Höegh LNG (MW) is out with its Q3 figures this morning, in a report we view as credit neutral. Key take-aways:
While revenues were stable q/q on very high uptime, EBITDA declined 8% q/q on higher admin costs. Cash flow softened, with FFO down 7% q/q. Positively, we see no significant negative impact from the Gallant lease so far.
NIBD/EBITDA (adj.) remained stable at 6.8x. We expect leverage to inch up marginally in 2021, due to cash drain on Gallant. Liquidity remains firm at USD142m in cash and no material committed capex.
While none of the prospected long-term contracts looks to get FID this year (as previously guided), the Port Kembla counterparty AIE signed a 25 year lease during Q3, signalling progression is made towards FID. Moreover, HLNG has been shortlisted for a new FSRU project in the Philippines, as announced during the quarter.
Three ongoing tenders and FID on the three FSRU contracts in Australia and on the Indian subcontinent remain the most important short-term triggers for HLNG in 2021. Positive news on this front will likely have positive impact on bond prices.
EDIT 09:30 EST
HLNG (MW): subsequent to the company’s Q3 publication, the company just announced that it has entered into a binding commitment to supply H-Energy with an FSRU in Jaigarh already from Q1 21. The final agreement will be for 10 years, though with annual termination options after the first five. The issuer will allocate on of its available FSRUs currently trading as LNGC for the project. No firm FSRU rate is disclosed with the announcement. If the Gallant unit will be allocated to the project, the issuer will likely be able to mitigate the negative cash impact from the lease to the MLP. The contract will provide heavily needed cash flow visibility for the issuer, and is clearly credit positive.
