Höegh LNG – The floating LNG services provider
Capital Markets Day 15 January 2013
Forward looking statements
3
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.
4
Agenda
Time Session Speakers
14:00 Introduction Arild Jæger, Investor Relations
14:05 Welcome Leif O. Høegh, Deputy Chairman
14:15 Status and perspectives Sveinung J.S. Støhle, President and CEO
14:40 LNG market overview Per-Christian W. Fett, Director, Fearnley LNG
15:10 FSRU business Vegard Hellekleiv, Senior Vice President
15:40 Break
16:00 LNG shipping Thomas Thorkildsen, Head of Commercial Management
16:30 FLNG Øivin Iversen, SVP, Höegh FLNG Ltd.
17:00 Financing strategy Steffen Føreid, Chief Financial Officer
17:20 Closing remarks Sveinung J.S. Støhle, President and CEO
17:30 Buffet and drinks
5
Leif O. Høegh
Deputy Chairman and
Main Shareholder
Representative
Welcome
6
Sveinung Støhle
President & CEO
Status and perspectives
7
Why invest in Höegh LNG?
LNG market growing by 6-7% per year
Very attractive rates of return of 11-12% on total capital in the FSRU segment
Unique market position as one of only three operators in FSRU market
Access to all main sources of capital to fund the Company’s growth strategy
Contracted EBITDA to increase fourfold by 2015
Fully funded for current capital programme
Solid management team with proven experience from natural gas and LNG markets
8
(Source: ExxonMobil, 2013, The Outlook for Energy: A View to 2040, based on Smil, Energy Transitions (1800-1960))
Natural gas : The fuel for the future
23%
32%
19%
9
Business model Höegh LNG provides floating LNG infrastructure services under long-term contracts. The Company owns and operates FSRUs and LNG carriers Vision To be a market leader in floating LNG Services. Strategy Secure long-term contracts with strong
counterparties Focus on new FSRUs built at leading LNG shipyards Keep one FSRU open for new projects and target 1-2
new FSRUs per year post 2015 Spin-off FLNG business Establish US listed MLP to access competitive equity
funding Prioritise allocation of capital to FSRU investments
Business model, vision and strategy
10
1973 Delivery of the first Moss type LNG carrier, "Norman Lady"
2006 Delivery of "Arctic Princess" and "Arctic Lady"
Höegh LNG Ltd. established
2009/10 Delivery of FSRUs; "GDF Suez Neptune" and "GDF Suez Cape Ann"
2011 Ordered two FSRUs at Hyundai Heavy Industries
IPO - Raised more than USD 400 million in new equity and debt
Purchase of "LNG Libra"
2012 FSRU agreements in Indonesia and Lithuania, preferred bidder in Chile
Exercised options for two additional new FSRUs
Exercised option for 50% of "STX Frontier"
Established Höegh FLNG Ltd.
Sold Port Meridian deepwater port project
Raised nearly USD 600 million in new equity and debt
Key milestones
Business overview
Fleet and operation Höegh FLNG Ltd.
6 LNG carriers in operation
Option exercised for 50% of 2010 built vessel
Mainly long-term charters with oil and gas majors
Modern fleet with 2 FSRUs in operation and 4 new units on order
Options for additional units
Long-term charters with blue chip / state owned counterparties
Own FLNG2 design
Performed paid field specific studies
Business transferred into Höegh FLNG Ltd., to be capitalised on a stand-alone basis
FSRU1
11
1) FSRU: A floating LNG import terminal moored offshore or to a jetty allowing energy companies to store and regasify LNG close to markets with limited impact on land. A highly cost competitive solution to building large, shore based storage and regasification facilities. Can be operated as a floating LNG import terminal receiving LNG from conventional LNG carriers by way of ship-to-ship transfers, or as a conventional trading ship transporting and regasifying its own cargo 2) FLNG: Enables energy companies to monetise gas fields that are located far from existing infrastructure (pipelines, gas processing, onshore LNG export facilities, etc.) or where the cost of installation of on-shore infrastructure is not competitive. It also enables LNG projects to go ahead more quickly as an FLNG will be constructed in a controlled environment at the shipyard and then floated to the offshore gas field
Design In-house technical competence and project development expertise Build World leading LNG shipyards Experienced site team Charter Focus on long-term contracts Solid counterparties Operate In-house ship management with 40 years of safe operations Finance Access to all capital markets Good relationship with banks
12
Competitive advantages
In 2012, Höegh LNG secured three long-term FSRU contracts; Why?
Continued strong demand growth for LNG
13
Demand for FSRU services driven by incremental demand for natural gas to fuel power production Fuel switch for existing plants
New combined-cycle gas turbines
Natural gas projected to be the fastest growing major energy source globally
LNG production in 2011 was 242 million tonnes - expected to reach 330 million tonnes p.a. by 2017
In main markets, such as Japan, Korea and Taiwan, LNG covers close to 100% of demand for natural gas
Source: Wood Mackenzie, BP Energy Outlook 2030
Main focus markets
Around 30 FSRU regasification projects in pipeline
14
Existing Under construction / awarded Potential
15
Key growth considerations
LNG will be the fastest growing fossil fuel driving the demand for Höegh LNG’s services
FSRU segment is main focus for growth
Proven ability to raise debt and equity for further expansion
Develop Höegh FLNG as a stand alone company together with new investors
Preparing for MLP as new funding source
16
LNG market overview
Per-Christian W. Fett
Director, Fearnley LNG
LNG LNG Market Update
Høegh LNG CMD January 2013
Fearnley LNG
STRICTLY PRIVATE & CONFIDENTIAL
Disclosures & Disclaimer
Fearnley and the analyst accept no responsibility and expressively disclaims any and all liabilities for any and all losses related to investments caused by or motivated by research reports or investment recommendations from Fearnley. The information in this report has been obtained from public sources believed to be reliable but we do not represent that such information is accurate or complete and it should not be relied upon as such. Any person receiving a research report or investment recommendation from Fearnley is deemed to have accepted this disclaimer. The disclaimer shall apply even if a research report or investment recommendation is shown to be erroneous or incomplete or based upon incorrect or incomplete facts, interpretations or assessments or assumptions by Fearnley, and irrespective of whether Fearnley or any person related to Fearnley can be blamed for the incident. This research report and investment recommendation was not presented to the issuer before dissemination. The analyst has assisted the corporate department related to the issuing companies the previous 12 months. For relevant definitions, methods, risks, disclosures of potential conflicts of interests etc. and disclaimers (including U.S. specific disclaimers) please see www.fearnleysecurities.com. All research reports and investment recommendations should be reviewed in conjunction with the information therein.
14-Jan-13 www.fearnleysecurities.no 18
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Contents
www.fearnleys.com
1. Fearnley LNG
2. Market, LNG Rates & Values
3. LNG Fleet and Order book
4. LNG Vessel & FSRU Supply / Demand
5. Forecasting
Fearnley LNG
14-Jan-13 20
LNG in the Astrup Fearnley Organisation
www.fearnleys.com
Astrup Fearnley AS
Fearnleys Asia Singapore Pte Ltd Singapore
Rodskog Shipbrokers Ltd Hong Kong
Fearnleys AS Oslo
Fearnley Offshore AS Oslo
Fearnley Offshore Supply AS Oslo
Fearnley Finans Eiendom AS Oslo
Fearnley Finans Shipping AS Oslo
Fearnleys Rodskog Shanghai
Nor-Freight Co. Ltd. Poland
Fearnleys Venezuela
Fearngas Pte Ltd Singapore
Fearnleys (Thailand) Ltd. Bangkok
Fearnleys Shipbr. Priv. Ltd Mumbai
Libra Fearnley Energy S.A.S. Paris
Libra Fearnley Energy Ltd. (UK) London
Libra Fearnley Energy Fearnoil Inc Houston
Fearngas Pte Ltd. Singapore
P.T.Fearnleys Indonesia Jakarta
Fearnleys Japan Tokyo
Fearnleys Beijing Beijing
Grifone Stockholm
Fearnley Offshore LLC Houston
Fearnley Offshore Pte Ltd Singapore
Fearnley Offshore Supply Pte Ltd Singapore
Fearnley Finans Management AS Oslo
Libra Fearnley Energy AS Oslo
Fearnley Fonds ASA Oslo
Fearnleys Korea Ltd Seoul
Fearnleys LNG Houston
Fearnley Consultants AS Oslo
World wide: 350+ employees
• Norway 200+
• Shipping 80+ (Norway)
Fearnley LNG
Fearnley LNG
LNG Procurement/
Shipping/ Consultancy
Oslo Houston Tokyo Bejing Singapore
LNG Vessel Contracting
Oslo Seoul Singapore
Organisation Chart
21 www.fearnleys.com Private& Confidential
LNG – Who, When, Where, What, Why,
Market Fundamentals
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• LNG is a niche in the global natural gas market
• Main reason for liquefying gas is to store and transport it by sea ….to a better paying market
• Nat Gas is a clean burning and competitive energy source – especially for power generation
• Highest fossile fuel growth ratios
• Increased global trade
• LNG is being commoditized
Different shades of gold for natural gas* Natural gas is the only fossil fuel for which global demand grows in all scenarios, showing that it fares well under different policy conditions; but the outlook varies by region. Demand growth in China, India and the Middle East is strong: active policy support and regulatory reforms push China’s consumption up from around 130 billion cubic metres (bcm) in 2011 to 545 bcm in 2035. In the United States, low prices and abundant supply see gas overtake oil around 2030 to become the largest fuel in the energy mix. Europe takes almost a decade to get back to 2010 levels of gas demand: the growth in Japan is similarly limited by higher gas prices and a policy emphasis on renewables and energy efficiency.
*From IEA Global Energy Outlook 2012 (published Nov 2012)
LNG
Recent Headlines
14-Jan-13 www.fearnleysecurities.no 23
• Japan 2012 imports at record high
• South Korea 2012 imports also at new record at ~35 mt or +8% yoy
• …but Korea to restart nuclear power plants soon
• New all time high Beijing air polution index of over 500
• Japan new PM also to restart a few nukes in 2013
• ENI and Anadarko to cooperate on Mozambique + enough gas for 12 trains/50+ mt LNG production
14-Jan-13 24
BP Forecast
www.fearnleys.com
14-Jan-13 25
Contents
www.fearnleys.com
1. Fearnley LNG
2. LNG Rates & Values
3. LNG Fleet and Order book
4. LNG Vessel & FSRU Supply / Demand
5. Forecasting
LNG Market Overview
14-Jan-13 26
Commoditization of LNG - LNG Trade Flow Developments
www.fearnleys.com
Regional market - Only a handful of players – ’the LNG Club’ – mainly big oil companies and utilites
Global market – banks, utilities, trading houses, projects, IOCs, power companies, etc…
The World Fleet
Commoditization of LNG - snapshot of the LNG world
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LNG Vessel Supply / Demand
Japan – World’s largest LNG importer
28
Japan is the world’s largest LNG importer.
LNG imports up over 12% in 2012
Source: FEFC, METI
All 54 reactors shut in June, two restarted in July. 2-4 to start in 2013
LNG Vessel Supply / Demand
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• Annual LNG import growth rates of 20-
30% • Target for natural gas of 8.3% share of
primary energy mix in 2015 – up from 3.8% in 2008
– Total demand to triple from about 85 bcm in 2008 to 260 bcm in 2015
• Priority sectors are residential gas use and power generation
• Government policies for expanding gas distribution – only 10% of China have access to natural gas (world average 40%)
• Continues to install LNG regasification terminals (both floating and land based) and expansion of pipelines (from Russia and Caspian region)
China Imports only ~20% of Japan – but growing…
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Monthly imports
Annual imports
LNG Market Overview
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Spot - History
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LNG Spot Market
Arbitrage Trading
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LNG Fleet and Order book
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• Strong appetite from Korean Yards for new orders • Currency plays a big role for LNG ships - Japanese yards struggle with a strong YEN • Chinese yards get ‘China’ orders – not interested/competitive for export orders • LNG Prices have remained relatively stable during this order boom – Now there is a somewhat soft undertone
LNG Newbuild Prices
www.fearnleys.com
No new orders
First speculative orders placed
(GasLog, Golar, MaranGas)
98 new orders
Limited new orders – mainly options being exercised
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Contents
www.fearnleys.com
1. Fearnley LNG
2. LNG Rates & Values
3. LNG Fleet and Order book
4. LNG Vessel & FSRU Supply / Demand
5. Forecasting
LNG Fleet and Order book
14-Jan-13 34
• LNG order book now at 98 units (inc. FSRU/FLNG), up from only 6 at start 2011!
• DFDE appears to be propulsion of choice – FIRST MEGI ordered!
• Size also changing and new orders are for 160-175,000 cbm, up from 145-150,000 cbm
• Idling vintage vessels have been reactivated and added to the “active fleet” in recent months
World LNG Fleet by Year of Build – Jan 2013
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40 vessel are 25 years+ replacement demand developing!
115% inc. 26% inc.
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Contents
www.fearnleys.com
1. Fearnley LNG
2. LNG Rates & Values
3. LNG Fleet and Order book
4. LNG Vessel & FSRU Supply / Demand
5. Forecasting
LNG Vessel Supply / Demand
US/Canada LNG terminals with export projects
Source: Cheniere, Fearnley LNG
36 Source: Cheniere
Export Project Partners Possible Buyers Quantity
Company MTPA
Sabine Pass, LA Cheniere, JP Morgan BG, Gas Natural, KOGAS, GAIL, Total 16
Freeport, TX Freeport LNG, ConocoPhi l l ips Osaka Gas, Chubu Electric 9
Lake Charles, LA BG and SUG BG 15
Cove Point, MD Dominion Tokyo Gas, Mitsubishi 7,8
Jordan Cove, OR Jordan Cove Energy 9
Cameron, LA Sempra Mitsubishi Mitsui 12
Freeport exp, TX Freeport LNG, ConocoPhi l l ips 10
Port Lavaca, TX Excelerate 10
Corpus Christi LNG Cheniere 13,5
Gulf Coast LNG, TX Michael Smith 21
Pascagoula, MI Gulf LNG 11,5
Oregon LNG, OR LNG Dev. Comp, Warrenton 9,4
Elba Island, GA El Paso, Southern LNG 3,75
Total USA 148
LNG Canada Shel l , KOGAS, Mitsubishi , P.China PetroChina, KOGAS 12
Kitimat LNG Apache, Chevron 10
Douglas Channel LNG Partners , Golar LNG 0,7
BC LNG Partners Petronas , Progress Petronas 0,75
Prince Rupert BG, Spectra Energy BG 15
West Coast BC Nexen, Inpex, JGC Inpex TBA
West Coast BC Imperia l Oi l , Exxon TBA
Total Canada 38,45
• ~ 150 MTPA in planned US export projects • ~ 40 MTPA in planned Canadian export projects • Shipping intensive projects
Production increases
Expected LNG growth backed by committed liquefaction Projects
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• New wave of liquefaction projects in Australia mainly
• Large projects in Russia, Mozambique and Tanzania + US exports expected to boost numbers above from 2017 onwards
11 % 12 % 9 % 7 % 13 % 19 % 5 % 3 % 1 % 4 % 2 % 9 % 17 % 11 %
FSRU Market
Brokers General Notes on FSRU Projects
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• FSRU’s are:
– Accepted, popular and serve their purpose
– Have changed country/regions energy policies
– Fast track
– Competitive
– Strategic
• Conservative customers
• Tender process
• Experience is vital
• Awards are based on proposed solutions
• Fearnleys count 25+ FSRU projects and expect some 3-5 awards next 6 months
Green: Existing and planned export locations Red: Existing and planned import projects
FSRU Market
World FSRU Players + Fleet
14-Jan-13 www.fearnleysecurities.no 39
Exce le ra te De livery Size (CBM) Name T ype Builder Owner Charte re r1 jan.05 138 060 Excelsior LNGRV Daewoo HI Excelerate/Teekay LNG Petrobras2 mai.05 138 120 Excellence LNGRV Daewoo HI G. Kaiser FF Ltd/Excelerate Energy Israel FSRU3 okt.06 138 074 Excelerate LNGRV Daewoo HI G. Kaiser FF Ltd/Exmar Excelerate Energy LLP4 mar.08 150 981 Explorer LNGRV Daewoo HI Excelerate 50%/Exmar 50% Excelerate Energy LLP5 apr.09 150 900 Express LNGRV Daewoo HI Excelerate 50%/Exmar 50% Bahia Blanca FSRU6 sep.09 150 900 Exquisite LNGRV Daewoo HI Excelerate 100% Petrobras7 nov.09 150 900 Expedient LNGRV Daewoo HI Excelerate 100% Mina Al Ahmadi?8 jun.10 150 900 Exemplar LNGRV Daewoo HI Excelerate 100% GNL Escobar
NB may-14 173 400 FSRU Daewoo HI Excelerate Petrobras VT3
Hoegh LNG Delivery Size (CBM) Name T ype Builder Owner Charte re r1 okt.09 145 000 GdF Suez Neptun LNGRV Samsung Høegh LNG / Mitsui OSK Suez2 mai.10 145 000 Gdf Suez Cape Ann LNGRV Samsung Høegh LNG/ Mitsui OSK Suez
NB feb.14 170 000 Hoegh TBN FSRU Hyundai Heavy Høegh LNG LithuaniaNB apr.14 170 000 Hoegh TBN FSRU Hyundai Heavy Høegh LNG IndionesiaNB jun.14 170 000 Hoegh TBN FSRU Hyundai Heavy Høegh LNG ChileNB apr.15 170 000 Hoegh TBN FSRU Hyundai Heavy Høegh LNG
GOLAR Delivery Size (CBM) Name T ype Builder Owner Charte re r1 mai.04 138 000 Golar Winter FSRU Daewoo HI Golar LNG Petrobras2 sep.81 129 013 Golar Spirit FSRU Kawasaki Golar LNG/Golar Gas Cryogenic Petrobras3 jun.04 137 500 Golar Frost FSRU Hyundai OLT Offshore Toscana Livorno FSRU4 feb.77 125 858 Golar Freeze FSRU HDW Golar LNG DUSUP5 jul.77 125 017 Khannur FSRU Rosenberg Golar LNG West Java
NB nov.13 170 000 LNGRV Samsung HI Golar LNGNB apr.14 160 000 LNGRV Samsung HI Golar LNGNB Option feb.15 170 000 FSRU Samsung HI Golar LNG Gas Atacana
OLT T oscana De livery Size (CBM) Name T ype Builder Owner Charte re r1 jun.04 137 500 FSRU Toscana (ex G. Frost) FSRU Hyundai OLT Offshore Toscana Livorno FSRU
Will the FSRU market attract more players?
Yes, ….its needed!
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Contents
www.fearnleys.com
1. Fearnley LNG
2. LNG Rates & Values
3. LNG Fleet and Order book
4. LNG Vessel & FSRU Supply / Demand
5. Forecasting
Forecast Vessel Requirement
14-Jan-13 41
LNG Production Growth:
•6-7% historically
•7-8% forecasted
Fleet growth:
•6-7% historically
•7-8% forecasted
We have a current fleet of over 330 large LNG vessels
•We will need 25 ships built per year in next 4 year period + replacement tonnage for vessel leaving the active fleet
Top – Down
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Forecasting
14-Jan-13 42
• Demand: • Still a sellers market next 1-3 yrs • LNG Production is expected to grow with 6-10% per year on average – but tail-heavy
in forecast period (US exports from 2016) • Distances expected to stay “stable” with some upside risk (again US exports) • Strong interest for LNG from “new” markets – Positive for FSRUs
• Supply: • Fleet has grown with 6-7% historically • Active fleet expected to grow with 5-8% in near future, hence a demand for 25-30
LNG newbuildings per year + replacement units (ships leaving active fleet for FSRU/FSU/Scarp, etc.)
• Technical changes/solutions developing • However – when studying project start-ups and the orderbook profile - short term it looks
like orders could be a bit ahead of the projects planned start-up dates
LNG Market 2013-2020
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Summary
14-Jan-13 43
• Short term (12m) : market likely to remain stable, but quiet (few ships entering and limited volume
growth) with seasonal rate developments – arbitration opportunities will be main driver for charter and rate movements
• We expect continued interest in FSRUs with several contract awards near term • Long term (3 yrs+) : very strong macro fundamentals – LNG production volumes expected to grow
significantly – Massive investments in LNG infrastructure
• Will be periods with tonnage over/undersupply, but in general – LNG is a commodity growth story that will result in vessel demand. Any oversupply periods will be short-lived!
• FLNG – 4 projects now – will be more this time next year!
Summary – LNG Market
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Q&A
14-Jan-13 www.fearnleysecurities.no 44
Fearnleys App
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Thank You
47
Vegard Hellekleiv
Senior Vice President
FSRU business
48
A Floating Storage and Regasification Unit is permanently moored close to the market
1.
Offshore mooring
Jetty mooring
Project specific mooring solution Some other mooring examples:
FSRU - What is it?
49
An LNG carrier approaches the FSRU to bring a new cargo
2. Höegh LNG’s FSRU is compatible with most of the world's LNG carrier fleet Typically, LNG/Cs of 80,000 to
170,000 m3 will be used Full feasibility to discharge LNG from the FSRU to LNG bunker vessels, Short-sea LNG shipping Road trucks
FSRU - What is it?
50
The LNG is transferred from the LNG carrier to the FSRU
1. 3. LNG transfer can be done “ship-to-ship” or across a berth with loading
arms or flexible hoses
Side-by-side
Across a berth
FSRU - What is it?
Onboard regasification of LNG Output from 1 to 10 bcm p.a., but
typically 3-5 bcm p.a. Seawater provides the heat to
heat the LNG; steam boilers may replace or supplement the seawater heating
A modular and train based design Proven systems and components High reliability
51
The FSRU continuously regasifies the LNG and sends high-pressure natural gas to shore
4.
Regas Module
Regas module
FSRU - What is it?
52
Main drivers for developing new LNG import projects are: Supply of gas where there is no or limited access to pipeline gas
Fuel for new power production capacity
Replace liquid fuel for existing power plants
Provide alternative source of energy
Increased supply to pipeline gas demand
Competitive advantages of FSRUs: Shortest schedule
Lowest capital costs
Provide flexibility for relocation
For projects where the above criteria have top priority, FSRU solutions are selected
Why do importers choose FSRUs instead of onshore terminals?
FSRUs delivered in 2009 and 2010 from Samsung Heavy Industries GDF Suez Cape Ann and GDF Suez Neptune are on 20 year time charters to GDF Suez
GDF Suez Cape Ann will be used as China’s first FSRU from Q3 2013
53
Höegh LNG’s FSRUs in operation
54
Regas unit at Sinopacific Offshore & Engineering Höegh LNG's site team at Hyundai
Ship sections at Hyundai
Construction program at Hyundai Heavy Industries
55
20 year charter with PGN
Höegh LNG will deliver the mooring to PGN on EPC basis at completion
Scheduled start-up in June 2014
Debt financing work progressing well and scheduled to be completed by mid 2013
Delivered cost (excluding mooring) USD 300 million
EBITDA contribution USD 40 million p.a.
Perusahaan Gas Negara (PGN) - Indonesia
Tower yoke mooring system
Gas Export
Regasification Module
56
Klaipedos Nafta - Lithuania
Chartered by Klaipedos Nafta for 10 years
FSRU to be located in the Port of Klaipeda, Lithuania
The project is on schedule for start-up in Q3 2014
Financing secured through USD 250 million debt facility and paid-in equity
Delivered cost USD 325 million
EBITDA contribution USD 50 million p.a.
Metering
station Pipeline route
57
Colbún / AES Gener - Chile
Höegh LNG is selected preferred bidder and in final contract negotiations
Terminal to be located in Quintero Bay close to Santiago
Clients are Colbún and AES Gener
Contract length 10 + 5 years
Planned start-up end 2014
Delivered cost USD 300 million
EBITDA contribution USD 41 million p.a.
Market outlook
58
Strong outlook for FSRU market
Additional LNG supply equals capacity of 40 regasification terminals
Increasing number of importing countries Several prefer FSRUs as import terminal solution
Source: BP, RS Platou Economic Research
Up to
144
Assumptions: 1 import terminal = 3.5 mtpa of regas capacity
Planned increase of global liquefaction capacity
59
Steady growth in number of FSRUs employed
Outlook:
Upcoming projects are expected to employ newbuilt FSRUs
Growth is expected to accelerate beyond 2015
Currently ca. 30 potential FSRU projects in pipeline
0
5
10
15
20
25
2000 2005 2010 2015
Num
ber o
f FSR
Us
Year
FSRU employment growth
60
Near-term contract award opportunities
Project Pre-qualified Bid Selection Contract Start-up
Indonesia Yes Submitted 2013 2013 2014/15
Uruguay Yes Q1 2013 Q2 2013 Q3 2013 2015
India Yes Q2 2013 Q3 2013 2013 2014/15
Lebanon Yes Q2 2013 Q3 2013 2013 2015
Port Meridian Exclusive N/A N/A Q4 2013 2016
Concluding remarks
61
Höegh LNG in unique competitive position
Proven track record:
Two FSRUs in operation
Secured three new FSRU contracts in 2012
Construction program on schedule and budget
High barriers to entry due to clients’ experience requirements
Attractive financial returns (target unlevered IRR of 12 %)
Well positioned to win additional contracts (one FSRU available)
62
LNG shipping business
Thomas Thorkildsen
Head of Commercial Management
Norman
Lady
Suez
Matthew
LNG
Libra
Arctic
Princess
Arctic
Lady
STX
Frontier
GDF Suez
Neptune
GDF Suez
Cape Ann
Delivered in
1973 from
Rosenberg
shipyard in
Norway. The
vessel is
chartered to
Gas Natural.
Delivered in
1979 from
Newport
News. The
vessel is
owned by
Suez LNG
Shipping NA.
The vessel is
operated &
managed by
Höegh LNG.
Acquired in
2011 and
delivered to
Höegh LNG
in 2012. The
vessel is
chartered to
North West
Shelf for six
months.
Delivered in
2006 from
Mitsubishi
Heavy
Industries. The
vessel is
chartered to
Statoil ASA
on a 20 year
time charter
for the Snøhvit
LNG Project.
Delivered in
2006 from
Mitsubishi
Heavy
Industries.
The vessel is
chartered to
Total E&P
Norge AS for
the Snøhvit
LNG Project.
Delivered in
June 2010
from Hanjin
Heavy
Industries.
The vessel is
chartered
from STXPO
and further
sub chartered
to Repsol.
Höegh LNG to
own 50%.
Delivered in
November
2009 from
Samsung
Heavy
Industries.
The vessel is
chartered to
GDF Suez
LNG Supply
SA.
Delivered in
June 2010
from
Samsung
Heavy
Industries.
The vessel is
chartered to
GDF Suez
LNG Supply
SA.
63
Existing fleet
64
Fleet mainly on long-term contracts
OPEX pass-through or indexation in long-term charter agreements
Vessel Built OwnershipCapacity (m3 '000) 20
13
2015
2017
2019
2024
2026
2028
2030
2032
2034
2036
2038
2040
2042
2044
Matthew 1979 0 % 126' Ship management ageement with GDF Suez
STX Frontier 2010 0% / 50% 153' (Exercised option to purchase 50% of vessel, delivery on or before 1 October 2013)
LNG Libra 1979 100 % 126'
Norman Lady 1973 50 % 87' Extension
Arctic Lady 2006 50 % 147'
Arctic Princess 2006 34 % 144'
GDF Suez Neptune 2009 50 % 145'
GDF Suez Cape Ann 2010 50 % 145'
PGN FSRU 2014 100 % 170'
KN FSRU 2014 100 % 170'
Colbún FSRU 2014 100 % 170' (Selected preferred bidder)
New FSRU 4 2015 100 % 170'
GDF Suez
Perusahaan Gas Negara
Klaipedos Nafta
Colbún / AES Gener
FSR
Us
Option 5+5
Option 5+5
Option 5
LNG
Car
riers
Total
Statoil
Option 5+5
GDF Suez
Option 5+5
Option 5+5
Constr.
Rep
sol
Constr.
Constr.
Construction
GasNatu-ral
65
Vessel Delivered cost (100% basis) Yard
Selection date
Delivery On budget? On Schedule?
Arctic Lady 215 Mitsubishi H.I 2002 2006
Arctic Princess 215 Mitsubishi H.I 2002 2006
GDF Suez Neptune 330 Samsung H.I 2006 2009
GDF Suez Cape Ann 330 Samsung H.I 2006 2010
Proven ability to design, construct and deliver on time and budget.
Recent project execution performance
Strong emphasis on operational performance
In-house ship management
Impeccable safety record
Support to and close cooperation with charterers
• Annual customer satisfaction reviews
Operational LNG experience from early 1970’s
• Norman Lady (built 1973) - 40 years of continuous commercial operations
66
Proven operational track record
Global LNG fleet overview
14 FSRUs in fleet
8 FSRU newbuildings on order plus 2 options to change from LNGC to FSRU
364 LNG vessels in fleet
88 newbuildings on order (24%)
67
Type Delivered Newbuildings
on order
Under
conversion Total
LNGC 364 88 - 452
FLNG - 2 - 2
FSRU 14* 8** 1 23
Total 378 98 1 477
LNGC fleet FSRU fleet
* 10 newbuildings and 4 conversions ** In additional to eight firm FSRU orders globally, Golar LNG has options to convert two LNGC orders to FSRUs
Source: Wood Mackenzie, LNG Unlimited, Fearnley LNG
68
LNG Libra (1979)
Available February 2013
Working on charter or sale
STX Frontier (2010)
Available April / October 2013
Working on medium to long-term charter
Norman Lady (1973)
Available September 2013 or 2015
Awaiting charterers decision on extension
Near-term LNG shipping opportunities
69
Shipping summary
Established operator
Existing fleet operated to the satisfaction of our customers and in accordance with industry standards
Near-term focus on securing employment for LNG Libra and STX Frontier
Growth focus on medium to long-term contracts with investment grade customers using newbuilt LNG carriers for 2015/2016 timeframe subject to meeting unlevered IRR target of 12% and availability of capital
Höegh FLNG Ltd.
Øivin Iversen
SVP of Höegh FLNG
70
71
Business model
To provide floating liquefaction services to small and medium size exploration and production companies based on long-term lease contracts
Strategy
To offer liquefaction capacities between 0.5 and 3 million tonnes of LNG per year
Construction at recognised yards
Separate company from 2012
Target unlevered IRR of 15%
Further equity contributions will come from new partners/investors or a potential stock listing
Debt financing through commercial banks and export credit agencies
Höegh FLNG Ltd. - Business model and strategy
72
Höegh FLNG Ltd. – Objectives and legal structure
Höegh FLNG Ltd.'s objectives for 2013
Bring partners / investors into Höegh FLNG in Q1/Q2 2013
Agree and execute 1-2 project specific front-end engineering designs ( FEEDs) for FLNG, funded by clients. This will allow a final investment decision (FID) in 2014 for the first project
Höegh LNG Holdings Ltd. Bermuda
Höegh LNG Ltd. Bermuda
Höegh FLNG Ltd. Bermuda
New partners / investors
New Investor Chairman New Investor
Chairman
73
Höegh FLNG Ltd. – Board and management
OPERATIONS Andre Thoresen
Operations Manager
BUSINESS DEVELOPMENT
Øivin Iversen Senior Vice President
Gunnar Knutsen CEO
TECHNICAL Thomas Larsen Vice President
PROJECTS TBC Man
agem
ent
Dire
ctor
s Sveinung J. Støhle Chairman
Morten W. Høegh Director
Timothy J. Counsell Director
New Investor Chairman Cameron Adderley
Director New Investor
74
FLNG – Complete floating LNG Plant
Accommodation and CCR
Gas Inlet Facilities
Acid Gas Removal
Liquefaction Trains
LPG Extraction
Hull Storage Tanks
Offloading Arms
Dehydration and Mercury Removal
1 3 5 4
2
Power Generation
75
Simplified FLNG solutions
Near shore / Jetty-moored solutions
0.5-3 MTPA (1 to 3 trains)
Minimized gas treatment (pipeline gas)
Electrical power from shore
Other utilities from shore
No accommodation onboard
Offshore solutions
0.5-3 MTPA (1 to 3 trains)
Not self-propelled
Spread moored
Barge-type solution for US export and West Africa projects
76
Advantages of FLNG
Cost effective – Significantly lower CAPEX than an onshore LNG facility
Environmentally safer – Less environmental impact than an onshore LNG plant
Fast track delivery – 4 years from FID to commencement of LNG production, or faster with simplified solution
Project execution method – Construction to take place at one shipyard optimised for fabrication, minimizing risk of cost overruns and delays
Flexible deployment – Opportunity to monetise stranded gas and with the potential to use at multiple fields over vessel’s lifetime
Highly attractive long-term and stable financial returns
77
Announced FLNG projects
COUNTRY LOCATION OF FIELD MAIN SPONSORS STATUS
Australia
Prelude FID taken – in EPC phase
Cash Maple Completed pre-FEED studies
Sunrise Pending resolution with Timor, under review
Bonaparte On-going concept studies
Brazil Santos FID likely delayed until or post 2013
Colombia Caribbean coast Service agreement signed
Indonesia Abadi “On hold”
Israel Tamar Completed pre-FEED study
Malaysia Sarawak Kanowit FID taken – in EPC phase
Sarawak Rotan On-going pre-FEED studies
Papua New Guinea
Gulf FLNG Under review, Governmental Approval (NEC) approval not received
Gulf of Papua Governmental Approval (NEC) approval received, gas allocation and final approval in process
USA Texas FEED commenced, no off-take or approvals in place
78
FLNG development
Key milestones
2006
2007
2008
2009 2010
2011 2013
• Conversion study
• Selected Niche technology • Initiated pre-FEED
• Completed pre-FEED
• Completed generic FEED
• Selected KBR
• PNG FLNG • WoodGoup PSN selected O&M partner
Construction of first FLNG
• Höegh FLNG in operation • FEED contract(s) expected
2012
• Pre-FEEDs for Asian client and Tamar
2014
• First FID expected
Invested 400 000 engineering man hours in proprietary FLNG design
79
Key technical challenges
Liquefaction
No liquids in the process – not sensitive to motions
Minimum hydrocarbons inventory – Safety
Low equipment count – reliable and easy to operate
Fast start-up
Storage
Central bulkhead to eliminate sloshing in cargo tanks
Extensive calculations and model tank tests
Membrane system selected by both Shell and Petronas
Liquid transfer
Ballast tanks optimised for constant draught
Operation within capabilities of existing loading arms
80
Partnership with global leaders
FPSO Operations
Operation & Maintenance Engineering / EPC FPSO EPCIC
& LNG/C
EPCIC
Owner & Operator
Project pipeline – Offshore Australia
Australia Asian national oil company
• Field development plan with FLNG only • Field owner currently evaluating a lease model for FLNG • Höegh LNG has executed a simplified pre-FEED in 2012 • FLNG capacity of 2 mtpa LNG for 15-20 years • Höegh FLNG is currently negotiating agreements to bring
the project into FEED phase
Opportunity Status
82
Project pipeline – Tamar field, Israel
Israel Joint Development with DSME/D&H Solutions Tamar
• FLNG as export solution from the Tamar field • Tamar field will go into operations in 2013 (domestic use) • Höegh LNG has executed a full pre-FEED in 2012 • FLNG capacity of 3 mtpa LNG for 15-20 years • Currently discussing the required structure and agreements
to bring the project into FEED phase
Opportunity Status
83
Project pipeline – Papua New Guinea
Status
• Höegh LNG and partners have Approval in Principle in PNG (National Executive Committee Approval)
• The Project Approval Process in PNG initiated • Field specific concept study for a jetty moored solution and
an offshore solution completed • Proposal to execute pre-FEED recently issued to a client
Papua New Guinea (“PNG”) Joint Development Area with Petromin and DSME E&R Independent of gas field
Opportunity
PRL04 Stanley Gas/Con
PL2
PRL03
PL1
PRL5 Elevala/ Ketu Gas/Con
PL3
PL4
PRL08 Kimu Gas
PRL02 PRL011
PRL012
PRL09 Barikewa Gas
PL5
APRL 14 Iehi, Bilip & Cobra Gas
PRL13 Kuru Gas
PL7
PL8 APRL 15 Elk/Antelope Gas/Con
PL10 PRL10 Uramu Gas
PL12
PRL01 Pandora Gas
PL 9
FPSO
Undeveloped gas discoveries in Papua New Guinea
PL11
PPL 237 Bwata Gas/Con
PPL 235 Douglas Pukpuk Gas
Project pipeline – Early stage opportunities
84
North America – export of pipeline gas
West and East Africa – export of associated gas from oil production and gas which otherwise would have been flared
Simplified technical solution, since the gas has already been treated
Shorter lead-times
Lower technical costs
85
FLNG summary
FLNG accepted as a solution to monetise gas fields and this new market will grow
Höegh FLNG is staffed and in operation
Höegh LNG is in the process of bringing partners / investors into the new company
Mature technical FLNG solution forms basis for specific project developments
Three advanced FLNG project opportunities and several early stage developments. Two can go into FEED phase in 2013 with a possible final investment decision for our first FLNG in 2014
86
Financial strategy
Steffen Føreid
CFO
87
EBITDA development
Capital expenditure & funding
Growth plans beyond current investment plan
Agenda
Strong growth in EBITDA
88
(*) KN and PGN project agreements signed - selected bidder status for Colbún/AES Gener project
EBITDA to more than quadruple by 2015
70% of earnings growth secured
Stable and predictable cash flows from high margin infrastructure business
New FSRUs wholly owned by Company
Back-ended capex schedule
89
Year Capex (USD bn)
Paid as of 3Q 2012 0.2
4Q 2012 0.0
2013 0.3
2014 0.7
2015 0.2
Total 1.4
Delivery schedule: FSRU KN: 1Q 2014 FSRU PGN: 2Q 2014 FSRU Colbún: 2Q 2014 FSRU #4: 1Q 2015 STX Frontier: Oct. 2013
60% of contract price payable upon delivery of FSRUs
Fixed price turn-key shipbuilding contracts with world leading shipyard
Capitalization strategy in growing the Company
Objective Maintain strong creditor and investor confidence Maximize shareholder value Be adequately capitalized given existing business
and expansion commitments
Financing strategy Raise equity before taking on capital commitments Raise debt financing when employment secured Broaden sources of equity and debt funding
Goals Long-term equity-to-total asset of 30%* Start paying dividends after completion of current
expansion program in 2015
90
(*) adjusted for mark-to-market of derivatives
91
Proven capital markets access
Equity USD 340 million
IPO proceeds USD 134 million @ 38 NOK/share Follow-on share issues USD 208 million @ 53 NOK/share Shares listed on the Oslo Stock Exchange («OSE»)
Bond financing USD 130 million
Bank financing USD 538 million
Senior unsecured corporate bond NOK issue swapped into USD with fixed interest rate of 7.3% Höegh LNG shadow rated at B+/B+/B with bonds listed at the OSE Proceeds for general corporate purposes and as equity in projects
USD 250 million bank financing of KN FSRU - fixed interest rate 5.1% First ever FSRU financing backed by K-sure and GIEK USD 288 million bridge financing of two FSRUs available regardless
of employment
The Company has raised USD 1.0 billion in debt and equity since June 2011
92
No need for further equity in funding current investment plan
USD 0.8 billion of cash and undrawn bank financing available
USD 0.8 billion of additional bank financing to be raised
Uses Sources
FSRU#1-4 (remaining) 1,0 Cash at hand 31/09/12 0,3
STX Frontier 0,1 Undrawn bank financing (USD250m KN and USD288m bridge) 0,5
Mooring 0,1 Incremental bank financing (FSRU2,3,4 / STXF / Mooring) 0,8
Remaining capital expenditures 1,2 Cancellation USD288m bridge facility (0,3)
Net proceeds sale of Mooring 0,0
Excess cash 0,2
Total 1,4 Total 1,4
Based on 3Q2012 figures. Cash at hand includes proceeds from the bond issue and the sale of Port Meridian
75% leverage assumed for FSRUs & Mooring, 65% for STX Frontier
Strong appetite for LNG backed lending among banks
Stable and predictable cash flow from provision of infrastructure services
Strong group of relationship banks
Expanding the banking group
Status financing activities
KN FSRU: Completed
PGN FSRU: In progress
PGN Mooring: In progress
Colbún/AES Gener FSRU: Initiated
STX Frontier: Initiated
FSRU #4: To be initiated + new banks for PGN financing
Plan to grow with 1-2 FSRUs per year beyond 2015
Potential equity funding of further growth
Internally generated funds
Share issue if acceptable pricing
Sale of existing assets
Partnerships
Master Limited Partnership
Potential debt financing of further growth
Commercial bank debt
Export credit agencies
Project bond market
Other debt sources
94
Master Limited Partnership
A partnership publicly listed in the US
Providing funding for further growth and lowering the cost of capital
Process of engaging financial and legal advisors started
Planning for a potential MLP IPO in 2014
95
96
Stable and predictable cash flows from provision of infrastructure services
Strong growth in earnings
Proven capital markets access
No need for additional equity in funding remaining capex of current investment plan
Planning for an MLP IPO in 2014
Closing remarks on financing
97
Sveinung Støhle
President & CEO
Closing remarks
98
Key investment considerations
LNG will be the fastest growing fossil fuel
Höegh LNG's services will continue to be in demand for the very long-term
FSRU main focus for growth
Fully funded for current capital programme
Proven ability to raise debt and equity for further growth
Develop Höegh FLNG as a stand alone company together with new investors
Preparing for MLP as new funding source