Q3 2021 Hoegh LNG Partners LP Earnings Call
Good morning, and welcome.
Speaker 1: Good morning and welcome to the Hogue LNG Partners 3rd Quarter 2021 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.
So the whole LNG partners third quarter 2021 earnings conference call.
All participants will be in listen only mode.
Should you need assistance. Please signal a conference specialist by pressing the star keys or.
Zero.
Speaker 1: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2.
After todays presentation, there will be an opportunity to ask questions.
To ask a question you May press Star then one on your telephone keypad.
To withdraw your question. Please press Star then two.
Please note this event is being recorded.
Speaker 1: I would now like to turn the conference over to Havard Furrow, Chief Financial Officer and Interim CEO . Please go ahead.
I would now like to turn the conference over to <unk>, Chief Financial Officer, and interim CEO. Please go ahead.
Speaker 2: Thank you, Adia, and good morning, ladies and gentlemen, and welcome to Hoge.NG Partners Earnings Call for the third quarter of 2021. My name is Howard Furu and I'm the Chief Financial Officer of the Partnerships and I also play the role as interim CEO .
Thank you Aldo.
And good morning, ladies and gentlemen, and welcome to Engie Partners' earnings call for the third quarter of 2021.
My name is what to do and the Chief financial Officer of the partnership.
Within their own of interim CEO.
Speaker 2: For your convenience, this webcast and presentation is available on our web.
For your convenience this caster and presentation is available on our website.
Speaker 2: 32 page 2 into this presentation we have an overview of the content of the presentation. I will start with some highlights from the third quarter and then cover the quarterly pronounce.
Turning to page two into this presentation, we have an overview of the content of the presentation I'll start with some highlights from the third quarter and then cover the quarterly financials.
Speaker 2: Thereafter, I will give a market update before summarizing the presentation. You will have the opportunity to ask questions.
Rob will go to market updates before summarizing the presentation.
You will have the opportunity to ask questions at the end of the call.
Before we start please take a look at the forward looking statements on page three of the glossary on page four.
Speaker 2: Before we start, please take a look at the forward looking statements on page 3 and the glossary on page 4.
Turning to page five the highlights I would like to start with some comments relating to the COVID-19 pandemic.
Speaker 2: 32 page 5 and the highlights. I would like to start with some comments relating to the COVID-19 pandemic.
And so today the partnership has not been materially impacted by the pandemic.
Speaker 2: As of today, the partnership has not been materially impacted by the pandemic.
Speaker 2: The Hurricane Energy Group has taken steps to mitigate risks from COVID-19 and ensure the health and safety of our crews and staff, which is our highest priority.
So how are we going to do group has taken steps to mitigate risks from COVID-19, and then show the health and safety of our crews and staff, which is our highest priority.
Thanks to the hard work of our people on board the vessels and onshore.
Speaker 2: Thanks to the hard work of our people on both vessels and on shore, the fleet is operating as expected despite the pandemic.
It is operating as expected despite the pandemic.
All revenues have been collected in accordance with contractual terms.
Speaker 2: All revenues have been collected in accordance with contractual terms.
Speaker 2: I'm therefore happy to report that all units of the fleet had 100% availability in the court.
I'm, therefore happy to report that all units or the fleet had 100% availability in the quarter.
This resulted in total revenues of $35 6 million and a segment EBITDA of $35 1 million in the quarter.
Speaker 2: This resulted in total revenues of $35.6 million and a segment EBITDA of $35.1 million in the quarter.
In the quarter departure contributed a new long term contracts for the Hoegh gallant.
Speaker 2: In the quarter, the positive concluded a new long-term SSAO contract for the herd gallant.
Speaker 2: We also agreed on the furrow of the maturity date of the commercial tranche for the PGN FSCU Lampoule test facility.
We also agree that before the maturity date of the commercial tranche for the PGN FSC will impose that facility.
Despite depending on vacation with your charter in the visa license agreement for the PJM necessary sample. Both parties have continued to perform their respective obligations under the agreements.
Speaker 2: Despite the pending arbitration with the Charter under the Lease and Maintenance Agreement for the PG&E Lampoon, both parties have continued to perform their respective obligations under the agreement.
After the end of the quarter. The participants received commitments at this for so called accrued refinancing of the PGN <unk> <unk> that's facility its commercial launch.
Speaker 2: After the end of the quarter, the partnership has received commitment letters for a so-called approved refinancing of the PG&E FSU Lampung Debt Facilities commercial tranche.
Speaker 2: In addition, the loan agreement for refinancing the Neptune's debt facility has also been signed.
They signed a loan agreement for refinancing the next Tuesday facility has also been sites.
I will get back to this in a few minutes.
Speaker 2: 30 to page 6 will be addressed in the new long-term FCOE contract for the whole government.
Turning to page six will be addressed a new long term contract for the <unk> guidance.
Speaker 2: In September , the partnership entered into a 10-year FSOU contract with subsidiaries of New Fortis Energy with planned commencement in December 2021.
In September the partnership entered into a 10 year FSU contract with subsidiaries of <unk>.
Fortis energy with planned commencement in December 2021.
The pace also entered into an agreement to suspend the existing charter for the Hoegh gallant with a subsidiary of <unk>.
Speaker 2: The partnership also entered into an agreement to suspend the existing charter for the Høgraland with a subsidiary of Høgraland Holdings, with effect from commencement of the new charter.
Holdings heat effect from commencement of the new charter.
Under the suspension agreements hurdle in this subsidiary will compensate the partnership sponsor for the difference between the charter rates earned under the new charter on the top right under the existing charter.
Speaker 2: Under the suspension agreements, Hergel and his subsidiary will compensate the partnership monthly for the difference between the charter rate earned under the new charter and the charter rate earned under the existing charter with the addition of a modest increase until July 31st 2025, which is the original expiration date of the existing charter.
The addition of a modest increase until July 31st 2025, which is the original expiration date of the existing charter.
Afterwards, the partnership will continue to receive the Choctaw Grace agreed the new fortress energy through the remaining term of the new charter.
Speaker 2: Afterwards, the partnership will continue to receive the chapter rates agreed with Neoportus Energy for the remaining term of the new chapter.
In addition, pursuant to the suspension agreement certain capital expenditures incurred to prepare and relocate the hook gallant for performance under the new charter will be shared 50 50 between Hogan Engie and the partnership.
Speaker 2: In addition, pursuant to the suspension agreement, certain capital expenditures incurred to prepare and relocate the Högland for performance under the new charter will be shared 50-50 between Högland G and the partnership, subject to a cap on the obligations of the partnership.
Subject to a cap on the obligations of the auction.
Turning to page seven we provide an update on the ongoing refinancing activities.
Speaker 2: 32 page 7 we provide an update on the ongoing refinancing activity.
Also the PJM attitude and ample debt facility.
Speaker 2: As for the PG&FSU Lampung death facility, the commercial transfer of the facility was initially due on September 29, 2021.
Commercial plans of the facility was an issue with you on September 29 2021.
Speaker 2: During the third quarter, the maturity date was deferred to January 14, 2022. I will be further deferred to March 29, 2022, if commitment letters and a term sheet for an approved refinancing as defined in the Lapong Facility Agreement are in place by December 29 this year.
During the third quarter. The maturity date was deferred to January 14, 2022, I will be further deferred to March nine 2022, if commitment letters and the term sheet for an accrued refinancing as defined in the Neptune facility agreement are in place.
29 this year.
Even a prudent financing commercial tranche is not completed by the deferred maturity date, the associated export credit swaps can be called by the lenders.
Speaker 2: If an approved refinancing on commercial tranche is not computed by the deferred maturity date, the associated export credit tranche can be called by the lender.
Speaker 2: In November , the partnership received commitment letters and a term sheet for an approved refinancing of the commercial tranche from a group of lenders.
In November the partnership received commitment letters in the term sheet format to the financing of the commercial tranche from our group of lenders.
The partnership expects to complete the refinancing before the deferred mature to date subject to certain required approvals by expert credit credit tranche lenders completing documentation and customary closing conditions.
Speaker 2: The participant expects to complete the refinancing before the deferred maturity date, subject to certain required approvals by expropriate credit tranche lenders, completing documentation and customary closing conditions.
Speaker 2: The terms of the refinancing, if the partnership is successful in finalizing it, are likely to be less favorable than the terms of the originally agreed refinancing under the existing one-point facility.
The terms of the refinancing if the partnership with successful financing it unlikely to be less favorable than the terms of the originally agreed the financing of the exit onto the existing lumping facility.
When it comes to the Neptune and Cape Ann debt facilities. The joint ventures are kind of all the states for refinancing of these two species.
Speaker 2: When it comes to the Left Union Cape and their facilities, the joint ventures are at an advanced stage for refinancing of these two facilities.
It is.
Speaker 2: which mature and become payable by our joint ventures on November 30th, 2021 and June 1st, 2022 respectively.
Which mature in the comparable by our joint ventures on November 13th to extend to one on June one 2022, respectively.
The loan agreement the new loan agreements for the Neptune has been sites and we expect that the new loan agreement to Cape Ann will be signed in December 2021.
Speaker 2: The new loan agreement for the Neptune has been signed and we expect that the new loan agreement for Cape Ann will be signed in December 2021.
Speaker 2: Subject to customer closing conditions, the refinancing of each Neptune and Ketan is expected to be completed on or about the respective maturity dates of the exchange.
Subject to customary closing conditions, the refinancing of each of Neptune in Qatar.
Expected to be completed on or about the respective maturity dates.
The existing debt facilities.
The two vessels on charter to tall until late 2029, and mid 2013, respectively.
Speaker 2: The two vessels were on charter with Total until late 2029 and mid-2030 respectively.
Turning to page eight.
Speaker 2: Turning to page 8, we are showing the overview of the partnerships created on modern assets.
So when the overview of the partnerships fleet of modern assets.
Speaker 2: But the new charter with new fortress energy has been added since the previous court.
The new charter with new fortress energy has been added since the previous quarter.
Speaker 2: The partnership has more than nine years average remaining contract length and full contract coverage until late 2020.
The partnership has more than nine years average remaining contract length and full contact coverage until late 2026.
Turning to page 10.
Speaker 2: Turning to page 10, we have the key figures for the quarter.
You have the key figures for the quarter.
Speaker 2: showing an operating performance which was slightly weaker than in the same quarter of 2020, with a second EBITDA of 35.1 million in the quarter compared to 36.4 million in the third quarter of 2020.
Showing an operating performance, which was slightly weaker than in the same quarter of 2020 with a segment EBITDA of $35 1 million in the quarter.
<unk> to $36 4 million in the third quarter of 2020.
Limited partners' interest in electric soft was cut in half a million in the quarter down from a profit of $15 8 million in the same quarter of 2020.
Speaker 2: Limited partners' interest in electric stock was $13.5 million in the quarter, down from a profit of $15.8 million in the same quarter of 2020.
Turning to page 11.
Speaker 2: We are showing the development in key meshes over time, and as you can see from the graphs, the operating performance remains relatively stable.
We are showing the development in key measures over time and as you can see from the graph the operating performance remains relatively stable.
Speaker 2: Two quarters have marked negative deviations, the second quarter of 2019 and the second quarter of 2021.
Two quarters have more negative deviations.
The second quarter of 2019 in the second quarter of 2021.
In the first thing since the duration was primarily caused by the drydocking and maintenance of the Hoegh gallant.
Speaker 2: In the first instance, the deviation was primarily caused by the dry docking and maintenance of the hull gallant.
Speaker 3: The deviation in the second quarter of 2021 was primarily caused by a tax provision for previous periods following the result of a tax audit, which we disagreed to and have disputed.
The deviation in the second quarter entered into AUM was primarily caused by a tax provision for previous periods. Following their software with tax audit, which would disagree too and have distributed.
Turning to page 12.
We are showing the income statement in more detail.
Poultry revenues of $35 6 million in the quarter was about <unk> 3 million in the same period in 2020.
Speaker 2: Total revenues of $35.6 million in the quarter was about $0.3 million less than in the same period in 2020.
Speaker 2: Vessel operating expenses of 5.9 million in the quarter were almost the same as in the same period last year.
Vessel operating expenses of $5 9 million in the quarter were almost the same as in the same period last year.
Equity earnings from joint ventures for the quarter was $6 1 million an increase from $5 8 million for the same period in 2020.
Speaker 2: Equity in earnings of joint ventures for the quarter was $6.1 million and increased from $5.8 million for the same period in 2020.
Unrealized gains from the Lincoln instruments impacted the equity and earnings of those ventures for the third quarter of 10 to 21 2028, respectively.
Speaker 2: Unrealized gains from derivative instruments impacted the equity and earnings of joint ventures for the third quarter of 2021 and 2020, respectively.
Excluding these two items the equity in earnings of joint Ventures would have been $3 8 million. This quarter, an increase from $3 5 million for the same period in 2020.
Speaker 2: excluding these three items, the equity earnings of joint ventures would have been $3.8 million this quarter and increased from $3.5 million for the same period in 2020.
Total financial expense of $7 million in the quarter equals an increase of <unk> 3 million from the same quarter of 2020, mainly due to commitment fees incurred for the Lumpier refinancing.
Speaker 2: Total financial expense of $7 million in the quarter equals an increase of $0.3 million from the same quarter of 2020, mainly due to commitment fees incurred for the Langkong Refinance.
Speaker 2: Income tax expense of 2.8 million in the quarter represents an increase of 0.9 million from the same quarter of 2020.
Income tax expense of $2 8 billion in the quarter represents an increase of <unk> 9 million from the same quarter of 2020.
Turning to page 13.
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.
Speaker 2: The balance sheet has not changed much since year-end 2020, with total liabilities and equities standing at just below $1 billion at the end of the quarter.
Speaker 2: As already mentioned, the refinancing of the Lampung facility and the Neptune and Cape Ande facilities is ongoing.
As already mentioned the refinancing of the long pole facility on the Neptune and Cape Ann debt facilities is ongoing.
Turning to page 15, we have.
Speaker 2: Turning to page 15, we have – we're covering the LNG markets. Global LNG trade rose by 10.5% year-on-year in the third quarter of 2021, and Asia keeps being the region with the highest growth in LNG import volume.
We're covering the LNG markets.
Global LNG trade rose by 10, 5% year on year in the third quarter of 2021, and Asia keeps being the region with the highest growth in LNG import volumes.
China continues to increase its imports and shows a strong growth of 13, 2% year on year.
Speaker 2: China continues to increase its imports and shows a strong growth of 13.2% year on year.
Turning to page 16, we have two graphs illustrates the projected development in global LNG markets from now until 2025.
Speaker 2: Turning to page 16, we have two graphs illustrating the projected development in global LNG markets from now until 2025.
Speaker 2: The graph on the left shows the projected growth in energy imports globally.
The graph on the left shows the projected growth in LNG imports globally.
Speaker 2: As you can see, the global energy demand growth is projected to remain robust, mainly driven by the Asian region, including existing or potential markets for FSE import terminals.
As you can see the global LNG demand growth is predicted to remain the best mainly driven by the Asia region, including existing or potential markets for efficacy we import totals.
Speaker 2: Examples of this are China, India, Pakistan, and Thailand.
Examples of this are China, India, Pakistan and Thailand.
On the supply side, the incremental volume is projected for the most part to come from Europe, and the Americas was specifically hit the USA and Russia.
Speaker 2: On the supply side, the incremental volume is predicted for the most part to come from Europe and the Americans, more specifically the USA and Russia.
From 2020 to 2025, the market growth is projected to be around 22%.
Speaker 2: From 2020 to 2025, the market growth is projected to be around 22%.
Speaker 2: With that, I turn to page 18 for a short summary, where I would like to highlight the following.
With that I turn to page 18 for a short summary, what I would like to highlight the following.
No material impact from the COVID-19 pandemic to date.
Speaker 2: no material impact from the COVID-19 pandemic to date.
Speaker 2: 100% availability of the fleet, resulting in stable operating performance and stable segment EBTA.
100% availability for the peak resorts begins stable operating performance and stable segment EBITDA.
Speaker 2: Our long-term contacts support both our refinancing activities and our reduction of debt over time. We see strong market fundamentals.
Our long term contract to support both our refinancing activities and a reduction of.
That over time.
We see strong market fundamentals.
We will now open up for questions from the audience.
We will now begin the question and answer session to.
Speaker 1: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad.
You asked a question you May press Star then one on your telephone keypad.
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Speaker 1: At this time, we will pause momentarily to assemble our roster.
At this time, we will pause momentarily to assemble our roster.
Speaker 1: Our first question will come from Chris Witherby of Citigroup. Please go ahead.
Our first question will come from Chris Wetherbee of Citigroup. Please go ahead.
Hey, great. Thanks for taking the question maybe wanted to start with the land policy and understand maybe if theres an update on the timing of the arbitration sort of what are the next steps in the process.
Speaker 4: Hey, great. Thanks for taking the question. Maybe we'll just start with the Lampung and understand maybe if there's an update on the timing of the arbitration, sort of what are the next steps in the process and, you know, if we have any sense of what the potential resolution might look like with that vessel.
If you have any sense of what the potential resolution might look like with that vessel.
Yeah, Hi, Chris Thanks for your question.
Speaker 2: Yeah, hi Chris, thanks for the question. You know this dispute with the charter of the Lampung is subject to strict confidentiality, so I'm afraid I can't give much comment to that. It's still early days for an arbitration process and we expect it will take time and we don't have much more than that to share, unfortunately.
This.
Dispute with the charterer of the lump Hong is subject to strict confidentiality. So I'm afraid I can't give much comment.
To that.
It's still early days for an arbitration process and we expect it will take time.
And.
We don't have much more than that to Sharon. Unfortunately.
Okay.
That's fine.
Maybe we could pivot to that.
Facility than for a moment can you talk about the potential for.
Step up in the in the interest expense on the renegotiated facility, assuming it kind of goes through as expected can you give us a sense. When we think about that and then we think about the Neptune and Cape Ann debt facilities, maybe a bigger picture question about.
That expense as we move forward, how should we be thinking about that the next couple of quarters or maybe if you think about 2022, what is the run rate interest expense, we should be thinking about for the business.
Speaker 5: It's a bit hard to comment on the final terms for the Lampung facility given that we're not at the point where we are ready to complete it, but we do see that it will be slightly more expensive.
Alright.
It's a bit hard to comment on the final terms for the lumpy facility given that.
At the point, where we are.
Ready to compete it.
But we do see that.
It will be slightly more expensive.
Speaker 5: and we'll have to get back with more details on that when it's completed. As for the Neptune and Cape Man, I think the interest expense for the two joint ventures are going to continue around the same level as today, a slight uptick in the margin.
And we will have to get back with more details on that when it is completed.
As for the Neptune and Cape Town.
I think the interest expense for the two joint ventures are going to continue around the same level.
Today, a slight uptick in the margin.
As the year.
Speaker 5: The existing debt facilities were concluded back in the days where the margin was very, very slim. But overall, I think the interest expense will, you know, increase slightly on the back of that. But of course, the debt is being amortized, so it's coming down year by year.
The existing debt facilities that concluded the speculative days, but the margin was very very slow.
But.
But overall I think.
This expense will.
Increased slightly on the back of that but of course the debt that's being amortized. So so it's coming down year by year.
Okay, Alright, that's helpful. And then maybe a final question just on the gallant.
Speaker 4: Okay. All right. That's helpful. And then maybe a final question just on the gallon, one to get a sense of, could you maybe give us a little bit more color on the potential step up that's included from Hoagy LNG in terms of that make whole, right? So there's a make whole provision. It sounds like that steps up progressively through the duration of the original charter terms. Can you just give us a sense of what that may mean for the economics of that?
Wanted to get a sense of.
Could you maybe give us a little bit more color on the potential step up that's included from.
Okay LNG in terms of that make whole right. So there's a make whole provision that sounds like that stepped up yet progressive.
Progressively through the duration of the original charter terms can you just give us a sense of what that might mean for the economics of backups.
Yes, certainly.
Speaker 5: Yeah, certainly. And it's, as we have commented, it's a modest increase and talking numbers, it's limited to $3,000 a day step up over that period from commencement of the new charter until July 2025.
That's.
I have commented, it's a modest increase in.
Talking numbers, it's limited to $3000 a day step up.
Over that period.
From commencement of the new charter until.
July 20 <unk>.
Speaker 2: Okay, and that happens how often? I'm sorry, the $3,000? It's an increase in a day rate, so $3,000 per day. Okay, got it.
Okay and that happens how often I'm sorry, the 3000.
Yes.
Okay.
It's an increase in the day rates, so 3000 Boes per day.
Okay got it thank you very much.
Thank you.
Okay.
This concludes our question and answer session I would now like to turn the conference back over to Hawaii.
Speaker 1: This concludes our question and answer session. I would like to turn the conference back over to Havard for any closing remarks.
Any closing remarks.
Speaker 2: Yes, thank you. So so just to close across the call, I would like to thank everyone for dialing in and participating. Thank you all and have a good day.
Yes. Thank you.
So just to close across the call I would like to thank everyone for dialing in and participating. Thank you all and have a good day.
Speaker 1: Thank you for attending today's presentation and you may now disconnect.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.