Q4 2021 Hoegh LNG Partners LP Earnings Call
Hello, and welcome to the Hoegh LNG partners fourth quarter 2021 earnings presentation.
All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad.
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.
Now I'd like to turn the conference over to Robert <unk> Interim Chief Executive Officer, and Chief Financial Officer. Please go ahead.
Thank you Andrew.
Good morning, ladies and gentlemen, and welcome to LNG partners on these calls for the fourth quarter of 2021 .
My name is a whole lot to do and I am the Chief financial Officer of the partnership and also in the role as interim CEO .
Your convenience this webcast and presentation is available on our website.
Turning to page two in today's presentation, we have an overview of the content of the presentation.
I will start with some highlights from the fourth quarter I didn't cover the quarterly financials.
Thereafter, I will give a market update before summarizing the presentation up yet.
You will also have the opportunity to ask question at the end of the presentation.
Before we start please take note of the forward looking statements on page three the glossary on page number four.
Yeah.
Then turning to page five on the highlights.
I'm pleased to report that the seats Hot 99, 9% availability in the quarter.
This resulted in total revenues of $36 2 million and a segment EBITDA of 35 million in the quarter.
Also today the partnership has not been materially impacted by the COVID-19 pandemic.
The hotel MZ group has taken steps to mitigate the risk from COVID-19, and ensure the health and safety of our crews and stuff, which is our highest priority.
Thanks to the hard work of our people on board the vessels are amongst all the fetus operating as expected despite the pandemic.
Yeah.
The whole gallon commenced operations for new fortress energy in late November .
During the quarter the vessel was modified and prepared for performance under this contract and it expenditures support one 9 million.
Which one 5 million is recorded as operating expenses and $1 4 million is capitalized.
50% of the $4 1 million will be reimbursed by her ability by the end of February 'twenty to 'twenty two.
The refinancing of the Neptune and the PGN FSU lump ore was completed during the quarter and in December . We also signed a new loan agreement for the caper.
I will cover these in more detail on the next pages.
In December the board of the partnership received an unsolicited non binding buyout offer for all publicly held common units of the partnership in exchange for $4.25 in cash or common units.
Despite depending arbitration with the charterer under the lease maintenance agreement for the pizza and efficacy with ample both parties have continued to perform their respective obligations under the agreement.
Turning to page six.
He would be I guess to refinancing of the P. G N F S. Even uncle.
In the Sunbelt departure.
Our refinancing of the pizza and FSU lump them depth lucentis commercial tons with an outstanding amount the $15 5 million in full.
The refinance commercial tranche with I'm, a price with quarterly installments to zero by June 'twenty tend to six subject to a cash sweep mechanism.
Until the pending arbitration with the charterer of the Peach in Epsilon has been terminated constant favorably resolved no shareholder loans may be serviced no dividends may be paid to the partnership by the subsidiaries that is borrowing under the lumping that facility. The P. T H LNG.
Furthermore, each quarter, 50% of the pizza enough to lump them spend the cash flow after debt service.
Must be applied to prepay outstanding loan amounts under the refinance boom facility applied pro rata across the commercial and export punches.
The remaining 50% will be retained by P. T H LNG and pledged to table the lenders until the pending arbitration has been terminated council favorably result.
As a consequence, no castro from the P. J necessary lump ore will be available for the partnership until depending arbitration thats been terminated called suite are favorably resolved. This limitation does not prohibit the partnership paid distributions to preferred and common unit holders.
The refinance commercial tranche bears interest at a rate equal to three months LIBOR plus.
Cause the margin of 375%, whereas the actual credit tranche continues to bear interest at a rate equal to piedmont's lager.
The margin of two 3%.
Yeah.
Then turning to page number seven we address the refinancing of the Neptune under Cape Town.
Starting with the Neptune facility at the end of November .
So you don't just limited to the owner of the Neptune close to refinancing our debt facility.
New debt facility replaces the balloon amounts of $169 million, we paid under the previous debt facility secured by the <unk>.
The new debt facility has an initial loan amount of $154 million and is scheduled to be fully amortized with corporate debt service over a period of eight years based on an annuity repayment profile.
The new Neptune facility bears interest at a rate equal to three month, LIBOR plus a margin of 175%.
Interest rate swaps entered into under the previous Neptune that facility have a remaining 10 over eight years and have been nobody from the previous group so providers to the new lenders and restructured to match the new nephew facilities loan amount and I'm going to say some pla.
The interest rate swaps are not reflected in the above mentioned interest rate for the June 2015.
Now moving onto the Cape and facility.
Mid December so he joined US two limited the owner of the Cape on signed a new loan agreement to refinance the existing Cape on debt facility that matures on June 1st 'twenty to 'twenty two.
Subject to customary closing conditions the closing on the draw down under the new facility are expected to occur on or about the maturity date of the existing facility.
The terms and conditions for the new Cape onto Cynthia philosophy, I didn't equal to the new Neptune facility.
Then turning to page eight where we cover the buyout offer.
In December the partnership announced that the board of Directors had received an unsolicited non binding proposal from Polk LNG pursuant to which hug Lindsey was acquired through a wholly owned subsidiary all publicly held common units of the partnership in exchange for $4.25 in cash or common in it.
Brooklyn G is proposed that the transaction would be affected through a merger between the partnership and the subsidiary of LNG.
The H M. A P board has authorized the conflicts committee of the MLP Board comprised only of non hedge LNG related affiliated directors to review and evaluate the offer.
The conflicts committee has retained advisors and discussions regarding the offer are ongoing.
The proposed transaction is subject to a number of contingencies, including the approval of the conflicts Committee.
M O P bought and the Realogy board of directors of any definitive agreement and if it does seem that your agreement is reached the approval, but its holders of a majority of the outstanding common units in the partnership.
The transaction would also be subject to customary closing conditions.
There can be no assurance that definitive documentation will be executed or that any transaction will materialize.
Yeah.
Turning to page nine we are showing the overview of the partnership's fleet of modern assets. The partnership has about nine years of average remaining contract length and food contract coverage until late 'twenty 'twenty six.
Yeah.
Turning to page 11, where the key figures for the quarter.
So again, the operating performance, which was weaker than in the same quarter of 2020 with a segment EBITDA of $35 million in the quarter compared to $34 9 million in the fourth quarter.
The decrease is mainly due to increased operating expenses on the gallant as a result of preparing and relocating the super performance under the new contract with U S entity.
Limited partners' interest in the net result was $12 3 million in the quarter down from $14 7 million in the same quarter of 'twenty.
Yeah.
Turning to page well.
We are showing the development in key measures all the time and as you can see from the graph the operating performance remains relatively stable.
Two quarters have more negative deviations second quarter 10 to 19 in the second quarter of 2021 .
In the first instance, the deviation was primarily caused by the dry docking and maintenance on the hook gallant in 2019.
A deviation in the second quarter of 10 to 21 was primarily caused by a tax provision for previous periods. Following there was sort of a tax audit, which would disagree to dispute it.
Turning to page 13.
Yeah.
Here, we are showing the income statement in more detail.
Total revenues of $46 2 million in the quarter was about she opened 1 million more than in the same period in 2020.
Vessel operating expenses of $10 6 million in the quarter were $3 8 million more than in the same period last year. The increase was mainly due to the increased operating expenses on the Hoegh gallant as all the dimensions on page five and 11.
Okay.
Equity and earnings so joint ventures for the quarter was $5 4 million an increase from $4 2 million for the same period in 2020.
Unrealized gains on derivative instruments impacted the equity and earnings of joint ventures for the fourth quarter and 2020, respectively.
Excluding these series of items the equity in earnings of joint Ventures would have been $3 4 million this quarter, an increase from $3 million for the same period in 2020.
Total financial expense of $5 8 billion in the quarter equals an increase of <unk> 1 million from the same quarter of 'twenty.
Income tax expense of 0.5 minutes in the quarter represents a decrease of <unk> 8 million from the same quarter of 'twenty two.
Turning to page 14.
He will have the balance sheet and as you can see it has not changed much since the year end 2020, with total liabilities and equity standing at 1 billion at the end of the quarter.
Yeah.
Moving on to page number 16, and the LNG market.
Global LNG trade rose with five 3% year on year in the fourth quarter of 10 to 21 and.
In Asia, it keeps being the region with the highest growth in LNG import volumes.
China continues to increase its imports and shows the strong growth was seven 8% year on year.
Turning to page 17.
Here, we have two graphs illustrating the protected development in global LNG markets from now until 2027.
The graph to the right shows the projected growth in LNG imports globally.
As you can see global LNG demand growth is projected to remain robust, mainly driven by the agent Asian region, including existing or potential market for emphasis input tunnels axon.
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 the USA, Russia and the Middle East.
With that I turn to page 19 for a short summary.
What I would like to highlight the following.
No material impact from the COVID-19 pandemic to date.
99, 9% availability all the fleets during the quarter.
Segment EBITDA of $30 5 million in the quarter.
We closed the refinancing on the left in that facility under P. J and FSU lumpiness that puts at his commercial tranche in the quarter.
We will now open up for questions from the audience.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
If you are using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Chris Wetherbee with Citi.
Please go ahead.
Hey, guys James on for Chris just wanted to ask about sort of the outlook and pipeline. It seems like there's been a bit of a reversal over the previous six months in.
Wanted to get a better understanding of the pipeline for projects that are coming up rfps or is there anything that you, particularly constructive about that's on the horizon and I. Just also wanted to just sort of get your take on sort of how far we are into that trend of sort of a rebound and a more optimistic outlook.
Yeah, Hi, Chris just just a clarification on the pod from do you mean, the hardwood upstairs from the projects. So they are working on for unemployment.
Got it.
Correct.
Right. Okay. So as you've seen in the pilot is also issued its quarterly report today and they have made a made progress lately on all the project in Australia. The Brazilian project that has been concluded lately.
And right now it looks like its a its only one one vessel that remains open that is being tendered for for various projects are assuming that start the Australia project becomes.
You know.
And finally.
Finally signed off by the customer so it.
It has happened quite a lot in the market lately and are harder to tail winds woods with new projects and we see a busy market right now from our point of view so.
Right why is it hasnt really moved much but it's at least we are looking at a market, where you know units on all being firmed up and.
The projects are all coming together.
Got it and then I also wanted to just touch on the.
Yes, you can call it more process oriented question, but just around the merger.
So lets touch on what the key dates coming up are in sort of Wow, where there would be opportunities are.
I have a discussion around potentially changing the big given that like the profitability or sort of the outlook has shifted a little bit more of a essentially a process question about what.
What are the key dates are what steps remain and opportunities for maybe bid revision within the context of that process. Thank you.
Yeah. So this this is now an ongoing process with discussions us as already mentioned on the it's very hard to kind of gave an extra timing on their own on this oh gosh. This is now in the hands of the conflicts committee on Dell dealing with its own.
You know that the whole process to get to with their devices. So we just have to wait and see how the process is developing and then get them to them to the market with more information in in due course.
Okay. That's good thank.
Thank you.
Yeah.
The next question comes from Ben Nolan with Stifel. Please go ahead.
Yeah, Hi show.
Maybe similar question to the last one a little bit more around the latter point, where I don't know six to eight months into the process here any update on sort of.
Where where things are with respect to the process I know, it's hard to maybe even say what the timing ultimately is going to be or the outcome, but just just where what has happened in the process and why maybe it's left to be done.
Yeah.
Thanks for the question this is.
To go into the details because it's a first of all so subject to strict confidentiality clauses in.
In an arbitration process like this so are you know we will have to get back when what when something can be the east coast. It of course house as a high priority on low side too to deal with the matter and they do that in a serious madness. So so.
Plus we have all of that said we believe this is.
So some people without merit, but you know it certainly has to be dealt with in the professional and diligent.
Diligent manner.
Okay.
It is to that end. It is there is a formal arbitration process correct.
Under British law or something like that that is governing how this goes is that.
Right.
It is support more arbitration process, yes.
Okay.
And then.
With respect to the Opex that you mentioned on the gallant.
Is what we saw in this quarter, a good run rate going forwards.
Nothing that which especially unique that would be reversed in the future.
Yes that is correct. So the $4 9 million is on a special towards the quarter because so the modifications.
Okay.
And then lastly, maybe similar to the first question, but you talked to the the tax audit.
It is underway and under negotiation or is it similar similar circumstance. There just in terms of not having really definitive color that you can share or is that something that you'd hope to have resolution on soon.
It's difficult to give a timeline on that told me says this is up to the you know the tax authorities are in Indonesia. It's a it may be a lengthy process, but we have certainly started on lots on onvia disputed are the outcome of the or the tech sold it on.
And well will continue to challenge it.
Okay Alright.
That does it for me thank you.
Thank you.
Okay.
This concludes our question and answer session I would like to turn the conference back over to over <unk> for any closing remarks.
Yes. Thank you. So then I would like to thank everyone for dialing in and participating on the call. Thank you have a good rest of the day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
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