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pu VT Hoegh LNG Companions LP (HMLP) This autumn 2020 Earnings Name Transcript - The Times Hub

Hoegh LNG Companions LP (HMLP) This autumn 2020 Earnings Name Transcript

Hoegh LNG Companions LP (HMLP) This autumn 2020 Earnings Name Transcript

Picture supply: The Motley Idiot.

Hoegh LNG Companions LP (NYSE:HMLP)
This autumn 2020 Earnings Name
Feb 26, 2021, 8:30 p.m. ET

Contents:

    Ready Remarks
    Questions and Solutions
    Name Contributors

Ready Remarks:

Operator

Good morning, and welcome to Hoegh LNG Companions LP Fourth Quarter 2020 Convention Name. [Operator Instructions]

I’d now like to show the convention over to Sveinung Stohle, CEO. Please go forward.

Sveinung J. S. StohleChief Govt Officer

Thanks, Emily. Good morning, girls and gents, and welcome to Hoegh LNG Companions’ earnings name for the fourth quarter 2020. To your comfort, this webcast and presentation is offered on our web site. With me right this moment, I’ve Mr. Havard Furu, the CFO of the Partnership.

Turning to Web page 2, in right this moment’s presentation, I’ll take you thru the quarter after which hand over the phrase to Mr. Furu, who will take you thru the financials. Then, I’ll current a market replace and on the finish the abstract. You’ll have the chance to ask inquiries to each of us on the finish of the presentation.

So, turning to Web page 3. Earlier than we begin, please pay attention to the forward-looking statements on Web page 3 and in addition the glossary on Web page 4. Turning to Web page 5 and the highlights. I wish to begin with some feedback regarding the COVID-19 pandemic. As of right this moment, the Partnership has not been materially impacted by the pandemic. The Hoegh LNG Group has taken steps to mitigate dangers from COVID-19 and make sure the well being and security of our crews and workers, which is our highest precedence. This contains growing mitigating actions for crew rotations, and I am glad to say that protected crew adjustments are actually — have now being carried out — and are being carried out at a suitable frequency for each officers and rankings on all of the vessels. Due to the arduous work of our individuals onboard the vessel and onshore, the fleet is working as anticipated regardless of the pandemic. All constitution events stay in full power and impact, and revenues are being collected in accordance with contractual phrases. I’m subsequently glad to report that each one items within the fleet had 100% availability [Technical Issues] $34.9 million within the quarter. Primarily based on a distribution of $0.44 per widespread unit, this resulted in a stable protection ratio of 1.2 within the quarter.

Turning to Web page 6, we’re displaying the overview of the Partnership’s fleet of contemporary belongings. Because the earlier quarter, the mum or dad has secured a brand new 12-month interim LNGC constitution with Trafigura for Hoegh Gallant, which is able to start when the present constitution expires in March of this 12 months. The Gallant can also be supplied for long-term FSRU employment on a number of potential initiatives.

With that, I wish to hand over the phrase to Mr. Furu, who will take us by way of the financials.

Havard FuruChief Monetary Officer

Thanks, Sveinung, and good morning, everybody. Turning to Web page 8, we now have the important thing figures for the quarter, that are displaying an working efficiency in step with the identical quarter of 2019, though with an improved distributable money movement. The phase EBITDA of $34.9 million within the quarter was almost the identical as within the fourth quarter of 2019. The working end result led to a distributable money movement of $18.1 million and as already talked about by Sveinung, a stable protection ratio within the quarter. I wish to thank all our seafarers and onshore workers, enabling the Partnership to ship steady outcomes and operations throughout these unprecedented occasions.

Turning to Web page 9, we’re displaying the event of key measures over time. And as you possibly can see from the graphs, the working efficiency remained steady. The one exception is the second quarter of 2019, which was impacted by the drydocking and upkeep of the Hoegh Gallant. Hoegh Grace is the subsequent vessel due for periodic survey, and it will happen through the first half of 2021. Nevertheless, this will probably be carried out afloat and isn’t anticipated to trigger any vital downtime or hearth [Phonetic]. I’d additional like to spotlight the soundness in distributions from the Partnership by way of the pandemic. The typical remaining contract size stands at roughly eight years on the finish of the quarter, underpinning the soundness in money flows.

Turning to Web page 10, we’re displaying the revenue assertion in additional element. Complete revenues of $36.1 million within the quarter was about $2.4 million lower than in the identical interval in 2019, primarily resulting from a diminished time constitution income for the Hoegh Gallant below its new constitution, and that the revenues within the fourth quarter of 2019 included some parts of tax reimbursement for FSRU PGN Lampung. Vessel working bills of $6.8 million within the quarter is down by $2.4 million from the identical interval in 2019. Within the fourth quarter of 2019, the working bills included a provision of $3 million for land and billing tax being imposed by Indonesian authorities for the years 2015 by way of 2019, which explains a lot of the variation. Fairness in earnings of joint ventures for the quarter was $4.2 million, a lower from $6.7 million for a similar interval in 2019. Unrealized positive factors on by-product devices considerably impacted the fairness in earnings of joint ventures for the fourth quarter of 2020 and 2019. Excluding these by-product objects, the fairness in earnings of joint ventures would have been $3 million this quarter, a rise from $2.5 million for a similar interval in 2019. Complete monetary expense of $5.7 million within the quarter is down by $1.7 million from the identical quarter of 2019, primarily resulting from decrease curiosity expense as debt is amortized and variation in international trade positive factors and losses.

Turning to Web page 11, the stability sheet has not modified a lot since year-end 2019, with complete liabilities in equities standing at just under $1 billion on the finish of the quarter. The business tranche of FSRU PGN Lampung’s debt facility is maturing within the fourth quarter of 2021. Additionally, one of many debt services within the joint ventures matures the identical quarter. The Partnership has commenced these refinancing processes and is in detailed discussions with its banks on the Lampung facility, whereas for the three way partnership, the method is within the starting stage.

I am going to now hand it again to Mr. Stohle to take us by way of the remaining sections of the presentation.

Sveinung J. S. StohleChief Govt Officer

Thanks, Havard. So, turning to Web page 13 and the view of the market. International LNG commerce rose with 1.5% year-on-year in 2020 regardless of the adverse demand results owing to the COVID-19 pandemic. This clearly exhibits the resilience in international LNG demand and underpins the function of LNG within the power transition by changing extra polluting fuels resembling coal and oil merchandise. Asia was the one continent with noteworthy progress in LNG imports in 2020, and China accounted for round two-thirds of the aggregated Asian enter progress regardless of a adverse year-on-year improvement within the first quarter, after all by the COVID-19 pandemic. After performing because the sync for the LNG spot market within the first half of the 12 months, European LNG imports declined within the second half of the 12 months in comparison with 2019. And for the 12 months, European imports ended barely down in comparison with the 12 months earlier than.

Turning to Web page 14, we now have a graph illustrating the anticipated improvement within the international power markets. As you possibly can see international demand progress for LNG is anticipated to proceed for the long-term at the same time as a slight downward route [Phonetic] following the COVID-19 pandemic, and estimate the demand remains to be anticipated to develop by roughly 50% within the interval 2020 to 2030. This once more will drive demand for brand spanking new regasification capability, of which some will materialize within the type of FSRUs. The ultimate funding resolution made by Qatar Petroleum for the North Discipline East challenge exhibits that subtle market individuals are persevering with to speculate to increase the LNG commerce.

Turning to Web page 15, which supplies an summary of the aggressive scenario within the FSRU market. This image seems kind of as offered during the last couple of years that for the reason that final quarterly presentation, the FSRU Jawa Satu, which was constructed for a challenge in Indonesia has been delivered from the yard. In January this 12 months, New Fortress introduced the acquisition of Golar LNG Companions and Hygo Power Transition. These transactions will make New Fortress Power the brand new proprietor of seven out of the eight FSRUs owned by the Golar LNG Group. The FSRU LNG Croatia, which was beforehand named Golar Viking has now been offered from Golar to LNG Hrvatska in Croatia.

Turning to Web page 16, concerning our mum or dad. All vessels in Hoegh LNG’s fleet are on contract and enterprise improvement actions for brand spanking new long-term FSRU contracts are excessive. Because the final quarterly presentation, this slide has been up to date with the brand new long-term FSRU contract secured by the dad and mom with H-energy in India, which will probably be served by the Hoegh Large. The contract is for 10 years, with annual break choices for the consumer after 12 months 5. The potential pipeline of contemporary acquisition candidates with the mum or dad stays the identical as in earlier quarters. Additionally value mentioning, Hoegh LNG Holding has initiated a brand new Clear Power initiative with the aim of offering infrastructure options for the transportation, storage and distribution of inexperienced hydrogen and ammonia, in addition to growing floating carbon seize and storage options. It will help that Hoegh LNG’s main industrial platform and top quality trendy belongings will proceed to drive ahead the power transition effectively into the longer term.

Turning to Web page 17, displaying an summary of the enterprise improvement exercise at Hoegh LNG mum or dad degree. The mum or dad is in superior phases of negotiation with a number of potential initiatives and if the whole lot goes in keeping with plan, it will result in progress alternatives for the Partnership over the subsequent 12 months or so. The field to the left exhibits the initiatives the place Hoegh LNG is chosen as FSRU supplier. All these initiatives have been introduced beforehand. In Australia, AIE signed a memorandum of understanding to attach the Port Kembla Fuel Terminal with the Jap Fuel Pipeline, a part of the most important fuel transmission system within the State of New South Wales. Squadron Power, the only proprietor of AIE can also be accelerating the related improvement of an 800 megawatt twin gasoline LNG-hydrogen energy station in Port Kembla, which will probably be fueled by fuel from the Port Kembla Fuel Terminal.

Hoegh LNG is at the moment in closing TCP negotiations with AIE. For AGL’s challenge at Crib Level, the listening to stage of the environmental allow utility course of is accomplished, and the Victorian Minister for planning is anticipated to make the choice concerning the EES by the tip of March of this 12 months. The field within the center is displaying ongoing tenders, the place Hoegh LNG is within the closing tender spherical for the first-gen challenge within the Philippines, in competitors with two different FSRU suppliers. Two potential new initiatives are added right here for the reason that final report. One, a long-term FSRU challenge in Africa and a short-term challenge in Brazil. The challenge in Brazil is for a length of solely three years, however that is due to regulatory circumstances in Brazil. That is particular for this challenge and doesn’t signify a brand new norm within the FSRU market in relation to contract length, as proven by the latest contract carried out by Hoegh LNG, which is for 10 years.

Lastly, the field to the suitable is displaying bilateral initiatives or initiatives that Hoegh LNG is growing itself. This contains one potential challenge in Cyprus, because the beforehand communicated challenge within the Atlantic Basin won’t to be served by Hoegh LNG. The extent of this enterprise improvement exercise is excessive, owing to the continued power transition, the place LNG replaces extra polluted oil and coal merchandise. That is triggering new LNG importers to maneuver forward with their plans to facilitate the import of pure fuel.

With that, I wish to flip to Web page 19 for the abstract, the place I wish to spotlight the next. For the quarter, no materials affect from the COVID-19 pandemic up to now, 100% availability of the fleet leading to steady working efficiency, and a stable protection ratio within the quarter, sturdy market fundamentals and at last, sturdy help from our mum or dad.

We’ll now open for questions from the viewers. With that, I wish to thank all people for dialing in and collaborating within the name. Thanks very a lot.

Questions and Solutions:

Operator

We’ll now start the question-and-answer session. [Operator Instructions] This primary query comes from Chris Wetherbee from Citigroup. Please go forward.

Christian WetherbeeCitigroup — Analyst

Hey, nice. Hey, then, thanks for taking the query. Perhaps we may begin with the Gallant, and if you happen to may give us an replace on what the potential alternatives are for employment there? So, I feel there’s a few potential alternatives taking place proper now. Are you able to simply give us a way of type of the place we stand and perhaps the place that may go? And likewise, perhaps with the timing is round probably getting one thing locked in there?

Sveinung J. S. StohleChief Govt Officer

Proper, proper. Okay, thanks for that query. So, as we simply talked about, at the moment, the Gallant is on an LNGC coming into constitution and can proceed on a brand new one with Trafigura ranging from March. That is for 12 months. After which, for the FSRU initiatives that we’re at the moment in both in a young or in negotiations, the timing for these — they really all have a start-up apart from H-Power in 2022, so subsequent 12 months. Gallant is obtainable in on two of those initiatives in the meanwhile. So, clearly, that is on prime of our listing. We do consider that we now have a powerful — there’s a sturdy pipeline of initiatives, since we now have a number of greater than we’ll really need. And clearly, the primary focus now can also be to safe the long-term contract for the Gallant, and that is the target for the subsequent few months.

Christian WetherbeeCitigroup — Analyst

Okay. Okay, that is useful. So one thing over the course of the subsequent couple of months we’d have some extra readability for the tip of the visitors 12 months deal?

Sveinung J. S. StohleChief Govt Officer

Yeah, right.

Christian WetherbeeCitigroup — Analyst

Okay. Okay, incredible. All proper, that is useful. I admire it. After which, perhaps one kind of conceptual query as you concentrate on this pipeline of potential vessels with contracts, clearly we’re type of working by way of a few of this tender course of proper now. What can be the setting that you’d must see to probably take into consideration a dropdown into the MLP? So, I do not know if it is kind of extra enticing financing alternative for one thing like that, however what are kind of the circumstances that you’d be searching for to type of take into consideration resuming the expansion profile of the corporate?

Sveinung J. S. StohleChief Govt Officer

Nicely, I imply first, by way of timing, clearly, the way in which we now have carried out this and we’ll proceed to do that is that the drop-downs will occur when the asset is on contract and in operation, not earlier than. And naturally, additionally the second level, which might be extra vital is, there must be the monetary circumstances accessible, each from the MLP aspect and the mum or dad aspect to be able to — for the numbers to work, so to talk. And with the pipeline that we now have, clearly we do see that the size of the contracts and in addition the anticipated revenues from the contracts, that is basic for doing a transaction. And that’s one thing that we are going to consider very intently when the contracts have been accomplished and the belongings have been confirmed on the contracts through the course of this 12 months.

Christian WetherbeeCitigroup — Analyst

Okay. I feel, yeah, I used to be getting type of towards that monetary circumstances was perhaps kind of the center of the questions. So, occupied with that, perhaps a bit extra particularly.

Sveinung J. S. StohleChief Govt Officer

Yeah, OK.

Christian WetherbeeCitigroup — Analyst

Is the present setting one thing that may be supportive if the opposite items have been to line up, is the present setting as you see it from a financing perspective enticing sufficient to have the ability to kind of execute on a deal? Do we have to see the inventory value at a greater place? I simply wish to type of get a way of perhaps a number of the parameters on the monetary circumstances that you simply’d must see?

Sveinung J. S. StohleChief Govt Officer

Harvad, you wish to reply it?

Havard FuruChief Monetary Officer

Yeah, I feel essentially, the share value of the MLP would most likely must be at the very least at this degree or ideally a contact increased than present. On the similar time, after all, that you must have a depth of the market that’s there to select up a transaction like this. And naturally, we’ve not seen these transactions within the MLP marketplace for fairly some time. So, as a result of there’s a query mark to that after we get there. So, it is a bit bit untimely, but it surely’s all the time one thing that’s — that we have to contemplate fastidiously after we sit [Phonetic].

Christian WetherbeeCitigroup — Analyst

Okay. Yeah.

Havard FuruChief Monetary Officer

I imply, that we comply with very intently after all. However we now have the settlement between the mum or dad and the MLP and that we totally stand behind on each side. So, we’ll cope with that after we get to that crossroad.

Christian WetherbeeCitigroup — Analyst

Okay. Yeah, that is it given the truth that we’ve not seen these sorts of transactions, however perhaps a probably kind of firming market, type of curious to see concerning the timing, however that is tremendous useful. I admire your time. Thanks very a lot.

Sveinung J. S. StohleChief Govt Officer

Thanks.

Operator

Our subsequent query comes from Ben Nolan from Stifel. Please go forward.

Benjamin NolanStifel — Analyst

Yeah, thanks. So, I’ve two questions. First, perhaps simply to kind of comply with on to what Chris was simply asking about. As you concentrate on kind of, if for example, the capital have been accessible and what not. How do you concentrate on the suitable a number of of EBITDA to pay for a hard and fast contract asset like would you be taking a look at right here relative to perhaps the way you considered that previously, any adjustments or variations there?

Sveinung J. S. StohleChief Govt Officer

It is once more a bit bit untimely to have a agency view on that. I feel we might be trying on the a number of stuff they’ve seen prior to now as a place to begin. after which additionally, after all, look into different valuation metrics for potential dropdown transactions. However, I feel the historic multiples will probably be at the very least as to the start line.

Benjamin NolanStifel — Analyst

Okay. After which, effectively — forgive me, I assume I’ve two, however kind of associated, however there — you’ve got talked about within the launch that you simply’re within the means of refinancing the Lampung later within the 12 months. Is the thought there to easily refinance the prevailing stability? Or would you anticipate perhaps having the ability to get a bit money out of that or conversely paying a bit bit extra principal onto it?

Sveinung J. S. StohleChief Govt Officer

Sure. So we — as you identified, we’re in discussions with the banks on this. It seems like we can upsize the power a bit. It is too early to get into the small print of that. So now, that’s our purpose to try this. So, we are going to after all get again on the small print as we proceed.

Benjamin NolanStifel — Analyst

Proper, OK. So, after which this kind of brings it full circle a bit bit. The — hopefully, or it should see, but when you’ll be able to get some money out of that after which you could have the proceeds from the ATM that you simply — sounds such as you’ve been energetic with. Any sense as to kind of what’s your accessible liquidity for issues like potential dropdowns from an fairness perspective? How a lot, as a result of the query is how a lot firepower do you suppose you could have while not having to entry the capital market?

Sveinung J. S. StohleChief Govt Officer

Nicely, I feel basically we would want to finance essentially the most a part of the transaction value with addressing new fairness.

Benjamin NolanStifel — Analyst

Okay.

Sveinung J. S. StohleChief Govt Officer

Some would possibly from the sources, however the lion’s share must come from elevating new fairness.

Benjamin NolanStifel — Analyst

Proper, OK.

Havard FuruChief Monetary Officer

Yeah, I feel so as to add to that. I feel additionally as we have carried out earlier than, Ben. I imply, we now have usually cut up transaction at the very least in two, proper? So, I feel after we take a look at this, and clearly that’s one thing that we might most likely be trying to do for any future transaction additionally.

Benjamin NolanStifel — Analyst

Proper, and that was kind of my pondering as you do not have to do the entire thing, however if you happen to — you could possibly even do 1 / 4 of it or successfully simply buying money flows, proper? So — all proper, effectively, that is very useful. Thanks.

Sveinung J. S. StohleChief Govt Officer

Thanks.

Operator

[Operator Instructions] Our subsequent query comes from Ken Hoexter from Financial institution of America. Please go forward.

Ken HoexterFinancial institution of America — Analyst

Hey, Sveinung and Havard. Simply — you talked about within the launch and in your dialogue the investments you make in hydrogen and taking a look at ammonia potential. I presume that’s not on the mum or dad degree, and also you’re ready to see how that flows? Or is that going to be on the companion degree?

Sveinung J. S. StohleChief Govt Officer

No, the initiative in the meanwhile is on the mum or dad degree as a result of it is principally in the meanwhile enterprise improvement and technical improvement, specializing in primarily two areas, inexperienced hydrogen and ammonia, and the infrastructure wanted to be able to deliver that to market, the place we even have a case the place we’re taking a look at utilizing our current FSRUs for that function, which might imply that we may retailer ammonia, convert it to hydrogen on the FSRU, and principally mix the hydrogen into the regasified fuel stream and ship it to shore with that.

That is one thing that’s already being carried out. I imply, the blending of hydrogen into current pipeline networks is already being carried out in Europe on a really small scale, similar in Australia. So, that after all can be when we now have proved and examined that answer, that could possibly be utilized to all of our current FSRUs. So, that is only one instance. We’ve a number of different initiatives that goes with that. And clearly, we will probably be taking a look at making use of that — all these options throughout the fleet, which after all would additionally contain the Partnership.

Ken HoexterFinancial institution of America — Analyst

After which, simply follow-up can be, simply — your ideas on in a rising rate of interest interval, which we appear to be coming into. What are your ideas? Is that one thing you could have — you are feeling the Partnership must counter with a rising distribution to maintain ranges? Perhaps simply your normal ideas on rising rate of interest setting? Thanks.

Sveinung J. S. StohleChief Govt Officer

So, I feel to begin with, on that time, in relation to the — managing the curiosity prices of the Partnership, what we’re — following the hedging coverage to hedge rates of interest at the very least until the tip of the prevailing debt services, and we now have locked-in rates of interest for fairly some interval going ahead. And we wish to do this additionally after we refinance the Lampung facility this 12 months. So on that aspect, we’re attempting to lock within the rate of interest publicity on the fee aspect. Though in relation to the distribution, there isn’t a plan to make adjustments to that in response to adjustments within the rate of interest setting.

Ken HoexterFinancial institution of America — Analyst

Nice. Recognize the fast ideas. Thanks, guys.

Sveinung J. S. StohleChief Govt Officer

Thanks.

Operator

Our subsequent query comes from Ken Khan [Phonetic] from Cooperative Holding Company. Please go forward.

Ken KhanCo-operative Holding Company — Analyst

Thanks a lot, gents. Quite simple query. Is there something that you’d consider will enhance the distributions being made throughout the subsequent 12 months or two, by way of distribution to the holders of the items?

Sveinung J. S. StohleChief Govt Officer

Havard, do you wish to reply?

Havard FuruChief Monetary Officer

No, there’s — we do not see any causes for altering — whether or not that is up or down.

Ken KhanCo-operative Holding Company — Analyst

All proper, thanks.

Operator

This concludes our question-and-answer session. I wish to flip the convention again over to Sveinung Stohle for closing remarks. Please go forward.

Sveinung J. S. StohleChief Govt Officer

Sure. Thanks, Emily. So, thanks very a lot all people for calling in. We admire your consideration and we sit up for having you on the decision once more on the subsequent quarter. Thanks very a lot and goodbye.

Operator

[Operator Closing Remarks]

Period: minutes

Name individuals:

Sveinung J. S. StohleChief Govt Officer

Havard FuruChief Monetary Officer

Christian WetherbeeCitigroup — Analyst

Benjamin NolanStifel — Analyst

Ken HoexterFinancial institution of America — Analyst

Ken KhanCo-operative Holding Company — Analyst

Extra HMLP evaluation

All earnings name transcripts

Hoegh LNG Companions LP (HMLP) This autumn 2020 Earnings Name Transcript

This text represents the opinion of the author, who could disagree with the “official” advice place of a Motley Idiot premium advisory service. We’re motley! Questioning an investing thesis — even one in all our personal — helps us all suppose critically about investing and make choices that assist us develop into smarter, happier, and richer.

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