balances under the $85 million revolving credit facility and the $63 million revolving credit tranche of the $385 million facility, are sufficient to meet the Partnership's working capital requirements for its business for the next twelve months.

As of June 30, 2020, the Partnership had outstanding interest rate swap agreements for a total notional amount of $344.0 million to hedge against the floating 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 Partnership's share of the joint ventures is accounted for using the equity method. As a result, the Partnership's share of the joint ventures' cash, restricted cash, outstanding debt, interest rate swaps and other balance sheet items are reflected net on the lines "accumulated earnings in joint ventures" and "accumulated losses in joint ventures" on the consolidated balance sheet and are not included in the balance sheet figures disclosed above.

On April 8, 2020, the Partnership was indemnified by Höegh LNG for its share of the joint ventures boil-off settlement payments by a reduction of $8.6 million on its outstanding balance on the $85 million revolving credit facility from Höegh LNG.

On April 24, 2020, the Partnership drew $4.5 million on the $85 million revolving credit facility from Höegh LNG.

On May 15, 2020, the Partnership paid a cash distribution of $15.0 million, or $0.44 per common unit, with respect to the first quarter of 2020, equivalent to $1.76 per unit on an annualized basis.

On May 15, 2020, the Partnership paid a cash distribution of $3.7 million, or $0.546875 per Series A preferred unit, for the period commencing on February 15, 2020 to May 14, 2020.

The Partnership sold 82,409 Series A preferred units and no common units under the ATM program in the first quarter of 2020.  The Partnership did not issue Series A preferred units or common units under the ATM program in the second quarter of 2020.

On August 7, 2020, the Partnership drew $6.6 million on the $85 million revolving credit facility from HLNG.

On August 14, 2020, the Partnership paid a cash distribution of $15.0 million, or $0.44 per common unit, with respect to the second quarter of 2020, equivalent to $1.76 per unit on an annualized basis.

On August 17, 2020, the Partnership paid a cash distribution of $3.7 million, or $0.546875 per Series A preferred unit, for the period commencing on May 15, 2020 to August 14, 2020.

For the period from July 1, 2020 to August 20, 2020, no Series A preferred units or common units were sold under the ATM program.

Outlook

Höegh LNG has the Subsequent Charter for the Höegh Gallant, has indemnified the Partnership for the joint ventures' boil-off settlement and provided the Partnership the $85 million revolving credit facility. Höegh LNG's ability to make payments to the Partnership under the indemnification for the boil-off settlement, the Subsequent Charter, and funding requests under the $85 million revolving credit facility may be affected by events beyond the control of Höegh LNG or the Partnership, including opportunities to obtain new employment for the Höegh Gallant and 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 under the indemnification for the boil-off settlement, the Subsequent Charter or meet funding requests, the Partnership's financial condition, results of operations and ability to make cash distributions to unitholders could be materially adversely affected.

The recent outbreak of Coronavirus (COVID-19) has negatively affected economic conditions in many parts of the world which may impact the Partnership's operations and the operations of its customers and suppliers. Although the Partnership's operations have not been materially affected by the Coronavirus outbreak to date, the ultimate length and severity of the Coronavirus outbreak and its potential impact on the Partnership's operations and financial condition is uncertain at this time. The Partnership believes its primary risk and exposure related to uncertainty of cash flows from its long-term time charter contracts is due to the credit risk associated with the individual charterers. Payments are due under time charter contracts regardless of the demand for the charterer's gas output or the utilization of the FSRU. It is therefore possible that charterers may not make payments for time charter services in times of reduced demand. As of August 20, 2020, the Partnership has not experienced any reduced or non-payments for obligations under the Partnership's time charter contracts. In addition, the Partnership has not provided concessions or made changes to the terms of payment for our customers. Furthermore, should there be an outbreak of the Coronavirus on board one of the Partnership's FSRUs or an inability to replace critical supplies or replacement parts due to disruptions to third-party suppliers, adequate crewing or supplies may not be available to fulfill the Partnership's obligations under its time charter contracts. This could result in off-hire or warranty payments under performance guarantees which would reduce revenues for the impacted period. To date, the Partnership has mitigated the risk of an outbreak of the Coronavirus on board its vessels by extending time between crew rotations on the vessels and developing mitigating actions for crew rotations. As a result, the Partnership expects that it will incur somewhat higher crewing expenses to ensure appropriate mitigation actions are in place to minimize risks of outbreaks. To date, the Partnership has not had service interruptions on our vessels. Management and administrative staffs have transitioned to working remotely from home to address the specific COVID-19 situation in the applicable geographic location. The Partnership has supported staffs by supplying needed internet boosters and office equipment to facilitate an effective work environment. In addition, if financial institutions providing the Partnership's interest rate swaps or lenders under the revolving credit facility are unable to meet their obligations, the Partnership could experience a higher interest expense or be unable to obtain funding. Since implementing our Prior ATM program in January 2018 until January 2020, the Partnership has sold preferred units and common units for total net proceeds of $59.5 million which has supplemented our liquidity. In current market conditions with lower unit prices, sales under the new ATM program is a less viable and more expensive option for accessing liquidity. If the Partnership's charterers or lenders are unable to meet their obligations under their respective contracts or if the Partnership is unable to fulfill its obligations under time charters, its financial condition, results of operations and ability to make cash distributions to unitholders could be materially adversely affected. The Partnership does not have long term debt maturing in the next twelve months. However, the Lampung facility must be refinanced in October 2021. Should the Partnership be unable to obtain refinancing for the Lampung facility in 2021, it may not have sufficient funds or other assets to satisfy all its obligations, which would have a material adverse effect on its business, results of operations and financial condition.

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:

Höegh LNG has four operating FSRUs, the Höegh Giant (HHI Hull No. 2552), delivered from the shipyard on April 27, 2017, the Höegh Esperanza (HHI Hull No. 2865), delivered from the shipyard on April 5, 2018, Höegh Gannet (HHI Hull No. 2909), delivered from the shipyard on December 6, 2018, and the Höegh Galleon (SHI Hull No. 2220), delivered from the shipyard on August 27, 2019. The Höegh Giant is operating on a contract with Naturgy. The Höegh Esperanza is operating on a contract that commenced on June 7, 2018 with CNOOC Gas & Power Trading and Marketing Ltd. ("CNOOC"). The Höegh Gannet serves on a 12-month LNG carrier contract that commenced in May 2020. The Höegh Galleon operates on an interim LNG carrier contract with Cheniere Marketing International LLP ("Cheniere") that commenced in September 2019.

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 2020 Results

A presentation will be held today, Thursday, August 20, 2020, at 8:30 A.M. (EST) to discuss financial results for the second quarter of 2020. 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/942/36626 

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 27, 2020.

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:

10147308

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, 2020, "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:

All forward-looking statements included in this press release are made only as of the date of this release. New factors emerge from time to time, and it is not possible for the Partnership to predict all of these factors. Further, the Partnership cannot assess the impact of each such factor on its business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement. The Partnership does not intend to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.

 

HÖEGH LNG PARTNERS LP
UNAUDITED CONDENSED INTERIM CONSOLIDATED
STATEMENTS OF INCOME
(in thousands of U.S. dollars, except per unit amounts)




Three months ended



Six months ended




June 30,



June 30,


(in thousands of U.S. dollars)


2020



2019



2020



2019


REVENUES













Time charter revenues


$

34,436



$

33,777



$

71,122



$

69,852


Other revenues



?




?




?




64


Total revenues



34,436




33,777




71,122




69,916


OPERATING EXPENSES

















Vessel operating expenses



(5,776)




(9,064)




(11,283)




(14,957)


Administrative expenses



(2,155)




(2,272)




(4,583)




(4,848)


Depreciation and amortization



(5,234)




(5,589)




(10,516)




(10,912)


Total operating expenses



(13,165)




(16,925)




(26,382)




(30,717)


Equity in earnings (losses) of joint ventures



6,475




(1,575)




(3,572)




(1,223)


Operating income (loss)



27,746




15,277




41,168




37,976


FINANCIAL INCOME (EXPENSE), NET

















Interest income



163




297




335




496


Interest expense



(6,322)




(7,148)




(12,833)




(13,984)


Gain (loss) on derivative instruments



?




?




?




1,030


Other items, net



(487)




(759)




(1,134)




(1,806)


Total financial income (expense), net



(6,646)




(7,610)




(13,632)




(14,264)


Income (loss) before tax



21,100




7,667




27,536




23,712


Income tax benefit (expense)



(1,419)




(1,511)




(2,381)




(3,421)


Net income (loss)


$

19,681



$

6,156



$

25,155



$

20,291


Preferred unitholders' interest in net income



3,668




3,378




7,337




6,742


Limited partners' interest in net income


$

16,013



$

2,778



$

17,818



$

13,549



















Earnings per unit

















Common unit public (basic and diluted)


$

0.47



$

0.07



$

0.51



$

0.38


Common unit Höegh LNG (basic and diluted)


$

0.50



$

0.10



$

0.56



$

0.44


Subordinated unit Höegh LNG (basic and diluted)


$

?



$

0.10



$

?



$

0.44


 

HÖEGH LNG PARTNERS LP
UNAUDITED CONDENSED INTERIM CONSOLIDATED
BALANCE SHEETS
(in thousands of U.S. dollars)




As of




June 30,



December 31,




2020



2019


ASSETS







Current assets









Cash and cash equivalents


$

25,623



$

39,126


Restricted cash



6,021




8,066


Trade receivables



4,266




735


Amounts due from affiliates



5,701




4,296


Inventory



?




463


Current portion of net investment in financing lease



4,756




4,551


Prepaid expenses and other receivables



3,334




2,534


Total current assets



49,701




59,771


Long-term assets









Restricted cash



12,369




12,627


Accumulated earnings of joint ventures



405




3,270


Advances to joint ventures



3,988




3,831


Vessels, net of accumulated depreciation



630,030




640,431


Other equipment



105




256


Intangibles and goodwill



15,444




17,108


Net investment in financing lease



271,827




274,353


Long-term deferred tax asset



197




217


Other long-term assets



849




936


Total long-term assets



935,214




953,029


Total assets


$

984,915



$

1,012,800


 

HÖEGH LNG PARTNERS LP
UNAUDITED CONDENSED INTERIM CONSOLIDATED
BALANCE SHEETS
(in thousands of U.S. dollars)




As of




June 30,



December 31,




2020



2019


LIABILITIES AND EQUITY









Current liabilities









Current portion of long-term debt


$

44,660



$

44,660


Trade payables



394




533


Amounts due to owners and affiliates



3,627




2,513


Value added and withholding tax liability



1,091




1,476


Derivative instruments



7,208




2,907


Accrued liabilities and other payables



7,756




11,164


Total current liabilities



64,736




63,253


Long-term liabilities









Accumulated losses of joint ventures



707




?


Long-term debt



391,141




412,301


Revolving credit facility due to owners and affiliates



4,749




8,792


Derivative instruments



23,652




12,028


Long-term tax liability



2,476




2,283


Long-term deferred tax liability



13,298




12,549


Other long-term liabilities



68




84


Total long-term liabilities



436,091




448,037


Total liabilities



500,827




511,290


EQUITY









8.75% Series A preferred units



166,607




164,482


Common units public



308,509




315,176


Common units Höegh LNG



42,858




39,795


Accumulated other comprehensive income (loss)



(33,886)




(17,943)


Total partners' capital



484,088




501,510


Total equity



484,088




501,510


Total liabilities and equity


$

984,915



$

1,012,800


 

HÖEGH LNG PARTNERS LP
UNAUDITED CONDENSED INTERIM CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)




Three months ended

June 30,




2020



2019


OPERATING ACTIVITIES









Net income (loss)


$

19,681



$

6,156


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









Depreciation and amortization



5,234




5,589


Equity in losses (earnings) of joint ventures



(6,475)




1,575


Changes in accrued interest income on advances to joint ventures



(79)




(73)


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



578




639


Amortization in revenue for above market contract and extension



759




905


Expenditure for drydocking



?




(2,862)


Changes in accrued interest expense



(102)




(628)


Receipts from repayment of principal on financing lease



1,125




1,030


Unrealized foreign exchange losses (gains)



(41)




52


Unrealized loss (gain) on derivative instruments



21




24


Non-cash revenue: tax paid directly by charterer



(218)




(220)


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



218




220


Deferred tax expense and provision for tax uncertainty



940




910


Issuance of units for Board of Directors' fees



?




155


Other adjustments



120




159


Changes in working capital:









Trade receivables



764




973


Inventory



463




185


Prepaid expenses and other receivables



(164)




1,179


Trade payables



(241)




(130)


Amounts due to owners and affiliates



238




1,862


Value added and withholding tax liability



148




760


Accrued liabilities and other payables



356




(754)


Net cash provided by (used in) operating activities



23,325




17,706











INVESTING ACTIVITIES









Expenditure for vessel and other equipment



(8)




(140)


Net cash provided by (used in) investing activities


$

(8)



$

(140)


 

HÖEGH LNG PARTNERS LP
UNAUDITED CONDENSED INTERIM CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)




Three months ended

June 30,




2020



2019


FINANCING ACTIVITIES









Proceeds from loans due to owners and affiliates


$

4,500



$

3,500


Repayment of long-term debt



(11,166)




(11,165)


Net proceeds from issuance of common units



?




1,029


Net proceeds from issuance of 8.75% Series A preferred units



?




1,316


Cash distributions to limited partners and preferred unitholders



(18,714)




(18,407)


Repayment of indemnifications received from Höegh LNG



?




(64)


Net cash provided by (used in) financing activities



(25,380)




(23,791)











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



(2,063)




(6,225)


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



102




(13)


Cash, cash equivalents and restricted cash, beginning of period



45,974




54,273


Cash, cash equivalents and restricted cash, end of period


$

44,013



$

48,035


 

HÖEGH LNG PARTNERS LP
UNAUDITED SEGMENT INFORMATION FOR THE QUARTER ENDED JUNE 30, 2020 AND 2019
(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, 2020 and 2019, Majority held FSRUs includes the financing lease related to the PGN FSRU Lampung and the operating leases related to the Höegh Gallant and the Höegh Grace.

For the three months ended June 30, 2020 and 2019, Joint Venture FSRUs include 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 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) 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, 2020
(in thousands of U.S. dollars)




Three months ended June 30, 2020








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


$

34,436




12,139




?




46,575




(12,139)


(1)


$

34,436


Total revenues



34,436




12,139




?




46,575









34,436


Operating expenses



(6,616)




(2,660)




(1,315)




(10,591)




2,660


(1)



(7,931)


Equity in earnings (losses) of joint ventures



?




?




?




?




6,475


(1)



6,475


Segment EBITDA



27,820




9,479




(1,315)




35,984











Depreciation and amortization



(5,234)




(2,490)




?




(7,724)




2,490


(1)



(5,234)


Operating income (loss)



22,586




6,989




(1,315)




28,260









27,746


Gain (loss) on derivative instruments



?




2,295




?




2,295




(2,295)


(1)



?


Other financial income (expense), net



(2,236)




(2,921)




(4,410)




(9,567)




2,921


(1)



(6,646)


Income (loss) before tax



20,350




6,363




(5,725)




20,988









21,100


Income tax benefit (expense)



(1,419)




112




?




(1,307)




(112)





(1,419)


Net income (loss)


$

18,931




6,475




(5,725)




19,681




?




$

19,681


Preferred unitholders' interest in net income



?




?




?




?




3,668


(2)



3,668


Limited partners' interest in net income (loss)


$

18,931




6,475




(5,725)




19,681




(3,668)


(2)


$

16,013




(1)

Eliminations reverse each of the income statement line items of the proportional amounts for Joint venture FSRUs and record
the Partnership's share of the Joint venture FSRUs net income (loss) to Equity in earnings (losses) of joint ventures.

(2)

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

 

HÖEGH LNG PARTNERS LP
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



Elimin-




Consolidated


(in thousands of U.S. dollars)


FSRUs



consolidation)



Other



reporting



ations




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 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 (losses) of joint ventures.

(2)

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

 

HÖEGH LNG PARTNERS LP
UNAUDITED SCHEDULE OF FINANCIAL INCOME AND EXPENSE
(in thousands of U.S. dollars)


The following table includes the financial income (expense), net for the three months ended June 30, 2020 and 2019.




Three months ended




June 30,


(in thousands of U.S. dollars)


2020



2019


Interest income


$

163



$

297


Interest expense:









Interest expense



(5,710)




(6,361)


Commitment fees



(34)




(148)


Amortization of debt issuance cost and fair value of debt assumed



(578)




(639)


Total interest expense



(6,322)




(7,148)


Other items, net:









Unrealized foreign exchange gain (loss)



41




(30)


Realized foreign exchange gain (loss)



125




(6)


Bank charges, fees and other



(41)




(85)


Withholding tax on interest expense and other



(612)




(638)


Total other items, net



(487)




(759)


Total financial income (expense), net


$

(6,646)



$

(7,610)


Appendix A: Segment EBITDA

Non-GAAP Financial Measures

Segment EBITDA. EBITDA is defined as earnings before interest, depreciation and amortization and taxes. Segment EBITDA is defined as earnings before interest, taxes, depreciation, amortization, impairment and other financial items. Other financial items consist of gain (loss) on debt extinguishment, gain (loss) on derivative instruments and other items, net (including foreign exchange gains and losses and withholding tax on interest expenses). Segment EBITDA is used as a supplemental financial measure by management and external users of financial statements, such as the Partnership's lenders, to assess its financial and operating performance. The Partnership believes that Segment EBITDA assists its management and investors by increasing the comparability of its performance from period to period and against the performance of other companies in the industry that provide Segment EBITDA information. This increased comparability is achieved by excluding the potentially disparate effects between periods or companies of interest, depreciation and amortization, taxes, and other financial items, which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which items may significantly affect net income between periods. The Partnership believes that including Segment EBITDA as a financial and operating measure benefits investor in (a) selecting between investing in it and other investment alternatives and (b) monitoring its ongoing financial and operational strength in assessing whether to continue to hold common units or preferred units. Segment EBITDA is a non-GAAP financial measure and should not be considered an alternative to net income, operating income or any other measure of financial performance presented in accordance with U.S. GAAP. Segment EBITDA excludes some, but not all, items that affect net income, and these measures may vary among other companies. Therefore, Segment EBITDA as presented below may not be comparable to similarly titled measures of other companies. The following tables reconcile Segment EBITDA for each of the segments and the Partnership as a whole to net income (loss), the comparable U.S. GAAP financial measure, for the periods presented: 



Three months ended June 30, 2020









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)


$

18,931




6,475




(5,725)




19,681








$

19,681


(3)

Interest income



(83)




?




(80)




(163)




?


(4)



(163)



Interest expense



1,883




2,918




4,439




9,240




(2,918)


(4)



6,322



Depreciation and amortization



5,234




2,490




?




7,724




(2,490)


(5)



5,234



Other financial items (2)



436




(2,292)




51




(1,805)




2,292


(6)



487



Income tax (benefit) expense



1,419




(112)




?




1,307




112


(7)



1,419



Equity in earnings of JVs:

Interest (income) expense, net



?




?




?




?




2,918


(4)



2,918



Equity in earnings of JVs:

Depreciation and amortization



?




?




?




?




2,490


(5)



2,490



Equity in earnings of JVs:

Other financial items (2)



?




?




?




?




(2,292)


(6)



(2,292)



Equity in earnings of JVs:

Income tax (benefit) expense



?




?




?




?




(112)


(7)



(112)



Segment EBITDA


$

27,820




9,479




(1,315)




35,984








$

35,984



 



Three months ended June 30, 2019










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)


$

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




(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 income consists of gains and losses on derivative financial 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.

(7)

Income tax (benefit) expense for the Joint venture FSRUs is eliminated from the Segment reporting to agree to the Income tax
(benefit) expense in the Consolidated reporting and reflected as a separate adjustment to the equity accounting on the line Equity
in earnings of JVs
: Income tax (benefit) expense for the Consolidated reporting.

Appendix B: Distributable Cash Flow

Distributable cash flow represents Segment EBITDA adjusted for cash collections on principal payments on the 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 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, 2020


Segment EBITDA


$

35,984


Cash collection/Principal payment on financing lease



1,125


Amortization in revenues for above market contracts



759


Non-cash revenue: Tax paid directly by charterer



(218)


Equity in earnings of JVs: Amortization of deferred revenue



(680)


Interest income (1)



163


Interest expense (1)



(9,240)


Amortization of debt issuance cost (1)



618


Amortization and gain on cash flow hedges included in interest expense



21


Other items, net



(492)


Unrealized foreign exchange losses (gains)



(41)


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



(479)


Non-cash income tax: Tax paid directly by charterer



218


Other adjustments:





Distributions relating to Series A preferred units (2)



(3,668)


Estimated maintenance and replacement capital expenditures



(5,350)


Distributable cash flow


$

18,720


 

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, 2020


Distributable cash flow


$

18,720


Estimated maintenance and replacement capital expenditures



5,350


Distributions relating to Series A preferred units (2)



3,668


Equity in earnings of JVs: Amortization of deferred revenue



680


Equity in earnings of JVs: Amortization of debt issuance cost



(40)


Equity in earnings of JVs: Depreciation and amortization



(2,490)


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



2,295


Equity in earnings of JVs: Income tax benefit (expense)



112


Equity in losses (earnings) of joint ventures



(6,475)


Changes in accrued interest expense and interest income



(181)


Other adjustments



122


Changes in working capital



1,564


Net cash provided by (used in) operating activities


$

23,325



(1)

The Partnership's interest in the joint ventures' interest expense and amortization of debt issuance cost is $2,918 and $40,
respectively

(2)

Represents distributions payable on the Series A preferred units related to the three months ended June 30, 2020

 

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

SOURCE Hoegh LNG Partners LP


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