Höegh LNG Partners LP Reports Preliminary Financial Results for the Quarter Ended December 31, 2015

29 Feb, 2016, 06:31 ET from Hoegh LNG Partners LP

HAMILTON, Bermuda, Feb. 29, 2016 /PRNewswire/ -- Höegh LNG Partners LP (NYSE: HMLP) (the "Partnership") today reported its financial results for the quarter ended December 31, 2015.

Highlights

  • Reported total time charter revenues of $23.4 million for the fourth quarter of 2015 compared to $13.1 million of time charter revenue and $6.7 million of construction contract revenues for the fourth quarter of 20141
  • Generated operating income of $22.2 million and net income of $16.5 million for the fourth quarter of 2015 compared to operating income of $10.9 million and net income of $7.5 million for the fourth quarter of 2014; operating income and net income were impacted by an unrealized gain on derivative instruments on the Partnership's share of equity in earnings of joint ventures in the fourth quarter of 2015 compared with an unrealized loss for the fourth quarter of 2014
  • Excluding unrealized gains (losses) on derivative instruments and the 2014 contribution from the construction contract, net income for the three months ended December 31, 2015 was $10.6 million compared to $5.3 million for the three months ended December 31, 2014. 
  • Generated Adjusted EBITDA2 of $27.1 million for the fourth quarter of 2015 compared to $24.5 million for the fourth quarter of 2014
  • On October 1, 2015, closed the acquisition of the entity that owns the floating storage and regasification unit ("FSRU") Höegh Gallant. The results of the Höegh Gallant contributed to the Partnership's earnings for the full fourth quarter of 2015.
  • On February 15, 2016, paid a $0.4125 per unit distribution with respect to the fourth quarter of 2015, equivalent to $1.65 per unit on an annual basis. This is an increase of approximately 22% from the distribution with respect to the third quarter of 2015. 
  • On February 28, 2016, entered into agreements with Höegh LNG Holdings Ltd ("Höegh LNG") to extend the maturities of the $47 million Seller's Credit related to the Höegh Gallant and the currently undrawn $85 million Revolving Credit Facility to January 1, 2020.

Richard Tyrrell, Chief Executive Officer and Chief Financial Officer stated: "Höegh LNG Partners continues to show solid earnings that reflect the fixed rate nature of its contracts and the absence of any direct commodity price exposure. The 22% increase in cash distributions is mainly attributable to the successful drop down of the FSRU Höegh Gallant. The Partnership's vessels have charters with an average remaining term of 14 years. ‎With no capital commitments or near term debt maturities, the Partnership is a stable platform from which to prepare for future drop downs from the healthy pipeline of candidates from Höegh LNG.

Höegh LNG continues to be strongly committed to Höegh LNG Partners as demonstrated by the extensions to the intercompany facilities. The facilities can be repaid at any time at the discretion of Höegh LNG Partners and we would expect to refinance them well in advance of the maturity dates."

Financial Results Overview

The Partnership reported net income for the three months ended December 31, 2015 of $16.5 million, an increase of $9.0 million from $7.5 million for the three months ended December 31, 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 all the unrealized gains (losses) on derivative instruments, net income for the three months ended December 31, 2015 was $10.6 million, a decrease of $3.4 million from $14.0 million for the three months December 31, 2014. The net income for the three months December 31, 2014 included a contribution from the construction contract of $8.7 million.

1

On November 30, 2015, the Partnership filed with the Securities and Exchange Commission ("SEC") 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. Financial data for the three months and year ended December 31, 2014 contained herein have been restated as further described in Note 2.d. to the financial statements contained in the Partnership's Form 20-F/A. Appendix C contained herein reflects the impact of the restatement on the Partnership's income statement data for the three months ended December 31, 2014.

2

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

Total revenues are comprised of time charter revenues related to the PGN FSRU Lampung and the Höegh Gallant and construction contract revenues related to the Tower Yoke Mooring System (the "Mooring"). The Mooring is an offshore installation that is used to moor the PGN FSRU Lampung to offload the gas into an offshore pipe that transports the gas to a land terminal. The Mooring was constructed on behalf of, and was sold to, PT PGN LNG Indonesia ("PGN"), and was accounted for using the percentage of completion method of accounting. The Mooring project was completed as of December 31, 2014.

Time charter revenues for the three months ended December 31, 2015 were $23.4 million, an increase of $10.3 million from the three months ended December 31, 2014. Excluding the revenues associated with the Höegh Gallant acquired in the fourth quarter of 2015, the time charter revenues decreased $1.6 million mainly due to lower revenues for reimbursed taxes for the PGN FSRU Lampung.

There were no construction contract revenues for the three months ended December 31, 2015 compared with $6.7 million for the for the three months ended December 31, 2014. During the fourth quarter of 2014, the final 10% payment for the Mooring was invoiced and received from PGN. For the three months ended December 31, 2014, construction contract expenses made a positive contribution to earnings of $2.0 million as result of the reversal of accruals recorded in the third quarter of 2014 for delay liquidated damages. Due to a settlement with the charterer, no delay liquidated damages were payable. As a result, the total contribution from the Mooring was $8.7 million for the three months ended December 31, 2014.

All FSRUs were onhire for the entire fourth quarter of 2015. As of October 1, 2015, the Höegh Gallant joined the Partnership's fleet increasing its ownership interest in vessels from three to four. In April 2015, the Höegh Gallant began operating under a charter with Hoegh LNG Egypt LLC ("EgyptCo"), a subsidiary of Höegh LNG. EgyptCo has a charter with the government-owned Egyptian Natural Gas Holding Company ("EGAS").

Excluding construction contract expenses for the three months ended December 31, 2014, total operating expenses for the three months ended December 31, 2015 were $9.2 million, an increase of $2.9 million, compared with $6.3 million for the three months ended December 31, 2014. The increase was mainly due to the additional operating expenses as a result of acquiring the Höegh Gallant. Total operating expenses, excluding those related to Höegh Gallant and adjusted for the construction contract expenses, decreased by approximately $2.2 million for the three months ended December 31, 2015 compared with the three months ended December 31, 2014 mainly due to lower operating expenses for the PGN FSRU Lampung which were partially offset by higher general and administrative expenses.

Equity in earnings of joint ventures, which own the vessels GDF Suez Neptune and the GDF Suez Cape Ann, for the three months ended December 31, 2015 was $8.0 million, an increase of $12.6 million from equity in losses of joint ventures of $4.6 million for the three months ended December 31, 2014. The reason for the increase was the Partnership's share of an unrealized gain on derivative financial instruments of the joint ventures for the three months ended December 31, 2015 of $5.4 million compared with an unrealized loss of $6.3 million for the three months ended December 31, 2014. For the three months ended December 31, 2015, the Partnership's share of operating income in the joint ventures was $6.6 million compared with $6.0 million for the three months ended December 31, 2014.

Operating income for the three months ended December 31, 2015 was $22.2 million, an increase of $11.3 million from $10.9 million for the three months ended December 31, 2014. Excluding the unrealized gains (losses) on derivative instruments on the Partnership's share of equity in earnings of joint ventures and the contribution of the Mooring, the operating income was $16.8 million, an increase of $8.2 million from $8.6 million for the three months ended December 31, 2014. The main reason for the increase was the inclusion of the results of the Höegh Gallant from October 1, 2015.

Adjusted EBITDA was $27.1 million for the three months ended December 31, 2015, an increase of $2.6 million from $24.5 million for the three months ended December 31, 2014.

Total financial expenses, net for the three months ended December 31, 2015 were $5.1 million, an increase of $1.8 million from $3.3 million for the three months ended December 31, 2014. The main reasons for the change was $2.0 million higher interest expense largely as a result of the issuance of the seller's credit note and the long-term debt assumed with the acquisition of the Höegh Gallant and $2.2 million lower interest income mainly due to the settlement of the $140 million demand note due from Höegh LNG as part of the consideration for the acquisition. The negative effects were partially offset by the impact of the $0.5 million gain on derivative instruments for the three months ended December 31, 2015 compared with the $0.2 million loss on derivative instruments for the three months ended December 31, 2014 and the positive impact of $1.8 million on other items, net. The gains and losses on derivative instruments relates to the ineffective portion of the hedge of the interest rate swaps related to the credit facilities that finance the PGN FSRU Lampung (the "Lampung facility") and the Höegh Gallant (the "Gallant Facility"). The interest rate swaps are designated as cash flow hedges of the variable interest payments on the Lampung and Gallant facilities and the effective portion of the changes in fair value of the hedges are recorded in other comprehensive income. Other items, net had a gain of $0.6 million for the three months ended December 31, 2015 compared with net expenses of $1.1 million for the three months ended December 31, 2014. The gain for the three months ended December 31, 2015 was largely due to a net unrealized exchange gain related to PGN FSRU Lampung's operations.

Income tax expense was $0.7 million for the three months ended December 31, 2015, an increase of $0.6 million from $0.1 million for the three months ended December 31, 2014, mainly due to higher earnings in Indonesia.

Segments

The Partnership has two segments, which are the "Majority held FSRUs" and the "Joint venture FSRUs." In addition, unallocated corporate costs that are considered to benefit the entire organization and interest income from advances to the Partnership's joint ventures are included in "Other." For the three months ended December 31, 2015, Majority held FSRUs include the direct financing lease related to the PGN FSRU Lampung and the 100% owned Höegh Gallant‎. For the three months ended December 31, 2014, Majority held FSRUs include the newbuilding PGN FSRU Lampung and the construction contract revenues and expenses of the Mooring under construction. For the three months ended December 31, 2014 and 2015, Joint Venture FSRUs include two 50% owned FSRUs , the GDF Suez Neptune and the GDF Suez Cape Ann, each of which operates under a long-term time charter with GDF Suez LNG Supply SA ("GDF Suez").

The Partnership measures its segment profit based on Segment EBITDA. Please see "Unaudited Segment Information for the Quarter Ended December 31, 2015 and 2015" beginning on page 10. Segment EBITDA is reconciled to operating income and net income for each segment in the tables included on "Unaudited Segment Information for the Quarter Ended December 31, 2015 and 2014."

Segment EBITDA for the Majority held FSRUs for the three months ended December 31, 2015 was $18.5 million, an increase of $1.9 million from $16.6 million for the three months ended December 31, 2014 primarily due to the acquisition of the Höegh Gallant on October 1, 2015. In the fourth quarter of 2014, the Segment EBITDA was significantly influenced by the contribution from the Mooring of $8.7 million.

Segment EBITDA for the Joint venture FSRUs for the three months ended December 31, 2015 was $8.8 million, an increase of $0.5 million from $8.3 million for the three months ended December 31, 2014. The increase was primarily due to lower costs for the three months ended December 31, 2015.

For Other, administrative expenses and Segment EBITDA for the three months ended December 31, 2015 were $1.6 million, an increase of $0.5 million from $1.1 million for the three months ended December 31, 2014. The increase in cost mainly related to higher audit and legal fees associated with the restatement and filing the Form 20-F/A on November 30, 2015 which were indemnified by Höegh LNG.

Preliminary Purchase Price Allocation for Höegh Gallant

On October 1, 2015, the Partnership closed the acquisition of 100% of the shares in Höegh LNG FSRU III Ltd. that indirectly owns the Höegh Gallant for a total consideration of $194.2 million. The Höegh Gallant was constructed by Hyundai Heavy Industries Co., Ltd. ("HHI") and was delivered to Höegh LNG in November 2014. In April 2015, the Höegh Gallant began operating under a charter that expires in 2020 with EgyptCo. EgyptCo has a charter with EGAS that expires in April 2020. Additionally, Höegh LNG and the Partnership have entered into an option agreement pursuant to which the Partnership has the right to cause Höegh LNG to charter the vessel from the expiration or termination of the EgyptCo charter until July 2025 at a rate equal to 90% of the rate payable pursuant to the current charter with EgyptCo, plus any incremental taxes or operating expenses as a result of the new charter.

The purchase price consisted of the cancellation of the $140 million interest-bearing demand note due from Höegh LNG, the issuance of a seller's credit note of $47 million and the establishment of a liability for a working capital adjustment of $7.2 million. The acquisition was accounted for under the purchase method of accounting. Under this method, the purchase price is allocated to assets acquired and liabilities assumed based on their fair values. Any excess of the purchase price over the fair values is recognized as goodwill. The following table summarizes the preliminary fair values of assets acquired and liabilities assumed:

(in millions of U.S. dollars)

Consideration

Cancellation of demand note

$

140.0

Seller's credit note

47.0

Liability for working capital adjustment

7.2

Total consideration

194.2

Assets acquired

Cash and cash equivalents

7.7

Other current assets

5.1

Vessel

355.7

Intangible: Above market time charter

11.0

Intangible: Option for time charter extension

8.0

Other long-term assets, excluding goodwill

0.1

Total assets, excluding goodwill

387.6

Liabilities assumed

Total long term debt

(184.7)

Derivative instruments

(3.8)

Other current and long-term liabilities

(5.2)

Total liabilities

(193.7)

Total identifiable net assets

193.9

Goodwill

0.3

Total consideration

$

194.2

There were two intangibles identified. The Partnership recorded $11.0 million for the favorable time charter contract with EgyptCo and $8.0 million for the option for the time charter extension until 2025. As a result, amortization of $0.6 million was recorded as a reduction in time charter revenues related to the Höegh Gallant for the three month period ended December 31, 2015.

Financing and Liquidity

As of December 31, 2015, the Partnership had cash and cash equivalents of $32.9 million and an undrawn sponsor credit facility of $85 million. Current restricted cash was $10.6 million of which $10.5 million and $0.1 million relates to operating obligations of the PGN FSRU Lampung and Höegh Gallant, respectively. Long-term restricted cash required under the Lampung facility was $14.8 million as of December 31, 2015. In addition $0.4 million of long-term restricted cash related to cash balances in Egyptian pounds which are not readily exchangeable into other currencies. During the fourth quarter of 2015, the Partnership received approximately $1.2 million in cash payment from Höegh LNG for certain non-creditable Indonesian VAT and non-budgeted Indonesian WHT for the periods and as further described in the Form 20-F/A for the year-ended December 31, 2014. The indemnification payment received was recorded as a contribution to equity in the fourth quarter of 2015. During the first quarter of 2016, the Partnership received an additional cash payment from Höegh LNG for the fourth quarter of 2015 for non-budgeted expenses mainly related to the restatement of approximately $0.8 million. The cash payment for indemnification received after December 31, 2015, will be recorded as a contribution to equity in the first quarter of 2016.

On October 1, 2015, the Partnership financed part of the acquisition of the Höegh Gallant with the seller's credit note of $47 million and a liability for the working capital adjustment of $7.2 million. The $47 million seller's credit note bears interest at 8% per annum which is paid on a quarterly basis. On February 28, 2016, the maturity of the seller credit note and the undrawn $85 million sponsor credit facility was extended to January 1, 2020. The fair value of the outstanding debt under the Gallant facility was approximately $184.7 million upon the closing of the acquisition. The Gallant facility includes two commercial tranches with a syndicate of banks and an export credit tranche with an export credit agency. The interest rates vary by tranche. The two commercial tranches have an interest rate of LIBOR plus a margin of 2.7% based on the facility agreement. The interest rate for the export credit tranche has a fixed interest rate and guarantee commission of 4.18% based on the facility agreement. The commercial tranches are repayable quarterly with a final balloon payment of $106.5 million in September 2019. The export credit tranche is repayable in quarterly instalments with the final payment in October 2026 assuming the balloon payments of the commercial tranches are refinanced. If not, the export credit agent can exercise a prepayment right for repayment of the outstanding balance upon maturity of the commercial tranches. The fair value of the Gallant facility has been determined based upon margins, fixed interest rates and guarantee commission had the financing been entered on the acquisition date. Based upon its fair value, the weighted average effective interest rate for the Gallant facility, excluding the impact of the associated interest rate swaps, is 3.0%.

During the fourth quarter of 2015, the Partnership made quarterly repayments of $4.7 million on the Lampung facility and $3.3 million on the Gallant facility. The Partnership's total long-term debt was $362.8 million as of December 31, 2015.

As of December 31, 2015, the Partnership had outstanding interest rate swap agreements for a total notional amount of $337.1 million to hedge against the interest rate risks of its long-term debt under the Lampung facility and the Gallant facility. The Partnership applies hedge accounting for derivative instruments related to those facilities. The Partnership receives interest based on three month US dollar LIBOR and pays a fixed rate of 2.8% for the Lampung facility. The Partnership receives interest based on three month US dollar LIBOR and pays a fixed rate of approximately 1.9% for the Gallant facility. The carrying value of the liability for derivative financial instruments was $10.8 million as of December 31, 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 $0.5 million for the three months ended December 31, 2015 was due to amortization of the amount excluded from hedge effectiveness and the ineffective portion of the cash flow hedge related to the Lampung and the Gallant facilities. There was a loss on derivative instruments of $0.2 million for the three months ended December 31, 2014 related to the Lampung facility.

On February 15, 2016, the Partnership paid a $0.4125 per unit distribution with respect to the fourth quarter of 2015, equivalent to $1.65 per unit on an annual basis. The distribution totaled $10.9 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-Lirquén 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.

FORWARD-LOOKING STATEMENTS

This press release contains certain forward-looking statements concerning future events and the Partnership's operations, performance and financial condition. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words "believe," "anticipate," "expect," "estimate," "project," "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.

  • the Partnership's ability to integrate and realize the anticipated benefits from the acquisition of the Höegh Gallant; 
  • FSRU and LNG carrier market trends, including hire rates and factors affecting supply and demand;
  • the Partnership's anticipated growth strategies;
  • the Partnership's anticipated receipt of dividends and repayment of indebtedness from joint ventures;
  • the effect of the worldwide economic environment;
  • turmoil in the global financial markets;
  • fluctuations in currencies and interest rates;
  • general market conditions, including fluctuations in hire rates and vessel values;
  • changes in the Partnership's operating expenses, including drydocking and insurance costs;
  • the Partnership's ability to make cash distributions on its units and the amount of any such distributions;
  • the Partnership's ability to comply with financing agreements and the expected effect of restrictions and covenants in such agreements;
  • the future financial condition of the Partnership's existing or future customers;
  • the Partnership's ability to make additional borrowings and to access public equity and debt capital markets;
  • planned capital expenditures and availability of capital resources to fund capital expenditures;
  • the exercise of purchase options by customers;
  • the Partnership's ability to maintain long-term relationships with its customers;
  • the Partnership's ability to leverage Höegh LNG's relationships and reputation in the shipping industry;
  • the Partnership's ability to purchase vessels from Höegh LNG in the future, including the Independence, the Höegh Grace or Höegh LNG's other FSRU newbuildings;
  • the Partnership's continued ability to enter into long-term, fixed-rate charters;
  • the Partnership's ability to maximize the use of its vessels, including the redeployment or disposition of vessels no longer under long-term charters;
  • expected pursuit of strategic opportunities, including the acquisition of vessels;
  • the Partnership's ability to compete successfully for future chartering and newbuilding opportunities;
  • timely acceptance of the Partnership's vessels by their charterers;
  • termination dates and extensions of charters;
  • the expected cost of, and the Partnership's ability to comply with, governmental regulations and maritime self-regulatory organization standards, as well as standard regulations imposed by its charterers applicable to its business;
  • demand in the FSRU sector or the LNG shipping sector in general and the demand for the Partnership's vessels in particular;
  • availability of skilled labor, vessel crews and management;
  • the Partnership's incremental general and administrative expenses as a publicly traded limited partnership and its fees and expenses payable under its ship management agreements, the technical information and services agreement and the administrative services agreements;
  • the anticipated taxation of the Partnership and distributions to its unitholders;
  • estimated future maintenance and replacement capital expenditures;
  • the Partnership's ability to retain key employees;
  • customers' increasing emphasis on environmental and safety concerns;
  • potential liability from any pending or future litigation;
  • potential disruption of shipping routes due to accidents, political events, piracy or acts by terrorists;
  • future sales of the Partnership's common units in the public market;
  • the Partnership's business strategy and other plans and objectives for future operations;
  • the Partnership's ability to successfully remediate any material weaknesses in its internal control over financial reporting and its disclosure controls and procedures; and
  • other factors listed from time to time in the reports and other documents that the Partnership files with the SEC, including its Annual Report on Form 20-F/A for the year ended December 31, 2014.

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 CONSOLIDATED AND COMBINED CARVE-OUT STATEMENTS OF INCOME (in thousands of U.S. dollars, except per unit amounts)

Three months ended

Year ended

December 31,

December 31,

2015

2014

2015

2014

Restated

Restated

REVENUES

Time charter revenues

$

23,426

13,140

57,465

$

22,227

Construction contract revenues

6,718

51,868

Other revenue

474

Total revenues

23,426

19,858

57,465

74,569

OPERATING EXPENSES

Voyage expenses

(340)

(1,139)

Vessel operating expenses

(4,136)

(3,545)

(9,679)

(6,197)

Construction contract expenses

1,952

(38,570)

Administrative expenses

(2,435)

(2,422)

(8,733)

(12,566)

Depreciation and amortization

(2,630)

(8)

(2,653)

(1,317)

Total operating expenses

(9,201)

(4,363)

(21,065)

(59,789)

Equity in earnings (losses) of joint ventures

8,012

(4,593)

17,123

(5,330)

Operating income (loss)

22,237

10,902

53,523

9,450

FINANCIAL INCOME (EXPENSE), NET

Interest income

293

2,516

7,568

4,959

Interest expense

(6,517)

(4,534)

(17,770)

(9,665)

Gain (loss) on derivative instruments

482

(161)

949

(161)

Other items, net

632

(1,134)

(2,678)

(2,788)

Total financial income (expense), net

(5,110)

(3,313)

(11,931)

(7,655)

Income (loss) before tax

17,127

7,589

41,592

1,795

Income tax expense

(672)

(105)

(933)

(481)

Net income (loss)

$

16,455

7,484

40,659

$

1,314

Earnings per unit

Common unit public (basic and diluted)

$

0.62

0.28

1.54

0.50

Common unit Höegh LNG (basic and diluted) 1

$

0.63

0.28

1.55

0.50

Subordinated unit (basic and diluted) 1

$

0.63

0.28

1.55

0.50

1 For the three months and year ended December 31, 2015, includes the impact of incentive distribution rights ("IDR") distributions.

 

                      

HÖEGH LNG PARTNERS LP UNAUDITED CONSOLIDATED AND COMBINED CARVE-OUT BALANCE SHEETS AS OF DECEMBER 31, 2015 AND DECEMBER 31, 2014   (in thousands of U.S. dollars)

As of

December 31,

2015

2014

ASSETS

Restated

Current assets

Cash and cash equivalents

$

32,868

$

30,477

Restricted cash

10,630

21,935

Trade receivables

8,200

6,189

Amounts due from affiliates

4,239

Demand note due from owner

143,241

Advances to joint ventures

7,130

6,665

Inventory

767

Current portion of net investment in direct financing lease

3,192

2,894

Current deferred tax asset

360

343

Prepaid expenses and other receivables

528

564

Total current assets

67,914

212,308

Long-term assets

Restricted cash

15,198

15,184

Vessels, net of accumulated depreciation

353,078

Other equipment

119

54

Intangibles and goodwill

18,646

Advances to joint ventures

6,861

12,287

Net investment in direct financing lease

290,111

292,469

Long-term deferred tax asset

1,666

1,667

Other long-term assets

10,150

15,449

Total long-term assets

695,829

337,110

Total assets

$

763,743

$

549,418

 

 

HÖEGH LNG PARTNERS LP UNAUDITED CONSOLIDATED AND COMBINED CARVE-OUT BALANCE SHEETS  AS OF DECEMBER 31, 2015 AND DECEMBER 31, 2014  (in thousands of U.S. dollars)

As of

December 31,

2015

2014

 Restated

LIABILITIES AND EQUITY

Current liabilities

Current portion of long-term debt

$

32,208

$

19,062

Trade payables

1,350

864

Amounts due to owners and affiliates

10,604

6,019

Loans and promissory notes due to owners and affiliates

47,287

467

Value added and withholding tax liability

2,078

3,066

Derivative financial instruments

4,912

4,676

Accrued liabilities and other payables

22,496

13,365

Total current liabilities

120,935

47,519

Long-term liabilities

Accumulated losses of joint ventures

42,507

59,630

Long-term debt 1

330,635

179,141

Derivative financial instruments

5,855

4,544

Other long-term liabilities

14,633

22,206

Total long-term liabilities

393,630

265,521

Total liabilities

514,565

313,040

EQUITY

Common units public

209,112

207,004

Common units Höegh LNG

6,554

5,202

Subordinated units

40,753

32,347

Total Partners' capital

256,419

244,553

Accumulated other comprehensive income (loss)

(7,241)

(8,175)

Total equity

249,178

236,378

Total liabilities and equity

$

763,743

$

549,418

1 In April 2015, the FASB issued revised guidance for the classification of debt issuance cost; Simplifying the Presentation of Debt Issuance Cost. Under the new guidance, deferred debt issuance cost will no longer be classified as assets but presented as a direct deduction from the carrying amount of the associated debt in the balance sheet. The presentation in the balance sheet will be adjusted on a retrospective basis. The amendments are effective for annual and interim periods beginning after December 31, 2015 and early adoption is permitted. The Partnership is implementing the guidance as of December 31, 2015 and has adjusted the balance sheet as of December 31, 2014 on a retrospective basis. The deduction from the carrying amount of long-term debt for deferred debt issuance cost is $11.7 million and $14.1 million as of December 31, 2015 and 2014, respectively.

 

   

HÖEGH LNG PARTNERS LP UNAUDITED SEGMENT INFORMATION FOR THE QUARTER ENDED DECEMBER 31, 2015 AND 2014 (in thousands of U.S. dollars)

Segment information

There are two operating segments. The segment profit measure is Segment EBITDA, which is defined as earnings before interest, taxes, depreciation, amortization and other financial items (gains and losses on derivative instruments and other items, net). Segment EBITDA is reconciled to operating income and net income in the segment presentation below. The two segments are "Majority held FSRUs" and "Joint venture FSRUs." In addition, unallocated corporate costs that are considered to benefit the entire organization and interest income from advances to joint ventures and the demand note due from Höegh LNG are included in "Other."

For the three months ended December 31, 2015, Majority held FSRUs includes the direct financing lease related to the PGN FSRU Lampung and the 100% owned Höegh Gallant. For the three months ended December 31, 2014, Majority held FSRUs includes a newbuilding, the PGN FSRU Lampung, and construction contract revenues and expenses of the Mooring under construction. The Mooring was constructed on behalf of, and was sold to, PGN using the percentage of completion method of accounting. The Mooring project was completed as of December 31, 2014.

For the three months ended December 31, 2015 and 2014, Joint venture FSRUs include two 50% owned FSRUs, the GDF Suez Neptune and the GDF Suez Cape Ann, that operate under long term time charters with one charterer, GDF Suez Global LNG Supply SA.

The accounting policies applied to the segments are the same as those applied in the financial statements, except that Joint venture FSRUs are presented under the proportional consolidation method for the segment note in the Partnership's financial statements and under equity accounting for the consolidated and combined carve-out financial statements. 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. The following tables include the results for the segments for the three months ended December 31, 2015 and 2014.

Three months ended December 31, 2015

Joint venture

Consolidated

Majority

FSRUs

Total

and combined

held

(proportional

Segment

Elimin-

carve-out

(in thousands of U.S. dollars)

FSRUs

consolidation)

Other

reporting

ations

reporting

Time charter revenues

$

23,426

10,800

34,226

(10,800)

$

23,426

Total revenues

23,426

10,800

34,226

23,426

Operating expenses

(4,962)

(1,956)

(1,609)

(8,527)

1,956

(6,571)

Equity in earnings of joint ventures

8,012

8,012

Segment EBITDA

18,464

8,844

(1,609)

25,699

Depreciation and amortization

(2,630)

(2,286)

(4,916)

2,286

(2,630)

Operating income (loss)

15,834

6,558

(1,609)

20,783

22,237

Gain (loss) on derivative instruments

482

5,416

5,898

(5,416)

482

Other financial income (expense), net

(4,632)

(3,962)

(960)

(9,554)

3,962

(5,592)

Income (loss) before tax

11,684

8,012

(2,569)

17,127

17,127

Income tax benefit (expense)

(692)

20

(672)

(672)

Net income (loss)

$

10,992

8,012

(2,549)

16,455

$

16,455

Three months ended December 31, 2014

Joint venture

Consolidated

Majority

FSRUs

Total

and combined

held

(proportional

Segment

Elimin-

carve-out

(in thousands of U.S. dollars)

FSRUs

consolidation)

Other

reporting

ations

reporting

(Restated)

(Restated)

(Restated)

Time charter revenues

$

13,140

10,588

23,728

(10,588)

$

13,140

Construction contract revenues

6,718

6,718

6,718

Total revenues

19,858

10,588

30,446

19,858

Operating expenses

(5,191)

(2,324)

(1,116)

(8,631)

2,324

(6,307)

Construction contract expenses

1,952

1,952

1,952

Equity in earnings of joint ventures

(4,593)

(4,593)

Segment EBITDA

16,619

8,264

(1,116)

23,767

Depreciation and amortization

(8)

(2,287)

(2,295)

2,287

(8)

Operating income (loss)

16,611

5,977

(1,116)

21,472

10,902

Gain (loss) on derivative instruments

(161)

(6,347)

(6,508)

6,347

(161)

Other financial income (expense), net

(5,329)

(4,223)

2,177

(7,375)

4,223

(3,152)

Income (loss) before tax

11,121

(4,593)

1,061

7,589

7,589

Income tax benefit (expense)

(129)

24

(105)

(105)

Net income (loss)

$

10,992

(4,593)

1,085

7,484

$

7,484

 

 

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 December 31, 2015 and 2014.

Three months ended

December 31,

(in thousands of U.S. dollars)

2015

2014

(Restated)

Interest income

$

293

$

2,516

Interest expense:

Interest expense

(5,696)

(3,064)

Commitment fees

(287)

(283)

Amortization of debt issuance cost and fair value of debt assumed

(534)

(1,187)

Capitalized interest

Total interest expense

(6,517)

(4,534)

Gain on derivative instruments

482

(161)

Other items, net:

Unrealized foreign exchange gain (loss)

1,245

268

Realized foreign exchange gain (loss)

54

(102)

Bank charges and fees and other

(39)

(63)

Withholding tax on interest expense and other

(628)

(1,237)

Total other items, net

632

(1,134)

Total financial income (expense), net

$

(5,110)

$

(3,313)

Appendix A: Adjusted EBITDA and Segment EBITDA

Non-GAAP Financial Measures

Segment EBITDA and Adjusted EBITDA. EBITDA is defined as earnings before interest, depreciation and amortization and taxes. Segment EBITDA is defined as earnings before interest, depreciation and amortization, taxes and other financial items. Other financial items consist of gains and losses on derivative instruments and other items, net (including foreign exchange gains and losses and withholding tax on interest expenses). Adjusted EBITDA is defined as earnings before interest, depreciation and amortization, taxes, other financial items, cash collections on direct financing lease investments and amortization in revenues for above market contracts. Cash collections on direct financing lease investments consist of the difference between the payments under the time charter and the revenues recognized as a financing lease (representing the repayment of the principal recorded as a receivable). Amortization in revenues for above market contracts consist of the non-cash amortization of the intangible for the above market time charter contract related to the acquisition of Höegh Gallant. Segment EBITDA and Adjusted EBITDA are used as supplemental financial measures 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 and Adjusted EBITDA assist 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 and Adjusted EBITDA information. This increased comparability is achieved by excluding the potentially disparate effects between periods or companies of interest, other financial items, depreciation and amortization and taxes, which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which items may significantly affect net income between periods. The Partnership believes that including Segment EBITDA as a financial and operating measure benefits investors in (a) selecting between investing in it and other investment alternatives and (b) monitoring its ongoing financial and operational strength in assessing whether to continue to hold common units. The Partnership believes Adjusted EBITDA benefits investors in comparing its results to other investment alternatives that account for time charters as operating leases rather than financial leases. Segment EBITDA and Adjusted EBITDA should not be considered alternatives to net income, operating income, cash flow from operating activities or any other measure of financial performance presented in accordance with U.S. GAAP. Segment EBITDA and Adjusted EBITDA exclude some, but not all, items that affect net income, and these measures may vary among other companies. Therefore, Segment EBITDA and Adjusted EBITDA as presented below may not be comparable to similarly titled measures of other companies. The following tables reconcile Segment EBITDA and Adjusted EBITDA for each of the segments and the Partnership as a whole (combined carve-out reporting) to net income (loss), the comparable U.S. GAAP financial measure, for the periods presented:

Three months ended December 31, 2015

Majority held FSRUs

Joint venture FSRUs (proportional consolidation

Other

Total Segment reporting

Consolidated & combined carve-out reporting

(in thousands of U.S. dollars)

Reconciliation to net income (loss)

Net income (loss)

$

10,992

8,012

(2,549)

16,455

$

16,455

Interest income

(293)

(293)

(293)

Interest expense, net

5,269

3,968

1,248

10,485

6,517

Depreciation and amortization

2,630

2,286

4,916

2,630

Income tax (benefit) expense

692

(20)

672

672

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

3,968

Equity in earnings of JVs: Depreciation and amortization

2,286

Other financial items (1)

(1,119)

(5,422)

5

(6,536)

(1,114)

Equity in earnings of JVs: Other financial items (1)

(5,422)

Segment EBITDA

18,464

8,844

(1,609)

25,699

25,699

Cash collection/ principal payment on direct financing lease

755

755

755

Amortization in revenues for above market contracts

605

605

605

Adjusted EBITDA

$

19,824

8,844

(1,609)

27,059

$

27,059

(1) Other financial items consist of (gains) and losses on derivative instruments and other items, net including foreign exchange (gains) or losses and withholding tax on interest expense.

 

 

Three months ended December 31, 2014

Majority held FSRUs

Joint venture FSRUs (proportional consolidation

Other

Total Segment reporting

Consolidated & combined carve-out reporting

(Restated)

(Restated)

(Restated)

(in thousands of U.S. dollars)

Reconciliation to net income (loss)

Net income (loss)

$

10,992

(4,593)

1,085

7,484

$

7,484

Interest income

(2,516)

(2,516)

(2,516)

Interest expense, net

4,229

4,224

305

8,758

4,534

Depreciation and amortization

8

2,287

2,295

8

Income tax (benefit) expense

129

(24)

105

105

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

4,224

Equity in earnings of JVs: Depreciation and amortization

2,287

Other financial items (1)

1,261

6,347

34

7,642

1,295

Equity in earnings of JVs: Other financial items(1)

6,347

Segment EBITDA

16,619

8,264

(1,116)

23,767

23,767

Cash collection/ principal payment on direct financing lease

684

684

684

Amortization in revenues for above market contracts

Adjusted EBITDA

$

17,303

8,264

(1,116)

24,451

$

24,451

(1) Other financial items consist of (gains) and losses on derivative instruments and other items, net including foreign exchange (gains) or losses and withholding tax on interest expense.

Appendix B: Distributable Cash Flow

Distributable cash flow represents Segment EBITDA adjusted for cash collections on principal payments on the direct financing lease, amortization in revenues for above market contracts, interest income‎, interest expense less amortization of debt issuance cost and fair value of debt assumed, other items (net), unrealized foreign exchange losses (gains), current income tax expense, and other adjustments including indemnification paid by Hoegh LNG and estimated maintenance and replacement capital expenditures. Estimated maintenance and replacement capital expenditures, including estimated expenditures for drydocking, represent capital expenditures required to maintain over the long-term the operating capacity of, or the revenue generated by, the Partnership's capital assets.

Distributable cash flow is presented starting with Total Segment reporting using the proportional consolidation method for the Partnership's 50% interests in the joint ventures as shown in Appendix A. Therefore, the adjustments to Segment EBITDA include the Partnership's share of the joint venture's adjustments. Distributable cash flow is a quantitative standard used by investors in publicly-traded partnerships to assist in evaluating a partnership's ability to make quarterly cash distributions. Distributable cash flow is a non-GAAP financial measure and should not be considered as an alternative to net income, net cash provided by operating activities or any other indicator of the Partnership's performance calculated in accordance with GAAP. Distributable cash flow excludes some, but not all, items that affect net income and net cash provided by operating activities, and these measures may vary among companies. Therefore, distributable cash flow may not be comparable to similarly titled measures of other companies. Distributable cash flow is not the same measure as available cash or operating surplus, both of which are defined by the Partnership's partnership agreement. The table below reconciles distributable cash flow to Segment EBITDA, which is reconciled to net income, the most directly comparable GAAP measure, in Appendix A. Refer to Appendix A for the definition of Segment EBITDA and Adjusted EBITDA.

(in thousands of U.S. dollars)

Three months ended December 31, 2015

Segment EBITDA

$

25,699

Principal repayment direct financing lease

755

Amortization in revenues for above market contracts

605

Adjusted EBITDA

$

27,059

Interest income

293

Interest expense (1)

(10,485)

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

580

Other items, net

632

Unrealized foreign exchange losses (gains)

(1,245)

Current income tax expense

(806)

Other adjustments:

Indemnification paid by Höegh LNG for non-budgeted expenses

751

Estimated maintenance and replacement capital expenditures

(3,870)

Distributable cash flow

$

12,909

(1) The Partnership's interest in the joint ventures' interest expense and amortization of debt issuance cost is $3,968 and $46, respectively.

Appendix C: Restated financial data for the three months ended December 31, 2014 (unaudited)

On November 30, 2015, the Partnership filed with the Securities and Exchange Commission ("SEC") 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. Financial data for the three months and the year ended December 31, 2014 contained herein have been restated as further described in Note 2.d. to the financial statements contained in the Partnership's Form 20-F/A. Please refer to the Form 20-F/A for a complete explanation. For convenience of the reader, a summary of the change to the unaudited consolidated and combined carve-out income statement for the three months ended December 31, 2014 is reflected below.

 Three months ended December 31, 2014

 Adjustments

(in thousands of U.S. dollars, except per unit amounts)

As reported

VAT, WHT and other

Indirect adjustments

As restated

REVENUES

Time charter revenues

$

10,547

2,628

(35)

$

13,140

Construction contract revenues

6,511

207

6,718

Total revenues

17,058

2,835

(35)

19,858

OPERATING EXPENSES

Voyage expenses

(340)

(340)

Vessel operating expenses

(2,252)

(1,293)

(3,545)

Construction contract expenses

2,195

(243)

1,952

Administrative expenses

(2,375)

(47)

(2,422)

Depreciation and amortization

(8)

(8)

Total operating expenses

(2,780)

(1,583)

(4,363)

Equity in earnings (losses) of joint ventures

(4,593)

(4,593)

Operating income

9,685

1,252

(35)

10,902

FINANCIAL INCOME (EXPENSES), NET

Interest income

2,516

2,516

Interest expense

(4,586)

52

(4,534)

Gain (loss) on derivative financial instruments

(161)

(161)

Other items, net

(1,045)

(89)

(1,134)

Total financial income (expense), net

(3,276)

(89)

52

(3,313)

Income (loss) before tax

6,409

1,163

17

7,589

Income tax expense

(129)

24

(105)

Net income (loss)

$

6,280

1,187

17

$

7,484

Earnings per unit

Common unit public (basic and diluted)

$

0.24

$

0.28

Common unit Höegh LNG (Basic and diluted)

$

0.24

$

0.28

Subordinated unit (basic and diluted)

$

0.24

$

0.28

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

SOURCE Hoegh LNG Partners LP



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