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Höegh LNG – The floating LNG services provider
First Quarter 2014
Presentation of financial results
23 May 2014
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.
Agenda
3
Highlights
Financials
Operational review
Market outlook
Summary
First quarter 2014 - Highlights and subsequent events
4
Mandatory change in accounting standard for recognition of joint venture
investments from proportionate consolidation to the equity method
EBITDA of USD (1.0) million and loss before tax USD 4.5 million
Signed a USD 412 million loan facility for the Höegh Gallant and FSRU #4
Tower Yoke Mooring System (TYMS) for the PGN FSRU project installed
PGN FSRU Lampung delivered from yard and connected to the TYMS
The second FSRU, Independence, delivered from yard
Letter of Intent for 5 year FSRU contract signed with Egas of Egypt
Höegh LNG Partners LP (“MLP”) made confidential submission to the United
States Securities and Exchange Commission of initial draft registration
statement for initial public offering of common units of the MLP
Agenda
5
Highlights
Financials
Operational review
Market outlook
Summary
Impact on consolidated figures from change in accounting standard
6
Reduction in Income, EBITDA and EBIT - net profit remains same
Reduction in liabilities and total assets - equity remains same
USD'000 1Q2014 1Q2014Total income 51,3 59,3 Operating profit before depreciation (1,0) 8,4 Operating profit (3,9) 2,1 Profit or (loss) for the period (4,5) (4,5)
31.03.2014 31.03.2014
Total assets 739 1 160 Equity adjusted for hedging reserves 453 453 Net interest bearing debt 146 527 Equity ratio adj. for hedging reserves 61 % 39 %
Consolidated by the proportionate method Consolidated by the equity method
Income statement
7
USD million 1Q2014 4Q2013 3Q2013 2Q2013 1Q2013
Income on T/C basis 17,2 17,8 17,2 11,3 15,6 Construction contract revenue 28,2 14,6 11,8 26,3 - Management and other income 3,6 8,9 3,8 1,6 1,7 Share of results from investments in joint ventures 2,2 4,2 3,8 3,6 3,5
TOTAL INCOME 51,3 45,5 36,7 42,7 20,7
Charterhire expenses (8,7) (8,9) (8,9) (8,8) (8,7) Construction contract expenses (24,0) (12,8) (10,4) (22,5) - Operating expenses (6,4) (6,2) (5,7) (5,9) (5,8) Administrative expenses (6,2) (4,9) (4,4) (3,9) (3,9) Business development expenses (7,0) (11,1) (5,9) (4,1) (4,5)
EBITDA (1,0) 1,5 1,3 (2,4) (2,2)
Depreciation (2,9) (4,6) (4,4) (4,3) (3,9)
EBIT (3,9) (3,1) (3,1) (6,7) (6,2)
Interest expenses (0,4) (0,6) (0,1) (0,1) (2,5) Interest income 0,5 0,5 0,5 0,6 0,7 Other financial items (0,7) (1,1) 0,1 0,2 0,5
PROFIT OR (LOSS) BEFORE TAX (4,5) (4,2) (2,6) (6,0) (7,6)
Taxes (0,0) 0,3 (0,2) (0,1) (0,4)
NET PROFIT OR (LOSS) (4,5) (3,9) (2,8) (6,1) (7,9)
Financial position
8
USD million 31.03.2014 31.12.2013 30.09.2013 30.06.2013 31.03.2013
Licences, design and other intangibles 74 74 74 74 74
Investments in newbuildings under construction and vessels 455 421 388 387 366 Shareholder loans to joint ventures 23 25 26 27 28 Investments in joint ventures 0 0 7 8 6 Mark-to market on hedging reserves 14 18 12 13 3 Other assets 10 19 17 19 19 Restricted cash (non-current) - - - 1 - Unbilled construction contract receivable 81 53 38 25 - Current cash and marketable securities 82 75 101 108 162
TOTAL ASSETS 739 684 665 662 657
Total equity 374 389 381 381 349 Investments in joint ventures 89 86 97 103 130 Interest bearing debt 227 165 154 148 152 Mark-to market on hedging reserves 14 14 8 8 7 Other liabilities 34 31 25 22 20
TOTAL EQUITY AND LIABILITIES 739 684 665 662 657
Total equity adjusted for MtM on interest rate swaps 456 460 461 463 469 Equity ratio adjusted for MtM on interest rate swaps 62% 67% 69% 70% 71%Net interest bearing debt * 146 90 52 39 (10) * [IBD less cash, mark.securi ties and restricted cash]
Cash flow statement
9
USD million 1Q2014 4Q2013 3Q2013 2Q2013 1Q2013
Net profit or (loss) before tax (4) (4) (3) (6) (8) Adjustments of non-cash P&L items (3) (1) (1) (3) 2
Dividend received from joint ventures 1 9 3 1 1 Net changes in working capital, other 6 0 3 (6) 2
Net cash flow from operating activities (1) 5 2 (15) (2)
Proceeds from sale of marketable securities - 21 - 80 - Investments newbuildings under construction and vessels (52) (45) (13) (38) (90)
Investments in intangibles and equipment (0) (0) (0) (1) (3) Proceeds of repayment on shareholders loans 2 2 1 2 2
Net cash flow from/(used in) investing activities (50) (23) (13) 43 (91)
Proceeds from borrowings 108 21 5 - 19
Repayment of borrowings (30) - - - - Interest paid (2) (2) (2) (2) (2) Other financing activities (8) (7) (0) (0) (4)
Net cash flow from/(used in) financing activities 67 12 2 (3) 12
TOTAL CASH FLOW 16 (6) (8) 26 (82)
Agenda
10
Highlights
Financials
Operational review
Market outlook
Summary
Status of FSRU newbuilding programme and new contracts
11
Vessel / Hull Customer Status Construction Delivery
PGN FSRU Lampung PGN, Indonesia Delivered April
Independence KN, Lithuania Delivered May
Höegh Gallant LOI/TS with Egas Under construction 95% August 2014
2551 On offer in tenders Under construction 38% March 2015
12
Perusahaan Gas Negara project
The Tower Yoke Moring System (TYMS) installed on site in Lampung
PGN FSRU Lampung delivered from yard and connected to the TYMS
Project on budget and schedule to commence operation in June 2014
13
Klaipedos Nafta FSRU project
Independence delivered from yard
Terminal on schedule to commence
operations no later than end 2014
Jetty and pipeline (Client’s scope) on
schedule for completion during 3Q
2014
Pursuing interim employment for
Independence in short term market
Klaipedos Nafta reports that LNG
supplier has been selected
14
Letter of Intent / Term Sheet with Egas of Egypt
Letter of Intent/Term Sheet signed with Egyptian
Natural Gas Holding Company (Egas) for a 5 year
FSRU contract
LNG to be used to cover natural gas deficit in power
sector
Basis Höegh Gallant which will sail directly from
yard to site
FSRU to be located at Ain Sokhna port on the Red
Sea
Average annual EBIDA of around USD 40 million
Operations scheduled to commence in 3Q 2014
Term Sheet subject to negotiation of Time Charter
Agreement, board approval and approval of the
Egyptian competent authorities
Egypt’s Natural Gas Transmission & Distribution
15
0
10
20
30
40
50
60
Billio
n c
ub
ic m
ete
rs
Development of Natural Gas Quantities Distribution (1997-2012)
Export
Local
Source: Egyptian Natural Gas Co.
Consumption of natural gas has
doubled in 10 years
Natural gas is used for power
generation (58%), commercial
sector (20%), Industrial sector
(12%) and petrochemical
industry (10%)
Volumes available for export to
Jordan (pipeline) and for
Damietta LNG facility have
declined
LNG imports will cover local
demand for natural gas in peak
season
16
Near-term FSRU opportunities for FSRU#4 and additional newbuildings
Project Pre-
qualified Bid Selection
Contract
award Start-up
Columbia 2014 2014 2015
Lebanon 2014 2014 2016
India 2015 2015 2017
Port Meridian Exclusive 2014-2015 2017-2018
Chile 2 2014 2015 2017
Chile/Colbun 2014-2015 2017
Höegh FLNG Ltd.
17
Awarded pre-FEED contract to one major shipyard and one major EPC contractor for
initial design of Höegh LNG’s proprietary FLNG Barge
Initial results of pre-FEED confirm Company’s expectations on competitive cost level
and schedule to first gas
Signed Letter of Intent with non-disclosed North American barge FLNG project
Re-evaluating current capitalization plan for Höegh FLNG
18
Vessels in operation
Existing fleet operated safely and without incidents
Agenda
19
Highlights
Financials
Operational review
Market outlook
Summary
Global LNG demand- according to the majors
20
Source: Fearnlys
Asia LNG demand growth – expectations continue to rise
21
Source: BG Group
Worldwide LNG import outlook
Significant growth in the use of FSRUs over the last 5-6 years
Average growth in peak regasification volume is 70% per year
22
LNG imports to Argentina and Brazil have grown with approx. 180% from
2010 - 2013
23
Brazil has a sudden severe drought and thus not enough hydro for electricity
production
Argentina disregarded their E&P investments and therefore do not have enough gas
1,3
3,2 3,8
4,9
2,0
0,6
2,5
4,4
0%
10%
20%
30%
40%
50%
60%
70%
80%
0
1
2
3
4
5
6
2010 2011 2012 2013
MTPA
LNG imports - Argentina LNG imports - Brazil
FSRU utilisation - Argentina FSRU utilisation - Brazil
Source: IGU World LNG Report
24
Around 30 projects in pipeline
16 projects in Asia/Middle East
6 projects in the Americas
7 projects in Europe/Africa
Owner FSRUs (oper+constr)
Customers*
Höegh LNG 4+2 GDF Suez (2),
Perusahaan Gas Negara,
Klaipedos Nafta, Egas
Golar LNG 5+2 Petrobras (2), Pertamina,
Dubai Power Authority,
Jordanian Energy Ministry,
Kuwait Oil Corporation
Excelerate 9 YPF (2), Petrobras,
PREPA, Israel Electric
Corporation
OLT 1+0 E.ON, IREN (also owners)
MOL 0+1 GDF Suez /Marubeni
BW Gas 0+2 N/A
* Projects in operation or awarded
Existing
Under construction / awarded
Potential
FSRU market outlook
25
FLNG Projects under construction
Main sponsor Country Technical solution
Shell Australia Offshore FLNG
Petronas Malaysia Offshore FLNG
Petronas Malaysia Offshore FLNG
Pacific
Rubiales/Exmar
Colombia Barge FLNG
Existing
Under construction / awarded
Potential for HLNG Barge FLNG
FLNG market outlook
Global LNG fleet overview
19 FSRUs in fleet
7 FSRU newbuildings on order
377 LNG carriers in fleet
114 newbuildings on order (30%)
26
Type Delivered Newbuildings
on order
Under
conversion Total
LNGC 377 114 - 491
FLNG - 4 - 4
FSRU 19 7 - 26
Total 396 125 - 521
LNG carrier fleet FSRU fleet
(Source: Platou)
27
Corporate strategy
Further expansion
With 3 of 4 FSRUs under contract, considering options for further expansion
Expansion will be in the following order of priority: 1) FSRU 2) FLNG 3) LNGC
All three Korean shipyards have confirmed that they still have available
slots in 2017, and plenty available slots in 2018
Dividend policy
Company in the process of formulating a dividend strategy
Expects first pay out during the first half 2015
Details of the dividend strategy will be communicated to the market in the
second half of 2014
Agenda
28
Highlights
Financials
Operational review
Market outlook
Summary
Summary
29
PGN FSRU project on schedule to start operations in June 2014
KN FSRU project on schedule for start up by end of the year – interim
employment being pursued for Independence
Term Sheet signed with Egas for a 5 year FSRU contract - Höegh Gallant to be
employed for the project
Firming up price and schedule on proprietary FLNG Barge. Signed a Letter of
Intent with non-disclosed North American barge FLNG project
Dividend strategy under development with expected first payout in first half 2015
Evaluating strategy for next phase of FSRU expansion
30
Thank You!
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