Hoegh LNG Partners profit up

Hoegh-LNG-Partners

Höegh LNG Partners LP (HMLP) reported its financial results for the quarter ended September 30, 2015.

Highlights

-Reported total time charter revenues of $11.5 million for the third quarter of 2015 compared to $9.1 million of time charter revenue and $6.3 million of construction contract revenues for the third quarter of 2014

-Generated operating income of $7.5 million and net income of $5.2 million for the third quarter of 2015 compared to operating income of $5.2 million and net income of $3.3 million for the third quarter of 2014; operating income and net income were impacted by an unrealized loss on derivative instruments on the Partnership’s share of equity in earnings of joint ventures in the third quarter of 2015 compared with an unrealized gain for the third quarter of 2014

-Excluding unrealized gains (losses) on derivative instruments, net income for the three months ended September 30, 2015 was $6.9 million compared to $1.9 million for the three months September 30, 2014

-Generated Adjusted EBITDA1 of $16.9 million for the third quarter of 2015 compared to $11.4 million for the third quarter of 2014

-On October 1, 2015, closed the acquisition of the entity that owns the floating storage and regasification unit (“FSRU”) Höegh Gallant

-On November 13, 2015 paid a $0.3375 per unit distribution with respect to the third quarter of 2015, equivalent to $1.35 per unit on an annual basis

-On November 30, 2015, filed with the Securities and Exchange Commission (“SEC”) (i) an Annual Report on Form 20-F/A for the year ended December 31, 2014 which contained restated financial statements for the Partnership for the years ended December 31, 2014 and 2013 and (ii) a Form 6-K for the period ended June 30, 2015 which contained restated unaudited interim financial statements for the Partnership for the three and six months ended June 30, 2015 and 2014.

Richard Tyrrell, Chief Executive Officer and Chief Financial Officer stated: “Höegh LNG Partners’ solid operational and financial performance in the third quarter reflected the stable nature of the Partnership’s long-term contracts. Including the dropdown of the FSRU Höegh Gallant that closed on October 1, 2015, our contracts have an average duration of 13 years excluding options. We are not exposed to commodity price risk and believe that the FSRU industry is benefiting from the current affordability of LNG. The fourth quarter will benefit from the FSRU Höegh Gallant – an acquisition that takes our fleet size to four FSRUs.”

Financial Results Overview

The Partnership reported net income for the three months ended September 30, 2015 of $5.2 million, an increase of $1.9 million from $3.3 million for the three months ended September 30, 2014. The net income for both periods was impacted by the unrealized gains (losses) on derivative instruments mainly on the Partnership’s share of equity in earnings of joint ventures. Excluding these unrealized gains (losses) on derivative instruments, net income for the three months ended September 30, 2015 was $6.9 million, an increase of $5.0 million from $1.9 million for the three months September 30, 2014.

All FSRUs were onhire for the entire third quarter of 2015. During the third quarter of 2014, the PGN FSRU Lampung only had time charter revenues for part of the period since its time charter commenced on July 21, 2014.

Operating income for the three months ended September 30, 2015 was $7.5 million, an increase of $2.3 million from $5.2 million for the three months ended September 30, 2014. Operating income was also impacted by the unrealized gains (losses) on derivative instruments on the Partnership’s share of equity in earnings of joint ventures.

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

2 Financial data for the three and nine months ended September 30, 2014 contained herein have been restated as further described in Note 2d. to the financial statements contained in the Partnership’s Form 6-K for the period ended September 30, 2015 filed with the SEC today.

Adjusted EBITDA was $16.9 million for the three months ended September 30, 2015, an increase of $5.5 million from $11.4 million for the three months ended September 30, 2014.

Equity in losses of joint ventures, which own the vessels GDF Suez Neptune and the GDF Suez Cape Ann, for the three months ended September 30, 2015 was $0.2 million, a decrease of $3.3 million from equity in earnings of joint ventures of $3.1 million for the three months ended September 30, 2014. The reason for the decrease was the Partnership’s share of an unrealized loss on derivative financial instruments of the joint ventures for the three months ended September 30, 2015 of $2.1 million compared with an unrealized gain of $1.4 million for the three months ended September 30, 2014. The joint ventures do not apply hedge accounting for interest rate swaps and all changes in fair value is included in equity in earnings (losses) of joint ventures. For the three months ended September 30, 2015, the Partnership’s share of operating income in the joint ventures was $5.9 million compared with $6.0 million for the three months ended September 30, 2014.

Financing and Liquidity

As of September 30, 2015, the Partnership had cash and cash equivalents of $25.3 million and an undrawn sponsor credit facility of $85 million. Current restricted cash for operating obligations of the PGN FSRU Lampung was $11.5 million and long-term restricted cash required under the credit facility related to the PGN FSRU Lampung (the “Lampung facility”) was $14.8 million as of September 30, 2015. The Partnership had an interest-bearing demand note due from Höegh LNG Holdings Ltd. (“Höegh LNG”) of $140.0 million which was used as part of the consideration for the acquisition of the Höegh Gallant on October 1, 2015.

During the third quarter of 2015, the Partnership made a quarterly repayment of $4.7 million on the Lampung facility. The Partnership’s total long-term debt was $198.0 million as of September 30, 2015.

As of September 30, 2015, the Partnership had outstanding interest rate swap agreements for a total notional amount of $198.0 million to hedge against the interest rate risks of its long-term debt under the Lampung facility. The Partnership applies hedge accounting for derivative instruments. The Partnership receives interest based on three month US dollar LIBOR and pays a fixed rate of 2.8%. The carrying value of the liability for derivative financial instruments was $11.6 million as of September 30, 2015. The effective portion of the changes in fair value of the interest rate swaps are recorded in other comprehensive income. The gain on derivative instruments of $0.4 million for the three months ended September 30, 2015 was mainly due to amortization of the amount excluded from hedge effectiveness and the ineffective portion of the cash flow hedge related to the Lampung facility. There was no comparable gain or loss on derivative instruments for the three months ended September 30, 2014.

On November 13, 2015, the Partnership paid a cash distribution of $0.3375 per unit with respect to the third quarter of 2015, equivalent to $1.35 per unit on an annualized basis. The distribution totaled $8.9 million.

Outlook

Pursuant to the omnibus agreement the Partnership entered into with Höegh LNG at the time of the initial public offering (i) Höegh LNG is obligated to offer to the Partnership any FSRU or LNG carrier operating under a charter of five or more years and (ii) the Partnership has a right to purchase from Höegh LNG all or a portion of its interests in the FSRU Independence within 24 months after the acceptance of the vessel by her charterer, AB Klaipedos Nafta (“ABKN”), subject to reaching an agreement with Höegh LNG regarding the purchase price and other terms of the transaction and subject to the consent of ABKN.

Accordingly, the Partnership has, or may in the future have, the opportunity to acquire the FSRUs operating under the agreements listed below:

-On May 26, 2015, Höegh LNG signed a contract for a term of twenty years with Octopus LNG SpA (“Octopus”) to provide an FSRU to service for the Penco-Lirquen LNG import terminal to be located in Concepción Bay, Chile. The contract is subject to Octopus completing financing and obtaining necessary environmental approvals. Höegh LNG will service the contract with an FSRU from its newbuilding program currently in progress. The contract is expected to commence in the second quarter of 2018.

-On November 1, 2014, Höegh LNG signed a contract for a minimum term of ten years with Sociedad Portuaria El Cayao S.A. E.S.P. (“SPEC”) to provide an FSRU (the Höegh Grace) to service a new LNG import terminal in Colombia. The contract is expected to commence in the middle of 2016.

-On December 5, 2014, the Independence began operating under its time charter with ABKN. The Partnership and Höegh LNG continue to pursue, but have not received, ABKN’s consent to the acquisition of the Independence by the Partnership.

In addition to the Höegh Grace and the FSRU being constructed for Octopus, Höegh LNG has one additional FSRU on order which is scheduled to be delivered in mid-2017. This newbuilding has not yet been contracted.

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.

LEAVE A COMMENT

×

Comments are closed.