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Höegh LNG Partners LP: Preliminary Financial Results for the Quarter Ended December 31, 2021

Höegh LNG Partners LP reported its preliminary financial results for the quarter ended December 31, 2021.

Highlights

  • 99.9% availability of FSRUs for the fourth quarter of 2021
  • Reported total time charter revenues of $36.2 million for the fourth quarter of 2021, compared to $36.1 million of time charter revenues for the fourth quarter of 2020
  • Generated operating income of $22.5 million, net income of $16.2 million and limited partners’ interest in net income of $12.3 million for the fourth quarter of 2021, compared to operating income of $25.5 million, net income of $18.5 million and limited partners’ interest in net income of $14.8 million for the fourth quarter of 2020
  • Operating income, net income and limited partners’ interest in net income were impacted by unrealized gains on derivative instruments for the fourth quarter of 2021 and 2020, mainly on the Partnership’s share of equity in earnings of joint ventures
  • Continued measures to mitigate the risks from the COVID–19 pandemic and ensure health and safety of crews and staff, whose wellbeing is the Partnership’s highest priority
  • As previously reported, by letter dated July 13, 2021, the charterer under the lease and maintenance agreement for the PGN FSRU Lampung (“LOM”) raised certain issues with PT Höegh LNG Lampung (“PT HLNG”) in relation to the operations of the PGN FSRU Lampung and the LOM and by further letter dated July 27, 2021, stated that it would commence arbitration against PT HLNG. On August 2, 2021 the charterer served a notice of arbitration (“NOA”) to declare the LOM null and void, and/or to terminate the LOM, and/or seek damages. PT HLNG has served a reply refuting the claims as baseless and without legal merit and has also served a counterclaim against the charterer for multiple breaches of the LOM. PT HLNG will take all necessary steps and will vigorously defend against the charterer’s claims in the legal process. Notwithstanding the NOA, both parties have continued to perform their respective obligations under the LOM.
  • On September 23, 2021 the Partnership announced that it had entered into an agreement with a subsidiary of New Fortress Energy Inc (“New Fortress”) to charter the Höegh Gallant primarily for FSRU operations for a period of ten years, with a planned commencement of the FSRU operations now expected in March 2022 (the “NFE Charter”). From November 26, 2021 until the FSRU operations commence, New Fortress is chartering the vessel for LNG carrier operations. The Partnership has also entered into an agreement to suspend the prior charter for the Höegh Gallant with a subsidiary of Höegh LNG Holdings Ltd. (“H?egh LNG”), with effect from the commencement of the NFE Charter (the “Suspension Agreement”). The charter rate under the NFE Charter, in line with the current market, will be lower than under the prior charter for the Höegh Gallant. However, under the Suspension Agreement, Höegh LNG’s subsidiary will compensate the Partnership monthly for the difference between the charter rate earned under the NFE Charter and the charter rate earned under the prior charter with the addition of a modest increase until July 31, 2025, the original expiration date of the charter with a subsidiary of H?egh LNG. Afterwards, the Partnership will continue to receive the charter rate agreed with New Fortress for the remaining term of the NFE Charter. In addition, pursuant to the Suspension Agreement, certain capital expenditures incurred to ready and relocate the Höegh Gallant for performance under the NFE Charter will be shared 50/50 between Höegh LNG and the Partnership, subject to a maximum obligation of the Partnership.
  • On October 27, 2021, a federal securities class action lawsuit was filed against the Partnership and certain of its current and former officers in the United States District Court for the District of New Jersey. The name of the case is Guillermo Sanchez v. Höegh LNG Partners LP, et al., Case No. 2:21-cv-19374. The complaint alleges that the Partnership made materially false and misleading statements about its business and operations, and seeks unspecified damages, attorneys’ fees and any other relief the court deems proper. A substantially identical lawsuit named Arthur F. Roizman v. Höegh LNG Partners LP, et al., Case No. 1:21-cv-19613, was filed in the same court on November 3, 2021. The Partnership believes the allegations in these suits are without merit and intends to vigorously defend against them.
  • On November 30, 2021, the SRV Joint Gas Ltd, a joint venture owned 50% by the Partnership, and the owner of the Neptune, closed the refinancing of the Neptune debt facility (the “New Neptune Facility”) which has an initial loan amount of $154 million and which is scheduled to be fully amortized with quarterly debt service over a period of 8 years based on an annuity repayment profile. The New Neptune Facility replaces the balloon amount of $169 million that was repaid under the previous debt facility secured by the Neptune. The difference in the loan amount was mainly financed by cash held by SRV Joint Gas Ltd and subordinated shareholder loans from the shareholders, including a new subordinated shareholder loan of $3 million from the Partnership. The New Neptune Facility bears interest at a rate equal to three months LIBOR plus a margin of 1.75%. The interest rate swaps entered into under the previous Neptune debt facility have a remaining tenor of 8 years and have been novated from the previous group of swap providers to the new lenders and restructured to match the New Neptune Facility’s loan amount and amortization plan. The interest rate swaps are not reflected in the above-mentioned interest rate for the New Neptune Facility.
  • On December 6, 2021, the Partnership announced that the board of directors of the Partnership (the “HMLP Board”) received an unsolicited non-binding proposal, dated December 3, 2021, from Höegh LNG pursuant to which Höegh LNG would acquire through a wholly owned subsidiary all publicly held common units of the Partnership in exchange for $4.25 in cash per common unit. H?egh LNG has proposed that a transaction would be effectuated through a merger between the Partnership and a subsidiary of H?egh LNG (the “Offer”). The HMLP Board has authorized the Conflicts Committee of the HMLP Board, comprised only of non-Höegh LNG affiliated directors, to review and evaluate the Offer. The Conflicts Committee has retained advisors and discussions regarding the Offer are ongoing.
  • On December 15, 2021, the SRV Joint Gas Two Ltd, a joint venture owned 50% by the Partnership, and the owner of the Cape Ann, signed a new loan agreement to refinance the existing Cape Ann debt facility that matures on June 1, 2022. Subject to customary closing conditions the closing and the drawdown under the new facility are expected to occur on or about the maturity date of the existing facility. The terms and conditions for the new Cape Ann facility are largely identical to the New Neptune Facility.
  • On December 24, 2021, the Partnership closed a refinancing of the PGN FSRU Lampung debt facility’s commercial tranche’s outstanding amount of $15.5 million in full. The refinanced PGN FSRU Lampung debt facility’s commercial tranche will amortize with equal quarterly installments to zero by June 2026, subject to a cash sweep mechanism. The refinanced commercial tranche bears interest at a rate equal to three months LIBOR plus a margin of 3.75%, whereas the export credit tranche continues to bear interest at a rate equal to three months LIBOR plus a margin of 2.3%. Borrowings under the export credit tranche continue to be hedged with interest rate swaps, while the refinanced commercial tranche is unhedged. The interest rate swaps are not reflected in the above-mentioned interest rate for the export credit tranche.
  • On February 15, 2022, paid a cash distribution of $0.01 per common unit with respect to the fourth quarter of 2021.
  • On February 15, 2022, paid a cash distribution of $0.546875 per 8.75% Series A cumulative redeemable preferred unit (“Series A preferred unit”), for the period commencing on November 15, 2021 to February 14, 2022.

Financial Results Overview

For the three months ended December 31, 2021, each of the Partnership’s FSRUs have had 99.9% 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 COVID–19 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 largely transitioned to working remotely from home to address the specific COVID–19 situation in the applicable geographic location. The Partnership has fulfilled its obligations under the time charter contracts, and with the exception of some minor technical down-time on one vessel, did not experience any off-hire for its FSRUs for the three months ended December 31, 2021.

The Partnership reported net income of $16.2 million for the three months ended December 31, 2021, a decrease of $2.3 million from net income of $18.5 million for the three months ended December 31, 2020. Net income was impacted by unrealized gains on derivative instruments for the fourth quarter of 2021 and 2020, mainly included in 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 December 31, 2021 would have been $14.2 million, a decrease of $3.2 million from $17.4 million for the three months ended December 31, 2020. Excluding the impact of the unrealized gains on derivatives, the decrease is primarily due to higher operating expenses and higher administrative expenses which were partially offset by lower income tax expense for the three months ended December 31, 2021, compared to the corresponding period in 2020.

Preferred unitholders’ interest in net income was $3.9 million for the three months ended December 31, 2021, an increase of $0.1 million from $3.8 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 December 31, 2021 was $12.3 million, a decrease of $2.4 million from limited partners’ interest in net income of $14.7 million for the three months ended December 31, 2020. Excluding all of the unrealized gains on derivative instruments, limited partners’ interest in net income for the three months ended December 31, 2021 would have been $10.3 million, a decrease of $3.3 million from limited partners’ interest in net income of $13.6 million for the three months ended December 31, 2020.

Equity in earnings of joint ventures for the three months ended December 31, 2021 was $5.4 million, an increase of $1.2 million from equity in earnings of joint ventures of $4.2 million for the three months ended December 31, 2020. The joint ventures own the Neptune and the Cape Ann. Unrealized gains on derivative instruments in the Partnership’s joint ventures impacted the equity in earnings of joint ventures for the three months ended December 31, 2021 and 2020, respectively. The joint ventures have previously not applied hedge accounting for interest rate swaps, and all changes in fair value have been included in equity in earnings (losses) of joint ventures. After the refinancing of the New Neptune Facility on November 30, 2021 hedge accounting is applied for the Neptune. Excluding the unrealized gains on derivative instruments for the three months ended December 31, 2021 and 2020, the equity in earnings of joint ventures would have been $3.4 million for the three months ended December 31, 2021, an increase of $0.4 million from $3.0 million for the three months ended December 31, 2020. Excluding the unrealized gains on derivative instruments for the three months ended December 31, 2021 and 2020, the increase was mainly due to higher time charter revenue partially offset by higher operating expenses and financial expenses for the three months ended December 31, 2021, compared to those for the three months ended December 31, 2020. The Partnership’s share of its joint ventures’ operating income was $5.9 million for the three months ended December 31, 2021 compared to $5.8 million for the three months ended December 31, 2020.

Operating income for the three months ended December 31, 2021 was $22.5 million, a decrease of $3.0 million from operating income of $25.5 million for the three months ended December 31, 2020. Excluding the impact of the unrealized gains on derivatives impacting the equity in earnings of joint ventures for the three months ended December 31, 2021 and 2020, operating income for the three months ended December 31, 2021 would have been $20.4 million, a decrease of $3.9 million from $24.3 million for the three months ended December 31, 2020.

Segment EBITDA for the three months ended December 31, 2021 was $30.5 million, a decrease of $4.4 million from $34.9 million for the three months ended December 31, 2020.

Total operating expenses for the three months ended December 31, 2021 were $19.1 million, an increase of $4.4 million from $14.7 million for the three months ended December 31, 2020. The increase is principally due to higher vessel operating expenses and administrative expenses for the three months ended December 31, 2021, compared with the three months ended December 31, 2020.

The increase in vessel operating expenses are mainly related to the Höegh Gallant as a result of preparing and relocating the vessel for performance under the NFE Charter.

Total financial expense, net for the three months ended December 31, 2021 was $5.8 million, an increase of $0.1 million from $5.7 million for the three months ended December, 2020. Interest expense decreased by $0.2 million and other items, net increased by $0.3 million for the three months ended December 31, 2021, compared with the three months ended December 31, 2020. Interest expense consists of the interest incurred, amortization and gain (loss) on cash flow hedges, commitment fees and amortization of debt issuance costs for the period. The decrease of $0.2 million in interest expense in the fourth quarter of 2021 compared to the fourth quarter of 2020 was principally due to repayment of outstanding loan balances for the facility financing the PGN FSRU Lampung (“Lampung facility”) and the commercial and export tranche of the $385 million facility financing the Höegh Gallant and the Höegh Grace (the “$385 million facility”). The increase of $0.3 million in other items, net in the fourth quarter of 2021 compared to the fourth quarter of 2020 was principally due to lower foreign exchange gain in the fourth quarter of 2021 compared to the fourth quarter of 2020.

Segment Information

The Partnership has two operating segments. The segment profit measure is Segment EBITDA, which is defined as earnings before interest, taxes, depreciation, amortization, impairment and other financial items (gain (loss) on debt extinguishment, gain (loss) on derivative instruments and other items, net). 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 additional information on the segments, including a reconciliation of Segment EBITDA to operating income and net income for each segment, refer to the description and the tables included in “Unaudited Segment Information for the Quarters Ended December 31, 2021 and 2020″ beginning on page 18.

Segment EBITDA for Majority held FSRUs for the three months ended December 31, 2021 was $24.1 million, a decrease of $4.2 million from $28.3 million for the three months ended December 31, 2020. The decrease is mainly due to increased operating expenses on the Höegh Gallant as a result of preparing and relocating the vessel for performance under the NFE Charter.

Segment EBITDA for the Joint venture FSRUs for the three months ended December 31, 2021 and 2020, was $8.3 million for both periods.

For Other, Segment EBITDA consists of administrative expenses. Administrative expenses for the three months ended December 31, 2021 were $ 1.9 million, an increase of $0.2 million from $1.7 million for the three months ended December 31, 2020.

Financing and Liquidity

As of December 31, 2021, the Partnership had cash and cash equivalents of $42.5 million. Current restricted cash for operating obligations of the PGN FSRU Lampung was $8.4 million, and long-term restricted cash required under the long-term debt facility for the Lampung facility was $11.0 million as of December 31, 2021. As of February 23, 2022, the Partnership has fully drawn on the $63 million revolving credit tranche of the $385 million facility and has an undrawn balance of $60.1 million on the $85 million revolving credit facility from Höegh LNG. However, the Partnership has received notice from Höegh LNG that it will not extend the $85 million revolving credit facility when it matures on January 1, 2023, and that it will have very limited capacity to extend any additional advances to the Partnership thereunder beyond what is currently drawn under such facility. Further drawdowns on the $85 million revolving credit facility may be subject to Höegh LNG’s consent because of the NOA received from the charterer of PGN FSRU Lampung, as described below.

On December 24, 2021, the Partnership closed a refinancing of the PGN FSRU Lampung debt facility’s commercial tranche’s outstanding amount of $15.5 million in full. The refinanced PGN FSRU Lampung debt facility’s commercial tranche will amortize with equal quarterly installments to zero by June 2026, subject to a cash sweep mechanism. The refinanced facility includes certain restrictions on the use of cash generated by the PGN FSRU Lampung as well as a cash sweep mechanism. Until the pending arbitration with the charterer of PGN FSRU Lampung has been terminated, cancelled or favorably resolved, no shareholder loans may be serviced and no dividends may be paid to the Partnership by the subsidiary borrowing under the Lampung Facility, PT HLNG. Furthermore, each quarter, 50% of the PGN FSRU Lampung’s generated cash flow after debt service must be applied to pre-pay outstanding loan amounts under the refinanced Lampung Facility, applied pro rata across the commercial and export credit tranches. The remaining 50% will be retained by PT HLNG and pledged in favor of the lenders until the pending arbitration with the charterer of PGN FSRU Lampung has been terminated, cancelled or favorably resolved. As a consequence, no cash flow from the PGN FSRU Lampung will be available for the Partnership until the pending arbitration has been terminated, cancelled or favorably resolved. This limitation does not prohibit the Partnership from paying distributions to preferred and common unitholders.

The refinanced commercial tranche bears interest at a rate equal to three months LIBOR plus a margin of 3.75%, whereas the export credit tranche continues to bear interest at a rate equal to three months LIBOR plus a margin of 2.3%. Borrowings under the export credit tranche continue to be hedged with interest rate swaps, while the refinanced commercial tranche is unhedged. The interest rate swaps are not reflected in in the above-mentioned interest rate for the export credit tranche. The Partnership has provided a guarantee in favor of the interest rate swap providers and the lenders of the commercial tranche and the export credit tranche.

On November 30, 2021, SRV Joint Gas Ltd, the owner of the Neptune, closed the New Neptune Facility. The New Neptune Facility replaces the balloon amount of $169 million that was repaid under the previous debt facility secured by the Neptune. The New Neptune Facility has an initial loan amount of $154 million and is scheduled to be fully amortized with quarterly debt service over a period of 8 years based on an annuity repayment profile. The difference in the loan amount was mainly financed by cash held by SRV Joint Gas Ltd and subordinated shareholder loans from the shareholders, including a new subordinated shareholder loan of $3 million from the Partnership. The New Neptune Facility bears interest at a rate equal to three months LIBOR plus a margin of 1.75%. The interest rate swaps entered into under the previous Neptune debt facility have a remaining tenor of 8 years and have been novated from the previous group of swap providers to the new lenders and restructured to match the New Neptune Facility’s loan amount and amortization plan. The interest rate swaps are not reflected in the above-mentioned interest rate for the New Neptune Facility.

The Partnership and the other SRV Joint Gas Ltd shareholders have provided guarantees for the New Neptune Facility in favor of the lenders and swap providers. The guarantees are capped at a total amount of $15 million in aggregate, of which the Partnership is liable for up to $7.5 million. The Partnership and the other shareholders have also pledged their shares in SRV Joint Gas Ltd as security for the facility.

The covenants and restrictions contained in the previous Neptune facility are largely continued in the New Neptune Facility, including but not limited to a covenant to retain restricted cash for debt service for the next 6 months. Furthermore, in order for SRV Joint Gas Ltd to pay dividends or repay the subordinated shareholder loans, a 1.20 historical and projected debt service coverage ratio must be met, no event of default must then be continuing, and debt service reserve and retention accounts must remain fully funded.

On December 15, 2021, SRV Joint Gas Two Ltd, the owner of the Cape Ann, signed a new loan agreement to refinance the existing Cape Ann debt facility that matures on June 1, 2022. Subject to customary closing conditions the closing and the drawdown under the new facility are expected to occur on or about the maturity date of the existing facility. The terms and conditions for the new Cape Ann facility are largely identical to the New Neptune Facility.

As of December 31, 2021, the Partnership has no material commitments for capital expenditures. During the fourth quarter of 2021, the Höegh Gallant was modified and prepared for performance under the NFE Charter, and incurred expenditures of $4.9 million during the quarter, of which $3.5 million is recorded as operating expenses and $1.4 million is capitalized under Vessels, net of accumulated depreciation on the consolidated balance sheet. Pursuant to an agreement entered with Höegh LNG’s subsidiary, the Partnership will receive, by the end of February 2022, indemnification payments for 50% of the amount incurred in the fourth quarter of 2021. When received, the indemnification payments will be recorded as contributions to equity.

During the fourth quarter of 2021, the Partnership made quarterly repayments of $4.5 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 $411.0 million and $416.7 million, as of December 31, 2021, including the Lampung facility, the $385 million facility and the $85 million revolving credit facility.

On July 27, 2021, the Partnership’s board of directors announced a reduction in the quarterly cash distribution on its common units to $0.01 per common unit, down from a distribution of $0.44 per common unit in the first quarter of 2021, commencing with the distribution for the second quarter of 2021 and continuing in the third and fourth quarters of 2021. The Partnership intends to use its internally generated cash flow to reduce debt levels and strengthen its balance sheet.

As of December 31, 2021, the Partnership’s total current liabilities exceeded total current assets by $4.9 million. The current portion of long-term debt reflects principal payments for the next twelve months including an additional payment of $2.6 million that was settled in January 2022 due to the cash sweep mechanism in the refinanced Lampung facility.

The current liabilities are expected to 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 cash flows from operations, including distributions to it from Höegh LNG Cyprus Limited, and Höegh LNG FSRU Ltd as payment of intercompany interest and/or intercompany debt or dividends, will be sufficient to meet its debt amortization and working capital needs and maintain cash reserves against fluctuations in operating cash flows and pay distributions to its unitholders at its current level of distributions, for the next twelve months assuming the closing of the new Cape Ann facility on a timely basis and continuing compliance with covenants under its credit facilities.

As of December 31, 2021, the Partnership had outstanding interest rate swap agreements for a total notional amount of $272.8 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 these 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 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.

In November 2021, the Partnership paid a cash distribution of $0.3 million, or $0.01 per common unit, with respect to the third quarter of 2021.

In November 2021, the Partnership paid a cash distribution of $3.9 million, or $0.546875 per Series A preferred unit, for the period commencing on August 15, 2021 to November 14, 2021.

On February 15, 2022, the Partnership paid a cash distribution of $0.3 million, or $0.01 per common unit, with respect to the fourth quarter of 2021.

On February 15, 2022, the Partnership paid a cash distribution of $3.9 million, or $0.546875 per Series A preferred unit, for the period commencing on November 15, 2021 to February 14, 2022.

For the period from October 1, 2021 to February 23, 2022, no Series A preferred units or common units were sold under the Partnership’s ATM program.

Management Transition

On November 1, 2021, Mr. Sveinung J. S. Støhle stepped down from his position as the Partnership’s Chief Executive Officer in order to pursue an alternative career opportunity. The Board of Directors of the Partnership is undertaking a process to select a successor for the CEO position, and has appointed Håvard Furu, the Partnership’s Chief Financial Officer, to also act as the Partnership’s interim Chief Executive Officer while the board conducts its search.

Outlook

The Partnership believes its primary risk and exposure related to uncertainty of cash flows from its long-term time charter contracts is due to the credit risk and counterparty risk associated with the individual charterers. Payments are due under time charter contracts regardless of the demand for the charterer’s gas output or the utilization of the FSRU. It is therefore possible that charterers may not make payments for time charter services in times of reduced demand. While there is a pending arbitration as further discussed below, as of February 23, 2022, the Partnership has not experienced any reduced or non-payments for obligations under the Partnership’s time charter contracts. In addition, the Partnership has not provided concessions or made changes to the terms of payment for its customers.

Höegh LNG has indemnified the Partnership for the joint ventures’ boil-off settlement, leased the Höegh Gallant under lease and maintenance agreement with a subsidiary of Höegh LNG (the “Subsequent Charter”) (which has subsequently been suspended as described below), entered into the Suspension Agreement and provided the Partnership the $85 million revolving credit facility. However, in July 2021, the Partnership received notice from Höegh LNG that the revolving credit line of $85 million will not be extended when it matures on January 1, 2023, and that Höegh LNG will have very limited capacity to extend any additional advances to the Partnership beyond what is currently drawn under such facility. Also, further drawdowns on the $85 million revolving credit facility may be subject to Höegh LNG’s consent because of the NOA received from the charterer of PGN FSRU Lampung. With these recent changes, the Partnership’s liquidity and financial flexibility has been reduced. If Höegh LNG is unable to meet its obligations to us under the Suspension Agreement or meet funding requests or indemnification obligations, our financial condition, results of operations and ability to make cash distributions to unitholders could be materially adversely affected. Furthermore, if the Partnership’s other charterparties or third-party lenders are unable to meet their obligations to the Partnership 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 distributions to unitholders could be materially adversely affected.

Höegh LNG’s ability to make payments to the Partnership under the Suspension Agreement and funding requests under the $85 million revolving credit facility and any claims for indemnification may be affected by events beyond the control of Höegh LNG or the Partnership, including 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 financial institutions providing the Partnership’s interest rate swaps or lenders under the revolving credit facilities are unable to meet their obligations, the Partnership could experience a higher interest expense or be unable to obtain funding. If the Partnership’s charterers or lenders are unable to meet their obligations under their respective contracts or if the Partnership is unable to fulfill its obligations under time charters, its financial condition, results of operations and ability to make cash distributions to unitholders could be materially adversely affected.

As previously reported, by letter dated July 13, 2021, the charterer under the LOM for the PGN FSRU Lampung raised certain issues with PT HLNG in relation to the operations of the PGN FSRU Lampung and the LOM and by further letter dated July 27, 2021, stated that it would commence arbitration against PT HLNG. On August 2, 2021 the charterer served a notice of arbitration to declare the LOM null and void, and/or to terminate the LOM, and/or seek damages. PT HLNG has served a reply refuting the claims as baseless and without legal merit and has also served a counterclaim against the charterer for multiple breaches of the LOM. PT HLNG will take all necessary steps and will vigorously defend against the charterer’s claims in the legal process.

No assurance can be given at this time as to the outcome of the dispute with the charterer of the PGN FSRU Lampung. Notwithstanding the NOA, both parties have continued to perform their respective obligations under the LOM. In the event the outcome of the dispute is unfavorable to the Partnership, it could have a material adverse impact on its business, financial condition, results of operations and ability to make distributions to unitholders.

On September 23, 2021, the Partnership entered into the NFE Charter with subsidiaries of New Fortress to charter the Höegh Gallant primarily for FSRU operations for a period of ten years, with a planned commencement of the FSRU operations now expected in March 2022. From November 26, 2021 until the FSRU operations commence, New Fortress is chartering the vessel for LNG operations. The Partnership has also entered into the Suspension Agreement to suspend the prior charter for the Höegh Gallant with a subsidiary of Höegh LNG, with effect from the commencement of the NFE Charter. The charter rate under the NFE Charter, in line with the current market, will be lower than under the Subsequent Charter for the Höegh Gallant. However, under the Suspension Agreement, Höegh LNG’s subsidiary will compensate the Partnership monthly for the difference between the charter rate earned under the NFE Charter and the charter rate earned under the Subsequent Charter plus a modest increase, mainly to cover higher operating expenses and taxes under the NFE Charter (“Suspension Payments”). The Suspension Payments will continue until July 31, 2025, the original expiration date of the Subsequent Charter. Afterwards, the Partnership will continue to receive the charter rate agreed with New Fortress for the remaining term of the NFE Charter. In addition, pursuant to the Suspension Agreement, certain capital expenditures and maintenance expenses incurred to prepare and relocate the Höegh Gallant for performance under the NFE Charter will be shared 50/50 between Höegh LNG and the Partnership, subject to a cap on the obligations of the Partnership.

The outbreak of Coronavirus (COVID–19) has negatively affected economic conditions in many parts of the world which may impact the Partnership’s operations and the operations of its customers and suppliers. Although the Partnership’s operations have not been materially affected by the COVID-19 outbreak to date, the ultimate length and severity of the COVID–19 outbreak and its potential impact on the Partnership’s operations and financial condition is uncertain at this time. Furthermore, should there be an outbreak of COVID–19 on board one of the Partnership’s FSRUs or an inability to replace critical supplies or replacement parts due to disruptions to third-party suppliers, adequate crewing or supplies may not be available to fulfill the Partnership’s obligations under its time charter contracts. This could result in off-hire or warranty payments under performance guarantees which would reduce revenues for the impacted period. To date, the Partnership has mitigated the risk of an outbreak of COVID–19 on board its vessels by extending time between crew rotations on the vessels and developing mitigating actions for crew rotations. As a result, the Partnership expects that it will incur somewhat higher crewing expenses to ensure appropriate mitigating actions are in place to minimize the risk of outbreaks. To date, the Partnership has not had service interruptions on the Partnership’s FSRUs. Management and administrative staffs have largely transitioned to working remotely from home to address the specific COVID–19 situation in the applicable geographic location. The Partnership has supported staffs by supplying needed internet boosters and office equipment to facilitate an effective work environment.

On December 6, 2021, the Partnership announced that the HMLP Board received an unsolicited non-binding proposal, dated December 3, 2021, from Höegh LNG pursuant to which Höegh LNG would acquire through a wholly owned subsidiary all publicly held common units of the Partnership in exchange for $4.25 in cash per common unit. Höegh LNG has proposed that a transaction would be effectuated through a merger between the Partnership and a subsidiary of Höegh LNG (the “Offer”). The HMLP Board has authorized the Conflicts Committee of the HMLP Board, comprised only of non-Höegh LNG affiliated directors, to review and evaluate the Offer. The Conflicts Committee has retained advisors and discussions regarding the Offer are ongoing. The proposed transaction is subject to a number of contingencies, including the approval by the Conflicts Committee, the HMLP Board and the Höegh LNG board of directors of any definitive agreement and, if a definitive agreement is reached, the approval by the holders of a majority of outstanding common units in the Partnership. The transaction would also be subject to customary closing conditions. There can be no assurance that definitive documentation will be executed or that any transaction will materialize.

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Keppel Corp posts 9% drop in full-year profit

Singapore’s Keppel Corp said on Thursday its net profit for the year fell 9%, partly hurt by weak performance from its urban development business...

Stolt-Nielsen sees Q4 profits rise on strong markets

Stolt-Nielsen Limited reported unaudited results for the fourth quarter and full year 2022. The Company reported a fourth-quarter net profit of $95.3 million, with revenue...

Euronav delivers better-than-expected Q4 revenue

Euronav NV reported its non-audited financial results for the fourth quarter ended 31 December 2022. Hugo De Stoop, CEO of Euronav said: “Constrained vessel supply...

Wartsila: A challenging year with strong annual growth

HIGHLIGHTS FROM OCTOBER–DECEMBER 2022 Order intake decreased by 24% to EUR 1,638 million (2,150)Service order intake increased by 6% to EUR 791 million (747)Net sales...

Hapag-Lloyd achieves extraordinarily strong result in its anniversary year 2022

On the basis of preliminary and unaudited figures, Hapag-Lloyd has concluded the 2022 financial year – in which it celebrated its 175th anniversary –...

Baltic index hits over 2-year trough on waning demand for larger vessels

The Baltic Exchange’s dry bulk sea freight index dropped to its lowest level in...

Luxury Cruise Market Holds Much Promise For Greek & East Med Hidden Gem Destinations

The appeal of Greece and the East Mediterranean as an ideal region for luxury...

Baltic index falls to over 2-year low as larger vessel rates slide

The Baltic Exchange’s dry bulk sea freight index fell to its lowest since June...

Baltic index logs worst month in 3 years

The Baltic Exchange’s main sea freight index registered its biggest monthly percentage fall in...

Baltic index snaps 9-day losing streak as panamax, supramax rates rise

The Baltic Exchange’s main sea freight index snapped its nine-session losing streak on Tuesday,...

DP World wins bid for development of a mega-container terminal at India’s Deendayal Port

DP World has won a major concession to develop, operate and maintain the mega-container terminal at Deendayal port in Gujarat, on the western coast...

Luxury Cruise Market Holds Much Promise For Greek & East Med Hidden Gem Destinations

The appeal of Greece and the East Mediterranean as an ideal region for luxury cruising will be one of the main highlights of the...

Port of Los Angeles proposes cruise terminal project

The Port of Los Angeles is inviting comments on a draft Request for Proposals (RFP) for the future development of a new Outer Harbor...

Port of Long Beach Closes 2022 with Second-Busiest Year

The Port of Long Beach marked its second-busiest year on record by moving 9.13 million twenty-foot equivalent units in 2022, allowing for a return...

Hapag-Lloyd AG acquires share in J M Baxi Ports & Logistics Limited

Hapag-Lloyd AG signed a binding agreement today under which it will acquire 35% of J M Baxi Ports & Logistics Limited (JMBPL) from a...