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Höegh LNG – The floating LNG services provider 2Q 2015 Presentation of financial results 27 August 2015
Höegh LNG – The floating LNG services provider
2Q 2015 Presentation of financial results
27 August 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.
Höegh LNG Holdings - Agenda for presentation of 2Q 2015 results
3
Sveinung J.S. Støhle
President & CEO
Highlights / Markets / Summary
Additional information
Steffen Føreid
CFO
Financials
Dedededw
2Q 2015 highlights
4
EBITDA USD 22.6 million and profit after tax USD 6.0 million
Quarterly dividend payment of USD 0.10 per share
Commenced FSRU operations in Egypt
Signed 20 year FSRU contract in Chile
Agreed terms for sale of Höegh Gallant to Höegh LNG Partners
Issued USD 130 million bond in Nordic market
Ordered FSRU#8
5
Ahead of schedule for 12 FSRUs by 2019
HLNG average remaining contract length = 13 years*
HMLP average remaining contract length = 16 years
Contracted Extension option Under construction
* Excluding LNG Libra
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 SOLD
Arctic Princess LNGC 2006 Statoil Maybe
Arctic Lady LNGC 2006 Total Maybe
Independence FSRU 2014 Klaipedos Nafta Yes
Höegh Gallant FSRU Nov 2014 Egas Yes
Höegh Grace FSRU Apr 2015 SPEC Yes
FSRU#7 / 2552 FSRU 1Q 2017 Yes
FSRU#8 / 2865 FSRU 1Q 2018 Octopus 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
Continue to create shareholder value through our track record of delivering
on time…
6
Egypt is a prime example of the flexibility Höegh LNG’s FSRU design offers; the
contract was awarded five months before start-up
Höegh Gallant commenced commercial operations in Ain Sokhna according to
schedule
The FSRU covers 10 - 15% of Egypt’s annual natural gas demand
Regasifying four to five cargos per month
Egas has since awarded a second FSRU contract
Höegh LNG did not participate in the tender
… And through signing new long term FSRU contracts (Octopus LNG)…
7
Contract
length
Project
start-up
Annual
EBITDA
Counter-
party
Octopus SpA (Owned 50/50 by
Cheniere and Biobiogenera)
Strategic
rationale
20 years
Mid-2018
Approximately USD 36 million
Increased demand for electricity
Government initiated PPA tender
Local gas distribution
Located in
Concepcion Bay
… Followed by new FSRU orders…
8
Ordered FSRU#8
Latest and most efficient technology
Delivery Q1 2018
Higher technical specification AND lower delivered cost compared to previous FSRUs
Priced option for FSRU#9 with predefined delivery window
Safe and
reliable FSRU
operations
Secure new
FSRU
contracts
Order new
FSRUs
…We continue to deliver on our FSRU strategy
At least one
newbuilt FSRU
on order
FLNG progress – Höegh LNG’s business model
9
The Delfin FLNG Project made significant progress when selecting Bechtel as FEED
provider and intended EPCIC contractor
Höegh LNG is Joint Venture partner and acts as Owners Engineer in the Delfin FLNG
Project
Höegh LNG continues to follow its FLNG business model:
Pre-FEED / FEED to reduce risk related to delivered cost and schedule delays
Order after signing a tolling agreement to eliminate commercial risk
Lower risks lead to longer project schedule, but avoids major capex risk upfront
Höegh LNG Holdings - Agenda for presentation of 2Q 2015 results
10
Sveinung J.S. Støhle
President & CEO
Highlights / Markets / Summary
Additional information
Steffen Føreid
CFO
Financials
Dedededw
Additional LNG supply, low LNG price and fragmented demand are good
news for FSRUs
11
0
100
200
300
400
500
2014 2015 2016 2017 2018 2019
MT
PA
Liquefaction capacity
Operational Under construction
Over the last twelve months, five FSRU
contracts have been awarded
An increasing number of inquiries and
tenders
FSRUs are now accepted as the
reliable, low cost, fast track and flexible
solution to import LNG
The Company expects the FSRU
market to remain strong with a rising
number of contract awards going
forward
Source: Clarksons Capital Markets
Expect continued FSRU growth in South and Latin America
12
Five FSRUs in operation and four FSRU
projects awarded / under construction
Additional FSRU projects initiated
Main strategic rationale for FSRUs in SA:
Availability of low priced LNG
Short schedule to operations
Lack of infrastructure / geography
Seasonal demand
Höegh LNG is competitively positioned to
expand its market presence in the Southern
Cone
FSRUs in operating
Awarded FSRU contracts
Potential FSRU projects
Post 2019, large volumes of contracted LNG will need to be renewed or
replaced – 100 MT by 2025
13
… Creating a potential for new liquefaction capacity beyond 2019…
… Potential for FLNGs with delivered cost < brownfield US landbased terminals
Source: WoodMackenzie
U.S. LNG remains competitive – even at 50 $/barrels
14
Delfin LNG
Höegh LNG’s FLNG focus
FLNGs under construction by
competitors and oil majors
U.S. LNG $/MMBtu
Cost of pipeline gas 2.7
Liquefaction fee (incl.
opex and fuel)
3.5
Transportation 0.7 - 1.8*
Delivered cost CIF 6.9 - 8.0
Spot LNG prices in Far East are currently around 7.7 $/MMBtu**
* Basis transport from U.S. to U.K. and China
** Platts LNG 18 August 2015
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Strong improvement in operating results; Compared to Q1, EBITDA up 37% and net
profit improved from a negative number to USD 6.0 million. Dividend of 10 cents / share
Continue to deliver according to strategy; operational track record, signing new
contracts and ordering new FSRUs to expand its FSRU Franchise
FSRU market continues to grow; 35 projects in the pipeline… and need for additional
liquefaction capacity beyond 2020 should create potential for FLNG
Summary
Strong financial platform and equity position enable the Company to continue growing
and strengthen its position as the leading FSRU provider
Höegh LNG Holdings - Agenda for presentation of 2Q 2015 results
16
Sveinung J.S. Støhle
President & CEO
Highlights / Markets / Summary
Additional information
Steffen Føreid
CFO
Financials
Dedededw
Successfully issued a USD denominated bond in Nordic HY market
Key deal terms
Issuer: Höegh LNG Holdings Ltd.
Amount: USD 130 million
Tenor: May 2015/2020 (5 years)
Coupong: 3M LIBOR + 5.00% quarterly
Status: Senior Unsecured
Shadow rating: BB- (Issuer) / B+ (issue)
Fi. covenants: Min Free cash / min Book equity
Use of proceeds General corporate purposes
Listing: Oslo Børs
Trustee: Nordic Trustee
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55 % 18 %
10 %
10 %
7 %
Geographical split by allocation
Norway
Sweeden
UK
Finland
other
59 % 16 %
8 %
6 % 11 %
Investor type by allocation
Asset manager
Private wealth
Pension
Bank
Insurance
Agreed terms for first drop down into Höegh LNG Partners LP
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Drop-down of Höegh Gallant
~4.5 years remaining TC with Egas of Egypt (expiry April 2020)
USD 370 million sales price equivalent to 9.25x EV/EBITDA
Existing bank debt of approximately USD 183 million forming part of transaction
Settlement through netting of USD 140 million I/C debt and issuance of USD 47 million
seller’s credit for 18 months
HMLP expected to increase quarterly distributions by 22% to USD 0.41175
Level Total quarterly distribution (USD/unit) Applicable to Unitholders Applicable to holder of IDRs
Minimum distribution 0.33750 100% 0%
First Target Distribution 0.33750-0.388125 100% 0%
Second Target Distribution 0.388125-0.421875 85% 15%
Third Target distribution 0.421875-0.50625 75% 25%
Thereafter 0.50625- 50% 50%
Key transaction summary
Improved results reflecting successful start up of projects
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39 41
44
54
63
0
10
20
30
40
50
60
70
2q14 3q14 4q14 1q15 2q15
MUSD Revenue
9
5
15
25
32
0
5
10
15
20
25
30
35
2q14 3q14 4q14 1q15 2q15
MUSD EBITDA
-9
-16
-59
-2
6
-70
-60
-50
-40
-30
-20
-10
0
10
2q14 3q14 4q14 1q15 2q15
MUSD Net (loss) after tax
Numbers based on proportionate consolidation of Joint Ventures
Quarterly cash flow influenced by new bond issue
20
USD million 2Q2015 1Q2015 4Q2014 3Q2014 2Q2014
Net profit or (loss) before tax 6 (2) (58) (16) (8)
Adjustments of non-cash P&L items 24 26 61 22 14
Proceeds from sale of mooring - - 11 - 97
Net changes in working capital, other 5 2 8 (1) (4)
Net cash flow from operating activities 35 26 23 5 98
Net (investments) proceeds in marketable securities (43) 17 42 (145) -
Investments newbuildings under construction and vessels (34) (13) (231) (9) (369)
Investments in intangibles and equipment - - (1) (0) (1)
Net cash flow from/(used in) investing activities (77) 4 (190) (154) (369)
Net proceeds form equity issuance - - - 203 -
Proceeds from borrowings 130 28 188 - 349
Repayment of borrowings (16) (16) (27) (39) (4)
Dividend paid to non-controllling interest (MLP) (4) (4) (2) - -
Dividend paid to shareholders of the parent (7) (7) - - -
Interest paid (15) (16) (14) (12) (8)
Increase in restricted cash - - (37) - -
Other financing activities (1) - (1) (1) (5)
Net cash flow from/(used in) financing activities 87 (15) 107 151 332
TOTAL CASH FLOW 45 15 (60) 2 62
Numbers based on proportionate consolidation of Joint Ventures
Diversified asset base and well capitalized balance sheet
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Assets
Eight cash generating units
Diversified geographical
operations and counterparties
Long term contracts generating
stable and predictable cash flows
Liabilities and equity
Limited refinancing concentration
Long amortization profiles
Diversified funding sources
556
219
977
147
Liabilities and equity
Other liabilties
Secured bank debt
Unsecured bonds
Book equity (adj MTM)
157
291
-
400
800
1 200
1 600
2 000
Assets
MUSD
Cash and marketable securities
Other assets
Vessels & newbuildings
1 450
Financial Position 2Q2015
Numbers based on proportionate consolidation of Joint Ventures
Strong HLNG trading performance since IPO
22
MLP drop down
- Höegh Gallant dropped down at 9.25x -
releasing USD 370 million and triggering IDRs
- Existing bank debt remains outstanding and
forms part of the transaction
- Settlement through netting of USD 140 million
i/c debt and a USD [47] million seller’s credit
Höegh LNG Holdings Ltd trading
0
50
100
150
200
250
300
350
400
04.07.2011 04.07.2012 04.07.2013 04.07.2014 04.07.2015
%
HLNG NO Equity
GLNG US Equity
EXM BB Equity
GLOG US Equity
23
Successful issue of new unsecured bond in the Nordic market
Agreed first drop down into HMLP
Improved operating and net results reflecting successful start up of projects
Summary
Diversified asset base and well capitalized balance sheet
Höegh LNG Holdings - Agenda for presentation of 2Q 2015 results
24
Sveinung J.S. Støhle
President & CEO
Highlights / Markets / Summary
Additional information
Steffen Føreid
CFO
Financials
Dedededw
Income Statement (*)
25
USD million 2Q2015 1Q2015 4Q2014 3Q2014 2Q2014
Freight revenues 50,5 42,8 26,2 29,3 17,2
Voyage expenses (0,3) (0,5) (2,4) (3,9) - Construction contract revenue - - 8,1 6,1 10,0 Management and other income 2,0 2,0 2,4 (0,4) 2,7 Share of results from investments in joint ventures 2,4 2,6 2,7 2,6 2,5
TOTAL INCOME 54,6 46,9 36,9 33,8 32,3
Charterhire expenses (8,8) (8,7) (8,9) (8,9) (8,8) Construction contract expenses - - 1,1 (6,6) (6,8)
Operating expenses (10,9) (9,5) (10,3) (8,5) (6,1) Project administrative expenses (3,9) (3,4) (4,2) (3,8) (4,8) Group administrative expenses (5,4) (5,1) (3,8) (5,1) (3,1) Business development expenses (3,0) (3,7) (5,3) (4,7) (3,1)
EBITDA 22,6 16,5 5,6 (3,9) (0,3)
Depreciation (8,5) (8,4) (7,8) (6,2) (4,2) Reversal of impairment (impairment) 3,1 - (44,8) - -
EBIT 17,2 8,1 (47,1) (10,1) (4,5)
Interest expenses (9,5) (9,4) (8,9) (5,4) (3,6) Interest income 0,4 0,4 0,4 0,4 0,4 Other financial items (2,1) (1,0) (2,1) (0,8) (0,6)
PROFIT OR (LOSS) BEFORE TAX 6,0 (1,9) (57,7) (15,9) (8,3) Taxes - (0,5) (1,3) (0,4) (0,3)
NET PROFIT OR (LOSS) 6,0 (2,4) (59,0) (16,3) (8,6)
(*) Including Joint Ventures according to the equity method
Financial position (*)
26
USD million 30.06.2015 31.03.2014 31.12.2014 30.09.2014 30.06.2014
Licences, design and other intangibles 37 37 37 74 74 Investments in newbuildings under construction and vessels 1 037 1 035 1029 818 814 Shareholder loans to joint ventures 10 11 19 21 21 Investments in joint ventures 0 0 0 0 0
Mark-to-market on hedging instruments 11 1 5 11 10 Other assets 86 54 44 50 45 Restricted cash (non-current) 15 15 15 - - Unbilled construction contract receivable 0 0 0 5 - Current cash and marketable securities 282 199 207 286 141
TOTAL ASSETS 1 478 1 352 1 356 1 264 1 106
Total equity 451 432 459 540 347 Investments in joint ventures 82 98 95 88 92
Interest bearing debt 811 691 683 534 575 Mark-to-market on hedging instruments 62 66 53 32 27 Other liabilities 72 65 66 70 65
TOTAL EQUITY AND LIABILITIES 1 478 1 352 1 356 1 264 1 106
Total equity adjusted for hedging reserves 556 560 573 634 445 Equity ratio adjusted for hedging reserves 38 % 41 % 42 % 50 % 40 %Net interest bearing debt 514 477 461 248 434
(*) Including Joint Ventures according to the equity method
Cash flow statement (*)
27
USD million 2Q2015 1Q2015 4Q2014 3Q2014 2Q2014
Net profit or (loss) before tax 6 (2) (58) (16) (8) Adjustments of non-cash P&L items 13 14 49 10 3 Dividend received from joint ventures 1 1 1 1 1 Proceeds from sale of mooring - - 11 - 97 Net changes in working capital, other 6 1 9 (1) (5)
Net cash flow from operating activities 26 14 13 (7) 87
Net (investments) proceeds in marketable securities (43) 17 42 (145) - Investments newbuildings under construction and vessels (34) (13) (231) (9) (369) Investments in intangibles and equipment - - (1) (0) (1) Proceeds of repayment on shareholders loans 2 2 2 1 2
Net cash flow from/(used in) investing activities (75) 6 (188) (153) (367)
Net proceeds form equity issuance - - - 203 -
Proceeds from borrowings 130 28 188 - 349 Repayment of borrowings (12) (12) (23) (36) - Dividend paid to non-controllling interest (MLP) (4) (4) (2) - - Dividend paid to shareholders of the parent (7) (7) - - - Interest paid (10) (11) (9) (7) (2) Increase in restricted cash - - (37) - - Other financing activities (1) - (1) (1) (5)
Net cash flow from/(used in) financing activities 96 (6) 116 161 342
TOTAL CASH FLOW 47 14 (59) 1 61
(*) Including Joint Ventures according to the equity method
