Q3 2020 Hoegh LNG Partners LP Earnings Call
Good day and welcome to the average.
And Oh, and GI partners third quarter 2020, <unk> earnings Conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After todays presentation, there will be the opportunity to ask questions to ask the question. Please press Star then one on the Touchtone phone.
To withdraw your question. Please press Star then two please note. This conference is being recorded I would now like to turn the conference over to spine non Stoli. Please go ahead.
Thank you Emily and good morning day since then.
Moving to the Goodman JV partners around the is called for the third quarter of Twentytwenty.
For your convenience the this because of the presentation.
Presentation is available on our website.
With me today I have missed the whole bunch of <unk> the CFO of the partnership.
So with the park of the presentation together for me.
Turning to page two.
The taste.
The would take you through the quarter.
I'm, sorry, I would take you through the quarter, and then hand over to Mr. Xue, who will take you through the financials.
And then what percent of the market uptake of the summary, you will have the opportunity to of course.
Yes to both of us and all of the presentation.
So turning to page for you.
The southern look at the forward looking statements.
[music] and all the.
So the losses on page for.
[music].
I would like to start with some color relating to the company's 19 pandemic.
As of today, the publicity has not being materially impacted by the kind of make.
Hey, Greg.
Taken steps to meet the get risks.
Like the uninsured, the and the safety of our crews and stuff.
Which is our highest priority.
This includes developing the mitigating the axis for crude crude realizations.
I'm happy to say that sales crew changes are not being done.
Except to the frequency for both the officers and ratings are older vessels.
Thanks for the hard work of our people onboard the the since Adams for the.
The fleet is operating EPS expected despite the pandemic.
Well the taught the party sort of Maine in full force.
And the effect of revenue so being collected in the quotas with the construction services.
I have never happy to report that the older units in the fleet had 100% availability in the quarter.
This results in total revenues for.
Good day.
The million.
And day segments each of you today of total.
The six for 4 million in the quarter.
Based on the distribution of 44 cents.
This was something of some of its called the trade show 1.24 times in the quarter.
Turning the page six.
We are showing the overview of the partnerships fleet modern assets.
The Golan is considered the debt is sort of quarter earnings for the chocolate.
Got it and this quarter's results.
The that's certainly something in LNG kind of remote under a southern Mountrail true.
Well I'm offered for lots of FSC you at the on several other potential projects.
Non aside the product.
[noise] with that I would like to handle the to institute moving take the student these kind of actions.
Thank you so I know.
Good morning, everyone I'm, turning the page eight we have the key figures for the quarter.
Which shows an operating performance in line the with the same quarter last year.
The segment the EBITDA of 36.4 million in the quarter is the same as of the third quarter last year.
The operating results led to the distributable cash flow of 18.6 million and that's all the domestic but so I don't a strong interest rates show in the quarter.
We would like the site all the seafarers and on sort of stuff and they bring the partnership to deliver the stable operations.
Wendy's I'm kind of sentence types.
Turning over to page nine.
We are showing to develop and the key meshes all the time and as you can see from the gross the consistency in the operating performance stands out.
The only exception is the second quarter last year, which was impacted by the dry docking and maintenance all of the hook Alex.
For the Grace is the next day, so do for pale the acts of it and this will take place towards the end of this year and in the <unk> beginning of 2020 rule.
However, this will be carried out the flow and is not expected to close significant downtime.
Right.
I would love to find out the stability of the distributions from the partnerships during the pandemic.
The average for many called Mclean Sensata for <unk> eight in the half years at the end of the quarter underpinning the stability of cash flows.
Moving on to page 10.
We are showing the income statement in more detail.
Total revenue, so 35.9 million in the quarter. It was about the 1 million less than in the same period last year mainly.
Mainly due to reduced time near for the hook balance under its new talk to the.
That's the operating expenses of 6 million of the quarter is down 7.7 million from the same free as of last year.
In the third quarter losses, the snow for the expenses included maintenance expenses of approximately zero point Ninemillion for the P.J. and that's the way you would unfold and to the district the degree the her guidance.
During the third part of this year, that's not for the expenses have been somewhat lower because of the reduction activities due to the growth of ours, which was partially offset by inclusion of property taxes for the beach and at the same level.
[noise] equity in the running so joint ventures for the quarter was 5.8 million an increase of 5.2 million for all Seo point 6 million for the same period last year.
Unrealized gains and losses on derivative instruments significantly impacted the expert in Oneq, So joint ventures for the third quarter this year.
Respectively.
Excluding these two items the equity and earnings of joint ventures would of been 3.6 million. This quarter. The increase you'll see the 0.8 for you done from 2.8 billion for it last year.
Talking for the last expense of 6.7 million in the quarter is done by the zero point Ninemillion from the same quarter last year, mainly due to lower the census debt it's amortized.
Turning to page 11, the balance sheets.
Which has not changed much since the year end 2019, I've been beating the piece of that could be standing of just below 1 billion at the end of the quarter.
One thing worth mentioning is that in addition to the 25 million of cash on the timing of state. The partnership had the approximately 88 million in Undrawn amounts of its two revolving credit facilities at the end of the quarter, taking the total liquidity to approximately 113 million.
I'll now hand, it back to Mr. started to take us through the remaining sections of the presentation.
Thank you Hello.
So turning to page 13 of the LNG market.
Global LNG trade said about Florida has sent the year on year in the third quarter, mainly the owing to the effects of the call the typing the limit.
However, overall the demand is up.
2.3% year to date in the Twentytwenty.
And after the acting as the sink for the LNG spot market. The the first half of what the 20 European LNG of course decline.
By about 10% of young the or into the third quarter.
China on the other hand.
The the 30% growth.
In LNG imports compared to the same quarter last year.
This is the second consecutive quarter of with good growth in Chinese imports asked of the company's 90 of the relate to the for drop in the first quarter of this year.
Turning to page 14.
We have the graph illustrates the we expect the development in the global energy markets.
As you can see the global demand growth for LNG is expected to continue the for the long term.
As shown for the next 30 years.
This is driven both by the capacity of LNG price and the environmental benefits for the switching from oil and coal to natural gas.
And the clearly the other Asia is the region with the largest expected demand growth and this of course includes the both China and India as the main markets.
So turning to page 15.
Which gives an overview of the competitive situation other than the FSRU market.
This picture.
No [laughter] looks more or less as a percentage over the last couple of years actually.
And since the last quarterly presentation.
Once.
The one change is going to us conversant for Croatia has left the yard and we have added another <unk>.
She order from the Carnival of joint venture, which you can see on direct side.
However for the Hegh LNG. This means that the competitive situation has not changed.
From the previous quarter.
[noise] turning to page six the is regarding our parents.
All of this is in the energy slate are on contract and business development activities for the new lot of the first few contracts are high.
The pipeline one of the acquisition candidates with the parent the remains the same as in the previous quarter.
Turning to page 17.
[noise] showing an overview of the business development activities.
[laughter] the parent level.
As kind of the see the patent is in advanced stages of negotiations on several potential projects.
I think for everything goes according to plan this will lead to.
The growth opportunities for the top partnership over the next year or so.
[noise] the so to the left.
Sales of the projects, where her guidance. He is already selected us the FSRU provider.
All of these projects have been announced previously in Australia Squadron LNG has it become the sole owner well detail you project.
And who's going to India is currently in finding.
Uh Huh negotiations for this project.
The project has recently signed the lease for up to 25 years the the courts.
And that secures the site for the term for.
For LNG is critical project in Melbourne.
The environmental permit application is ongoing and expected to be completed during the first half for the 21.
The bucks in the middle of shows ongoing at the theirs.
Where amongst others, who are gonna GE is in the final tender for the first the other projects in the Philippines.
Finally, the books of the right shows.
To buy that for the projects. The total energy is developing its of.
And is it includes a project in the Atlantic Basin, and one of potential project in Cyprus.
[noise] is.
Kind of the sold from the the.
The slide the debt.
There's develop the activity is high.
And this of course is driven mainly by the very competitive price for LNG.
No I would also like to add the the news from the parent which was the.
Not to the ready when the slim to press, the namely that.
The Big LNG signed a 10 year contract with H. energy in India.
Today or this morning.
And this is obviously the is on the very positive news and not the least because the plan the startup for that project is in the first quarter all the 20.
But the one.
With that I would like to turn to page seven.
So sorry.
My team for the summary.
Well I would like to highlight the following.
We see no matter the impact from the club is 19 today on the company.
A very good operating the record with 100% availability of the fleet and stages the.
Operating performance and they sold at the corporate rate so in the quarter.
That's a bunch of strong fundamentals.
Yeah, the in the LNG market [noise].
And finally, the very strong support from the parent.
Yes, all the presentation, we will now open up for questions from the audience.
I would like to thank everyone for dialing in.
[noise]. So please if we can open up for questions.
We will now begin the question and answer session to ask the question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your headset for pressing the keys if at any time. Your question husband interest and you would like to withdraw. Your question. Please press Star then channel at this time, we will pause momentarily to assemble our roster.
[noise]. The first question comes from Chris Wetherbee from Citi. Please go ahead.
Thanks, and thanks for taking my call I guess, I guess I wanted to talk a little bit about for development at the park.
Well so.
You highlighted some new opportunities here and obviously.
Level I guess can you give us the sense from your perspective.
What maybe the the timing or cadence.
Actually getting back into growth mode for you in the end, it's too early to be thinking about the potential of bringing new assets into the partnership or.
Actually for the line of sight for that and I guess at the end.
Yes, I wonder the one of the steps that you would expect to see happen to get to that point of growth again.
[laughter] right. The thanks for that the other question.
First the I mean, we have Oh the group level of we've we've had the the principle that we do not to do any.
For the sections until the the asset the question is actually on the specific contract.
The has been the.
He has been the commissions and put into operation. So you know we would you anyway, we would the talking.
The next Oh that the six to 12 months, if that was to happen.
The.
The that takes the intention of.
Oh, we do have a the power of passionate commitment.
The towards the MLP to offer any assets on a.
So the contract of more than five years to the to the partnership and the clearly the.
That's commitment stays in place.
And we expect that two to two.
To be done the or when the when there is a ready candidates the with.
With the contract the in the operation.
Okay. Okay. So it sounds like we have some time.
The five year contract duration for we think about cash.
Total growth going back for the.
Okay.
Well I mean, that's the that's the principle of call it the arrangement or the.
There might be some other ways of doing it but I mean, that's the principal arrangements.
Okay, Okay understood.
Is there any appetite as you guys have done a nice job of rebuilding distribution coverage over the of.
Of course of the last several quarters is there any appetite to consider.
Usage of that cash.
<unk>.
Potentially very modest increase to the distribution or.
Sure we should be focusing on.
The down debt I want to get a sense of sort of what you think about that as the distribution coverage ratio.
The over the last for five quarters.
Yeah, I think of.
The whole that would you like for like the rest of yeah. Thank you I. Its sales. It's the good observation of course on the on I would say both for the time being what we think we want to probably tell us so the leveraging and keep the gift distribution, so where it is so it's.
It's it's good to have that's the kind of folks who actually also be able to date the lever.
Okay. Okay, well. Thank you very much for the time I appreciate it.
Sure you're welcome.
Our next question comes from Ken Hoexter from Bank of America Merrill Lynch. Please go ahead.
Hey, good morning, I'm, sorry can you just kind of talk about the whole gallon, whereas the position now obviously parts of the parent, but you talked about a lot of active tenders is there opportunity to put the gallon to one of those projects.
Sure. So currently its trading as the carrier for for.
For one of the LNG majors.
So it's obviously a very important.
It's actually a very active market. The US you know for the for the for the normal.
Korea market the also but that's obviously what we.
Don't know for what we want to do with these assets.
So to that end of yes of.
Of course of the gallant a it's a couple of at least the.
No our.
Efforts I use the you know they have the.
More or less the same specifications, though the yeah.
They are interchangeable the.
The due in large extent and that means that the.
We all for the Guy that the on several of the projects I mentioned previously a in the presentation.
If you look at that the in the the number of opportunities negotiations tenders, we are involved with.
The.
The exceeds the by a large number the other the number of the eye procedures, we have the available so I'm very hopeful that the.
We would have.
Several of the contracts lined up in the near future, including the one the that'd be just completed the in India. So the if you include that the.
And the.
The other.
Contracts, we haven't of developments in Australia of every in principle of have the allocate the already to go for say use clearly there's a.
There's there's some very good contract opportunities also for the gallant coming up.
Okay can you maybe just the ticket stepped back and I know you mentioned it briefly in the prepared marks the talking about the LNG see spot market as tracked over the last couple of months, what you're seeing now and talking about the you kind of where you see those rates going.
But in the in the short term market.
It's important of course, the make the distinction between spot and term.
The term the.
Being anything for.
Six to 12 too much longer.
The six to seven months of much older of course, I think spot rates today for the these type of vessels. The is a it's actually north of a $100000 a day.
So they have really.
A lot of over the last the six eight weeks in particular.
Oh for.
Well, it's a nine to 12 month contract of the.
For the rates today would be.
In the mid Fiftys.
Thereabouts, maybe up to 60 it the funding.
ER for the.
For the Uh Huh.
The to the units we have in the market those rates are or two units actually with the L.R. anyway.
Hi for peace to high Seventys, So I.
I think the market there, it's it's extremely dependent the when do you actually fix when the vessel becomes available.
I do believe that this market the we continue.
The the very strong seasonality going forward with the.
The lower rates in the summer and.
Very high rates in the in the winter.
Oh, I think Twentytwenty, one will look more or less the same as 2020 it'll taking out the taking that the the.
A copy of the effects of course, but.
We follow the smoke it very closely we do not we do not go into the spot market, because we don't want to take the positioning and and the also the the fuel the risks.
So we are focused on the get the turn call rich.
We'll see we.
We'll have the some some the expenses to do over the next.
Couple of months, but the the interest is strong and I have no.
[laughter] be concerned about the re fixing whatever beneath the re fix depending on how the the.
The FSRU market the also develops.
Just a quick clarification you did mention you expect no downtime in the in the fourth quarter right. Because you obviously had a strong hydro percentage in the third quarter.
The other than we have no downtime in the book.
Okay.
And then and then just lastly.
The the growth opportunities you mentioned a couple of projects.
The is the Australia, one the one that you see coming up quite gets the is that the one we should keep an eye on in terms of of seeing the next steps or maybe just highlight what what the next news flow we could see on on kind of some of those announcements at the parent you mentioned.
Yeah. So so at the parent the like I mentioned, the I mean, the the activity is very very high there's been a real rebound the in the in the EPS are you market over the over the last few months of despite a copy of the one other thing that came with it.
Maybe the driven by.
The very competitive price for.
For LNG, but also the.
The.
And the utilization and the moving away from the from coal the north.
The the.
As I mentioned in the.
Earlier on some of the.
The the obligation from the time for the is to offer.
ER and the long term contract the.
That said the two the M. P. S. It comes of becomes available from the time when the asset would be on the on the on the in the FSRU operation the I'm not that contract so.
Oh, sorry, Yeah, clearly a you know is a prime is a prime the target for us and we have the.
Seeing that the day the two clients. We have there are making very good progress in completing the project I think the first the first project that we saw though is actually the one.
We announced this morning in India.
'cause it goes the stopped to update the Aries is.
Is it.
In the in the beginning of next year. So in the first quarter of next year.
So we'll see the wouldn't be a number of of opportunities over the next 12 to 18 months and Oh.
Contracts or the.
Five years, the Lord they wouldn't be offered to the to the partnership.
Thank you very much of touch I appreciate the thoughts.
True.
Our next question comes from Ben Nolan from Stifel. Please go ahead.
Yeah I'm good morning.
And the assigned the congratulations on the a H.
H. entered me contracting of that one has been.
Hi analyst for a while Oh, yeah, maybe if you could.
And I appreciate the there were not any.
Financial terms disclose but.
And I appreciate the there's probably sensitivities around that but.
It could you maybe compare it relative to other.
Or or give some sense as to where the market is maybe relative to where the parent is currently chartering the go off.
Yeah. So the of course, the then the no very good question I think it's clearly it's fair to say that the the.
The market today is the is lower than what it was meant that option was entered into.
Hello.
So the the the deal with H LNG.
He said, what I would call of the kind of market rates.
Yeah. It's also the.
Both of the to know the or the the contract and so the in the first for for the next year.
The south of the obvious.
Obviously has the high value when you look at the contract Oh of that length of the 10 years huh.
So I mean, we have the we have a contract with the with the very.
Uh huh.
Good counterparty or into the market or which strategically we believe we'll also have a number of additional import facilities and.
Certainly some of them will also be after so you contracts. So I think you take all of that into account.
And the release upside the in the contract also for doing small scale.
Your shoes and the addition of the.
On the selling additional capacity.
I apologize for not being able to give you a specific number but the it's a good <unk>.
In the current market with the or what.
What we believe the very important strategic ankle expense.
Okay, No I I mean, I appreciate the color that youre able to get the.
The my next question relates to the refinancing of the Lampung, which.
You mentioned in the release is something for next year and beyond sort of discussion, which curious how you think about that with respect to.
I either a day they need to you know just sort of refinancing continue on all of the similar amortization schedule, whether there might be cash that you might be able to pull out of that financing or or inversely might have to put a little bit extra in the any thoughts on on how the.
Might play out relative to the you know the the current loan to value et cetera.
Well I don't know the and all I can comment on lots and a it's a it's the limited on the day so for about the refinancing process or so so the considering the the alternative.
Well, yeah, we could see some potential to two the increase the oh the debt facility other when when the apparent on some non and okay.
Okay. So you probably want to repay other with on the revolving credit facilities with the without the amount so.
So, let's see how about the that develops going forward.
Okay, all right perfect. The those my two questions. Thanks, guys.
Thank you.
Again, if you ask the question. Please press Star then one of our next question comes from Liam Burke from B. Riley FBR. Please go ahead. Thank you good morning.
We highlighted on one of your slides the order.
The order book and it's certainly coming more in line with the with current demand, but we're seeing the FSRU market rebounding pretty nicely.
Would you anticipate that that order book get out of whack for what keeps that under control.
[noise] right no I think of.
With the with the fact that the the market has been long for.
The an extended period of time I I.
I would bet, but very much debt you would see any speculative ordering.
The into these markets I think that.
That is also underscored by the fact that the the high side.
No new entrants.
Into into this market segment for a long long time.
The the reproduce and.
Order for a specific project for the project actually orders.
But I I think that the.
The the the risk of.
A new order book of speculative for say use I find that the very very remote.
So we're looking at an environment, where you're looking at capacity.
Very tight and continued continued growth on the demand side. So it looks like over the next day pick of time frame of that you've got a nice opportunity for growth there.
No I I do share the and clearly I think that we've seen the the bottom of the cycle of.
I think that this this market now has turned the.
And.
Hopefully the Illinois and normally that also means that the the.
The would be some good growth opportunities going forward and the also a pick up the in the right levels.
Great. Thank you.
This concludes our question and answer session I would now like to turn the conference over the back over to Finance Stone. Please for closing remarks. Please go ahead.
Thank you Emily so [laughter].
Thanks, everybody for calling in thanks for interesting and good questions.
The we look forward to the next quarterly per Se presentation, if anybody has any.
Additional questions or.
The subjects they would like to bring up the please do not hesitate to contact the us directly through.
Our IR Richard.
Representatives.
Thank you very much for your time and goodbye.
This conference has now concluded. Thank you for attending today's presentation you may now disconnect.
[noise].