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Summary

  • Oslo-based HMLP, a limited partnership formed by Hoegh LNG Holdings Ltd. to acquire, own, and operate LNG infrastructure assets, plans to raise $192 million in its upcoming IPO.
  • HMLP's interests in FSRUs with long-term charters should provided the company with steady cash flows, along with opportunities to expand.
  • HMLP’s excellent potential quarterly distributions (~6.75%) should also serve to entice investors.
  • With additionally strong management, we are optimistic on this IPO and suggest investors consider buying in.

Hoegh LNG Partners LP (Pending:HMLP), a limited partnership formed by Hoegh LNG Holdings Ltd. to acquire, own, and operate LNG infrastructure assets, plans to raise $192 million in its upcoming IPO.

The Oslo, Norway-based firm will offer 9.6 million shares at an expected price range of $19-21 per share. If the IPO can find the midpoint of that range at $20 per share, HMLP will command a market value of $526 million.

Solid Underwriting

HMLP filed on July 3, 2014.

Lead Underwriters: BofA Merrill Lynch; Citigroup Global Markets Inc; Morgan Stanley & Co. LLC

Underwriters: Barclays Capital Inc; Credit Agricole Securities (NYSE:USA) Inc.; DNB Markets, Inc; RS Platou Markets AS; UBS Investment Bank

Summary: Floating Storage and Regasification Units (FSRUs)

HMLP is a limited partnership formed by Hoegh LNG Holdings Ltd. to acquire, own, and operate floating storage and regasification units (FSRUs) and other LNG support assets. The firm's initial assets will consist of interests in a trio of FSRUs, including a 50% interest in the GDF Suez Neptune, a 50% interest in the GDF Suez Cape Ann, and a 100% economic interest in the PGN FSRU Lampung. Each of these FSRUs is under contract through at least 2029, with options for extensions.

HMLP plans to make further acquisitions from Hoegh and from third parties. Under an omnibus agreement between HMLP and its parent and general partner, HMLP will have the right to purchase any FSRU or LNG carrier operating under a charter of longer than five years from Hoegh. The firm will also have the right to purchase some or all of Hoegh's interests in the FSRU Independence, which was delivered in May 2014.

Valuation

HMLP offers the following figures in its F-1 balance sheet for the three months ended March 31, 2014:

Revenue: $29,127,000.00

Net Loss: ($1,764,000.00)

Total Assets: $261,855,000.00

Total Liabilities: $222,522,000.00

Stockholders' Equity: $39,333,000.00

HMLP plans to make quarterly distributions of $0.3375 per unit, which annualizes to $1.35 per unit. Assuming a unit price at the midpoint of the expected IPO range, this would be equivalent to an annual yield of 6.75%.

Other FSRU Competitors

HMLP will face competition from other owners and operators of FSRUs. Though there are currently a limited number of companies operating FSRUs, energy companies, utilities, and LNG operators may enter the market in the future. Major current competitors include Golar LNG (NASDAQ:GLNG) and Excelerate Energy.

Management: Strong Academic, Industry Credentials

CEO and CFO Richard Tyrrell joined Höegh in January 2014 in order to serve in his current positions. He previously served as a Managing Director in the energy team of Perella Weinberg Partners, a global asset management firm, and as an investment professional with Morgan Stanley Infrastructure, where he was tasked with the evaluation of principal investment opportunities.

Mr. Tyrrell has also worked as a technical manager and field engineer for Schlumberger Limited in Australia and Southeast Asia.

Mr. Tyrrell holds an MBA from Harvard Business School and an undergraduate degree in Mechanical Engineering from the Imperial College of Science, Technology and Medicine.

Conclusion: Consider Buying In

We are optimistic on this IPO in the proposed range.

HMLP's interests in FSRUs with long-term charters should provided the company with steady cash flows, and its agreement with Hoegh to potentially acquire further FSRUs under similar charters will allow HMLP strong opportunities to expand those cash flows.

Other recent LNG-related IPOs like GLOP and GLNG have performed well on the market, and we expect that rising demand for LNGs and their support assets will help HMLP to achieve similar success.

The excellent quarterly distributions that HMLP offers (assuming, of course, that they are actually paid) should also serve to entice investors.

We believe that investors should consider buying into HMLP.

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Source: Hoegh LNG Partners IPO: Moving Full Steam Ahead