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  • Roger S. Conrad

New MLPs on the Seas

By Elliott H. Gue on Nov. 2, 2014

Norway-based Hoegh LNG Holdings (Oslo: HLNG, OTC: HOHLF), which bills itself as “the floating LNG company,” owns a fleet of three specialized marine vessels that transport liquefied natural gas:

  • Libra (built in 1979), which operates under shorter-term contracts;
  • Arctic Princess (2006), which Statoil (Oslo: STL, NYSE: STO) has engaged through January 2026; and
  • Arctic Lady (2006), which Total (Paris: FP, NYSE: TOT) will operate through April 2026.

The company created Hoegh LNG Partners LP (NYSE: HMLP) to help shore up its balance sheet and provide a vehicle for monetizing its investments in floating storage and regasification units (FSRU).

These specialized vessels give would-be LNG importers access to this commodity without the massive up-front capital expense and potential obsolescence associated with building a permanent regasification unit onshore.

Not only does building a FSRU entail less expense and time, but these floating units can also relocate to areas of greater need if local demand wanes.

The global fleet of operating FSRUs stands at 19 units, with another seven under development. Hoegh LNG Holdings contributed ownership interests in the following FSRUs to Hoegh LNG Partners:

  • Neptune (50 percent interest),an FSRU built in 2009 that operates under a time charter with GDF Suez (Paris: GSZ, OTC: GDFZY) until 2029;
  • Cape Ann (50 percent), an FSRU completed in 2010 that operates under a time charter with GDF Suez until 2030; and
  • Lampung (100 percent), an FSRU built in 2014 that operates under a time charter with PT Peusahaan Gas Negara Persero (Indonesia: PGAS) until 2034.

Given the long-term nature of the contracts covering its asset base, we expect the bulk of Hoegh LNG Partners’ cash flow and distribution growth to come from drop-down transactions from its general partner.

At present, potential candidates include Hoegh LNG Holdings’ two carriers that operate under long-term contracts and two FSRUs: the Independence, which secured a fixture with Lithuanian utility Klaipedos Nafta (Vilnius: KNF1L) that expires in 2024, and the Gallant, which Egyptian Natural Gas Company signed a letter of intent to engage on a five-year contract.

Meanwhile, Hoegh LNG Holdings has another FSRU slated for delivery in March 2015 that will be eligible for drop-down after securing a fixture of five years or longer.

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    • Elliott H. Gue

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Roger S. Conrad

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor