Höegh LNG Partners LP
Q3 2015 Earnings Call Transcript

Published: 15 Dec 2015

[Operator:]

Good morning and welcome to the Hoegh LNG Partners LP Third Quarter 2015 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Richard Tyrrell. Please go ahead.

[Richard Tyrrell:]

Thank you, Emily. Ladies and gentlemen, good morning and welcome to the Hoegh LNG Partners’ third quarter 2015 results. I do apologize for the late arrival. We have to get the restatement out as you know and that is something that I am more than happy to answer questions on at the end. Please take note of the forward-looking statements on Page 2 and the abbreviations on Page 3. The agenda for this call is the third quarter financial results. What you will see is a solid operational and financial performance that reflects the stable nature of our long-term contracts. We have 14 years of contracted revenue on average, none of which is exposed to oil price and all of our FSRUs are contracted through 2025. The third quarter highlights are listed on Page 5. Hoegh LNG Partners reported time charter revenues of $11.5 million for the quarter. Our proportional measure of adjusted EBITDA that includes a 50% interest in the GDF Suez FSRUs was $16.9 million. The operating income of $7.5 million includes a loss on the swaps at the JV level. Without this known cash effect, the operating income would have been $9.6 million. Our net income for the third quarter was $5.2 million, or $6.9 million adjusted for the swaps. Distributable cash flow for the period, which backs out various non-cash items adjusts for the finance lease on Lampung and this quarter includes a $300,000 indemnity payment related to Indonesian withholding tax before subtracting our replacement CapEx division was $9.2 million and this more than covers the period’s $8.9 million distribution. Subsequent to the end of the quarter, we closed the dropdown of the Hoegh Gallant on October 1. This means that we will have a full quarter contribution from the Gallant to look forward to in the fourth quarter. In addition, we filed restated financial results on November 30 for the previously flagged corrections to Indonesian withholding tax and value added tax. As the problems either originated before IPO or flowed from startup related events, our indemnity payment of $1.2 million was received from Hoegh LNG that compensates Hoegh LNG Partners for the cash flow impact. This amount will show up as a contribution to equity in the fourth quarter results. We have a remediation plan in place to address the accounting issue and this is set out in our amended 20-F. All our FSRUs are operating according to their long-term contracts for the quarter and continued to do so. This goes for both our IPO fleet that contributed to the quarter and the Gallant that will be included in the fourth quarter. The average contracted revenue of the current Hoegh LNG Partners’ fleet is 14.1 years and our pipeline of dropdown candidates, have similarly long contracts. All current contracts are with robust counterparties that have full or significant government ownership. Engie is an A rated credit through 20-year credit default swaps imply a counterparty risk of less than 5%. An FSRU contract isn’t a 20-year bond, but the level at which Hoegh LNG Partners trades is clearly out of whack with this. PGN is a multi-billion dollar company with BB plus rating. And in the case of EGAS, we look at the high level of utilization of supporting the credit and Hoegh LNG Partners has the fallbacks of first to bank guaranty that covers approximately three quarters of a year and then a further parent guaranty if not paid. All-in-all, I believe our portfolio of contracts to be a robust one. And this is reflected in the third quarter financials. You will remember that Lampung is the only consolidated FSRU in the third quarter to be joined by Gallant next time. And the Neptune and Cape Ann JV is flowing by equity accounting. The income statement on Page 7 shows the transition from the ramp-up period on Lampung this time last year to steady state operations. This quarter we see – this year we see a full quarter of time charter revenue and no construction related revenue. We also see total operating expenses, which here relate to Lampung and corporate overhead for the quarter of $3.6 million down on the 9-month run rate of almost $4 million. We can’t consolidate the JVs, so they flow in at the equity line, where this quarter the contribution was affected by a $2.1 million mark-to-market loss on the swaps. This amount net of a positive $340,000 amount at the consolidated level affects all numbers below the operating income line down to the $5.2 million at the net income. The net income for the quarter after adjusting for the swaps was $6.9 million, which equates to just over $0.26 per unit. The segment view paints the picture of what’s happening at the asset level. All the assets were operating according to their long-term contracts. I have mentioned the full quarter on Lampung compared to this time last year. And I would also like to highlight the stability of the JV vessels, where EBITDA has risen from $8.25 million to $8.35 million for the quarter year-on-year. Other costs reflect corporate overhead and came to $1.4 million in the quarter, which equates to a run rate of $5.5 million. This included ongoing stock implementation costs and some Gallant-related transaction costs to things such as advice to the conflicts committee. Page #9 is the 2014 comparison of the same. Turning to Page 10, I here detail the financial income and expense line items. I include this as it breaks out non-cash elements of interest expense, which on Lampung are high at $650,000 that’s related to the facility. It also shows withholding tax some of which won’t become offsettable against taxable income until our Indonesian entity enters profit. Since it is a knock-on effect of the [stocks for bonds] [ph], it is covered by Hoegh LNG indemnity and is subject to a $310,000 claim that was made and paid in this quarter. On Page 11, you will recognize quite a few of the previous page numbers in the distributable cash flow table. This table builds up from the net income of the consolidated P&L to the adjusted EBITDA which includes a proportional amount for the JVs and adjusts for the finance lease on Lampung before netting off financial income and expenses adjusting for non-cash items and deducting income tax and net estimated replacement capital expenditures. The result is our distributable cash flow for the third quarter of $9.2 million which compares to our distribution of $8.9 million. Page 12 shows the balance sheet for the quarter and the year end 2014. The amortization of the Lampung debt since start of the year can be seen in the reduction of the long-term debt line. There is additional amortization however which I would like to point out on the JVs and that’s something which can be seen in Note 10 of our financials in the 6-K. I think our approach to that is important especially in the context of the current focus in the markets on the subject. The illustration on Page 13 shows how all our FSRUs are financed with fully hedged long-term facilities. Our debt is amortizing and we have no facilities maturing before mid-2019. There is a small balloon in 2021 related to non-export credit tranche on Lampung and the GDF Suez FSRUs mature in 2022. Given our contracts extend beyond the dates of maturities and of that amortizes. We don’t envision problems with refinancing. Remember the life expectancy of an FSRU is 35 years. Our GDF Suez vessels have mortgage style repayment profiles. Lampung and Gallant have 12 year and 15 year amortization profiles respectively. We bridge amortization and replacement capital expenditures with an $85 million revolving credit facility from Höegh LNG. Now it’s important to note that no drawings have yet been made against this facility and current cash balances and cash from operations will push out the need to draw and that’s for a while yet. It’s also important to note that approximately $28 million of restricted cash is tied up in the facilities and which is something that would be released ahead of the maturities making it akin to available cash in net debt calculations. Now before opening up the line to questions, I would like to end on the market Höegh LNG and Höegh LNG Partners continue to see considerable opportunity to FSRUs. This something that’s covered in some detail in the Höegh LNG third quarter presentation that’s available online and makes the good viewing. What does it mean for Höegh LNG Partners, well firstly its comforting own assets and an asset class that’s in demand. And secondly it means the dropdown pipeline is set to continue developing nicely. FSRU is the critical infrastructure under long-term cash generating contracts that are well suited to MLPs. The ready supply of competitively priced LNG drives demand for the infrastructure and we see this and how FSRUs are being used to unlock new markets. Egypt is the prime example where a combination of Höegh Gallant and now the BW Singapore of supplying 1.1 billion cubic feet per day of gas demand. EGAS has market in six months. They have done a terrific job and it’s really seen as the case study for others to follow. With that, I will put up the summary page that highlights Höegh LNG Partners key selling points and leave that up as I open up the lines for questions.

[Operator:]

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question is from Chris Wetherbee of Citi. Please go ahead.

[Prashant Nair:]

Hi, Richard. This is Prashant in for Chris.

[Richard Tyrrell:]

Hi Prashant.

[Prashant Nair:]

Hi. My first question is sort of bigger picture, the competitive advantage, economic advantages for FSRU increased, right, in the more challenging macro, but we are also hearing anecdotally given the market that the same macro conditions may effect some developing regions such that there could potentially be downward pressure on TCE rates looking towards 2017 – 2016 and 2017. How do you see the balance of this playing out? Is there at least even anecdotally a downward pressure on rates looking forward in a prolonged sort of commodity downturn? And related to that where do you see the greatest opportunities regionally going forward and how is that shifting versus your outlook say at the beginning of the year?

[Richard Tyrrell:]

Sure. I mean it’s – on your first part of the question in regards to rates, we are seeing no pressure on rates at this time. I wouldn’t say particularly big sample set but you see that Golar have been contracting vessels I think most recently at quite attractive rates, in fact slightly higher than some of our rates. So we really aren’t seeing any pressure on the rates at this time. And of course the returns are attractive, so I guess there is scope for some pressure. But the incumbents while operating in a competitive environment which is subject to tender have all managed to hold pretty firm. And I think that’s just because of the complexity of the – of an FSRU compared to a more commoditized type of assets and we really see that continuing. Now the other point I guess to add on that is that the cost of an FSRU on a unitized basis is very, very small compared to the price of the gas not still stands even at today’s lower LNG prices which helps; you might be able to reduce the rates marginally on an FSRU, but it really isn’t going to make a massive difference to your overall gas price which is what the utilities are of course focused on. So where are we seeing the demand, the areas of demand are pretty much as we have always said, Latin America driven by the relatively spread out populations along the coast which make them well suited to supply by an FSRU those gasoil type substitution there; of course there is the U.S. volumes coming online for which those particular places are very close in proximity and therefore easy to deliver to. We see a little bit of activity now in Africa again Golar got the vessel there, we think there will be more and we have a team focused on Africa looking at those opportunities. And then again as before India, China and Southeast Asia is the other area. China is particularly interesting because of the issues with pollution there and there is obviously high demand for energy. So I think that’s certainly an area which I would expect to see an FSRU and one other FSRU and I should say because we already have the Cape Ann up in Bohai Bay before too long.

[Prashant Nair:]

Okay, great, that’s really helpful. Thanks Richard. I guess focusing on the new-building side then are you – there is some advantage potentially to lower cost of build for FSRUs and shipyard capacity given where commodity feed prices would be for construction?

[Richard Tyrrell:]

Yes. I mean the cost of FSRUs house come down slightly over the last 18 months or 2 years without a question. That’s partly because the steel prices come down, but it’s I think equally because the yards are very much keen for business now that they haven’t got as many drilling rigs to build. So I think if we have go out and order an FSRU today we would be able to do so at a very attractive price. How long that attractive price will stay available will depend partly on the steel price, but it will also depend on how long these yards are willing to operate at really quite marginal levels of economics.

[Prashant Nair:]

Okay, great. And just a final question, sort of two part, the – any update on the Independence dropdown timing how we should we be thinking about it and I think previously we had maybe discussed that this would be like a mid-2016 target was reasonable, I was wondering if that still stands. And then given the Gallant’s full contribution to 4Q and Independence in 2016, but balancing against the tougher environment, how are you thinking about dividend increases and sort of related to that, did you callout a cash flow coverage number if I missed it, I am sorry for this quarter and sort of has your thinking around cash flow coverage changed at all?

[Richard Tyrrell:]

Yes. Well, firstly on the Independence, we still need to get the consent, but I think as an assumption mid 26 is reasonable. At the end of the day, we have got to digest Gallant first as we are now doing and would like to get a few quarters under our belt with that. We have said what we think Gallant can do in terms of distribution when we announced the transaction and we have – I think we stated it when we have the press release related to the restatement. So, yes, that’s where we are on Gallant. And yes, it’s obviously just subject to the final decision come January, which is when the dividend will be declared.

[Prashant Nair:]

Alright, excellent. Richard, thank you so much for the time. I will pass it along.

[Operator:]

Our next question is from Fotis Giannakoulis of Morgan Stanley. Please go ahead.

[Fotis Giannakoulis:]

Yes, hello and thank you. I have a couple of questions. First of all, I want to ask how do you see your growth given the fact that the MLP valuations have not been supportive for any equity issuances? And also, if you can talk to us about the credit facilities, the facilities that you have from your parent, they have some expiration right now, but are you in discussions about extending the maturities of these intercompany loans?

[Richard Tyrrell:]

Yes. On the intercompany loans, we have the sellers’ credit which relates to the Gallant, which is $47 million and that’s at a 18 month maturity after the close of the transaction, so 18 months is going to be October 1. The clear intention for that is to take it out most likely with equity at some point. If that hasn’t happened within 18 months, then we are going to talk to the parent, but that’s the plan with respect to that. The other facility we have in place with the parent is this revolving credit facility which is designed to bridge the gap between the rate of which our debt amortizes and the distribution. So, that I had it in the presentation it’s an $85 million facility. It runs for three years from the IPO. At this stage, it’s not drawn. I honestly don’t think we will have drawn $85 million by year three at least based on the current portfolio we didn’t want dropdown to be amortizing that within those dropdowns, the rate at which it was drawn it would increase, but that’s something which will be drawn on Engie of course. And the way it works is that once we have got enough headroom in the system again to refinance the amounts on a commercial basis and not sort of just with the parent, then we will do so. And because the underlying bank facilities are amortizing that headroom obviously comes with time.

[Fotis Giannakoulis:]

Okay, thank you. And on the overall LNG market, obviously with the lower LNG prices, there is lot of incremental demand and discussions for FSRUs, how shall we think about the amount of volume that the new FSRU projects can absorb? How much of the incremental LNG supply can be absorbed by FSRU to the next five years? Can you give us a little bit of an overview of how the outlook of the FSRU markets and new projects look like?

[Richard Tyrrell:]

Yes, I mean, I guess to be a sort of bit more thought into that question to give a sort of direct answer, but if you look at Egypt for example, they are going to be importing close to 9 million TPAs. And that’s probably a high end of the scale and it obviously is two FSRUs. Now, when it comes to additional FSRUs entering the market, the low LNG prices is definitely making them – for making the commodity more attractive and therefore increasing the demand for FSRUs, but I wouldn’t necessarily say it’s sort of ramping up on an exponential basis. I think over the next few years we will probably have we will see between 2 and 4 FSRU contracts being awarded, which I guess all be enough to absorb approximately 20 MTPA of incremental LNG. Beyond that, we could see – we can see more of a ramp up, but in the near future, those are the sort of numbers that I think of it.

[Fotis Giannakoulis:]

Thank you. And can you also talk to us about the potential competition, obviously Golar is looking at the space and you are the other main company in the FSRU market? Can you also describe what is happening with Excelerate and companies like Teekay and other potential competitors or BW, how many companies do you think that you will see in front of you in the standards that they will come ahead?

[Richard Tyrrell:]

Yes, thanks for having an attendance. We are seeing the four incumbents to be like. So, as Golar, Excelerate and BW, we obviously have a battle available at the moment, at the parent level I should hasten to that. We, I think, Golar has got a vessel, which is going to be a while before it comes out of the yard, but they were little bit earlier this year. Excelerate, they have got older vessels, but nothing new. So and even those I think it now actually have worked with the possible exception of one. So, they are competitive if they lower that price to reflect the age of – and the relative lower efficiency of the vessel and then you have got BW, you still have second FSRU to charter, but show no signs of ordering another. So, that’s who we see in these competitive purchases. You hear a lot of talk about this looking at entering the market and they may well be, but I think well my sense is that at least initially they are looking to get more into more bilateral type projects, like we do to such as the project which Teekay recently announced in Bahrain, which is an FSRU project as well. They are using a LNG carrier in the [indiscernible] regas, but sort of taking more of that kind of approach at least as a first step into the market.

[Fotis Giannakoulis:]

Thank you. And one last question about your view on LNG prices and the activity, real stake activity, there are a lot of concerns about LNG pricing going forward with all this new supply, can you give us your outlook and also your view about the potential relationship going forward between LNG prices and oil?

[Richard Tyrrell:]

Yes, sure. I mean, it’s obviously a concern if you are a seller, but it’s a bonus if you are a buyer. So, there is someone out there in the chain who is welcoming us and the demand well. We are at the right price just to meet the supply.

[Fotis Giannakoulis:]

And then do you think of the link with oil will remain or you think that we are moving into a world where the tool – commodity there will be completely disconnected?

[Richard Tyrrell:]

Well, we are definitely moving away. I know it’s clearly linked with oil but that primarily relates to the longer term contracts and even that is quite often captain flows to the link. So that will remain and for certain volumes we have clearly the long-term link will remain. And as I think utilities you have a long-term view wherever we want to go completely spot that will be a big jump for them. So but always want a certain amount of long-term coverage and that will be at least somewhat oil linked maybe with some cap stores and discounts as I mentioned. But if you look at the volumes coming out of the U.S., the Henry Hub links and then you have the spot volumes which you hear various numbers for what was thought market really is. And those numbers go away from 20% to 50% given the sort of the trading – the on-trading of some of the contracted volumes. And they are in the market and people like Egypt, you obviously sort of put together there project in a very rapid fashion being benefiting from that.

[Fotis Giannakoulis:]

Thank you very much for good answers.

[Richard Tyrrell:]

Thanks very much for the questions participants.

[Operator:]

Our next question is from Shawn Collins of Bank of America. Please go ahead.

[Shawn Collins:]

Great. Thank you. Good morning Richard, hope you are well.

[Richard Tyrrell:]

Good morning, Shawn.

[Shawn Collins:]

So Richard I wanted to ask about the potential independence dropdown and more specifically that consent from Lithuania which I know that you are pursuing, I believe that we discussed this in the last earnings call in August, but I wanted to ask if you give an update on the situation and provide your best guess for why ABKN has not provided this consent is it bureaucracy, is it not quite a strong understanding of MLP structures, is it a deterioration in its relationship with the sponsor or something else, any color would be helpful? Thank you.

[Richard Tyrrell:]

No it’s not of the above it’s related to the politics on the ground and the FSRUs are very high profile projects in Lithuania and there is a lot of sensitivity around this for obvious reasons sort of vastly which is being used for energy security as much as anything. And the – you could see it in the report but being downstream of us some back and forth on here exactly should pay what from a regulatory point of view and until that settles down which actually is now it’s just in field like the right time to push the consent.

[Shawn Collins:]

Okay, understand. So it’s somewhat relationship management and kind of appropriate is this aspect?

[Richard Tyrrell:]

Precisely.

[Shawn Collins:]

Okay, great. So then moving on I have a inquiry that maybe more at the sponsor level, but let me try and see if it’s applicable to you, I wanted to ask if there is any update that is available on the sponsors development of a floating LNG export vessel thing? Any color on this might be helpful or certainly interesting? Thank you.

[Richard Tyrrell:]

Well, I know that they are working on this. I know if you at the sponsors presentation you will see the official word and I think they – the lower LNG prices and certainly pull back progress a little bit when it comes to incremental FLNG volumes. So we are certainly not expecting anything before 2020 but we – or the parent, the sponsor think that there is an opportunity for piped volumes picking out of North America that make – that take advantage of low cost gas to meet sort of small scale LNG demand. So it’s never going to be similar type scale start at least not initially, but the buyers LNG appreciates the diversity and they have contracts rolling off and as existing contracts roll-off, they will seek to replace at least some those volumes with alternative sources of supply.

[Shawn Collins:]

Okay, great, that’s helpful. Thank you. And then just my last question kind of shifting to shipyards and I know that you or the sponsors building the newbuild as we speak, I just want to – and you already touched upon it so much but I want to ask given some of the distress that the shipyards are experiencing at the moment, have you seen any change in the relationship with your shipyard which I believe is Korea, but I could be mistaken, but is there any change in timing or demand for payments or relationship of any sort that would be helpful? Thank you.

[Richard Tyrrell:]

I don’t think so in this and there is lot of flexibility on the part of the shipyard, but no sort of tightening that’s kind of reflects any level of stress.

[Shawn Collins:]

Okay, understood. That’s great. Thank you for the time and the insight Richard. I appreciate it.

[Richard Tyrrell:]

Great. Thanks for the question Shawn.

[Operator:]

Your next question is from [indiscernible] Partners. Please go ahead.

[Unidentified Analyst:]

Great. Thanks for giving me the chance to ask the questions. I had two questions, one has to do with the legal impact if any of – a number of notices that we saw in the press of law firms investigating the restatement of the accounts, could you just let us know if there is actually anything tangible whether lawsuits or anything else in terms of a legal impact out of the restatement. And the second question is more around your cash return policy, obviously with the current level of the share price and the dividend yield a lot of other companies and MLPs in the sector either suspend dividend and/or implemented some sort of a strong buyback program, can you just maybe elaborate on what your view is on the returning cash to shareholders going forward is? Thank you.

[Richard Tyrrell:]

Yes, sure. On the first question I am not a lawyer. So in terms of likelihood of any issue it’s difficult to say. You just never know with these things from what I understand, but we obviously feel that there is no cash effects and no go forward impacts and nothing we haven’t felt of anything – we haven’t felt is anything that needed disclosing at this stage. And hopefully it stays that way. That’s the first part of your question. The second part of your question, sorry can you just repeat to us?

[Unidentified Analyst:]

Sure, it has to do around your cash return policy a lot of MLP…

[Richard Tyrrell:]

Yes. Sorry, I remember that. Sorry, excuse me. Yes. So on the cash retention policy we look at the numbers and we look at the debt profile and we obviously don’t really have any kind of CapEx commitments and as we do a job down. So I don’t think we have any sense that we need to lower the distribution and when it comes to buybacks and I think at this price it’s a very good deal. So maybe it is something to be considered. But for us I don’t see us as being in the same position as others.

[Unidentified Analyst:]

Right. So in the trade off between the two you would just say that you would stay with your current given payouts?

[Richard Tyrrell:]

Well, I mean it’s one of those things which I think it always makes sense to look at these things at the time, but we certainly feel that the assets are performing in line with expectations as long as that remains the case. The business can support that payout.

[Unidentified Analyst:]

Correct. Correct, thank you.

[Operator:]

Our next question is from Spiro Dounis of UBS. Please go ahead.

[Spiro Dounis:]

Hey, Richard. Just two quick ones for me. First want to follow-up on a prior question, but maybe ask it a different way. So, lot of your LNG peers and competitors have been talking about FSRUs for a while currently with what you said, which I guess is a validation of your strategy that they are all looking to get into that business. But just wondering from your perspective I guess, is there any interest in doing a JV, would one benefit you in anyway possible to maybe linkup with one of these companies and offer a full suite of services to your customers?

[Richard Tyrrell:]

On a case by case basis, it might make sense if someone has a good project and needs FSRU expertise. So, first join with them. Yes, I will be talking about on a sort of companywide basis, it isn’t something that I put a lot of thought into quite honestly and I think our view is that the FSRU business is the sweet spot and in a way at least right now to add LNG carriers, for example, to the mix would delete our story somewhat, dilute our story somewhat.

[Spiro Dounis:]

Yes, that makes sense. Okay. And then just as it relates to the Egypt as it’s been in the news for a few months now, but just the discovery of that, the gas field there and potential development by 2020 granted slow LNG prices might hold that back, but nonetheless just wondering maybe is there an impact there on Gallant or just growth as you see it in that region just given their potential development of gas field?

[Richard Tyrrell:]

Yes, it certainly could have an impact and we are fortunate at the Hoegh LNG Partners level of having the option with the parent which makes that contract a 10-year contract from an MLP point of view, it pays for a 5-year contract albeit at a slightly reduced day rate. So, the MLP has been pretty good about Egypt. I mean question is how long it will take for it to develop that asset. It is obviously going to take a few years. We don’t know what is going to be agreed yet on how much of those volumes he and I are going to be allowed to export through Damietta, which is an LNG front that they already own in return for developing the field. I am sure that’s subjective in terms of negotiations of this type. And it’s that kind of thing that will ultimately affect the supply of gas into the local market and how much space there is for additional LNG to come in, but either way if you look at the project and the timing it takes to get these projects up and running and they are not going to be fully up and running from day 1, there will be a ramp up period. I will be very surprised if the Gallant wasn’t still employed in Egypt beyond year 5.

[Spiro Dounis:]

Okay, that’s fair. That’s it from me. Richard, have a great holiday and Happy New Year.

[Richard Tyrrell:]

Thank you very much.

[Operator:]

[Operator Instructions] Our next question is from Andy Gupta of HITE Hedge. Please go ahead.

[Andy Gupta:]

Hi, Richard. Good afternoon. How are you?

[Richard Tyrrell:]

I am good. Thanks, Andy. Hi.

[Andy Gupta:]

Hi. Couple of quick questions. One is I want to go back to your comments on the competition and outlook for the FSRU market. I will make sure I got this right you say about I think 2 to 4 contracts being awarded in the next 2 to 3 years, did I get that right?

[Richard Tyrrell:]

Per year.

[Andy Gupta:]

Per year?

[Richard Tyrrell:]

Yes.

[Andy Gupta:]

And how do you think the distinction between you had a comment about bilateral project like the one you just signed up and in the industry we have heard from at least two players that they are about 30 FSRU type projects, not necessarily tenders, but can be bilateral projects next year. Can you help us differentiate what’s the difference between a bilateral project and the tender and do you see more such project more than the 2 to 4 per year being awarded with the inclusion of bilateral projects?

[Richard Tyrrell:]

It certainly could increase without question. I think the projects that normally get out in the tender routes are the ones where there is a utility involved. Often, they have to get down that routes because the rules around utilities are fairly strict and the governments give us – and the stakes and they insist upon us. So, that’s the kind of typical 10 to 5 projects would be for a local incumbent utility. Contrast that with the bilateral type projects, these are more the I guess more entrepreneurial type operators whether they have seen a opportunity to surprise the market. And we have, an example of that is Chile for example, where the local group and the engineer came together and they are not just buyers of gas for existing – to satisfy existing demand, they are actually building a power station to provide these electrons at the end of the value chain as well. And it’s more of those kind of projects which go down the bilateral route and for good reasons and of course those projects require a lot of things to come together and certain amounts of patience and perseverance on the part of all the parties and they therefore lend themselves more to the bilateral parties.

[Andy Gupta:]

But when you say you think there would be two or four contracts per year, you are thinking more of the tender type projects?

[Richard Tyrrell:]

Yes. I mean, yes, exactly.

[Andy Gupta:]

Do you see – you mentioned four incumbents and potentially some acquirers, do you see a potential for consolidation in the FSRU space and as some of these names you mentioned are not pure-play FSRU companies, but would they be a reason to consolidate and you mentioned you don’t want to dilute LNG carrier space I agree with that, but what about the FSRU space?

[Richard Tyrrell:]

You have to look at it very much on a case by case basis and then very, very closely at the underlying contracts to process, whether they are going to add anything to the business or not. Quite often, the FSRU contracts are not just the official type contracts, which you typically have for carriers and you would want to go into them in some detail I think before coming to any conclusions on whether any sort of activity such as that makes sense.

[Andy Gupta:]

Understood. One last one for me, Richard is that you mentioned buybacks at the slides it’s a good deal along with the growth and agree with you. Now, is this the shift I know in the past you have been very focused on trying to increase liquidity at HMLP. So, is the consideration of buyback a tangible thing that we should expect or is it more of an interesting part?

[Richard Tyrrell:]

I think at this stage, it’s more of an interesting thought, but clearly, we will have to look at the markets and when things move like they have over the last few weeks, these kind of thoughts obviously spring to mind.

[Andy Gupta:]

Okay. Understandably. Well, thank you so much, Richard.

[Richard Tyrrell:]

Thank you very much, Andy.

[Operator:]

Showing no further questions, this concludes the question-and-answer session. I would like to turn the call back over for any closing remarks.

[Richard Tyrrell:]

Thanks, Emily. Well, firstly, I would like to thank everybody for attending today’s call. And secondly, I would like to wish everybody a very happy holidays and certainly better markets in the New Year. Thanks, again.

[Operator:]

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.