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

HAMILTON, Bermuda, May 28, 2015 /PRNewswire/ -- Höegh LNG Partners LP (NYSE: HMLP) (the "Partnership") today reported its financial results for the period ended March 31, 2015.

Highlights

• Reported total time charter revenues of $11.5 million for the first quarter of 2015 compared to $29.1 million of construction contract revenues for the first quarter of 2014
• Generated operating income of $5.0 million and net income of $2.4 million for the first quarter of 2015 compared to an operating loss of $1.4 million and a net loss of $1.8 million for the first quarter of 2014; operating income and net income were impacted by unrealized losses on derivative instruments on the Partnership's share of equity in earnings of joint ventures in the first quarter of 2015 and 2014
• Generated Adjusted EBITDA (1) of $15.9 million for the first quarter of 2015 compared to $8.4 million for the first quarter of 2014
• On May 15, 2015 paid a $0.3375 per unit distribution with respect to the first quarter of 2015, equivalent to $1.35 per unit on an annual basis

Richard Tyrrell, Chief Executive Officer and Chief Financial Officer stated: "All three FSRUs in the HMLP fleet were on-hire for the entire first quarter. The quarter clearly demonstrates the cash generation from the underlying contracts. The potential pipeline of which was increased yesterday to four additional FSRUs with the announcement by Höegh LNG of a new contract in Chile"

Financial Results Overview

The Partnership reported a net income for the three months ended March 31, 2015 of $2.4 million, an increase of $4.2 million from a net loss of $1.8 million for the three months ended March 31, 2014. The net income (loss) for both periods was impacted by the unrealized gains (losses) on derivative instruments mainly on the Partnership's share of equity in earnings of joint ventures. Excluding these unrealized gains (losses) on derivative instruments, net income for the three months ended March 31, 2015 was $6.2 million, an increase of $4.8 million from a net income of $1.4 million for the three months March 31, 2014. Income tax expense was $0.2 million, a decrease of $0.2 million from the three months ended March 31, 2014.

All FSRUs were onhire for the entire first quarter of 2015. In the first quarter of 2014, the PGN FSRU Lampung was still under construction such that there was no time charter revenues for the period. GDF Suez Neptune and GDF Suez Cape Ann were fully utilized during the first quarter of 2014.

Operating income for the three months ended March 31, 2015 was $5.0 million, an increase of $6.4 million from an operating loss of $1.4 million for the three months ended March 31, 2014. Operating income was also impacted by the unrealized gains (losses) on derivative instruments on the Partnership's share of equity in earnings of joint ventures.

Adjusted EBITDA (1) was $15.9 million for the three months ended March 31, 2015, an increase of $7.5 million from $8.4 million for the three months ended March 31, 2014.

Equity in losses of joint ventures, which own the vessels GDF Suez Neptune and the GDF Suez Cape Ann, for the three months ended March 31, 2015 was $2.1 million, a decrease of $0.5 million from $1.7 million for the three months ended March 31, 2014. The reason for the decrease was the Partnership's share of an unrealized loss on derivative financial instruments of the joint ventures for the three months ended March 31, 2015 of $3.9 million compared with $3.2 million for the three months ended March 31, 2014. For the three months ended March 31, 2015, the Partnership's share of operating income in the joint ventures was $5.9 million compared with $5.8 million for the three months ended March 31, 2014.

Financing and Liquidity

As of March 31, 2015, the Partnership had cash and cash equivalents of $35.8 million and an undrawn sponsor credit facility of $85 million. Current restricted cash for operating obligations of the PGN FSRU Lampung was $16.0 million and long-term restricted cash required under the credit facility related to the PGN FSRU Lampung (the "Lampung Facility") was $15.1 million as of March 31, 2015. The Partnership has an interest-bearing demand note due from Höegh LNG of $140.0 million.

During the first quarter of 2015, the Partnership made a quarterly repayment of $4.7 million on the Lampung facility. The Partnership's total long-term debt was $207.6 million as of March 31, 2015.

As of March 31, 2015, the Partnership had outstanding interest rate swap agreements for a total notional amount of $207.6 million to hedge against the interest rate risks of its long-term debt under the Lampung facility. The Partnership applies hedge accounting for derivative instruments. The Partnership receives interest based on three month US dollar LIBOR and pays a fixed rate of 2.8%. The carrying value of the liability for derivative financial instruments was $11.4 million as of March 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 $0.1 million for the three months ended March 31, 2015 was due to amortization of the amount excluded from hedge effectiveness related to the Lampung facility. There was no comparable gain or loss on derivative instruments for the three months ended March 31, 2014.

On May 15, 2015, the Partnership paid a cash distribution of $0.3375 per unit with respect to the first quarter of 2015, equivalent to $1.35 per unit on an annual basis. The distribution totalled $8.9 million.

Outlook

 Pursuant to the Omnibus Agreement the Partnership entered into with Höegh LNG Holdings Ltd. ("Höegh LNG") at the time of initial public offering, 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, subject to reaching an agreement with Höegh LNG regarding the purchase price and other terms in accordance with the provisions of the Omnibus Agreement. The Independence was constructed by Hyundai Heavy Industries Co., Ltd. ("HHI") and was delivered to Höegh LNG from the shipyard in May 2014. In November 2014, the Independence began operating under a time charter that expires in 2024 with AB Klaipèdos Nafta, a Lithuanian publicly listed, government-controlled utility.

Pursuant to the Omnibus Agreement, Höegh LNG is also obligated to offer the Partnership the opportunity to purchase the FSRU Höegh Gallant. The Höegh Gallant was constructed by HHI and was delivered to Höegh LNG from the shipyard in November 2014. In April 2015, the Höegh Gallant began operating under a time charter that expires in 2020 with the government owned EGAS of Egypt.

Pursuant to the Omnibus Agreement, Höegh LNG is obligated to offer to the Partnership any FSRU or LNG carrier operating under a charter of five or more years. 

Höegh LNG has entered into the following agreements with respect to its newbuilding FSRUs:

• 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 2018. 
• On November 1, 2014, Höegh LNG signed a contract for a minimum term of five 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.  

In November 2014, Höegh LNG placed an order for an additional FSRU newbuilding (Hull 2552) to be constructed by HHI with an expected delivery in the first quarter of 2017.  

There can be no assurance that the Partnership will acquire any vessels from Höegh LNG.

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: 

• 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 borrowings that may be necessary to make 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 Gallant, 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;
• expected 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; 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 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.

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 and cash collections on direct financial lease investments. Cash collections on direct finance lease investments consist of the difference between the payments under the time charter and the revenues recognized as a financial lease (representing the repayment of the principal recorded as a receivable). 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:

Appendix A: Adjusted EBITDA and Segment EBITDA (cont.)

Appendix B: Distributable Cash Flow

Distributable cash flow represents Segment EBITDA adjusted for cash collections on principal repayments on the direct financing lease, interest income, interest expense less amortization of debt issuance cost, other items (net) less unrealized foreign exchange gains  or losses, current income tax expense, other adjustments  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.

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

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

SOURCE Hoegh LNG Partners LP

Related Links

http://www.hoeghlngpartners.com