Hoegh LNG Partners LP Common Units representing Limited Partner Interests

Good day and welcome to the Hogue LNG Partners second quarter 2021 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to turn the conference over to Svendon Stola, CEO. Please go ahead, sir.

Thank you, Rocco. Good morning, ladies and gentlemen, and welcome to Fergal & G Partners' earnest call for the second quarter of 2021. For your convenience, this webcast and presentation is available on our website. With me today, I have Mr. Håvard Fyri, the CFO of the partnership. Turning to page two in today's presentation, I will take you through the quarter and then hand over the word to Mr. Furu, who will take you through the financials. Then I will present a market update and the summary. You will have the opportunity to ask questions to both of us at the end of the presentation. Before we start, please take note of the forward-looking statements on page three and the glossary on page four. Turning to page five and the highlights, I would like to start with some comments relating to the COVID-19 pandemic. As of today, the partnership has not been materially impacted by the pandemic. The Höganygi Group has taken steps to mitigate risks from COVID-19 and ensure the health and safety of our crews and staff, which is our highest priority. Thanks to the hard work of our people on both the vessels and onshore, The fleet is operating as expected despite the pandemic. All revenues have been collected in accordance with contractual terms. I am therefore happy to report that all units in the fleet had 100% availability in the quarter. This resulted in total revenues of 34.7 million and a segment EBITDA of 34.3 million in the quarter. In the quarter, the partnership has recorded a tax provision of 10.9 million, following a tax audit for 2019 conducted by tax authorities in Indonesia. We disagree with this and will dispute the position taken by the tax authorities. After the end of the quarter, the charterer of PGN FSAU Lampung has served a notice of arbitration a NOA, to declare the lease and maintenance agreement, the LOM, null and void, and or terminate the LOM, and or seek damages. The partnership has served a reply refuting the claims as baseless and without legal merit. Both parties continue to perform their respective obligations under the LOM. Turning to page six, where we address the PGN-FSIU Lampung arbitration. By letter dated July 13th, 2020 on, the Charter under the LOM raised certain issues with PT Högel & G. Lampung, a subsidiary of the partnership, in relation to the operations of the PGN-FSIU Lampung and the LOM. and by further letter dated July 27, 2021, stated that it would commence arbitration against PT Hög LNG. On August 2, 2021, the Charter served a NOA to declare the LOM null and void and or to terminate the LOM and or to seek damages. PT Hög LNG has served a reply refuting the claims by the Charter as baseless and without legal merit, and has also served a counterclaim against the Charter for multiple breaches of the LOM. PT Hög LNG will take all necessary steps and will vigorously defend against the Charter's claims in the legal process. Both parties are continuing to perform their respective obligations under the LOM. Turning to page seven, where we provide an update on the ongoing refinancing activities. First, PGN-FSAU Lampung debt facility. The commercial tranche of the Lampung facility becomes due end September 2021, and the export credit plan can be called if the commercial tranche is not refinanced. The ongoing refinancing of the PGN-FSAU Lampung credit facility, which had been scheduled to close by the end of the second quarter of 2021, is not yet completed due to the failure by the charterer of the PGE and FSHU Lampung to countersign certain customary documents related to the new credit facility. We have asked the existing lenders to approve a six-month extension to the maturity date to allow for more time to complete a refinancing and have commenced discussions with existing lenders and certain other potential lenders about this. We expect that the terms of any alternative refinancing if we are successful in finalizing such refinancing, are likely to be less favorable than the terms of the original agreed refinancing. No insurance can be given at this time as to the outcome of the dispute with the Charter of PG&E Ulaanbaum or the aforementioned discussions with lenders. We are highly focused on securing a solution for this near-term issue and will provide further information as and when such solution is finalized. Neptune and Cape Anne debt facilities. Progress is being made in relation to the refinancing of the Neptune facility and the Cape Anne facility, which mature and become payable by our joint ventures in November 2021 and June 2022, respectively. The vessels are on charter to total and have more than eight years remaining on those. Turning to page 8, we are showing the overview of the partnership's fleet of modern assets, where there are no changes since the previous quarter. The partnership still has more than eight years average remaining contract length. With that, I would like to hand over the word to Mr. Furu, who will take us through the financials. Thank you, Sven, and good morning, everyone. Turning to page 10, we have the key figures for the quarter. showing an operating performance which was slightly weaker than in the same quarter of 2020, with a segment EBITDA of 34.3 million in the quarter compared to 36 million in the same quarter of 2020. The partnership expensed significant financing costs in the quarter related to the refinancing of the Lampung debt facility and also made a provision of 10.9 million for uncertain tax position as a consequence on tax audit in Indonesia. The limited partners' interest in the net result was a loss of 1.2 million in the quarter, down from a profit of 16 million in the same quarter of 2020. Moving to page 11, we are showing the development in key measures over time, and as you can see from the graphs, the operating performance remains relatively stable. The only exception is the second quarter of 2019, which was impacted by the dry docking and maintenance of the Hogue Gallants. Her grades completed its periodic survey during the second quarter this year. This was carried out afloat and did not cause significant downtime or off-hire. As opposed to the stable segment EBTA, you can see that our adjusted net income this quarter was significantly negatively impacted by the tax provision I mentioned a moment ago. Moving to page 12, here we are showing the income statement in more detail. Total revenues of 34.7 million in the quarter was about 0.3 million more than in the same period in 2020. Vessel operating expenses of 6.1 million in the quarter are up by 0.3 million from the same period last year. Equity in earnings of joint ventures for the quarter was 3.3 million, a decrease from 6.5 million in the same period in 2020. Unrealized gains on derivative instruments impacted the equity in earnings of joint ventures for the second quarter of 2021 and 2020, respectively. Excluding these derivative items, the equity in earnings of joint ventures would have been 3.3 million this quarter, a decrease from 4.2 million for the same period in 2020. Total financial expense of 10.2 million in the quarter equals an increase of 3.6 million from the same quarter in 2020, mainly due to expensing debt issuance cost and commitment fees for the Lampung refinancing. This was partly offset with lower interest expense as debt is amortized. Income tax expense of 11.2 million in the quarter represents an increase of 9.8 million from the same quarter of 2020, mainly due to the tax provision made in the quarter. Turning to page 13, The balance sheet has not changed much since year-end 2020, with total liabilities and equities standing at just below 1 billion at the end of the quarter. As already mentioned earlier in this presentation, the refinancing of the Lampung debt facility and the Neptune and Cape and debt facilities is ongoing. I will now hand it back to Mr. Söller to take us through the remaining part of the presentation. Thank you, Håvard. So for the market, turning to page 15, as you can see, global energy trade rose 5.3% year-on-year in the first half of 2021, and Asia continues to be the region with the highest growth in LNG import volumes. We're also China recorded an all-time high in LNG imports in the second quarter with 20.6 million tons. Turning to page 16, we have two graphs illustrating the projected development in the global energy markets from now until 2025. The graph on the left shows the projected growth in LNG imports globally. As you can see, global energy demand growth is projected to remain robust and mainly driven by Asian region, including existing or potential markets for FSIU import terminals. such as China, India, Pakistan, and Thailand. On the supply side, the incremental volume is projected to come for the most part from Europe and the Americas, which means, more specifically, the United States and Russia. From 2020 to 2025, the market growth is projected to be 22%. With that, I would like to turn to page 18 for the summary, where I would like to highlight the following. No material impact from COVID-19 pandemic to date. 100% availability of the fleet resulting in stable operating performance and stable segment EBITDA. Our long-term contracts support both our refinancing activities and our deal averaging. And last but not least, strong market fundamentals. So with that, we will now open up for questions from the audience.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you're using a speakerphone, we ask that you please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. Today's first question comes from Chris Weatherby at Citi. Please go ahead.