Höegh LNG Partners LP Reports Financial Results for the Quarter Ended June 30, 2019

HAMILTON, Bermuda, Aug. 22, 2019 /PRNewswire/ -- Höegh LNG Partners LP (NYSE: HMLP) (the "Partnership") today reported its financial results for the quarter ended June 30, 2019.

Highlights

    --  Reported total time charter revenues of $33.8 million for the second
        quarter of 2019 compared to $35.5 million of time charter revenues for
        the second quarter of 2018
    --  Generated operating income of $15.3 million, net income of $6.2 million
        and limited partners' interest in net income of $2.8 million for the
        second quarter of 2019 compared to operating income of $28.9 million,
        net income of $19.9 million and limited partners' interest in net income
        of $16.9 million for the second quarter of 2018
    --  Planned off-hire for the Höegh Gallant and maintenance with accelerated
        timing to allow completion during the scheduled drydock impacted
        operating income, net income and limited partners' interest in net
        income in the second quarter of 2019
    --  Operating income, net income and limited partners' interest in net
        income were impacted by unrealized losses on derivative instruments for
        the second quarter of 2019, compared with unrealized gains on derivative
        instruments for the second quarter of 2018, mainly on the Partnership's
        share of equity in earnings (losses) of joint ventures in the second
        quarter of 2019 and 2018
    --  Excluding the impact of the unrealized gains (losses) on derivative
        instruments for the second quarter of 2019 and 2018 impacting the equity
        in earnings (losses) of joint ventures, operating income for the three
        months ended June 30, 2019 would have been $19.9 million, a decrease of
        $6.0 million from $25.9 million for the three months ended June 30, 2018
    --  Generated Segment EBITDA (1) of $31.0 million for the second quarter of
        2019 compared to $36.9 million for the second quarter of 2018
    --  On August 14, 2019, paid a $0.44 per unit distribution on common and
        subordinated units with respect to the second quarter of 2019,
        equivalent to $1.76 per unit on an annualized basis
    --  On August 15, 2019, paid a cash distribution of $0.546875 per 8.75%
        Series A cumulative redeemable preferred unit (the "Series A preferred
        unit"), for the period commencing on May 15, 2019 to August 14, 2019

Steffen Føreid, Chief Executive Officer and Chief Financial Officer stated: "In the second quarter, the Partnership's modern assets continued to perform according to contract, underpinning its stable distribution, however, the planned off-hire and maintenance during the scheduled dry-docking of two of the vessels weighed on the result. More broadly, global trade in LNG continues to increase year-on-year, driven by fuel-switching and new LNG production facilities coming on stream, which is fueling demand for more LNG import terminals. With an established platform of long-term contracts generating stable and predictable cash flows, Höegh LNG Partners is in a strong position to maintain its leadership position in the FSRU sector and grow as new opportunities crystalize."

(1) Segment EBITDA is a non-GAAP financial measure used by investors to measure financial and operating performance. Please see Appendix A for a reconciliation of Segment EBITDA to net income, the most directly comparable GAAP financial measure.

Financial Results Overview

Effective January 1, 2019, the Partnership adopted the new accounting standard, Leases, which did not change the timing or amount of revenue recognized for the Partnership.

The Partnership reported net income of $6.2 million for the three months ended June 30, 2019, a decrease of $13.7 million from net income of $19.9 million for the three months ended June 30, 2018. The net income for both periods was significantly impacted by unrealized gains and losses on derivative instruments mainly on the Partnership's share of equity in earnings (losses) of joint ventures.

Excluding all of the unrealized gains (losses) on derivative instruments, net income for the three months ended June 30, 2019 would have been $10.8 million, a decrease of $5.6 million from $16.4 million for the three months ended June 30, 2018. Excluding the impact of the unrealized gains (losses) on derivatives, the decrease for the three months ended June 30, 2019 is primarily due to lower time charter revenue as a result of off-hire related to the drydock for the Höegh Gallant, lower other revenue related to the receipt of insurance proceeds associated with prior periods expenses and higher vessel operating expenses as a result of maintenance, principally for the Höegh Gallant but also for the PGN FSRU Lampung. These items were also the main drivers for the lower limited partners' interest in net income, operating income and Segment EBITDA for the three months ended June 30, 2019 compared with the three months ended June 30, 2018.

Preferred unitholders' interest in net income was $3.4 million for the three months ended June 30, 2019, an increase of $0.4 million from $3.0 million due to additional preferred units issued as part of the at-the-market offering program ("ATM program"). Limited partners' interest in net income, for the three months ended June 30, 2019 was $2.8 million, a decrease of $14.1 million from limited partners' interest in net income of $16.9 million for the three months ended June 30, 2018. Excluding all of the unrealized gains (losses) on derivative instruments, limited partners' interest in net income for the three months ended June 30, 2019 would have been $7.4 million, a decrease of $6.0 million from $13.4 million for the three months ended June 30, 2018.

The Höegh Gallant had the equivalent of 16 days of off-hire due to the scheduled drydock for the three months ended June 30, 2019 compared with no days off-hire for the three months ended June 30, 2018. The PGN FSRU Lampung and the Höegh Grace were both on-hire for the full three months periods ended June 30, 2019 and 2018.

During the second quarter of 2019, the drydock was completed for the Höegh Gallant and the on-water class renewal survey commenced for the PGN FSRU Lampung. The opportunity was utilized to accelerate the timing of as many maintenance procedures as possible resulting in an increase in maintenance expenses of approximately $3.0 million for the three months ended June 30, 2019 compared with the three months ended June 30, 2018. Performing routine maintenance during the drydock reduces the risk of service interruption or off-hire in subsequent periods.

Equity in losses of joint ventures for the three months ended June 30, 2019 was $1.6 million, a decrease of $6.7 million from equity in earnings of joint ventures of $5.1 million for the three months ended June 30, 2018. The joint ventures own the Neptune and the Cape Ann. Unrealized gains (losses) on derivative instruments in the joint ventures significantly impacted the equity in earnings (losses) of joint ventures for the three months ended June 30, 2019 and 2018. The joint ventures do not apply hedge accounting for interest rate swaps and all changes in fair value are included in equity in earnings (losses) of joint ventures. Excluding the unrealized loss on derivative instruments for the three months ended June 30, 2019 and the unrealized gain on derivative instruments for the three months ended June 30, 2018, the equity in earnings (losses) of joint ventures would have been $3.1 million for the three months ended June 30, 2019, an increase of $1.0 million from $2.1 million for the three months ended June 30, 2018. Excluding the unrealized gains (losses) on derivative instruments, the increase was mainly due to higher time charter revenues related to the reimbursement of project costs in the three months ended June 30, 2019 and additional expenses for the three months ended June 30, 2018 in relation to a new project for the charterer related to the Cape Ann and higher maintenance expenses.

Operating income for the three months ended June 30, 2019 was $15.3 million, a decrease of $13.6 million from operating income of $28.9 million for the three months ended June 30, 2018. Excluding the impact of the unrealized gains (losses) on derivatives impacting the equity in earnings (losses) of joint ventures for the three months ended June 30, 2019 and 2018, operating income for the three months ended June 30, 2019 would have been $19.9 million, a decrease of $6.0 million from $25.9 million for the three months ended June 30, 2018.

Segment EBITDA (1) was $31.0 million for the three months ended June 30, 2019, a decrease of $5.9 million from $36.9 million for the three months ended June 30, 2018.

Financing and Liquidity

As of June 30, 2019, the Partnership had cash and cash equivalents of $27.1 million, an undrawn portion of $42.2 million of the $85 million revolving credit facility from Höegh LNG Holdings Ltd. ("Höegh LNG") and an undrawn $63 million revolving credit facility under the $385 million facility. On August 12, 2019, the Partnership drew $48.3 million on the $63 million revolving credit facility under the $385 million facility. On August 13, 2019, the Partnership repaid $34.0 million on the $85 million revolving credit facility. As a result, the Partnership currently has undrawn balances of $76.2 million and $14.7 million on the $85 million revolving credit facility and $63 million revolving credit facility, respectively. Current restricted cash for operating obligations of the PGN FSRU Lampung was $8.0 million and long-term restricted cash required under the Lampung facility was $12.9 million as of June 30, 2019.

During the second quarter of 2019, the Partnership made quarterly repayments of $4.8 million on the Lampung facility and $6.4 million on the $385 million facility.

The Partnership's book value and outstanding principal of total long-term debt was $472.5 million and $482.9 million, respectively, as of June 30, 2019, including long-term debt financing of the FSRUs and $42.8 million on the $85 million revolving credit facility. As of June 30, 2019, the Partnership's total current liabilities exceeded total current assets by $12.4 million. This is partly a result of the current portion of long-term debt of $44.7 million being classified as current while restricted cash of $12.9 million associated with the Lampung facility is classified as long-term. The current portion of long-term debt reflects principal payments for the next twelve months which will be funded, for the most part, by future cash flows from operations. The Partnership does not intend to maintain a cash balance to fund the next twelve months' net liabilities.

The Partnership believes its current resources, including the undrawn balances under the $85 million revolving credit facility and the $63 million revolving credit facility, are sufficient to meet the Partnership's working capital requirements for its business for the next twelve months.

As of June 30, 2019, the Partnership did not have material commitments for capital or other expenditures for its current business. However, during the third quarter of 2019, the PGN FSRU Lampung will complete its on-water class renewal survey that commenced in the second quarter of 2019. Additional maintenance expenses for the PGN FSRU Lampung are expected to be incurred during the third quarter of 2019.

For the joint ventures, the Neptune will have an on-water class renewal survey during the third quarter of 2019. The majority of the survey expenditures are expected to be compensated by the charterer and the Neptune will remain on-hire. During the class survey of the Neptune, the joint venture expects to incur costs for certain capital improvements that will not be reimbursed by the charterer for which the Partnership's 50% share is expected to be approximately $0.2 million for the year ended December 31, 2019. As discussed in note 14 under "Joint ventures claims and accruals" in the Partnership's unaudited condensed interim consolidated financial statements for the period ended June 30, 2019, the joint ventures have a probable liability for a boil-off claim under the time charters. The Partnership's 50% share of the accrual was approximately $11.9 million as of June 30, 2019. The joint ventures will continue to monitor this issue and adjust accruals, as might be required, based upon additional information and further developments. The claim may be resolved through negotiation or arbitration. To the extent that excess boil-off claims result in a settlement, the Partnership would be indemnified by Höegh LNG for its share of the cash impact of any settlement. However, other concessions, if any, would not be expected to be indemnified.

As of June 30, 2019, the Partnership had outstanding interest rate swap agreements for a total notional amount of $381.9 million to hedge against the interest rate risks of its long-term debt under the Lampung facility and the $385 million facility. The Partnership applies hedge accounting for derivative instruments related to those facilities. The Partnership receives interest based on three month US dollar LIBOR and pays fixed rates of 2.8% for the Lampung facility. The Partnership receives interest based on the three month US dollar LIBOR and pays a fixed rate of an average of approximately 2.8% for the $385 million facility. The carrying value of the liability for derivative instruments was a net liability of $15.6 million as of June 30, 2019. The Partnership adopted the revised guidance for Derivatives and Hedging, Targeted Improvements to Accounting for Hedging Activities on January 1, 2019 on a prospective basis. Amortization amounts reclassified or recorded to earnings for the Partnership's interest rate swaps for the three months ended June 30, 2019 are presented as a component of interest expense compared with the presentation in previous periods in the gain (loss) on derivatives instruments line item in the consolidated statements of income.

The Partnership's share of the joint ventures is accounted for using the equity method. As a result, the Partnership's share of the joint ventures' cash, restricted cash, outstanding debt, interest rate swaps and other balance sheet items are reflected net on the line "accumulated losses in joint ventures" on the consolidated balance sheet and are not included in the balance sheet figures disclosed above.

On May 13, 2019, the Partnership drew $3.5 million under the $85 million revolving credit facility.

On May 15, 2019, the Partnership paid a quarterly cash distribution of $15.0 million, or $0.44 per common and subordinated unit, with respect to the first quarter of 2019.

On May 15, 2019, the Partnership paid a cash distribution of $3.4 million, or $0.546875 per Series A preferred unit, for the period commencing on February 15, 2019 to May 14, 2019.

On August 12, 2019, the Partnership drew $48.3 million on the revolving credit facility under the $385 million facility. On August 13, 2019, the Partnership repaid $34.0 million on the $85 million revolving credit facility.

On August 14, 2019, the Partnership paid a cash distribution of $15.0 million, or $0.44 per common and subordinated unit, with respect to the second quarter of 2019, equivalent to $1.76 per unit on an annual basis.

On August 15, 2019, the Partnership paid a cash distribution of $3.4 million, or $0.546875 per Series A preferred unit, for the period commencing on May 15, 2019 to August 14, 2019.

Outlook

As discussed under "Financing and Liquidity" above, there is additional maintenance expense expected during the on-water renewal class survey for the PGN FSRU Lampung during the third quarter of 2019.

A subsidiary of the Partnership, as the owner of the Höegh Gallant, has a lease and maintenance agreement with EgyptCo until April 2020. To date, the Partnership has not entered a new contract for the Höegh Gallant from April 2020. Pursuant to an option agreement, the Partnership has the right to cause Höegh LNG to charter the Höegh Gallant from the expiration or termination of the EgyptCo charter until July 2025, at a rate equal to 90% of the rate payable pursuant to the current charter with EgyptCo, plus any incremental taxes or operating expenses as a result of the new charter. Höegh LNG's ability to make payments to the Partnership with respect to an exercise of the option by the Partnership may be affected by events beyond either of the control of Höegh LNG or the Partnership, including opportunities to obtain new employment for the vessel, prevailing economic, financial and industry conditions. If market or other economic conditions deteriorate, Höegh LNG's ability to meet its obligations to the Partnership may be impaired. If Höegh LNG is unable to meet its obligations to the Partnership for the option, the Partnership's financial condition, results of operations and ability to make cash distributions to unitholders could be materially adversely affected.

Pursuant to the omnibus agreement that the Partnership entered into with Höegh LNG at the time of the initial public offering, Höegh LNG is obligated to offer to the Partnership any floating storage and regasification unit ("FSRU") or LNG carrier operating under a charter of five or more years.

Höegh LNG is actively pursuing the following projects that are subject to a number of conditions, outside its control, impacting the timing and the ability of such projects to go forward. The Partnership may have the opportunity in the future to acquire the FSRUs listed below, when operating under a charter of five years or more, if one of the following projects is fulfilled:

    --  On December 21, 2018, Höegh LNG announced that it had entered a
        contract with AGL Shipping Pty Ltd. ("AGL"), a subsidiary of AGL Energy
        Ltd., to provide an FSRU to service AGL's proposed import facility in
        Victoria, Australia. The contract is for a period of 10 years and is
        subject to AGL's final investment decision by the board of directors of
        AGL Energy Ltd. for the project and obtaining necessary regulatory and
        environmental approvals.
    --  Höegh LNG has also won exclusivity to provide an FSRU for potential
        projects for Australian Industrial Energy ("AIE") at Port Kembla,
        Australia and for another company in the Asian market. Both projects are
        dependent on a variety of regulatory approvals or permits as well as
        final investment decisions.

Höegh LNG has two operating FSRUs, the Höegh Giant (HHI Hull No. 2552), which was delivered from the shipyard on April 27, 2017, and the Höegh Esperanza (HHI Hull No. 2865), which was delivered from the shipyard on April 5, 2018. The Höegh Giant is operating on a three-year contract that commenced on February 7, 2018 with Gas Natural SGD, SA ("Gas Natural Fenosa"). The Höegh Esperanza is operating on a three-year contract that commenced on June 7, 2018 with CNOOC Gas & Power Trading and Marketing Ltd. ("CNOOC") which has an option for a one-year extension. Höegh LNG took delivery of the Höegh Gannet (HHI Hull No. 2909) on December 6, 2018, which serves on a 15 month LNGC contract with Naturgy. Höegh LNG has one additional FSRU, named Höegh Galleon, on order (SHI Hull No. 2220). The Höegh Galleon will operate on an interim LNGC contract with Cheniere Marketing International LLP ("Cheniere") commencing in September 2019 following its delivery from the shipyard.

Pursuant to the terms of the omnibus agreement, the Partnership will have the right to purchase the Höegh Giant, the Höegh Esperanza, the Höegh Gannet and the Höegh Galleon following acceptance by the respective charterer of the related FSRU under a contract of five years or more, subject to reaching an agreement with Höegh LNG regarding the purchase price.

There can be no assurance that the Partnership will acquire any vessels from Höegh LNG or of the terms upon which any such acquisition may be made.

Presentation of Second Quarter 2019 Results

A presentation will be held today, Thursday, August 22, 2019, at 8:30 A.M. (EST) to discuss financial results for the second quarter of 2019. The results and presentation material will be available for download at http://www.hoeghlngpartners.com.

The presentation will be immediately followed by a Q&A session. Participants will be able to join this presentation using the following details:

a. Webcast

https://www.webcaster4.com/Webcast/Page/942/31402

b. Teleconference



            International call:                 +1-412-542-4123



            US Toll Free call:                  +1-855-239-1375



            Canada Toll Free call:              +1-855-669-9657

Participants should ask to be joined into the Höegh LNG Partners LP call.

There will be a Q&A session after the presentation. Information on how to ask questions will be given at the beginning of the Q&A session.

For those unable to participate in the conference call, a replay will be available from one hour after the end of the conference call until August 29, 2019.

The replay dial-in numbers are as follows:



              International call:       
              +1-412-317-0088



              US Toll Free call:        
              +1-877-344-7529


               Canada Toll Free call:    
              +1-855-669-9658



              Replay passcode:                             10134367

Financial Results on Form 6-K

The Partnership has filed a Form 6-K with the SEC with detailed information on the Partnership's results of operations for the three and six months ended June 30, 2019, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and unaudited condensed interim consolidated financial statements. The Form 6-K can be viewed on the SEC's website: http://www.sec.gov and at HMLP's website: http://www.hoeghlngpartners.com

FORWARD-LOOKING STATEMENTS

This press release contains certain forward-looking statements concerning future events and the Partnership's operations, performance and financial condition. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words "believe," "anticipate," "expect," "estimate," "future," "project," "will be," "will continue," "will likely result," "plan," "intend" or words or phrases of similar meanings. These statements involve known and unknown risks and are based upon a number of assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which are beyond the Partnership's control. Actual results may differ materially from those expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially include, but are not limited to:

    --  market conditions and trends for FSRUs and LNG carriers, including hire
        rates, vessel valuations, technological advancements, market preferences
        and factors affecting supply and demand of LNG, LNG carriers, and FSRUs;
    --  the Partnership's distribution policy and ability to make cash
        distributions on the Partnership's units or any increases in the
        quarterly distributions on the Partnership's common units;
    --  restrictions in the Partnership's debt agreements and pursuant to local
        laws on the Partnership's joint ventures' and subsidiaries' ability to
        make distributions;
    --  the Partnership's ability to settle or resolve the boil-off claim for
        the joint ventures, including the estimated amount thereof;
    --  the ability of Höegh LNG to satisfy its indemnification obligations to
        the Partnership, including in relation to the boil-off claim;
    --  the Partnership's ability to compete successfully for future chartering
        opportunities;
    --  demand in the FSRU sector or the LNG shipping sector; including demand
        for the Partnership's vessels;
    --  the Partnership's ability to purchase additional vessels from Höegh LNG
        in the future;
    --  the Partnership's ability to integrate and realize the anticipated
        benefits from acquisitions;
    --  the Partnership's anticipated growth strategies; including the
        acquisition of vessels;
    --  the Partnership's anticipated receipt of dividends and repayment of
        indebtedness from subsidiaries and joint ventures;
    --  effects of volatility in global prices for crude oil and natural gas;
    --  the effect of the worldwide economic environment;
    --  turmoil in the global financial markets;
    --  fluctuations in currencies and interest rates;
    --  general market conditions, including fluctuations in hire rates and
        vessel values;
    --  changes in the Partnership's operating expenses, including drydocking,
        on-water class surveys, insurance costs and bunker costs;
    --  the Partnership's ability to comply with financing agreements and the
        expected effect of restrictions and covenants in such agreements;
    --  the financial condition, liquidity and creditworthiness of the
        Partnership's existing or future customers and their ability to satisfy
        their obligations under the Partnership's contracts;
    --  the Partnership's ability to replace existing borrowings, make
        additional borrowings and to access public equity and debt capital
        markets;
    --  planned capital expenditures and availability of capital resources to
        fund capital expenditures;
    --  the exercise of purchase options by the Partnership's customers;
    --  the Partnership's ability to perform under its contracts and maintain
        long-term relationships with its customers;
    --  the Partnership's ability to leverage Höegh LNG's relationships and
        reputation in the shipping industry;
    --  the Partnership's continued ability to enter into long-term, fixed-rate
        charters and the hire rate thereof;
    --  the operating performance of the Partnership's vessels and any related
        claims by Total S.A. or other customers;
    --  the Partnership's ability to maximize the use of its vessels, including
        the redeployment or disposition of vessels no longer under long-term
        charters;
    --  the Partnership's ability to compete successfully for future chartering
        and newbuilding opportunities;
    --  timely acceptance of the Partnership's vessels by their charterers;
    --  termination dates and extensions of charters;
    --  the cost of, and the Partnership's ability to comply with, governmental
        regulations and maritime self-regulatory organization standards, as well
        as standard regulations imposed by its charterers applicable to its
        business;
    --  economic substance laws and regulations adopted or considered by various
        jurisdictions of formation or incorporation of the Partnership and
        certain of its subsidiaries;
    --  availability of skilled labor, vessel crews and management;
    --  the ability of Höegh LNG to meet its financial obligations to the
        Partnership, including its indemnity, guarantee and option obligations;
    --  the number of offhire days and drydocking requirements, including the
        Partnership's ability to complete scheduled drydocking on time and
        within budget;
    --  the Partnership's incremental general and administrative expenses as a
        publicly traded limited partnership and the Partnership's fees and
        expenses payable under the Partnership's ship management agreements, the
        technical information and services agreement and the administrative
        services agreements;
    --  the anticipated taxation of the Partnership, its subsidiaries and
        affiliates and distributions to its unitholders;
    --  estimated future maintenance and replacement capital expenditures;
    --  the Partnership's ability to retain key employees;
    --  customers' increasing emphasis on environmental and safety concerns;
    --  potential liability from any pending or future litigation;
    --  risks inherent in the operation of the Partnership's vessels including
        potential disruption due to accidents, political events, piracy or acts
        by terrorists;
    --  future sales of the Partnership's common units and Series A preferred
        units in the public market;
    --  the Partnership's business strategy and other plans and objectives for
        future operations;
    --  the Partnership's ability to maintain effective internal control over
        financial reporting and effective disclosure controls and procedures;
        and
    --  other factors listed from time to time in the reports and other
        documents that the Partnership files with the SEC, including the
        Partnership's Annual Report on Form 20-F for the year ended December 31,
        2018 and subsequent quarterly reports on Form 6-K.

All forward-looking statements included in this press release are made only as of the date of this press release. New factors emerge from time to time, and it is not possible for the Partnership to predict all of these factors. Further, the Partnership cannot assess the impact of each such factor on its business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement. The Partnership does not intend to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.


                                                                                   
              
                HÖEGH LNG PARTNERS LP


                                                                         
              
                UNAUDITED CONDENSED INTERIM CONSOLIDATED


                                                                                   
              
                STATEMENTS OF INCOME


                                                                  
              
                (in thousands of U.S. dollars, except per unit amounts)




                                                                          Three months ended                                                   Six months ended


                                                         
          
             June 30,                             
              
                June 30,



                                                           2019                                            2018                                                2019             2018




     
                REVENUES



     Time charter revenues                                         $
              33,777                                              $
              35,510              $
           69,852  $
            70,395



     Other revenue                                                                                                                             1,100                           64             1,100




     
                Total revenues                                               33,777                                                          36,610                       69,916            71,495




     
                OPERATING EXPENSES



     Vessel operating expenses                                                (9,064)                                                        (5,462)                    (14,957)         (11,215)



     Administrative expenses                                                  (2,272)                                                        (2,101)                     (4,848)          (4,888)



     Depreciation and amortization                                            (5,589)                                                        (5,268)                    (10,912)         (10,536)




     
                Total operating expenses                                   (16,925)                                                       (12,831)                    (30,717)         (26,639)




     Equity in earnings (losses) of joint ventures                            (1,575)                                                          5,111                      (1,223)           14,481




     
                Operating income (loss)                                      15,277                                                          28,890                       37,976            59,337




     
                FINANCIAL INCOME (EXPENSE), NET



     Interest income                                                              297                                                             174                          496               361



     Interest expense                                                         (7,148)                                                        (6,918)                    (13,984)         (13,782)



     Gain (loss) on debt extinguishment                                                                                                                                    1,030



     Gain (loss) on derivative instruments                                                                                                       544                                         1,175



     Other items, net                                                           (759)                                                          (880)                     (1,806)          (1,486)




     
                Total financial income (expense), net                       (7,610)                                                        (7,080)                    (14,264)         (13,732)




     
                Income (loss) before tax                                      7,667                                                          21,810                       23,712            45,605




     Income tax expense                                                       (1,511)                                                        (1,866)                     (3,421)          (3,975)




     
                Net income (loss)                                 $
              6,156                                              $
              19,944              $
           20,291  $
            41,630




     Preferred unitholders' interest in net income                              3,378                                                           3,003                        6,742             5,663




     Limited partners' interest in net income (loss)                $
              2,778                                              $
              16,941              $
           13,549  $
            35,967






     
                Earnings per unit



     Common unit public (basic and diluted)                          $
              0.07                                                $
              0.50                $
           0.38    $
            1.07



     Common unit Höegh LNG (basic and diluted)                       $
              0.10                                                $
              0.53                $
           0.44    $
            1.11



     Subordinated unit (basic and diluted)                           $
              0.10                                                $
              0.53                $
           0.44    $
            1.11


                                                                      
          
               HÖEGH LNG PARTNERS LP


                                                                  
        
           UNAUDITED CONDENSED INTERIM CONSOLIDATED


                                                                         
         
                BALANCE SHEETS


                                                                    
          
            (in thousands of U.S. dollars)




                                                                                   
              
                As of



                                                                                                         June 30,                       December 31,


                                                                                                             2019                                2018




     
                ASSETS



     
                Current assets



     Cash and cash equivalents                                                                                            $
        27,137                  $
        26,326



     Restricted cash                                                                                                             8,011                         6,003



     Trade receivables                                                                                                           4,485                         1,228



     Amounts due from affiliates                                                                                                 2,481                         4,328



     Inventory                                                                                                                     461                           646



     Current portion of net investment in direct financing lease                                                                 4,356                         4,168



     Derivative instruments                                                                                                                                   1,199



     Prepaid expenses and other receivables                                                                                      4,357                         2,967




     
                Total current assets                                                                                          51,288                        46,865




     
                Long-term assets



     Restricted cash                                                                                                            12,887                        13,125



     Vessels, net of accumulated depreciation                                                                                  650,596                       658,311



     Other equipment                                                                                                               419                           445



     Intangibles and goodwill                                                                                                   18,939                        20,739



     Advances to joint ventures                                                                                                  3,679                         3,536



     Net investment in direct financing lease                                                                                  276,679                       278,905



     Long-term deferred tax asset                                                                                                  199                           174



     Other long-term assets                                                                                                        936                           940




     
                Total long-term assets                                                                                       964,334                       976,175




     
                Total assets                                                                                         $
        1,015,622               $
        1,023,040


                                                                 
             
              HÖEGH LNG PARTNERS LP


                                                             
         
             UNAUDITED CONDENSED INTERIM CONSOLIDATED


                                                                     
           
                BALANCE SHEETS


                                                               
           
              (in thousands of U.S. dollars)




                                                                         
            
                As of



                                                                                             June 30,                           December 31,


                                                                                                 2019                                    2018




     
                LIABILITIES AND EQUITY



     
                Current liabilities



     Current portion of long-term debt                                                                           $
         44,660                  $
        45,458



     Trade payables                                                                                                        490                           529



     Amounts due to owners and affiliates                                                                                3,691                         2,301



     Value added and withholding tax liability                                                                             722                         1,175



     Derivative instruments                                                                                              2,199                           259



     Accrued liabilities and other payables                                                                             11,952                         7,458




     
                Total current liabilities                                                                             63,714                        57,180




     
                Long-term liabilities



     Accumulated losses of joint ventures                                                                                4,031                         2,808



     Long-term debt                                                                                                    385,085                       390,087



     Revolving credit facility due to owners and affiliates                                                             42,792                        39,292



     Derivative instruments                                                                                             13,438                         2,438



     Long-term tax liability                                                                                             1,936                         1,725



     Long-term deferred tax liability                                                                                   10,878                         8,974



     Other long-term liabilities                                                                                           137                            99




     
                Total long-term liabilities                                                                          458,297                       445,423




     
                Total liabilities                                                                                    522,011                       502,603




     
                EQUITY



     8.75% Series A Preferred Units                                                                                    152,590                       151,259



     Common units public                                                                                               317,626                       325,250



     Common units Höegh LNG                                                                                              5,813                         6,844



     Subordinated units                                                                                                 35,970                        42,421



     Accumulated other comprehensive income (loss)                                                                    (18,388)                      (5,337)




     
                Total partners' capital                                                                              493,611                       520,437




     
                Total equity                                                                                         493,611                       520,437




     
                Total liabilities and equity                                                                $
         1,015,622               $
        1,023,040


                                                                                                       
          
              HÖEGH LNG PARTNERS LP


                                                                                                  
          
          UNAUDITED CONDENSED INTERIM CONSOLIDATED


                                                                                                      
          
              STATEMENTS OF CASH FLOWS


                                                                                                    
          
             (in thousands of U.S. dollars)




                                                                                                                                                                     Three months ended

                                                                                                                                                         
          
        June 30,



                                                                                                                                                           2019                         2018




     
                OPERATING ACTIVITIES



     Net income (loss)                                                                                                                                           $
          6,156              $
        19,944



     Adjustments to reconcile net income to net cash provided by (used in) operating activities:



          Depreciation and amortization                                                                                                                                  5,589                     5,268



          Equity in losses (earnings) of joint ventures                                                                                                                  1,575                   (5,111)



          Changes in accrued interest income on advances to joint ventures                                                                                                (73)                     (63)



          Amortization of deferred debt issuance cost and fair value of debt assumed                                                                                       639                       176



          Amortization in revenue for above market contract                                                                                                                905                       905



          Expenditure for drydocking                                                                                                                                   (2,862)



          Changes in accrued interest expense                                                                                                                            (628)                    (982)



          Receipts from repayment of principal on direct financing lease                                                                                                 1,030



          Unrealized foreign exchange losses (gains)                                                                                                                        52                       201



          Unrealized loss (gain) on derivative instruments                                                                                                                  24                     (544)



          Non-cash revenue: tax paid directly by charterer                                                                                                               (220)                    (214)



          Non-cash income tax expense: tax paid directly by charterer                                                                                                      220                       214



          Deferred tax expense and provision for tax uncertainty                                                                                                           910                     1,426



          Issuance of units for Board of Directors' fees                                                                                                                   155                       160



          Other adjustments                                                                                                                                                159                       114



     Changes in working capital:



          Trade receivables                                                                                                                                                973                     2,089



          Inventory                                                                                                                                                        185                         9



          Prepaid expenses and other receivables                                                                                                                         1,179                     (492)



          Trade payables                                                                                                                                                 (130)                    (218)



          Amounts due to owners and affiliates                                                                                                                           1,862                   (2,222)



          Value added and withholding tax liability                                                                                                                        760                       961



          Accrued liabilities and other payables                                                                                                                         (754)                    (974)




     
                Net cash provided by (used in) operating activities                                                                                                   17,706                    20,647






     
                INVESTING ACTIVITIES



     Expenditure for vessel and other equipment                                                                                                                          (140)



     Receipts from repayment of principal on direct financing lease                                                                                                                                 943




     
                Net cash provided by (used in) investing activities                                                                                            $
          (140)                $
        943


                                                                                         
          
              HÖEGH LNG PARTNERS LP


                                                                                    
          
          UNAUDITED CONDENSED INTERIM CONSOLIDATED


                                                                                        
          
              STATEMENTS OF CASH FLOWS


                                                                                      
          
             (in thousands of U.S. dollars)




                                                                                                                                                         Three months ended

                                                                                                                                             
          
          June 30,



                                                                                                                                               2019                         2018




     
                FINANCING ACTIVITIES



     Proceeds from long-term debt                                                                                                         
          $                              
     $



     Proceeds from loans and promissory notes due to owners and affiliates                                                                                       3,500



     Repayment of long-term debt                                                                                                                              (11,165)                 (11,364)



     Repayment of amounts due to owners and affiliates                                                                                                                                 (11,500)



     Repayment of customer loan for funding of value added liability on import                                                                                                          (1,194)



     Net proceeds from issuance of common units                                                                                                                  1,029                       104



     Net proceeds from issuance of 8.75% Series A Preferred Units                                                                                                1,316                    11,681



     Cash distributions to limited partners and preferred unitholders                                                                                         (18,407)                 (17,737)



     Repayment of indemnifications received from Höegh LNG                                                                                                        (64)




     
                Net cash provided by (used in) financing activities                                                                                         (23,791)                 (30,010)






     Increase (decrease) in cash, cash equivalents and restricted cash                                                                                         (6,225)                  (8,420)



     Effect of exchange rate changes on cash, cash equivalents and restricted cash                                                                                (13)                     (54)



     Cash, cash equivalents and restricted cash, beginning of period                                                                                            54,273                    48,816




     Cash, cash equivalents and restricted cash, end of period                                                                                       $
             48,035              $
        40,342

HÖEGH LNG PARTNERS LP
UNAUDITED SEGMENT INFORMATION FOR THE QUARTER ENDED JUNE 30, 2019 AND 2018
(in thousands of U.S. dollars)

Segment information

There are two operating segments. The segment profit measure is Segment EBITDA, which is defined as earnings before interest, taxes, depreciation, amortization and other financial items (gain (loss) on debt extinguishment, gain (loss) on derivative instruments and other items, net). Segment EBITDA is reconciled to operating income and net income in the segment presentation below. The two segments are "Majority held FSRUs" and "Joint venture FSRUs." In addition, unallocated corporate costs, interest income from advances to joint ventures, and interest expense related to the outstanding balances on the $85 million revolving credit facility and the $385 million facility are included in "Other."

For the three months ended June 30, 2019 and 2018, Majority held FSRUs includes the direct financing lease related to the PGN FSRU Lampung and the operating leases related to the Höegh Gallant and the Höegh Grace.

For the three months ended June 30, 2019 and 2018, Joint venture FSRUs includes two 50% owned FSRUs, the Neptune and the Cape Ann, that operate under long term time charters with one charterer.

The accounting policies applied to the segments are the same as those applied in the financial statements, except that i) Joint venture FSRUs is presented under the proportional consolidation method for the segment note to the Partnership's financial statements and in the tables below, and under equity accounting for the consolidated financial statements and ii) internal interest income and interest expense between the Partnership's subsidiaries that eliminate in consolidation are not included in the segment columns for the other financial income (expense), net line. Under the proportional consolidation method, 50% of the Joint venture FSRUs' revenues, expenses and assets are reflected in the segment note. Management monitors the results of operations of joint ventures under the proportional consolidation method and not the equity method of accounting.


                                                                                                          
              
                HÖEGH LNG PARTNERS LP


                                                                                    
              
                UNAUDITED SEGMENT INFORMATION FOR THE QUARTER ENDED JUNE 30, 2019


                                                                                                     
              
                (in thousands of U.S. dollars)




                                                                          
     
                Three months ended June 30, 2019



                                                                              Joint venture


                                                      Majority                     FSRUs                                                                                        Total


                                                        held                  (proportional                                                                                    Segment                            Consolidated



     
                (in thousands of U.S. dollars)       FSRUs                 consolidation)                                                      Other                       reporting   Eliminations              reporting




     Time charter revenues                                    $
      33,777                                         10,752                                                                                   44,529                (10,752)    (1)               $
         33,777




     
                Total revenues                                  33,777                                         10,752                                                                                   44,529                                       33,777




     Operating expenses                                          (9,885)                                       (2,233)                                                         (1,451)                (13,569)                  2,233     (1)                    (11,336)



     Equity in earnings (losses) of joint ventures                                                                                                                                                                            (1,575)    (1)                     (1,575)




     
                Segment EBITDA                                  23,892                                          8,519                                                          (1,451)                  30,960




     Depreciation and amortization                               (5,589)                                       (2,452)                                                                                 (8,041)                  2,452     (1)                     (5,589)




     
                Operating income (loss)                         18,303                                          6,067                                                          (1,451)                  22,919                                       15,277




     Gain (loss) on derivative instruments                                                                     (4,649)                                                                                 (4,649)                  4,649     (1)



     Other financial income (expense), net                       (2,689)                                       (2,993)                                                         (4,921)                (10,603)                  2,993     (1)                     (7,610)




     
                Income (loss) before tax                        15,614                                        (1,575)                                                         (6,372)                   7,667                                        7,667




     Income tax benefit (expense)                                (1,511)                                                                                                                               (1,511)                                     (1,511)




     
                Net income (loss)                           $
      14,103                                        (1,575)                                                         (6,372)                   6,156                                 $
         6,156




     Preferred unitholders' interest in net income                                                                                                                                                                              3,378     (2)                       3,378




     Limited partners' interest in net income (loss)          $
      14,103                                        (1,575)                                                         (6,372)                   6,156                 (3,378)    (2)                $
         2,778



              (1)              Eliminations reverse each of the
                                  income statement line items of
                                  the proportional amounts for
                                  Joint venture FSRUs and record
                                  the Partnership's share of the
                                  Joint venture FSRUs net income
                                  (loss) to Equity in earnings
                                  (loss) of joint ventures.





              (2)              Allocates the preferred
                                  unitholders' interest in net
                                  income to the preferred
                                  unitholders.


                                                                                                             
              
                HÖEGH LNG PARTNERS LP


                                                                                       
              
                UNAUDITED SEGMENT INFORMATION FOR THE QUARTER ENDED JUNE 30, 2018


                                                                                                        
              
                (in thousands of U.S. dollars)




                                                                              
     
               Three months ended June 30, 2018



                                                                                  Joint venture


                                                      Majority                         FSRUs                                                                                       Total


                                                        held                      (proportional                                                                                   Segment                            Consolidated



     
                (in thousands of U.S. dollars)       FSRUs                     consolidation)                                                      Other                      reporting   Eliminations              reporting




     Time charter revenues                                    $
      35,510                                             10,576                                                                                  46,086              (10,576)   (1)               $
        35,510



     Other revenue                                                 1,100 (3)                                                                                                                                 1,100                         (1)                      1,100




     
                Total revenues                                  36,610                                             10,576                                                                                  47,186                                    36,610




     Operating expenses                                          (6,383)                                           (2,709)                                                        (1,180)                (10,272)                2,709    (1)                    (7,563)



     Equity in earnings (losses) of joint ventures                                                                                                                                                                               5,111    (1)                      5,111




     
                Segment EBITDA                                  30,227                                              7,867                                                         (1,180)                  36,914




     Depreciation and amortization                               (5,268)                                           (2,399)                                                                                (7,667)                2,399    (1)                    (5,268)




     
                Operating income (loss)                         24,959                                              5,468                                                         (1,180)                  29,247                                    28,890




     Gain (loss) on derivative instruments                           544                                              2,967                                                                                   3,511               (2,967)   (1)                        544



     Other financial income (expense), net                       (6,839)                                           (3,324)                                                          (785)                (10,948)                3,324    (1)                    (7,624)




     
                Income (loss) before tax                        18,664                                              5,111                                                         (1,965)                  21,810                                    21,810




     Income tax expense                                          (1,845)                                                                                                             (21)                 (1,866)                                  (1,866)




     
                Net income (loss)                           $
      16,819                                              5,111                                                         (1,986)                  19,944                             $
         19,944




     Preferred unitholders' interest in net income                                                                                                                                                                               3,003    (2)                      3,003




     Limited partners' interest in net income (loss)          $
      16,819                                              5,111                                                         (1,986)                  19,944               (3,003)   (2)               $
        16,941



              (1)              Eliminations reverse each of the
                                  income statement line items of
                                  the proportional amounts for
                                  Joint venture FSRUs and record
                                  the Partnership's share of the
                                  Joint venture FSRUs net income
                                  (loss) to Equity in earnings
                                  (loss) of joint ventures.





              (2)              Allocates the preferred
                                  unitholders' interest in net
                                  income to the preferred
                                  unitholders.





              (3)              Other revenue consists of
                                  insurance proceeds received for
                                  claims related to repairs under
                                  the Mooring warranty. The
                                  Partnership was indemnified by
                                  Höegh LNG for the cost of the
                                  repairs related to the Mooring,
                                  subject to repayment to the
                                  extent recovered from insurance
                                  proceeds. The amount was
                                  refunded to Höegh LNG during the
                                  third quarter of 2018.


                                                                                        
              
                HÖEGH LNG PARTNERS LP


                                                                          
              
                UNAUDITED SCHEDULE OF FINANCIAL INCOME AND EXPENSE


                                                                                    
              
                (In thousands of U.S. dollars)





     The following table includes the financial income (expense), net for the three months ended June 30, 2019 and 2018.




                                                                                                                                                                   Three months ended


                                                                                                                                                     
            
            June 30,




     
                (in thousands of U.S. dollars)                                                                                                      2019                           2018




     
                Interest income                                                                                                                              $
          297                   $
          174




     
                Interest expense:



     Interest expense                                                                                                                                              (6,361)                      (6,742)



     Commitment fees                                                                                                                                                 (148)



     Amortization of debt issuance cost and fair value of debt assumed                                                                                               (639)                        (176)




     
                Total interest expense                                                                                                                           (7,148)                      (6,918)




     
                Gain (loss) on derivative instruments                                                                                                                                             544




     
                Other items, net:



     Unrealized foreign exchange gain (loss)                                                                                                                          (30)                        (212)



     Realized foreign exchange gain (loss)                                                                                                                             (6)                           14



     Bank charges, fees and other                                                                                                                                     (85)                         (37)



     Withholding tax on interest expense and other                                                                                                                   (638)                        (645)




     
                Total other items, net                                                                                                                             (759)                        (880)




     Total financial income (expense), net                                                                                                                 $
          (7,610)                $
        (7,080)

Appendix A: Segment EBITDA

Non-GAAP Financial Measures

Segment EBITDA. EBITDA is defined as earnings before interest, depreciation and amortization and taxes. Segment EBITDA is defined as earnings before interest, depreciation and amortization, taxes and other financial items. Other financial items consist of gain (loss) on debt extinguishment, gain (loss) on derivative instruments and other items, net (including foreign exchange gains and losses and withholding tax on interest expense). Segment EBITDA is used as a supplemental financial measure by management and external users of financial statements, such as the Partnership's lenders, to assess its financial and operating performance. The Partnership believes that Segment EBITDA assists its management and investors by increasing the comparability of its performance from period to period and against the performance of other companies in the industry that provide Segment EBITDA information. This increased comparability is achieved by excluding the potentially disparate effects between periods or companies of interest, depreciation and amortization, taxes and other financial items, which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which items may significantly affect net income between periods. The Partnership believes that including Segment EBITDA as a financial and operating measure benefits investors in (a) selecting between investing in it and other investment alternatives and (b) monitoring its ongoing financial and operational strength in assessing whether to continue to hold common units. Segment EBITDA is a non-GAAP financial measure and should not be considered an alternative to net income, operating income or any other measure of financial performance presented in accordance with U.S. GAAP. Segment EBITDA excludes some, but not all, items that affect net income, and these measures may vary among other companies. Therefore, Segment EBITDA as presented below may not be comparable to similarly titled measures of other companies. The following tables reconcile Segment EBITDA for each of the segments and the Partnership as a whole to net income (loss), the comparable U.S. GAAP financial measure, for the periods presented:


                                                                                   
             
     Three months ended June 30, 2019



                                                                              Joint venture


                                                       Majority                    FSRUs                                                Total


                                                         held                 (proportional                                            Segment                                  Consolidated



     
                (in thousands of U.S. dollars)        FSRUs                consolidation)                                    Other reporting       Eliminations (1)            reporting




     
                Reconciliation to net income (loss)



     Net income (loss)                                             $
     14,103                        (1,575)                             (6,372)                        6,156                                        $
     6,156         (3)



     Interest income                                                   (181)                         (108)                               (116)                        (405)                     108      (4)                     (297)



     Interest expense                                                  2,169                          3,098                                4,979                        10,246                  (3,098)     (4)                     7,148



     Depreciation and amortization                                     5,589                          2,452                                                             8,041                  (2,452)     (5)                     5,589



     Other financial items (2)                                           701                          4,652                                   58                         5,411                  (4,652)     (6)                       759



     Income tax (benefit) expense                                      1,511                                                                                           1,511                                           1,511



     
                Equity in earnings of JVs:                                                                                                                                                  2,990      (4)                     2,990


     Interest (income) expense, net



     
                Equity in earnings of JVs:                                                                                                                                                  2,452      (5)                     2,452


     Depreciation and amortization



     
                Equity in earnings of JVs:                                                                                                                                                  4,652      (6)                     4,652


     Other financial items (2)




     
                Segment EBITDA                               $
     
       23,892                          8,519                              (1,451)                       30,960                                   $
     
       30,960







                                                                                   
             
     Three months ended June 30, 2018

                                                                                                                                                  ---

                                                                              Joint venture


                                                       Majority                    FSRUs                                                Total


                                                         held                 (proportional                                            Segment                                  Consolidated



     
                (in thousands of U.S. dollars)        FSRUs                consolidation)                                    Other reporting       Eliminations (1)            reporting




     
                Reconciliation to net income (loss)



     Net income (loss)                                             $
     16,819                          5,111                              (1,986)                       19,944                                       $
     19,944         (3)



     Interest income                                                    (76)                          (59)                                (98)                        (233)                      59      (4)                     (174)



     Interest expense                                                  6,075                          3,383                                  843                        10,301                  (3,383)     (4)                     6,918



     Depreciation and amortization                                     5,268                          2,399                                                             7,667                  (2,399)     (5)                     5,268



     Other financial items (2)                                           296                        (2,967)                                  40                       (2,631)                   2,967      (6)                       336



     Income tax (benefit) expense                                      1,845                                                                 21                         1,866                                           1,866



     
                Equity in earnings of JVs:                                                                                                                                                  3,324      (4)                     3,324


     Interest (income) expense, net



     
                Equity in earnings of JVs:                                                                                                                                                  2,399      (5)                     2,399


     Depreciation and amortization



     
                Equity in earnings of JVs:                                                                                                                                                (2,967)     (6)                   (2,967)


     Other financial items (2)




     
                Segment EBITDA                               $
     
       30,227                          7,867                              (1,180)                       36,914                                   $
     
       36,914



     (1) Eliminations reverse each of the income
            statement reconciling line items of the
            proportional amounts for Joint venture FSRUs
            that are reflected in the consolidated net
            income for the Partnership's share of the Joint
            venture FSRUs net income (loss) on the Equity
            in earnings (loss) of joint ventures line item
            in the consolidated income statement. Separate
            adjustments from the consolidated net income to
            Segment EBITDA for the Partnership's share of
            the Joint venture FSRUs are included in the
            reconciliation lines starting with "Equity in
            earnings of JVs."





     (2) Other financial items consist of gains and
            losses on derivative instruments and other
            items, net including foreign exchange gains or
            losses and withholding tax on interest expense.





     (3) There is no adjustment between net income for
            Total Segment reporting and the Consolidated
            reporting because the net income under the
            proportional consolidation and equity method of
            accounting is the same.





     (4) Interest income and interest expense for the
            Joint venture FSRUs is eliminated from the
            Total Segment reporting to agree to the
            interest income and interest expense in the
            Consolidated reporting and reflected as a
            separate adjustment to the equity accounting on
            line Equity in earnings of JVs: Interest
            (income) expense for the Consolidated
            reporting.





     (5) Depreciation and amortization for the Joint
            venture FSRUs is eliminated from the Total
            Segment reporting to agree to the depreciation
            and amortization in the Consolidated reporting
            and reflected as a separate adjustment to the
            equity accounting on line Equity in earnings of
            JVs: Depreciation and amortization for the
            Consolidated reporting.





     (6) Other financial items for the Joint venture
            FSRUs are eliminated from the Segment reporting
            to agree to the Other financial items in the
            Consolidated reporting and reflected as a
            separate adjustment to the equity accounting on
            the line Equity in earnings of JVs: Other
            financial items for the Consolidated reporting.

Appendix B: Distributable Cash Flow

Distributable cash flow represents Segment EBITDA adjusted for cash collections on principal payments on the direct financing lease, amortization in revenues for above market contracts less non-cash revenue: tax paid directly by charterer, amortization of deferred revenues for the joint ventures, interest income , interest expense less amortization of debt issuance cost, amortization and gain on cash flow hedges included in interest expense and proceeds from settlement of derivatives, other items (net), unrealized foreign exchange losses (gains), current income tax benefit (expense), net of uncertain tax position less non-cash income tax: tax paid directly by charterer, and other adjustments such as indemnification paid or to be paid by Höegh LNG for legal expenses related to the boil-off claim, non-budgeted expenses or losses, or prior period indemnifications refunded to, or to be refunded to, Höegh LNG for amounts recovered from insurance or the charterer, distributions on the Series A preferred units and estimated maintenance and replacement capital expenditures. Cash collections on the direct financing lease investment with respect to the PGN FSRU Lampung consist of the difference between the payments under time charter and the revenues recognized as a financing lease (representing the payment of the principal recorded as a receivable). Amortization in revenues for above market contracts consist of the non-cash amortization of the intangible for the above market time charter contract related to the acquisitions of the Höegh Gallant and Höegh Grace. Amortization of deferred revenues for the joint ventures accounted for under the equity method consist of non-cash amortization to revenues of charterer payments for modifications and drydocking to the vessels. Non-cash revenue: tax paid directly by charterer and non-cash income tax: tax paid directly by charterer consists of certain taxes paid by the charterer directly to the Colombian tax authorities on behalf of the Partnership's subsidiaries which is recorded as a component of time charter revenues and current income tax expenses. Estimated maintenance and replacement capital expenditures, including estimated expenditures for drydocking, represent capital expenditures required to maintain over the long-term the operating capacity of, or the revenue generated by, the Partnership's capital assets.

Distributable cash flow is presented starting with Segment EBITDA taken from the total segment reporting using the proportional consolidation method for the Partnership's 50% interests in the joint ventures as shown in Appendix A. Therefore, the adjustments to Segment EBITDA include the Partnership's share of the joint venture's adjustments. The Partnership believes distributable cash flow is an important liquidity measure used by management and investors in publicly traded partnerships to compare cash generating performance of the Partnership' cash generating assets from period to period by adjusting for cash and non-cash items that could potentially have a disparate effect between periods, and to compare the cash generating performance for specific periods to the cash distributions (if any) that are expected to be paid to limited partners. The Partnership also believes distributable cash flow benefits investors in comparing its cash generating performance to other companies that account for time charters as operating leases rather than financial leases, or that do not have non-cash amortization of intangibles or deferred revenue. Distributable cash flow is a non-GAAP liquidity measure and should not be considered as an alternative to net cash provided by operating activities, or any other measure of the Partnership's liquidity or cash flows calculated in accordance with GAAP. Distributable cash flow excludes some, but not all, items that affect net cash provided by operating activities and the measures may vary among companies. For example, distributable cash flow does not reflect changes in working capital balances. Distributable cash flow also includes some items that do not affect net cash provided by operating activities. Therefore, distributable cash flow may not be comparable to similarly titled measures of other companies. Distributable cash flow is not the same measure as available cash or operating surplus, both of which are defined by the Partnership's partnership agreement. The first table below reconciles distributable cash flow to Segment EBITDA, which is reconciled to net income, the most directly comparable GAAP measure for Segment EBITDA, in Appendix A. Refer to Appendix A for the definition of Segment EBITDA. The second table below reconciles distributable cash flow to net cash provided by operating activities, the most directly comparable GAAP measure for liquidity.



       
                (in thousands of U.S. dollars)                              Three months ended

                                                                                    June 30, 2019

    ---


       Segment EBITDA                                                                                  $
       30,960



       Cash collection/Principal payment on direct financing lease                                           1,030



       Amortization in revenues for above market contracts                                                     905



       Non-cash revenue: Tax paid directly by charterer                                                      (220)



       
                Equity in earnings of JVs: Amortization of deferred revenue                              (634)



       Interest income (1)                                                                                     405



       Interest expense (1)                                                                               (10,246)



       Amortization of debt issuance cost                                                                      681



       Amortization and gain on cash flow hedges included in interest expense                                   24



       Other items, net (1)                                                                                  (761)



       Unrealized foreign exchange losses (gains)                                                               30



       Current income tax benefit (expense), net of uncertain tax position                                   (601)



       Non-cash income tax: Tax paid directly by charterer                                                     220



       
                Other adjustments:



       Distributions relating to Series A preferred units (2)                                              (3,378)



       Estimated maintenance and replacement capital expenditures                                          (5,175)




       
                Distributable cash flow                                                        $
     
         13,240



              (1)              The Partnership's interest in the
                                  joint ventures' interest income,
                                  interest expense and
                                  amortization of debt issuance
                                  cost is $108, $3,098 and $42,
                                  respectively


              (2)              Represents distributions
                                  payable on the Series A
                                  preferred units related to the
                                  three months ended June 30,
                                  2019

Reconciliation of distributable cash flows to net cash provided by (used in) operating activities



       
                (in thousands of U.S. dollars)                       Three months ended

                                                                             June 30, 2019

    ---


       Distributable cash flow                                                                  $
      13,240


        Estimated maintenance and replacement capital
         expenditures                                                                                 5,175


        Distributions relating to Series A preferred units (2)                                        3,378


                     Equity in earnings of JVs: Amortization of deferred
                      revenue                                                                           634


                     Equity in earnings of JVs: Amortization of debt
                      issuance cost                                                                    (42)


                     Equity in earnings of JVs: Depreciation and
                      amortization                                                                  (2,452)


                     Equity in earnings of JVs: Gain (loss) on derivative
                      instruments                                                                   (4,649)


        Equity in losses (earnings) of joint ventures                                                 1,575



       Expenditure for drydocking                                                                  (2,862)


        Changes in accrued interest expense and interest income                                       (701)



       Other adjustments                                                                               335



       Changes in working capital                                                                    4,075



                     Net cash provided by (used in) operating activities                     $
     
        17,706

Media contact: Steffen Føreid
Chief Executive Officer and Chief Financial Officer
+47 975 57 406
www.hoeghlngpartners.com

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SOURCE Hoegh LNG Partners LP