Q1 2021 Hoegh LNG Partners LP Earnings Call

Okay.

Good morning, ladies and gentlemen, and welcome to the Hoegh LNG partners Q1, 'twenty 'twenty 1 conference call.

All participants will be in a listen only mode should you need assistance. Please you know a conference specialist by pressing the star key followed by zero.

After todays presentation, there will be and opportunity to ask questions.

Please also note today's event is being recorded.

At this time I'd like to turn the conference call over to you and Mr. Stoli <unk> CEO of <unk>.

LNG. Please go ahead.

Thank you Jamie good morning, ladies and gentlemen, and welcome to <unk> LNG partners earnings call for the first quarter of 2021 for.

For your convenience this webcast and presentation is available on our website.

With me today.

Mr <unk>, the CFO of <unk>.

Partnerships.

So turning to page 2 and today's presentation I would take you through the quarter and.

And then hand over the word for Mr. Pierre Luc who will take you through the financials and then.

And that will present, a market update and the summary.

You will have the opportunity to ask questions to both of us at the end of.

The presentation.

So turning to page 3 before we start please take a note of the forward looking statements.

And also the glossary on page 4.

Turning to page 5 and the highlights.

I would like to start with some comments relating to the COVID-19 pandemic.

As of today, the partnership has not been materially in for.

That by the pandemic.

And the Hogan.

And as a group has taken steps to mitigate risks from COVID-19, and then share.

The health and safety of our crews and stuff which is.

Our highest priority.

This includes developing mitigating actions for crude rotation and then.

And I'm happy to say that safe crew changes and now being done at an acceptable frequency from both officers and vertex at all versus.

Thanks for the hard work of our people onboard the vessels and onshore the fleet is operating as expected despite the pandemic.

Well charter parties remains in full force and the fixed and revenues are being collect did in accordance with contractual terms.

I am definitely happy to report that all units and the fleet.

And a 100% availability in the quarter.

This resulted in total revenues of $34.8 million and a segment EBITDA of $34.5 million in the quarter.

Based on our distribution growth.

44 cents per common unit this.

And this resulted in a solid coverage ratio of 1.1 for in the book.

Turning to page 6.

And where we address the take private initiative at the parent level.

Well Nathan March this year, let's take and company limited.

The company and which the hooks and how many holds their shares independent company and funds managed by Morgan Stanley infrastructure partners launched an offer to acquire all outstanding shares in the parent.

Not already controlled by <unk> and company.

And way of amalgamation.

And this transaction was subsequently approved by the shareholders and bondholders independence.

And close and the beginning of this month.

Leading to the parent now being wholly owned by late 2 and company and funds managed by Morgan Stanley infrastructure partners.

The main consequence for the partnership is that some provisions of the omnibus agreement.

Entered into in connection with the IPO.

And when they did buy the terms and the most important changes and at the parent can now acquire owned and operated versus non.

Term contracts.

The partnership can know.

Owned and operate the vessels on short term contracts.

And that the parent is no longer obliged to offer any vessels on long term contract.

And to the partnership.

Furthermore, Hagar LNG is allowed to compete with H M and peak.

The parent has indicated that it remains focused on ways to further enhance the partnership between <unk> and LNG in Asia, and with Pete and remains open.

Judy opportunity too.

For vessels to H P.

Market conditions warrant.

Turning to page 7.

We are showing the overview of the partnership's fleet of modern assets.

There are no changes since the previous quarter.

The partnership has more than 8 years average remaining contract linked and this portfolio.

With that I would like to hand, the word over to Mr. Felipe.

Who will take us through the finances.

Thank you and.

Good morning, everyone.

Turning to page 9 we have the key figures for the quarter, showing and operating performance, which was slightly weaker than in the same quarter of 2020.

And just segment EBITDA of $34.5 million and in the quarter compared to $6.1 million and the first quarter of 2020.

The operating result, led to distributable cash flow of $17.1 million.

Which was about 1 million less and in the same quarter of 2020.

The coverage ratio was 1.14 times and that is a decline from 1.2 times in the first quarter till 2020.

I would like to thank all of our seafarers and onshore staff, enabling the partnership to continue to operate all of its assets without interruptions. During these unprecedented times.

Okay.

Turning to page 10.

We are showing the development and key messages over time and as you can see it from the graph the operating performance remains relatively stable.

The only exception is the second quarter of 2019, which was impacted by the dry docking and maintenance of the Hoegh gallant.

Graces and excess of do for periodic survey and has commenced and the first quarter 'twenty to 'twenty 1 and.

And is expected to be completed during the second quarter.

However, this is Kate ebbs and flows and is not expected to cause significant downtime or old fire.

I would like to highlight the stability and distributions from the partnership.

Who depend that Mick.

Moving on to page 11.

Here, we are showing the income statement in more detail.

Total revenue so.

For 8 million and the quarter was about $1.9 million less and in the same period in 2020.

And mainly due to reduced time charter revenue for the hook gallant and reached new charter.

Vessel operating expenses of $6.2 million and the quarter are up by <unk> 7 million from the same period in 2020.

The increase was driven by higher operating expenses, just for the PGA and FSA lampo and the whole grace as well as less need for spare parts and lower use of external services in 2020.

Yeah.

Equity and earnings from joint ventures for the quarter was $11.1 million and increased from a loss of 10 million for the same period in 2020.

Unrealized gains and losses on derivative instruments significantly impacted the equity and earnings from joint ventures for the first quarter touches and dwell and 2020, respectively.

Excluding these 3 items the equity and earnings from joint ventures.

And would have been 3.4 million and this quarter and increased from $1.7 million and the same period 2020.

Total financial expense of $6.2 million and the quarter is down by <unk> 8 million from the same quarter of 2020, mainly due to lower interest expense as debt is amortized.

Turning to page 12.

The balance sheet has not changed much since year end 2020, with total liabilities and equity standing at just below 1 billion at the end of the quarter.

The commercial transfer P J and FSA will lump homestead facility is maturing and the fourth quarter of this year and the export tons can also be called is a commercial and Tom says not refinanced.

Also 1 other debt facilities and the joint ventures mature and the same quarter.

The adjusted liquidity needs. The partnership has commenced these refinancing processes and <unk>.

Is that and advanced stages of completing the refinancing of the Lumpier and facility.

And loan documentation has been finalized and it's all subject to satisfaction of closing conditions before drawdown.

For the joint venture the refinancing is and the planning stage.

I'll now hand, it back to Mr. <unk> to take us through the remaining sections of the presentation.

Thank you.

So turning to page 14, and the LNG market location.

[laughter].

The total market, so global LNG trade rose with about 1.2% year on year and the first quarter.

Asia keeps being the region with the highest growth in LNG and port volumes.

And the first quarter of 2021 is the quarter with the highest volume of imported LNG and history.

China had a strong year on year growth of 14.4.

And 4% and the first quarter.

Mainly due to the fact that and the same quarter last year of course, the Chinese economy was affected by Covid.

Yeah.

Turning to page.

15.

We have 2 graphs illustrates the expected development and the global LNG markets from now until 2025 day.

Graph on the net shows the expected.

Growth and LNG inputs globally.

And once again you can see most of the growth is expected to be.

And the Asian region excluding.

The legacy market, Okay, So, Japan, South Korea and Taiwan.

The countries accounting for around 3 quarters of the expected input growth are all either existing or potential markers for episode, you import terminals, mainly China, and India, Pakistan and Thailand.

The total market growth and the period.

And for 'twenty to 2020.5.

And I expect it to be.

To this forecast about 23%.

On the supply side and the incremental volume.

And for the most part come from Europe, and the Americas and more specifically.

The us and Russia.

Turning to page 16, which gives an overview of the expected development and floating Regasification terminal projects.

And also when these are expected to come Onstream.

Versus the assumed FSU fleet input capacity illustrated by the Green dashed line.

The dark Blue line Blue desk die and so it presents.

All announced floating regas projects.

But there's some of this and have a low probability of materializing. They are not all are included in the forward book injections as you can see.

The current capacity surplus and the procedure market is expected to be reduced.

And an important point to make and restart fsrus will be committed to projects several months and years before this update of the project.

Meaning that the market balance.

And.

Ken can balance.

And become tight at an earlier point and time and what can be seen on this graph.

With that I would like to turn to page 18 and for a summary.

Where I would like to highlight the following.

No material impact from the COVID-19 pandemic to date.

100% availability of the fleet, resulting in stable operating performance.

And this solid coverage ratio in the quarter.

And finally.

As just explained a very strong market fundamentals.

And both in the short term and the long term.

With that we will now open for questions from the audience.

Okay.

Ladies and.

Yep hunting over to the operator.

Ladies and gentlemen at this time, we'll begin the question and answer session.

To ask a question you May press Star and then 1 using a touch tone telephone.

If you are using a speaker phone and we do ask you. Please pick up your handset before pressing the keys.

And with your all your question you May press Star and 2.

And once again net of Star and then 1 to join the question queue.

Our first question today comes from <unk>.

Chris Wetherbee from Citigroup. Please go ahead with your question.

Hey, guys. Good morning. This is James on for Chris.

Yes, and just 1 day basically.

Perhaps sort of like the current market environment. It definitely seems like there's a bid out there for assets from the.

Pools of private capital just wanted to understand if you basically were seeing and page for your particular assets and sort of like what your sort of appetite for a cell where just kind of wanted to go through or just understand taking care of that and also what you were seeing.

I was wondering I mean, you have 2 questions could the line was a bit lower can you. Please repeat.

Yes.

And there seems to be.

Can you just for LNG assets out there.

<unk>.

Have you actually being macheting any inbound interest for your assets in particular and what.

What are your thoughts around potentially.

Selling tuning coming bid.

What you and what would your thinking around that would be in terms of reservations or would it be something you would actively pursue.

Okay. So so so let me take the last 1 first.

Speaking on behalf of the partnership and looking at the.

Our remaining contract portfolio we have.

I doubt very much that.

Let's see.

<unk> said would justify selling selling any of those assets.

As for.

Contract of historical ask for assets without contracts.

We have had.

Some indications but.

I think that.

And as I just explained our view of the market are certainly.

And is such that we believe that the market is coming.

Back into balance and and.

Surplus and Bristow use available is.

And in the process of.

Disappearing as I explained a few minutes ago, and therefore, we believe that there will be.

And there are ample and.

Availability of.

Commercial contracts that will make the assets.

Certainly much more.

Valuable with a contract and selling them without the contract or.

Acting and the LNG market so.

Yeah.

Even if we had.

Indications for potential purchase.

And that we have but that has always been in connection with a specific project and not the not the pure sales as such.

Does that answer your question.

Yes, it does.

And it is helpful and I understand that and then.

But also sort of along the same lines.

You mentioned you have spoken about the improving environment could you also touch on the prospects you're seeing for around the.

Right so on that obviously our galleys.

Galleon is is.

The basis for at least 2.

Ongoing.

Call it.

Projects or bids that we are actively pursuing.

These are both for.

Longer term contracts.

Obviously, they are not they are not turned yet.

But.

We are marketing and the galleon together with the.

The.

The 3 other fsrus that we currently have.

Operating and and.

And the carrier market so.

Well, we should never say never intended it for them, but we believe that theres very good prospects to have that on a longer term contract.

Over call. It the next 1 to 2 years.

Got it and it should.

Things don't materialize the way you would think.

Potential sales that potentially makes sense for you or is that something that.

It doesn't necessarily align with how you think about the company and that asset.

No I mean, obviously.

I guess and anything is for sale at the right price, but we do believe that the value of the assets is much much higher than and then and what you can obtain from Apio sales, if you'd get a contract on it and really at the moment actually the LNG market is.

Of course, and not on the level that we would like to see but.

Actually a lot better than it was.

Only a short while ago. So we think that that's.

It's a with the model and we have we can we can chalk out and the LNG market, whilst we developed long term efforts of new contracts and.

At the moment, we don't really see and the reason to change that.

Understood all right I'll.

And I'll hop back in the queue.

Thank you.

Once again, if you would like to ask a question. Please press star and then 1 to withdraw your question you May press Star and 2.

Our next question comes from Liam Burke from B Riley FBR. Please go ahead with your question.

Yes, Thank you I'm already today.

Very good thank you.

Could.

Could we go well when I look at the acquisition of <unk>.

Oh go I N G and.

And historically, you've been able to grow through the dropdown arrangement.

How do you how does this arrangement change you're looking at possibly buying assets outside the the old sponsor.

LP relationship.

Right.

Very good question clearly the.

With this change and that opens.

The door for the partnership to acquire.

Basically assets from also other parties.

So.

That's for the partnership obviously.

It's an important change.

Would you look at that as an opportunity or be able to go outside the traditional dropdown Avenue.

Well I think it's both right because.

And we have <unk>.

Referred to in the statement.

The <unk>.

And the parents.

And holds the holds the door open for potential Dropdowns.

If the conditions are right for both parties.

Oh.

That is that is still.

And a potential.

And the avenues for potential growth.

Great and a quick question on the progress you're making on the refinancing of the Neptune I know that's in conjunction with your JV partner, but can.

And we gave a little more detail on that.

Please go ahead the whole book.

Yeah.

And I think I can say that we have an active dialogue with the existing lenders.

On that refinancing for for both vessels, so its Neptune and Cape Ann she might not.

The Cape and facility matures 6 months later than the the Neptune.

So we are.

Moving to refinance both from both for them at the same time.

So.

We're working on that.

It's too early to discuss and reveal details around that but.

But just in active dialogue ongoing.

Great. Thank you very much.

Thank you.

And once again, if you would like to ask a question. Please press star and 1.

And ladies and gentlemen at this time, we've reached the end of today's question and answer session I would like to turn the floor back over to the management team for any closing remarks.

Okay.

Yes, Thank you Jimmy I would like to thank everybody for.

I'm dialing in and participating and Nicole and also for the questions. So thank you very much.

Uh huh.

And we close from here.

And ladies and gentlemen, with that we'll we'll conclude today's presentation. We do thank you for attending you may now disconnect your lines.