THE FSRU PROVIDER
ANNUAL REPORT 2021
2 | Auditor’s report
HÖEGH LNG
Annual
Report
2021
Cover photo
Höegh Galleon
HÖEGH LNG
Auditor’s report | 3
About Höegh LNG
Höegh LNG operates world-wide with a leading
position as owner and operator of floating LNG
import terminals; floating storage and regasification
units (FSRUs), and is one of the most experienced
operators of LNG Carriers (LNGCs). Höegh LNG’s
Vision is “Enabling the transition to Clean Energy”.
The company is owned by Larus Holding Limited, a
50/50 joint venture between Leif Höegh & Co. Ltd.
and Funds managed by Morgan Stanley Infrastructure
Partners, and owns approximately 46% of Höegh
LNG Partners LP (NYSE:”HMLP”). Höegh LNG is a
Bermuda based company with established presence
in Norway, Singapore, the United Kingdom, USA,
China, Indonesia, Lithuania, Egypt, Colombia and the
Philippines. The group employs approximately 180
office staff and 680 seafarers.
Please see: www.hoeghlng.com
4 | Auditor’s report
HÖEGH LNG
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All rights reserved - 2018
Type Ownership (%) Built Flag
Storage capacity
(m
3
)
Regas capacity
(MMscf/d)
Arctic Princess LNGC 34 2006 NIS 147 208
Arctic Lady LNGC 50 2006 NIS 147 208
Neptune
2)
FSRU 50 2009 NIS 145 130 750
Cape Ann
2)
FSRU 50 2010 NIS 145 130 750
Independence FSRU 100 2014 SGP 170 132 384
PGN FSRU Lampung
2)
FSRU 100 2014 IDN 170 132 360
Höegh Gallant
2)
FSRU 100 2014 NIS 170 000 500
Höegh Grace
2)
FSRU 100 2016 MHL 170 000 500
Höegh Giant FSRU 100 2017 MHL 170 032 750
Höegh Esperanza FSRU 100 2018 NIS 170 032 750
Höegh Gannet FSRU 100 2018 SGP 170 000 1000
Höegh Galleon FSRU 100 2019 MHL 170 000 750
KEY FINANCIAL FIGURES
FLEET LIST
2
Owned by Höegh LNG Partners LP.
(in USD’000 unless otherwise indicated) 2021 2020
INCOME STATEMENT
Total income 351 834 335 136
Operating profit before depreciation and amortisation (EBITDA) 217 194 225 435
Operating profit 103 788 113 061
Profit (loss) for the year (21 284) 146
BALANCE SHEET
1
Equity adjusted for hedging transactions 743 505 757 049
Adjusted equity ratio (%) 30 30
Net interest-bearing debt 1 440 524 1 536 288
CASH FLOWS
Net cash flows from operating activities 196 513 216 176
Net cash flows from investing activities (26 527) (15 746)
Net cash flows from financing activities (178 490) (244 863)
Net decrease in cash and cash equivalents (8 504) (44 433)
2021 2020
Technical availability (%) 99.6 99.7
Lost time injury frequency (per million work hours) 0.63 0.29
OPERATIONAL KPIs
1
At year end.
Contents
A CHANGING WORLD 08
DIRECTORS’ REPORT 10
Strategic direction 12
Sustainability and impact on the external environment 13
Review of 2021 14
LNG and FSRU market in 2021 16
Financial results 17
Risk and risk management 20
Shareholder information 21
Corporate governance 21
Prospects 21
CORPORATE GOVERNANCE REPORT 24
Implementation and reporting on corporate governance 26
Business 27
Equity and dividends 28
Equal treatment of shareholders 29
Shares and negotiability 29
General meetings 29
Nomination committee 29
Board of directors: Composition and independence 29
The work of the board of directors 32
Risk management and internal control 32
Remuneration of the board of directors 33
Remuneration of executive personnel 34
Information and communications 34
Takeovers 34
Auditor 34
DIRECTORS’ RESPONSIBILITY STATEMENT 36
CONSOLIDATED FINANCIAL STATEMENTS HÖEGH LNG GROUP 40
Consolidated statement of income 42
Consolidated statement of comprehensive income 42
Consolidated statement of financial position 43
Consolidated statement of changes in equity 45
Consolidated statement of cash flows 46
Notes 47
FINANCIAL STATEMENTS HÖEGH LNG HOLDINGS LTD. 110
Statement of income 112
Statement of comprehensive income 112
Statement of financial position 113
Statement of changes in equity 115
Statement of cash flows 116
Notes 117
Independent Auditor’s report 131
01
01
A changing world
Höegh Galleon
8 | A Changing World
HÖEGH LNG
At the time of releasing this annual report, the energy markets look significantly different
from a year ago. During 2021 a strong demand growth for LNG outpaced the supply
which led to a tight market with record high LNG prices. The global LNG trade grew with
5%, reaching 380 million tonnes. With the recent tragic events in Ukraine, energy markets,
including the market for LNG, have tightened further and are currently mainly driven by
concerns over security of energy supply in Europe. This has implication for energy prices
worldwide. It has also spurred the interest for FSRUs for increased LNG import capacity
in Europe in order to reduce the dependence of pipeline gas from Russia. While near-
term business opportunities may arise for the company in Europe, the general level of
uncertainty is high, and the future is unpredictable.
A Changing World
The Covid-19 pandemic continued to plague the
world in 2021. Thankfully, with the exception of a
delay in crew changes on our vessels, Höegh LNG
has experienced limited operational impacts and
no contractual effects from Covid-19. However,
the situation is fluid and can change quickly, in
particular with regard to maritime personnel and
logistical challenges. The company will continue
to take necessary measures to ensure the health
and safety of our personnel and to mitigate risks
to our operations. We are proud to have achieved
another year of operational excellence. The technical
availability was 99.6% and the lost-time injury
frequency (LTIF) only 0.6 (per million work hours).
These are true marks of the quality and safety of
our services. The efforts and dedication of all our
employees onshore and onboard our vessels are
highly appreciated.
Our focus on sustainability and the energy transition
gained momentum during 2021. We developed
our new sustainability framework, focusing on a
selection of UN’s sustainability development goals
relevant for our business, and we established
Clean Energy as a new business area. As part of
the energy sector, we have contributed to reduce
carbon dioxide emissions. We actively engage
with other stakeholders in developing technology
to drive change towards a low-carbon future. We
remain committed to reduce the absolute carbon
A Changing World | 9
HÖEGH LNGHÖEGH LNG
emissions from our assets by taking active measures
to operate the vessels as energy efficient as possible.
For the first time, we will also publish a separate
sustainability report, outlining our ESG goals and
report progress made to achieve the targets we have
set for our operations.
Over the last year, we have continued to develop our
business, securing additional long-term contracts
for the FSRUs. Moreover, the company’s shares
were delisted from the Oslo Stock Exchange in May
2021, following a take-private transaction by Leif
Höegh & Co and funds managed by Morgan Stanley
Infrastructure Partners.
We have strong backing from our new ownership
structure. We are a global FSRU leader with the most
modern and sophisticated fleet. We continue with an
impeccable track record for operational excellence.
Höegh LNG is well positioned to compete for new
regasification projects world-wide as well for any fast-
track projects for securing energy supply, including
in Europe.
Thor Jørgen Guttormsen
President and CEO
Photo: Bård Gudim
02
12 Strategic direction
13 Sustainability and impact on the
external environment
14 Review of 2021
16 LNG and FSRU market in 2021
17 Financial results
20 Risk and risk management
21 Shareholder information
21 Corporate governance
21 Prospects
Directors’ report
Höegh Galleon
12 | Directors' report
HÖEGH LNG
Höegh LNG Holdings Ltd. (“Höegh LNG Holdings”
or the “company”) and its subsidiaries and joint
ventures (together “Höegh LNG” or “the group”)
operate worldwide and has a leading position in the
market for floating storage and regasification units
(FSRUs). Following a take-private transaction and
de-listing of the company’s shares from Oslo Børs in
2021, the company is privately owned.
With the company’s registered office located in
Hamilton, Bermuda, the group operates worldwide
and has an office presence in Oslo (Norway), Manila
(Philippines), London (UK), Singapore, Miami (USA),
Jakarta (Indonesia), Klaipeda (Lithuania), Cairo
(Egypt), Cartagena (Colombia) and Shanghai (China).
The group’s fleet had a technical availability of 99.6%
in 2021, which was a very strong performance.
Höegh LNG is, with the exception of a delay in crew
changes, experiencing limited operational impacts
from Covid-19 and no contractual effects. Ensuring
the health and safety of its personnel continues to be
the group’s highest priority. The board of directors
recognises the challenges for all employees and in
particular for the seafarers during these challenging
times. To improve the situation for all seafarers,
Höegh LNG encourages national governments,
industry organisations and other international
stakeholders to keep their commitments to support
the seafarers and do what they can to facilitate
crew changes and international travel allowing crew
repatriation.
Strategic direction
Höegh LNG’s vision is “Enabling the transition to
clean energy”. Its mission is to supply innovative
and reliable floating infrastructure solutions,
thereby creating value for customers, shareholders,
employees and the local communities in which
it operates, and to reduce the impact on the
environment from the group’s own business and that
of its clients.
The group’s strategy is to drive and embrace
technological and commercial innovation,
contributing actively to the transition to a low-
During 2021 the LNG demand saw a strong growth, which led to a tight market with
record high LNG prices. The LNG carrier market also witnessed record high rate levels
during the peak winter season, driven by high LNG demand and more ton miles. Global
LNG trade grew by 5% in 2021, reaching 380 million tonnes. In this busy market, Höegh
LNG had a successful year on the business development side, securing two new long-
term FSRU contracts, thereby taking important steps towards its ambition of securing
firm long-term employment for all the group’s assets. At the time of releasing this report,
the tragic events in Ukraine have a significant impact on the energy prices worldwide.
The market for LNG has tightened further and is currently driven by concerns over
security of energy supply in Europe. The situation has spurred the interest for FSRUs for
increased LNG import capacity in Europe in order to reduce the dependence of pipeline
gas from Russia. While near-term business opportunities may arise for the company in
Europe,, the general level of uncertainty is high, and the impact on the group’s business
and operations is unpredictable.
DIRECTORS’ REPORT FOR 2021
Directors' report | 13
HÖEGH LNG
carbon energy future, while embracing the role of
LNG in this ongoing energy transition process. To
reflect the group’s strategic objective to include the
development of non-carbon energy solutions, Höegh
LNG established Clean Energy as a new business
area in 2021. Höegh LNG always seeks excellence
in its operations in order to maximise value for the
group and its clients, while at the same time ensuring
the welfare of its employees and minimising its
impact on the environment.
The company owns approximately 46% of the
common units of Höegh LNG Partners LP (“HMLP”),
a master limited partnership listed on the New York
Stock Exchange. HMLP was established in 2014 to
own, operate and acquire LNG assets which are in
operation and employed under long-term contracts,
and has both common and preferred equity
instruments listed on the New York Stock Exchange.
In December 2021, Höegh LNG Holdings submitted
a non-binding proposal to the board of directors
of HMLP pursuant to which Höegh LNG Holdings
would acquire through a wholly owned subsidiary all
publicly held common units of HMLP in exchange
for USD 4.25 in cash per common unit. If approved,
the transaction would be effected through a merger
of the Partnership with a wholly owned subsidiary of
Höegh LNG. The proposed transaction is subject to
the negotiation and approval of mutually satisfactory
definitive documentation by the parties thereto. If a
definitive agreement is reached, the transaction will
also require approval by a majority of the holders
of outstanding common units in the Partnership.
The transaction would be subject to customary
closing conditions. There can be no assurance that
definitive documentation will be executed or that any
transaction will materialise.
Sustainability and impact on the
external environment
With effect from the beginning of 2021, Höegh LNG
increased its ESG efforts, and decided to focus on
certain of UN’s Sustainability Development Goals
(SDGs) relevant for its business. Consequently, the
group also made changes to its ESG reporting, and
for the first time publishes a separate sustainability
report for 2021, where it discloses its ESG goals and
reports progress made to achieve its targets based
on the SDGs and the ESG indicators recommended
by The Norwegian Shipowners Association.
Maintaining safe operations and minimising health,
safety and environmental risk has the highest priority
for Höegh LNG. The group works actively with the
goal that all incidents can and should be prevented.
Höegh LNG encourages an open communication
culture where reporting is perceived as a strength
and a vital element for improvement.
Höegh LNG operates with a clear communication
of its corporate values from board to management,
and from management to the rest of the organisation.
These values are expressed and implemented
through written guidance on compliance and
ethics training, business-partner risk management
assessments - and an effective governing
management system.
As part of the energy sector, the group focuses on
contributing to reducing carbon dioxide emissions
as much as possible. Reducing CO
2
emissions
is therefore one of Höegh LNG main priorities
and the group is actively engaging with maritime
organisations for developing technology and driving
change towards a low-carbon future. Höegh LNG is
committed to reducing absolute carbon emissions
from its assets (Scope 1) by 30 percent by 2025,
using 2020 as a baseline. Höegh LNG is taking active
measures to operate the vessels as energy efficient
as possible. In addition, the group will continue to
engage with suppliers, and logistics and freight
providers during 2022 with an ambition of reducing
their CO
2
emissions (Scope 3) when providing their
services to the group.
The group`s ambition is also to limit any negative
impact our operations might have on marine
ecosystems and biodiversity, with attention to
minimising the risk of spills and the discharge of
excess biocides and cooling water. To further
14 | Directors' report
HÖEGH LNG
reduce the environmental footprint, Höegh LNG is
also focusing on reducing waste of food and plastic
onboard the vessels.
During 2021, Höegh LNG has increased safety and
security awareness by introducing Duty of Care and
Duty of Loyalty principles with the aim of clarifying
company risk management responsibilities.
Beyond the group’s own internal measures, Höegh
LNG believes in collective action to achieve our
ethical and compliance goals. Höegh LNG is an
active member of the Maritime Anti-Corruption
Network (MACN), which provides valuable insights
into specific anti-corruption challenges in the
maritime industry.
Höegh LNG is actively seeking areas where the
company can contribute to the transition to a
low carbon world while growing its business in a
commercially sustainable manner. Building on the
experience and knowledge from establishing floating
infrastructure for delivery of natural gas through
LNG, the group believes there are several areas
where maritime concepts can be applicable and
where Höegh LNG can provide innovative solutions.
These are being developed within our Clean Energy
business area, which was established in 2021.
More detailed information is available in the
company’s sustainability report for 2021 on
hoeghlng.com
Personnel
Höegh LNG had 180 permanent office employees
and 680 maritime personnel on 31 December
2021. The 24-month cumulative retention rate on 31
December 2021 was 96% for maritime personnel.
Average sickness absence among office employees
in Oslo was 2.4% in 2021 (1.0%). One lost-time injury
(LTI) was reported in 2021 on Höegh LNG vessels,
resulting in an LTI frequency (LTIF) of 0.63. This
exceptional performance is a result of the group’s
continuous implementation of safety-related initiatives
and the attention paid to building a safety culture.
Diversity
Höegh LNG has a policy of equal opportunities for
men and women. Discrimination based on race,
gender or similar grounds is not accepted. However,
male and female representation in the maritime
industry’s recruitment base is unequal and this is
reflected in Höegh LNG’s demographics, with only
five women among the maritime personnel. Women
accounted for 43% (43%) of Höegh LNG’s office
employees on 31 December 2021. Two out of the
seven directors on the company’s board are female,
while the group executive team has one female
member out of six.
Review of 2021
Commercial development
Höegh LNG had a successful year on the business
development side in 2021 by:
• Executing the FSRU contract with H-Energy in
India that was concluded towards the end of
2020,
• Securing two new firm 10-year FSRU contracts
with subsidiaries of New Fortress Energy for the
Höegh Gallant and with a subsidiary of Compass
Gãs & Energia, Brazil’s largest gas distributor, for
the Höegh Gannet, and
• Signing a conditional 15-year FSRU contract with
AIE in Australia for the Höegh Galleon.
Höegh LNG has thereby taken important steps
towards its ambition of securing firm long-term
employment for all the group’s assets. Höegh LNG
continues to develop its pipeline of FSRU projects,
to ensure that Höegh Esperanza, as the remaining
FSRU in the fleet, will also be assigned to a long-term
FSRU charter.
Operational performance
Höegh LNG is experiencing limited operational
impacts from Covid-19 and no contractual effects.
However, ensuring the health and safety of its
personnel continues to be the group’s highest priority.
Per 4 February 2022, close to 93% of maritime
personnel have received their second dose of
Directors' report | 15
HÖEGH LNG
vaccine and some have also received a booster dose.
To support the industry-wide efforts being made
for seafarers, the group has signed the Neptune
Declaration on Seafarer Wellbeing and Crew Change.
The Covid-19 situation is dynamic and could change
quickly – in particular with regard to maritime
personnel and vessel operational logistics, including
repairs and maintenance. Although Höegh LNG’s
operations have not been directly affected by the
Covid-19 pandemic so far, the group has been
taking and will continue to take necessary measures
to mitigate risks to employees and its operations.
The group is continuously monitoring the Covid-19
situation, and undertaking scenario analyses and
other evaluations to address any changes related
to the health, safety and wellbeing of personnel, the
LNG and FSRU markets, government restrictions, and
other aspects potentially affecting operations and the
business.
Delays to scheduled crew changes continue to be
the main effect of the Covid-19 situation, and Höegh
LNG is working continuously to ensure the welfare
of its maritime personnel by making these delays
as short and as few in number as possible. While
the group has been able to conduct full or partial
crew changes on all vessels in its fleet, the situation
remains challenging for the maritime industry as a
whole owing to travel restrictions and quarantine
regulations. Nevertheless, all FSRUs and LNGCs
are fully operational and crewed in accordance with
relevant safety and regulatory requirements.
Fleet development
No changes occurred in the group’s fleet during
2021.
On 31 December 2021, Höegh LNG had a fleet
of 10 FSRUs and two LNG carriers (LNGCs). The
average age of the assets in operation is 8.1 years,
while the average remaining length of the commercial
contracts is close to 6 years, including joint ventures.
For 2022, the fleet has a high contract coverage.
However, three FSRUs currently trading in LNG
carrier mode will potentially roll off existing charters
in the second quarter of 2022. For two of them, the
existing charterers have an option to extend the
charters.
Corporate activities
Take-private transaction – Höegh LNG Holdings Ltd.
On 8 March 2021 the company announced a
recommended offer by Leif Höegh & Co (LHC) and
funds managed by Morgan Stanley Infrastructure
Partners (MSIP) through a 50/50 joint venture, Larus
Holding Limited (JVCo), to acquire the remaining
issued and outstanding shares of Höegh LNG
Holdings Ltd not owned by LHC or its affiliates,
representing approximately 50.4% of the shares
outstanding, by way of amalgamation between Larus
Limited, a subsidiary of JVCo, and Höegh LNG
Holdings Ltd.
On 30 March 2021 the amalgamation was approved
at a special general meeting. The amalgamation was
completed on 4 May 2021, after which the company
became wholly owned by LHC and MSIP through
their 50/50 joint venture, Larus Holding Limited, and
the company’s shares were delisted from the Oslo
Stock Exchange on 27 May 2021.
Equity and dividends - Höegh LNG Holdings Ltd.
Following the take-private transaction completed in
May 2021, the company has raised a total of USD
48 million in new equity from its shareholder. The
company did not pay any dividend to its shareholders
in 2021.
Buyout offer launched for Höegh LNG Partners LP’s
common units
On 6 December 2021, Höegh LNG launched a non-
binding buyout offer for Höegh LNG Partners LP’s
common units, pursuant to which Höegh LNG would
acquire through a wholly owned subsidiary all publicly
held common units of the Partnership in exchange for
USD 4.25 in cash per common unit. If approved, the
transaction would be effected through a merger of the
Partnership with a wholly owned subsidiary of Höegh
LNG.
16 | Directors' report
HÖEGH LNG
The proposed transaction is subject to the
negotiation and approval of mutually satisfactory
definitive documentation by the parties thereto. If a
definitive agreement is reached, the transaction will
also require approval by a majority of the holders
of outstanding common units in the Partnership.
The transaction would be subject to customary
closing conditions. There can be no assurance that
definitive documentation will be executed or that any
transaction will materialise.
Resignation of and appointment of interim President
and CEO
On 1 November 2021, Mr. Sveinung J. S. Støhle
resigned from his position as President and CEO
of the Höegh LNG group after 16 years of service
in order to pursue a new career opportunity based
outside of Norway. The board is in process of
identifying a permanent successor for the President
and CEO position and appointed Mr. Thor Jørgen
Guttormsen to serve as interim President and CEO
while the board conducts its search. The board
regrets Sveinung’s decision, and would like to thank
him for his hard work and leadership in building
Höegh LNG into the premier FSRU provider in the
LNG industry.
Contingencies
Pending arbitration with the charterer of PGN FSRU
Lampung
The charterer under the lease and maintenance
agreement for the PGN FSRU Lampung (“LOM”)
served a notice of arbitration (“NOA”) on 2 August
2021 to declare the LOM null and void, and/or to
terminate the LOM, and/or seek damages. PT Höegh
LNG Lampung (“PT HLNG”) has served a reply
refuting the claims as baseless and without legal
merit and has also served a counterclaim against the
charterer for multiple breaches of the LOM. PT HLNG
will take all necessary steps and will vigorously defend
against the charterer’s claims in the legal process.
Notwithstanding the NOA, both parties are continuing
to perform their respective obligations under the
LOM. No assurance can be given at this time as to
the outcome of the dispute with the charterer of PGN
FSRU Lampung.
Pending Class Action Lawsuit relating to Höegh LNG
Partners LP
On 27 October 2021 and 3 November 2021, two
purported unit holders filed a class action securities
fraud lawsuit in the United States District Court
for the District of New Jersey against Höegh LNG
Partners LP and certain of its current and former
officers, alleging violations of the Securities Exchange
Act of 1934. Höegh LNG Partners LP believes the
allegations are without merit and intends to vigorously
defend against them.
LNG and FSRU market in 2021
The LNG market has seen significant movements
over the past two years, with an oversupplied
market when demand contracted in the beginning
of the Covid-19 pandemic, which turned around and
became a market short of supply during 2021
leading to a record high LNG spot prices in the
second half of 2021.
During 2021, the annual global LNG trade reached
380 million tonnes, an increase of 19 million tonnes
from 2020, equivalent of a growth rate of 5%. China
continues to be the largest growth market for LNG
demand and imported 81 million of tonnes of LNG
in 2021, up 17% from 69 million tonnes of LNG
imported in 2020.
The FSRU market continues to grow as
demonstrated by Höegh LNG’s successful business
development activities in 2021. On 31 December
2021, the global FSRU fleet consisted of 40 FSRUs
on the water (excluding two KARMOL vessels with
significantly lower send-out capacity and small-
scale barges). Of these, 32 are committed on
FSRU contracts and 8 are available and/or trading
as LNGCs. The order book contains one FSRU
newbuilding.
LNG carrier spot charter rates declined in the
beginning of the year on the back of a usual
seasonal pattern following strong rate levels in the
northern hemisphere’s winter season, but turned
around during the second quarter of the year and
thereafter climbed steeply, buoyed by strong Asian
Directors' report | 17
HÖEGH LNG
demand and high LNG prices. Owing to the large
volumes exported from the USA, waiting time at the
Panama Canal provided further support and led
to an extremely tight market with very low vessel
availability during the last three months of the year. In
the beginning of 2022, LNG carrier spot charter rates
have again seen a seasonal decline.
Newbuilding prices have increased during the
year for LNG carriers as well as for other shipping
segments.
Financial results
Group figures
The financial statements of Höegh LNG consolidate
HMLP and include joint venture companies in
accordance with the equity method. Unless
otherwise stated, figures for 2021 are compared with
those for 2020.
Income statement
Total income was USD 351.8 million in 2021
(2020: USD 335.1 million), while operating profit
before depreciation and amortisation (EBITDA)
was USD 217.2 million (USD 225.4 million). Although
revenues increased, the group also incurred higher
expenses in 2021, with increased opex primarily
related to maintenance conducted to prepare two
vessels for operations in FSRU mode, class renewals
and increased SG&A.
Operating profit was USD 103.8 million in 2021 (USD
113.1 million). An impairment assessment has been
carried out for the group’s vessels, which did not
identify any impairment requirement.
Net financial expenses amounted to USD
109.2 million in 2021 (USD 108.3 million).
Loss after tax was USD – 21.3 million (profit of USD
0.1 million). The decrease is, in addition to decrease
in EBITDA and higher net financial expenses, mainly
due to a tax provision recorded for uncertain tax
position following a tax audit in Indonesia in 2021.
Business segments
The group’s activities are focused on four operating
segments, namely HMLP, operations, business
development and project execution. Activities not part
of operations are included in corporate and other. The
segment structure is in line with the way the group’s
operations are managed and monitored internally.
The HMLP segment, which includes activities related
to Höegh LNG Partners, recorded a total income
of USD 160 million in 2021 (USD 162 million) and
EBITDA of USD 121 million (USD 129 million).
The operations segment is responsible for the
commercial and technical management of the
group’s operational FSRUs and LNGCs which have
not been transferred to Höegh LNG Partners. It
recorded a total income of USD 187 million in 2021
(USD 173 million) and EBITDA of USD 116 million
(USD 117 million).
The business development and project execution
segment comprises all activities related to business
development and project execution, including non-
capital expenditure costs related to newbuildings. It
recorded a total income of USD 2 million (no income
for 2020) and a a negative EBITDA of USD 7 million
(negative USD 8 million).
The corporate and other segment, which comprises
the group’s management, finance, legal and other
corporate services, recorded a total income of USD
3 million in 2021 (no income in 2020) and negative
EBITDA of USD 12 million (negative USD 13 million),
reflecting group administrative expenses.
Financial position
On 31 December 2021, the consolidated book value
of assets totalled USD 2 429 million (USD
2 473 million). The decrease from 31 December 2020
mainly reflects the depreciation of the fleet and the
reduced book value of right-of-use assets, as well
as a reduction in cash and cash equivalents, offset
by an increase in investments in associates and joint
ventures.
18 | Directors' report
HÖEGH LNG
The carrying amount of equity on 31 December 2021
was USD 651 million (USD 597 million). Net of mark-
to-market of hedging reserves, the equity adjusted
for hedging transactions was USD 744 million (USD
757 million), bringing the adjusted equity ratio to
30% (30%). The capital structure of Höegh LNG is
considered to be adequate given the risks facing the
group. The capital structure will probably be subject
in the future to the issuance of further debt relating to
scheduled refinancing and new debt, net results and
potential new equity capital being issued and other
factors.
Financing
The group is financing its assets and business
activities through a combination of equity and
interest-bearing debt. The interest-bearing debt
consist of asset-backed bank financing as well as
unsecured loans and bond loans. On 31 December
2021, outstanding interest-bearing debt carried on
the balance sheet totalled USD 1 614 million, net of
debt issuance costs, compared to a total of USD 1
703 million as of 31 December 2020. The decrease
is mainly explained by ordinary debt and lease
repayments and the changes in debt facilities listed
below.
The group has limited debt maturities in 2022, save
for addressing a credit-event related to its two bond
loans (HLNG03 and HLNG04), which was fulfilled by
the company in March 2022. If not fulfilled, it would
have given the bond loan investors a put option to
sell their bonds back to the company in April 2022.
During 2021, the group raised additional equity as
follows:
• Following the amalgamation, Höegh LNG
Holdings Ltd. has raised USD 48 million in new
equity from its shareholder in the second quarter
and the fourth quarter of 2021, of which USD
47.2 million was settled in cash. The capital
increase is categorised as Contributed Surplus
in the consolidated statement of changes in
equity. A part of the amount has been used to
settle costs incurred by the amalgamation.
• Höegh LNG Partners raised USD 9.1 million in
net proceeds from issuing new preferred units
and common units under its ATM equity raising
programme.
During 2021, the group concluded refinancing of
some of its debt as well as amendments to certain
debt facilities. The main activities were as follows:
• In connection with the take-private and
amalgamation transaction referred to above,
certain amendments to the bond terms were
agreed with the company’s bond holders,
including but not limited to an extension of the
HLNG03 bond loan maturity date by 18 months
from 1 February 2022 to 1 August 2023.
• Höegh LNG Holdings Ltd. completed a NOK
330 million bond loan tap issuance in June in the
HLNG04 bond loan, paired with a buy-back of
NOK 101 million in the HLNG03 bond loan. The
tap issue was priced at 97% of par value.
• Höegh LNG Holdings Ltd. repaid and cancelled
the up to USD 80 million credit facility in July 2021
with proceeds from the NOK 330 million tap
issue in the HLNG04 bond loan in June 2021 and
by drawing USD 44 million on a new bank facility
in July 2021.
• The group completed the refinancing of the
Höegh Giant debt facility with a new USD
165 million 5-year facility in August 2021.
• During the fourth quarter, Höegh LNG Partners
completed the refinancing of the PGN FSRU
Lampung debt facility’s commercial tranche of
USD 15.5 million and the Neptune USD
154 million debt facility. It also signed the loan
agreement for a refinancing of the Cape Ann
debt facility, which is planned to be completed in
the second quarter of 2022.
Directors' report | 19
HÖEGH LNG
Cash flows and liquidity
Cash flows from operating activities in 2021 was USD
196.5 million, down from USD 216.2 million in 2020,
owing mainly to variations in working capital.
Net cash flows used in investing activities amounted
to USD 26.5 million (USD 15.7 million). The
increase is mainly related to vessels being subject
to modification and class renewal, investment in
associates and loans granted to joint ventures and
associates.
Cash flows from financing activities was negative
at USD 178.5 million (negative at USD 244.9
million), driven by debt and lease repayments,
interest expenses and dividends paid, and offset by
proceeds from borrowings and new equity received
from the owner.
Total cash flows in 2021 was negative at USD
8.5 million (negative at USD 44.4 million). On 31
December 2021, unrestricted cash and cash
equivalents amounted to USD 134.0 million
(USD 142.5 million).
On 31 December 2021, the group’s current interest-
bearing debt was USD 404.2 million (USD 213.7
million), including current lease liabilities. Bond debt
was classified as current interest-bearing debt since
the bond holders have a right to require that the
company purchases all or some of the bonds held by
a bond holder if a credit event has not occurred by
1 April 2022. On 24 March 2022, the Company
fulfilled the credit event by creating a first ranking
pledge over its ownership of 15.26 million common
units of Höegh LNG Partners LP in favour of the
Bond Trustee (on behalf of the bond holders). As a
result, USD 266.4 million will be reclassified from
current to non-current debt in the first quarter 2022.
Plans call for debt service and refinancing to be
funded through the available cash and cash flows
from operation, as well as refinancing debt on or
before its maturity date.
Going concern
The annual financial statements have been prepared
under the going concern assumption, and the board
of directors confirms that this assumption is fulfilled.
This assumption rests on financial forecasts and
plans for the coming year on the basis of several
assumptions made about future events and planned
transactions. On 31 December 2021, outstanding
interest-bearing debt carried on the balance sheet
totalling USD 1 614 million, net of debt issuance
costs, is expected to be repaid through the cash
flow generated from existing assets in Höegh LNG
and through refinancing when the debt matures. The
group has two FSRUs currently trading on interim
LNGC contracts, which generate charter income
below the required cash-break-even for these
FSRUs. Moreover, the group has significant debt
maturities in aggregate for 2022 and 2023 which will
or may require refinancing or extension of maturity
dates. Consequently, Höegh LNG is exposed to the
risk of insufficient cash flows generated to service its
debt, and the risk of refinancing amounts falling short
of the amount of debt maturing.
As further commented in the prospects section, it
is not possible to forecast and assess the potential
effects of the Covid-19 pandemic and the recent
events in Ukraine on the company accurately at
the time this report is released, but these are being
continuously monitored.
Parent company financials
The total comprehensive loss for the company on a
stand-alone basis in 2021 was USD 7.3 million (loss
of USD 479.8 million). The improvement from 2020
is mainly related to that there was no impairment of
investment in subsidiaries and loans to subsidiaries in
2021. On 31 December 2021, total assets were USD
651 million (USD 620 million), while the equity ratio
was 49% (48%). Cash flows in 2021 was positive
at USD 2 million (negative USD 51 million). On 31
December 2021, the company held USD 26.1 million
in cash and cash equivalents (USD 23.7 million).
20 | Directors' report
HÖEGH LNG
Risk and risk management
Risk management
Höegh LNG manage strategic and operational risk
in line with ISO 31000 in relation to both new and
existing business. The following certifications are
held for management of quality, the environment,
safety and occupational health:
• International Safety Management.
• ISO 9001 Quality Management System.
• ISO 14001 Environmental Management System.
Operating in a high-risk environment requires
a strong focus on health, safety, quality and
environment. Höegh LNG devotes continuous
attention to developing and improving procedures
and routines.
Risk management processes are integrated in
governance, management and operations on all
levels of organisation. Enterprise Risk is assessed on
monthly basis by the management and reported to
the board on quarterly intervals.
Market risk
Höegh LNG has 10 FSRUs in operation, of which
eight are either operating under or committed on firm
long-term contracts with expiration dates between
2024 and 2036, including Höegh Gannet due to start
up in Brazil late 2022 or early 2023. Further, one
FSRU (Höegh Galleon), is committed to a conditional
long-term FSRU contract. Höegh LNG continues to
develop its pipeline of FSRU projects, to ensure that
the remaining FSRU in the fleet (Höegh Esperanza)
will also be assigned to a long-term FSRU contract.
Some of the FSRUs are employed on interim LNG
carrier contracts pending long-term FSRU contracts
commencing or being concluded. Höegh LNG will
consequently remain exposed to variations in market
rates for FSRUs and LNG carriers for units currently
employed on interim trading contracts.
The two LNGCs in the fleet are on long-term
contracts with creditworthy counterparties and not
exposed to short-term variations in the demand for
LNG transport.
Operational risk
Höegh LNG assumes operational risks associated
with loading, transporting, offloading, storing,
reloading and regasifying LNG cargoes, which can
cause delays to operations. In addition, difficulties
presented by port constraints, weather conditions,
vessel compatibility, technical availability and
performance may affect the results of operations
and expose Höegh LNG to adverse financial
consequences.
Financial risk
Höegh LNG is exposed in the ordinary course of its
business to different types of financial risk, including
market (interest and foreign exchange rates), credit
and liquidity risk. Risk management routines are
in place to mitigate such risks. When such risks
are identified, these are evaluated and if deemed
appropriate, mitigating actions are taken. Höegh
LNG’s primary strategy in mitigating financial market
risks is to apply derivatives, where appropriate, in
hedging its various net financial-market risk positions.
When the use of derivatives is deemed appropriate,
only well-understood, conventional instruments
issued by highly rated financial institutions are used.
All interest-bearing debt in Höegh LNG is subject
to floating interest rates, but the group has entered
into fixed interest-rate swaps for most debt facilities
and is therefore not exposed in any material way to
fluctuations in interest-rate levels on existing debt
facilities.
Currency risks arise from business transactions,
capitalised assets and liabilities denominated in
currencies other than the reporting currency of
Höegh LNG. The majority of Höegh LNG’s business
transactions, capitalised assets and liabilities are
denominated in USD. The majority of its foreign
exchange exposure relates to administrative
expenses denominated in NOK, totalling around
NOK 335 million in 2021. In addition, Höegh LNG
has certain revenues in EUR. Höegh LNG’s NOK-
denominated bond loans have been swapped to
USD for the principal amount and the coupons.
Directors' report | 21
HÖEGH LNG
On 31 December 2021, the group had USD 134
million in total available liquidity. Liquidity risk is the
risk that Höegh LNG will be unable to fulfil its financial
obligations when they fall due, including servicing
its interest-bearing debt and refinancing debt at
maturity.
Höegh LNG is also exposed to liquidity risk related
to derivatives entered into to hedge interest rate and
currency risks, since some of these derivatives are
subject to margin calls if negative value exceeds
a certain threshold, and the difference will require
the deposit of cash collateral. On 31 December
2021, the corresponding cash collateral amounted
to approximately USD 6.5 million and was mainly
related to interest-rate swaps hedging the interest-
rate risk of the debt facility for Höegh Galleon.
Customer credit risk is the risk that a counterparty
does not meet its obligations under a customer
contract, leading to a financial loss. Existing FSRUs/
LNGCs are chartered to creditworthy counterparties
and/or projects with a strong strategic rationale
for the country they operate in. Cash funds are
only deposited with internationally recognised
financial institutions which have a high credit rating,
or invested in marketable securities issued by
companies holding a high credit rating.
The maximum exposure to credit risk amounts to
USD 229 million represented by the carrying amount
of each financial asset in the balance sheet, including
financial derivatives plus guarantees provided to the
associated company Avenir.
Shareholder information
On 31 December 2021, the company’s share capital
was USD 12 000, consisting of 1 200 000 fully paid
common shares, each with a par value of USD 0.01.
All the shares in the company are owned by Larus
Holding Limited, a 50/50 joint venture between Leif
Höegh & Co Ltd. and Funds managed by Morgan
Stanley Infrastructure Partners.
The company’s stock option program was terminated
without any settlement paid to the holders of the
options, when the company’s shares were delisted
from the Oslo Stock Exchange on 27 May 2021.
Corporate governance
The board’s statement of policy on corporate
governance is set out in the corporate governance
report included as a separate chapter in this annual
report. Höegh LNG has adopted and implemented a
corporate governance system which complies with
section 6.3.6 of the Oslo Børs rulebook II – issuer
rules and, other than as stated in the said report,
with the Norwegian code of practice for corporate
governance .
Prospects
Höegh LNG’s main commercial focus is to deliver
the FSRU projects that have been secured, ensure
the contract with AIE becomes a firm contract, and
conclude long-term FSRU employment for Höegh
Esperanza, which currently is the remaining FSRU in
the fleet which is not assigned to a specific project.
The business development activity was high in 2021
and this is expected to continue into 2022.
The energy markets, including the LNG market,
have recovered after a period of steep decline and
high volatility in the early phase of the Covid-19
pandemic. Even if the projected growth in demand
for natural gas and LNG has held up, the ongoing
Covid-19 pandemic may affect future demand for
natural gas and LNG and therefore reduce business
opportunities for the company. This could have a
significant adverse impact on Höegh LNG’s financial
position, operational results and cash flows.
Höegh LNG has so far experienced a limited
operational impact from Covid-19, but the situation
is dynamic and could change quickly – in particular
with regard to maritime personnel and logistical
challenges. The current pandemic could significantly
and adversely impact the group’s maritime
operations, onshore support, corporate activities,
customers, vendors and the countries in which it
operates. As a result it is not possible to give an
accurate forecast of the effect of Covid-19 on Höegh
LNG’s business at the date of this report. What can
22 | Directors' report
HÖEGH LNG
Hamilton, Bermuda, 26 April 2022
The Board of Directors and the President and CEO of Höegh LNG Holdings Ltd.
Morten W. Høegh
Chairman
Johan Pfeiffer
Deputy Chairman
Martine Vice Holter
Director
Tonesan Amissah
Director
Alberto Donzelli
Director
Thor Jørgen Guttormsen
President and CEO
Leif O. Høegh
Director
John Kwaak
Director
be said is that as of the date of this report, effects
on its employees, operations or revenues have been
limited.
The recent developments in Ukraine may continue to
impact the market for LNG as well as for LNG carriers
and FSRUs, in particular because Russia is a major
global exporter of crude oil and natural gas, but also
generally. While near-term business opportunities
may arise for the company in Europe, the potential
effects of the ongoing conflict in Ukraine are complex
to project and therefore highly uncertain, including
any potential effects on the group’s business and
operations. For example, the situation may lead to
further regional and international conflicts or armed
action. It is possible that such conflict could disrupt
supply chains and cause instability in the global
economy. Additionally, the ongoing conflict could
result in the imposition of further economic sanctions
by the United States and the European Union against
Russia. While much uncertainty remains regarding
the global impact of the invasion, it is possible that
such tensions could adversely affect our business,
financial condition, results of operation and cash
flows. Furthermore, it is possible that third parties with
whom we have charter contracts may be impacted by
events in Russia and Ukraine, which could adversely
affect our operations.
Directors' report | 23
HÖEGH LNG
PGN FSRU Lampung
03
Corporate
governance report
26 Implementation and reporting on
corporate governance
27 Business
28 Equity and dividends
29 Equal treatment of shareholders
29 Shares and negotiability
29 General meetings
29 Nomination committee
29 Board of directors:
Composition and independence
32 The work of the board of directors
32 Risk management and internal control
33 Remuneration of the board of directors
34 Remuneration of executive personnel
34 Information and communications
34 Takeovers
34 Auditor
Höegh Galleon
26 | Corporate governance report
HÖEGH LNG
Höegh LNG Holdings Ltd. (“Höegh LNG Holdings”
or “company”) is an exempted company limited by
shares, domiciled and incorporated under the laws of
Bermuda.
On 8 March 2021, the company announced a
recommended offer by Leif Höegh & Co (LHC) and
funds managed by Morgan Stanley Infrastructure
Partners (MSIP) through a 50/50 joint venture,
Larus Holding Limited (JVCo), to acquire the
remaining issued and outstanding shares of Höegh
LNG Holdings not owned by LHC or its affiliates,
representing approximately 50.4% of the shares
outstanding, by way of amalgamation between Larus
Limited, a subsidiary of JVCo, and Höegh LNG
Holdings. The amalgamation was completed on 4
May 2021, after which the company became wholly
owned by LHC and MSIP through their 50/50 joint
venture, Larus Holding Limited, and the company’s
shares were delisted from Oslo Børs on 27 May
2021.
The company is subject to Bermudian law regarding
corporate governance. As the company has issued
two bonds which are listed on Oslo Børs (tickers:
HLNG03 and HLNG04), the company is required
to provide a report on its corporate governance
as further set out in section 6.3.6 of the Oslo Børs
rulebook II – issuer rules (the “issuer rules”).
When it was a listed company, Höegh LNG (the
company and its subsidiaries) adopted and
implemented a corporate governance system
which mainly complied with the Norwegian code of
practice for corporate governance (the “Norwegian
corporate governance code”). As good corporate
governance enhances business performance by
reducing risk and improving accountability and
is essential for maintaining the trust of Höegh
LNG’s stakeholders and the company’s strong
standing in the financial market, the company
retained its corporate governance system following
the de-listing. The board has chosen to continue
issuing a corporate governance report based on
the Norwegian corporate governance code. The
deviations from the Norwegian corporate governance
code are predominantly attributable to the fact
that the company is a privately held company and
incorporated in Bermuda and the deviations are
further described in this report.
The Norwegian corporate governance code is
published at www.nues.no and the issuer rules
are published on the Oslo Børs website at www.
euronext.com.
Implementation and reporting
on corporate governance
The foundation of corporate governance in Höegh
LNG is set out in the company’s bye-laws, in addition
to a governing principles policy and Höegh LNG’s
code of conduct.
The governing principles policy is based on the
Norwegian corporate governance code and is
approved by the board. It identifies the key governing
bodies in Höegh LNG, describes the roles and
responsibilities of the governing bodies and functions
of the group, and specifies requirements for the
CORPORATE GOVERNANCE
REPORT
Governing
policies
Governing
procedures
Functional policies
Functional procedures incl.
processes and key controls
Evaluation and reporting
Roles, responsibility and competence
Corporate governance report | 27
HÖEGH LNG
business with regard to important governing
processes, documents and systems. The board has
also adopted governing procedures to implement the
principles set out in the governing principles policy.
These procedures include separate charters for
the board of directors, the coordination committee
and the capital structure committee, as well as
instructions for both the President and CEO and the
group’s chief compliance officer.
Höegh LNG and the group’s employees are required
to adhere to and comply with laws and regulations,
including on international trade and economic
sanctions, and Höegh LNG’s standards for ethics,
health, safety, the environment and quality as further
set out in Höegh LNG’s code of conduct, the insider
trading policy and the procedure for governmental
investigation adopted by the board. In addition, the
board has adopted a supplier code of conduct which
all suppliers are required to adhere to.
Through compliance with the above, the board and
management contributes to achieving the following
objectives:
Trust: Good corporate governance establishes a
basis for trust in the board and the management by
the shareholders and other stakeholders.
Transparency: Communication with the company’s
stakeholders will be based on transparency
concerning both Höegh LNG’s business, which is
important for assessing the company’s development,
and its financial position.
Independence: The relationship between the board,
the management and the shareholders will be on an
independent basis to ensure that decisions are made
on a qualified and neutral basis.
Equality: Höegh LNG aims to give all its
shareholders equal treatment and rights.
Control and management: Good control and
governance mechanisms will contribute to
predictability and risk reduction.
Deviations from the code: None.
Business
In January 2021, the company’s vision and mission
statements were revised to match its strategy of
contributing actively to the transition to a carbon-free
energy future, while embracing the role of LNG in this
ongoing energy transition process. Its mission is to
supply innovative and reliable floating infrastructure
solutions, thereby creating value for customers,
shareholders, employees and the local communities
in which it operates, and to reduce the impact on the
environment from the group’s own business and that
of its clients.
The group’s strategy is to drive and embrace
technological and commercial innovation,
contributing actively to the transition to a carbon-
free energy future, while embracing the role of
LNG in this ongoing energy transition process. To
reflect the group’s strategic objective to include the
development of non-carbon energy solutions, Höegh
LNG established Clean Energy as a new business
area in 2021. Höegh LNG always seeks excellence
in its operations in order to maximise value for the
group and its clients, while at the same time ensuring
the welfare of its employees and minimising its
impact on the environment.
The board evaluates the objectives, strategies and
risk profiles continuously and at least annually.
The company has guidelines for how it integrates
considerations related to its stakeholders into its
value creation. Since 2014, Höegh LNG has issued
a separate sustainability report in accordance with
Oslo Børs’ Guidance on the Reporting of Corporate
Responsibility and the “core” level of the Global
28 | Corporate governance report
HÖEGH LNG
Reporting Initiative (GRI) standard. Höegh LNG is
increasing its sustainability awareness and efforts
and changed its sustainability reporting framework
to the UN Sustainable Development Goals (SDGs)
with effect from 2021. Reference is made to the
sustainability report for further details.
The Memorandum of Association and the company’s
bye-laws are available on the company’s website
(www.hoeghlng.com – corporate governance
– governance documents – other governance
documents).
Deviations from the code:
• In line with common practice for Bermudian-
registered companies, the company’s objectives
and powers, as set out in its Memorandum of
Association, are broad and therefore wider and
more extensive than recommended in the
Norwegian corporate governance code.
Equity and dividends
Capital structure
The issued share capital in the company on 31
December 2021 was USD 12 000 consisting of
1 200 000 fully paid common shares, each with a
par value of USD 0.01.
Book equity on 31 December 2021 totalled USD 651
million. Net of mark-to-market of hedging reserves,
the adjusted book equity on 31 December 2021 was
USD 744 million.
The board regards the current level of equity and
financing as adequate in view of Höegh LNG’s
objectives, strategy and risk profile. However, as
noted in the prospects section of the directors’
report, it is not currently possible to forecast and
assess the potential effects of the Covid-19 virus
outbreak on the company accurately. The capital
structure will probably be subject in the future to
the issuance of further debt relating to scheduled
refinancing and new debt, net profits and dividend
payments, potential issuance of new equity capital
and other factors.
Dividend policy
The company is under restrictions of its loan
agreements, which currently does not allow the
company to pay dividends. The dividend policy will
be decided by the board of directors when these
restrictions are relaxed or cease to be in force.
Deviations from the code:
• Pursuant to Bermudian law and common practice
for Bermudian-registered companies, it is not
necessary to obtain the general meeting’s
approval for payment of dividends (bye-law 15).
Equity issuance
The authorised share capital of the company is USD
12 000.
Deviations from the code:
The following applies pursuant to Bermudian law
and common practice for Bermudian-registered
companies.
• The board has wide powers to issue any
authorised but unissued shares in the company
on such terms and conditions as it may decide,
and may, subject to any resolution of the
shareholders in a general meeting and to the
rights of any issued shares, attach such rights and
restrictions as the board may determine.
• The board may, without approval from the
shareholders in a general meeting, acquire the
company’s own shares to be cancelled or held as
treasury shares. These bye-law provisions
(bye-law 3) are neither limited to specific purposes
nor to a specified period as recommended in the
Norwegian corporate governance code.
Corporate governance report | 29
HÖEGH LNG
Equal treatment of shareholders
Equal treatment of all shareholders is a core
governance principle in Höegh LNG.
The company has only one class of shares and, on
a poll, each share confers one vote at the general
meeting.
Deviations from the code: None.
Shares and negotiability
The common shares of the company are freely
transferable, and the company’s constitutional
documents impose no transfer restrictions on the
company’s common shares.
Deviations from the code: None
General meetings
Being a Bermudian entity, the general meeting of the
company is held annually in Bermuda.
The shareholders of the company are responsible
for making certain key decisions concerning the
company’s business. At the annual general meeting
(AGM), these include the appointment of the
auditor, the election of the board of directors and
the determination of the remuneration of directors.
Alternate directors are appointed by the individual
directors and are not elected by the general meeting.
The financial statements are presented to the AGM
for information, but under Bermudian law, the
shareholders’ approval of these is not required.
Bye-laws 19 to 35 set out extensive rules regarding
the conduct of general meetings, including in relation
to the notice of general meetings, proceedings,
voting, proxies and corporate representatives.
Deviations from the code:
• The general meeting procedures are aligned to
the fact that the company is privately held with
one shareholder.
• Pursuant to bye-law 27, the chairman or the
President and CEO shall act as chairman of
a general meeting. In their absence, a chairman
shall be appointed or elected by those present at
the meeting and entitled to vote.
Nomination committee
As a private company, the company does not have a
nomination committee.
Deviations from the code: As a private company, the
company does not have a nomination committee.
Board of directors: composition and
independence
The board and its chairman are elected or appointed
in the first place at the statutory meeting of the
company and thereafter, except in the case of a
casual vacancy, at the annual general meeting or at
any special general meeting called for that purpose.
1
The bye-laws provide for the board to consist of not
less than one director.
The composition of the board of directors represent
diversity in background, expertise and gender (29%
female directors).
The board has established two committees: A
coordination committee and a capital structure
committee.
Currently, the board consist of the following seven
directors:
• Morten W. Høegh (born 1973) has served as
chairman of Höegh LNG since 2006 and is a
member of the company’s coordination
committee. He also serves as chairman of Leif
Höegh (U.K.) Limited. Since 2003 he has been a
director of Höegh Autoliners Holdings AS (and its
predecessors Leif Höegh & Co. ASA, Leif Höegh
& Co. Ltd. and Höegh Autoliners Ltd.).
Morten W. Høegh is a director of Höegh Eiendom
Holdings AS. He is a director and Chairman
of Gard P&I (Bermuda) Ltd. and chairman of its
1
The company does not have a corporate assembly.
30 | Corporate governance report
HÖEGH LNG
risk and election and governance committees
and a director and chairman of certain of its
subsidiaries. He also serves as the Chairman of
the western Europe committee of DNV GL. From
1998 to 2000, Morten W. Høegh worked as an
investment banker with Morgan Stanley. He holds
an MBA from Harvard Business School with High
Distinction (Baker Scholar) and an MSc in Ocean
Systems Management and a BSc in Ocean
Engineering from the Massachusetts Institute of
Technology.
• Johan Pfeiffer has served as deputy chairman of
Höegh LNG since May 2021 and is a member of
the company’s coordination committee. Johan
Pfeiffer is a Managing Director and Operating
Partner with Morgan Stanley Infrastructure
Partners (MSIP). He serves on the board of
several companies in the MSIP portfolio. Prior to
Morgan Stanley, Johan Pfeiffer was the President
for Europe, Latin America and Africa for Johnson
Controls and previously Tyco. Prior to Johnson
Controls, Johan Pfeiffer was a Vice President
for FMC Technologies in Houston and General
Manager and Managing Director in Kongsberg,
Norway. Johan Pfeiffer was previously the Vice
Chairman of the US Petroleum Equipment and
Services Association. He holds an MBA from the
Wharton School, an MA in International Studies
from the University of Pennsylvania, and an MSC
in Material Sciences Engineering from the Swiss
Federal Institute of Technologies (EPFL).
• Leif O. Høegh (born 1963) has served as director
of Höegh LNG since 2006. He is also the
chairman of Höegh Autoliners Holdings AS and
Höegh Eiendom Holdings AS. Leif O. Høegh
worked for McKinsey & Company and the Royal
Bank of Canada Group. He holds an MA in
Economics from the University of Cambridge and
an MBA from Harvard Business School.
• Alberto Donzelli has served as a director of Höegh
LNG since May 2021 and is a member of the
company’s capital structure committee. Alberto
Donzelli is a Managing Director and co-head of
Europe for Morgan Stanley Infrastructure Partners
(MSIP). Alberto Donzelli worked in the investment
banking businesses of UBS and Credit Suisse,
where he was part of the European Utilities
Group advising on numerous M&A transactions
in Europe. Alberto Donzelli holds a degree in
Business Administration from Bocconi University.
• Martine Vice Holter has served as a director of
Höegh LNG since May 2021 and is a member
of the company’s capital structure committee.
Martine Vice Holter has been the Chief Executive
Officer of Hoegh Capital Partners (HCP) for over
a decade. HCP is a family investment office
co-located in London and Oslo which manages
all of the investment interests of the Høegh
family. Martine Vice Holter oversees a multi-
asset class investment portfolio which includes
direct investments (both private and public) and
financial assets (managed through in-house
portfolio managers as well as allocations to third
party fund managers). The group embraces an
active ownership approach; she is shareholder
representative and/or non-executive director
on several direct investment boards in the
portfolio. Sector focus includes: shipping and
transportation, real estate, East Africa agriculture,
and media. Corporate actions include: IPOs, M&A,
fund-raisings, refinancings and restructurings.
Born in Canada, Martine Vice Holter has lived
and worked in the US, Asia and Europe and
has experience working in Africa. Prior to HCP,
she was Chief Operating Officer of Arts Alliance
Advisors, a venture capital fund focused on
early stage media and technology investments
(from 2000- 2005). Previously, she worked as a
management consultant at McKinsey & Company
based in London where she focused on strategy,
finance and organisation-building. She began her
career in investment banking (corporate finance
and M&A) with Goldman Sachs in New York
followed by Hong Kong. Martine received her
Corporate governance report | 31
HÖEGH LNG
MBA from INSEAD (1994) and graduated with a
Bachelor of Arts (Honours) joint in Economics and
Political Science from Queen’s University, Canada.
• John Kwaak has served as a director of Höegh
LNG since May 2021 and is a member of the
company’s coordination committee. John Kwaak
served as Executive Director of Morgan Stanley
Infrastructure Partners (MSIP) covering the
energy and transportation sectors from late 2017
to February 2022. Before joining MSIP, he was
a Senior Vice President at Fortress Investment
Group in their private equity division. Prior to that,
he was an investment banker at Evercore. He also
served as First Lieutenant in the Republic of Korea
Air Force. John Kwaak holds an MBA from the
Wharton School of the University of Pennsylvania
and an AB in Government from Harvard College.
• Tonesan Amissah has served as our director since
June 2021. Tonesan Amissah is the Managing
Director of Appleby Global Services Bermuda
(“AGS”), where she oversees all aspects of
client service and is a former partner of Appleby
(Bermuda) Limited (“Appleby”), where she
practiced within the corporate department as
a member of the corporate finance and funds
& investment services teams, having joined
Appleby in 1989. She also serves as a director of
Höegh LNG Partners LP and a number of other
companies, the majority of which are clients
of AGS. Tonesan Amissah holds a law degree
from the London School of Economics and
Political Science and qualified as a Barrister at
Holborn Law Tutors in 1988. She is a member
of the Bermuda Bar Association, the Institute of
Directors and has been an accredited speaker for
the Regulatory and Compliance Association since
2015.
The board does not include executive personnel
and all directors are independent of Höegh
LNG’s executive personnel and material business
connections. Only M. Tonesan Amissah is
deemed to be independent of the company’s
main shareholders.
The company has one shareholder, Larus Holding
Limited, which is a 50-50 joint venture between Leif
Höegh & Co. Ltd. and Floating Infrastructure LP.
Leif Höegh & Co. Ltd. is indirectly controlled by Leif
O. Høegh and family trusts under which Morten W.
Høegh and his immediate family are the primary
beneficiaries. As of 31 December 2021, Leif Höegh &
Co. Ltd. held a total of 600 000 shares, representing
50% of the shares in the company and 441 037
common units in Höegh LNG Partners LP. Leif
Höegh & Co. Ltd. is represented on the board by
Morten W. Høegh, Leif O. Høegh and Martine Vice
Holter.
Floating Infrastructure LP is owned by funds which is
managed by Morgan Stanley Infrastructure Holdings
Inc. and as of 31 December 2021, held a total of
600 000 shares, representing 50% of the shares,
in the company. Floating Infrastructure LP is
represented on the board by Johan Pfeiffer, Alberto
Donzelli and John Kwaak.
Owing to the Covid-19 restrictions, the board held
one physical board meeting in 2021 and in addition
one physical meeting with the manager, Höegh
LNG AS, in 2021 with all directors present, as well
as several briefing calls. The board held 24 interim
meetings, with the Bermuda-resident director and/or
alternate(s) present.
Bye-laws 36 and 40 regulates the appointment and
removal of directors, respectively.
Deviations from the code:
• As a private company, only one director is
independent of the company’s main shareholders.
• The chairman of the board of directors is elected
by the board of directors.
• As a private company, the members of the board
of directors are not elected for a specific time
period.
• As a private company, the members of the board
of directors are not encouraged to own shares in
the company.
32 | Corporate governance report
HÖEGH LNG
The work of the board of directors
The board is responsible for overseeing the
management of Höegh LNG, safeguarding the
business and implementing sound corporate
governance for the group to follow.
The board has authorised Höegh LNG AS to carry
out the day-to-day management of Höegh LNG’s
assets under a management agreement comprising
administrative, commercial and technical activities.
The board has established and defined authorities
through a delegation authority matrix.
The main responsibilities of the board as well as the
framework for proceedings of its work are set out
in a charter for the board of directors. In general,
the board will approve the strategy, business plans,
financial statements, investment decisions, debt
financings and budgets for Höegh LNG.
The board has adopted procedures and standards
which cover and impose an obligation on individuals
who are members of the group executive team and
hold other group roles to secure sound governance
and control. The board will also ensure that Höegh
LNG protects its reputation in relation to owners,
employees, customers and the public.
The work of the board is scheduled in an annual plan
with fixed information and decision points. If required,
interim board meetings are arranged in accordance
with the board charter.
Each director is responsible for continuously
assessing whether a conflict exists or could
potentially arise between the interests of the
company and the interests of the director in question.
Existence of a conflict extends to, but is not limited
to, matters put before a director involving a personal
interest, direct or indirect, financial or otherwise, in
the matter concerned.
Circumstances referred to above will be discussed
without undue delay with the chairman of the board.
Where a director’s employment relationship or other
duties regularly give rise to a conflict of interest to
occur, and in other special circumstances, specific
guidelines will be prepared for review by the board
which prevent, as far as possible, such conflict of
interests from arising.
The board conducts a self-evaluation of its own
performance and expertise on an annual basis,
which includes an evaluation of the composition of
the board and the manner in which its members
function, both individually and as a group, in relation
to the objectives set out for the board’s work.
The work of the board committees
Following the privatisation of the company, the board
has decided that the entire board of directors shall
act as the company’s audit committee.
As all the directors are independent of the
executive personnel, the company does not have a
remuneration committee.
The tasks of the coordination committee and the
capital structure committee are defined in committee
charters, which are reviewed annually.
The work of these committees is preparatory in
nature and intended to increase the efficiency of
the board, and does not imply any delegation of the
board’s legal responsibilities. The committees report
to the board.
Deviations from the code:
• As a private company, the full board act as the
company’s audit committee.
• As all of the directors of the board are
independent of the executive personnel,
the company does not have a remuneration
committee.
Risk management and
internal control
The board is responsible for overseeing that the
company has sound internal control and systems for
risk management which are appropriate in relation to
the extent and nature of the group’s activities.
Corporate governance report | 33
HÖEGH LNG
Risk management
Höegh LNG uses risk management tools based on
ISO 31000 Risk Management in relation to both new
and existing business.
The board is responsible for overseeing that the
accumulated risks which could influence the
achievement of HLNG’s strategic and key operational
objectives are being consistently and effectively
identified and managed.
The President and CEO assumes the overall
responsibility for enterprise risk management and
reports the enterprise risk status to the board on
a regular basis. The group has a risk monitoring
committee comprising the group executive team and
the VP QA and Risk. Its objectives are to support
business decisions by monitoring the accumulated
strategic risk for HLNG, and to assess risk mitigation
measures and the effect of changes and new
commitments.
Höegh LNG has a QA and risk management function,
which assists the company in achieving its objectives
by taking a systematic, disciplined approach to
evaluating and improving the effectiveness of
enterprise risk and security management, control and
governance processes. The function meets regularly
with the full board.
The group has implemented an integrated governing
management system (GMS) to govern its processes
for planning, operating and controlling the services
rendered. Health (including occupational health),
safety and environmental management, as well
as project and security risk management are all
included in the GMS. The latter is certified to ISO
9001:2015 Quality Management Systems and ISO
14001:2015 Environmental Management Systems by
an accredited certification body. The GMS complies
with the requirements of OHSAS 18001:2008
Occupational Health and Safety Management
Systems as well as meeting the International Safety
Management (ISM) standard. In addition, the group’s
integrated fleet management company has a
separate HSEQ function.
See also the “Risk and risk management” section in
the directors’ report included in this annual report
and Note 13 “Financial risk management objectives
and policies” for further information.
Internal control
The group has policies and procedures in place
and an effective system for internal controls on
financial reporting, which is based on COSO 2013
(Committee of Sponsoring Organisations of the
Treadway Commission) and satisfies, where Höegh
LNG Partners is concerned, the requirements of the
US Sarbanes-Oxley Act 404. The internal control
process is supervised by the chief of staff and the
chief financial officer, and comprises an annual
process which includes risk assessment, evaluating
whether existing controls are designed and operating
as intended, reviewing and testing implementation
and operational effectiveness of the controls,
reporting and continuous performance monitoring.
Höegh LNG is also subject to extensive external
control by its auditors, external partners in joint
ventures and charterers.
The group has ethical hotlines in place which allows
employees, as well as external parties in the case
of HMLP, to report any non-compliance issues
(anonymously if desired). These reports are received
by Höegh LNG’s chief legal and compliance officer
in the case of the company, and by the chairman of
HMLP’s audit committee in case of HMLP.
Deviations from the code: None.
Remuneration of the board of
directors
The directors who resigned upon the effectiveness
of the amalgamation in May 2021 received a total
remuneration of USD 320 000 for 2021.
Save as set out in below paragraph, the
current board of directors does not receive any
remuneration.
34 | Corporate governance report
HÖEGH LNG
Appleby Global Services (Bermuda) Ltd. is
remunerated on the basis of invoices for its services,
including the provision of M. Tonesan Amissah as a
director and the services of alternate directors to the
company.
The company has no pension or retirement benefits
for directors.
Deviations from the code: None
Remuneration of executive
personnel
The board approves the remuneration package for
the President and CEO.
In addition, the board approves the main terms of
the remuneration package offered to employees
in Höegh LNG, including the parameters of any
annual salary adjustments, pension schemes, and
short- and long-term incentives schemes. The
compensation and benefits package is determined
on the basis of an evaluation of the qualifications
and competencies of the individual employee and
is designed to be competitive with comparable
positions in the market and the achievement
of Höegh LNG’s corporate goals, operating
performance and sustainability targets.
Further details on remuneration of the President and
CEO, the CFO and the executive personnel for the
current financial year are provided in Note 30 to the
2021 annual financial statements.
Deviations from the code:
• The board does not produce a separate
statement on the remuneration of executive
personnel, and consequently no such statement
is submitted to the AGM for consideration,
since the company is a Bermudian company
and the section 6-16a of the Norwegian
Public Company Act and section 7-31b of
the Norwegian Accounting Act do not apply to
the company.
Information and communications
Höegh LNG has a policy of openness on reporting
information to stakeholders. Periodical reports
include quarterly interim reports and the annual
report. All reports are published through stock
exchange releases and on the company’s website.
Important events are also reported through press
and/or stock exchange releases.
The board’s charter includes guidelines to ensure
disclosure in accordance with the financial calendar
adopted by the board.
Contact with the external stakeholders is handled by
the President and CEO and the CFO.
Deviations from the code: None.
Takeovers
As a private company ultimately owned by two
shareholders, the board has not established explicit
guiding principles for dealing with takeover bids.
Deviation from the code: As a private company, the
board has not established explicit guiding principles
for dealing with takeover bids.
Auditor
The auditor is appointed by the general meeting
and has the duty to audit the company’s financial
reporting. The company’s auditor has been Ernst
& Young since 2006. Lead partners have been
changed in accordance with rotation requirements
for publicly listed entities.
In order to safeguard the board’s access to and
control of the auditor’s work, the auditor meets with
the full board when quarterly and annual reports
are reviewed. The auditor is also given access to
the agenda of, documentation for and minutes from
board meetings.
Deviations from the code: None.
HÖEGH LNG
Arctic Lady
04
Directors’ responsibility
statement
38 Directors’ responsibility statement
Corporate governance report | 37
Höegh Grace
HÖEGH LNG
38 | Directors’ Responsibility Statement
Today, the board and the President and CEO
reviewed and approved the board of directors’
report, the corporate governance report, and
the consolidated and separate annual financial
statements for Höegh LNG Holdings Ltd., for the year
ending 31 December 2021 (Annual Report 2021).
Höegh LNG’s parent company and consolidated
financial statements have been prepared in
accordance with International Financial Reporting
Standards as adopted by the EU (“IFRS”) and
additional disclosure requirements set out in the
Norwegian Securities Trading Act.
To the best of our knowledge:
• The consolidated and separate annual financial
statements for 2021 have been prepared in accor-
dance with IFRS;
• The consolidated and separate annual financial
statements give a true and fair view of the assets,
liabilities, financial position and profit (or loss) as a
whole as of 31 December 2021 for the group and
the parent company; and
• The board of directors’ report for the group and
the parent company includes a true and fair
view of
• The development and performance of the
business and the position of the group and
the parent company; and
• The principal risks and uncertainties the
group and the parent company face.
Directors’ responsibility
statement
Hamilton, Bermuda, 26 April 2022
The Board of Directors and the President and CEO of Höegh LNG Holdings Ltd.
Morten W. Høegh
Chairman
Johan Pfeiffer
Deputy Chairman
Martine Vice Holter
Director
Tonesan Amissah
Director
Alberto Donzelli
Director
Thor Jørgen Guttormsen
President and CEO
Leif O. Høegh
Director
John Kwaak
Director
HÖEGH LNG
Directors’ Responsibility Statement | 39
Höegh Grace
05
Consolidated
financial statements
Höegh LNG Group
For the year ended
31 December 2021
42 Consolidated statement of income
43 Consolidated statement of comprehensive income
44 Consolidated statement of financial position
45 Consolidated statement of changes in equity
46 Consolidated statement of cash flows
47 Notes
Höegh Galleon
42 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
USD'000 Note 2021 2020
Time charter revenues 4,15 322 224 313 358
Management and other income 5 10 114 4 690
Share of results from investments in associates and joint ventures 20 19 496 17 088
TOTAL INCOME 351 834 335 136
Bunker and other voyage related expenses (2 189 ) (2 769 )
Operating expenses 6 (85 907 ) (70 844 )
Project administrative expenses 7,8 (16 546 ) (11 123 )
Group administrative expenses 7,10 (21 721 ) (19 738 )
Business development expenses 7,9 (8 277 ) (5 227 )
OPERATING PROFIT BEFORE DEPRECIATION AND AMORTISATION (EBITDA) 217 194 225 435
Depreciation 11,15,28 (113 406 ) (112 374 )
OPERATING PROFIT 103 788 113 061
Interest income 733 1 133
Interest expenses 15,17 (103 207 ) (99 801 )
Income from other financial items 18 722 4 354
Expenses from other financial items 18 (7 431 ) (13 967 )
NET FINANCIAL ITEMS (109 183 ) (108 281 )
ORDINARY PROFIT (LOSS) BEFORE TAX (5 395 ) 4 780
Income taxes 23 (15 889 ) (4 634 )
PROFIT (LOSS) FOR THE YEAR AFTER TAX (21 284 ) 146
Profit (loss) for the year attributable to (from):
Equity holders of the parent (54 479 ) (44 713 )
Non-controlling interests 20 33 195 44 859
TOTAL (21 284 ) 146
CONSOLIDATED STATEMENT OF INCOME 1 JANUARY – 31 DECEMBER
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 1 JANUARY – 31 DECEMBER
The notes on page 47 to 107 are an integral part of these consolidated financial statements.
USD’000 Note 2021 2020
Profit (loss) for the year (21 284 ) 146
Items that will not be reclassified to profit or (loss)
Net gain (loss) on other capital reserves (488 ) 703
Items that may be subsequently reclassified to profit or (loss)
Net gain (loss) on hedging reserves 13 47 058 (46 923 )
Share of other comprehensive income from joint ventures 13,20 20 245 (8 246 )
OTHER COMPREHENSIVE INCOME FOR THE YEAR NET OF TAX 66 815 (54 466 )
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 45 531 (54 320 )
Total comprehensive income attributable to (from):
Equity holders of the parent (2 942 ) (89 553 )
Non-controlling interests 20 48 473 35 233
TOTAL 45 531 (54 320 )
Consolidated Financial Statements Höegh LNG Group | 43
HÖEGH LNG
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
USD’000 Note 31 Dec 2021 31 Dec 2020
ASSETS
Non-current assets
Deferred tax assets 23 1 274 1 166
Vessels and spareparts 11 1 963 980 2 032 460
Right-of-use assets 15 129 916 160 573
Investments in associates and joint ventures 20 91 198 45 390
Other non-current financial assets 29 11 654 17 471
Other non-current assets 28 21 146 18 316
Shareholder loans 30 7 511 869
Non-current restricted cash 14 30 662 16 895
Total non-current assets 2 257 341 2 293 140
Current assets
Bunkers and inventories 76 129
Shareholder loans 30 1 777 3 284
Trade and other receivables 24 27 444 26 755
Other current financial assets 13 13 170
Investment in marketable securities 13 98 102
Current restricted cash 14 8 419 7 225
Cash and cash equivalents 14 134 041 142 545
Total current assets 171 868 180 210
TOTAL ASSETS 2 429 209 2 473 350
EQUITY AND LIABILITES
Equity
Share capital 21 12 773
Share premium, contributed surplus and other paid in capital 820 462 556 344
Hedging and other capital reserves (70 286 ) (121 823 )
Retained earnings (422 833 ) (139 539 )
Equity attributable to equity holders of the parent 327 355 295 755
Non-controlling interests 20 323 676 301 396
Total equity 651 031 597 151
Non-current liabilities
Deferred tax liabilities 23 16 134 13 180
Non-current interest-bearing debt 16 1 101 756 1 351 051
Non-current lease liabilities 15,16 107 790 138 265
Investments in joint ventures 20 - 1 921
Other non-current financial liabilities 13,30 34 097 67 471
Deferred revenues 12 14 989 13 889
Total non-current liabilities 1 274 766 1 585 777
Current liabilities
Current interest-bearing debt 16 373 385 184 066
Current lease liabilities 15,16 30 814 29 673
Income tax payable 23 11 141 3 602
Trade and other payables 25 19 328 19 205
Other current financial liabilities 13,27 34 598 34 077
Other current liabilities 26 34 146 19 799
Total current liabilities 503 412 290 422
TOTAL EQUITY AND LIABILITIES 2 429 209 2 473 350
The notes on page 47 to 107 are an integral part of these consolidated financial statements.
44 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
Hamilton, Bermuda, 26 April 2022
The Board of Directors and the President and CEO of Höegh LNG Holdings Ltd.
Morten W. Høegh
Chairman
Johan Pfeiffer
Deputy Chairman
Martine Vice Holter
Director
Tonesan Amissah
Director
Alberto Donzelli
Director
Thor Jørgen Guttormsen
President and CEO
Leif O. Høegh
Director
John Kwaak
Director
Consolidated Financial Statements Höegh LNG Group | 45
HÖEGH LNG
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders of Höegh LNG Holdings Ltd.
Share
capital
Share
premium
Treasury
shares
Contributed
Surplus
Other
paid-in
capital
Hedging
reserves
Other
capital
reserves
Retained
earnings
TOTAL
Non-
controlling
interests
TOTAL
EQUITYUSD’000
At 1 January 2021 773 447 716 (11 ) - 108 639 (119 646 ) (2 177 ) (139 538 ) 295 755 301 396 597 151
Profit (loss) for the year (54 479 ) (54 479 ) 33 195 (21 284 )
Other comprehensive income
(loss) for the year
- - - - - 52 024 (486 ) 51 538 15 278 66 815
Total comprehensive in
-
come (loss) for the year
- - - - 52 024 (486 ) (54 479 ) (2 941 ) 48 473 45 531
Amalgamation effects
(Note 2.1)
(761 ) 108 546 11 106 687 - - - (232 548 ) (18 065 ) - (18 065 )
Shareholder contribution
(Note 2.1)
- - - 48 066 - - - - 48 066 - 48 066
HMLP dividend to non-
controlling interests
- - - - - - - - - (31 801 ) (31 801 )
Units granted to the board
of HMLP
- - - - - - - - - 211 211
Net proceeds from issuance
of preferred units
- - - - - - - - - 8 318 8 318
Net proceeds from issuance
of common units
- - - - - - - - - 818 818
Share-based payment cost - - - - 807 - - - 807 1 808
Capital contribution to HMLP - - - - - - - (388 ) (388 ) 388 -
Transfer of assets from
HMLP (Note 5)
- - - - - - - 4 128 4 128 (4 128 ) -
Other changes in equity - - - - - - - (7 ) (7 ) - (7 )
Total other transactions
recognised directly in equity
(761 ) 108 546 11 154 753 807 - - (228 815 ) 34 541 (26 193 ) 8 348
At 31 December 2021
At 1 January 2020 773 447 656 (12 ) - 108 399 (74 103 ) (2 794 ) (83 590 ) 396 329 299 760 696 088
Profit (loss) for the year (44 713 ) (44 713 ) 44 859 146
Other comprehensive income
(loss)
(45 543 ) 703 - (44 839 ) (9 626 ) (54 465 )
Total comprehensive in
-
come (loss) for the year
- - - - (45 543 ) 703 (44 713 ) (89 552 ) 35 233 (54 319 )
HMLP dividend to non-
controlling interests
- - - - - - - - - (46 435 ) (46 435 )
Dividend to shareholders of
the parent
- - - - - - - (1 905 ) (1 905 ) - (1 905 )
Net proceeds from
issuance preferred units
- - - - - - - - - 3 174 3 174
Shares granted to the board
of HLNG
- 60 0 - - - - - 60 - 60
Units granted to the board
of HMLP
- - - - - - - - - 260 260
Share-based payment - - - - 240 - - - 240 75 315
Capital contribution to HMLP - - - - - - - (6 419 ) (6 419 ) 6 419 -
Transfer of assets to HMLP
(Note 5)
- - - - - - - (2 911 ) (2 911 ) 2 911 -
Other changes in equity - - - - - - (86 ) - (86 ) - (86 )
Total other transactions
recognised directly in equity
- 60 0 - 240 - (86 ) (11 235 ) (11 021 ) (33 596 ) (44 617 )
At 31 December 2020 773 447 716 (11 ) - 108 639 (119 646 ) (2 177 ) (139 538 ) 295 755 301 396 597 151
The notes on page 47 to 107 are an integral part of these c onsolidated financial statements.
46 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
CONSOLIDATED STATEMENT OF CASH FLOWS 1 JANUARY - 31 DECEMBER
USD’000 Note 2021 2020
Cash flows from operating activities:
Profit (loss) of the year before tax (5 395 ) 4 780
Adjustments to reconcile profit before tax to net cash flows
Depreciation 11,15,28 113 405 112 374
Fair value adjustments on marketable securities 4 8
Interest income (733 ) (1 132 )
Interest expenses 17 103 207 99 801
Net loss on interest hedges 13 2 503 5 528
Share-based payment cost and board remuneration 845 687
Share of results from investments in associates and joint ventures 20 (19 496 ) (17 088 )
Working capital adjustments
Change in inventories, receivables and payables 7 372 13 640
Payment of corporate income tax (5 199 ) (2 422 )
I) NET CASH FLOWS FROM OPERATING ACTIVITIES 196 513 216 176
Cash flows from investing activites:
Investments in marketable securities (588 ) -
Investment in FSRUs, assets under construction and class renewals (11 277 ) (4 116 )
Investment in intangibles, equipment and other (1 325 ) (2 685 )
Loans granted to joint ventures and associates (4 733 ) -
Investments in associates 20 (8 625 ) (9 375 )
Interest received 21 430
II) NET CASH FLOWS FROM INVESTING ACTIVITIES (26 527 ) (15 746 )
Cash flows from financing activites:
Net proceeds from equity issuance (HMLP) 9 136 3 174
Capital contribution from owners 47 213 -
Dividend paid to non-controlling interest (HMLP) 20 (31 802 ) (46 435 )
Dividend paid to shareholders of the parent - (1 905 )
Proceeds from borrowings gross 273 342 211 685
Payment of refinancing- and amalgamation fees, debt issuance cost and bond discount (30 029 ) (7 797 )
Repayment and buy-back of bonds including termination of swaps (12 453 ) (161 500 )
Repayment of borrowings (311 935 ) (102 589 )
Interest paid on mortgage debt and bonds (79 427 ) (87 029 )
Repayment of leases 15 (29 885 ) (28 533 )
Interest paid on leases 15,17 (7 422 ) (8 845 )
Increase in restricted cash and cash collateral (5 228 ) (15 089 )
III) NET CASH FLOWS FROM FINANCING ACTIVITIES (178 490 ) (244 863 )
NET DECREASE IN CASH AND CASH EQUIVALENTS (I+II+III) (8 504 ) (44 433 )
Current cash and cash equivalents at 1 January 142 545 186 978
CURRENT CASH AND CASH EQUIVALENTS AT 31 DECEMBER 14 134 041 142 545
Undrawn amounts under revolving credit faclities 13 - 34 700
The group’s share of aggregated cash flows in the group’s associates and joint ventures 11 392 (7 187 )
The notes on page 47 to 107 are an integral part of these consolidated financial statements.
Consolidated Financial Statements Höegh LNG Group | 47
HÖEGH LNG
Note 1: Corporate information
an exempted company limited by shares and
incorporated under the laws of Bermuda . The
company’s registered office is at Canon’s Court,
consolidated financial statements for the fiscal year
of 2021 comprise the company, its subsidiaries, joint
ventures and associate company (collectively “Höegh
LNG” or the “group”).
On 8 March 2021 the company announced a
recommended offer by Leif Höegh & Co (LHC) and
funds managed by Morgan Stanley Infrastructure
Partners (MSIP) through a 50/50 joint venture, Larus
issued and outstanding shares of Höegh LNG
Holdings Ltd. not owned by LHC or its affiliates,
representing approximately 50.4% of the shares
outstanding, by way of amalgamation between Larus
Limited, a subsidiary of JVCo, and Höegh LNG
Holdings Ltd. On 30 March 2021 the amalgamation
was approved at a special general meeting. The
amalgamation was completed on 4 May 2021, after
which the company became wholly owned by LHC
and MSIP through their 50/50 joint venture, Larus
delisted from the Oslo Stock Exchange on 27 May
2021.
Höegh LNG Partners LP is a limited partnership
formed by the company in 2014 and listed on the
New York Stock Exchange (“NYSE”) under the ticker
“HMLP”. HMLP and its subsidiaries are collectively
referred to as “HMLP” or the “MLP”. In accordance
with IFRS 10, the company is deemed to have
control over HMLP and its subsidiaries. Based on
this assessment HMLP and its subsidiaries are
consolidated in the consolidated financial statements
of the group.
Information on the group’s structure is provided
in Note 20. Information on other related party
transactions of Höegh LNG is provided in Note 30.
The annual accounts for the company and the
group for the year ended 31 December 2021 were
approved by the board of directors on 26 April 2022.
Note 2: Summary of significant
accounting policies
2.1 Basis of preparation
The consolidated financial statements of Höegh
LNG and the financials for the company have been
prepared in accordance with the International
Financial Reporting Standards (IFRS) as issued by
the International Accounting Standards Board (IASB)
and adopted by the EU. The accounting principles
for Höegh LNG also apply to the company.
Before the amalgamation described under note 1
was effectuated, LHC controlled about 49% of the
shares of Höegh LNG Holdings Ltd. and considered
Höegh LNG Holdings Ltd to be a subsidiary of LHC
for accounting purposes.
The basis for the amalgamation was that LHC
contributed both its shares Höegh LNG Holdings
Ltd. and cash upon formation of JVCo. MSIP
contributed cash in exchange for its shares in JVCo,
thereby creating a 50/50 joint venture where the two
owners are deemed to have joint control of JVCo.
JVCo is therefore considered by management to
be a joint venture under IFRS 11. The contributed
shares in HLNG and the contributed cash were
thereafter transferred by JVCo to its subsidiary
Larus Limited, in exchange for shares in Larus
Limited, and used to acquire the remaining issued
and outstanding shares of Höegh LNG Holdings Ltd
owned by the public shareholders up until the time
of the amalgamation becoming effective.
The amalgamation does not fall within the definition
of a business combination under the accounting
standard IFRS 3 Business combinations, since
neither JVCo, as a newly formed company, nor
Höegh LNG Holdings Ltd. (in a reverse acquisition)
48 | Consolidated Financial Statements Höegh LNG Group
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can be identified as an acquirer. The amalgamation
is therefore not regulated by IFRS 3, nor any other
accounting standard in IFRS. As required by IAS
8, management has considered how transactions
of the same nature typically have been accounted
for and concluded that this transaction has many
similarities with a business combination under joint
control, where the pooling of interests method is
commonly applied to account for the transaction.
As HLNG was a subsidiary of LHC before the
amalgamation, and that JVCo is considered a joint
venture under joint control, management has elected
to account for the amalgamation using the pooling
of interests method. As a result, the consolidated
financial statements are prepared on the basis
of a continuation of Höegh LNG’s consolidated
financial statements at the time of completion
of the amalgamation, net of costs related to the
amalgamation process.
As presented in the consolidated statement of
change in equity, the amalgamation was executed
under Bermudan Companies Law by cancelling and
extinguishing the outstanding shares and treasury
shares in Höegh LNG Holdings Ltd. and replacing
them with the new share capital in the amalgamated
company issued to the owner Larus Holding Limited.
Classification of share premium, contributed surplus
and other paid-in capital pre-amalgamation, was
continued in the amalgamated company, net of
costs related to the amalgamation process.
The consolidated financial statements have been
prepared on a historical cost basis, except for
derivative financial instruments and debt that have
been measured at fair value. The carrying values
of recognised assets and liabilities which are
designated as hedged items in fair value hedges
that otherwise would be carried at amortised cost
are adjusted to record changes in the fair values
attributable to the risks that are being hedged in
effective hedge relationships.
The consolidated financial statements are presented
in USD and all values are rounded to the nearest
thousand (USD’000) unless otherwise indicated.
As a result of rounding differences amounts and
percentages may not add up to the total.
The cash flow statement is presented using the
indirect method. The income statement is presented
by showing expenses by their function.
The annual financial statements have been prepared
under a going concern assumption. This assumption
rests on financial forecasts and plans for the coming
year on the basis of several assumptions made
about future events and planned transactions. At
the date of this report, management is not aware of
any significant impacts from Covid-19 or the recent
invasion in Ukraine. However, as further commented
in the prospects’ section of the Directors’ report, the
evolving nature of the Covid-19 pandemic means
that uncertainties will remain, and it is not possible
to give an accurate forecast of the future effect of
Covid-19 on Höegh LNG’s business. Further, the
situation in Ukraine may continue to impact the
market for LNG as well as for LNG carriers and
FSRUs, in particular because Russia is a major
global exporter of crude oil and natural gas, but also
generally. While near-term business opportunities
may arise for the company in Europe, the potential
effects of the ongoing conflict in Ukraine are
complex to project and therefore highly uncertain,
including any potential effects on the group’s
business and operations.
2.2 Basis of consolidation
The consolidated financial statements comprise the
financial statements of the parent company and its
subsidiaries as of 31 December 2021.
(a) Subsidiaries
Subsidiaries are all entities in which Höegh has a
controlling interest. Control is achieved when Höegh
LNG is exposed, or has rights, to variable returns
from its involvement with the investee and has the
ability to affect those returns through its power over
the investee. When Höegh LNG has less than a
majority of the voting or similar rights of an investee,
all relevant facts and circumstances are considered
in assessing whether Höegh LNG has de facto power
Consolidated Financial Statements Höegh LNG Group | 49
HÖEGH LNG
over an investee. Höegh LNG re-assesses whether
it controls an investee if facts and circumstances
change.
Subsidiaries are fully consolidated from the date
on which control is transferred to Höegh LNG
and de-consolidated from the date on which
control ceases to exist. All intra-group balances,
transactions, unrealised gains and losses resulting
from intra-group transactions and dividends are
eliminated in full. Höegh LNG recognises any non-
controlling interest in the acquirer on an acquisition-
by-acquisition basis, either at fair value or at the
non-controlling interests proportionate share of the
recognised amounts of the acquirer’s identifiable net
assets at the time of the transaction. Any change
in ownership interests without change of control is
accounted for as equity transactions towards non-
controlling interest.
(b) Investment in associates and joint ventures
An associate is an entity over which the group has
significant influence. Significant influence is the
power to participate in the financial and operating
policy decisions of the investee but is not control or
joint control over those policies.
A joint venture is a type of joint arrangement whereby
the parties that have joint control of the arrangement
have rights to the net assets of the joint venture. Joint
control is the contractually agreed sharing of control
of an arrangement, which exists only when decisions
about the relevant activities require the unanimous
consent of the parties sharing control.
Höegh LNG applies IFRS 11 to all joint arrangements.
Under IFRS 11, investments in joint arrangements are
classified as either joint operations or joint ventures
depending on the contractual rights and obligations.
Höegh LNG has assessed the nature of four of its
joint agreements to be joint ventures.
Investments in both joint ventures and associates are
accounted for using the equity method.
Under the equity method, the investment in an
associate or a joint venture is initially recognised at
cost and adjusted thereafter to recognise the post-
acquisition profits or losses, movements in other
comprehensive income or dividends received.
Unrealised gains and losses resulting from
transactions between companies in the group and
joint ventures are eliminated to the extent of the
interest in the associate or joint venture. The financial
statements of the associate or joint venture are
prepared for the same reporting period as the group.
When necessary, adjustments are made to bring the
accounting policies in line with those of Höegh LNG.
2.3 Foreign currencies
Höegh LNG presents its financial statements in USD.
This is also the functional currency for all the material
companies in the group.
Transactions in other currencies than USD are
recognised in USD at the rate of exchange at the
date of the transactions. Monetary assets and
liabilities denominated in foreign currencies are
translated to USD using the exchange rate at the
reporting date. Non-monetary items measured
in terms of historical cost in foreign currency are
translated using the exchange rate at the date of the
initial transaction.
2.4 Segment reporting
The activities in the group are divided into four
operating segments: HMLP, Operations, Business
development and project execution and Corporate
and other. The operating segments are reported
in a manner consistent with the internal reporting
provided to the chief operating decision maker. The
chief operating decision maker, who is responsible
for allocating resources, making strategic decisions
and assessing performance, has been identified as
the board of the company.
2.5 Revenue recognition
Revenue is derived from long-term time charter
contracts for the provision of LNGCs or FSRUs,
including the management and operation of
FSRUs at the direction of the charterer. The group
determined that its time charter contracts contain a
lease and a performance obligation for the provision
of time charter services.
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The lease of the vessel, representing the use of
the vessel without any associated performance
obligations or warranties, is accounted for in
accordance with IFRS 16 “Leases”.
The provision of time charter services, including
guarantees for the level of performance provided by
the time charter contracts, is considered a distinct
service and is accounted for in accordance with
IFRS 15. The group determined that the nature of the
time charter services promised, represents a single
performance obligation, to stand ready over a 24-
hour interval to accept LNG cargos, to regasify the
LNG and discharge the resulting gas into a pipeline
in accordance with the charterer’s instructions and
requirements. If the performance standards are not
met, off-hire, reduced hire, liquidated damages or
other performance payments may result.
The transaction price is estimated as the standalone
selling price for the lease and the time charter
services components of the fixed day rate element.
Variable consideration per day for operating expense
and tax reimbursements is estimated at the most
likely amount to which the group is expected to be
entitled.
Lease revenue recognition:
Leases are classified based upon defined criteria
either as financing leases or operating leases. A
lease that transfers substantially all of the benefits
and risks of the LNGC or the FSRU to the charterer
is accounted for as a financing lease by the lessor.
All other leases that do not meet the criteria are
classified as operating leases. The lease component
of time charters that are accounted for as financing
leases is recognised over the lease term using the
effective interest rate method and is included in time
charter revenues.
Time charter services revenue recognition:
Variable consideration for the time charter services
performance obligation, including amounts allocated
to time charter services, estimated reimbursements
for vessel operating expenses and estimated
reimbursements of certain types of costs and taxes,
are recognised as revenues as the performance
obligation for the 24-hour interval is fulfilled,
subject to adjustment for off-hire and performance
warranties. Constrained variable consideration is
recognised as revenue on a cumulative catch-up
basis when the significant uncertainty related to
that amount of variable consideration to be received
is resolved. Estimates for variable consideration,
including constrained variable consideration, are
reassessed at the end of each period. Payments
made by the charterer directly to the tax authorities
on behalf of the subsidiaries for advance collection of
income taxes directly related to the provision of the
time charter services are recorded as a component
of time charter service revenues.
Management and other income recognition:
Höegh LNG receives management income from
technical, commercial and administrative services
delivered to joint ventures and external parties. This
income is recognised in the period in which the
service is provided.
Contract assets:
Revenue recognised in excess of the monthly
invoiced amounts, or accrued revenue, is recorded
as contract assets on the consolidated balance
sheet. Short term contract assets are reported
as a component of Trade and other receivables
whereas long term contract assets are reported as
components of Other non-current financial assets.
Contract liabilities:
Advance payments in excess of revenue recognised,
or prepayments, and deferred revenue are recorded
as contract liabilities on the consolidated balance
sheet. Contract liabilities are classified as current
or non-current based on the expected timing of
recognition of the revenue. Current and non-current
contract liabilities are reported as components
of Other current liabilities and Deferred revenue,
respectively.
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HÖEGH LNG
Refund liabilities:
Amounts invoiced or paid by the customer that
are expected to be refunded to the customer are
recorded as refund liabilities on the consolidated
balance sheet. Refund liabilities may include invoiced
amounts for estimated reimbursable operating
expenses or other costs and taxes that exceeded
the actual costs incurred, or off-hire, reduced
hire, liquidated damages, or other payments for
performance warranties. Refund liabilities are
reported in the consolidated balance sheet as
components of Other current liabilities.
2.6 Operating expenses
FSRU and LNGC operating expenses include crew
personnel expenses, repairs and maintenance,
insurance, stores, lube oils, communication expenses
and management fees.
For some contracts, most of the vessel operating
expenses are reimbursed from the charterer. In
such circumstances, the operating expenses
are recognised as incurred and the revenue is
recognised accordingly.
2.7 Current versus non-current classification
Höegh LNG presents assets and liabilities in the
statement of financial position based on current/
non-current classification. An asset is current when
it is (i) expected to be realised or intended to be
sold or consumed in the normal operating cycle, (ii)
held primarily for trading, (iii) expected to be realised
within twelve months after the reporting period or (iv)
cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least
twelve months after the reporting period. All other
assets are classified as non-current.
A liability is current when (i) it is expected to be
settled in the normal operating cycle, (ii) it is held
primarily for trading, (iii) it is due to be settled within
twelve months after the reporting period or (iv) there
is no unconditional right to defer the settlement of the
liability for at least twelve months after the reporting
period. The group classifies all other liabilities as
non-current.
Deferred tax assets and liabilities are all classified as
non-current assets and liabilities.
2.8 Cash and cash equivalents
Cash and cash equivalents include cash at hand,
bank
deposits and short-term deposits with maturity
of three months or less.
Cash not available for general use by Höegh LNG
due to loan restrictions or currency restrictions are
classified as restricted cash.
2.9 Fair value measurement
Financial instruments, such as derivatives, are
measured at fair value. The fair value of financial
instruments traded in active markets is determined
by reference to quoted market prices or dealer price
quotations, without any deduction for transaction
costs. The fair value of financial instruments not
traded in active markets is determined using
appropriate valuation techniques.
A fair value measurement of a non-financial asset
considers a market participant’s ability to generate
economic benefits by using the asset in its highest
and best use or by selling it to another market
participant that would use the asset in its highest and
best use.
Höegh LNG uses valuation techniques that are
appropriate in the circumstances and for which
sufficient data are available to measure fair value,
maximising the use of relevant observable inputs and
minimising the use of unobservable inputs. All assets
and liabilities for which fair value is measured or
disclosed in the financial statements are categorised
within the fair value hierarchy based on the lowest
level input that is significant to the fair value
measurement as a whole, and can be described as
follows:
Level 1 — Quoted (unadjusted) market prices in
active markets for identical assets or liabilities.
Level 2 — Valuation techniques for which the
lowest level input that is significant to the fair value
measurement is directly or indirectly observable.
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Level 3 — Valuation techniques for which the
lowest level input that is significant to the fair value
measurement is unobservable.
Fair value related disclosures for financial instruments
and non-financial assets that are measured at
fair value or where fair values are disclosed are
summarised in the following note:
• Financial risk management objectives and
policies, Note 13
2.10 Financial instruments
Recognition and derecognition
Financial assets and liabilities are recognised when
the group becomes a party to the contractual
provisions of the financial instrument. Derivatives
are carried as financial assets when the fair value is
positive and as financial liabilities when the fair value
is negative.
Financial assets are derecognised when the
contractual rights to the cash flows from the
financial asset expire, or when the financial asset
and substantially all the risks and rewards are
transferred. A financial liability is derecognised when
its contractual obligations are extinguished that
is, when the obligation specified in the contract is
discharged, cancelled, or expires.
Classification and initial measurement of financial
assets
Except for those trade receivables that do not
contain a significant financing component and are
measured at the transaction price in accordance
with IFRS 15, all financial assets are initially
measured at fair value adjusted for transaction costs
(where applicable).
Financial assets, other than those designated and
effective as hedging instruments, are classified in
the following categories: at amortised cost (including
transaction cost), at fair value through profit or loss
(FVTPL) and fair value through other comprehensive
income (FVTOCI) including transaction cost.
Subsequent measurement of financial assets
The subsequent measurement of financial assets
depends on their classification. The measurement
principles for the relevant categories for the group
are described below:
(a) Financial assets at amortised cost
Financial assets are measured at amortised cost if
they are held to collect contractual cash flows which
are solely payment of principal and interest on the
principal amount outstanding.
After initial recognition, these are measured
at amortised cost using the effective interest
method. Discounting is omitted where the effect
of discounting is immaterial. The group’s cash and
cash equivalents, trade and most other receivables
fall into this category.
(b) Financial assets at fair value through profit or
loss
Financial assets at fair value through profit or loss
include financial assets held for trading and financial
assets designated upon initial recognition at fair
value through profit or loss.
Financial assets at fair value through profit or loss
are carried in the statement of financial position at
fair value with net changes in fair value in the income
statement.
The group evaluates its financial assets held for
trading, other than derivatives, to determine whether
the intention to sell them in the near term is still
appropriate.
(c) Financial assets at fair value through other
comprehensive income
The group uses derivative financial instruments
such as forward currency contracts and interest
rate swaps, to hedge its foreign currency risks
and interest rate risks related to borrowings.
Such derivative financial instruments are initially
recognised at fair value on the date on which
a derivative contract is entered into and are
subsequently re-measured at fair value.
Consolidated Financial Statements Höegh LNG Group | 53
HÖEGH LNG
Trade and other receivables
Trade and other receivables are recognised at fair
value and subsequently measured at amortised
cost. The interest element is disregarded if it is
insignificant, which is normally the situation for the
group. Trade and other receivables are measured
and recognised based on expected losses
computed on a probability-weighted basis where
impairment represents the value between the asset’s
gross carrying amount and the present value of
estimated future cash flows.
Classification and measurement of financial liabilities
The group’s financial liabilities include borrowings,
trade and other payables and derivative financial
instruments. Financial liabilities are initially measured
at fair value, and, where applicable, adjusted for
transaction costs unless the group designated a
financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at
amortised cost using the effective interest method
except for derivatives and financial liabilities
designated at FVTPL which are carried subsequently
at fair value with gains or losses recognised in profit
or loss (other than derivative financial instruments
that are designated and effective as hedging
instruments).
Debt issuance cost, including arrangement fees and
legal expenses are deferred and netted against the
financial liability in the balance sheet and amortised
using an effective interest rate method except for
debt issuance cost associated with the revolving
credit facility. Such cost is recorded as an asset
and amortised on a straight-line basis to reflect the
service provided by the lender.
Interest-bearing debt is derecognised when its
contractual obligations are extinguished that is,
when the obligation specified in the contract is
discharged, cancelled or expires. Derecognition
is also made when terms are modified, and the
cash flows of the modified liability are substantially
different, in which case a new financial liability based
on the modified terms is recognised at fair value.
The difference between the carrying amount and the
consideration paid is recognised in profit and loss.
Derivative financial instruments and hedge
accounting
The group applies the hedge accounting
requirements in IFRS prospectively. Derivative
financial instruments are accounted for at fair value
through profit and loss FVTPL except for derivatives
designated as hedging instruments in cash flow
hedge relationships, which require a specific
accounting treatment.
To qualify for hedge accounting, the hedging
relationship must meet all of the following
requirements: there is an economic relationship
between the hedged item and the hedging
instrument, the effect of credit risk does not
dominate the value changes that result from that
economic relationship, and the hedge ratio of the
hedging relationship is the same as that resulting
from the quantity of the hedged item that the group
actually hedges and the quantity of the hedging
instrument that the group actually uses to hedge
that quantity of hedged item.
For the reporting periods under review, the group
uses derivative financial instruments such as
forward currency contracts and interest rate swaps,
to hedge its foreign currency risks and interest
rate risks related to borrowings. All derivative
financial instruments used for hedge accounting
are recognised initially at fair value and reported
subsequently at fair value in the statement of
financial position. To the extent that the hedge is
effective, changes in the fair value of derivatives
designated as hedging instruments in cash flow
hedges are recognised in other comprehensive
income and included within the cash flow hedge
reserve in equity. Any ineffectiveness in the hedge
relationship is recognised immediately in profit or
loss. At the time the hedged item affects profit or
loss, any gain or loss previously recognised in other
comprehensive income is reclassified from equity
to profit or loss and presented as a reclassification
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adjustment within other comprehensive income.
If a forecast transaction is no longer expected to
occur, any related gain or loss recognised in other
comprehensive income is transferred immediately to
profit or loss. If the hedging relationship ceases to
meet the effectiveness conditions, hedge accounting
is discontinued, and the related gain or loss is held
in the equity reserve until the forecast transaction
occurs.
2.11 Tangible assets
Non-current assets such as FSRUs, LNGCs,
investments in construction of newbuildings and
equipment are carried at cost less accumulated
depreciation and impairment charges. The cost
comprises directly attributable cost-plus borrowing
cost incurred during the construction period.
a) Depreciation of FSRUs and LNGCs
Depreciation is calculated on a straight-line basis
over the estimated useful life of a vessel taking its
residual value into consideration. Estimated useful
life for FSRUs and LNGCs is 35 years. Certain
capitalised elements, like costs related to major
classification/dry-docking have a shorter estimated
useful life and are depreciated over the period to the
next planned dry docking, typically over a period of
five to seven years. When second-hand vessels are
purchased and newbuildings are delivered, a portion
of the purchase price is classified as dry-docking
costs. Costs of day-to-day servicing, maintenance
and repairs are expensed as incurred.
The useful life and residual values are reviewed at
each financial year-end and adjusted prospectively
when appropriate.
b) Newbuildings
FSRUs and LNGCs under construction are classified
as non-current assets and recognised at the costs
incurred till date. Yard instalments are recognised
when due. Newbuildings are not depreciated
prior to delivery from the yard as an FSRU or an
LNGC. Borrowing costs directly attributable to the
construction of FSRUs are added to the cost of the
vessels, until the vessels are ready for their intended
use.
c) Equipment
Investments in office equipment and IT are
depreciated over a period of three to five years on a
straight-line basis.
Equipment used for FSRU operations, such as jetty
topsides and other infrastructure where the FSRU
is located, are depreciated either over the contract
period or the estimated useful life.
2.12 Leases
The group assesses at contract inception whether
a contract is, or contains, a lease. That is, if the
contract conveys the right to control the use of an
identified asset for a period of time in exchange for
consideration.
Group as a lessee
The group applies a single recognition and
measurement approach for all leases, except for
short-term leases and leases of low-value assets.
The group recognises lease liabilities to make lease
payments and right-of-use assets representing the
right to use the underlying assets.
a) Right-of-use assets
The group recognises right-of-use assets at the
commencement date of the lease (i.e., the date the
underlying asset is available for use). Right-of-use
assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted
for any remeasurement of lease liabilities. The
cost of right-of-use assets includes the amount
of lease liabilities recognised, initial direct costs
incurred, and lease payments made at or before
the commencement date less any lease incentives
received. Right-of-use assets are depreciated on
a straight-line basis over the shorter of the lease
term and the estimated useful lives of the assets, as
follows:
• Vessels 6 years
• Office premises 3 to 5 years
• Motor vehicles and office equipment 2 to 4 years
Consolidated Financial Statements Höegh LNG Group | 55
HÖEGH LNG
If ownership of the leased asset transfers to the
group at the end of the lease term or the cost reflects
the exercise of a purchase option, depreciation is
calculated using the estimated useful life of the asset.
The right-of-use assets are also subject to
impairment.
b) Lease liabilities
At the commencement date of the lease, the group
recognises lease liabilities measured at the present
value of lease payments to be made over the lease
term. The lease payments include fixed payments
(including in-substance fixed payments) less any
lease incentives receivable, variable lease payments
that depend on an index or a rate, and amounts
expected to be paid under residual value guarantees.
The lease payments also include the exercise price
of a purchase option reasonably certain to be
exercised by the group and payments of penalties
for terminating the lease, if the lease term reflects the
group exercising the option to terminate. Variable
lease payments that do not depend on an index
or a rate are recognised as expenses in the period
in which the event or condition that triggers the
payment occurs.
In calculating the present value of lease payments,
the group uses its incremental borrowing rate at the
lease commencement date because the interest
rate implicit in the lease is not readily determinable.
After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of
interest and reduced for the lease payments made.
In addition, the carrying amount of lease liabilities
is remeasured if there is a modification, a change
in the lease term, a change in the lease payments
(e.g., changes to future payments resulting from a
change in an index or rate used to determine such
lease payments) or a change in the assessment of an
option to purchase the underlying asset. The group’s
lease liabilities are included in Interest-bearing loans
and borrowing, see Note 16.
c) Short-term leases and leases of low-value assets
The group applies the short-term lease recognition
exemption to its short-term leases of machinery and
equipment (i.e., those leases that have a lease term
of 12 months or less from the commencement date
and do not contain a purchase option). It also applies
the lease of low-value assets recognition exemption
to leases of office equipment that are considered to
be low value. Lease payments on short-term leases
and leases of low-value assets are recognised as
expense on a straight-line basis over the lease term.
Group as a lessor
Leases in which the group does not transfer
substantially all the risks and rewards incidental to
ownership of an asset are classified as operating
leases. Lease income is accounted for on a straight-
line basis over the lease terms and is included in
revenue in the statement of profit or loss due to its
operating nature.
Sale and leaseback
Under IFRS 16, the determining factor when
accounting for a sale and lease back transaction,
is whether the transfer of assets qualifies as a
sale. If the buyer/lessor has obtained control of the
underlying asset and the transfer is classified as a
sale, the seller/lessee measures a right-of-use asset
arising from the leaseback as the proportion of the
previous carrying amount of the asset which relates
to the right-of-use asset retained. The gain or loss
which the seller/lessee recognises is limited to the
proportion of the total gain or loss which relates
to the rights transferred to the buyer/lessor. If the
transfer is not a sale (that is, the buyer/lessor does
not obtain control of the asset), the seller/lessee does
not derecognise the transferred asset and accounts
for the cash received as a financial liability, net of
debt issuance cost, applying IFRS 9.
2.13 Provisions
Provisions are recognised when Höegh LNG has a
present legal or constructive obligation as a result
of a past event, when it is probable that an outflow
or resources representing economic benefits will
be required to settle the obligation and a reliable
estimate can be made of the amount of the
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obligation. The expense relating to any provision is
presented net of any reimbursement.
2.14 Equity
(a) Preferred units
Preferred units in subsidiaries are presented as
share-holders equity. For the group, this is presented
as non-controlling interests’ and the result, equivalent
to the preference dividend is presented as the non-
controlling interests share of result regardless of
whether dividends have been paid or accumulated.
(b) Own equity instruments
Own equity instruments, which are reacquired
(treasury shares), are recognised at cost and
deducted from equity. No gain or loss is recognised
in profit or loss on the purchase, sale, issue or
cancellation of Höegh LNG’s own equity instruments.
Any difference between the carrying amount and the
consideration, if reissued, is recognised as a share
premium. Transaction costs related to an equity
transaction are recognised directly in equity, net of
tax.
2.15 Income tax
The companies in Höegh LNG are subject to income
tax in certain countries in which they operate. Income
tax expense in these entities represents the current
income tax and changes in any deferred tax assets
and liabilities.
(a) Current income tax
Current income tax assets and liabilities for the
current period are measured at the amount
recovered from or expected paid to the tax
authorities. Tax rates and tax laws used to
compute the amount are those that are enacted or
substantively enacted, at the reporting date in the
countries where Höegh LNG operates and generate
taxable income.
(b) Deferred tax
Deferred tax is calculated using the method on
temporary differences at the reporting date between
the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes.
2.16 Impairment of assets
(a) Financial assets
Höegh LNG assesses at each reporting date,
whether a financial asset or a group of financial
assets is impaired. For financial assets carried at
amortised cost, the group assesses expected credit
losses. The amount of the loss is measured as
the difference between the asset’s gross carrying
amount and the present value of estimated future
cash flows.
(b) Vessels, newbuildings and equipment
The carrying amounts of FSRUs, LNGCs,
newbuildings and equipment are tested for
impairment whenever there are indications that
the value may be impaired. When such indicators
exist, Höegh LNG estimates the asset’s recoverable
amount. The recoverable amount is the lowest of the
fair market value of the asset, less cost to sell, and
the net present value of future estimated cash flows
from the employment of the asset (“value in use”).
In assessing value in use, the estimated future cash
flows are discounted to their present value using
a pre-tax discount rate that reflects Höegh LNG’s
long-term borrowing rate, a risk-free interest rate
plus a risk premium for the equity, see Note 11. If the
recoverable amount is lower than the carrying value,
the asset is impaired to the recoverable amount.
All vessels are considered separate cash generating
units and assessed independently. Future cash flows
are based on expected charter earnings, estimated
operating expenses, expected capital expenditures
and dry-docking expenses over the remaining useful
life of the vessel. Impact of climate related matters is
also included in assessing value-in-use calculations.
2.17 Share-based payments
Key employees rendering services to the subsidiary
Höegh LNG Partners LP (“HMLP”) are granted
phantom units, which are settled in both equity and
in cash (cash-settled transactions).
(a) Equity-settled transactions
Fair value is measured initially at grant date and
recorded as equity in other capital reserves. The
Consolidated Financial Statements Höegh LNG Group | 57
HÖEGH LNG
cost is recognised over the period in which the
performance and/or service conditions are fulfilled.
The cumulative expenses recognised for equity-
settled transactions at each reporting date until
the vesting date reflects the extent to which the
vesting period has expired and Höegh LNG’s best
estimate of the number of equity instruments that
will ultimately vest. The income statement expense
or credit for a period represents the movement
in cumulative expense recognised as at the
beginning and end of that period and is recognised
as employee benefits expense. No expense is
recognised for awards that do not ultimately vest,
except for equity-settled transactions for which
vesting is conditional, upon a market or non-
vesting condition. When an equity-settled award is
cancelled, it is treated as if it vested on the date of
cancellation, and any expense not yet recognised for
the award is recognised immediately.
(b) Cash-settled transactions
The fair value is measured initially as a liability and
at each reporting date up to and including the
settlement date, changes in fair value are recognised
in employee benefits expense (see Note 22). The fair
value is determined using Black-Scholes valuation,
which for phantom units yields a fair value equal to
the share price at reporting date.
The approach used to account for vesting conditions
when measuring equity-settled transactions also
applies to cash-settled transactions.
2.18 Indemnification payments and other
transfer of assets to HMLP
Indemnification payment and other transfers of
assets, generally, do not impact the allocation of
profit between non-controlling interests and the
equity holders of the company. The non-controlling
interests share of indemnification payments are
reflected separately in the consolidated statement of
changes in equity.
2.19 Events after balance sheet date
New information becoming available after the
balance sheet date with impact on Höegh LNG’s
financial position at the balance sheet date is taken
into account in the annual financial statements and
disclosed if significant.
2.20 Significant accounting judgements
estimates and assumptions
The preparation of the group’s consolidated
financial statements requires management to make
judgements, estimates and assumptions that affect
the reported amounts of revenues, expenses, assets
and liabilities, and the accompanying disclosures,
and the disclosure of contingent liabilities. Uncertainty
about these assumptions and estimates could result
in outcomes that require a material adjustment to
the carrying amount of assets or liabilities affected in
future periods.
Significant accounting judgements
In the process of applying the group’s accounting
policies, management has made the following
judgements, which have the most significant effect on
the amounts recognised in the consolidated financial
statements:
• Consolidation of entities in which Höegh LNG
holds less than 50% of the voting rights.
Höegh LNG Partners LP (“HMLP”)
The company held 45.72% of the units in HMLP
on 31 December 2021. Historically, Management
has concluded that Höegh LNG has had de facto
control since the formation of the HMLP in 2014 even
though it has less than 50% of the voting rights. See
Note 20 for additional information. An evaluation of
de facto control involves assessing all the facts and
circumstances, including the current composition
of the board of directors of HMLP, the rights of
unitholders and other arrangements and relationships
between the parties. Management’s assessment was
based on a combination of factors where the current
composition of the board of directors of HMLP was
an important element in the overall conclusion.
Management has updated the assessment for
the year ended 31 December 2021 and there are
no material changes in facts and circumstances
impacting the conclusion.
58 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
PT Hoegh LNG Lampung
HMLP indirectly owns 49.0% of the shares in PT
Hoegh LNG Lampung, a company owning and
operating PGN FSRU Lampung. HMLP has the
power to make the most significant key operating
decisions and receives all the expected benefits or
expected losses. Therefore, 100% of the assets,
liabilities, revenues and expenses are consolidated in
Höegh LNG’s accounts. Management has updated
the assessment for the year ended 31 December
2021 and there are no material changes in facts and
circumstances impacting the conclusion.
Significant estimates and assumptions
The key assumptions concerning the future and
other key sources of estimation uncertainty at the
reporting date, that have a significant risk of causing
a material adjustment to the carrying amounts of
assets and liabilities within the next financial year, are
described below. The group based its assumptions
and estimates on parameters available when the
consolidated financial statements were prepared.
Existing circumstances and assumptions about future
developments, however, may change due to market
changes or circumstances arising that are beyond
the control of the group. Such changes are reflected
in the assumptions when they occur. Management
has applied significant estimates and assumptions
mainly relating to the following:
• Uncertain tax positions
• Impairment testing of vessels, newbuildings and
equipment
Accounting of uncertain tax positions
The group conducts much of its operations in
emerging market which have historically less
developed and less stable tax regimes than the
OECD.
The group is subject to tax regulations in those
countries with respect to withholding taxes, value
added taxes, payroll taxes, property taxes, taxes
on certain financial transactions, permanent
establishments, and corporate income taxes. Tax
regulations, guidance and interpretation in these
countries may not always be clear and may not
contemplate floating infrastructure activities, such
as FSRUs. In addition, such regulations may be
subject to alternative interpretations or changes in
interpretations over time, including as a result of
audits by the local tax authorities.
Liabilities related to uncertain tax positions are
recognised when it is determined “more likely than
not” that the group will be required to settle a tax
obligation in the future.
Benefits from uncertain tax positions are recognised
when it is probable that a tax position will be
sustained upon examination based on technical
merits of the position.
Impairment evaluation of vessels, newbuildings and
equipment
As outlined in note 2.16 (b), the carrying amounts of
these assets are tested for impairment whenever
there are indications that the value may be impaired.
Such impairment assessment calculations demand
a high degree of estimation, where management
must make complex assessment of expected future
cash flows and for which discount rates to use. The
assumptions made are built into different scenarios,
including extension of period as intermediate LNGC,
with different cash flows for each unit. Each of the
scenarios are probability-weighted to provide for a
recoverable amount for each unit that is a weighted
average of all scenarios. Changes to these estimates
could have a significant impact on the impairments
recognised.
2.21 New and amended standards and
interpretations
It is the group’s intention to adopt relevant new and
amended standards and interpretations when they
become effective, subject to EU approval before the
consolidated financial statements are issued.
Consolidated Financial Statements Höegh LNG Group | 59
HÖEGH LNG
Such standards and interpretations include:
• Interest Benchmark Reform – Phase 2
amendments to IFRS9, IAS 39, IFRS7, IFRS 4
and IFRS 16
• Covid-19 Related Rent Concessions beyond 30
June 2021 - amendments to IFRS 16
These new and amended standards and inter-
pretations were interpreted not to have a significant
impact on the consolidated financial statements of
the group.
2.22 Standards issued but not yet effective
The new and amended standards and interpretations
that are issued, but not yet effective, up to the date
of issuance of the group’s financial statements are
disclosed below.
Such standards and interpretations include:
• IFRS 17 Insurance Contracts
• Classification of Liabilities as Current or Non-
current - amendments to IAS 1
• Reference to the Conceptual Framework –
amendments to IFRS 3
• Property, Plant and Equipment. Proceeds before
Intended Use – amendments to IAS 16
• Onerous Contracts – Costs of fulfilling a Contract
– amendments to IAS 37
• IFRS 9 Financial Instruments - Fees in the
’10 per cent’ test for derecognition of financial
liabilities
• Definition of Accounting Estimates -
amendments to IAS 8
• Disclosure of Accounting Policies - amendments
to IAS 1 and IFRS Practice Statement 2
The amendments are not expected to have a material
impact on the group.
60 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
Note 3: Operating segments
The business activities in Höegh LNG are divided into the following operating segments: HMLP, Operations,
Business development and project execution and Corporate and other. Höegh LNG’s operating segments
reflects how the group’s chief operating decision maker is assessing the financial performance of the group’s
business activities and allocates resources to these. Höegh LNG’s chief operating decision maker is the
group’s board of directors. Revenues, expenses, gains and losses arising from internal sales, internal transfer
of businesses, group contributions and dividends within the group are not included in the income statements
for the segments. Assets and liabilities allocated to the individual segments include FSRUs, newbuildings and
interest-bearing debt. Other assets and liabilities are monitored on a consolidated basis for the group.
HMLP
HMLP segment includes the activities managed by Höegh LNG Partners LP, which was established to own,
operate and acquire FSRUs, LNGCs and other LNG infrastructure assets under long-term charters, defined as
five years or more. HMLP fleet comprises as of 31 December 2020 ownership interests in five FSRUs, namely
(i) a 50% interest in Neptune, (ii) a 50% interest in Cape Ann, (iii) a 100% interest in PGN FSRU Lampung, (iv) a
100% interest in Höegh Gallant and (v) a 100% interest in Höegh Grace.
OPERATIONS
The Operations segment is responsible for the commercial and technical management of the group’s FSRUs
and LNGCs which have not been transferred to Höegh LNG Partners LP. The segment includes the five FSRUs
Independence, Höegh Giant, Höegh Esperanza, Höegh Gannet, Höegh Galleon and the LNGCs Arctic Princess
and Arctic Lady. The segment comprises revenues and expenses related to FSRUs and LNGCs in operation
and management income for commercial management services paid by joint ventures. The FSRUs are included
in the Operations segment once delivered from the yard.
BUSINESS DEVELOPMENT AND PROJECT EXECUTION
The Business development and project execution segment comprises all activities related to business
development and project execution, including non-capital expenditure costs related to newbuildings. Expenses
relating to new FSRU and LNGC contracts are included until delivery of the vessel and completion of the
pre-commencement phase of the commercial contracts. Capitalised costs in the segment relate to the FSRU
newbuilding programme.
CORPORATE AND OTHER
The segment includes corporate functions such as group management, group finance, legal and other
administrative expense that are not allocated to the other operating segments.
Consolidated Financial Statements Höegh LNG Group | 61
HÖEGH LNG
HMLP Operations
Business
development
and Project
execution
Corporate
and other Total
USD million 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
Time charter revenues 148.9 150.0 173.3 163.4 - - - - 322.2 313.4
Management and other income 0.0 0.0 5.2 4.8 2.0 (0.2) 2.9 - 10.1 4.6
Share of results from investments in
associates and joint ventures
11.4 12.1 8.1 5.0 - - - - 19.5 17.1
TOTAL INCOME 160.3 162.1 186.6 173.1 2.0 (0.2) 2.9 - 351.8 335.1
Bunker and other voyage related expenses - (0.1) (2.2) (2.7) - - - - (2.2) (2.8)
Operating expenses (29.1) (24.3) (56.8) (46.5) - (0.0) - - (85.9) (70.8)
Project administrative expenses (4.1) (2.3) (11.5) (6.6) (0.9) (2.2) - - (16.5) (11.1)
Group administrative expenses (6.4) (6.3) - - - - (15.3) (13.4) (21.7) (19.7)
Business development expenses - - - - (8.3) (5.2) - - (8.3) (5.2)
EBITDA 120.7 129.1 116.1 117.3 (7.2) (7.7) (12.4) (13.4) 217.2 225.4
HMLP Operations
Business
development
and Project
execution
Corporate
and other Total
USD million 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
Tangible assets
Investment in vessels, spare parts
and Right-of-use assets 731.2 753.6 1 353.4 1 430.2 9.3 9.2 - - 2 093.9 2 193.0
Liabilities
Interest-bearing debt including
lease liabilities 386.0 414.6 917.3 977.6 - - 310.4 310.8 1 613.7 1 703.1
SEGMENT INFORMATION
For condensed statement of cash flows for HMLP, see Note 20.
Income statement
ASSETS AND LIABILITIES ALLOCATED TO OPERATING SEGMENTS AS AT 31 DECEMBER.
62 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
TIME CHARTER CONTRACTS AS AT 31 DECEMBER 2021
USD’000 Year 1 Year 2 Year 3 Year 4 Year 5 > 5 years Total
TOTAL 280 759 271 353 266 808 221 505 158 135 650 899 1 849 458
USD’000 Year 1 Year 2 Year 3 Year 4 Year 5 > 5 years Total
TOTAL 295 124 253 749 241 815 237 145 184 981 657 491 1 870 305
Vessel
Current
contract Charterer Country TCP Expiry Option
Arctic Princess LNGC Equinor ASA Norway 20 years Jan 2026 5 + 5 years
Arctic Lady LNGC Total E&P Norge AS Norway 20 years Apr 2026 5 + 5 years
Independence FSRU AB Klaipedos Nafta Lithuania 10 years Dec 2024 -
PGN FSRU Lampung FSRU PT PGN LNG Indonesia Indonesia 20 years Jul 2034 5 + 5 years
Höegh Gallant FSRU
New Fortress Energy International
Shipping LLC USA 10 years Nov 2031 1 year
Höegh Giant FSRU Western Concessions Private Limited India 10 years
1
Mar 2026 -
Höegh Grace FSRU Sociedad Portuaria El Cayao S.A. Colombia 20 years
2
Dec 2036 -
Höegh Esperanza LNGC Undisclosed - 1 year Jun 2022 1 year
Höegh Gannet LNGC Undisclosed - 1 year May 2022 -
Höegh Galleon LNGC Undisclosed - 18 months Mar 2022 -
Accounted for as investments in joint ventures
Neptune FSRU Total Gas & Power Ltd France 20 years Nov-2029 5 + 5 years
Cape Ann FSRU Total Gas & Power Ltd France 20 years Jun-2030 5 + 5 years
Option means a right for the charterer to extend the contract for a pre-agreed period.
1)
The initial term of the Indian charter for Höegh Giant is 10 years. However, there is an annual break option for the charterer from end of year 5 to
year 10.
2)
The initial term of the Colombian charter for Höegh Grace is 20 years. However, each party has an unconditional option to cancel the charter after
10 and 15 years without penalty. However, if SPEC waives its right to terminate in year 10 within a certain deadline, Höegh LNG Partners LP will not
be able to exercise its right to terminate in year 10.
The table below specifies the expected time charter revenues to be received from 1 January 2022 to the end
of the firm charter parties for Höegh LNG’s vessels, except for revenue from Neptune and Cape Ann, which is
presented through share of results from investments in joint ventures. Expected future time charter revenue includes
Arctic Princess, Arctic Lady, Independence, PGN FSRU Lampung, Höegh Gallant, Höegh Giant, Höegh Grace,
Höegh Esperanza, Höegh Gannet and Höegh Galleon. Contracted expected future time charter revenue from firm
contracts from 1 January 2022 (undiscounted) is USD 1.9 billon (USD 1.9 billion) with maturity as follows:
Note 4: Time charter revenues and related contract balances
The group generates revenue primarily from time charter of FSRUs and LNGCs to its customers. Höegh LNG,
including its joint ventures, operates ten FSRUs and two LNGCs. Revenues from Neptune and Cape Ann is
recorded through Höegh LNG’s share of results in joint ventures. Arctic Lady and Arctic Princess are owned
together with joint venture partners but subleased to the wholly owned subsidiary Leif Höegh (U.K.) Limited,
which recognises the time charter party hire as time charter revenues.
2021
2020
Contracted expected future time charter revenues - undiscounted
Consolidated Financial Statements Höegh LNG Group | 63
HÖEGH LNG
Largest customers
In 2021, Höegh LNG had three customers, which individually accounted for 10% or more of the consolidated
total revenues. Time charter revenue from largest customers totalled USD 163 million (USD 162 million in 2020).
The single largest customer in Höegh LNG represented 18% of total time charter revenues (18% in 2020). The
three customers in 2021 individually contributing 10% or more of total time charter revenues were:
• AB Klaipédos Nafta (Operations segment)
• PT PGN LNG Indonesia (HMLP segment)
• Sociedad Portuaria El Cayao S.A (HMLP segment)
2021
DISAGGREGATION BY NATURE OF TIME CHARTER REVENUES BY SEGMENT
USD’000 Note HMLP Operations Total
Lease revenues 15 61 731 147 650 209 381
Service component of time charter revenues,
excluding amortisation 87 144 21 580 108 724
Amortisation of deferred revenue 47 4 072 4 118
TOTAL TIME CHARTER REVENUES 148 922 173 301 322 224
USD’000 Note HMLP Operations Total
Lease revenues 15 61 870 141 480 203 350
Service component of time charter revenues,
excluding amortisation 88 098 19 960 108 058
Amortisation of deferred revenue 47 1 903 1 950
TOTAL TIME CHARTER REVENUES 150 015 163 343 313 358
DISAGGREGATION OF TIME CHARTER REVENUES BY GEOGRAPHICAL AREA
The group’s FSRUs and LNGCs operate on long-term contracts, where the charterer controls the choice of
locations or routes to be served by the FSRUs/LNGCs, and the economic factors of a geographical region
where the vessels are located would not impact revenues due under time charter contracts. Disaggregation
of revenues by geographical region is therefore not meaningful. The group’s risk and exposure related to
uncertainty of revenues or cash flows related to its long-term time charter contracts relate primarily to the credit
risk associated with the individual charterers. Payments are due under time charter contracts regardless of the
demand for the charterers’ gas output or utilisation of the vessel.
2020
64 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
USD’000 Note 31 Dec 2021 31 Dec 2020
Trade receivables for time charter revenues,
included in trade and other receivables 24 6 299 5 156
Total contract assets, included in trade
and other receivables 553 5 716
Refund liabilities to customers,
included in provisions and accruals 26 (5 536) (1 439)
Contract liabilities, included in
provisions and accruals 26 (10 857) (5 340)
Contract liabilities, included in deferred revenues 12 (14 989) (13 889)
Total contract liabilities (31 381) (20 668)
RECEIVABLES, CONTRACT ASSETS AND CONTRACT LIABILITIES
The consolidated trade receivables and contract balances included in the table, exclude the balances recorded
in the group’s joint ventures which are accounted for based on the equity method. There were no impairment
losses for lease or service receivables or contract assets for the years ended 31 December 2021 and 2020.
Note 5: Management fees and other income
Höegh LNG’s commercial fees and technical management fees are mainly related to the LNGCs and the FSRUs
owned by the group’s joint ventures.
USD’000 2021 2020
Commercial and technical management fee 2 548 2 987
Environmental taxes reimbursed by charterer 2 251 628
Other income 5 315 1 075
TOTAL 10 114 4 690
MANAGEMENT FEES AND OTHER INCOME
USD’000 2021 2020
Crew salaries 23 822 28 156
Employer's contribution 4 233 4 061
Crew agency fee 1 740 1 050
Other social costs 83 125
TOTAL CREW COST 29 878 33 392
Services 8 953 5 265
Withholding tax 287 284
Spare parts and consumables 18 999 13 528
Insurance 5 346 4 772
Class renewals (dry-docking, afloat) and modification work 8 450 1 830
Property- and environmental taxes 2 731 1 195
Ship management and other expenses 11 263 10 578
TOTAL 85 907 70 844
Note 6: Operating expenses
Consolidated Financial Statements Höegh LNG Group | 65
HÖEGH LNG
Note 7: Salaries and personnel expenses
USD’000 Note 2021 2020
Salaries 20 063 18 082
Benefits employees 657 747
Bonus 3 597 (325)
Pension cost 1 262 1 179
Share-based payment cost 22 622 929
Other social costs 2 528 2 460
TOTAL SALARIES AND PERSONNEL EXPENSES 28 729 23 073
Allocated to Group administrative expenses 10 12 340 10 340
Allocated to Business development expenses 9 4 745 2 974
Allocated to Project administrative expenses 8 11 644 9 759
NUMBER OF OFFICE EMPLOYEES 180 190
Note 8: Project administrative expenses
Project administrative expenses comprise the management of the administration of commercial operations
including the costs of operating local offices in Egypt, Indonesia, Lithuania, Singapore, Philippines, Colombia
and the UK.
Höegh LNG’s costs related to technical services are reclassified from project administrative expenses to
operating expenses.
USD’000 Note 2021 2020
Total salaries and personnel costs 7 11 644 9 759
Audit fees 333 240
External services 7 250 4 892
Remuneration board members in subsidiaries 56 53
Office cost 862 724
Travel related cost 127 172
Other 193 167
Overhead distribution 9 5 081 3 389
Reclassified to operating expenses (8 999) (8 271)
TOTAL 16 546 11 123
Norwegian employers are obliged to have an occupational pension scheme for their employees under the
Norwegian Act on Mandatory Occupational Pension Schemes. The pension plans for the group’s Norwegian
employees comply with the requirements of this Act. The contributions made to the defined contribution
pension plan for full-time employees equal 5-8% of the employee’s salary. Höegh LNG has no legal or
constructive obligations to pay further contributions. Höegh LNG also operates a defined contribution pension
scheme involving the employees in Leif Höegh (U.K.) Limited. Höegh LNG has no outstanding or prepaid
contributions in Leif Höegh (U.K.) Limited. For other offices, Höegh LNG pays membership fees to defined
contribution plans according to local statutory requirements. The group’s legal or constructive obligations for
these plans are limited to the contributions. Refer to Note 30 for remuneration to key management.
66 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
Note 9: Business development expenses
Business development expenses are related to the tendering activities and development of new projects.
USD’000 Note 2021 2020
Total salaries and personnel costs 7 4 745 2 974
Audit fees 18 17
External services 2 272 979
Office cost 194 210
Travel related cost 75 135
Other 132 166
Overhead distribution 10 841 746
TOTAL 8 277 5 227
USD’000 Note 2021 2020
Total salaries and personnel costs 7 12 340 10 340
Audit fees 1 474 1 357
External services 8 010 7 253
Remuneration board members in subsidiaries 892 804
Office cost 3 138 3 956
Travel related cost 95 122
Other 2 244 39
Overhead distribution 8, 9 (5 922) (4 135)
Directly attributable cost capitalised as investments in intangibles (551) -
TOTAL 21 721 19 738
USD’000 2021 2020
Statutory audits and other audit services 1 824 1 614
Note 10: Group administrative expenses
Group administrative expenses are expenses associated with management-, administrative-, and general
functions of Höegh LNG. The expenses of general functions, such as IT and HR, are distributed to Project
administrative expenses and Business development expenses based on headcount.
TOTAL AUDIT FEES AS PRESENTED IN NOTES 8, 9 AND 10 ARE FURTHER SET OUT BELOW:
The amount of about USD 1.8 million (2020: USD 1.6 million) is based on actual billing made during 2021 and
include services related to Public Company Accounting Oversight Board (PCAOB) audit and PCAOB quarterly
interim reviews. The charges are accordingly not directly traceable against fees for the 2021-audit.
Consolidated Financial Statements Höegh LNG Group | 67
HÖEGH LNG
In addition, the two LNGCs Arctic Princess and Arctic Lady are recorded as right-of-use assets, see Note 15.
Note 11: Vessels and spare parts
USD’000 2021 2020
Cost at 1 January 2 353 869 2 349 438
Capitalisation of class renewals and spareparts 11 117 4 431
COST AT 31 DECEMBER 2 364 986 2 353 869
Accumulated depreciation and impairment at 1 January (321 408) (242 549)
Depreciation charge FSRUs and depot spares (79 598) (78 859)
ACCUMULATED DEPRECIATION AND IMPAIRMENT AT 31 DECEMBER (401 006) (321 408)
NET CARRYING AMOUNT AT 31 DECEMBER 1 963 980 2 032 461
USD’000 31 Dec 2021 31 Dec 2020
FSRUs 1 940 145 2 009 602
Dry-docking and afloat class renewals 13 779 12 699
Spareparts 742 927
Long-lead items, regasification equipment 9 314 9 233
TOTAL 1 963 980 2 032 460
Depreciation methods and estimated useful lives for the asset classes are described in Note 2.
USD’000 Note 31 Dec 2021 31 Dec 2020
Vessels 73 906 73 598
Dry-docking 5 692 5 261
Equipment 28 2 474 2 152
Right-of-use assets 15 31 333 31 362
TOTAL 113 405 112 373
DEPRECIATION CHARGES PER ASSET CLASS
All vessels were on contract with charterer on 31 December 2021. Reference is made to Note 4 disclosing the
vessels owned directly by the group or through joint ventures and the time charter contracts entered into on 31
December 2021.
Impairment assessment
On 31 December 2021, the market value of Höegh LNG Partners LP’s common units valued the common units at
price/book < 1, indicating a potential impairment. In addition, the markets for FSRUs remains highly competitive
causing rate levels for new FSRU contracts to trend down over the recent years. Although Höegh LNG has
secured three long-term FSRU contracts during the last five quarters, two FSRUs in the fleet lack firm, long-term
FSRU contracts. One is assigned to the conditional contract in Australia with AIE, and the other is being marketed
in ongoing tender processes. Rate levels obtainable for LNGC term charters remain volatile and subject to
seasonality as well as changes to the overall supply/demand balance for LNG transport. Also, Covid-19 continues
to create an elevated uncertainty related to the short-term market impact, which can impact the estimation of
recoverable amounts.
In determining fair value measurement, the impact of potential climate-related matters, including emission-
reduction legislation, which may affect the fair value measurement of assets and liabilities in the financial
statements, has been considered. These climate-related risks are included as key assumptions if they materially
68 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
It is assumed that after the first FSRU contracts have ended, the contracts are replaced with subsequent FSRU
contracts with a tenor of 10 years, save for the last period leading up to the maximum of 35 years useful life. Future
cash flows are modelled based on probability weighted long-term market charter rates for each vessel, taking
age of the vessel and vessel technology and equipment into consideration. While the group has knowledge of the
current market rates for FSRUs, it is more challenging to predict what future rates may be in 5-25 years from now.
The market for FSRUs at the time of concluding subsequent contracts will eventually decide the rates achieved.
Due to the current depressed charter rates, one of the vessels on interim LNGC contracts as of 31 December
2021 is the vessel together with the two LNG carriers, with the lowest headroom between the book value and
the estimated value-in-use. These three vessels have a combined value-in-use of USD 517 million (USD 563
million) and a combined net book value of USD 494 million (USD 515 million), the aggregate headroom for the
three vessels is USD 23 million per 31 December 2021 (USD 21 million). Sensitivities based on scenarios with
weighted charter rates (FSRU and LNGC), higher WACC and for the FSRU vessel on interim LNGC, extension
of intermediate periods without FSRU contract, have been conducted particularly related to these three vessels.
The scenarios take into consideration the current uncertain sentiment in global LNG carrier markets. The group
considers that the LNGC market for time charter contracts are currently at a typical mid-cycle level and believes
that the long-term demand for LNG is solid. This is based on the assumptions that new liquefaction capacity will
be coming online in coming quarters and years and that LNG prices are expected to return to competitive levels.
This is expected to increase demand for FSRUs over time. LNG continues to be a preferred option for providing
back-up resilience for renewable energy sources of power production.
impact the measure of recoverable amount. At present, the impact of climate-related matters is not considered
material to the Group’s financial statements since all our vessels meet the new IMO regulations and LNG plays
an important role in the world’s energy supply and the transition towards a low carbon economy. However,
development of regulatory frameworks to reduce greenhouse gas emissions which could include, among others,
adoption of cap and trade regimes, carbon taxes, increased efficiency standards and incentives or mandates
for renewable energy, may impact the valuation of some of the vessels in the future and is therefore closely
monitored.
Based on these indicators, an impairment test was performed. As the estimated value-in-use was higher than the
net book value for each of the vessels in the fleet, management has concluded that the impairment testing did not
identify any required impairment.
Each vessel is regarded as a separate cash generating unit (CGU) for impairment testing. The recoverable amount
is based on a value-in-use calculation for each of the vessels. To estimate the recoverable amount, the group
must make assumptions on contracted (intermediate contracts as LNGC and firm contract as FSRUs) cash flows,
as well as uncontracted (first firm contract as FSRUs and subsequent contracts as FRSUs) cash flows over the
estimated useful life of 35 years for each vessel. Contracted cash flows are based on contract terms for vessels
on interim LNGC contracts and contract terms for vessels operating as FSRUs. Uncontracted cash flows have
been estimated based on experience and expectations related to future market conditions. For vessels already
employed on long-term contracts, these contracts are assumed to be honored and kept in place until expiry.
For vessels currently employed on shorter-term interim contracts pending long-term FSRU employment being
concluded, the group has a pipeline of relevant FSRU employment contracts under negotiation or completed
contracts where final subjects are not yet lifted. The projects with the highest probability of success are assigned
to the vessels with best fit to the project and modelled with probability-weighted assumptions for market charter
rates and other contract terms for alternative employment.
Consolidated Financial Statements Höegh LNG Group | 69
HÖEGH LNG
When estimating the value-in-use, the assumed cash flows have been discounted using a Weighted Average Cost
of Capital (WACC) of 7.2% percent (2020: 7.0%) on a pre-tax basis. The following assumptions have been made for
the WACC:
• Cost of equity reflects a long-term expected market return and has been estimated to 11.9% per 31 December
2021
• The equity ratio of 30 percent is based on long-term assumptions on the Group’s financial strategy and capital
structure and deemed reasonable for use on each of the CGUs
• The risk-free rate shall have a time horizon reflecting the timing of the cash flows. The estimated cash flows in
the group’s value-in-use model have a horizon of up to 35 years, and 10-year rates are thus considered to be
the best available approximation for the risk-free rate
• The assumed cost of debt is based on an assessment of the average interest rate achieved for long-term
asset-backed debt funding to the group. The interest rate will over time move up and down as new financing is
arranged and as the overall portfolio of secured financing evolves
The recoverable amount for each vessel would be particularly sensitive to changes in WACC, assumptions used
for cash flows such as market rates and timing of new FSRU and LNGC contracts and weight given to each of the
scenarios. The recoverable amount for each vessel would be sensitive to changes for any of the above-mentioned
assumptions.
For the three vessels with the lowest headroom the sensitivity for each key variable (other variables are held
constant) shows that:
• An increase of the WACC by 1 percent point would result in an impairment for all three of these vessels, equal
to an amount of USD 11 million in aggregate for all three vessels
• The group makes assumptions on redeployment of vessels as FSRUs after the end of a certain period of
intermediate LNGC contracts. An additional two years of LNGC interim contracts for the vessel still on LNGC
contract, before redeployment as FSRUs would not result in need for impairment
• A reduction in the probability weighted charter rates for subsequent FSRU and LNGC contracts of 15 percent
result in an impairment for two of these vessels, equal to an amount of USD 10 million in aggregate for both
vessels
70 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
Note 12: Non-current deferred revenues
Deferred revenues primarily relate to cost reimbursements from charterer as defined in some of the group’s
time charter contracts. The prepayments arise from the drydocking of Arctic Lady and Arctic Princess when
conducting their 15-year class renewals. The charterers for these two LNGCs refund all or a part of the
drydocking costs and will be recorded as revenues base on a straight-line method until next class renewal.
USD’000 Note 2021 2020
Non-current deferred revenues at 1 January 13 889 2 164
Amortisation of charter hire (revenue recognition) Arctic Lady and Arctic Princess (3 630) (193)
Prepayments of hire related class renewals of Arctic Princess and Arctic Lady 4 017 12 625
Other 713 (707)
CARRYING AMOUNT AT 31 DECEMBER 4 14 989 13 889
Note 13: Financial risk management objectives and policies
Capital Management
The objective of Höegh LNG’s capital management is to ensure that the group is sufficiently capitalised to
support its underlying business risk and financial risk profile. Balancing the benefits of a strong balance sheet
with the advantage of financial leverage, Höegh LNG is seeking to maintain adequate access to diverse capital
markets and optimise the cost of capital. Höegh LNG has a Master Limited Partnership listed on the New York
Stock Exchange. Furthermore, Höegh LNG has issued bond loans which also are listed on the Oslo Stock
Exchange.
Höegh LNG monitors its capital structure considering future cash flow projections, including expected operating
cash flows, debt service and debt maturities as well as any off-balance sheet capital commitments and its
available funding. The financial position and forecasts of Höegh LNG is reported to the top management and
the board of directors on a regular basis. Höegh LNG’s capital structure might be adjusted over time to reflect
the commercial risks associated with the underlying assets, its funding situation, and the status of the financial
markets. To maintain or adjust the capital structure, Höegh LNG may refinance its debt, issue new shares or
debt instruments, sell assets, pay dividends or return capital to the shareholders.
Höegh LNG’s capital structure includes the debt listed in Note 16, series A preferred units issued in HMLP (see
Note 20), paid in equity and all other equity reserves attributable to the equity holders of the parent and the non-
controlling interest holders in HMLP.
On 31 December 2021, the total consolidated book value of the equity was USD 651 million (USD 597 million).
Net of mark-to-market of hedging reserves the consolidated adjusted book value equity was USD 744 million
(USD 757 million), bringing the adjusted book equity ratio to 30% (30%). The group’s overall capital structure is
deemed appropriate given the nature of Höegh LNG’s business and its existing commitments.
Höegh LNG is measuring the book equity ratio net of hedging instruments, as an indicator of the solidity of the
group, and targets to maintain a ratio of 27.5% or more.
Consolidated Financial Statements Höegh LNG Group | 71
HÖEGH LNG
Financial Risk
The group is in the ordinary course of its business activities exposed to different types of financial risks,
including market risk (interest- and currency risk), credit risk and liquidity risk. Appropriate procedures and
policies for determining, mitigating and monitoring these risk exposures have been established. To mitigate
financial market risks, the group primarily applies hedging instruments, which are well-understood conventional
instruments, issued by financial institutions with solid credit rating.
Currency risk
Currency risks arise from business transactions, capitalised assets and liabilities denominated in currencies
other than the reporting currency of Höegh LNG. The majority of Höegh LNG’s business transactions,
capitalised assets and liabilities are denominated in USD. The majority of its foreign exchange exposure relates
to administrative expenses denominated in NOK, totalling around NOK 335 million in 2021. In addition, Höegh
LNG has certain revenues in EUR. Höegh LNG’s NOK denominated bond loans have been swapped to USD for
the principal amount and the coupons using cross currency interest rate swaps (CCIRS). In terms of sensitivity
for exchange rate fluctuations, the administrative expenses in NOK in 2021 when reported in USD would have
been USD 4 million higher if the USDNOK exchange rate had been 10% stronger than it was in 2021, and
around USD 4 million lower if the USDNOK exchange rate had been 10% weaker than it was in 2021.
Interest rate risk
The group’s interest-bearing debt is subject to floating interest rates. In line with the group’s policy, the exposure
to interest rate fluctuations has been mitigated by entering into fixed interest-rate swap agreements for nearly
all loan agreements, including bond loans, but excluding the corporate credit facilities entered into by HMLP
and HLNG respectively. As of 31 December 2021, the net mark-to-market valuation of the interest rate and
currency swaps was negative net USD 54.8 million (negative net USD 90.7 million in 2020). The group’s share
of net mark-to-market valuation of interest rate swaps entered into by joint ventures was negative net USD
46.7 million (negative net USD 64.9 million in 2020). The group has elected to apply hedge accounting which
is governed under the accounting standard IFRS 9 - Financial Instruments, for its hedging of interest rate risk.
The group enters into hedge relationships where the critical terms of the hedging instrument and the hedged
item match, therefore, for the prospective assessment of effectiveness a qualitative assessment is performed.
Hedge effectiveness is determined at the origination of the hedging relationship. Quantitative effectiveness tests
are performed at each period end to determine the continuing effectiveness of the relationship. In instances
where changes occur to the hedged item which result in the critical terms no longer matching, the hypothetical
derivative method is used to assess effectiveness. The effective part of changes in the fair values of interest rate
swaps and the interest element of cross currency interest rate swaps are recognised in Other comprehensive
income. Changes in the value related to the ineffective portion of these swaps are recorded over the income
statement.
USD’000 31 Dec 2021 31 Dec 2020
Equity adjusted for hedging transactions 743 505 757 048
Total assets adjusted for hedging transactions 2 473 104 2 527 552
EQUITY RATIO ADJUSTED FOR HEDGING 30% 30%
ADJUSTED EQUITY RATIO
72 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
USD’000 Note 31 Dec 2021 31 Dec 2020
Non-current financial assets - carrying amounts 2 780 135
Total Financial assets - carrying amounts 2 780 135
Non-current financial liabilities - carrying amounts 29 (33 678) (66 348)
Current financial liabilities - carrying amounts 27 (23 910) (24 498)
Total Financial liabilities - carrying amounts (57 588) (90 846)
NET FINANCIAL LIABILITIES See APM (54 808) (90 711)
Changes in fair value of designated instruments
(see below table reconciling changes in fair value) 35 903 (38 817)
Changes in fair value designated hedged item (35 903) 38 817
NOTIONAL AMOUNTS 1 302 791 1 374 586
Maturity dates Multiple Multiple
Hedge ratio 1:1 1:1
MARK-TO-MARKET VALUATIONS OF HEDGES IN PARENT AND SUBSIDIARIES:
USD’000 Note 2021 2020
OCI to changes in fair value of deisgnated instruments in subsidiaries 47 058 (46 923)
Separate equity component (currency portion of CCIRS) recorded to profit (loss) (11 059) 11 957
Ineffectiveness of IRS hedges recorded to loss 18 (1 529) (649)
Unrealised loss CCIRS - (3 302)
Termination of interest rate swaps 1 267 -
Other movements in mark-to-market valuations 166 100
CHANGE IN FAIR VALUE OF DESIGNATED INSTRUMENTS 35 903 (38 817)
RECONCILIATION OF THE CHANGES IN FAIR VALUE OF DESIGNATED INSTRUMENTS IN PARENT AND
SUBSIDIARIES
USD’000 Note 31 Dec 2021 31 Dec 2020
Non-current financial assets - carrying amounts 727 -
Total financial assets - carrying amounts 727 -
Non-current financial liabilities - carrying amounts (40 948) (54 754)
Current financial liabilities - carrying amounts (6 453) (10 096)
Total financial liabilities - carrying amounts (47 400) (64 850)
NET FINANCIAL LIABILITIES See APM (46 673) (64 850)
Changes in fair value of designated instruments 20 18 177 (8 246)
Changes in fair value designated hedged item (18 177) 8 246
NOTIONAL AMOUNTS 250 191 274 866
Maturity dates Multiple Multiple
Hedge ratio 1:1 1:1
USD’000 Note 2021 2020
OCI to changes in fair value of designated instruments in joint ventures and
associates 13,20 20 245 (8 246)
Ineffectiveness of IRS hegdes recorded to loss (2 025) -
Settlement of swaps (43) -
CHANGE IN FAIR VALUE OF DESIGNATED INSTRUMENTS 18 177 (8 246)
MARK-TO-MARKET VALUATIONS OF HEDGES IN JOINT VENTURES AND ASSOCIATES
RECONCILIATION OF THE CHANGES IN FAIR VALUE OF DESIGNATED INSTRUMENTS IN
JOINT VENTURES
Consolidated Financial Statements Höegh LNG Group | 73
HÖEGH LNG
Liquidity risk
Liquidity risk is the risk that Höegh LNG will be unable to fulfil its financial obligations when they fall due. On 31
December 2021, outstanding interest-bearing debt carried on the balance sheet totalling USD 1 614 million,
net of debt issuance costs, is expected to be repaid through the cash flow generated from the existing assets
in Höegh LNG and through refinancing when the debt matures. The group has two FSRUs currently trading on
interim LNGC contracts, which generate charter income below the required cash-break-even (after debt service)
for these FSRUs. Moreover, the group has significant debt maturities in aggregate for 2022 and 2023 which
will or may require refinancing or extension of maturity dates. Consequently, Höegh LNG is exposed to the risk
of insufficient cash flows generated to service its debt, and the risk of refinancing amounts falling short of the
amount of debt maturing.
The turmoil in the financial markets caused by the Covid-19 pandemic has amongst other things led to debt
financing becoming less available and more expensive in general, and refinancing processes taking longer than
previously. This might have an implication on the refinancing risk and liquidity risk of the group in the future.
On 31 December 2021, the group had USD 134 million in total available liquidity.
Höegh LNG is also exposed to liquidity risk related to derivatives entered into to hedge interest rate and
currency risks, as some of these derivatives are subject to margin calls for negative value exceeding a certain
threshold, and the difference will require deposit of cash collateral. On 31 December 2021, the cash collateral
amounted to approximately USD 6.5 million and was mainly related to the interest-rate swaps hedging the
interest- rate risk of the debt facility for Höegh Galleon.
The table below/on next page reflects the maturity profile of Höegh LNG’s interest-bearing debt and the timing
and size of the estimated interest payments:
USD’000 < 1 year 1-5 years > 5 years Total
Instalments and balloons on mortage debt and unsecured bonds 379 577 673 338 446 872 1 499 786
Estimated interest on mortgage debt and unsecured bond¹ 74 810 162 109 53 943 290 861
Lease liabilities including interest 30 814 107 790 - 138 604
TOTAL 485 201 943 236 500 815 1 929 252
1
The amounts do not include estimated interest on the issued redeemable preferred units, as the preferred units are classified as equity in
the consolidated statement of financial position.
MATURITY PROFILE ON INTEREST-BEARING DEBT ON 31 DECEMBER 2021 AND ESTIMATED
INTEREST EXPENSES
74 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
Financial obligations are subject to re-financing and the group’s liabilities at year-end 2021 has the following
maturity (reference is made to Note 16 for outstanding amounts on 31 December 2021:
• The commercial and the ECA tranche
1
on the financing for Höegh Esperanza matures in Q2 2023 and Q1
2030, respectively
• The outstanding amount on the HLNG03 bond matures in Q3 2023
2
• The commercial and the ECA tranche
1
on the financing for Höegh Gannet matures in Q4 2023 and Q4
2030, respectively
• The corporate bank facility of Höegh LNG Holdings Ltd. matures in Q2 2024
• The commercial and the ECA tranche
1
on the financing for Independence matures in Q4 2024 and Q2
2026, respectively
• The outstanding amount of the HLNG04 bond matures in Q1 2025
2
• The commercial and the ECA tranche
1
of PNG FSRU Lampung matures in Q2 2026.
• The debt financing for Höegh Giant matures in Q2 2026
• The commercial and the ECA tranche
1
on the financing for both Höegh Gallant and Höegh Grace matures
in Q4 2026 and Q1 2033, respectively
• The sale and leaseback debt facility for Höegh Galleon matures in Q2 2031
1
For all debt facilities with ECA tranches: If no refinancing of the commercial tranches takes place, the ECA tranche will fall due. As such, the group
plans to refinance either the commercial tranche, or the full size of the debt facility including the ECA tranche ahead of the scheduled
maturity of the commercial tranche.
2
The HLNG03 and HLNG04 bond loans have maturity date in Q3 2023 and Q1 2025 respectively. However, both loans have been classified as
current interest-bearing debt on 31 December 2021 because the bondholders of each of the bond loans have a right to require that the company
purchases all or some of the bonds held by a bondholder at a price equal to 102% of par if a Credit Event has not occurred by
1
April 2022. A Credit Event means that either:
i. An amount of at least USD 100 000 000 has been contributed to the company as new equity or other fully subordinated and non-cash interest/
non-amortising capital subsequent to 4 May 2021: or
ii. first ranking security is created over the company’s ownership of common units of Höegh LNG Partners LP.
The financial lease obligations relating to Arctic Princess and Arctic Lady (reference to Note 15) are not subject
to any refinancing and will be fully amortised during the length of the underlying lease agreements.
As of 31 December 2021, the company has raised USD 47.2 million in new equity after 4 May 2021 and will need to raise an additional USD 52.8
million before 1 April 2022 to comply with item i) above, or alternatively fulfil item ii). On 24 March 2022, the company fulfilled item ii) by creating a first
ranking pledge over its ownership of 15.2 million common units of Höegh LNG Partners LP in favour of the Bond Trustee
(on behalf of the bondholders). As a result, USD 266.4 million will be reclassified from current to non-current debt in first quarter 2022.
Consolidated Financial Statements Höegh LNG Group | 75
HÖEGH LNG
USD’000 < 1 year 1-5 years > 5 years Total
Interest rate swaps designated as effective hedging
instruments in subsidiaries (23 910) (26 266) (4 632) (54 808)
NET FINANCIAL LIABILITIES GROUP (23 910) (26 266) (4 632) (54 808)
Interest rate swaps designated as effective hedging
instruments in the group's joint ventures (100%) (21 575) (52 071) (22 201) (95 847)
TOTAL (45 484) (78 337) (26 833) (150 655)
MATURITY PROFILE ON FINANCIAL DERIVATIVES AT 31 DECEMBER 2021
Credit risk
Customer credit risk is the risk that a counterparty does not meet its obligations under a customer contract,
leading to a financial loss. Existing FSRUs/LNGCs are chartered to creditworthy counterparties and/or
projects with a strong strategic rationale for the country they operate in. Cash funds are only deposited with
internationally recognised financial institutions which have a high credit rating, or invested in marketable
securities issued by companies holding a high credit rating
The maximum exposure to credit risk amounts to USD 229 million and is represented by the carrying amount
of each financial asset in the balance sheet, including financial derivatives plus the guarantees provided to the
associated company Avenir.
For further information about guarantees and commitments, reference is made to Note 19.
Fair values
Set out on the next page is a comparison by class of the carrying amounts and fair values of Höegh LNG’s
financial instruments included in the financial statements for years ended on 31 December 2021 and 2020:
Non-consolidated debt in joint ventures:
For the two JV companies owning Arctic Princess and Arctic Lady, the financing arrangement matures in 2031.
However, these financings are subject to a credit review upon the expiry of the firm period of the time charters
with Total and Equinor in 2026, which could require an adjustment to the outstanding loan amount or additional
security granted, depending on the outcome of the credit review process.
For the two joint ventures companies owning Neptune and Cape Ann, the financing arrangement matures in
the fourth quarter of 2029 and in the second quarter of 2022, respectively. For Cape Ann, a refinancing of the
debt facility has been arranged, with the new loan agreement signed in December 2021. Subject to customary
closing conditions the closing and the drawdown under the new facility is expected to occur on or about the
maturity date of the existing facility.
Interest on Höegh LNG’s debt, based on the swapped fixed interest rates and maturity profile of interest rate
swaps in subsidiaries and joint ventures, is presented below:
76 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
Carrying amount Fair value
USD’000 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020
Financial liabilities at fair value through
profit and loss
Ineffective portion of cash flow hedges 6 044 5 783 6 044 5 783
Total financial liabilities at FVTPL 6 044 5 783 6 044 5 783
Financial liabilities at fair value through
other comprehensive income
Derivatives in effective cash flow hedges 51 544 85 063 51 544 85 063
Total financial liabilities at FVTOCI 51 544 85 063 51 544 85 063
Other financial liabilities at amortised cost
Trade and other payables 19 329 19 205 19 329 19 205
Other financial liabilities 10 688 9 580 10 688 9 580
Interest-bearing loans and borrowings 1 499 786 1 559 849 1 419 356 1 520 762
Lease liabilities 138 604 167 938 138 604 167 938
Total financial liabilities at amortised cost 1 668 407 1 756 572 1 587 978 1 717 485
TOTAL 1 725 995 1 847 418 1 645 566 1 808 331
TOTAL NON-CURRENT 1 261 678 1 589 976 1 181 248 1 550 889
TOTAL CURRENT 464 318 257 441 464 318 257 442
FINANCIAL LIABILITIES
Carrying amount Fair value
USD’000 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020
Financial instruments at fair value through
profit and loss
Cash flow hedges related to FX options 13 860 13 860
Total financial assets at FVTPL 13 860 13 860
Financial assets at fair value through other com
-
prehensive income
Derivatives in effective cash flow hedges 2 780 135 2 780 135
Total financial assets at FVTOCI 2 780 135 2 780 135
Financial assets at amortised cost
Non-current restricted cash 30 662 16 895 30 662 16 895
Trade and other receivables 27 442 26 755 27 442 26 755
Shareholder loans 9 288 4 153 9 288 4 153
Other non-current receivables 8 874 17 506 8 874 17 506
Marketable securities 98 102 98 102
Cash and cash equivalents (including short term
restricted cash) 142 461 149 770 142 461 149 770
Total financial assets at amortised cost 218 826 215 181 218 826 215 181
TOTAL 221 619 216 176 221 619 216 176
TOTAL NON-CURRENT 49 828 36 094 49 828 36 094
TOTAL CURRENT 171 791 180 082 171 791 180 082
FINANCIAL ASSETS
Consolidated Financial Statements Höegh LNG Group | 77
HÖEGH LNG
The fair value of the financial assets and liabilities is the value at which they could be exchanged in a transaction
between willing parties other than in a forced or liquidation transaction. The following methods and assumptions
were used to estimate the fair value of each class of financial instrument:
• Cash and restricted cash, trade receivables, trade payables and other current liabilities are recognised at
their carrying amounts, largely due to the short-term maturities of these instruments
• Fair value of loans from banks and other financial liabilities is estimated by discounting future cash flows
using rates currently available for debt on similar terms, credit risk and remaining maturities
• The bonds issued by the company are listed on the Oslo Stock Exchange, and the fair values of these are
disclosed based on traded information
• Fair value of revolving credit facility is estimated by discounting future cash flows from using rates currently
available for debt on similar terms, credit risk and remaining maturities
• Höegh LNG enters into derivative financial instruments, such as interest rate swaps and foreign exchange
forward contracts with various financial institutions, where the fair value of such instruments is based on
valuation techniques including market observable inputs. The most frequently applied valuation techniques
include forward pricing and swap models using net present value calculations. The models used incorporate
various inputs, including the credit quality of counterparties, foreign exchange spot and forward rates and
interest rate curves. The valuation is performed by banks or external valuation providers
Fair value hierarchy
Höegh LNG uses a hierarchy for determining and disclosing the fair value of financial instruments by valuation
techniques.
The table below presents fair value measurements of Höegh LNG’s assets and liabilities on 31 December 2021
and 2020, respectively.
USD’000 Level 1 Level 2 Level 3 Total
Financial assets at FVTPL
Marketable securities - 98 - 98
FX options - 13 - 13
Financial assets at FVTOCI
Derivatives used for hedging - 2 780 - 2 780
TOTAL ASSETS - 2 891 - 2 891
ASSETS AT 31 DECEMBER 2021
78 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance
sheet date and included in level 1. The fair value of financial instruments that are not traded in an active market is
determined by using valuation techniques. These valuation techniques maximise the use of observable market
data when it is available and rely as little as possible on entity specific estimates. If all significant input required in
calculating the fair value of an instrument is based on observable market data, the instrument is included in level
2. This includes the group’s portfolio of marketable securities, as part of the portfolio’s instruments is not directly
observable. If one or more significant input is not based on observable market data, the instrument is included
in level 3. See Note 15: Leases, for reconciliation from the opening balances to the closing balances disclosing
separately changes during the period. During the reporting periods of 2021 and 2020, there were no transfers
between any of the levels.
USD’000 Level 1 Level 2 Level 3 Total
Financial assets at FVTPL
Marketable securities - 102 - 102
FX options - 860 - 860
Financial assets at FVTOCI
Derivatives used for hedging - 135 - 135
TOTAL ASSETS - 1 097 - 1 097
ASSETS AT 31 DECEMBER 2020
USD’000 Level 1 Level 2 Level 3 Total
Derivatives used for hedging
Derivatives in effective cash flow hedges - 90 846 - 90 846
Financial liabilities not measured at fair value,
but for which fair values are disclosed
Bonds 228 576 - - 228 576
Mortgage debt - 1 231 843 - 1 231 843
Revolving credit facility 60 343 - 60 343
Lease liabilities - - 167 938 167 938
TOTAL LIABILITIES 228 576 1 383 032 167 938 1 779 546
LIABILITIES AT 31 DECEMBER 2020
USD’000 Level 1 Level 2 Level 3 Total
Derivatives used for hedging
Derivatives in effective cash flow hedges - 57 588 - 57 588
Financial liabilities not measured at fair value,
but for which fair values are disclosed
Bonds 254 033 - - 254 033
Mortgage debt - 1 121 323 - 1 121 323
Revolving credit facility 44 000 - 44 000
Lease liabilities - - 138 604 138 604
TOTAL LIABILITIES 254 033 1 222 911 138 604 1 615 549
LIABILITIES AT 31 DECEMBER 2021
Consolidated Financial Statements Höegh LNG Group | 79
HÖEGH LNG
Note 14: Unrestricted and restricted cash
Currency Note
Exchange
rate 2021
Exchange
rate 2020
US Dollar (USD) USD 1.00 126 090 1.00 116 551
Norwegian Kroner (NOK) USD/NOK 8.82 3 013 8.53 19 485
Pound Sterling (GBP) GBP/USD 0.74 585 0.73 909
Euro (EUR) EUR/USD 0.88 984 0.81 2 262
Singapore Dollar (SGD) SGD/USD 1.35 1 045 1.32 920
Other 2 324 2 418
TOTAL 16 134 041 142 545
CURRENT CASH AND CASH EQUIVALENTS PER CURRENCY
USD’000 Note 31 Dec 2021 31 Dec 2020
Indonesia, debt service account 8 410 7 198
Bermuda, escrow account 9 9
Egypt, escrow account 0 18
TOTAL 16 8 419 7 225
As of 31 December 2021, USD 8.4 million was classified as short-term restricted cash related to a financing
agreement, where cash is required to be held for specifically designated uses, including payment of working
capital, operations and maintenance related expenses.
CURRENT RESTRICTED CASH
Non-current restricted cash of USD 11.0 million at year-end 2021 (USD 12.1 million year-end 2020) relates to the
project financing of PGN FSRU Lampung whereof Höegh LNG is required to hold amounts equal to six months’
debt service deposited in an escrow account. The USD 4.8 million in restricted cash at year-end both years,
equals three months’ debt service required to be held in escrow under the Höegh Gannet facility. Höegh LNG
Galleon Ltd. has USD 12.9 million, equating to 5% of purchase price, held in an escrow account. Höegh LNG
Giant Ltd., USD 2.0 million, has issued a letter of credit in April 2021 with expiry on 15 April 2023.
USD’000 Note 31 Dec 2021 31 Dec 2020
Höegh LNG Gannet Pte. Ltd., debt service 4 799 4 800
Höegh LNG Giant Ltd. 2 000 -
Höegh LNG Galleon Ltd. 12 872 -
PT Hoegh LNG Lampung, debt service 10 991 12 095
TOTAL 16 30 662 16 895
NON-CURRENT RESTRICTED CASH
80 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
Note 15: Leases
The group as a lessee
The group has lease contracts for vessels, office premises, company cars, house leases etc. The group has
elected not to recognise a lease liability for short-term leases (leases with an expected term of 12 months
or less) or for leases of low-value assets. The group does not have contracts with variable lease payments.
Payments made under such leases are expensed in operating expenses.
Depreciation of right of use assets is calculated based on the straight-line method for the remaining term since
implementation of IFRS 16 on 1 January 2019. Right-of-use vessels have terms between 25-30 years, but
depreciation is calculated based on remaining term of 6 years for the vessels. Office premises have average
remaining term of 5 years and company cars, and house leases have an average term of 2-4 years.
Carrying amounts of right-of-use assets recognised and the movements during the year are disclosed in the
table below:
Vessels are Arctic Lady and Arctic Princess, two LNG carriers that are bareboat chartered by Leif Höegh (U.K.)
Limited, a wholly owned subsidiary of Höegh LNG Ltd from the joint venture companies Joint Gas Ltd. and Joint
Gas Two Ltd, in which Höegh LNG Ltd has a 33.98% and 50.00% ownership respectively. Arctic Princess and
Arctic Lady are chartered on operating lease by Leif Höegh (U.K.) Limited to Equinor and Total, respectively.
The group assesses at lease commencement, whether it is reasonably certain to exercise the extension and
termination options related to lease contracts and reflects these options in the lease term. The charterers of
Arctic Princess and Arctic Lady have options to extend the lease term, but the group is not certain that the
options will be exercised and has concluded that it is not reasonably certain to exercise the extension and
termination options in any existing contract. Lease liabilities are therefore calculated based on fixed lease terms
and finalised contracts.
USD’000 Note Vessels Premises Other Total
Right-of-use assets as at 1 January 2021 155 131 5 289 152 160 572
Increase during the year due to lease
modifications 504 109 64 676
Depreciation 11 (29 891) (1 394) (48) (31 333)
RIGHT-OF-USE ASSETS AS OF 31 DECEMBER 2021 125 744 4 004 167 129 915
Right-of-use assets:
Consolidated Financial Statements Höegh LNG Group | 81
HÖEGH LNG
The maturity analysis of lease liabilities is disclosed in Note 13.
USD’000 Note 2021 2020
As of 1 January 167 938 196 934
Increase (decrease) during the year due to lease modifications 551 (462)
Interest expenses 17 7 422 8 845
Payments (37 307) (37 378)
TOTAL LEASE LIABILITIES AS OF 31 DECEMBER 138 604 167 938
Non-current lease liabilities 16 107 790 138 265
Current lease liabilities 16 30 814 29 673
TOTAL LEASE LIABILITIES AS OF 31 DECEMBER 138 604 167 938
LEASE LIABILITIES
USD’000 Note 2021 2020
Depreciation of Right-of-use assets 11 (31 333) (31 362)
Interest expenses, lease liabilities 17 (7 422) (8 845)
Expenses related to short-term leases and low-value leases
(included in administrative expenses) (384) (368)
TOTAL AMOUNT RECOGNISED IN PROFIT AND LOSS (39 139) (40 574)
The following are the amounts recognised in profit or loss:
The carrying amounts of lease liabilities and the movements during 2021 were as follows:
The group as a lessor
The group has entered into operating leases on its vessels. These leases have terms of between 1 and
20 years, reference made to disaggregation of time charter revenues disclosed in Note 4. Lease revenues
recognised by the group during 2021 was USD 209 million (USD 203 million in 2020). Future minimum payment
receivables under non-cancellable operating leases on 31 December 2021 were as follows:
USD’000 Year 1 Year 2 Year 3 Year 4 Year 5 > 5 years Total
TOTAL 215 177 207 157 203 560 167 696 213 113 375 248 1 381 950
Expected future lease revenues (undiscounted) from 1 Jan 2022:
82 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
Note 16: Interest-bearing debt
Financing activities in 2021
In connection with the amalgamation referred to in note 21 certain amendments to the bond terms were agreed
with bond holders, including but not limited to an extension of the HLNG03 bond loan maturity date by 18
months from 1 February 2022 to 1 August 2023.
Höegh LNG Holdings Ltd. completed a NOK 330 million bond loan tap issuance in June in the HLNG04 bond
loan, paired with a buy-back of NOK 101 million in the HLNG03 bond loan. The tap issue was priced at 97% of
par value.
Höegh LNG Holdings Ltd. repaid and cancelled the up to USD 80 million credit facility in July 2021 with
proceeds from the NOK 330 million tap issue in the HLNG04 bond loan in June 2021 and by drawing USD 44
million on a new bank facility in July 2021.
The group completed the refinancing of the Höegh Giant debt facility with a new USD 165 million 5-year facility
in August 2021.
During the fourth quarter 2021, Höegh LNG Partners completed the refinancing of the PGN FSRU Lampung
debt facility’s commercial tranche of USD 15.5 million. The commercial tranche was refinanced with an equal
amount and will amortise with equal quarterly instalments to zero by 2026. The export credit tranche of the debt
facility remains unchanged. Across both tranches, the debt facility is subject to certain restrictions on the use of
cash generated by PGN FSRU Lampung as well as a cash sweep mechanism. Until the pending arbitration with
the charterer of PGN FSRU Lampung has been terminated, cancelled or favourably resolved, no shareholder
loans may be serviced, and no dividends may be paid to the Partnership by the subsidiary borrowing under
the Lampung Facility, PT Hoegh LNG Lampung. Furthermore, each quarter, 50% of the PGN FSRU Lampung’s
generated cash flow after debt service must be applied to pre-pay outstanding loan amounts under the
refinanced Lampung Facility, applied pro rata across the commercial and export credit tranches. The remaining
50% will be retained by PT Hoegh LNG Lampung and pledged in favour of the lenders until the pending
arbitration with the charterer of PGN FSRU Lampung has been terminated, cancelled or favourably resolved.
As a consequence, no cash flow from the PGN FSRU Lampung will be available for the Partnership until the
pending arbitration has been terminated, cancelled or favourably resolved. This limitation does not prohibit the
Partnership from paying distributions to preferred and common unitholders.
The new Neptune facility, which closed in November 2021, has an initial loan amount of USD 154 million, which
is scheduled to be fully amortised with quarterly debt service over a period of 8 years based on an annuity
repayment profile. The new facility was used to repay the existing balloon amount of USD 169 million, with the
difference being mainly financed by cash held by the vessel owning entity and subordinated loans from the
shareholders (of which USD 3 million from HMLP). The interest rate swaps entered into under the previous debt
facility have a remaining tenor of 8 years and have been novated from the previous group of swap providers to
the new lenders and restructured to match the new facility’s loan amount and amortisation plan.
Consolidated Financial Statements Höegh LNG Group | 83
HÖEGH LNG
USD’000 Note Non-current Current Total
Independence facility 159 332 15 248 174 580
PGN FSRU Lampung facility 58 337 20 788 79 125
Höegh Esperanza facility 140 625 12 500 153 125
Höegh Giant facility 149 063 12 750 161 813
Höegh Gannet facility 130 833 11 042 141 875
Höegh Galleon facility 150 959 9 012 159 971
USD 385 million facility 287 060 25 597 312 657
Bond debt - 272 640 272 640
Corporate Bank facility 44 000 - 44 000
Debt issuance cost and bond issue discount (18 453) (6 192) (24 645)
TOTAL INTEREST-BEARING DEBT EXCLUDING
LEASE LIABILITIES 1 101 756 373 385 1 475 141
Lease liabilities 15 107 790 30 814 138 604
TOTAL INTEREST-BEARING DEBT INCLUDING
LEASE LIABILITIES 1 209 546 404 199 1 613 745
INTEREST-BEARING DEBT AT 31 DECEMBER 2021
The existing Cape Ann debt facility matures on 1 June 2022, and the documentation for the refinancing is
ongoing. In December 2021, the new loan agreement was signed and subject to customary closing conditions,
the closing and drawdown under the new facility is expected to occur on or about the maturity of the existing
facility in the second quarter of 2022. The term and conditions for the new Cape Ann facility are largely identical
to the new Neptune facility.
Overview of debt facilities
The tables below present Höegh LNG’s carrying amount of interest-bearing debt by non-current and current
portions, and the maturity schedule for the total interest-bearing debt.
USD’000 Note Non-current Current Total
Independence facility 174 580 15 248 189 828
PGN FSRU Lampung facility - 97 959 97 959
Höegh Esperanza facility 153 125 12 500 165 625
Höegh Giant facility 133 420 12 707 146 127
Höegh Gannet facility 141 875 11 042 152 917
Höegh Galleon facility 159 971 9 012 168 984
USD 385 million facility 297 907 25 597 323 505
Bond debt 254 905 - 254 905
RCF USD 80 million 60 000 60 000
Debt issuance cost and bond issue discount (24 732) - (24 732)
TOTAL INTEREST-BEARING DEBT EXCLUDING
LEASE LIABILITIES 1 351 051 184 066 1 535 117
Lease liabilities 15 138 265 29 673 167 938
TOTAL INTEREST BEARING DEBT INCLUDING
LEASE LIABILITIES 1 489 316 213 739 1 703 055
INTEREST-BEARING DEBT AT 31 DECEMBER 2020
84 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
USD’000
1 Jan
2021
Cash flows
repayment
and buy-back
of bonds
Cash
flows
new interest
bearing debt
Lease
modifications
Foreign
exchange
movement Other
31 Dec
2021
Current interest bearing loans and
borrowings (excluding lease liabilities
and bond issues) 184 066 (18 834) - - - (58 294) 106 937
Current lease liabilities 29 673 1 141 - - - - 30 814
Current bond issues - - - - - 266 447 266 447
Non-current interest bearing loans
and borrowings (excluding lease
liabilities and bond issues) 1 100 244 (293 101) 233 750 - - 60 862 1 101 756
Non-current lease liabilities 138 265 (31 026) - 551 - 107 790
Non-current bond issues 250 807 (12 118) 39 592 - (9 740) (268 541) -
TOTAL LIABILITIES FROM
FINANCING ACTIVITIES 1 703 055 (353 938) 273 342 551 (9 740) 474 1 613 744
CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
USD’000 Note 31 Dec 2021 31 Dec 2020
Interest-bearing debt including lease liabilities,
current and non-current (1 613 745) (1 703 055)
Restricted cash, non-current 14 30 662 16 895
Cash and cash equivalents including restricted
current cash and marketable securities 14 142 559 149 873
NET INTEREST-BEARING DEBT (1 440 524) (1 536 288)
NET INTEREST-BEARING DEBT AT 31 DECEMBER 2021
USD’000 Currency
Due in
year 1
Due in
year 2
Due in
year 3
Due in
year 4
Due in
year 5
and later Total
Independence facility USD 15 248 15 248 121 293 15 248 7 543 174 580
PGN FSRU Lampung facility USD 20 788 18 150 18 150 18 150 3 887 79 125
Höegh Esperanza facility USD 12 500 62 500 12 500 12 500 53 125 153 125
Höegh Giant facility USD 12 750 12 750 12 750 12 750 110 813 161 813
Höegh Gannet facility USD 11 042 53 542 11 042 11 042 55 208 141 875
Höegh Galleon facility USD 9 012 9 012 9 012 9 012 123 921 159 971
USD 385 million facility USD 25 597 25 597 25 597 25 597 210 268 312 657
Bond debt USD 272 640 - - - - 272 640
Corporate bank facility USD - 29 333 14 667 - - 44 000
INTEREST-BEARING
DEBT OUTSTANDING 379 577 226 133 225 012 104 300 564 766 1 499 786
Lease liabilities 30 814 32 225 33 787 35 276 6 502 138 604
TOTAL INTEREST-BEARING DEBT
INCLUDING LEASE LIABILITIES 410 391 258 358 258 799 139 576 571 268 1 638 390
Debt issuance cost (4 286) - - - - (22 740)
Bonds issue discount (1 906) - - - - (1 906)
CURRENT AND TOTAL INTEREST-
BEARING DEBT INCLUDING LEASE
LIABILITIES 404 199 1 613 745
MATURITY SCHEDULE, INTEREST-BEARING DEBT AT 31 DECEMBER 2021
For more detailed descriptions about maturity, see the liquidity section in Note 13.
Consolidated Financial Statements Höegh LNG Group | 85
HÖEGH LNG
The movement in the “other” column comprises reclassification of interest-bearing debt between non-current
and current related to bonds issues, the PGN FSRU Lampung and Höegh Giant facilities, respectively, along with
recognition of debt issuance cost partly offset by its amortisation.
USD’000 Independence
PGN FSRU
Lampung
Höegh Gallant/
Höegh Grace Höegh Giant
Höegh
Esperanza
Höegh
Gannet
Höegh
Galleon
Drawdown date 08.05.2014 17.04.2014 31.01.2019 09.08.2021 05.04.2018 06.12.2018 27.08.2019
Original amount
drawn under the
facility
242 000 225 000 383 000 165 000 200 000 175 000 180 250
Type of Financing
ECA/
commercial
banks
ECA/
commercial
banks
ECA/
commercial
banks
Commercial
Banks
ECA/
commercial
banks
ECA/
commercial
banks SLB
Blended Tenor on
the debt ( years ) 10 11 7 5 10 10 12
Blended profile on
the debt ( years ) 16 12 15 13 16 16 20
Blended fixed all-
in-rate 4.10% 5.37% 4.90% 3.94% 4.00% 5.00% 5.71%
INTEREST- BEARING DEBT IN THE CONSOLIDATED ENTITIES AT 31 DECEMBER 2021
USD’000 Arctic Lady
Arctic
Princess Neptune Cape Ann
Drawdown date 12.04.2006 13.01.2006 29.11.2021 01.06.2010
Original amount drawn under the facility 195 508 196 361 154 000 300 000
Type of Financing SLB SLB
Commercial
banks
Commercial
banks
Blended Tenor on the debt (years) 25 25 8 12
Blended profile on the debt (years) 25 25 8 20
Blended fixed all-in-rate 5.11% 5.39% 7.43% 5.90%
INTEREST-BEARING DEBT IN JOINT VENTURE COMPANIES AT 31 DECEMBER 2021
Financial covenants and restrictions related to interest-bearing debt and lease liabilities
Existing credit facilities impose restrictions, which may limit or prohibit Höegh LNG’s ability to incur
indebtedness, create liens, sell shares in subsidiaries, pay dividends, engage in mergers and acquisitions, or
purchase and sell vessels without the consent of the lenders. In addition, lenders may accelerate the maturity of
the indebtedness under financing agreements and foreclose upon the collateral securing the indebtedness upon
the occurrence of certain events of default, including a failure to comply with any of the covenants contained in
the financing agreements. Financial covenants requires that Höegh LNG maintain a minimum equity (adjusted
for mark-to-market of hedging reserves) of USD 200 million, a minimum equity ratio (adjusted for mark-to-market
of hedging reserves) of 25%, which is increased to 27.5% when dividend is paid, and a minimum free cash
position being the higher of USD 35 million and 5% of funded indebtedness. HMLP must maintain a minimum
equity (adjusted for mark-to-market of hedging reserves) of USD 200 million, a minimum equity ratio (adjusted
for mark-to-market of hedging reserves) of 25% and a minimum free cash position being the higher of USD 15
million or USD 2.5 million per vessel, subject to a cap of USD 20 million. Most credit facilities include project
covenants which require positive working capital and minimum debt service coverage ratios. Höegh LNG was
in compliance with all its covenants for the year ended 31 December 2021. See Note 13 and Note 33 disclosing
the refinancing subsequent to year ended 31 December 2021.
86 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
USD’000 Note 2021 2020
Interest expense on mortgage debt and revolving credit facilities 72 257 67 625
Interest expenses on bonds 23 501 23 316
Interest expenses on leases 15 7 422 8 845
Other interest expenses 27 15
TOTAL 103 207 99 801
Note 18: Expenses from other financial items
Note 17: Interest expenses
USD’000 Note 2021 2020
Income from other financial items
Currency gain 111 3 568
Guarantee fees from from investment in associates 610 784
Other 1 2
INCOME FROM OTHER FINANCIAL ELEMENTS - GROSS 722 4 354
Expenses from other financial items
Currency loss (1 206) (5 960)
Withholding tax (2 607) (2 567)
Ineffectiveness on interest rate hedges 13 (1 529) (649)
Loss from terminating CCIRS on HLNG03 (127) -
Loss on FX options (846) (3 492)
Guarantee- and other fees (1 117) (1 299)
EXPENSES FROM OTHER FINANCIAL ELEMENTS - GROSS (7 431) (13 967)
INCOME (EXPENSES) FROM OTHER FINANCIAL ELEMENTS - NET (6 709) (9 613)
Consolidated Financial Statements Höegh LNG Group | 87
HÖEGH LNG
Vessel Performance guarantee issued in favor of charterer Guarantor
Höegh Galleon Not applicable under the current charter. It has agreed for Höegh LNG
Holdings Ltd. to guarantee of the obligations of the subsidiary’s future
charter with the customer subject to a maximum cap of USD 55.5 million,
but the execution of the guarantee is pending commencement of the
contract
Not applicable
Höegh Gannet Not applicable under the current charter. It has been agreed for Höegh LNG
Holdings Ltd. to guarantee of the obligations of the subsidiary’s future char
-
ter with the customer subject to a maximum cap of USD 50 million, but the
execution of the guarantee is pending commencement of the contract
Not applicable
Höegh Esperanza Not applicable under the current charter Not applicable
Höegh Giant Guarantee of the obligations of the subsidiary’s charter with the customer
subject to a maximum cap of USD 18 million
Höegh LNG Holdings Ltd.
Independence Guarantee of the obligations of the subsidiary’s charter with the customer Höegh LNG Ltd. is the
guarantor and is count
-
er-guaranteed by Höegh
LNG Holdings Ltd.
Arctic Princess Guarantee of the obligations of the subsidiary’s charter with the customer Höegh LNG Ltd. is the
guarantor and is count
-
er-guaranteed by Höegh
LNG Holdings Ltd.
Arctic Lady Guarantee of the obligations of the subsidiary’s charter with the customer Höegh LNG Ltd.
Neptune Guarantee of the obligations of the JV’s charter with the customer equal to
the pro rata (50%) ownership share
Höegh LNG Ltd.
Note 19: Security granted, guarantees and commitments
In relation to charter contracts with its customers, the group has in some instances provided parent company
performance guarantees in favour of the charterers as listed below.
Cape Ann Guarantee of the obligations of the JV’s charter with the customer equal to
the pro rata (50%) ownership share
Höegh LNG Ltd.
PGN FSRU Lampung Guarantee of the obligations of the subsidiary’s charter with the customer Höegh LNG Holdings Ltd.
Höegh Grace Guarantee of the obligations of the subsidiary’s charter with the customer Höegh LNG Partners LP
Höegh Gallant It has been agreed to guarantee of the obligations of the subsidiary’s charter
with the customer, but the execution of the guarantee is pending
Höegh LNG Partners LP
In relation to its vessel financing, the group has provided a customary security package (ship mortgage, account
pledge, assignment of agreement, earnings, insurances etc.) under each credit facility, and certain guarantees
as listed on the next page.
Overview of charter contract performance guarantees granted and outstanding on 31 December 2021
88 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
Debt facility (see note 15) Pledges Guarantee Guarantor
Höegh Galleon Not applicable – finance lease
under a sale-leaseback trans
-
action
Parent company guarantee for
the obligations related to the
sale-leaseback and the interest
rate swaps
Höegh LNG Holdings Ltd.
Höegh Gannet Customary pledge of vessel,
certain bank accounts and
shares in the vessel-owning
entity
Parent company guarantee for
the obligations related to the
debt facility and interest rate
swaps
Höegh LNG Holdings Ltd.
Höegh Esperanza Customary pledge of vessel,
certain bank accounts and
shares in the vessel-owning
entity
Parent company guarantee for
the obligations related to the
debt facility and interest rate
swaps
Höegh LNG Holdings Ltd.
Höegh Giant Customary pledge of vessel,
certain bank accounts and
shares in the vessel-owning
entity
Parent company guarantee for
the obligations related to the
debt facility and interest rate
swaps
Höegh LNG Holdings Ltd.
Independence Customary pledge of vessel,
certain bank accounts and
shares in the vessel-owning
entity
Parent company guarantee for
the obligations related to the
debt facility and interest rate
swaps
Höegh LNG Holdings Ltd.
Arctic Princess Not applicable for the vessel
since this is a finance lease.
Customary pledge of certain
bank accounts and shares in
the vessel-owning entity
Sponsor’s guarantee pro-rata
according to its shareholding for
payment obligations under the
lease agreements and interest
rate swaps entered into by
the JV
Höegh LNG Ltd and Höegh LNG
Holdings Ltd.
Arctic Lady Not applicable for the vessel
since this is a finance lease.
Customary pledge of certain
bank accounts and shares in the
vessel-owning entity
Sponsor’s guarantee pro-rata
according to its shareholding for
payment obligations under the
lease agreements and interest
rate swaps entered into by
the JV
Höegh LNG Ltd and Höegh LNG
Holdings Ltd.
Neptune Customary pledge of vessel,
certain bank accounts and
shares in the vessel-owning
entity
Sponsor guarantee for the
obligations related to the debt
facility and interest rate swaps,
limited to maximum USD 7.5
million
Höegh LNG Partners LP
Cape Ann Customary pledge of vessel,
certain bank accounts and
shares in the vessel-owning
entity
Sponsor guarantee for the
obligations related to the debt
facility and interest rate swaps,
limited to maximum USD 7.5
million
Höegh LNG Partners LP
PGN FSRU Lampung Customary pledge of vessel,
certain bank accounts and
shares in the vessel-owning
entity
Parent company guarantee for
the obligations related to the
debt facility and interest rate
swaps
Höegh LNG Partners LP
Höegh Grace/Höegh Gallant Customary pledge of vessel,
certain bank accounts and
shares in the vessel-owning
entity
Not applicable, Höegh LNG
Partners LP is the borrower
under the facility
Not applicable
Overview of securities and guarantees granted and outstanding on 31 December 2021 for the
Group’s debt facilities
Consolidated Financial Statements Höegh LNG Group | 89
HÖEGH LNG
Höegh LNG Partners LP – indemnifications
In connection with the sale of assets to HMLP, the company has agreed to indemnify HMLP against certain
losses for the periods prior to the closing date related to the title of the transferred assets, the commercial and
financial agreements and vessel operation, the latter being i.e., against certain environmental and toxic tort
liabilities (claims must be submitted within five years following the closing date and for HMLP IPO fleet it is an
aggregate cap of USD 5 million). In addition, the company has agreed to indemnify HMLP against all federal,
state, foreign and local income tax liabilities attributable to the operation of the contributed assets prior to the
respective closing date. The company has agreed to indemnify HMLP against specific losses related to the PGN
Project also after the closing date, as the project was transferred to HMLP before commencing operation under
its commercial agreement (charter). Lastly, in relation to the boil-off claim regarding Neptune and Cape Ann, the
company has indemnified HMLP against for its share of the cash impact of the settlement, the arbitration costs
and any legal expenses, and has agreed to indemnify HMLP for any necessary technical modifications of the
vessels and any prospective boil-off claims or other direct impacts of the settlement agreements.
Avenir LNG Limited (see Note 20)
On 31 December 2021, Höegh LNG had no remaining outstanding investment commitment in Avenir LNG
Limited.
By the end of 2021, Avenir had completed the construction of four of its six newbuilds. In connection with the
debt financing of one of the completed vessels, Höegh LNG Holdings Ltd. has provided a sponsor’s guarantee
with a maximum liability amount of USD 6.9 million plus interests and costs.
On 31 December 2021, Avenir had two vessels under construction, where the three main shareholders have
provided certain guarantees to the shipyards in connection with the shipbuilding contracts signed by Avenir.
These two vessels are scheduled for completion in 2022. The guarantees issued for the two vessels under
construction cover a total amount of USD 22.9 million (plus change orders and interests). The three main
shareholders have entered into counter-indemnity agreements for the guaranteed obligations, so that the
company’s net liability for a claim would be equal to its pro rata shareholding in Avenir at the time of any claim
being raised. Also, the three main shareholders of Avenir have issued non-binding letters of comfort related to
the final payment instalments under shipbuilding contracts signed by Avenir.
Office lease
Höegh LNG Ltd. has guaranteed payment of up to six months’ office lease for the premises in Drammensveien
134, 0277 Oslo, Norway.
90 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
Note 20: Investments in joint ventures, associates and subsidiaries
Höegh LNG had ownership in four joint ventures and one associate at year-end 2021, all accounted for
according to the equity method. The associate and joint ventures have share capital consisting solely of ordinary
shares.
JOINT VENTURES AND ASSOCIATES IN HÖEGH LNG
Company
Registered
office Country Principal activity
Ownership in %
31 Dec 2021 31 Dec 2020
Joint Gas Ltd. Georgetown Cayman Islands Shipowning 33.98 33.98
Joint Gas Two Ltd. Georgetown Cayman Islands Shipowning 50.00 50.00
SRV Joint Gas Ltd. Georgetown Cayman Islands Shipowning 50.00 50.00
SRV Joint Gas Two Ltd. Georgetown Cayman Islands Shipowning 50.00 50.00
Avenir LNG Limited Hamilton Bermuda Shipowning 23.67 23.35
Joint Gas Ltd. is leasing Arctic Princess under a 25-year financial lease agreement. Joint Gas Two Ltd. is leasing
Arctic Lady under a 25-year financial lease agreement. Reference is made to Note 19 for further information.
SRV Joint Gas Ltd. and SRV Joint Gas Two Ltd. own and operate the FSRUs Neptune and Cape Ann, both
leased to Total Gas & Power Ltd.
The associate, Avenir LNG Limited, has taken delivery of four of the 6 vessels ordered by the end of 2021,
whereof one of them was sold to a third party in 2021. The two remaining four small-scale LNG carriers currently
under construction at Keppel Sing marine in Nantong, China are scheduled to be completed in 2022. The LNG
storage terminal and distribution terminal facility in the Italian port of Oristano, Sardinia was completed in 2021.
Avenir LNG Limited intends to source and ship LNG to the terminal using its own vessel small LNG carriers and
distribute the LNG in the growing market in Sardinia by trucks and through regasification into the local gas grid.
USD’000 2021 2020
At 1 January 43 469 24 359
Share of profit 19 496 17 088
Other comprehensive income 19 609 (7 353)
Investment in Avenir LNG Limited 8 625 9 375
AT 31 DECEMBER 91 198 43 469
Included in non-current assets 91 198 45 390
Included in non-current liabilities - (1 921)
CHANGE IN CARRYING VALUE OF JOINT VENTURES AND ASSOCIATES DURING THE YEAR
The joint venture companies, except for Avenir LNG Limited, are privately owned and there are no quoted
market prices available for the shares.
Consolidated Financial Statements Höegh LNG Group | 91
HÖEGH LNG
CONDENSED STATEMENT OF COMPREHENSIVE INCOME FOR THE GROUP’S JOINT VENTURES AND
ASSOCIATES
Joint Gas
Ltd.
Joint Gas
Two Ltd.
SRV Joint
Gas Ltd.
SRV Joint
Gas Two Ltd.
Avenir LNG
Limited
USD’000 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
Time charter revenues 17 941 17 916 17 612 17 623 42 216 42 127 42 845 45 017 19 175 -
Operating expenses (105) (125) (122) (152) (7 987) (7 312) (8 440) (11 594) (15 479) (5 968)
EBITDA 17 836 17 792 17 490 17 471 34 228 34 816 34 405 33 423 3 696 -
Depreciation (6 095) (6 085) (6 067) (6 058) (12 800) (12 810) (12 303) (12 298) (4 660) -
Interest income 6 79 6 78 18 58 18 63 - -
Interest expenses (5 274) (4 985) (4 887) (5 038) (13 399) (11 582) (11 554) (11 538) (2 952) -
Other items - - - - - - - - 11 423 -
PROFIT (LOSS) FOR THE
YEAR 6 473 6 801 6 541 6 453 8 048 10 482 10 566 9 650 7 507 (5 968)
Other comprehensive
income 7 480 (2 328) 6 894 (2 764) 13 697 (5 751) 14 811 (6 394) (2 678) 3 418
TOTAL COMPRE-
HENSIVE INCOME 13 954 4 473 13 435 3 689 21 744 4 731 25 378 3 256 4 829 (2 550)
The information above reflects the amounts presented in the financial statements of the joint ventures and not
Höegh LNG’s share of those amounts.
CONDENSED STATEMENT OF FINANCIAL POSITION AT YEAR-END FOR THE GROUP’S JOINT
VENTURES AND ASSOCIATES
Joint Gas
Ltd.
Joint Gas
Two Ltd.
SRV Joint
Gas Ltd.
SRV Joint
Gas Two Ltd.
Avenir LNG
Limited
USD’000 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
ASSETS
Cash and cash equivalents 18 226 16 853 22 147 19 908 3 138 5 852 11 876 7 903 46 813 8 025
Other current assets - 3 40 80 2 159 4 304 19 463 4 375 10 140 9 327
TOTAL CURRENT
ASSETS 18 226 16 856 22 187 19 988 5 296 10 156 31 339 12 278 56 953 17 352
Vessels/Right-of-use assets 98 977 105 072 100 103 106 170 227 693 240 493 223 832 236 057 202 153 151 299
Other non-current assets 9 100 6 998 9 000 6 998 14 564 12 662 2 149 14 351 2 330 1 819
TOTAL NON-CURRENT
ASSETS 108 077 112 070 109 103 113 168 242 257 253 155 225 981 250 408 204 483 153 118
TOTAL ASSETS 126 303 128 926 131 290 133 156 247 554 263 311 257 320 262 686 261 436 170 470
LIABILITIES
TOTAL CURRENT
LIABILITIES 14 018 13 858 12 143 12 316 28 786 203 945 187 862 26 796 33 247 9 701
Non-current interest-
bearing debt 93 257 102 810 98 369 106 954 137 151 - - 178 580 64 199 36 565
Other non-current liabilities 20 160 27 343 14 766 21 308 54 208 53 701 38 727 51 956 - -
TOTAL NON-CURRENT
LIABILITIES 113 416 130 153 113 135 128 263 191 358 53 701 38 727 230 536 64 199 36 565
TOTAL LIABILITIES 127 435 144 011 125 278 140 579 220 144 257 646 226 589 257 332 97 446 46 266
Net assets (1 132) (15 085) 6 012 (7 423) 27 409 5 665 30 731 5 353 163 990 124 204
92 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
The negative fair values of the cash flow hedges in Höegh LNG’s joint ventures are all recorded as part of the
investments in the joint ventures.
CONDENSED STATEMENT OF FINANCIAL POSITION FOR THE GROUP’S JOINT VENTURES AND
ASSOCIATES
Joint Gas
Ltd.
Joint Gas
Two Ltd.
SRV Joint
Gas Ltd.
SRV Joint
Gas Two Ltd.
Avenir LNG
Limited
USD’000 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
NET ASSETS AT
1 JANUARY (15 085) (19 558) (7 425) (11 114) 5 667 936 5 354 2 098 124 204 89 254
Profit (loss) for the year 6 473 6 801 6 541 6 453 8 048 10 482 10 566 9 650 7 508 (5 968)
Other comprehensive
income 7 480 (2 328) 6 894 (2 764) 13 697 (5 751) 14 811 (6 394) (2 678) 3 418
Issuance of shares - - - - - - - - 34 500 37 500
NET ASSETS AT 31
DECEMBER (1 131) (15 085) 6 010 (7 425) 27 412 5 667 30 732 5 354 163 533 124 204
Interest in joint venture 33.98% 33.98% 50.00% 50.00% 50.00% 50.00% 50.00 % 50.00% 23.67% 23.35%
Investment - - - - - - - - 8 625 9 375
Aggregate consolidation
adjustments 3 562 3 205 5 176 4 661 5 071 3 998 4 060 3 065 2 513 2 513
CARRYING VALUE
INVESTMENT AT 31
DECEMBER 3 178 (1 921) 8 181 948 18 776 6 832 19 426 5 742 41 639 31 872
Höegh Gallant
Consolidated Financial Statements Höegh LNG Group | 93
HÖEGH LNG
SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES AT 31 DECEMBER 2021
Company Country Principal activity
Proportion
of ordinary
shares held
by parent
Proportion
of ordinary
shares held
by the group
Proportion
of ordinary
shares held
by the NCI
Höegh LNG Ltd. Bermuda Holding 100
Höegh LNG AS Norway Management 100
- Höegh LNG AS:
Shanghai Representative Office
Höegh LNG Fleet Management AS Norway Ship management 100
- Höegh LNG Fleet Management AS:
UK branch
Höegh LNG Services AS Norway Management 100
- Höegh LNG Services AS: Höegh LNG
Sevices ROHQ Regional office in Manila
Leif Hoegh (U.K.) Limited England Ship management 100
Hoegh LNG Asia Pte. Ltd. Singapore Business development 100
Hoegh LNG Shipping Services Pte. Ltd. Singapore Ship management 100
Hoegh LNG Maritime Management Pte. Ltd. Singapore Ship management 100
Port Dolphin Energy LLC USA Dormant 100
Port Dolphin Holding Company, LLC USA Dormant 100
Höegh LNG Giant Ltd. Cayman Islands Shipowning 100
Hoegh LNG India Private Ltd. India Ship operating 100
Hoegh LNG Klaipeda Pte. Ltd. Singapore Shipowning 100
Hoegh LNG Gannet Pte. Ltd. Singapore Shipowning 100
Höegh LNG Galleon Ltd. Bermuda Shipowning 100
Hoegh LNG Klaipeda, UAB Lithuania Ship operation 100
Höegh LNG Egypt LCC Egypt Business development 100
Höegh LNG Egypt Holding I Ltd. Cayman Islands Holding 100
Höegh LNG Egypt Holding II Ltd. Cayman Islands Holding 100
Höegh LNG GP LLC Marshall Islands General partner in the
HMLP
100
Höegh LNG Chile Holding Ltd. Cayman Islands Holding 100
Höegh LNG FSRU VI Ltd. Cayman Islands Shipowning 100
Hoegh LNG Chartering LLC Marshall Islands Ship operation 100
Höegh LNG Partners LP ¹ Marshall Islands Holding 45.72 100 54.28
Joint ventures and associates
Joint Gas Ltd. Cayman Islands Shipowning 33.98
Joint Gas Two Ltd. Cayman Islands Shipowning 50
Avenir LNG Limited Bermuda Shipowning 23.67
1
HMLP is a partnership incorporated in the Marshall Islands and listed at the New York Stock Exchange in the US. The partnership agreement
limits the voting power of an individual common unit holder to a maximum of 4.9% for election to the board. Subordinated unit holders have no right
to appoint or elect board members. Common unit holders have the right to elect four members of the board while the General Partner, an entity
controlled by the company, has the right to appoint the remaining three members of the board.
94 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
2
Höegh LNG consolidates PT Hoegh LNG Lampung as it controls the economic interest in the company.
COMPANIES IN HMLP AS AT 31 DECEMBER 2021
Company Country Principal activity
Proportion of ordinary
shares held by parent
Höegh LNG Partners LP Marshall Islands Parent company/holding
Subsidiaries
Höegh LNG Partners Operating LLC Marshall Islands Holding 100
Höegh LNG Services Ltd. England Liquidation in progress 100
Hoegh LNG Lampung Pte. Ltd. Singapore Holding 100
PT Hoegh LNG Lampung ² Indonesia Shipowning 49
Hoegh LNG Cyprus Limited Cyprus Shipowning 100
Hoegh LNG Cyprus Limited 100
- Egypt branch (liquidation in progress)
Höegh LNG Colombia Holding Ltd. Cayman Islands Holding 100
Höegh LNG Colombia S.A.S. Colombia Ship operation 100
Höegh LNG FSRU IV Ltd. Cayman Islands Shipowning 100
Höegh LNG Jamaica Limited Jamaica Ship operating (from 2022) 100
Höegh LNG Gallant Limited Cayman Islands Dormant 100
Joint ventures
SRV Joint Gas Ltd. Cayman Islands Shipowning 50
SRV Joint Gas Two Ltd. Cayman Islands Shipowning 50
All subsidiary undertakings are included in the consolidated financial statements. Other than the subsidiaries
described above, the proportion of the voting rights in subsidiary undertakings held directly by Höegh LNG do
not differ from the proportion of ordinary shares held.
Summarised financial information on subsidiaries with material non-controlling interests
The distribution of dividend to the preferred unit holders in HMLP is fixed at 8.75% per annum based on a
cost of USD 25 per unit, payable on a quarterly basis (15 February, 15 May, 15 August and 15 November).
The preferred units represent an equity instrument. The fundamental characteristics of the preferred units
are not considered to be a financial liability. The preferred units do not provide for a redemption on a specific
date and the preferred units do not satisfy the definition of a financial liability. The substance of the contractual
arrangements for the preferred units is in substance an equity instrument. The preferred units do not have
any voting rights but have been granted a right to appoint one of the general partners appointed members
of the board of directors in the event dividend is in arrears by an amount equal to six quarterly payments.
The rights are protective in nature and is contingent on HMLP failing to pay distributions to the preferred unit
holders, payments that takes priority to all other distributions. As such we do not consider those rights as being
substantive as of now. Consequently, no change in the control assessment with regards to consolidation of the
HMLP into the group accounts of Höegh LNG Holdings Ltd.
Consolidated Financial Statements Höegh LNG Group | 95
HÖEGH LNG
The preferred units are entitled to a share of the HMLP’s result, capped at 8.75% of the cost of a unit, USD
25, per year. The cumulative preferred units shall be allocated their share of profit before further allocations are
made, equal to the dividend and irrespective of HMLP’s profit.
According to IFRS 10, the assessment of control must be performed on a continuous basis. For the year ended
31 December 2014, following the election of four members of the board, Management made an assessment
over the control of the partnership. The assessment evaluated all facts and circumstances, including the
composition of the board of HMLP, the rights of unitholders and other arrangements and relationships
between the parties. Based on an overall assessment of all facts and circumstances, Management concluded
that the company had de facto control of HMLP even though it did not have a majority of the voting rights.
Management’s assessment was based on the combination of factors where the current composition of the
board of directors of HMLP was an important element in the overall conclusion. Management have reassessed
the conclusion in 2021. The issuance of the preferred units has been deemed not to have any impact on the
conclusion. It has been concluded that Höegh LNG has de-facto control over HMLP also after the issuances of
preferred units.
The summarised financial statements of HMLP prepared in accordance with IFRS are presented below and on
the next page. The tables include transactions and balances towards other companies within Höegh LNG. The
figures are not directly comparable with the consolidated financial statements for HMLP sub-group, as these are
based on US GAAP and for certain assets and liabilities have deviating acquisition dates.
On 1 October 2015, the company sold Höegh Gallant to HMLP in a dropdown transaction. The sales contract
granted HMLP an option to lease the vessel back to Höegh LNG Ltd from the date of termination or expiry of the
lease and maintenance agreement (LMA) until 31 July 2025 (with no option to extend) at a rate equal to 90% of
the daily LMA rate plus any incremental taxes or operating expenses as a result of such a charter. The option
was declared by HMLP on 26 February 2020. A wholly owned subsidiary of the company has made a provision
for the present value of the estimated net obligation to HMLP (net of estimated future time charter revenue). On
31 December 2021, the provision amounted to USD 61.1 million. Since the group consolidates HMLP and all
intercompany transactions (including assets/liabilities) are eliminated, the provision and any changes to it will
not impact profit and loss, nor the liabilities in the consolidated financial statements. However, as HMLP is only
partly owned by the group, the provision has an effect on the portion of the group’s equity being attributed to
the non-controlling interests (NCI) in HMLP. On 31 December 2021, an aggregate amount of USD 33.2 million
has been reflected as equity attributable to the NCI in relation to the provision, based on the NCI owning
approximately 54% of HMLP’s common units.
96 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
USD’000 31 Dec 2021 31 Dec 2020
ASSETS
FSRUs 731 134 753 625
Investments in joint ventures 38 201 12 573
Other non-current assets 22 031 19 967
Total non-current assets 791 367 786 165
Cash and cash equivalents 42 516 31 838
Restricted cash 8 410 7 198
Other current assets 11 358 7 076
Total current assets 62 284 46 112
TOTAL ASSETS 853 651 832 278
LIABILITIES
Non-current interest-bearing debt 339 541 291 053
Deferred tax liabilities 16 001 13 046
Other non-current liabilites 33 072 38 479
Total non-current liabilities 388 614 342 578
Current interest-bearing debt 46 385 123 596
Other current liabilites 32 588 20 434
Current liabilities 78 973 144 030
TOTAL LIABILITIES 467 587 486 608
NET ASSETS 386 065 345 670
Attributable to non-controlling interests 323 676 301 396
HÖEGH LNG PARTNERS CONSOLIDATED , CONDENSED STATEMENT OF FINANCIAL POSITION
USD’000 2021 2020
Time charter revenues 148 922 150 015
Management and other income - 731
Share of results from investments in associates and joint ventures 11 373 12 058
TOTAL INCOME 160 295 162 804
Bunker and other voyage related expenses - (95)
Operating expenses (29 132) (24 256)
Project administrative expenses (3 563) -
Group administrative expenses (8 671) (9 644)
OPERATING PROFIT BEFORE DEPRECIATION AND AMORTISATION (EBITDA) 118 929 128 809
Depreciation (25 584) (26 110)
OPERATING PROFIT 93 344 102 699
NET FINANCIAL ITEMS (29 466) (26 202)
ORDINARY PROFIT BEFORE TAX 63 879 76 496
Income taxes (14 983) (4 527)
PROFIT FOR THE YEAR AFTER TAX 48 895 71 969
Other comprehensive income 28 150 (17 758)
TOTAL COMPREHENSIVE INCOME 77 045 54 210
Attributable to non-controlling interests 48 473 35 233
Dividends paid to non-controlling interests 31 801 46 435
HÖEGH LNG PARTNERS - CONSOLIDATED, CONDENSED STATEMENT OF INCOME
Consolidated Financial Statements Höegh LNG Group | 97
HÖEGH LNG
USD’000 2021 2020
I) Net cash flows from operating activities 102 052 108 737
II) Net cash flows from investing activities (5 942) (183)
III) Net cash flows from financing activities (85 432) (115 925)
Net increase in cash and cash equivalents (I+II+III) 10 678 (7 371)
Current cash and cash equivalents at 1 January 31 838 39 209
CURRENT CASH AND CASH EQUIVALENTS AT 31 DECEMBER 42 516 31 838
HÖEGH LNG PARTNERS CONSOLIDATED, CONDENSED STATEMENT OF CASH FLOWS
Note 22: Share based payment
Share options in Höegh LNG Holdings Ltd.
In 2012, the company introduced a share option programme, where share options of the company were granted
to members of the group management and key employees of Höegh LNG. The share options were vested
in three equal portions over a three-year period from the initial date of granting. The share options could be
exercised up to one year after the end of the total vesting period. The share option programme ended with the
amalgamation and de-listing of Höegh LNG Holdings Ltd.’s shares from Oslo Stock Exchange. There are no
options outstanding on 31 December 2021. The ending of the share option programme had no material impact
on the financial statements.
Phantom unit award to management of Höegh LNG
To align the interest of the management of Höegh LNG and HMLP, the board of directors of the company has
decided to award a right to receive common units in HMLP (phantom units) to members of management and
key employees who are directly involved in providing services to HMLP. A phantom unit is a notional unit that,
upon vesting, entitles the participant to receive, at the time of settlement, a common unit in HMLP or an amount
of cash equal to the fair market value of a common unit, as determined by the board in its sole discretion.
The fair value is determined using Black-Scholes valuation, which for phantom units yields a fair value equal to
the share price at reporting date.
Note 21: Shares and share capital
The share capital of the company of USD 773 thousand pre-amalgamation in May 2021 was cancelled and
extinguished as part of the amalgamation. Post-amalgamation, the company retained the share capital of Larus
Limited of USD 12 000.
On 31 December 2021, the company’s share capital was therefore USD 12 000, consisting of 1 200 000 fully
paid common shares, each with a par value of USD 0.01. All the shares in the company are owned by Larus
Holding Limited, a 50/50 joint venture between Leif Höegh & Co Ltd. and Funds managed by Morgan Stanley
Infrastructure Partners.
98 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
2021 2020
Outstanding on 1 January 55 707 36 660
Granted during the year - 37 379
Exercised during the year (22 148) (18 332)
Forfeited during the year (14 827) -
Adjustment due to transfer of emloyee from HMLP - -
OUTSTANDING NUMBER OF PHANTOM UNITS ON 31 DECEMBER 18 732 55 707
Fair value on 31 December (in USD'000) 81 797
OUTSTANDING PHANTOM UNITS IN HLNG
Phantom unit award to the CEO & CFO of HMLP
No phantom units were awarded to CEO and CFO in 2021.
Social security contributions on phantom units
The provision for social security contributions on phantom units is calculated based on the number of
outstanding options at the reporting date that are expected to be exercised. The provision is based on market
price of the shares at the reporting date, which is the best estimate of the market price at the date of exercise.
It is expected that costs will be incurred during the exercise period of 1 January 2022 to 31 December 2023.
Note 23: Corporate income tax expenses and deferred taxes
The group conducts much of its operations in emerging market which have historically less developed and less
stable tax regimes than the OECD.
The group is subject to tax regulations in those countries with respect to withholding taxes, value added taxes,
payroll taxes, property taxes, taxes on certain financial transactions, permanent establishments, and corporate
income taxes. Tax regulations, guidance and interpretation in these countries may not always be clear and may
not contemplate floating infrastructure activities, such as FSRUs. In addition, such regulations may be subject
to alternative interpretations or changes in interpretations over time, including as a result of audits by the local
tax authorities. In this regard, the group’s Indonesian subsidiary is subject to examination by the Indonesian tax
authorities for up to five years following the completion of a fiscal year, and subsidiaries jurisdictions are subject
to examination by tax authorities accordingly; Singapore - four years, Lithuania - three years, Egypt -five years,
Norway - five years, UK - one year, Cyprus - six years and Colombia - three years, following the completion of a
fiscal year or from the date of the tax return.
The group’s LNG carrier activities may be subject freight taxes and permanent establishment exposure in port
jurisdictions. Under the charter agreements the charterer is responsible for the tax cost and the group monitors
closely the port activity mitigating the potential exposure and ensuring compliance. The group has legal entities
subject to recent economic substance requirements in Cayman Islands and Bermuda. The group monitors the
guidance being developed by these jurisdictions and proceeds accordingly to ensure compliance.
Income tax expense for the year comprise corporate income tax and changes in deferred taxes and tax
expenses for 2021 and 2020 primarily incurred in the group’s subsidiaries in Indonesia, Singapore and
Colombia partly offset by tax income recorded in UK derived from a tax loss that incurred in 2021.
Consolidated Financial Statements Höegh LNG Group | 99
HÖEGH LNG
Tax expenses in Indonesia related to prior years has resulted in a reduction of historical tax loss carry forward,
mainly due to disallowing interest expenses on intercompany loans partly offset by reduced tax rate from 25%
to 22% from 2020. The taxable income in the Singaporean subsidiary owning the Indonesian subsidiary, mainly
arises from internal interest income. The charterer in Colombia pays certain taxes directly to the Colombian tax
authorities on behalf of the group’s subsidiaries that own and operate Höegh Grace. The tax payments are a
mechanism for advance collection of part of the income taxes for the Colombian subsidiary and a final income
tax on Colombian source income for the non-Colombian subsidiary.
TAX EXPENSE FOR THE YEAR
CHANGES IN DEFERRED TAXES
DEFERRED TAX ASSETS (LIABILITIES)
USD’000 2021 2020
Current income tax charge
(10 202) (3 735)
Changes in deferred taxes (2 737) (945)
Adjustments in respect of current income tax of previous year (2 950) 46
INCOME TAX EXPENSE REPORTED IN THE INCOME STATEMENT (15 889) (4 634)
USD’000 31 Dec 2021 31 Dec 2020
Deferred tax assets
Pension liabilities 88 233
Tax loss carried forward 744 844
Other tangible assets 442 89
TOTAL DEFERRED TAX ASSETS GROSS 1 274 1 166
Deferred tax liabilities
Vessels (12 465) (10 828)
Other tangible assets (3 669) (2 352)
TOTAL DEFERRED TAX LIABILITIES GROSS (16 134) (13 180)
TOTAL DEFERRED TAX ASSETS (LIABILITIES) NET (14 859) (12 014)
USD’000 31 Dec 2021 31 Dec 2020
Deferred tax assets 1 274 1 166
Deferred tax liabilities (16 134) (13 180)
DEFERRED TAX LIABILITIES - NET (14 859) (12 014)
EFFECTIVE TAX RATE
PROFIT (LOSS) BEFORE INCOME TAX (5 395) 4 780
At Bermuda's statutory income tax rate of 0% - -
Income tax expense reported outside Bermuda (15 889) (4 634)
INCOME TAX EXPENSE REPORTED IN THE INCOME STATEMENT (15 889) (4 634)
EFFECTIVE TAX RATE n/a 97.0%
100 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
Deferred tax assets and liabilities are offset when it is a legally enforceable right to offset current tax assets
against liabilities and when deferred revenues become taxable.
The changes in deferred tax assets and liabilities are expected to be settled after more than 12 months. The
group also has tax loss carried forward in Egypt amounting to USD 2.3 million as of 31 December 2021 (USD
1.1 million year-end 2020). The group has not recognised a deferred tax asset for these losses as it is not
possible to predict with reasonable certainty whether adequate taxable profit will be generated in the future to
utilise the losses.
The tax losses in 2021 of USD 2.1 million that incurred in the group’s subsidiary in the UK, derived from Arctic
Princess’ off hire during dry dock. This loss together with the tax losses of USD 1.5 million from when Arctic
Lady was off-hire while undergoing her 15-year class renewal in 2020 is expected to be fully utilised during
the remaining terms of the charterers. Deferred tax assets of USD 0.7 million is recognised at year ended 31
December 2021 (USD 0.3 million at year end 2020), and tax income recorded of USD 0.3 million in 2021 (USD
0.8 million in 2020). In addition, the group has USD 0.4 million recorded as a receivable against HMRC on 31
December 2021 related to tax losses carried back to 2017, which is expected to be settled in 2022.
Uncertain tax positions in Indonesia
In late June 2021, the tax audit for the group’s Indonesian subsidiary’s 2019 tax return was completed. The
main finding was that an internal promissory note was reclassified from debt to equity such that 100% of the
accrued interest was disallowed as a tax deduction. The group and its Indonesian subsidiary disagree with the
conclusion of the tax audit and have filed an Objection Request with the Central Jakarta Regional Tax Office.
Nevertheless, the Indonesian subsidiary may not be successful in its appeal and has expensed the additional
tax of USD 2.7 million including penalties for 2019. During 2021, the Indonesian subsidiary recorded a decrease
in the tax provision of USD 3.2 million for the expiration of the statute of limitations for 2016. The subsidiary
had as of 31 December 2021, and 2020 a tax provision of USD 9 million and USD 2.7 million respectively, an
increase year-on-year of USD 6.3 million, for the potential future tax obligation related to the open years that
remain subject to a potential tax audit in Indonesia.
Benefits of uncertain tax positions are recognised when it is more-likely-than-not that a tax position taken in a
tax return will be sustained upon examination based on the technical merits of the position.
Consolidated Financial Statements Höegh LNG Group | 101
HÖEGH LNG
USD’000 31 Dec 2021 31 Dec 2020
Trade payables 9 714 8 263
Public duties 4 411 4 997
Accrued holiday- and leave pay 5 204 5 944
TOTAL 19 329 19 205
Note 25: Trade and other payables
Outstanding trade payables as of 31 December 2021 fall due between 30 and 180 days.
USD’000 Note 31 Dec 2021 31 Dec 2020
Contract liabilities (prepaid charter revenues) 4 10 857 5 340
Refund liabilitties to customers (audit matters, tax element) 4 5 536 1 439
Bonus provisions including social security taxes 4 421 -
Accrued operational and drydocking expenses 4 706 5 878
Accrued costs for acquisiton of long lead regasification items - 1 098
Crew related liabilities 168 702
Other provisions and accruals 8 458 5 342
TOTAL 34 146 19 799
Note 26: Other current liabilities
Historically, the group has not had any credit losses. An assessment made at year end 2021 did not identify
any need for accrual for any expected credit losses in accordance with IFRS 9. The group manages to collect
receivables timely.
Note 24: Trade and other receivables
USD’000 Note 31 Dec 2021 31 Dec 2020
Trade receivables 4 6 299 5 156
Receivables towards related parties (joint ventures, associates and owner) 30 5 502 2 993
Accrued hire 4 983 3 096
Prepaid insurance 2 162 3 741
Prepaid administrative and operating expenses including drydocking 4 772 5 776
Unbilled drydocking expenses 553 2 746
VAT receivables 804 655
Other receivables and prepayments 2 366 2 592
TOTAL 27 442 26 755
USD’000 Note 31 Dec 2021 31 Dec 2020
Interest rate swaps designated as effective hedging instruments¹ 13 23 910 24 498
Accrued interest on mortgage debt 6 257 6 065
Accrued interest on bonds and corporate facilties 4 431 3 515
TOTAL 34 598 34 077
Note 27: Other current financial liabilities
1
The interest rate swap agreements are designated as effective hedging instruments. The current portion of the liabilities related to the interest rate
swap agreements’ mark-to-market as of 31 December is presented above. For further information on interest rate swaps, reference is made to Note
13.
102 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
USD’000 31 Dec 2021 31 Dec 2020
Pre-contract costs 5 165 3 193
Investment in IT (hardware and software) and office equipment 3 206 5 712
Loading arms related to FSRU operations - 599
Arctic vessels' 15-year class renewal cost 12 775 8 284
Arrangement fees on revolving credit facility - 526
Other - 2
TOTAL 21 145 18 316
USD’000 Note 2021 2020
Cost at 1 January 12 091 10 583
Additions 550 1 508
Net disposals (1 182) -
COST AT 31 DECEMBER 11 459 12 091
Accumulated deprecation at 1 January (5 780) (3 627)
Depreciation charge 11 (2 474) (2 153)
ACCUMULATED DEPRECIATION AT 31 DECEMBER (8 253) (5 780)
NET CARRYING AMOUNT AT 31 DECEMBER 3 206 6 311
CARRYING VALUE OF INVESTMENT OF IT, EQUIPMENT AND LOADING ARMS ARE SPECIFIED AS
FOLLOWS:
Note 28: Other non-current assets
Pre-contract costs are incremental costs recorded in the period from when Höegh LNG is selected as the
preferred bidder of an FSRU until a firm charter party agreement is signed. These costs are amortised linearly over
the charter party period.
Note 29: Non-current financial assets and liabilities
Interest rate swap agreements are entered into by Höegh LNG in addition to a cross currency interest rate swap
agreement (see Note 13). The interest rate and currency swap agreements are designated as effective hedging
instruments. The non-current portion of the mark-to-market valuation of these agreements and the related cash
collateral requested by swap banks as at year ended 31 December 2021 and 2020 is presented below.
For further information on the interest rate swaps and the current portion of the mark-to-market valuations,
see Note 13.
Consolidated Financial Statements Höegh LNG Group | 103
HÖEGH LNG
The pension liabilities of USD 0.4 million at year-end 2021 relate to three key members of Management employed
in Oslo (five at year-end in 2020) who will receive a fixed amount if still employed by Höegh LNG when retiring at
the age of 67.
USD’000 Note 31 Dec 2021 31 Dec 2020
Cash collateral 8 286 16 067
Interest rate swaps - designated as hedges 13 2 780 135
Long term receivables charterers 588 580
Fair value of FX options - 690
TOTAL 11 654 17 471
USD’000 Note 31 Dec 2021 31 Dec 2020
Interest rate swaps designated as hedges 13 33 678 66 348
Pension liabilities (defined benefit) 401 1 104
Other 18 18
TOTAL 34 097 67 470
NON-CURRENT FINANCIAL ASSETS
NON-CURRENT FINANCIAL LIABILITIES
Note 30: Transactions with related parties
TRANSACTIONS WITH JOINT VENTURES AND ASSOCIATES
Total bareboat hire paid by Leif Hoegh UK Limited to the group’s joint ventures chartering out the two LNGs
Arctic Princess and Arctic Lady amounted to about USD 35 million in 2021 (USD 35 million in 2020).
Höegh LNG provides various management services to its joint ventures as well its associate Avenir LNG
Limited and the owner Larus Holding Limited. The below tables provide the total amounts of the management
services that have been rendered by Höegh LNG AS, Höegh LNG Fleet Management AS for 2021 and 2020
and outstanding receivables at year end. For recognition of management revenues, see Note 4.
USD’000 2021 2020
Joint Gas Ltd. 75 74
Joint Gas Two Ltd. 75 74
SRV Joint Gas Ltd. 1 092 1 256
SRV Joint Gas Two Ltd. 1 198 1 760
Larus Holding Limited 102 -
Avenir LNG Limited 58 -
TOTAL 2 599 3 164
Management income from related parties
104 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
USD’000 31 Dec 2021 31 Dec 2020
Non-current
SRV Joint Gas Ltd. 6 570 -
SRV Joint Gas Two Ltd 941 869
Total non-current 7 511 869
Current
SRV Joint Gas Ltd. - 3 284
Avenir LNG Limited 1 777 -
Total current 1 777 3 284
TOTAL 9 288 4 153
Shareholder loans with joint ventures and associates
USD’000 Note 31 Dec 2021 31 Dec 2020
SRV Joint Gas Ltd. and SRV Joint Gas Two Ltd. 1 126 2 993
Avenir LNG Limited 4 324 -
Larus Holding Limited 51 -
TOTAL 24 5 501 2 993
Receivables against related parties
Guarantee fee income from associates
In April 2019, Höegh LNG issued a parent guarantee for the building of S1050 at Nantong Yard towards Avenir
LNG Limited for a 1.0 % fee. USD 0.5 million has been recorded as financial income in 2021 (USD 0.5 million in
2020).
TRANSACTIONS WITH OTHER RELATED PARTIES
Höegh LNG considers Höegh Autoliners Holdings AS and Höegh Capital Partners Ltd (“HCP”) to be related
parties, as both Morten W. Høegh (Chairman of the Board) and Leif O. Høegh (Deputy Chairman) indirectly have a
significant beneficial interest in the two companies. Höegh LNG pays an annual fee to HCP for advisory services.
USD’000 2021 2020
Höegh Capital Partners - advisory 40 46
Höegh Capital Partners Ltd 11 57
Höegh Autoliners Management AS 95 70
Höegh Autoliners Inc 312 326
Höegh Autoliners (India) Pvt Ltd. 73 -
Höegh Autoliners Regional Operation - 200
TOTAL 531 700
Administrative services from other related parties
Consolidated Financial Statements Höegh LNG Group | 105
HÖEGH LNG
Terms and conditions of transactions with related parties
The purchases from and sales to related parties are entered into based on arms’ length principles.
Group management and board of directors’ remuneration
The remuneration to group management, consisting of six (2020: nine) and the board of directors is presented
below:
USD’000 2021 2020
Salaries 2 423 2 977
Pension compensation (cash allowance) 136 245
Share-based payment 141 289
Other taxable benefits 751 311
Bonus - 471
Board of directors' fee 948 857
TOTAL 4 399 5 150
The remuneration paid out to the President and CEO and the CFO for both years 2021 and 2020 is
presented below:
USD’000 Salaries
Pension
benefits
Share-based
payment
Other
taxable
benefits Bonus Total
President and CEO Sveinung J.S. Støhle 752 71 - 568 - 1 391
President and CEO Thor Jørgen Guttormsen 141 - - - - 141
CFO Håvard Furu 371 - 21 22 - 414
TOTAL 1 265 71 21 590 - 1 947
2021
USD’000 Salaries
Pension
benefits
Share-based
payment
Other
taxable
benefits Bonus Total
President and CEO Sveinung J.S. Støhle 653 73 88 121 54 989
CFO Håvard Furu 268 8 20 20 45 361
TOTAL 921 81 108 141 99 1 350
2020
Management and general bonus scheme
The management bonus scheme is subject to individual performance and the achievement of Höegh LNG’s
corporate goals and operating performance targets. The bonus potential will vary from two to twelve months’
salary for the individual members of the scheme. Höegh LNG has a general bonus scheme which incorporates
all Höegh LNG’s permanent and qualifying employees, except for the participants in the Management bonus
scheme. Full bonus potential of the general bonus scheme is 1.5 times monthly salary, and the achievement is
based on individual performance, corporate goals and operating performance. A provision of USD 4.4 million
in bonus for onshore and offshore personnel including social security taxes has been recorded at year end 31
December 2021 (Nil in 2020). See Note 26.
Remuneration for Thor Jørgen Guttormsen is for the period 1 November to 31 December 2021
106 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
Note 31: Contingent liabilities
Höegh LNG is an international group which, through its ongoing business operations, will be exposed to
litigation and claims from public authorities and contracting parties as well as assessments from public
authorities in each country it operates in.
Potential tax liability for UK finance leases
In 2002, two UK finance lease agreements were entered into for Arctic Princess and Arctic Lady respectively
between two UK lessors and the Joint Gas Ltd and Joint Gas Two Ltd joint venture companies as lessees (the
Arctic Leases). The vessels were delivered in 2006 and the lease agreements are for 25 years from delivery. Her
Majesty’s Revenue and Customs (HMRC) has been challenging the use of similar lease structures and has been
engaged in litigation in one case, which was decided in the autumn of 2015 in favour of HMRC. In the event of
a formal challenge by HMRC regarding the lessors’ right to claim capital allowances under the Arctic Leases,
this would lead to higher rental payments to the UK vessel lessors, which would have a negative effect on the
earnings of the lessee companies and consequently on Höegh LNG.
Leif Höegh (U.K) Limited, as managing owner and operator of the vessels, has been in dialogue with HMRC
since 2005 and has presented the factual background to and the business rationale for entering into the lease
agreements back in 2002. The latest exchange of letter with HMRC in September 2021 has not materially
changed Joint Gas Two Ltd.’s assessment and no provision has been made.
Colombian Municipal Industry and Commerce Tax
On 8 April 2022, the group’s Colombian subsidiary received a notification from the Tax Administration of
Cartagena assessing a penalty of approximately USD 1.8 million for failure to file the 2016 to 2018 Municipal
Industry and Commerce Tax (“ICT”) returns. ICT is imposed on gross receipts on customer invoices and is
similar to a sales tax. The municipal tax authorities have alleged that the subsidiary’s customer invoices are
for industrial activities performed within the municipal jurisdiction. However, all of the subsidiary’s activities
take place offshore which is outside of the municipality’s borders. According to Colombian law, municipalities
do not have jurisdiction over maritime waters or low-tide areas. Management intends to deny the allegations
and file an appeal to vigorously defend the Colombian subsidiary’s position. Accruals for loss contingencies
are recorded when it is probable that a liability has been incurred and the amount of loss can be reasonably
estimated. Management, with advice of its outside legal advisors, has assessed the status of this matter and
has concluded that an adverse judgment after concluding an appeals process is not probable. As a result, no
provision has been made in the consolidated financial statements. Management estimates the range of possible
loss for 2016-2021, including accrued interest, to be approximately USD 1.3 million to USD 2.9 million as of 31
December 2021, plus additional accrued interest thereon until final disposition of the ICT allegation.
Pending arbitration with the charterer of PGN FSRU Lampung
The charterer under the lease and maintenance agreement for the PGN FSRU Lampung (“LOM”) served a
notice of arbitration (“NOA”) on 2 August 2021 to declare the LOM null and void, and/or to terminate the LOM,
and/or seek damages. PT Höegh LNG Lampung (“PT HLNG”) has served a reply refuting the claims as baseless
and without legal merit and has also served a counterclaim against the charterer for multiple breaches of the
LOM. PT HLNG will take all necessary steps and will vigorously defend against the charterer’s claims in the
legal process. Notwithstanding the NOA, both parties have continued to perform their respective obligations
under the LOM. No assurance can be given at this time as to the outcome of the dispute with the charterer of
PGN FSRU Lampung. In the event the outcome of the dispute is unfavourable to the PT HLNG, it could have
Consolidated Financial Statements Höegh LNG Group | 107
HÖEGH LNG
a material adverse impact on HMLP’s business, financial condition, results of operations and ability to make
distributions to unitholders.
Pending Class Action Lawsuit relating to Höegh LNG Partners LP
On 27 October 2021 and 3 November 2021, two purported unit holders filed a class action securities fraud
lawsuit in the United States District Court for the District of New Jersey against Höegh LNG Partners LP and
certain of its current and former officers, alleging violations of the Securities Exchange Act of 1934. Höegh LNG
Partners LP believes the allegations are without merit and intends to vigorously defend against them.
Note 32: Subsequent events
Klaipédos Nafta, the charterer of Independence, has publicly announced that it intends to exercise its purchase
option to acquire Independence at the end of the existing charter, which runs until the fourth quarter of 2024
On 24 March 2022, the Company announced that it had created a first ranking pledge over its ownership of
15.26 million common units of Höegh LNG Partners LP, in favour of the Bond Trustee (on behalf of the bond
holders), to secure all present and future obligations and liabilities of Höegh LNG under the bond issues
HLNG03 and HLNG04.
On 8 April 2022, the group’s Colombian subsidiary received a notification from the Tax Administration of
Cartagena, assessing a penalty of approximately USD 1.8 million for failure to file the 2016 to 2018 ICT returns.
Refer to note 31 under “Contingent liabilities” and “Colombian Municipal Industry and Commerce Tax” for details
and management’s assessment.
On 21 April 2022, Höegh LNG Holdings Ltd. raised USD 19.8 million in new equity from its shareholder.
The recent tragic events in Ukraine may continue to impact the market for LNG as well as for LNG carriers and
FSRUs, in particular because Russia is a major global exporter of crude oil and natural gas, but also generally.
While near-term business opportunities may arise for the company in Europe, the potential effects of the
ongoing conflict in Ukraine are complex to project and therefore highly uncertain, including any potential effects
on the group’s business and operations.
108 | Consolidated Financial Statements Höegh LNG Group
HÖEGH LNG
Appendix 1 – Alternative performance measures (APMs)
Höegh LNG’s financial information is prepared in accordance with the International Financial Reporting
Standards (IFRS). In addition, it is management’s intent to provide additional performance measures when this is
deemed relevant for the understanding of Höegh LNG’s financial performance.
Alternative performance measures are used by Höegh LNG to provide supplemental information to the different
users of its external financial reporting. Financial APMs are intended to enhance comparability of the results
and to give supplemental information related to measures not within the applicable financial reporting frame
-
work, and it is Höegh LNG’s experience that these measures are frequently used by equity- and debt investors,
analysts and other stakeholders. Management uses these measures internally to drive performance in terms
of target setting and as basis for measuring actual financial performance. These measures are adjusted IFRS
measures defined, calculated and used in a consistent and transparent manner over the years and across the
group.
Operational measures such as, but not limited to, volumes, technical availability of vessels/fleet and contract
backlog are not defined as financial APMs.
Financial APMs should not be considered as a substitute for measures of performance in accordance with the
IFRS. The alternative performance measures presented may be determined or calculated differently by other
companies.
Höegh LNG’s APMs
• Earnings before interest, depreciation, amortisation and impairments (EBITDA): EBITDA is defined as the
line-item Operating profit before depreciation and impairment in the consolidated statement of income.
• Net interest-bearing debt: non-current and current interest-bearing debt deducted cash, marketable
securities and restricted cash (current and non-current).
• Equity adjusted for hedging: Total book equity adjusted for mark-to-market value of financial derivative
swaps recorded against equity (hedging reserves). Financial derivative swaps consist of interest-rate and
cross-currency interest-rate swaps. In the money mark-to-market, financial derivative swaps will increase
equity, while out of the money mark-to-market financial derivative swaps will reduce equity. Mark-to-market
value of interest-rate swaps in Höegh LNG’s joint ventures are recorded as part of line-item Investment in
joint ventures. The computation of equity adjusted for hedging is consistent with the definitions set out in the
group’s covenants in loan agreements.
• Equity ratio adjusted for hedging: Total book equity adjusted for hedging reserves divided by total assets
adjusted for hedging related assets. Hedging related assets represents an increase in investment in joint
ventures when removing the negative impact of out of the money mark-to-market financial derivative swaps.
• Adjusted basic and diluted earnings per share shows the value of EPS if an allocation of profit had been
made for transfer of assets (to) from HMLP.
USD’000 31 Dec 2021 31 Dec 2020
Net interest-bearing debt 1 440 524 1 536 287
Equity adjusted for hedging 743 505 757 048
EQUITY RATIO ADJUSTED FOR HEDGING 30% 30%
ALTERNATIVE PERFORMANCE MEASURES, SUMMARY
USD’000 Note 31 Dec 2021 31 Dec 2020
Interest-bearing debt including lease liabilities, current and non-current (1 613 745) (1 703 055)
Restricted cash, non-current 14 30 662 16 895
Cash and cash equivelents including restricted cash and marketable securities 14 142 558 149 873
NET INTEREST-BEARING DEBT (1 440 524) (1 536 287)
USD’000 Note 31 Dec 2021 31 Dec 2020
Net MTMs of financial liabilities in parent and subsidiaries 13 (54 808) (90 712)
Net MTMs of financial liabilities in joint ventures and associates 13 (46 675) (64 850)
Changes in MTMs not recorded as OCI:
Net foreign exchange (gain) losses under cross currency swaps included in MtM 5 225 (5 834)
Accumulated break cost paid (4 285) (4 285)
Accumulated loss on swap in profit or loss 8 068 5 783
HEDGE RESERVES INCLUDING NON-CONTROLLING INTEREST SHARE (92 474) (159 897)
USD’000 31 Dec 2021 31 Dec 2020
Equity 651 031 597 151
Hedge reserve, including non-controlling interest share 92 474 159 897
EQUITY ADJUSTED FOR HEDGING TRANSACTIONS 743 505 757 048
USD’000 31 Dec 2021 31 Dec 2020
Total assets 2 429 209 2 473 350
Hedge reserves in JVs for investments presented as assets 46 675 54 203
Hedges recorded as assets (2 780) (134)
TOTAL ASSETS ADJUSTED FOR HEDGING TRANSACTIONS 2 473 104 2 527 418
EQUITY ADJUSTED FOR HEDGING TRANSACTIONS 743 505 757 048
EQUITY RATIO ADJUSTED FOR HEDGING TRANSACTIONS 30% 30%
NET INTEREST-BEARING DEBT
HEDGE RESERVES
EQUITY ADJUSTED FOR HEDGING TRANSACTIONS
EQUITY RATIO ADJUSTED FOR HEDGING TRANSACTIONS
HÖEGH LNG
06
Financial statements
Höegh LNG Holdings Ltd.
For the year ended
31 December 2021
112 Statement of income
112 Statement of comprehensive income
113 Statement of financial position
115 Statement of changes in equity
116 Statement of cash flows
117 Notes
Höegh Giant
112 | Financial Statements Höegh LNG Holdings Ltd.
HÖEGH LNG
STATEMENT OF INCOME 1 JANUARY – 31 DECEMBER
STATEMENT OF COMPREHENSIVE INCOME 1 JANUARY – 31 DECEMBER
USD’000 Note 2021 2020
Administrative expenses 9 (5 320) (15 330)
OPERATING RESULT (5 320) (15 330)
Interest income 6 12 352 14 285
Dividends received 16 14 532 28 451
Impairment of investments in subsidiaries 3 - (400 591)
Impairment of loans to subsidiaries 5 - (82 061)
Interest expenses 7 (32 327) (25 359)
Income from other financial items 17 403 6 058
Expenses from other financial items 17 (2 546) (12 010)
LOSS FOR THE YEAR AFTER TAX (12 906) (486 556)
USD’000 Note 2021 2020
LOSS FOR THE YEAR AFTER TAX (12 906) (486 556)
Items that may be subsequently reclassified to profit
Net gain on cash flow hedges 8 5 572 6 755
OTHER COMPREHENSIVE INCOME FOR THE YEAR 5 572 6 755
TOTAL COMPREHENSIVE LOSS FOR THE YEAR (7 334) (479 802)
Financial Statements Höegh LNG Holdings Ltd. | 113
HÖEGH LNG
STATEMENT OF FINANCIAL POSITION
USD’000 Note 31 Dec 2021 31 Dec 2020
ASSETS
Non-current assets
Investments in subsidiaries 3 218 183 218 183
Loans to subsidiaries 5 358 608 340 425
Investment in associates 4 43 125 34 500
Other receivables - 505
Cash collateral 13 20 -
Other non-current financial assets 8 2 072 1 350
Total non-current assets 622 008 594 964
Current assets
Loans to associates 5 1 777 -
Trade receivables 1 482 1 510
Other current financial assets 8 13 170
Cash and cash equivalents 10 26 146 23 682
Total current assets 29 418 25 362
TOTAL ASSETS 651 426 620 327
EQUITY AND LIABILITIES
Equity
Share capital 11 12 773
Share premium reserve 556 260 447 715
Treasury shares - (11)
Contributed surplus 154 753 -
Other paid-in equity 295 295
Hedging reserves 8 (6 561) (12 133)
Retained earnings (386 336) (140 882)
Total equity 318 424 295 756
Non-current liabilities
Other non-current financial liabilities 8 9 315 5 943
Other mortgage debt 14 - 60 000
Other debt 14 44 000 -
Bonds 12 - 250 807
Total non-current liabilities 53 315 316 750
Current liabilities
Bonds 12 266 447 -
Accrued interest 14 4 431 3 515
Trade and other payables 952 271
Provisions and accruals 12 241
Other current financial liabilities 8 7 846 3 794
Total current liabilities 279 688 7 821
TOTAL EQUITY AND LIABILITIES 651 426 620 327
114 | Financial Statements Höegh LNG Holdings Ltd.
HÖEGH LNG
Hamilton, Bermuda, 26 April 2022
The Board of Directors and the President and CEO of Höegh LNG Holdings Ltd.
Morten W. Høegh
Chairman
Johan Pfeiffer
Deputy Chairman
Martine Vice Holter
Director
Tonesan Amissah
Director
Alberto Donzelli
Director
Thor Jørgen Guttormsen
President and CEO
Leif O. Høegh
Director
John Kwaak
Director
Financial Statements Höegh LNG Holdings Ltd. | 115
HÖEGH LNG
STATEMENT OF CHANGES IN EQUITY
USD’000 Note
Share
capital
Share
premium
reserve
Treasury
shares
Con-
tributed
surplus
Other paid-
in equity
Hedging
reserves
Retained
earnings
Total
equity
At 1 January 2020 773 447 656 (11) - (307) (18 888) 347 578 776 800
Shares granted to board of directors - 60 0 - - - - 60
Share-based payment cost - - - - 602 - - 602
Dividend to shareholders 16 - - - - - - (1 905) (1 905)
Total comprehensive loss 8 - - - - - 6 755 (486 556) (479 802)
At 31 December 2020 773 447 715 (11) - 295 (12 133) (140 882) 295 756
Total comprehensive loss 8 - - - - - 5 572 (12 906) (7 334)
Shareholder contribution 2 - - - 48 066 - - - 48 066
Amalgamation effects 2 (761) 108 546 11 106 687 - - (232 548) (18 065)
At 31 December 2021 12 556 260 - 154 753 295 (6 561) (386 336) 318 424
Of the Shareholder contribution of USD 48.1 million, USD 47.2 was settled in cash.
116 | Financial Statements Höegh LNG Holdings Ltd.
HÖEGH LNG
STATEMENT OF CASH FLOWS 1 JANUARY – 31 DECEMBER
USD’000 Note 2021 2020
Cash flows from operating activities:
Loss before tax for the year (12 906) (486 556)
Adjustments to reconcile loss before tax to net operational cash flow
Board of directors remuneration paid out in shares - 60
Impairment of investments in subsidiaries 3 - 400 591
Impairment of loans to subsidiaries 5 - 82 061
Interest income 6 (12 352) (14 285)
Interest expenses 7 32 327 25 359
Net loss on derivatives and other financial instruments 1 992 5 256
Dividends received from Höegh LNG Partners LP 16 (14 532) (28 451)
Working capital adjustments (changes in receivables and payables) 1 590 10 622
I) NET CASH FLOWS FROM OPERATING ACTIVITIES (3 881) (5 343)
Cash flows from investing activites:
Dividends received from Höegh LNG Partners LP 16 14 532 28 451
Grants lending to subsidiaries (32 822) (69 247)
Grants lending to associates (1 750) -
Repayments lending to subsidiaries 26 000 30 000
Interest received - 553
Investments in associates 4 (8 625) (9 375)
II) NET CASH FLOWS FROM INVESTING ACTIVITIES (2 664) (19 618)
Cash flows from financing activites:
Dividend paid 16 - (1 905)
Interest paid (25 309) (23 960)
Payment of debt issuance cost, bond discount, amalgamation fees and financial fees (24 013) (5 091)
Repayment and buy-back of bonds (incl. paid accrued interest, swap settlement and premium) 14 (12 453) (161 500)
Repayment of RCF 14 (70 000) -
Shareholder contribution 47 213 -
Proceeds from borrowings gross 14 93 592 166 685
Acquired foreign exchange options under the credit support agreements - (4 352)
Decrease (Increase) in restricted cash and cash collateral 13 (20) 4 088
III) NET CASH FLOWS FROM FINANCING ACTIVITIES 9 009 (26 035)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (I+II+III) 2 464 (50 996)
Cash and cash equivalents at 1 January 23 682 74 678
CASH AND CASH EQUIVALENTS AT 31 DECEMBER 10 26 146 23 682
Financial Statements Höegh LNG Holdings Ltd. | 117
HÖEGH LNG
Note 1: Corporate information
Höegh LNG Holdings Ltd. (the company) is an exempted company limited by shares and incorporated under
the laws of Bermuda. The company’s registered office is at Canon’s Court, 22 Victoria Street, Hamilton HM 12,
Bermuda.
On 8 March 2021 the company announced a recommended offer by Leif Höegh & Co Ltd. (LHC) and funds
managed by Morgan Stanley Infrastructure Partners (MSIP) through a 50/50 joint venture, Larus Holding Limited
(JVCo), to acquire the remaining issued and outstanding shares of Höegh LNG Holdings Ltd not owned by LHC
or its affiliates, representing approximately 50.4% of the shares outstanding, by way of amalgamation between
Larus Limited, a subsidiary of JVCo, and Höegh LNG Holdings Ltd. On 30 March 2021 the amalgamation was
approved at a special general meeting. The amalgamation was completed on 4 May 2021, after which the
company became wholly owned by LHC and MSIP through their 50/50 joint venture, Larus Holding Limited, and
the company’s shares were delisted from the Oslo Stock Exchange on 27 May 2021.
The financial statements and note disclosures are presented in USD and all values are rounded to the nearest
thousand (USD’000) unless otherwise indicated. As a result of rounding differences amounts and percentages
may not add up to the total. The annual accounts for the company for the year ended 31 December 2021 were
approved by the board of directors on 26 April 2022.
Note 2: Summary of significant accounting policies
The financial statements of the company are prepared in accordance with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and adopted by the EU.
Before the amalgamation described under note 1 was effectuated, LHC controlled about 49% of the shares of
Höegh LNG Holdings Ltd. and considered Höegh LNG Holdings Ltd. to be a subsidiary of LHC for accounting
purposes. The basis for the amalgamation was that LHC contributed both shares in its subsidiary Höegh LNG
Holdings Ltd. and cash upon formation of JVCo. MSIP contributed cash in exchange for its shares in JVCo,
thereby creating a 50/50 joint venture where the two owners are deemed to have joint control of the company.
JVCo is therefore considered by management to be a joint venture under IFRS 11. The contributed shares in
Höegh LNG Holdings Ltd. and the contributed cash were thereafter transferred by JVCo to its subsidiary Larus
Limited, in exchange for shares in Larus Limited, and used to acquire the remaining issued and outstanding
shares of Höegh LNG Holdings Ltd. owned by the public shareholders up until the time of the amalgamation
becoming effective.
The amalgamation does not fall within the definition of a business combination under the accounting standard
IFRS 3 Business combinations, since neither JVCo, as a newly formed company, nor Höegh LNG Holdings Ltd.
(in a reverse acquisition) can be identified as an acquirer. The amalgamation is therefore not regulated by IFRS 3,
nor any other accounting standard in IFRS.
As required by IAS 8, management has considered how transactions of the same nature typically have been
accounted for and concluded that this transaction has many similarities with a business combination under joint
control, where pooling of interests method is commonly applied to account for the transaction. As Höegh LNG
Holdings Ltd. was a subsidiary of LHC before the amalgamation, and that JVCo is considered a joint venture
under joint control, management has elected to account for the amalgamation using the pooling of interests
method. As a result, the financial statements are prepared on the basis of a continuation of the company’s
financial statements at the time of completion of the amalgamation.
118 | Financial Statements Höegh LNG Holdings Ltd.
HÖEGH LNG
As presented in the statement of change in equity, the amalgamation was executed under Bermudan
Companies Law by cancelling and extinguishing the outstanding shares and treasury shares in Höegh LNG
Holdings Ltd. and replacing them with the new share capital in the amalgamated company issued to the owner
Larus Holding Limited. Classification of share premium, contributed surplus and other paid-in capital pre-
amalgamation, was continued in the amalgamated company, net of costs related to the amalgamation process.
Summary of significant accounting policies in Note 2 to the consolidated financial statements generally apply to
the company, but the following accounting principles are considered the most important for assessment of the
company’s financial statements:
2.1 Shares in subsidiaries and associates
Shares and units in subsidiaries and shares in associated companies are recorded at historical cost. These
investments are reviewed for impairment when there are indications that carrying value may not be recoverable.
Dividends or other distributions from subsidiaries or associated companies are recognised as revenue when the
company’s right to receive payment is established.
2.2 Financial assets
The company’s financial assets are trade receivables, cash collateral, other receivables, cash and cash
equivalents, cash collateral, intercompany loans and derivatives.
The company classifies its financial assets in three categories:
• Financial assets at amortised cost, which includes cash and cash equivalents, cash collateral,
intercompany loans and trade receivables and other receivables. Assets are subsequently measured using
the effective interest method and are subject to impairment testing.
• Financial assets at fair value through other comprehensive income (FVTOCI), which includes the positive
balance of interest rate and foreign currency swaps where the hedge is considered effective.
• Financial assets at fair value through profit or loss (FVTPL), which includes derivatives such as foreign
exchange options.
Financial assets at amortised cost are subject to impairment testing based on expected credit losses. The
company consider its historical credit loss experience, and any changes in the underlying credit risk based on
financial performance and position of the counterparty to determine probability of default. For assets not having
exhibited a significant increase in credit risk, the company will make provisions for expected losses from default
which may arise for the assets 12 months from the balance sheet date. For other assets, the company will make
provisions for expected losses over the asset’s expected remaining lifetime. In order to calculate expected credit
losses, the company assesses the loss given default level based on expected shortfall of contractual cash flows.
The company recognises an impairment if present value of estimated future cash flows is lower than the asset’s
gross carrying value. Financial assets are derecognised when the company’s rights to receive cash flows from
the asset cease.
Financial Statements Höegh LNG Holdings Ltd. | 119
HÖEGH LNG
Note 3: Investments in subsidiaries
USD’000 2021 2020
Carrying value at 1 January 218 183 518 172
Impairment of investment in Höegh LNG Partners LP - (54 186)
Impairment of investment in Höegh LNG Ltd. - (346 404)
Conversion of intra-group loan to paid-in equity in Höegh LNG Ltd. - 100 000
Share-based payment - 602
CARRYING VALUE AT 31 DECEMBER 218 183 218 183
USD’000 2021 2020
Höegh LNG Ltd. - -
Höegh LNG Partners LP 218 182 218 182
Höegh LNG General Partner LLC 1 1
CARRYING VALUE AT 31 DECEMBER 218 183 218 183
Refer to Note 22 in the consolidated financial statements disclosing information of the company’s share-based
payment program.
COUNTRY OF INCORPORATION
2.3 Financial liabilities
The company classifies its financial liabilities in two categories:
• Financial liabilities at amortised cost, which includes trade and other payables, bonds and other debt.
Liabilities are subsequently measured using the effective interest method.
• Financial liabilities through other comprehensive income (FVTOCI), which includes the negative balance of
interest rate and foreign currency swaps where the hedge is considered effective.
Financial liabilities are derecognised when its contractual obligations are discharged, cancelled or expired.
Derecognition is also made when terms are modified, and the cash flows of the modified liability are
substantially different, in which case a new financial liability based on the modified terms is recognised at fair
value. The difference between the carrying value and the consideration paid is recognised in the statement of
profit or loss.
2.4 Income tax
The company is not subject to income tax as it operates in a jurisdiction not imposing such tax.
Companies Registered office
Ownership
share
Carrying value
31 Dec 2021
Höegh LNG Ltd. Bermuda 100.00% -
Höegh LNG Partners LP Bermuda 45.72% 218 182
Höegh LNG General Partner LLC Marshall Islands 100.00% 1
TOTAL 218 183
120 | Financial Statements Höegh LNG Holdings Ltd.
HÖEGH LNG
Note 4: Investments in associates
The company made an investment in Avenir LNG Limited (Avenir LNG) in 2018, initially a joint venture with
Golar LNG Ltd. (Golar LNG) and Stolt-Nielsen Ltd. (Stolt-Nielsen) to pursue opportunities in the small-scale
LNG market. The initial combined equity commitment was USD 182 million, which planned to fund six small-
scale LNG carriers and a small-scale LNG terminal under construction in Sardinia. The combined initial equity
contribution of USD 99 million by the three partners was supplemented with USD 11 million raised in a private
placement on 13 November 2018. The shares in Avenir LNG were subsequently registered on the Norwegian
OTC market under the ticker AVENIR. In 2021, the company subscribed for additional 8 625 000 shares
increasing its holding to 23.66% on 31 December 2021 (year-end 2020: 23.4%). The company has no remaining
capital commitments as of 31 December 2021.
Avenir took delivery of two 7 500cbm LNG newbuildings, Avenir Accolade and Avenir Aspiration in March
2021 and October 2021, respectively. Avenir Accolade, on delivery, entered into a 3-year charter with LNG
Power Limited, a subsidiary of New Fortress Energy. Avenir Aspiration on the other hand will be positioned in
the Mediterranean to service Avenir’s newly constructed LNG storage and distribution terminal in the Italian
port of Oristano, Sardinia which commenced operations in August 2021. Avenir LNG plans to source and ship
LNG to the terminal using its own vessel, and supply LNG in the Sardinian market. In December 2021, Avenir
sold its first 20 000cbm newbuilding, Avenir Allegiance, to Shanghai SIPG Energy Service Co., Ltd (“SSES”) a
Chinese joint venture between Shanghai International Port Group (“SIPG”) and Shenergy Group (“Shenergy”),
and entered into a joint collaboration agreement where Avenir will provide operational, technical and marketing
services to support SSES. As of 31 December 2021, Avenir has three 7,500cbm dual-purpose small-scale LNG
vessels in operation. Avenir has two remaining newbuildings under construction expected to be delivered in
2022.
Reference is made to Note 20 in the consolidated financials disclosing 100% of condensed numbers in the
associate’s statement of comprehensive income for 2021 and 2020 and statement of financial position on 31
December 2021 and 2020, respectively.
USD’000 2021 2020
Carrying value at 1 January 34 500 25 125
Purchase of shares in Avenir LNG Limited 8 625 9 375
CARRYING VALUE AT 31 DECEMBER 43 125 34 500
Impairment assessment
Following a significant drop in the price per common unit during 2021, the market value of the Company’s
share of common units in Höegh LNG Partners LP (“HMLP”) was considerably lower than the carrying value of
the investment per 31 December 2021. Management concluded that this was an impairment indicator which
would trigger an impairment test to be performed. The recoverable amount for investments carried at cost is the
higher of fair value (market value) of the company’s share of common units in the subsidiary and value-in-use for
the majority owned net assets of the subsidiary. Value-in-use for the majority owned net assets of the subsidiary
is calculated applying the same methodology and assumptions for discounted cash flows as used for the group
impairment test for vessels (see Note 11 to the consolidated financial statements), with certain appropriate
adjustments to reflect net assets. The recoverable amount based on value-in-use for the majority owned net
assets of the subsidiary was at the same level as the carrying amount of the investment in Höegh LNG Partners
LP. Hence no impairment was required for 2021.
Financial Statements Höegh LNG Holdings Ltd. | 121
HÖEGH LNG
Note 5: Loans to subsidiaries and associates
USD’000 2021 2020
Non-current receivables Höegh LNG Ltd. at face value 416 124 404 020
Non-current receivables Höegh LNG Partners LP at face value 24 545 18 465
GROSS CARRYING VALUE AT 31 DECEMBER AT FACE VALUE 440 669 422 486
USD’000 2021 2020
Impairment non-current receivables Höegh LNG Ltd. 82 061 82 061
Impairment non-current receivables Höegh LNG Partners LP - -
IMPAIRMENT AT 31 DECEMBER 82 061 82 061
USD’000 Note 2021 2020
Non-current receivables Höegh LNG Ltd. net of impairment 15 334 063 321 959
Non-current receivables Höegh LNG Partners LP net of impairment 15 24 545 18 465
CARRYING VALUE AT 31 DECEMBER NET OF IMPAIRMENT 358 608 340 425
On 22 May 2013, the company entered a loan facility with Höegh LNG Ltd. of up to USD 600 million. The
interest rate of the facility is 3 months LIBOR plus a margin of 2.5%. Repayment of this facility shall be done
in one or several amounts, as agreed between the parties. Repayments and draws on the loan facility have
occurred during the year.
On 12 August 2014, the company issued a revolving credit facility (RCF) in an aggregate amount of USD 85
million to the borrower Höegh LNG Partners LP. The drawn amount on 31 December 2021 amounted to USD
24.5 million (USD 18.5 million on 31 December 2020). The RCF has a floating interest rate equal to 3 months
LIBOR plus a margin. The margin was 3.0% at year-end 2020 increasing from 1.4% on 28 May 2019 and is set
at 4.0% for 2021 and onwards. The revolving credit facility matures 1 January 2023. A draw of USD 6 million on
the loan was made during the year.
No impairments or reversals of previous impairments were made during 2021 related to the loans to
subsidiaries. During 2020 an impairment of USD 82.1 million on the receivables towards Höegh LNG Ltd. was
recognised as the company expected that the intercompany loan was not fully recoverable.
LOANS TO ASSOCIATES
USD’000 2021 2020
Current receivables Avenir LNG at face value 1 777 -
GROSS CARRYING VALUE AT 31 DECEMBER AT FACE VALUE 1 777 -
USD’000 2021 2020
Impairment current receivables Avenir LNG - -
IMPAIRMENT AT 31 DECEMBER - -
USD’000 Note 2021 2020
Current receivables Avenir LNG net of impairment 15 1 777 -
CARRYING VALUE AT 31 DECEMBER NET OF IMPAIRMENT 1 777 -
LOANS TO SUBSIDIARIES
122 | Financial Statements Höegh LNG Holdings Ltd.
HÖEGH LNG
Note 6: Interest income
For outstanding interest-bearing loans see Note 5. Reference is also made to Note 15 for transactions with
related parties.
USD’000 Note 2021 2020
Interest income from loan to Höegh LNG Ltd. 15 11 282 13 946
Interest income from revolving credit facility with Höegh LNG Partners LP 15 945 64
Interest income from revolving loan to Avenir LNG 15 27 -
Other interest income 97 274
TOTAL INTEREST INCOME 12 352 14 285
On 23 November 2021, the company entered into a revolving loan agreement with Avenir LNG of up to USD
5.25 million of which USD 1.75 million has been drawn as of 31 December 2021. The interest rate of the facility is
5% per annum. The borrower pays a commitment fee of 40% of the interest rate on the undrawn amount.
The revolving credit matures 23 November 2022 (with borrower’s optionality of voluntary prepayment prior to
this date).
See Note 6 for recognition of interest income and Note 15 for transactions with related parties.
Note 7: Interest expenses
USD’000 2021 2020
Interest expenses from bond issue 2015 (HLNG02) - 3 208
Interest expenses from bond issue 2017 (HLNG03) 11 828 13 530
Interest expenses from bond issue 2020 (HLNG04) 11 673 6 580
Interest expenses from corporate facility 6 853 -
Interest expenses from revolving credit facility issue 2020 (RCF) 1 970 2 341
Reimbursement of swap interest expenses - (299)
Other interest expenses 3 -
TOTAL INTEREST EXPENSES 32 327 25 359
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Note 8: Financial derivatives
Mark-to-market (MTM) of interest rate swaps in the financial position
USD’000 2021 2020
MTMs presented as financial assets non-current portion 2 072 135
MTMs presented as financial liabilities non-current portion (9 315) (5 943)
MTMs presented as financial liabilities current portion (7 846) (3 794)
Net MTMs of interest rate swaps on 31 December (15 089) (9 602)
Accumulated exchange losses (gains) under CCIRS included in MTM 8 528 (2 531)
INTEREST RATE SWAPS RECORDED AGAINST EQUITY ON 31 DECEMBER (6 561) (12 133)
Changes in MTMs of interest rate swaps from previous year (5 487) 15 472
USD’000 2021 2020
Changes recorded to other comprehensive income 5 572 6 755
Separate component of equity (currency portion of CCIRS) recorded to profit (loss) (11 059) 8 717
TOTAL CHANGES IN MTM
S OF INTEREST RATE SWAPS FROM PREVIOUS YEAR (5 487) 15 472
Notional amount of hedge instruments 311 322 283 644
Maturity dates Multiple Multiple
Hedge ratio 1:1 1:1
INTEREST RATE SWAPS IN THE FINANCIAL POSITION
The company had entered cross currency interest rate swaps relating to NOK bonds HLNG03 and HLNG04.
On 31 December 2021, the mark-to-market valuation of the interest rate swaps was recognised in the financial
position with a net liability of USD 15.1 million (net liabilities 31 December 2020 USD 9.6 million).
On 31 December 2021, interest rate swaps recorded against equity was negative by USD 6.6 million
(negative of USD 12.1 million at year-end 2020).
The notional amount of hedge instruments as of 31 December 2021 includes certain forward starting cross
currency interest rate swaps of USD 34.2 million (CCIRS) which commences in 2022 certain of the original
CCIRS which are hedging the HLNG03 bond loan matures.
Note 9: Administrative expenses
USD’000 2021 2020
Remuneration to board members 146 233
Audit fees 308 208
External services 1 109 1 068
Indemnification of boil-off claim 15 713 11 850
Management fee from companies within the group 15 2 480 1 882
Other 565 89
TOTAL ADMINISTRATIVE EXPENSES 5 320 15 330
124 | Financial Statements Höegh LNG Holdings Ltd.
HÖEGH LNG
Note 10: Cash and cash equivalents
Currency
Exchange rate
31 Dec 2021 2021 USD'000
Exchange rate
31 Dec 2020 2020 USD'000
US Dollars (USD) 1 26 140 1 16 634
Norwegian Kroner (NOK) 8.8175 6 8.5326 7 047
CASH AND CASH EQUIVALENTS AT 31 DECEMBER 26 146 23 682
The share capital of the company of USD 773 thousand pre-amalgamation in May 2021 was cancelled and
extinguished as part of the amalgamation. Post-amalgamation, the company retained the share capital of Larus
Limited of USD 12 000.
On 31 December 2021, the company’s share capital was therefore USD 12 000, consisting of 1 200 000 fully
paid common shares, each with a par value of USD 0.01. All the shares in the company are owned by Larus
Holding Limited, a 50/50 joint venture between Leif Höegh & Co Ltd. and Funds managed by Morgan Stanley
Infrastructure Partners.
Note 11: Share capital
Note 12: Bonds
USD’000 2021 2020
Bond issue 2017 (HLNG03) - 141 223
Bond issue 2020 (HLNG04) - 113 682
Amortisation of bond issue discount (HLNG04) - (2 090)
Debt issuance cost bond issue (HLNG03) - (331)
Debt issuance cost bond issue (HLNG04) - (1 677)
CARRYING VALUE AT 31 DECEMBER - 250 807
NON-CURRENT LIABILITIES
CURRENT LIABILITIES
USD’000 2021 2020
Bond issue 2017 (HLNG03) 125 205 -
Bond issue 2020 (HLNG04) 147 434 -
Amortisation of bond issue discount (HLNG04) (1 906) -
Debt issuance cost bond issue (HLNG03) (1 221) -
Debt issuance cost bond issue (HLNG04) (3 065) -
CARRYING VALUE AT 31 DECEMBER 266 447 -
The HLNG03 and HLNG04 bond loans have maturity dates in August 2023 and January 2025 respectively.
However, both loans have been classified as current interest-bearing debt on 31 December 2021 because the
bondholders of each of the bond loans have a right to require that the company purchases all or some of the
bonds held by a bondholder at a price equal to 102% of par if a Credit Event has not occurred by 1 April 2022.
A Credit Event means that either:
Financial Statements Höegh LNG Holdings Ltd. | 125
HÖEGH LNG
i. An amount of at least USD 100 000 000 has been contributed to the company as new equity or other fully
subordinated and non-cash interest/non-amortising capital subsequent to 4 May 2021; or
ii. first ranking security is created over the company’s ownership of common units of Höegh LNG Partners LP.
As of 31 December 2021, the company has raised USD 47.2 million in new equity after 4 May 2021 and will need
to raise an additional USD 52.8 million before 1 April 2022 to comply with item i) above, or alternatively fulfil item
ii). On 24 March 2022, the company fulfilled item ii) by creating a first ranking pledge over its ownership of 15.2
million common units of Höegh LNG Partners LP in favour of the Bond Trustee (on behalf of the bondholders).
As a result, USD 266.4 million will be reclassified from current to non-current debt in first quarter 2022.
The company completed a NOK 330 million bond loan tap issuance in June 2021 in the HLNG04 bond loan,
paired with a buy-back of NOK 101 million in the HLNG03 bond loan. The tap issue was priced at 97% of
par value and the total outstanding amount after the tap issue was NOK 1 300 million as of 31 December
2021. Total outstanding amount on HLNG03 as of 31 December 2021 was NOK 1 104 million. The terms
and conditions for the financial instruments are described in Note 16 in the consolidated financial statements.
Interest expenses on the bonds was totalling USD 23.5 million during 2021 (2020: USD 23.3 million).
Note 13: Cash collateral
USD’000 2021 2020
Carrying value on 1 January - 4 088
Change in cash collateral 20 (4 088)
CARRYING VALUE ON 31 DECEMBER 20 -
In connection with the company’s cross currency interest rate swaps for HLNG03 and HLNG04, credit support
agreements (CSAs) have been requested by swap bank lenders. Höegh LNG Holdings Ltd. is therefore exposed
to liquidity risk if the negative market value of the swap is higher than a pre-defined threshold, as the company
will be required to post cash collateral for the difference.
On 31 December 2021, the company has posted USD 20 thousand in cash collateral.
126 | Financial Statements Höegh LNG Holdings Ltd.
HÖEGH LNG
Carrying value Fair value
USD’000 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020
Financial assets at fair value through other
comprehensive income (FVTOCI)
Mark-to-market of interest rate swaps
2 072 135 2 072 135
Total financial assets at FVTOCI 2 072 135 2 072 135
Financial assets at fair value through profit or loss (FVTPL)
Derivatives
13 860 13 860
Total financial assets at FVTPL 13 860 13 860
Financial assets at amortised cost
Interest-bearing receivables 360 385 340 425 360 385 340 425
Trade receivables and other receivables 1 482 2 015 1 482 2 015
Other financial assets - 526 - 526
Cash collateral 20 - 20 -
Cash and cash equivalents 26 146 23 682 26 146 23 682
Total financial assets at amortised cost 388 032 366 648 388 032 366 648
TOTAL FINANCIAL ASSETS 390 118 367 642 390 118 367 642
TOTAL NON-CURRENT FINANCIAL ASSETS 360 700 342 280 360 700 342 280
TOTAL CURRENT FINANCIAL ASSETS 29 418 25 362 29 418 25 362
Note 14: Financial risk management objectives and policies
The groups objectives and policies related to capital management and financial risks are described in Note 13 in
the consolidated financial statements.
FINANCIAL ASSETS
FINANCIAL LIABILITIES
Carrying value Fair value
USD’000 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020
Financial liabilities at fair value through other
comprehensive income (FVTOCI)
Mark-to-market of interest rate swaps
17 161 9 737 17 161 9 737
Total financial liabilities at FVTOCI 17 161 9 737 17 161 9 737
Financial liabilities at amortised cost
Trade and other payables and accrued interest 5 383 3 786 5 383 3 786
Revolving credit facility - 60 000 - 60 343
Other debt 44 000 - 44 000 -
Bonds 266 447 250 807 254 033 228 576
Total financial liabilities at amortised cost 315 830 314 593 303 416 292 705
TOTAL FINANCIAL LIABILITIES 332 991 324 329 320 577 302 442
TOTAL NON-CURRENT FINANCIAL LIABILITIES 53 315 316 750 53 315 294 861
TOTAL CURRENT FINANCIAL LIABILITIES 279 676 7 581 267 262 7 581
On 31 December 2021, accrued interest was USD 4.4 million comprising USD 3.8 and 0.7 million related to
bonds and other debt, respectively.
Financial Statements Höegh LNG Holdings Ltd. | 127
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The fair value of the financial assets and liabilities are included in the amount at which the instruments could
be exchanged in a current transaction between willing parties other than in a forced or liquidation sale. The
following methods and assumptions were used to estimate the fair value of each class of financial instrument:
Cash and cash equivalents, trade receivables and other receivables, loans to associates, cash collateral, and
trade and other payables approximate their carrying values largely due to the short-term maturities of these
instruments.
Long-term fixed rate and variable-rate receivables are evaluated by the company based on interest rates and
expected recovery of future contractual cash flows. The discounted estimates of cash flows approximate the
carrying value.
The fair value of financial instruments measured at fair value (interest rate swaps and derivatives) is calculated
by using valuation techniques with market observable inputs, including forward pricing and swap models,
using present calculations. The models incorporate various inputs including the credit quality of counterparties,
foreign exchange spot and forward rates and interest rate curves.
Fair value of other debt and revolving credit facility is estimated by discounting future cash flows from using
rates currently available for debt on similar terms, credit risk and remaining maturities.
The bonds issued by the company (HLNG03 issued January 2017 and HLNG04 issued January 2020) are listed
on Oslo Stock Exchange, and the fair values of these are disclosed based on traded information.
On 31 December 2021, the fair values were 94.96% (91.95% on 31 December 2020) and 91.66%
(86.84% on 31 December 2020) for HLNG03 and HLNG04, respectively.
CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
During the year, the company repaid and cancelled the up to USD 80 million revolving credit facility, while
drawing USD 44 million on a new bank facility (“Other debt”). Due to the nature of the USD 44 million facility,
no interest rate swaps have been entered. The loan has a floating interest rate equal to 3 months LIBOR plus
a margin. The loan matures 3 May 2024 and repayments will incur on a quarterly basis with equal instalments
each quarter starting 27 January 2023.
USD’000 1 Jan 2021
Cash flows
repayment
and buy-back
of bonds
Cash flows
new interest
bearing debt
Foreign
exchange
movement Other 31 Dec 2021
Current bond issue - - - - 266 447 266 447
Non-current other debt - - 44 000 - - 44 000
Non-current revolving credit facility 60 000 (70 000) 10 000 - - -
Non-current bond issues 250 807 (12 118) 39 592 (9 740) (268 542) -
TOTAL LIABILITIES FROM
FINANCING ACTIVITIES 310 807 (82 118) 93 592 (9 740) (2 095) 310 447
128 | Financial Statements Höegh LNG Holdings Ltd.
HÖEGH LNG
Note 15: Related party transactions
USD’000 Note 31 Dec 2021 31 Dec 2020
Subsidiary
Höegh LNG Ltd. 5 334 063 321 959
Höegh LNG Partners LP 5 24 545 18 465
Associate
Avenir LNG Limited 5 1 777 -
TOTAL RECEIVABLES AGAINST RELATED PARTIES 360 385 340 424
USD’000 Note 2021 2020
Subsidiary
Höegh LNG Ltd. 6 11 282 13 946
Höegh LNG Partners LP 6 945 64
Associate
Avenir LNG Limited 6, 17 397 516
TOTAL INTEREST INCOME AND FEES FROM RELATED PARTIES 12 625 14 526
USD’000 Note 2021 2020
Subsidiary
Höegh LNG AS 9 2 480 1 882
Höegh LNG Partners LP 9 713 11 850
TOTAL ADMINISTRATIVE EXPENSES TO RELATED PARTIES 3 192 13 732
LOANS TO RELATED PARTIES
ADMINISTRATIVE EXPENSES TO RELATED PARTIES
INTEREST INCOME AND FEES FROM RELATED PARTIES
Note 16: Dividends
The company has during 2021 received quarterly dividends from Höegh LNG Partners LP, totalling USD
14.5 million (2020: USD 28.5 million). During 2021, the company has not paid out any dividends to its
shareholders (2020: USD 1.9 million).
The net movement in “other” column comprises payments and amortisation of debt issuance cost and bond
issue discount. The USD 266 million movement in “other” column relates to reclassification from non-current to
current. Reference is made to Note 12 for information on the reclassification.
Refer to Note 13 in the consolidated financial statements for fair value hierarchy and for further outline of
financial risk management objectives and policies.
For Höegh LNG Partners LP, the amounts include settlement of indemnities for certain excess boil-off in 2020
and 2021.
Financial Statements Höegh LNG Holdings Ltd. | 129
HÖEGH LNG
Note 17: Expenses and income from other financial items
1
Of the USD 2.3 million net loss on foreign exchange recorded in 2020, USD 2.4 million related to foreign exchange hedges of acquiring NOK 330
million against purchase of USD 36.4 million that fell due during 2020. The fair value changes of the foreign exchange hedges were recorded in the
statement of profit or loss.
USD’000 Note 2021 2020
Income from other financial items
Gain on foreign exchange
1
33 5 542
Guarantee fees accrued 15 370 516
INCOME FROM OTHER FINANCIAL ITEMS - GROSS 403 6 058
Expenses from other financial items
Loss on foreign exchange
1
(1 420) (7 884)
Fair value adjustment USD/NOK FX call options 8 (847) (3 493)
Expensed settlement on extinguished NOK 101 million swap related to buy-back
of bonds (127) -
Other financial expenses (151) 63
Credit support agreement amendment expenses - (696)
EXPENSES FROM OTHER FINANCIAL ITEMS - GROSS (2 546) (12 010)
EXPENSES FROM OTHER FINANCIAL ITEMS - NET (2 143) (5 952)
Note 18: Commitments and guarantees
On 31 December 2021, Höegh LNG had no remaining outstanding investment commitment in Avenir LNG
Limited (Avenir).
By the end of 2021, Avenir had completed the construction of four of its six newbuildings. In connection with the
debt financing of one of the completed vessels, Höegh LNG Holdings Ltd. has provided a sponsor’s guarantee
with a maximum liability amount of USD 6.9 million plus interests and costs.
On 31 December 2021, Avenir had two vessels under construction, where the three main shareholders have
provided certain guarantees to the shipyards in connection with the shipbuilding contracts signed by Avenir.
These two vessels are scheduled for completion in 2022. The guarantees issued for the two vessels under
construction cover a total amount of USD 22.9 million (plus change orders and interests). The three main
shareholders have entered into counter-indemnity agreements for the guaranteed obligations, so that the
company’s net liability for a claim would be equal to its pro rata shareholding in Avenir at the time of any claim
being raised. Also, the three main shareholders of Avenir have issued non-binding letters of comfort related to
the final payment instalments under shipbuilding contracts signed by Avenir.
Reference is made to Note 19 in the consolidated financial statements disclosing guarantees provided by the
company as well as the group
Note 19: Subsequent events
Refer to Note 32 in the consolidated financial statements for events after the balance sheet date.
130 | Financial Statements Höegh LNG Holdings Ltd.
HÖEGH LNG
FINANCIAL STATEMENTS FOR HÖEGH LNG HOLDINGS LTD. | 130
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HÖEGH LNG
Auditor’s report | 131
Statsautoriserte revisorer
Ernst & Young AS
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Medlemmer av Den norske Revisorforening
A member firm of Ernst & Young Global Limited
INDEPENDENT AUDITOR'S REPORT
To the Annual Shareholders' Meeting of Höegh LNG Holdings Ltd
Opinion
We have audited the financial statements of Höegh LNG Holdings Ltd (the Company and the Group),
which comprise the statement of financial position as at 31 December 2021, the statement of income,
statement of comprehensive income, statement of cash flows and statement of changes in equity for the
year then ended, and notes to the financial statements, including a summary of significant accounting
policies.
In our opinion, the financial statements comply with applicable legal requirements and give a true and fair
view of the financial position of the Company and the Group as at 31 December 2021 and their financial
performance and cash flows for the year then ended in accordance with International Financial Reporting
Standards as adopted by the EU.
Our opinion is consistent with our additional report to the board of directors.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of
the financial statements section of our report. We are independent of the Company and the Group in
accordance with the requirements of the relevant laws and regulations in Norway and the International
Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants
(including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
To the best of our knowledge and belief, no prohibited non-audit services referred to in the Audit
Regulation (537/2014) Article 5.1 have been provided.
We have been the auditor of the Company for 16 years from the incorporation and election by the general
meeting of shareholders in 2006 for the accounting year 2006.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements for 2021. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters. For each matter below, our description of how our audit addressed the matter is
provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial
statements section of our report, including in relation to these matters. Accordingly, our audit included the
performance of procedures designed to respond to our assessment of the risks of material misstatement
of the financial statements. The results of our audit procedures, including the procedures performed to
address the matters below, provide the basis for our audit opinion on the financial statements.
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Impairment evaluation of vessels
Basis for the key audit matter
The book value of vessels as of 31 December
2021 was USD 1 954.6 million and represented
80.5 % of the Group’s total assets. Due to
continued challenging market conditions in 2021,
management identified impairment indicators and
tested recoverable amounts of each vessel, by
comparing each vessel’s carrying amount to value
in use. The value in use impairment testing is
dependent on a several assumptions such as
future charter rates, deployment, operating
expenses and discount rates (weighted average
cost of capital), all impacted by future market
developments and economic conditions. The
estimation of future uncontracted cash flows
requires significant judgment related to if or when
a new FSRU contract will be signed, at what
charter rates and the associated operating
expenses. We consider the impairment evaluation
a key audit matter due to the uncertainty of
estimates and judgments involved in establishing
the assumptions.
Our audit response
Our audit procedures included evaluating
management’s assessment of impairment
indicators for vessels and the assumptions
applied in the value in use calculations. We
assessed the accuracy of prior years’ forecasts,
compared expected revenue and operating
expenditures to approved budgets, current
contracts, historical data and to the long-term
market expectations. We also considered the
likelihood and timing of employment and
redeployment of vessels as FSRUs. We involved
an internal valuation specialist in the assessment
of the impairment model and discount rates
applied. Furthermore, we tested the mathematical
accuracy of the value in use calculations and
assessed management’s sensitivity analyses.
Refer to note 11 of the consolidated financial
statements.
Provisions for Uncertain Tax Positions in Indonesia
Basis for the key audit matter
As of 31 December 2021, the Group has
recognised a provision of USD 9.0 million for
uncertain tax positions including associated
interest and penalties in Indonesia. The Group’s
tax positions in Indonesia are subject to audit by
local taxing authorities and the resolution of such
audits may take several years. Indonesian tax law
is complex and often subject to various
interpretations, accordingly, the ultimate outcome
with respect to taxes the Partnership may owe
may differ from the amounts recognized.
We identified the provisions for uncertain tax
positions in Indonesia as a key audit matter
because auditing the identification, recognition
and measurement of the provision includes a
higher degree of judgment. The judgment was
due to the Group’s interpretation of, and
compliance with, numerous and complex tax laws.
In addition, a higher degree of auditor judgment
was required in evaluating the Group’s estimate of
the ultimate resolution of its tax positions in
Indonesia.
Our audit response
Our audit procedures included, among others,
evaluating management’s interpretation of
Indonesian tax law by developing an independent
assessment. For example, we involved local tax
professionals with specialized skills to assist us in
obtaining an understanding of and assessing the
technical merits and the amount of the provision
recognized related to the Group’s tax positions.
We inspected the Group’s correspondence and
assessments with the relevant Indonesian tax
authorities. We evaluated third-party advice
obtained by management in relation to specific
Indonesian income tax law. We tested the
completeness and accuracy of the underlying
data used by management to calculate its
uncertain tax positions in Indonesia. We assessed
the adequacy of the Group’s disclosures around
uncertain tax positions.
Refer to note 23 of the consolidated financial
statements.
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Other information
Other information consists of the information included in the annual report other than the financial
statements and our auditor’s report thereon. Management (the board of directors and the president and
CEO) is responsible for the other information. Our opinion on the financial statements does not cover the
other information, and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information,
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If,
based on the work we have performed, we conclude that there is a material misstatement of this other
information or that the information required by applicable legal requirements is not included, we are
required to report that fact.
We have nothing to report in this regard.
Responsibilities of management for the financial statements
Management is responsible for the preparation and fair presentation of the financial statements in
accordance with International Financial Reporting Standards as adopted by the EU, and for such internal
control as management determines is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s and the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless management either intends to liquidate the
Company or the Group, or to cease operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional
scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s and the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Company’s and the Group’s ability to
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Independent auditor's report - Höegh LNG Holdings Ltd 2021
A member firm of Ernst & Young Global Limited
continue as a going concern. If we conclude that a material uncertainty exists, we are required to
draw attention in our auditor’s report to the related disclosures in the financial statements or, if
such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Company and the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion.
We communicate with the board of directors regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the board of directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters
that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the board of directors, we determine those matters that were of
most significance in the audit of the financial statements of the current period and are therefore the key
audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirement
Report on compliance with regulation on European Single Electronic Format (ESEF)
Opinion
As part of our audit of the financial statements of Höegh LNG Holdings Ltd we have performed an
assurance engagement to obtain reasonable assurance whether the financial statements included in the
annual report, with the file name hoeghlngholdingsltd-2021-12-31-en, has been prepared, in all material
respects, in compliance with the requirements of the Commission Delegated Regulation (EU) 2019/815
on the European Single Electronic Format (ESEF Regulation) and regulation given with legal basis in
Section 5-5 of the Norwegian Securities Trading Act, which includes requirements related to the
preparation of the annual report in XHTML format and iXBRL tagging of the consolidated financial
statements.
In our opinion, the financial statements included in the annual report have been prepared, in all material
respects, in compliance with the ESEF Regulation.
Management’s responsibilities
Management is responsible for the preparation of an annual report and iXBRL tagging of the consolidated
financial statements that complies with the ESEF Regulation. This responsibility comprises an adequate
process and such internal control as management determines is necessary to enable the preparation of
an annual report and iXBRL tagging of the consolidated financial statements that is compliant with the
ESEF Regulation.
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Independent auditor's report - Höegh LNG Holdings Ltd 2021
A member firm of Ernst & Young Global Limited
Auditor’s responsibilities
Our responsibility is to express an opinion on whether, in all material respects, the financial statements
included in the annual report have been prepared in accordance with the ESEF Regulation based on the
evidence we have obtained. We conducted our engagement in accordance with the International
Standard for Assurance Engagements (ISAE) 3000 – “Assurance engagements other than audits or
reviews of historical financial information”. The standard requires us to plan and perform procedures to
obtain reasonable assurance that the financial statements included in the annual report have been
prepared in accordance with the ESEF Regulation.
As part of our work, we performed procedures to obtain an understanding of the company’s processes for
preparing its annual report in XHTML format. We evaluated the completeness and accuracy of the iXBRL
tagging and assessed management’s use of judgement. Our work comprised reconciliation of the iXBRL
tagged data with the audited financial statements in human-readable format. We believe that the
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Oslo, 26 April 2022
ERNST & YOUNG AS
The auditor's report is signed electronically
Magnus Hegertun Birkeland
State Authorised Public Accountant (Norway)
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NOTES
www.hoeghlng.com