Hoegh LNG Partners LP Common Units representing Limited Partner Interests

Hello and welcome to the Hoag LNG Partners fourth quarter 2021 earnings presentation. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Hovart Thuru, Interim Chief Executive Officer and Chief Financial Officer. Please go ahead.

Thank you, Andrew, and good morning, ladies and gentlemen. Welcome to Hergal Energy Partners Earnings Call for the fourth quarter of 2021. My name is Håvard Huru, and I am the Chief Financial Officer of the partnership and also fill the role as Interim CEO. For your convenience, this webcast and presentation is available on our website. Turning to page two in today's presentation, we have an overview of the content of the presentations. I will start with some highlights from the fourth quarter and then cover the quarterly financials. Thereafter, I will give a market update before summarizing the presentation at the end. You will then also have the opportunity to ask questions 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 number four. Then turn to page five and the highlights. I'm pleased to report that the fleet had 99.9% availability in the quarter. This resulted in total revenues of 36.2 million and a segment EBTA of 30.5 million in the quarter. As of today, the partnership has not been materially impacted by the COVID-19 pandemic. The Högl Energy Group has taken steps to mitigate the risk 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 board the vessels and on shore, the fleet is operating as expected, despite the pandemic. The Herb Gallant commenced operation for New Fortress Energy in late November. During the quarter, the vessel was modified and prepared for performance under this contract and incurred expenditures of 4.9 million, of which 3.5 million is recorded as operating expenses and 1.4 million is capitalized. 50% of the 4.9 million will be reimbursed by Höglund G by the end of February 2022. The refinancing of the Neptune and the PGN FSU Lampo was completed during the quarter. And in December, we also signed a new loan agreement for the K-Bahn. I will cover these in more detail on the next pages. In December, the board of the partnership received an unsolicited non-binding buyout offer for all publicly held common units of the partnership in exchange for $4.25 in cash per common unit. Despite the pending arbitration with the Charter under the Lease and Maintenance Agreement for the PGN FSU Lampung, both parties have continued to perform their respective obligations under the agreement. Turning to page six, here we address the refinancing of the PGN FSU Lampung. In December, the partnership closed a refinancing of the PGN FSU Lampung debt facilities commercial charge with an outstanding amount of 15.5 million in full. The refinanced commercial charge will amortize with quarterly installments to zero by June 2026, subject to a cash sweep mechanism. Until the pending arbitration with the charter of the PGN FSU Lampung has been terminated, cancelled or favorably resolved, No shareholder loans may be serviced and no dividends may be paid to the partnership by the subsidiary that is borrowing under the Lampung Debt Facility, the PTHLNG. Furthermore, each quarter, 50% of the PTHLNG's generated cash flow after debt service must be applied to prepare outstanding loan amounts under the refinanced Lampung Debt Facility, applied pro rata across the commercial and export credit tranches. The remaining 50% will be retained by PT, HL and G and pledged in favor of the lenders until the pending arbitration has been terminated, counseled or favorably resolved. As a consequence, no cash flow from the PJ and FSU landform will be available for the partnership until the pending arbitration has been terminated, counseled or favorably resolved. This limitation does not prohibit the partnership from paying distributions to preferred and common unit holders. The refinance commercial tranche bears interest at a rate equal to three months LIBOR plus a margin of 3.75%, whereas the actual credit tranche continues to bear interest at a rate equal to three months LIBOR plus a margin of 2.3%. Then turning to page number seven, where we address the refinancing of the Neptune and the Cape Run. Starting with the Neptune facility, at the end of November, SOE Joint Council Limited, the owner of the Neptune, closed the refinancing of the Neptune debt facility. The new Neptune facility replaces the balloon amount of 169 million that was repaid under the previous debt facility secured by the Neptune. The new Neptune facility has an initial loan amount of 154 million and is scheduled to be fully amortized with quarterly debt service over a period of eight years based on an annuity repayment profile. The new Neptune facility bears interest at a rate equal to three months' library plus a margin of 1.75%. Interest rate swaps entered into the previous Neptune debt facility have a remaining ten or eight years and have been novated from the previous group of swap providers to the new lenders and restructured to match the new Neptune facility's loan amount and amortization plan. The interest rate swaps are not reflected in the above-mentioned interest rate for the new Neptune facility. Now moving on to the K-PAN facility. In mid-December, SAV Joint Gas II Limited, the owner of the K-PAN, signed a new loan agreement to refinance the existing K-PAN debt facility that matures on June 1st, 2022. Subject to customer closing condition, the closing and the drawdown under the new facility are expected to occur on or about the maturity date of the existing facility. The terms and conditions for the new K-PAN facility are largely identical to the new Neptune facility. Then turning to page eight, where we cover the buyout offer. In December, the partnership announced that the board of directors had received an unsolicited non-binding proposal from Högl & G, pursuant to which Högl & G would acquire through a wholly owned subsidiary or publicly held common units of the partnership in exchange for $4.25 in cash per common unit. Högl & G has proposed that a transaction would be effectuated through a merger between the partnership and the subsidiary of Högl & G. The HMLP Board has authorized the Conference Committee of the MLP Board, comprised only of non-HERG LNG-affiliated directors, to review and evaluate the offer. The Conference Committee has retained advisors and discussions regarding the offer are ongoing. The proposed transaction is subject to a number of contingencies, including the approval of the Conference Committee, the HMLP Board and the HERG LNG Board of Directors of any definitive agreement and, if a definitive agreement is reached, the approval by the holders of a majority of the outstanding common units in the partnership. The transaction would also be subject to customary closing conditions. There can be no assurance that definitive documentation will be executed or that any transaction will materialize. Turning to page nine, we are showing the overview of the partnership's fleet of modern assets. The partnership has about nine years of average remaining contract length and full contract coverage until late 2026. Turning to page 11, we have the key figures for the quarter, showing an operating performance which was weaker than in the same quarter of 2020 with a segment EBITDA of 30.5 million in the quarter compared to 34.9 million in the fourth quarter of 2020. The decrease is mainly due to increased operating expenses on the Herg Gallant as a result of preparing and relocating the vessel for performance under the new contract with New Fortress Energy. Limited partners interest in the net result was 12.3 million in the quarter, down from 14.7 million in the same quarter of 2020. Turning to page 12. We are showing the development in key measures over time, and as you can see from the graphs, the operating performance remains relatively stable. Two quarters have marked negative deviations, second quarter of 2019 and the second quarter of 2021. In the first instance, the deviation was primarily caused by the dry docking and maintenance of the Hergallant in 2019. The deviation in the second quarter of 2021 was primarily caused by a tax provision for previous periods following the result of a tax audit, which we disagreed to and have disputed. Turning to page 13, here we are showing the income statement in more detail. Total revenues of 36.2 million in the quarter was about 0.1 million more than in the same period in 2020. Personal operating expenses of 10.6 million in the quarter were 3.8 million more than in the same period last year. The increase is mainly due to the increased operating expenses on the whole gallon, as already mentioned on page 5 and 11. Equity in earnings of joint ventures for the quarter was 5.4 million and increased from 4.2 million for the same period in 2020. Unrealized gains on derivative instruments impacted the equity in earnings of joint ventures for the fourth quarter of 2021 and 2020 respectively. Excluding these derivative items, the equity in earnings of joint ventures would have been 3.4 million this quarter and increased from 3 million for the same period in 2020. Total financial expense of 5.8 million in a quarter equals an increase of 0.1 million from the same quarter of 2020. Income tax expense of 0.5 million in a quarter represents a decrease of 0.8 million from the same quarter of 2020. Turning to page 14, here we have the balance sheet, and as you can see, it has not changed much since the year end 2020. with total liabilities and equities standing at 1 billion at the end of the quarter. Moving on to page number 16, and the LNG market. Global LNG trade rose with 5.3% year-on-year in the fourth quarter of 2021, and Asia keeps being the region with the highest growth in LNG import volumes. China continues to increase its imports and shows a strong growth of 7.8% year-on-year. Turning to page 17, here we have two graphs illustrating the projected development in global LNG markets from now until 2027. The graph to the right shows the projected growth in LNG imports globally. As you can see, global LNG demand growth is projected to remain robust, mainly driven by the Asian region, including existing or potential markets for FSU import terminals. Examples of this China, India, Pakistan, and Thailand. On the supply side, the incremental volume is projected for the most part to come from the USA, Russia, and the Middle East. With that, I turn to page 19 for a short summary where I would like to highlight the following. No material impact from the COVID-19 pandemic to date. 99.9% availability of the fleet during the quarter, segment EBITDA of 30.5 million in the quarter, and we closed the refinancing on the net-to-net facility and the PGN FSU Lampung's debt facilities commercial tranche in the quarter. We will now open up for questions from the audience.

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Chris Weatherby with Citi. Please go ahead.