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Höegh LNG Partners LP – The Floating LNG Infrastructure MLP
1
Investor and Analyst LuncheonNew York
30 October 2018
Forward looking statements
2
This presentation contains certain forward-looking statements concerning future events and our operations, performance and financial condition. Forward-looking statements include, without limitation, anystatement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words “believe,” “anticipate,” “expect,” “estimate,” “project,” “future”, “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 inherentlysubject to significant uncertainties and contingencies, many of which are beyond our control. Actual results may differ materially from those expressed or implied by such forward-looking statements. Importantfactors that could cause actual results to differ materially include, but are not limited to: market trends for FSRUs and LNG carriers, including hire rates and factors affecting supply and demand; the Partnership'sdistribution 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 agreementsand 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 estimatedamount 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 purchase additional vessels from Höegh LNGin 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'santicipated 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 economicenvironment; 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'soperating expenses, including drydocking and insurance costs; the Partnership's ability to comply with financing agreements and the expected effect of restrictions and covenants in such agreements; the financialcondition 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 existingborrowings, including the Gallant/Grace facility, make additional borrowings and to access public equity and debt capital markets; planned capital expenditures and availability of capital resources to fund capitalexpenditures; the exercise of purchase options by the Partnership's customers; the Partnership's ability to perform under the Partnership's contracts and maintain long-term relationships with its customers; thePartnership'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; theoperating performance of the Partnership's vessels and any related claims by Total SA or other customers; the Partnership's ability to maximize the use of its vessels, including the redeployment or disposition ofvessels 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 regulationsimposed by its charterers applicable to its business; demand in the FSRU sector or the LNG shipping sector in general and the demand for the Partnership's vessels in particular; availability of skilled labor, vesselcrews and management; the ability of Höegh LNG to meet its financial obligations to the Partnership, including its indemnity, guarantee and option obligations; the Partnership's incremental general andadministrative 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 servicesagreement and the administrative services agreements; the anticipated taxation of the Partnership, its subsidiaries and affiliates and distributions to its unitholders; estimated future maintenance and replacementcapital 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; potentialdisruption of shipping routes 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 businessstrategy and other plans and objectives for future operations; the Partnership's ability to successfully remediate any material weaknesses in its internal control over financial reporting and its disclosure controls andprocedures; and other factors listed from time to time in the reports and other documents that we file with the SEC, including the Partnership's Annual Report on Form 20-F for the year ended December 31, 2017and subsequent quarterly reports on Form 6-K. All forward-looking statements included in this presentation are made only as of the date of this presentation. New factors emerge from time to time, and it is notpossible 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, maycause 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 statementscontained herein to reflect any change in our expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.
Presenters
3
Steffen FøreidCEO & CFO
Höegh LNG Partners
Sveinung J.S. StøhleChairman, Höegh LNG Partners
President & CEO, Höegh LNG
Agenda
4
Introduction to Höegh LNG Partners
Höegh LNG - FSRU leadership
LNG and FSRU markets update
Höegh LNG Partners in-depth
Steffen FøreidCEO & CFO
Höegh LNG Partners
Höegh LNG Partners LP – At a glance
5
Only publicly listed pure-play owner and operator of FSRUs
Modern assets providing critical energy infrastructure
Strong distribution coverage supported by growing portfolio of long-term contracts
Rapidly growing supply of inexpensive LNG driving FSRU adoption
GP support from a clear market leader in Höegh LNG Holdings Ltd.
1.20xDistribution coverage
ratio1
9.5%Yield
10.7 yearsAverage remaining
charter length
USD 2 bnRevenue backlog3
Form 1099For tax purposes
~$580mHMLP marketcapitalisation
BoardMajority independent
and experienced
$144 / 83 mAnnualized segment
EBITDA / net income2
1) Distribution coverage ratio is for the quarter ended June 30, 2018and represents distributable cash flow divided by distributions declared2) Segment EBITDA is a non-GAAP financial measures. See the Appendix for a reconciliation Segment EBITDA to net income, the most directly
comparable GAAP financial measure. Annualized net income and Segment EBITDA is Segment EBITDA for the quarters ended March 31, 2018 and June 30, 2018 multiplied by two
3) Revenue backlog is calculated as HMLP’s share of the monthly hire rate for each vessel multiplied by the number of months remaining for each charter
Drop-down candidates
Höegh LNG Partners
6
Höegh LNG Holdings Ltd.Listed Oslo Børs
46.1%
Fleet ownership and operation
Business development
Futurebusiness
Leif Höegh & Co Public
53.9%
Public
Long-term contracts – stable cash flows – strongdistribution coverage
Agenda
7
Introduction to Höegh LNG Partners
Höegh LNG - FSRU leadership
LNG and FSRU markets update
Höegh LNG Partners in-depth
Sveinung J.S. StøhleChairman, Höegh LNG Partners
President & CEO, Höegh LNG
Höegh LNG: Unlocking access to the expanding global LNG market
Regasification/ infrastructure ConsumptionTransportationLiquefactionProduction
The natural gas value chain
Natural Gas Liquefied Natural Gas Natural Gas
Höegh LNG focus
Construction, ownership and operation of FSRUs on long-term contracts
Höegh LNG business model
8
FSRUs: Time and cost-efficient access to global LNG markets
9
Installation time reduced to 2 weeks, with jetty in place
20-50% of the installation cost relative to land-based
Subject to fewer regulations, depending on location
Flexibility to move to new site or trade as LNGC
4-6 years to develop green-field regas plants
Cost: USD 1bn plus, depending on capacity
Land-based regasification Floating storage and regasification units
Höegh LNG FSRU: Market-leading regasification capacity and full trading capabilities
Main Dimensions:Length: 294 mBreadth: 46 mDepth: 26 mDraught: 12 m
Storage capacity: 170,000 cbmRegasification capacity: 750,000 mmscfd
Deadweight 80,430 tonsGross tonnage 103,800 tons
10
Superior operating record highlights overall operational strengths and efficiencies
Achieved zero lost-time incidents last 12 months
− Clear policy and communication: Safety First!
− Competent, committed, cooperative and safety aware teams
− All incidents and near-misses investigated
− State-of-the-art risk management systems
11
1 Per million work hours
99.87% 99.70% 99.95% 99.94% 99.79% 100.00% >99.50%
2013 2014 2015 2016 2017 2018 YTD Target
Technical availability1.07
0.44
0.73
0.00
0.38
0.00
<1.00
2013 2014 2015 2016 2017 2018YTD
Target
Lost time injury frequency1
Full technical availability
− Highly qualified teams onboard and onshore
− Intense focus on implementing best practices
− Robust technical designs of vessels and equipment
− Spare part and maintenance systems well adapted
Höegh LNG’s FSRUs ideal for providing multiple LNG services
12
LNG bunkering
LNG truck distribution
ISO containers distribution
Small-scale LNG distribution
Pipe-to-shore regasified LNG from FSRU
Avenir LNG: Strategic complement for further growth for Höegh LNG
Avenir LNG Ltd. – Established to build market leader position in the small-scale LNG market
− Anchor investors: Höegh LNG (25%), Golar LNG (25%), Stolt-Nielsen (50%)
Business model: Delivery of LNG to small-scale industrial and power demand, development of LNG bunkering services and transportation sector supply
Initial asset base, under construction:
− 4x 7,500-cbm +2x 20,000-cbm LNG carriers
− Small-scale LNG import terminal in Sardinia
Avenir LNG represents an attractive investment opportunity in a fast growing LNG segment
Small-scale LNG expected to create additional LNG demand and strong synergies for HLNG’s FSRUs
13
Höegh LNG: Important developments
14
Entire fleet fully funded
− Debt financing secured for FSRU #9
− Debt financing secured for FSRU #10
Financing
Operational
Commercial
100% technical availability across the global fleet
Excellent HSEQ statistics - Zero LTIs last 12 months
Successfully amended Höegh Gallant charter with Egas
3-year +1 TC for Höegh Esperanza with CNOOC in China
Interim employment for FSRU #9 with Naturgy
Investment in Avenir LNG for small-scale LNG
Progress made on several FSRU tendering processes
Agenda
15
Introduction to Höegh LNG Partners
Höegh LNG - FSRU leadership
LNG and FSRU markets update
Höegh LNG Partners in-depth
Sveinung J.S. StøhleChairman, Höegh LNG Partners
President & CEO, Höegh LNG
Global energy outlook: Expanding LNG market to increase gas’ share of global energy mix
16
Transition to a lower carbon fuel mix set to continue
Natural gas expected to overtake oil and coal as the primary fossil fuel with an annual average demand growth of 1.6%
Coal’s share of the energy mix expected to decrease sharply
Source: BP Energy Outlook 2018
Primary energy consumption Shares of primary energy
Global LNG supply expanding with higher Australian and US production
Largest exporters, 2018:
1. Qatar
2. Australia
3. Malaysia
4. Nigeria
5. United States
22 28 28
West Africa
12 13 11
N Africa3
1223
USA
14 14 16S America
4 4 5
Europe
11 11 17
Russia
4556
65
Australia
59 61 55
SE Asia
2016 2017 2018
Global LNG production, in millions of tonnes
94 91 96MEG
Sources: GIIGNL, IHS Markit, 2018 based on annualized YTD data
17
Liquefaction investment impasse ended with LNG Canada FID
18
LNG Canada FID− Initial capacity 14 mtpa with two trains:
possibility to add another two trains
− Expected to come on-line by 2025
LNG Canada not backed by third-party offtake− Developers Shell (40%), Petronas
(25%) and Mitsubishi (15%) take on significant price and volume exposure
− Fellow developers PetroChina and KOGAS (20% combined) to use LNG for domestic markets
Corpus Christi train 3 FID− 4.5 mtpa capacity
− Supported by foundation contracts
Sources: IHS Markit
LNG: Attractively priced energy for the future
19
Current spot prices reflect solid demand for LNG
Delivered cost of North American LNG highly attractive relative to spot prices in the current oil price environment
Long-term contracts rolling off towards 2025 favouring North American production
7.77
9.3
10.7
5
7.5
10
12.5
0
2
4
6
8
10
12
14
US Gulf Canada NWE Japan USD 40 USD 60 USD 80 USD 100
USD
per
MM
Btu
LNG prices
DES North East Asia Current spot Brent-indexed slope
Sources: IHS Markit, Platts
Significant momentum in LNG trade, driven by China’s coal-to-gas switch
20
Global LNG trade could reach ~320 million tonnes in 2018; up ~7.5% from 2017
Chinese imports expected to increase ~50% from 2017 to around 56 million tonnes, or ~21% of the world market
Aggressive coal-to-gas switch and increased supply of global LNG the main drivers behind the growth in Chinese LNG imports
Source: Waterborne LNG / IHS Markit / Höegh LNG 2018 estimates based on YTD trade and historical seasonal movements in the fourth quarter
0%
5%
10%
15%
20%
25%
0
50
100
150
200
250
300
350
2010 2011 2012 2013 2014 2015 2016 2017 2018E
milli
on to
nnes
China's share of global LNG trade
RoW China China share, rhs
Significant potential for a further increase in Chinese LNG imports
21
Sources: IHS Markit
50.7%
13.2%
6.6%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Coal Oil Gas
Bn to
nnes
oil
equi
vale
nts
Share of global consumption 2017
World total
China ex HK
China in % of world total, rhs
More regasification capacity required for Chinese LNG imports to continue to increase
22
Imports periodically exceed available regasification capacity, particularly in northern China
During such periods, LNG is being loaded on trucks and distributed inland
One FSRU would add aroundUSD 0.5 million tonnes of monthlyregasification capacity0
1
2
3
4
5
6
2016 2017 2018
milli
on to
nnes
per
mon
th
China, imports and regasification capacity
Total imports Total nameplate capacity
Sources: IHS Markit
The Tianjin LNG terminal
Höegh LNG operates the sole FSRU in the Chinese market
23
Höegh LNG has in place a 3-year FSRU/LNGC contract with CNOOC for the FSRU Höegh Esperanza
− Will serve as regasification terminal in Tianjin
− Contract runs to June 2021, CNOOC has the option to extend the contract for one year
Höegh LNG’s first-mover advantage provides benefits as FSRU infrastructure continues to expand across the country
FSRUs unlocking access to LNG markets for new importers
24
0
100
200
300
400
500
600
700
800
900
2000 2005 2010 2015 2020E 2025E 2030E 2035E 2040E
mtp
a
World LNG supply and demand
JKT Europe China
India Other Asia MENA
S America RoW LNG Capacity
Source: IHS Markit
FSRU opportunities in Asia
China: 1st FSRU in place
India: 1st FSRU to be installed Q4 2018, several contemplated
Bangladesh: FSRU in place, contemplating more
Thailand: Contemplating FSRU
Pakistan: 2x FSRUs installed, contemplating more
Indonesia: 2x FSRUs installed
Vietnam: Contemplating FSRU
Myanmar: Contemplating FSRU
Other (Australia, Hong Kong, Sri Lanka, Philippines): All contemplating FSRUs
Large number of market opportunities backed by diverse drivers of demand
Region Existing Underway Proposed
N America - 1 2
S America 6 2 3
Europe 4 1 4
MENA 6 - 5
Sub-Saharan Africa - 1 4
South Asia 4 3 5
Asia/Oceania 4 2 7
Sum 24 10 30 +
25
Enabler
Security of supply
Seasonal demand
Back-up for hydro
Balance of trade
New gas-fired generation
Demand drivers
Increasing supply of
attractively priced LNG
Transportation
Replacement for coal and oil
Existing and potential FSRU contracts
Source: IHS Markit, Höegh LNG
Robust LNG carrier markets have several positive implications for the FSRU market
Fall-back option well in the money
− FSRUs with full trading capabilities earn the same rates as purpose-built LNGCs
− Höegh LNG has fixed its non-FSRU trading capacity at long-term rate levels
Attention diverted away from LNGC-to-FSRU conversions
− Several shipowners have put plans to convert LNGCs to FSRUs on hold
26
0
20
40
60
80
100
120
140
160
180
2011 2012 2013 2014 2015 2016 2017 2018 2019
'000
USD
per
day
LNGC charter rates
Steam spot DFDE spot Long-term
Data source: IHS Markit
FSRU supply and demand balance remains favorable
27
Recent newbuilding contracting:− BW LNGC-to-FSRU conversion
− Maran Gas: 1x FSRU ordered, 1x FSRU order cancelled (LNGC)
− Botas 1x FSRU for own project
Single-purpose FSRUs are intended for a pre-determined project, rather than participation in competitive tenders8 8
5
2
1
2
1
1
2
1
0
2
4
6
8
10
12
Höegh LNG Excelerate Golar LNG BW Gas Other Single-purpose
Uni
ts
FSRU fleet and orderbook by owner/employment
Committed Available Committed NB Uncommitted NB
MOL
Exmar
Maran
Dynagas
Dynagas
Gazprom
Kol/Kal
SWAN
Java-1
OLT
Botas
Agenda
28
Introduction to Höegh LNG Partners
Höegh LNG - FSRU leadership
LNG and FSRU markets update
Höegh LNG Partners in-depth
Steffen FøreidCEO & CFO
Höegh LNG Partners
Modern fleet with fixed-rate, long-term contracts
29
Unit Type Ownership Built Region Charterer 2018
2020
2022
2024
2026
2028
2030
2032
2034
2036
2038
Current HMLP FleetNeptune FSRU 50% 2009 Turkey TotalCape Ann FSRU 50% 2010 India TotalPGN FSRU Lampung FSRU 100% 2014 Indonesia PGNHöegh Gallant FSRU 100% 2014 WW trading EgyptCo/HLNGHöegh Grace FSRU 100% 2016 Colombia SPEC
Contracted Revenue Option
Average 10.7 year contract length provides predictability and stability in cash flows
1
2
2
3
1) Economic interest; ownership interest 49%2) Subsidiary of Total3) Includes HMLP option to charter Höegh Gallant to HLNG at end of EgyptCo contract
PGN LNG
Total
Spec
EgyptCo/HLNG
Revenue backlog by counterpart
Asia
Europe
S America
Revenue backlog by region
Diversified portfolio of solid counterparties representing critical energy infrastructure
30
Cape AnnJaigarh, IndiaIncrease energy supply
PGN FSRU LampungLampung, IndonesiaReplacing expensive oilliquids in power generation
NeptuneAliaga, TurkeyMeeting peak demandin energy consumption
Höegh GraceCartagena, ColombiaProviding security ofsupply in periods ofdrought
Höegh GallantEgypt/worldwide tradingBalancing of trade, currentlyoperating as LNGC
Generating stable and predictable cash flows
Q2 2018 Since IPO
Distributable cash flow1 USD 0.53 per unit + 90 %
Distributions declared USD 0.44 per unit + 30 %
Distribution coverageratio4 1.20x 1.08x-1.20x
IDRs 25% 0-25%
31
1) Segment EBITDA and distributable cash flow are non-GAAP financial measures. Please see the Appendix for definitions of Segment EBITDA and distributable cash flow and a reconciliation of the comparable U.S. GAAP financial measure
2) Excludes principal payment on direct financing lease, amortization in revenues for above market contracts and equity in earnings of JVs: amortization for deferred revenue
3) Non-cash accrual related to boil-off-gas claim to be indemnified by HLNG4) Distribution coverage ratio represents distributable cash flow divided by distributions declared
0
5
10
15
20
25
30
35
40
1Q152Q153Q154Q151Q162Q163Q164Q161Q172Q173Q174Q171Q182Q18
Segment EBITDA1,2, $m
Indemnity 3
Balance sheet steady deleveraging
32
UPDATE
June 30, 2018
Cash and cash equivalents USD 21 million
Available under RCF USD 40 million
Total liquidity USD 61 million
Interest bearing debt, reported USD 458 million
Interest bearing debt, proportionate share of JVs USD 679 million
Equity capitalization4 USD 725 million
Debt5 / Total capitalization 48 %
Net debt1 / Segment EBITDA2, LQA3 4.5x
1) Proportionate share of net debt, i.e. includes 50% of JV net debt. Net debt is a non-GAAP financial measure , please see theAppendix for a definition of net debt and a reconciliation of net debt to the comparable US GAAP financial measure2) Segment EBITDA is a non-GAAP financial measure. Please the Appendix for a definition of Segment EBITDA and a reconciliation of Segment EBITDA to net income, the comparable U.S. GAAP financial measure3) Last Quarter Annualized
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
Dec 31, 2015 Dec 31, 2016 Dec 31, 2017 Jun 30, 2018
Net debt1/Segment EBITDA2, LQA3
4) As of October 26 2018, reflecting outstanding common, subordinated and preferred units as of June 30, 20185) Total proportionate outstanding interesting bearing debt
Höegh LNG Partners has consistently and significantly outperformed the Alerian MLP index
33
HMLP vs. Alerian MLP index, adj. for distributions
0
50
100
150
200
250
IPO 2015 2016 2017 2018
USD
milli
on
Equity raised by Höegh LNG Partners1
Common equity Preference equity ATM
Pre-funding ofHöegh Gallant
acquisition
• Acquisition of Höegh Grace• Settlement of seller credit from
Höegh Gallant acquisition
Source: InFront
1) Net proceeds to HMLP from IPO to 23 August 2018
Drop-down potential of modern and attractive assets
34
Unit Type Ownership Built Region Charterer 2018
2020
2022
2024
2026
2028
2030
2032
2034
2036
2038
HLNG FSRU FleetIndependence FSRU 100% 2014 Lithuania KNHöegh Giant FSRU 100% 2017 WW trading NaturgyHöegh Esperanza FSRU 100% 2018 China CNOOCFSRU#9 FSRU 100% 2019 WW trading NaturgyFSRU#10 FSRU 100% 2019
Long-term business under development
Contracted Revenue Option
The most modern and efficient FSRUs in the market
Long-term business under development for four units
Assets marketed through open-market tenders, bilateral discussions and partnerships
Future business
Höegh LNG Partners – Key investment considerations
35
Only publicly listed pure-play owner and operator of FSRUs
Modern assets providing critical energy infrastructure
Strong distribution coverage supported by growing portfolio of long-term contracts
Rapidly growing supply of inexpensive LNG driving FSRU adoption
GP support from a clear market leader in Höegh LNG Holdings Ltd.
Agenda
36
Appendix
Glossary
37
Höegh LNG Partners LP – “Höegh LNG Partners” or “HMLP”
Höegh LNG Holdings Ltd. – “HLNG”
HMLP and HLNG – “Höegh LNG Group” or “Höegh LNG”
“EgyptCo” – LNG owned counterparty to HMLP in Egypt
Floating Storage and Regasification Unit – “FSRU”
Liquefied Natural Gas Carrier – “LNGC”
Egyptian Natural Gas Holding Company – “EGAS”
Perusahaan Gas Negara – “PGN”
Sociedad Portuaria El Cayao S.A. E.S.P. – “SPEC”
Non-GAAP financial measures: Segment EBITDA
38
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 less non-controlling interest in Segment EBITDA. Other financial items consist of gains and losses on derivative instruments and other items, net (including foreign exchange gains and losses and withholding tax on interest expenses). 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, other financial items, depreciation and amortization and taxes, 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:
Non-GAAP financial measures: Segment EBITDA
39
Segment reporting
40
Three months ended June 30, 2018Joint venture
Majority FSRUs Totalheld (proportional Segment Elimin- Consolidated
(in thousands of U.S. dollars) FSRUs consolidation) Other reporting ations reportingTime charter revenues $ 35,510 10,576 — 46,086 (10,576) (2) $ 35,510 Other revenue 1,100 — — 1,100 1,100 Total revenues 36,610 10,576 — 47,186 36,610 Operating expenses (6,383) (2,709) (1,180) (10,272) 2,709 (2) (7,563)Equity in earnings (losses) of joint ventures — — — — 5,111 (2) 5,111 Segment EBITDA (1) 30,227 7,867 (1,180) 36,914 Depreciation and amortization (5,268) (2,399) — (7,667) 2,399 (2) (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) (2) 544 Other financial income (expense), net (6,839) (3,324) (785) (10,948) 3,324 (2) (7,624)Income (loss) before tax 18,664 5,111 (1,965) 21,810 — 21,810 Income tax benefit (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 (3) 3,003 Limited partners' interest in net income (loss) $ 16,819 5,111 (1,986) 19,944 (3,003) (3) $ 16,941
(1) Segment EBITDA is a non-GAAP financial measure. For a definition of Segment EBITDA and reconciliations to net income, the most directly comparable US GAAP financial measure, please see the Appendix.
(2) 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.
(3) Allocates the preferred unitholders’ interest in net income to the preferred unitholders.
Non-GAAP financial measures: Distributable cash flow
41
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-controlling interest in amortization in revenues for above market contracts, non-cash revenue: tax paid directly by charterer less non-controlling interest: non-cash revenue, amortization of deferred revenues for the joint ventures, interest income, interest expense less amortization of debt issuance cost and fair value of debt assumed, other items (net), unrealized foreign exchange losses (gains), current income tax expense, net of uncertain tax position less non-cash income tax: tax paid directly by charterer, non-controlling interest in finance and tax items and other adjustments such as indemnification paid or to be paid by Höegh LNG for the non-cash boil-off accrual, non-budgeted expenses, losses and estimated maintenance, indemnified by, or refunded to HLNG, distributions of the Series A preferred units 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 this Appendix. 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 unitholders. 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 this Appendix. Refer to this Appendix 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 measures for liquidity.
Non-GAAP financial measures: Distributable cash flow
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Reconciliation of distributable cash flow to net cash provided by operating activities
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Net Debt
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Net Debt. Net Debt is defined as long-term debt plus revolving credit and seller’s credit due to owners and affiliates net of cash and cash equivalents, restricted cash and cash designated for acquisition Net Debt is used as a supplemental financial measure used by management and external users of financial statements, such as the Partnership's lenders, to assess leverage. Net Debt is a non-GAAP financial measure and should not be considered an alternative to total debt or any other measure of liquidity presented in accordance with U.S. GAAP. The following tables reconcile Net Debt to total debt from which it is derived for the Partnership’s consolidated balance sheet and the balance sheet of its non-consolidated joint ventures, for the periods presented:
(in thousands of US dollars) Dec 31, 2015 Dec 31, 2016 Dec 31, 2017 Jun 30, 2018
Current portion of consolidated long-term debt 32,208 32,208 45,458 45,458Consolidated long-term debt 330,635 300,440 434,845 412,479Consolidated revolving credit and seller's credit due to owners and affiliates 47,000 43,005 51,832 45,292Share of joint ventures' current portion of long-term debt 11,047 11,752 12,502 12,895Share of joint ventures' long-term debt 238,551 226,979 214,654 208,193Consolidated cash and cash equivalents - current portion (32,868) (18,915) (22,679) (20,980)Consolidated restricted cash - current portion (10,630) (8,055) (6,962) (5,958)Consolidated restricted cash - long-term portion (15,198) (14,154) (13,640) (13,404)Share of joint ventures' cash and cash equivalents (2,099) (4,753) (4,050) (2,504)Share of joint ventures' restricted cash - current portion (4,222) (4,229) (4,260) (7,685)Share of joint ventures' restricted cash - long-term portion (12,552) (12,554) (12,604) (12,662)Net interest-bearing debt 581,872 551,724 695,095 661,124
Segment EBITDA, LQA 102,796 103,384 134,808 147,656
Net debt/Segment EBITDA, LQA 5.7x 5.3x 5.2x 4.5x