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HAMILTON, Bermuda, Nov. 17, 2022 /PRNewswire/ -- Höegh LNG Partners LP (NYSE: HMLP-PA) (the "Partnership") today reported its financial results for the quarter ended September 30, 2022.
Highlights
Financial Results Overview
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. The Partnership has fulfilled its obligations under its time charter contracts, and except for 22 days of off-hire incurred for the planned maintenance and class renewal for the Neptune, did not experience any off-hire for its FSRUs for the three months ended September 30, 2022.
Total time charter revenues for the three months ended September 30, 2022 were $36.9 million (Q3 2021: $35.6 million). The increase in total time charter revenues is mainly due to increased time charter revenue for the Höegh Gallant commencing new charter under the contract with subsidiaries of New Fortress Energy Inc ("NFE") in late 2021 partially offset by a decrease in time charter revenues for the PGN FSRU Lampung and the Höegh Grace.
Total operating expenses for the three months ended September 30, 2022 were $21.2 million (Q3 2021: $14.5 million). The increase is principally due to higher vessel operating expenses and administrative expenses for the three months ended September 30, 2022, compared with the three months ended September 30, 2021. The increase in vessel operating expenses is mainly related to higher operating costs for the Höegh Gallant incurred in the three months ended September 30, 2022. The increase in administrative expenses is mainly related to external financial advisory fees, insurance premiums and legal fees incurred in relation to the Merger Agreement with Höegh LNG and legal fees incurred in relation to the dispute with the charterer of the PGN FSRU Lampung.
Equity in earnings of joint ventures for the three months ended September 30, 2022 was $2.5 million (Q3 2021: $6.1 million). 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 September 30, 2021. 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 Neptune debt facility on November 30, 2021, hedge accounting is applied for the Neptune. After the refinancing of the Cape Ann debt facility on June 1, 2022, hedge accounting is also applied for the Cape Ann.
Excluding the unrealized gains on derivative instruments for the three months ended September 30, 2022 and 2021, the equity in earnings of joint ventures for the three months ended September 30, 2022 would have been $2.5 million (Q3 2021: $3.8 million). Excluding the unrealized gains on derivative instruments for the three months ended September 30, 2022 and 2021, the decrease was mainly due to certain non-reimbursable operating expenses incurred in connection with the planned maintenance and class renewal of the Neptune for the three months ended September 30, 2022, and reduced time charter revenues due to 22 days of off-hire incurred for the planned maintenance and class renewal for the Neptune. The decrease was partly offset by lower financial expenses during 2022 due to refinancing of the two joint ventures' debt facilities in the fourth quarter of 2021 and second quarter of 2022.
The Partnership's share of its joint ventures' operating income for the three months ended September 30, 2022 was $4.2 million (Q3 2021: $6.4 million).
Segment EBITDA1 for the three months ended September 30, 2022 was $27.5 million (Q3 2021: $35.1 million).
Operating income for the three months ended September 30, 2022 was $18.2 million (Q3 2021: $27.1 million).
Excluding the impact of the unrealized gains on derivatives impacting the equity in earnings of joint ventures, operating income for the three months ended September 30, 2022 would have been $18.2 million (Q3 2021: $24.9 million). The decrease is primarily due to higher operating expenses, administrative expenses and lower equity in earnings of joint ventures mainly due to the planned maintenance and class renewal for the Neptune partially offset by higher time charter revenues.
Total financial expense, net for the three months ended September 30, 2022 was $5.8 million, (Q3 2021: $7.0 million).
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 $0.6 million in interest expense in the third quarter of 2022 compared to the third quarter of 2021 was principally due to incurred commitment fees and higher bank fees in the third quarter of 2021 related to refinancing activities on the PGN FSRU Lampung debt facility (the "Lampung facility").
The Partnership reported net income is $16.6 million for the three months ended September 30, 2022 (Q3 2021: $17.4 million).
Net income was impacted by unrealized gains on derivative instruments for the third quarter of 2021, 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 September 30, 2022 would have been $16.7 million (Q3 2021: $15.1 million). Excluding the impact of the unrealized gains on derivatives, the increase is primarily due to a decrease in uncertain tax liabilities and refund of additional taxes paid and expensed in 2021 in connection with a tax audit for the PGN FSRU Lampung for the tax year 2019. The Partnership has disputed the result of the tax audit, and during the third quarter of 2022, the Central Jakarta regional tax office changed its position, resulting in a refund of some of the additional taxes paid for 2019, and a reassessment by the Partnership of the uncertain tax liability.
Preferred unitholders' interest in net income for the three months ended September 30, 2022 and 2021 was $3.9 million. Limited partners' interest in net income for the three months ended September 30, 2022 was $12.7 million (Q3 2021: $13.4 million).
Excluding all of the unrealized gains on derivative instruments, limited partners' interest in net income for the three months ended September 30, 2022 would have been $12.9 million (Q3 2021: $11.1 million).
_____________________________
1
Segment EBITDA is a non-GAAP financial measure used by investors to measure financial and operating performance. Please see Appendix A for a reconciliation of Segment EBITDA to net income, the most directly comparable GAAP financial measure.
Segment 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 September 30, 2022 and 2021" below.
Segment EBITDA for Majority held FSRUs for the three months ended September 30, 2022 was $26.9 million (Q3 2021: $28.3 million). The decrease is mainly due to increased vessel operating expenses and administrative expenses partly offset by increased revenue from time charters.
Segment EBITDA for the Joint venture FSRUs for the three months ended September 30, 2022 was $6.6 million (Q3 2021: $8.9 million). The decrease is mainly due to increased vessel operating expenses and reduced time charter revenues due to 22 days of off-hire due to the class renewal on the Neptune that was completed during the third quarter of 2022.
Other, Segment EBITDA consists of administrative expenses. Administrative expenses for the three months ended September 30, 2022 were $6.0 million (Q3 2021: $2.1 million).
Financing and Liquidity
As of September 30, 2022, the Partnership had cash and cash equivalents of $45.3 million. Current restricted cash for operating obligations of the PGN FSRU Lampung was $9.3 million, and long-term restricted cash required under the long-term debt facility for the Lampung facility was $11.0 million as of September 30, 2022. As of November 17, 2022, the Partnership has fully drawn on the $63 million revolving credit tranche of the $385 million facility and has an undrawn balance of $60.5 million on the $85 million revolving credit facility from Höegh LNG. As of September 30, 2022, the outstanding balance of $24.5 million on the $85 million revolving credit facility from Höegh LNG is classified as a current liability. Further drawdowns on the $85 million revolving credit facility may be subject to Höegh LNG's consent because of the notice of arbitration received from the charterer of the PGN FSRU Lampung, as described below.
As of September 30, 2022, the Partnership has no material commitments for capital expenditures.
During the third quarter of 2022, the Partnership made quarterly repayments of $5.4 million on the Lampung facility and $6.4 million on the $385 million facility. The repayment $5.4 million on the Lampung facility includes ordinary installments of $4.5 million and additional installments of $0.9 million due to the cash sweep mechanism in the Lampung facility. 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 Hoegh LNG Lampung ("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 Lampung facility, applied pro rata across the commercial and export credit tranches. The remaining 50% will be retained by PT HLNG and pledged in favour of the lenders until the pending arbitration with the charterer of the 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 Partnership's book value and outstanding principal of total long-term debt were $349.6 million and $353.9 million respectively, as of September 30, 2022, including the Lampung facility, the $385 million facility and the $85 million revolving credit facility.
As of September 30, 2022, the Partnership's total current liabilities exceeded total current assets by $11.0 million. This is partly a result of the current portion of long-term debt of $43.7 million being classified as current while restricted cash of $11.0 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. Additionally, because the $85 million revolving credit facility from Höegh LNG matures on January 1, 2023, the outstanding balance thereunder of $24.5 million is classified as a current liability.
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 IV Ltd as payment of intercompany interest and/or intercompany debt or dividends and payments under the Suspension and Make-Whole Agreements (as defined below), 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 continuing compliance with covenants under its credit facilities and assuming that the Partnership's vessels remain fully operational and that revenues are generated as per existing contractual terms.
As of September 30, 2022, the Partnership had outstanding interest rate swap agreements for a total notional amount of $247.5 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 ranging from 2.650% to 2.941% 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 below.
In August 2022, the Partnership paid a cash distribution of $0.3 million, or $0.01 per common unit, with respect to the second quarter of 2022.
In August 2022, the Partnership paid a cash distribution of $3.9 million, or $0.546875 per Series A preferred unit, for the period commencing on May 16, 2022 to August 14, 2022.
On November 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 August 15, 2022 to November 14, 2022.
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 November 17, 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 entered into the Suspension and Make-Whole Agreements 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 (as defined below) received from the charterer of PGN FSRU Lampung. With these 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 and Make-Whole Agreements 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.
Höegh LNG's ability to make payments to the Partnership under the Suspension and Make-Whole Agreements and any 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 are unable to meet their obligations, the Partnership could experience a higher interest expense or be unable to obtain funding. Furthermore, 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 lease and maintenance agreement for the PGN FSRU Lampung ("LOM") raised certain issues with PT Hoegh LNG Lampung 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 Hoegh LNG Lampung. 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. On June 13, 2022, the charterer filed a statement of claim with a request for a primary relief and three alternative reliefs. The charterer's claim of restitution if the LOM is declared null and void is $416 million, increasing to $472 million by June 2023 plus interest and costs. In September 2022, PT Hoegh LNG Lampung filed its Statement of Defense.
PT Hoegh LNG Lampung has previously 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 and a claim against the parent company of the charterer for the fulfilment of the charterer's obligations under the LOM as stated in a guarantee provided by the parent company, with a claim for damages. On June 13, 2022, PT Hoegh LNG Lampung filed its statement of claim.
PT Hoegh LNG Lampung will take all necessary steps and will vigorously contest 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 that the outcome of such dispute is unfavorable to the Partnership, it could have a material adverse impact on its business, results of operations, financial condition and ability to pay distributions to unitholders.
On March 20, 2022, the Partnership commenced FSRU operations under agreements with subsidiaries of New Fortress Energy Inc. ("New Fortress") to charter the Höegh Gallant for a period of ten years (the "NFE Charter"). The charter rate under the NFE Charter is lower than under the prior charter for the Höegh Gallant (the "Suspended Gallant Charter"). The Partnership has entered into an agreement to suspend the Suspended Gallant Charter, with effect from the commencement of the NFE Charter, and a make-whole agreement (together, the "Suspension and Make-Whole Agreements"), pursuant to which 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 Suspended Gallant Charter with the addition of a modest increase until July 31, 2025, the original expiration date of the Suspended Gallant 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 and Make-Whole Agreements, 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. As of November 17, 2022, Höegh LNG has paid an aggregate of $2.6 million to the Partnership pursuant to the Suspension and Make-Whole Agreements related to such capital expenditures.
The outbreak of 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 extended the time between crew rotations on the vessels and developed other mitigating actions to reduce the risk of a COVID-19 outbreak. As a result, the Partnership expects that it will incur somewhat higher crewing expenses. To date, the Partnership has not had material service interruptions on the Partnership's vessels. 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.
In February 2022, the Russian attack on Ukraine started. It may lead to further regional and international conflicts or armed action. It is possible that such conflict could disrupt supply chains and cause instability in the global economy. Additionally, the ongoing conflict could result in the imposition of further economic sanctions by the United States and the European Union against Russia. While much uncertainty remains regarding the global impact of the invasion, it is possible that such tensions could adversely affect the Partnership's business, financial condition, results of operation and cash flows. Furthermore, it is possible that third parties with whom the Partnership has charter contracts may be impacted by events in Russia and Ukraine, which could adversely affect its operations. The invasion has among other things, led to a significantly increased attention to security of energy supply in Europe. Several European countries are looking to reduce their reliance on pipeline gas from Russia, and are planning to increase the import capacity for LNG through the application of FSRUs and/or landbased import facilities in combination with increased use of renewable energy sources in the energy mix. Over time, this could accelerate the energy transition to renewable energy.
On April 1, 2022, the Partnership's Colombian subsidiary received a notification from the Tax Administration of Cartagena assessing a penalty of approximately $1.8 million for failure to file the 2016 to 2018 Municipal Industry and Commerce Tax ("ICT") returns. ICT is imposed on gross receipts on customer invoices and is similar to a sales tax. The municipal tax authorities have alleged that the customer invoices are for industrial activities performed within the municipal jurisdiction. However, all of the Colombian subsidiary's activities take place offshore which is outside of the Municipality's borders. According to Colombian law, municipalities do not have jurisdiction over maritime waters or low-tide areas. Management intends to deny the allegations and file an appeal to vigorously defend the Colombian subsidiary's position. Accruals for loss contingencies are recorded when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Management, with advice of its outside legal advisors, has assessed the status of this matter and has concluded that an adverse judgment after concluding an appeals process is not probable. As a result, no provision has been made in the consolidated financial statements. Management estimates the range of possible loss for 2016-2021, including accrued interest, to be approximately $1.3 million to $2.9 million as of September 30, 2022, plus additional accrued interest thereon until final disposition of the ICT allegation. In May 2022, the Partnership and its Colombian subsidiary filed a response to the Tax Administration of Cartagena disputing the claim. This was confirmed registered on May 27, 2022, by the Tax Administration of Cartagena.
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
Nine months ended
September 30,
September 30,
2022
2021
2022
2021
REVENUES
Time charter revenues
$
36,947
$
35,596
$
109,198
$
105,068
Total revenues
36,947
35,596
109,198
105,068
OPERATING EXPENSES
Vessel operating expenses
(7,673)
(5,927)
(21,430)
(18,213)
Administrative expenses
(8,392)
(3,491)
(19,021)
(9,005)
Depreciation and amortization
(5,131)
(5,096)
(15,376)
(15,318)
Total operating expenses
(21,196)
(14,514)
(55,827)
(42,536)
Equity in earnings (losses) of joint ventures
2,451
6,056
15,605
20,397
Operating income (loss)
18,202
27,138
68,976
82,929
FINANCIAL INCOME (EXPENSE), NET
Interest income
426
166
815
397
Interest expense
(5,532)
(6,146)
(16,039)
(21,440)
Other items, net
(679)
(982)
(1,883)
(2,293)
Total financial income (expense), net
(5,785)
(6,962)
(17,107)
(23,336)
Income (loss) before tax
12,417
20,176
51,869
59,593
Income tax expense
4,201
(2,817)
(2,034)
(15,757)
Net income (loss)
$
16,618
$
17,359
$
49,835
$
43,836
Preferred unitholders' interest in net income
3,877
3,877
11,631
11,631
Limited partners' interest in net income (loss)
$
12,741
$
13,482
$
38,204
$
32,205
HÖEGH LNG PARTNERS LP
UNAUDITED CONDENSED INTERIM CONSOLIDATED
BALANCE SHEETS
(in thousands of U.S. dollars)
As of
September 30,
December 31,
2022
2021
ASSETS
Current assets
Cash and cash equivalents
$
45,265
$
42,519
Restricted cash
9,324
8,410
Trade receivables
7,088
3,653
Amounts due from affiliates
3,282
7,500
Current portion of net investment in financing lease
5,795
5,426
Derivative instruments
3,075
—
Prepaid expenses and other receivables
4,828
3,772
Total current assets
78,657
71,280
Long-term assets
Restricted cash
10,991
10,991
Accumulated earnings of joint ventures
61,678
35,708
Advances to joint ventures
10,411
7,511
Vessels, net of accumulated depreciation
586,928
602,289
Other equipment
37
100
Intangibles and goodwill
9,241
11,301
Net investment in financing lease
259,468
263,862
Long-term derivative instruments
5,439
—
Long-term deferred tax asset
151
144
Other long-term assets
821
822
Total long-term assets
945,165
932,728
Total assets
$
1,023,822
$
1,004,008
HÖEGH LNG PARTNERS LP
UNAUDITED CONDENSED INTERIM CONSOLIDATED
BALANCE SHEETS
(in thousands of U.S. dollars)
As of
September 30,
December 31,
2022
2021
LIABILITIES AND EQUITY
Current liabilities
Current portion of long-term debt
$
43,747
$
46,385
Revolving credit facility due to owners and affiliates
24,545
—
Trade payables
635
3,890
Amounts due to owners and affiliates
1,592
3,655
Value added and withholding tax liability
694
935
Derivative instruments
—
5,239
Accrued liabilities and other payables
18,490
16,105
Total current liabilities
89,703
76,209
Long-term liabilities
Long-term debt
305,902
339,687
Revolving credit facility due to owners and affiliates
—
24,942
Derivative instruments
—
7,631
Long-term tax liability
3,382
6,391
Long-term deferred tax liability
21,780
18,462
Other long-term liabilities
141
166
Total long-term liabilities
331,205
397,279
Total liabilities
420,908
473,488
EQUITY
8.75% Series A preferred units
176,078
176,078
Common units public
—
317,515
Common units Höegh LNG
410,373
52,626
Accumulated other comprehensive income (loss)
16,463
(15,699)
Total partners' capital
602,914
530,520
Total equity
602,914
530,520
Total liabilities and equity
$
1,023,822
$
1,004,008
HÖEGH LNG PARTNERS LP
UNAUDITED CONDENSED INTERIM CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)
Three months ended
September 30,
2022
2021
OPERATING ACTIVITIES
Net income (loss)
$
16,618
$
17,359
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization
5,131
5,096
Equity in (earnings) losses of joint ventures
(2,451)
(6,056)
Changes in accrued interest income on advances to joint ventures
(209)
(124)
Amortization of deferred debt issuance cost
474
572
Amortization in revenue for above market contract
694
694
Changes in accrued interest expense
140
(120)
Receipts from repayment of principal on financing lease
1,371
1,256
Unrealized foreign exchange losses (gains)
(9)
25
Unrealized loss (gain) on derivative instruments
125
67
Non-cash revenue: tax paid directly by charterer
(227)
(225)
Non-cash income tax expense: tax paid directly by charterer
227
225
Deferred tax expense and provision for tax uncertainty
(2,927)
(849)
Issuance of units for Board of Directors' fees
—
84
Other adjustments
—
(4)
Changes in working capital:
Trade receivables
500
2
Inventory
—
5
Prepaid expenses and other receivables
5,062
3,131
Trade payables
(431)
(190)
Amounts due to owners and affiliates
80
(579)
Value added and withholding tax liability
273
(96)
Accrued liabilities and other payables
(2,716)
1,585
Net cash provided by (used in) operating activities
21,725
21,858
INVESTING ACTIVITIES
Net cash provided by (used in) investing activities
$
—
$
—
HÖEGH LNG PARTNERS LP
UNAUDITED CONDENSED INTERIM CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)
Three months ended
September 30,
2022
2021
FINANCING ACTIVITIES
Proceeds from long-term debt
$
—
$
14,750
Repayment of long-term debt
(11,822)
(11,165)
Cash distributions to limited partners and preferred unitholders
(4,209)
(4,211)
Net cash provided by (used in) financing activities
(16,031)
(4,303)
Increase (decrease) in cash, cash equivalents and restricted cash
5,694
17,555
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(29)
2
Cash, cash equivalents and restricted cash, beginning of period
59,915
43,174
Cash, cash equivalents and restricted cash, end of period
$
65,580
$
60,731
HÖEGH LNG PARTNERS LP
UNAUDITED SEGMENT INFORMATION FOR THE QUARTERS ENDED SEPTEMBER 30, 2022 and 2021
(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, impairment 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 September 30, 2022 and 2021, 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 September 30, 2022 and 2021, 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 consolidated financial statements, except that i) Joint venture FSRUs is presented under the proportional consolidation method for the segment note to the Partnership's financial statements and in the tables below, and under equity accounting for the consolidated financial statements and ii) internal interest income and interest expense between the Partnership's subsidiaries that eliminate in consolidation are not included in the segment columns for the other financial income (expense), net line. Under the proportional consolidation method, 50% of the Joint venture FSRUs' revenues, expenses and assets are reflected in the segment note. Management monitors the results of operations of joint ventures under the proportional consolidation method and not the equity method of accounting.
HÖEGH LNG PARTNERS LP
UNAUDITED SEGMENT INFORMATION FOR THE QUARTER ENDED SEPTEMBER 30, 2022
(in thousands of U.S. dollars)
Three months ended September 30, 2022
Joint venture
Majority
FSRUs
Total
held
(proportional
Segment
Consolidated
(in thousands of U.S. dollars)
FSRUs
consolidation)
Other
reporting
Eliminations
reporting
Time charter revenues
$
36,947
10,600
—
47,547
(10,600)
(1)
$
36,947
Total revenues
36,947
10,600
—
47,547
36,947
Operating expenses
(10,089)
(3,957)
(5,976)
(20,022)
3,957
(1)
(16,065)
Equity in earnings (losses) of joint ventures
—
—
—
—
2,451
(1)
2,451
Segment EBITDA
26,858
6,643
(5,976)
27,525
Depreciation and amortization
(5,131)
(2,489)
—
(7,620)
2,489
(1)
(5,131)
Operating income (loss)
21,727
4,154
(5,976)
19,905
18,202
Gain (loss) on derivative instruments
—
—
—
—
—
(1)
—
Other financial income (expense), net
(1,758)
(1,703)
(4,027)
(7,488)
1,703
(1)
(5,785)
Income (loss) before tax
19,969
2,451
(10,003)
12,417
12,417
Income tax expense
4,201
—
—
4,201
—
4,201
Net income (loss)
$
24,170
2,451
(10,003)
16,618
—
$
16,618
Preferred unitholders' interest in net income
—
—
—
—
3,877
(2)
3,877
Limited partners' interest in net income (loss)
$
24,170
2,451
(10,003)
16,618
(3,877)
(2)
$
12,741
____________________________
(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 SEPTEMBER 30, 2021
(in thousands of U.S. dollars)
Three months ended September 30, 2021
Joint venture
Majority
FSRUs
Total
held
(proportional
Segment
Consolidated
(in thousands of U.S. dollars)
FSRUs
consolidation)
Other
reporting
Eliminations
reporting
Time charter revenues
$
35,596
10,835
—
46,431
(10,835)
(1)
$
35,596
Total revenues
35,596
10,835
—
46,431
35,596
Operating expenses
(7,332)
(1,932)
(2,086)
(11,350)
1,932
(1)
(9,418)
Equity in earnings (losses) of joint ventures
—
—
—
—
6,056
(1)
6,056
Segment EBITDA
28,264
8,903
(2,086)
35,081
Depreciation and amortization
(5,096)
(2,489)
—
(7,585)
2,489
(1)
(5,096)
Operating income (loss)
23,168
6,414
(2,086)
27,496
27,138
Gain (loss) on derivative instruments
—
2,287
—
2,287
(2,287)
(1)
—
Other financial income (expense), net
(2,935)
(2,645)
(4,027)
(9,607)
2,645
(1)
(6,962)
Income (loss) before tax
20,233
6,056
(6,113)
20,176
20,176
Income tax expense
(2,817)
—
—
(2,817)
—
(2,817)
Net income (loss)
$
17,416
6,056
(6,113)
17,359
—
$
17,359
Preferred unitholders' interest in net income
—
—
—
—
3,877
(2)
3,877
Limited partners' interest in net income (loss)
$
17,416
6,056
(6,113)
17,359
(3,877)
(2)
$
13,482
___________________________
(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 September 30, 2022 and 2021.
Three months ended
September 30,
(in thousands of U.S. dollars)
2022
2021
Interest income
$
426
$
166
Interest expense:
Interest expense
(4,933)
(5,001)
Amortization and gain (loss) on cash flow hedge
(125)
(67)
Commitment fees
—
(506)
Amortization of debt issuance cost
(474)
(572)
Total interest expense
(5,532)
(6,146)
Other items, net:
Foreign exchange gain (loss)
42
(18)
Bank charges, fees and other
(68)
(391)
Withholding tax on interest expense and other
(653)
(573)
Total other items, net
(679)
(982)
Total financial income (expense), net
$
(5,785)
$
(6,962)
Appendix A: Segment EBITDA
Non-GAAP Financial Measures
Segment EBITDA. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. 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, amortization, impairment, taxes, and other financial items, which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which items may significantly affect net income between periods. The Partnership believes that including Segment EBITDA as a financial and operating measure benefits investors in (a) selecting between investing in it and other investment alternatives and (b) monitoring its ongoing financial and operational strength in assessing whether to continue to hold common units 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 September 30, 2022
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)
$
24,170
2,451
(10,003)
16,618
$
16,618
(3)
Interest income
(119)
(115)
(307)
(541)
115
(4)
(426)
Interest expense
1,235
1,890
4,297
7,422
(1,890)
(4)
5,532
Depreciation and amortization
5,131
2,489
—
7,620
(2,489)
(5)
5,131
Other financial items (2)
642
(72)
37
607
72
(6)
679
Income tax (benefit) expense
(4,201)
—
—
(4,201)
—
(4,201)
Equity in earnings of JVs: Interest (income) expense,
net
—
—
—
—
1,775
(4)
1,775
Equity in earnings of JVs: Depreciation and
amortization
—
—
—
—
2,489
(5)
2,489
Equity in earnings of JVs: Other financial items (2)
—
—
—
—
(72)
(6)
(72)
Segment EBITDA
$
26,858
6,643
(5,976)
27,525
$
27,525
Three months ended September 30, 2021
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)
$
17,416
6,056
(6,113)
17,359
$
17,359
(3)
Interest income
(42)
—
(124)
(166)
—
(4)
(166)
Interest expense
2,043
2,641
4,103
8,787
(2,641)
(4)
6,146
Depreciation and amortization
5,096
2,489
—
7,585
(2,489)
(5)
5,096
Other financial items (2)
934
(2,283)
48
(1,301)
2,283
(6)
982
Income tax (benefit) expense
2,817
—
—
2,817
—
2,817
Equity in earnings of JVs: Interest (income) expense,
net
—
—
—
—
2,641
(4)
2,641
Equity in earnings of JVs: Depreciation and
amortization
—
—
—
—
2,489
(5)
2,489
Equity in earnings of JVs: Other financial items (2)
—
—
—
—
(2,283)
(6)
(2,283)
Segment EBITDA
$
28,264
8,903
(2,086)
35,081
$
35,081
_____________________
(1)
Eliminations reverse each of the income statement reconciling line items of the proportional amounts for Joint venture FSRUs and record the Partnership's share of the Joint venture FSRUs net income (loss) to Equity in earnings (loss) of joint ventures. Separate adjustments from the consolidated net income to Segment EBITDA for the Partnership's share of the Joint venture FSRUs are included in the reconciliation lines starting with "Equity in earnings of JVs".
(2)
Other financial items consist of gain and loss on debt extinguishment, gains and losses on derivative instruments and other items, net including foreign exchange gains or losses and withholding tax on interest expense.
(3)
There is no adjustment between net income for Total Segment reporting and the Consolidated reporting because the net income under the proportional consolidation and equity method of accounting is the same.
(4)
Interest income and interest expense for the Joint venture FSRUs is eliminated from the Total Segment reporting to agree to the interest income and interest expense in the Consolidated reporting and reflected as a separate adjustment to the equity accounting on the line Equity in earnings of JVs: Interest (income) expense for the Consolidated reporting.
(5)
Depreciation and amortization for the Joint venture FSRUs is eliminated from the Total Segment reporting to agree to the depreciation and amortization in the Consolidated reporting and reflected as a separate adjustment to the equity accounting on the line Equity in earnings of JVs: Depreciation and amortization for the Consolidated reporting.
(6)
Other financial items for the Joint venture FSRUs is eliminated from the Segment reporting to agree to the Other financial items in the Consolidated reporting and reflected as a separate adjustment to the equity accounting on the line Equity in earnings of JVs: Other financial items for the Consolidated reporting.
_________________________
Media contact:
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SOURCE Hoegh LNG Partners LP