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Höegh LNG – The floating LNG services provider FSRU – The fast track solution to energy independence By Sveinung J.S. Støhle, CEO and President, Höegh LNG 23 April 2015
Höegh LNG – The floating LNG services provider
FSRU – The fast track solution to energy
independence
By Sveinung J.S. Støhle, CEO and President, Höegh LNG
23 April 2015
Forward looking statements
2
This presentation contains forward-looking statements which reflects management’s current expectations, estimates and projections about
its operations. All statements, other than statements of historical facts, that address activities and events that will, should, could or may
occur in the future are forward-looking statements. Words such as “may,” “could,” “should,” “would,” “expect,” “plan,” “anticipate,” “intend,”
“forecast,” “believe,” “estimate,” “predict,” “propose,” “potential,” “continue” or the negative of these terms and similar expressions are
intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to
certain risks, uncertainties and other factors, some of which are beyond our control and are difficult to predict. Therefore, actual outcomes
and results may differ materially from what is expressed or forecasted in such forward-looking statements. You should not place undue
reliance on these forward-looking statements, which speak only as of the date of this presentation. Unless legally required, Höegh LNG
undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or
otherwise.
Among the important factors that could cause actual results to differ materially from those in the forward-looking statements are: changes
in LNG transportation and regasification market trends; changes in the supply and demand for LNG; changes in trading patterns; changes
in applicable maintenance and regulatory standards; political events affecting production and consumption of LNG and Höegh LNG’s
ability to operate and control its vessels; change in the financial stability of clients of the Company; Höegh LNG’s ability to win upcoming
tenders and securing employment for the FSRUs on order; changes in Höegh LNG’s ability to convert LNG carriers to FSRUs including
the cost and time of completing such conversions; changes in Höegh LNG’s ability to complete and deliver projects awarded; increases in
the Company’s cost base; changes in the availability of vessels to purchase; failure by yards to comply with delivery schedules; changes
to vessels’ useful lives; changes in the ability of Höegh LNG to obtain additional financing, in particular, currently, in connection with the
turmoil in financial markets; the success in achieving commercial success for the projects being developed by the Company; changes in
applicable regulations and laws; and unpredictable or unknown factors herein also could have material adverse effects on forward-looking
statements.
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Introduction: The LNG Chain
The LNG market
Energy Independence – The Klaipeda FSRU
Summary
Agenda
Höegh LNG in brief
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Traditional landbased facilities require:
Large onshore area
Huge capital commitment
Depreciation over 30 years +
Höegh LNG has developed floating LNG solutions that replace parts of the
traditional value chain – by offering more competitive and flexible solutions
for the liquefaction and receiving terminals
The traditional LNG value chain
Gas
fields Market
End-user
Trading
LNG carrier
Storage/regas
terminal
Liquefaction
terminal
5
Floating LNG Import Terminals (FSRUs) – The mechanics
An FSRU is permanently moored close
to the market
An LNG carrier approaches the FSRU
and the LNG is transferred to the
FSRU
The FSRU continuously regasifies the
LNG and sends high-pressure natural
gas to shore
1
3
2
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Introduction: The LNG Chain
The LNG market
Energy Independence – The Klaipeda FSRU
Summary
Agenda
Höegh LNG in brief
7
Provider of floating LNG infrastructure services
Provider of floating LNG infrastructure services
Long term contracts generating stable and predictable cash flows
9 vessels/FSRUs in operation – 2 FSRUs under construction
Höegh LNG Holdings Ltd. listed at Oslo Stock Exchange with market cap of USD 830 million1
Höegh LNG Partners LP (MLP) listed at NYSE with market cap of USD 550 million1
(1) 21 April 2015
Transportation Liquefaction Regasification /
Infrastructure Production
Pipeline
Delivery
FLNG LNG carriers FSRU
Low cost barge solution 4 units 5+2 units
Höegh LNG’s part in the LNG value chain
1 2 3
8
Always one FSRU without contract under construction
No spot exposure, only long term contracts
Only newbuilt assets with latest technology
The most modern and efficient FSRU fleet in the market
In-house design and project execution teams
Integrated FSRU solutions
Höegh LNG’s FSRU business model
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One of only three established FSRU players
Höegh LNG has 25% of the FSRUs in operation and under construction
world wide
40% of the second generation FSRUs
The most modern and efficient FSRU fleet in the market
The FSRU market offers attractive economic terms
Long term contracts; 5-20 years
Project returns of about 11-12%, EBITDA around USD 40 million
Barriers to enter the market
Operational expertise
Technical expertise
Availability of FSRU to meet project start-up
Höegh LNG has the leading position in the FSRU market
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Höegh LNG portfolio overview
HLNG average remaining contract length = 10 years
HMLP average remaining contract length = 17 years
Contracted Extension option Under construction Spot market
Unit Type Built Charterer
HMLP drop-
down
candidate? 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033
Höegh LNG Holdings Ltd
Libra LNGC 1979 Gas Natural No
Arctic Princess LNGC 2006 Statoil Maybe
Arctic Lady LNGC 2006 Total Maybe
Independence FSRU 2014 Klaipedos Nafta Yes
Höegh Gallant FSRU 2014 Egas Yes
2551 FSRU Q2 2015 SPEC Yes
2552 FSRU 1Q 2017 Yes
Höegh LNG Partners LP
GDF Suez Neptune FSRU 2009 GDF Suez
GDF Suez Cape Ann FSRU 2010 GDF Suez
PGN FSRU Lampung FSRU 2014 PGN
The Company has grown considerably over the last three years…
11 * JVs accounted for by the proportionate method
0
500
1 000
1 500
2 000
2011 2012 2013 2014
Million USD Balance sheet*
-
200
400
600
800
1 000
2011 2013 2015 2017 2019 2021 2023
USD million FLNG (assumed ordered)
FSRU#8-13 (assumed ordered)
FSRU#7
FSRU#3-6
Pre-IPO fleet
… And has secured and diversified growth ahead
Potential development T/C income
2013-2023 CAGR 20%
Chart assumptions:
FSRUs (#7-13) generating USD 40 million of EBITDA each
FLNG with 1.0 million tons per year production capacity
Contracted income USD 300
million p.a.
Growing by one FSRU per year
adds another USD 300 million
to income by 2023
One FLNG (1mtpa) could add
USD 150-200 million to income
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Höegh LNG Partners is the primary vehicle for raising new equity capital
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HLNG
HMLP
Newbuilding
orders
Securing
employment
Intermediate
trading
Acquires
contracted asset
Operation of
assets
Re-employment of
assets
HLNG
HMLP
Drop-down
of assets
Lump sum
Drop down
proceeds
$ $ $
Quarterly
Dividends
Quarterly
IDRs
Capital market transaction
Leif Höegh
& Co. Ltd.
44%
58%
(HLNG)
Public
56% Business model Fleet Relationship
Public
42%
3 LNGCs
2+2 FSRUs
FLNG barge
design
3 FSRUs
Proven capital market access with USD 1.6 billion raised since 2011
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USD 550 million USD 972 million
Equity Unsecured Bond debt Secured Bank debt
Total
amount
raised
USD 130 million
IPO HLNG
USD 130 million
Tran-
sactions
Relation-
ships
USD 200 million
Follow-on HLNG
USD 220 million
IPO HMLP
USD 250 million
Independence
USD 310 million
Lampung FSRU/Mooring
USD 412 million
Höegh Gallant and HN2552
USD 130 million
General corporate purposes
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Plenty of FSRU projects in the pipeline
Existing
Under construction / awarded
Potential
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Introduction: The LNG Chain
The LNG market
Energy Independence – The Klaipeda FSRU
Summary
Agenda
Höegh LNG in brief
The largest LNG exporters
Qatar has by far been the largest LNG exporter the last ten years
In the U.S. there has been made FID on more than 50% of the Qatari
capacity and more projects are expected to make FID over the next
couple of years..
17 Source: International Gas Union, World LNG Report 2011
LNG importers 2014
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61% 14%
14%
9 % 2 %
Japan, South Korea and China
Other Asia
Europe
Americas
Middle East
Lower crude oil prices lead to lower LNG prices… (Hell, probably not!)
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In Asia long term LNG contracts are typically sold at around 85% discount to crude oil parity
On Continental Europe the majority of long term LNG contracts are linked to oil – on average sold at 60-65%
discount to crude oil parity
S- curve is an important element in long term LNG contract, which is limiting price fluctuations
LNG prices under long term contracts have gone down but not to the same extent as the oil price
70% of the LNG world wide is currently sold under long term contracts linked to oil….
… The remainder is linked to natural gas hubs and/or sold spot
Spot prices have dropped significantly as a result of the drop in oil price
60% y/y in Asia
30% y/y in Europe
U.S. export starting later this year will introduce a new pricing element in the market; HH based pricing that will
lead to increased competition among producers and prices converging
…lower LNG prices lead to increased demand for LNG...
20 Source: Petronet LNG
USD/MMBtu 0
10
20
30
40
50
60
19-20 16-17 13-14 11-12
MT
PA
Lower LNG prices makes LNG available to price sensitive and new clients/markets
India is a good example; Petronet expects LNG demand to increase up to 300% at current LNG
price level
…and increased demand for LNG will lead to higher demand for FSRUs
21 (Source: Shell)
Production Demand
Potential FSRU clients
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Why have FSRUs become the preferred solution for new LNG importers?
FSRU Landbased LNG import terminal
Compared to landbased LNG terminals FSRUs:
Take half the time to build
Are built at half the cost
Have the flexibility to be moved to another location or trade as an LNG carrier
Who is the typical FSRU customer?
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The majority of the successful FSRU projects are initiated by governments
or state owned entities, due to the strategic importance such infrastructure
represents to the country
New FSRU projects are mainly located in emerging markets and have one
or more of the following drivers:
Need to replace expensive liquid fuels with a cheaper alternative
Need for supply diversification / energy independence
Limited access to pipeline gas
Seasonal loads
But lower oil/gas price will stop all land based LNG export projects still in
development phase
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HLNG barge based FLNG
Source: IHS Cera
High cost LNG export projects (1500 USD/ton+) will be delayed and redesigned to reduce
project cost
Long term prospects for FLNG are still positive due to lower capex, smaller volumes to be
sold, lower unit cost and generally higher flexibility compared to land based export projects
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Introduction: The LNG Chain
The LNG market
Energy Independence – The Klaipeda FSRU
Summary
Agenda
Höegh LNG in brief
Klaipeda FSRU
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Lithuania had one supplier of natural gas; Gazprom
Russian pipeline gas supplied through Latvia and Belarus
One supplier paid the second highest price for natural gas in Europe
President decided to diversify Lithuania’s supply sources
Energy independence
Reduce cost of energy
2011: Initiated the process
2012: Signed 10 years contract
2014: Commenced operation
Klaipeda FSRU – Commercial basis
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The Independence can cover more than Lithuania’s gas consumption on an
annual basis
Access to world market for natural gas in the form of LNG
LNG is stored and regasified on Independence and sent into the Lithuanian
natural gas grid through a 20 km subsea and onshore pipeline
Klaipeda FSRU – a Lithuanian success story
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Lithuania is no longer dependent on one supplier = energy security
Has bought LNG from Statoil/Norway and the U.S. so far
Klaipeda FSRU has given Lithuania a bargaining position towards Gazprom,
resulting in significant discount when renewing the supply contract in 2014
Gives Lithuania ability to distribute LNG in smaller cargoes to local markets
discretely from Independence
Gives Lithuania ability to supply natural gas to neighbouring countries
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Introduction: The LNG Chain
The LNG market
Energy Independence – The Klaipeda FSRU
Summary
Agenda
Höegh LNG in brief
Summary
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HLNG is the market leader in the FSRU segment on a world-wide basis
The value of the company has increased fourfold since listing in Oslo in 2011
The LNG market is projected to grow 5-6% per year over the next 10 years
FSRUs have over the last 3-4 years become the preferred LNG import solution
for new markets due to low cost, short schedule and increased flexibility
compared to a land based terminal
Lower LNG prices increase demand for LNG increased demand for LNG
import infrastructure increased demand for FSRUs
In Europe, several countries are looking at the political and commercial success
Lithuania has had with their Klaipeda FSRU project supplied by Höegh LNG
Second Quarter 2014
Presentation of financial results
22 August 2014
Second Quarter 2014
Presentation of financial results
22 August 2014
Corporate presentation
August 2014
Thank you!
Email: [email protected]
Thank you!
