UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018

Commission File Number 001-36588

Höegh LNG Partners LP

(Translation of registrant’s name into English)

Wessex House, 5 ^th Floor

45 Reid Street

Hamilton, HM 12 Bermuda

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F     x            Form 40-F    ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1).

Yes    ¨            No    x

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7).

Yes    ¨            No    x

HÖEGH LNG PARTNERS LP

REPORT ON FORM 6-K FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2018

Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion of our financial condition and results of operations for the three and nine months ended September 30, 2018 and 2017. References in this report to “Höegh LNG Partners,” “we,” “our,” “us” and “the Partnership” refer to Höegh LNG Partners LP or any one or more of its subsidiaries, or to all such entities unless the context otherwise indicates. References in this report to “our operating company” refer to Höegh LNG Partners Operating LLC, a wholly owned subsidiary of the Partnership. References in this report to “Höegh Lampung” refer to Hoegh LNG Lampung Pte Ltd., a wholly owned subsidiary of our operating company. References in this report to “Höegh FSRU III” refer to Höegh LNG FSRU III Ltd., a wholly owned subsidiary of our operating company. References in this report to “Höegh Cyprus” refer to Hoegh LNG Cyprus Limited including its wholly owned branch, Hoegh LNG Cyprus Limited Egypt Branch (“Egypt Branch”), a wholly owned subsidiary of Höegh FSRU III and the owner of the Höegh Gallant. References in this report to “PT Höegh” refer to PT Hoegh LNG Lampung, the owner of the PGN FSRU Lampung. References in this report to “Höegh Colombia Holding” refer to Höegh LNG Colombia Holding Ltd., a wholly owned subsidiary of our operating company. References in this report to “Höegh FSRU IV” refers to Höegh LNG FSRU IV Ltd., a wholly owned subsidiary of Höegh Colombia Holding and the owner of the Höegh Grace. References in this report to “Höegh Colombia” refer to Höegh LNG Colombia S.A.S., a wholly owned subsidiary of Höegh Colombia Holding. References in this report to our or the “joint ventures” refer to SRV Joint Gas Ltd. and/or SRV Joint Gas Two Ltd., the joint ventures that own two of the vessels in our fleet, the Neptune and the Cape Ann, respectively. References in this report to “Global LNG” refer to Global LNG Supply S.A., a subsidiary of Total S.A.. References in this Report to “PGN LNG” refer to PT PGN LNG Indonesia, a subsidiary of PT Perusahaan Gas Negara (Persero) Tbk (“PGN”). References in this report to “SPEC” refer to Sociedad Portuaria El Cayao S.A. E.S.P. References in this report to “Höegh LNG” refer, depending on the context, to Höegh LNG Holdings Ltd. and to any one or more of its direct and indirect subsidiaries, other than us. References in this Report to “EgyptCo” refer to Höegh LNG Egypt LLC, a wholly owned subsidiary of Höegh LNG.

You should read this section in conjunction with the unaudited condensed interim consolidated financial statements as of September 30, 2018 and for the periods ended September 30, 2018 and 2017 and the related notes thereto included elsewhere in this report, as well as our historical consolidated financial statements and related notes included in our report on Form 20-F filed with the Securities and Exchange Commission (“SEC”) on April 6, 2018 (our “2017 Form 20-F”). This discussion includes forward-looking statements which, although based on assumptions that we consider reasonable, are subject to risks and uncertainties which could cause actual events or conditions to differ materially from those currently anticipated and expressed or implied by such forward-looking statements. See also the discussion in the section entitled “Forward- Looking Statements” below.

Highlights

Our results of operations

Nine Months ended September 30, 2018 Compared with the Nine Months ended September 30, 2017

Revenues. The following table sets forth details of our revenues for the nine months ended September 30, 2018 and 2017:

Time charter revenues for the nine months ended September 30, 2018 were $107.7 million, an increase of $1.7 million from $106.0 million for the nine months ended September 30, 2017. Time charter revenues increased due to higher time charter revenue for the PGN FSRU Lampung for the nine months ended September 30, 2018 which was partially offset by lower time charter revenue for the Höegh Grace. The increase in revenues for the PGN FSRU Lampung was mainly due to recognition of revenue in the first and third quarters of 2018 for previously constrained variable consideration for reimbursement of prior period expenses following the conclusion of the charterer's audit process which was partially offset by the reduction in revenues for the Höegh Grace mainly related to one day of off-hire. Time charter revenues for the Höegh Gallant were at the same level for the nine months ended September 30, 2018 and 2017. The Höegh Gallant had 10 days of scheduled maintenance for the nine months ended September 30, 2018 compared with approximately 11 days of scheduled maintenance resulting in several days of reduced hire for the nine months ended September 30, 2017. We were indemnified by Höegh LNG for the prior period expenses for the PGN FSRU Lampung when they were incurred, subject to repayment to the extent recovered from reimbursement by the charterer. During the fourth quarter of 2018, we expect to refund to Höegh LNG approximately $1.0 million for the previous indemnification as a result of the revenue recognized for the reimbursement in the third quarter of 2018.

Other revenue consists of insurance proceeds received for claims related to repairs under a warranty provision related to the Mooring (as defined below) which were completed in 2017. Refer to "Construction Contract Expenses" below.

Time charter revenues for the PGN FSRU Lampung consist of the lease element of the time charter, accounted for as a direct financing lease using the effective interest rate method, as well as variable consideration for providing time charter services, reimbursement for vessel operating expenses, performance warranties, if any, and withholding taxes borne by the charterer. Time charter revenues for the Höegh Gallant consist of the fixed daily hire rate which covers the operating lease and the provision of time charter services including the costs incurred to operate the vessel and performance warranties, if any. Time charter revenues for the Höegh Grace consist of a lease element accounted for as an operating lease, as well as variable consideration for providing time charter services, reimbursement of vessel operating expenses, performance warranties, if any, and certain taxes incurred. Effective January 1, 2018, we adopted the new accounting standard, Revenue from Contracts with Customers, which did not change the timing or amount of revenue recognized but requires additional qualitative and quantitative disclosures. Refer to notes 2.c. and 5 in the unaudited condensed interim consolidated financial statements.

Vessel Operating Expenses. The following table sets forth details of our vessel operating expenses for the nine months ended September 30, 2018 and 2017:

Vessel operating expenses for the nine months ended September 30, 2018 were $17.0 million, a decrease of $0.7 million from the nine months ended September 30, 2017. The decrease was mainly due to lower vessel operating expenses for the Höegh Gallant and the Höegh Grace as a result of a more focused purchasing strategy for supplies.

Construction Contract Expenses. The following table sets forth details of our construction contract expenses for the nine months ended September 30, 2018 and 2017:

Construction contract expenses relate to an offshore installation that is used to moor the PGN FSRU Lampung to offload natural gas into an offshore pipe that transports the gas to a land terminal for the charterer, PGN LNG (the “Mooring”). The Mooring was constructed on behalf of, delivered and sold to, PGN LNG in 2014. As of December 31, 2014 and June 30, 2016, the Partnership recorded provisions for a warranty allowance of $2.0 million and $0.3 million, respectively, for technical issues that required the replacement of equipment parts for the Mooring. The warranty repair work, including the installation of the replacement parts, was completed during second quarter of 2017, and the final cost exceeded the remaining warranty allowance. As a result, an additional expense of $0.2 million was recorded. Part of the costs incurred for the remaining warranty replacements, net of deductible amounts, were anticipated to be recoverable under insurance coverage. Subsequent to June 30, 2018, $1.1 million of the insurance claim was received which was recognized as Other revenue for the six months ended June 30, 2018. We were indemnified by Höegh LNG for all warranty provisions at the time the costs were incurred, subject to repayment to the extent recovered by insurance. During the third quarter of 2018, approximately $1.1 million was refunded to Höegh LNG.

Administrative Expenses. The following table sets forth details of our administrative expenses for the nine months ended September 30, 2018 and 2017: 

Administrative expenses for the nine months ended September 30, 2018 were $7.0 million, a decrease of $0.3 million from $7.3 million for the nine months ended September 30, 2017. Reduced administrative expenses related to the entities operating the PGN FSRU Lampung, the Höegh Gallant and the Höegh Grace were partly offset by higher partnership expenses.

Depreciation and Amortization. The following table sets forth details of our depreciation and amortization for the nine months ended September 30, 2018 and 2017:

Depreciation and amortization was $15.8 million for each of the nine months ended September 30, 2018 and 2017.

Total Operating Expenses. The following table sets forth details of our total operating expenses for the nine months ended September 30, 2018 and 2017:  

Total operating expenses for the nine months ended September 30, 2018 were $39.8 million, a decrease of $1.1 million from $40.9 million for the nine months ended September 30, 2017. The decrease is mainly due to reduced vessel operating expenses and lower administrative expenses for the PGN FSRU Lampung, the Höegh Gallant and the Höegh Grace in the nine months ended September 30, 2018 compared to the corresponding period of 2017.

Equity in Earnings (Losses) of Joint ventures. The following table sets forth details of our equity in earnings (losses) of joint ventures for the nine months ended September 30, 2018 and 2017:

Equity in earnings of joint ventures for the nine months ended September 30, 2018 was $19.0 million, an increase of $20.0 million from equity in losses of joint ventures for the nine months ended September 30, 2017 of $1.0 million. Unrealized gains on derivative instruments in our joint ventures significantly impacted the equity in earnings (losses) of joint ventures for the nine months ended September 30, 2018 and 2017.  

Excluding the unrealized gains on derivative instruments for the nine months ended September 30, 2018 and 2017, the equity in earnings of joint ventures would have been $6.4 million for the nine months ended September 30, 2018, an increase of $10.9 million compared to equity in losses of joint ventures of $4.5 million for the nine months ended September 30, 2017. The increase was mainly due to the accruals for boil-off claims under the joint ventures' time charters for the nine months ended September 30, 2017. The Partnership's 50% share of the accruals was approximately $11.9 million for the nine months ended September 30, 2017. Refer to "Segments; Joint venture FSRUs" below and note 14 under "Joint ventures' claims and accruals" to the unaudited condensed interim consolidated financial statements contained in this Report on Form 6-K for additional information.

Our share of our joint ventures’ operating income was $16.2 million for the nine months ended September 30, 2018 compared to $6.0 million for the nine months ended September 30, 2017. Excluding the impact of the boil-off accruals for the nine months ended September 30, 2017, our joint ventures’ operating income decreased by $1.7 million mainly due to higher vessel operating and administrative expenses for the nine months ended September 30, 2018.

Our share of other income (expense), net, principally consisting of interest expense, was $9.8 million for the nine months ended September 30, 2018, a decrease of $0.7 million from $10.5 million for the nine months ended September 30, 2017, principally due to the repayment of outstanding loan balances for bank financing.

Our share of unrealized gain on derivative instruments was $12.6 million for the nine months ended September 30, 2018, an increase of $9.1 million from unrealized gain of $3.5 million for the nine months ended September 30, 2017.

There was no accrued income tax expense for the nine months ended September 30, 2018 and 2017. Our joint ventures did not pay any dividends for the nine months ended September 30, 2018 and 2017.

Operating Income (Loss). The following table sets forth details of our operating income (loss) for the nine months ended September 30, 2018 and 2017:

Operating income for the nine months ended September 30, 2018 was $88.0 million, an increase of $23.9 million from operating income of $64.1 million for the nine months ended September 30, 2017. Excluding the impact of the unrealized gains on derivatives for the nine months ended September 30, 2018 and 2017 impacting the equity in earnings (losses) of joint ventures, operating income for the nine months ended September 30, 2018 would have been $75.4 million, an increase of $14.9 million from $60.5 million for the nine months ended September 30, 2017. Excluding the unrealized gains on derivatives, the increase for the nine months ended September 30, 2018 is primarily due to the recognition of revenue for reimbursement of prior period expenses, receipt of insurance proceeds related to prior periods expenses, and increased equity in earnings of our joint ventures due to the impact from the accruals for boil-off claims for the joint ventures for the nine months ended September 30, 2017.

Interest Income. The following table sets forth details of our interest income for the nine months ended September 30, 2018 and 2017:

Interest income for the nine months ended September 30, 2018 was $0.5 million, an increase of $0.2 million from $0.3 million for the nine months ended September 30, 2017. Interest income is mainly related to cash balances and interest accrued on the advances to our joint ventures for the nine months ended September 30, 2018 and 2017, respectively. The interest rate under the shareholder loans is a fixed rate of 8.0% per year.

Interest Expense. The following table sets forth details of our interest expense for the nine months ended September 30, 2018 and 2017: 

Total interest expense for the nine months ended September 30, 2018 was $20.4 million, a decrease of $2.8 million from $23.2 million for the nine months ended September 30, 2017. Interest expense consists of the interest incurred, commitment fees and amortization of debt issuance cost and fair value of debt assumed for the period.

The interest incurred of $19.9 million for the nine months ended September 30, 2018, decreased by $2.0 million compared to $21.9 million for the nine months ended September 30, 2017, principally due to repayment of outstanding loan balances for the loan facilities related to the PGN FSRU Lampung (the “Lampung facility”), the Höegh Gallant (the “Gallant facility”) and the Höegh Grace (the “Grace facility”) and the repayment of the seller’s credit note in October 2017. The positive impact on interest expense of the repayment of the seller’s credit note was partially offset by the increased outstanding balance on the revolving credit facility.

Commitment fees were $0.04 million for the nine months ended September 30, 2018, a decrease of $0.69 million for the nine months ended September 30, 2017. The commitment fees relate to the undrawn balance of the $85 million revolving credit facility. On January 29, 2018, the revolving credit facility was amended to eliminate the requirement to pay a commitment fee on the undrawn balance of the facility as of that date.

Amortization of debt issuance cost and fair value of debt assumed was $0.5 million for the nine months ended September 30, 2018 compared to $0.6 million for the nine months ended September 30, 2017.

Gain (Loss) on Derivative Instruments. The following table sets forth details of our gain (loss) on derivative instruments for the nine months ended September 30, 2018 and 2017:

Gain on derivative instruments for the nine months ended September 30, 2018 was $1.7 million, an increase of $0.2 million from $1.5 million for the nine months ended September 30, 2017. Gain on derivative instruments for the nine months ended September 30, 2018 and 2017 related to the interest rate swaps for the Lampung facility, the Gallant facility and the Grace facility. The increase is mainly due to a higher loss on the ineffective portion of the cash flow hedges for the nine months ended September 30, 2017.

Other Items, Net. The following table sets forth details of our other items, net for the nine months ended September 30, 2018 and 2017:

Other items, net, were $2.3 million for the nine months ended September 30, 2018, a decrease of $0.6 million from $2.9 million for the nine months ended September 30, 2017. The decrease is mainly due to reduced foreign exchange loss.

Income (Loss) Before Tax. The following table sets forth details of our income (loss) before tax for the nine months ended September 30, 2018 and 2017:

Income before tax for the nine months ended September 30, 2018 was $67.5 million, an increase of $27.7 million from $39.8 million for the nine months ended September 30, 2017. The income before tax for both periods was impacted by unrealized gains on derivative instruments mainly on the Partnership’s share of equity in earnings (losses) of joint ventures. Excluding all the unrealized gains on derivative instruments, income before tax for the nine months ended September 30, 2018 was $53.2 million, an increase of $18.4 million from $34.8 million for the nine months ended September 30, 2017. Excluding the unrealized gain on derivative instruments, the increase is primarily due to higher revenues related to recovery of prior period expenses, lower total operating expenses and interest expense and increased equity in earnings (losses) of our joint ventures. 

Income Tax Expense. The following table sets forth details of our income tax expense for the nine months ended September 30, 2018 and 2017:

Income tax expense was $6.0 million for each of the nine months ended September 30, 2018 and 2017. We are not subject to Marshall Islands income taxes. However, we are subject to tax for earnings of our subsidiaries incorporated in Singapore, Indonesia, Colombia, Cyprus and the UK and certain Colombian source income. For the nine months ended September 30, 2018 and 2017, the income tax expense largely related to activities in Indonesia, Colombia and Singapore. The Singapore subsidiary’s taxable income mainly arises from internal interest income. The charterer in Colombia pays certain taxes directly to the Colombian tax authorities on behalf of the Partnership’s subsidiaries that own and operate the Höegh Grace ("the Höegh Grace entities"). The tax payments are a mechanism for advance collection of income taxes for the Colombian subsidiary and a final income tax on Colombian source income for the non-Colombian subsidiary. We concluded these third-party payments to the tax authorities represent income taxes that must be accounted for under the guidance for income taxes. The amount of non-cash income tax expense was $0.6 million for both the nine months ended September 30, 2018 and 2017.

Benefits of uncertain tax positions are recognized 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. For the nine months ended September 30, 2018 and 2017, the estimated generation of taxable income resulted in the utilization of $1.5 million and $0.3 million of tax loss carryforward in Indonesia which was not recognized due to the uncertainty of this tax position. As a result, an income tax payable of $1.5 million and $0.3 million was recorded for the uncertain tax position for the nine months ended September 30, 2018 and 2017, respectively. The Indonesian subsidiary is currently undergoing a tax examination for the fiscal years of 2013 and 2014. Tax examinations may lead to ordinary course adjustments or proposed adjustments to the Partnership's taxes or tax loss carryforwards with respect to years under examination. Such an examination may or may not result in changes to the Partnership’s provisions on tax filings from 2013 through 2017. Refer to note 14 to the unaudited condensed interim consolidated financial statements contained herein.

Net Income (Loss). The following table sets forth details of our net income (loss) for the nine months ended September 30, 2018 and 2017:

As a result of the foregoing, net income for the nine months ended September 30, 2018 was $61.5 million, an increase of $27.7 million from net income of $33.8 million for the nine months ended September 30, 2017. For the nine months ended September 30, 2017, net income of $8.5 million was attributable to non-controlling interest for the 49% interest in Höegh Colombia Holding, the owner of the Höegh Grace entities, not owned by us in the period from January 1, 2017 to September 30, 2017. On December 1, 2017, we acquired the remaining 49% ownership interest in the Höegh Grace entities and, as of that date, there was no longer a non-controlling interest in the Höegh Grace. For the nine months ended September 30, 2018, net income of $8.9 million was attributable to the holders of the Series A preferred units due the issuance of Series A preferred units on October 5, 2017 and subsequently as part of our at-the-market ("ATM") program. Our limited partners' interest in net income for the nine months ended September 30, 2018 was $52.6 million, an increase of $27.2 million from net income of $25.4 million for the nine months ended September 30, 2017.

Segments

There are two operating segments. The segment profit measure is Segment EBITDA, which is defined as earnings before interest, taxes, depreciation, amortization and other financial items (gains and losses on derivative instruments and other items, net) less the non-controlling interest in Segment EBITDA. Segment EBITDA is reconciled to operating income and net income in the segment presentation below. The two segments are “Majority held FSRUs” and “Joint venture FSRUs.” In addition, unallocated corporate costs that are considered to benefit the entire organization, interest income from advances to joint ventures and interest expense related to the seller’s credit note and the outstanding balance on the $85 million revolving credit facility are included in “Other.”

For the nine months ended September 30, 2018 and 2017, Majority held FSRUs includes the direct financing lease related to the PGN FSRU Lampung and the operating leases related to the Höegh Gallant and the Höegh Grace. For the nine months ended September 30, 2018 and 2017, Joint Venture FSRUs include two 50% owned FSRUs, the Neptune and the Cape Ann, that operate under long-term time charters with one charterer.

The accounting policies applied to the segments are the same as those applied in the financial statements, except that i) Joint Venture FSRUs are presented under the proportional consolidation method for the segment note and in the tables below, and under equity accounting for the consolidated financial statements and ii) non-controlling interest in Segment EBITDA is subtracted in the segment note and the tables below to reflect the Partnership’s interest in Segment EBITDA as the Partnership’s segment profit measure, Segment EBITDA. Under the proportional consolidation method, 50% of the Joint Venture FSRUs’ revenues, expenses and assets are reflected in the segment note. Management monitors the results of operations of joint ventures under the proportional consolidation method and not the equity method of accounting. On January 1, 2017, the Partnership began consolidating its acquired 51% interest in the Höegh Grace entities. Since the Partnership obtained control of the Höegh Grace entities, it consolidated 100% of the revenues, expenses, assets and liabilities of the Höegh Grace entities and the interest not owned by the Partnership was reflected as non-controlling interest in net income and non-controlling interest in total equity under US GAAP. Management monitored the results of operations of the Höegh Grace entities based on the Partnership’s 51% interest in Segment EBITDA of such entities and, therefore, subtracted the non-controlling interest in Segment EBITDA to present Segment EBITDA. The adjustment to non-controlling interest in Segment EBITDA is reversed to reconcile to operating income and net income in the segment presentation. On December 1, 2017, the Partnership acquired the remaining 49% ownership interest in the Höegh Grace entities and, as of that date, there is no longer a non-controlling interest in the Höegh Grace entities.

Majority held FSRUs. The following table sets forth details of segment results for the Majority held FSRUs for the nine months ended September 30, 2018 and 2017:

Time charter revenues for the nine months ended September 30, 2018 were $107.7 million, an increase of $1.7 million from the nine months ended September 30, 2017. As discussed in more detail above, the main reason for higher time charter revenues was higher revenues recognized for reimbursement of prior period expenses for the PGN FSRU Lampung following the conclusion of the charterer's audit process which was partially offset by lower revenues for the Höegh Grace mainly related to one day of off-hire. The Höegh Gallant had off-hire or reduced hire days principally related to scheduled maintenance for both the nine months ended September 30, 2018 and 2017. The PGN FSRU Lampung was on-hire for the nine months ended September 30, 2018 and 2017.

Other revenue consists of insurance proceeds received for claims related to repairs under a warranty provision related to the Mooring which were completed in 2017. The Partnership was indemnified by Höegh LNG for the cost of the repairs, subject to repayment to the extent recovered from insurance proceeds. During the third quarter of 2018, approximately $1.1 million was refunded to Höegh LNG which was recorded as cash distribution in equity. 

Vessel operating expenses for the nine months ended September 30, 2018 were $17.0 million compared to $17.7 million for the nine months ended September 30, 2017. The decrease reflects reduced vessel operating expenses for the Höegh Gallant and the Höegh Grace.

Construction contract expenses were $0.2 million for the nine months ended September 30, 2017. As discussed in more detail above, the expenses were for installation of replacement parts under a warranty related to the Mooring. 

Administrative expenses for the nine months ended September 30, 2018 were $2.4 million, a decrease of $0.5 million from $2.9 million for the nine months ended September 30, 2017, reflecting lower expenses for all the entities owning the vessels.

Segment EBITDA for the nine months ended September 30, 2018 was $89.4 million, an increase of $20.0 million from $69.4 million for the nine months ended September 30, 2017. The increase was mainly due to no longer having a non-controlling interest in Segment EBITDA because of the acquisition of the remaining 49% interest in the Höegh Grace entities, which closed on December 1, 2017. In addition, Segment EBITDA was positively impacted by the higher revenues related to prior periods expenses and lower vessel operating expenses.

Joint venture FSRUs. The following table sets forth details of segment results for the Joint venture FSRUs for the nine months ended September 30, 2018 and 2017:

Total time charter revenues for the nine months ended September 30, 2018 were $32.0 million, an increase of $0.4 million compared to $31.6 million for the nine months ended September 30, 2017. Higher time charter revenues for the nine months ended September 30, 2018 mainly reflects reimbursements of costs incurred for a new project for the charterer related to the Cape Ann.

For the nine months ended September 30, 2017, the joint ventures recorded accruals for boil-off claims made by the charterer under the Neptune and the Cape Ann time charters. The charterer and the joint ventures have referred the claim to arbitration. The charterer and the joint ventures have asked the arbitration panel for a partial award on certain key contractual interpretations and these proceedings commenced in November 2018. The joint ventures will continue to monitor this issue and adjust accruals, as might be required, based upon additional information and further developments. The Partnership's 50% share of the accruals was approximately $11.9 million which was recorded as a reduction of time charter revenues for the three months ended September 30, 2017, and as of September 30, 2018, the accruals were unchanged. Refer to note 14 under "Joint ventures' claims and accruals" to the unaudited condensed interim consolidated financial statements contained in this Report on Form 6-K for additional information.

Total revenues for the nine months ended September 30, 2018 were $32.0 million compared to $19.8 million for the nine months ended September 30, 2017. The increase in total revenue is mainly due to the accruals for the historical boil-off claim impacting the revenues negatively for the nine months ended September 30, 2017.

Vessel operating expenses were $7.4 million for the nine months ended September 30, 2018, an increase of $1.6 million compared to $5.8 million as of September 30, 2017. Lower on-going vessel operating expenses related to the operations of the Neptune in Turkey were offset by higher vessel operating expenses related to the Cape Ann for the nine months ended September 30, 2018 compared with the nine months ended September 30, 2017. The Cape Ann commenced drydock and modifications work in August 2018 and left the shipyard close to the end of September 2018 resulting in increased maintenance expenses for the nine months ended September 30, 2018. The Cape Ann was on-hire during the drydock period.

Administrative expenses for the nine months ended September 30, 2018 were $1.2 million, an increase of $0.7 million compared to $0.5 million for the nine months ended September 30, 2017. The higher administrative expenses were mainly due to a new project for the charterer related to the Cape Ann.

Segment EBITDA was $23.4 million for the nine months ended September 30, 2018 compared with $13.4 million for the nine months ended September 30, 2017. The main reason for the increase was the accruals for historical boil-off recorded in the nine months ended September 30, 2017. Excluding the impact of the boil-off accruals for the nine months ended September 30, 2017, Segment EBITDA decreased by $1.9 million mainly due to higher vessel operating and administrative expenses for the nine months ended September 30, 2018.

Other. The following table sets forth details of other results for the nine months ended September 30, 2018 and 2017:

Administrative expenses and Segment EBITDA for the nine months ended September 30, 2018 were $4.6 million, an increase of $0.2 million from $4.4 million for the nine months ended September 30, 2017.

Other financial income (expense), net, which is not part of the segment measure of profits, is related to the interest income accrued on the advances to our joint ventures and bank accounts and interest expense for a seller’s credit note, which was fully repaid in October 2017, and the $85 million revolving credit facility.

Other financial income (expense), net was an expense of $2.1 million for the nine months ended September 30, 2018, a decrease of $1.0 million from $3.1 million for the nine months ended September 30, 2017. The decrease is mainly due to reduced interest expense incurred on the revolving credit facility principally due to repayment and reduced outstanding loan balance on the revolving credit facility.

Three Months Ended September 30, 2018 Compared with the Three Months Ended September 30, 2017

Revenues. The following table sets forth details of our revenues for the three months ended September 30, 2018 and 2017:

Time charter revenues for the three months ended September 30, 2018 were $37.3 million, an increase of $1.4 million from the three months ended September 30, 2017. The increase was mainly due to higher time charter revenue for the PGN FSRU Lampung for the three months ended September 30, 2018 which was partially offset by reduced time charter revenue for the Höegh Grace due to one day of off-hire. The increase in revenues for the PGN FSRU Lampung was mainly due to recognition of revenue in the third quarter of 2018 for previously constrained variable consideration for the reimbursement of prior period expenses as a result of concluding an audit for the charterer. We were indemnified by Höegh LNG for the period expenses when they were incurred, subject to repayment to the extent recovered from reimbursement by the charterer. During the fourth quarter of 2018, we expect to refund to Höegh LNG approximately $1.0 million for the previous indemnification. The Höegh Gallant was on-hire for the entire three months ended September 30, 2018. During the three months ended September 30, 2017, there were several days of reduced hire equivalent to approximately one day of off-hire for the Höegh Gallant.

Vessel Operating Expenses. The following table sets forth details of our vessel operating expenses for the three months ended September 30, 2018 and 2017:

Vessel operating expenses for the three months ended September 30, 2018 were $5.8 million, a decrease of $0.1 million from the $5.9 million for the three months ended September 30, 2017. The decrease is mainly due to lower vessel operating expenses for the Höegh Gallant which is partially offset by increased vessel operating expenses for PGN FSRU Lampung.

Administrative Expenses. The following table sets forth details of our administrative expenses for the three months ended September 30, 2018 and 2017:

Administrative expenses were $2.1 million for each of the three months ended September 30, 2018 and 2017.

Depreciation and Amortization. The following table sets forth details of our depreciation and amortization for the three months ended September 30, 2018 and 2017:

Depreciation and amortization was $5.3 million for each of the three months ended September 30, 2018 and 2017.

Total Operating Expenses. The following table sets forth details of our total operating expenses for the three months ended September 30, 2018 and 2017: 

Total operating expenses were $13.2 million for each of the three months ended September 30, 2018 and 2017. 

Equity in Earnings (Losses) of Joint ventures. The following table sets forth details of our equity in earnings (losses) of joint ventures for the three months ended September 30, 2018 and 2017:

Equity in earnings of joint ventures for the three months ended September 30, 2018 was $4.6 million, an increase of $11.9 million from equity in losses of joint ventures of $7.3 million for the three months ended September 30, 2017. Unrealized gains on derivative instruments in our joint ventures significantly impacted the equity in earnings (losses) of joint ventures for the three months ended September 30, 2018 and 2017. 

Excluding the unrealized gains on derivative instruments for the three months ended September 30, 2018 and 2017, the equity in earnings of joint ventures would have been $1.4 million for the three months ended September 30, 2018, an increase of $10.5 million compared to equity in losses of joint ventures of $9.1 million for the three months ended September 30, 2017. The increase was mainly due to the accruals for boil-off claims under the joint ventures' time charters for the three months ended September 30, 2017. The Partnership's 50% share of the accruals was approximately $11.9 million for the three months ended September 30, 2017. Refer to "Segments; Joint venture FSRUs" below and note 14 under "Joint ventures' claims and accruals" to the unaudited condensed interim consolidated financial statements contained in this Report on Form 6-K for additional information.

Our share of our joint ventures’ operating income was $4.6 million for the three months ended September 30, 2018, an increase of $10.2 million compared with our share of our joint ventures' operating loss of $5.6 million for the three months ended September 30, 2017. Excluding the impact of the boil-off accruals for the three months ended September 30, 2017, our joint ventures’ operating income decreased by $1.7 million mainly due to higher vessel operating expenses for maintenance expenses for the three months ended September 30, 2018.

Our share of other expense, net, principally consisting of interest expense, was $3.2 million for the three months ended September 30, 2018, a decrease of $0.3 million from $3.5 million for the three months ended September 30, 2017.

Our share of unrealized gains on derivative instruments was $3.1 million for the three months ended September 30, 2018, an increase of $1.3 million from unrealized gains of $1.8 million for the three months ended September 30, 2017.

There was no accrued income tax expense for the three months ended September 30, 2018 and 2017. Our joint ventures did not pay any dividends for the three months ended September 30, 2018 and 2017.

Operating Income (Loss). The following table sets forth details of our operating income (loss) for the three months ended September 30, 2018 and 2017:

Operating income for the three months ended September 30, 2018 was $28.7 million, an increase of $13.4 million from operating income of $15.3 million for the three months ended September 30, 2017. Excluding the impact of the unrealized gains on derivatives for the three months ended September 30, 2018 and 2017 impacting the equity in earnings (losses) of joint ventures, operating income for the three months ended September 30, 2018 would have been $25.5 million, an increase of $12.0 million from $13.5 million for the three months ended September 30, 2017. The increase for the three months ended September 30, 2018 was primarily due to increase in equity in earnings (losses) of joint ventures mainly due to the historical boil-off claim that had a negative impact for the three months ended September 30, 2017 with no comparable accruals for the three months ended September 30, 2018.

Interest Income. The following table sets forth details of our interest income for the three months ended September 30, 2018 and 2017:

Interest income for the three months ended September 30, 2018 was $0.2 million, an increase of $0.1 million from $0.1 million for the three months ended September 30, 2017. Interest income is mainly related to cash balances and interest accrued on the advances to our joint ventures for the three months ended September 30, 2018 and 2017, respectively. The interest rate under the shareholder loans is a fixed rate of 8.0% per year.

Interest Expense. The following table sets forth details of our interest expense for the three months ended September 30, 2018 and 2017:

Total interest expense for the three months ended September 30, 2018 was $6.7 million, a decrease of $1.0 million from $7.7 million for the three months ended September 30, 2017. Interest expense consists of the interest incurred, commitment fees and amortization of debt issuance cost and fair value of debt assumed for the period.

The interest incurred of $6.5 million for the three months ended September 30, 2018, decreased by $0.8 million compared to $7.3 million for the three months ended September 30, 2017, principally due to repayment of outstanding loan balances for the Lampung facility, the Gallant facility and the Grace facility and the repayment of the seller's credit note in October 2017. The positive impact on interest expense of the repayment of the seller’s credit note was partially offset by the increased outstanding balance on the revolving credit facility.

There were no commitment fees for the three months ended September 30, 2018 compared with $0.2 million for the three months ended September 30, 2017. The commitment fees relate to the undrawn balance of the $85 million revolving credit facility. On January 29, 2018, the revolving credit facility was amended to eliminate the requirement to pay a commitment fee on the undrawn balance of the facility as of that date.

Amortization of debt issuance cost and fair value of debt assumed were $0.2 million for each of the three months ended September 30, 2018 and 2017.

Gain (Loss) on Derivative Instruments. The following table sets forth details of our gain (loss) on derivative instruments for the three months ended September 30, 2018 and 2017:

Gain on derivative instruments for the three months ended September 30, 2018 was $0.5 million, a decrease of $0.1 million compared to the three months ended September 30, 2017. Gain on derivative instruments for the three months ended September 30, 2018 and 2017 related to the interest rate swaps for the Lampung facility, the Gallant facility and the Grace facility. The decrease is mainly due to a lower amortization of amount excluded from hedge effectiveness for the three months ended September 30, 2018 compared with the three months ended September 30, 2017. 

Other Items, Net. The following table sets forth details of our other items, net for the three months ended September 30, 2018 and 2017:

Other items, net for the three months ended September 30, 2018 were $0.8 million, an increase of $0.2 million from $0.6 million for the three months ended September 30, 2017. The increase is mainly due to the increased net foreign exchange loss and increased bank charges, fees and other.

Income (Loss) Before Tax. The following table sets forth details of our income (loss) before tax for the three months ended September 30, 2018 and 2017:

Income before tax for the three months ended September 30, 2018 was $21.9 million, an increase of $14.3 million from $7.6 million for the three months ended September 30, 2017. The income before tax for both periods was impacted by the unrealized gains on derivative instruments mainly on the Partnership’s share of equity in earnings (losses) of joint ventures. Excluding all the unrealized gains on derivative instruments, income before tax for the three months ended September 30, 2018 was $18.3 million, an increase of $13.1 million from $5.2 million for the three months ended September 30, 2017. Excluding the unrealized gain on derivative instruments, the increase is primarily due to higher time charter revenues, an increase in equity in earnings (losses) of joint ventures and lower total financial expense, net, for the three months ended September 30, 2018 compared with the three months ended September 30, 2017.

Income Tax Expense. The following table sets forth details of our income tax expense for the three months ended September 30, 2018 and 2017:

Income tax expense for the three months ended September 30, 2018 was $2.1 million, a decrease of $0.1 million compared to $2.2 million for the three months ended September 30, 2017. We are not subject to Marshall Islands income taxes. However, we are subject to tax for earnings of our subsidiaries incorporated in Singapore, Indonesia, Colombia, Cyprus and the UK and certain Colombian source income. For the three months ended September 30, 2018 and 2017, the income tax expense largely related to activities in Singapore, Indonesia and Colombia. The charterer in Colombia pays certain taxes directly to the Colombian tax authorities on the Höegh Grace entities. 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. We concluded these third party payments to the tax authorities represent income taxes that must be accounted for under the guidance for income taxes. The amount of non-cash income tax expense was $0.2 million for each of the three months ended September 30, 2018 and 2017.

Benefits of uncertain tax positions are recognized 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. For the three months ended September 30, 2018 and 2017, the estimated generation of taxable income resulted in the utilization of $0.7 and $0.1 million, respectively, of tax loss carryforward in Indonesia which was not recognized due to the uncertainty of this tax position. The Indonesian subsidiary is currently undergoing a tax examination for the fiscal years of 2013 and 2014. The tax examinations may lead to ordinary course adjustments or proposed adjustments to the Partnership's taxes or tax loss carryforwards with respect to years under examination. Such an examination may or may not result in changes to the Partnership’s provisions on tax filings from 2013 through 2017. Refer to note 14 to the unaudited condensed interim consolidated financial statements contained herein.

Net Income (Loss). The following table sets forth details of our net income (loss) for the three months ended September 30, 2018 and 2017:

As a result of the foregoing, net income for the three months ended September 30, 2018 was $19.9 million, an increase of $14.5 million from net income of $5.4 million for the three months ended September 30, 2017. For the three months ended September 30, 2017, net income of $2.9 million was attributable to non-controlling interest for the 49% interest in Höegh Colombia Holding, the owner of the Höegh Grace entities, not owned by us in the period from July 1, 2017 to September 30, 2017. On December 1, 2017, we acquired the remaining 49% ownership interest in the Höegh Grace entities and, as of that date, there was no longer a non-controlling interest in the Höegh Grace. For the three months ended September 30, 2018, net income of $3.3 million was attributable to the holders of the Series A preferred units due the issuance of Series A preferred units on October 5, 2017 and subsequently as part of our ATM program. Our limited partners' interest in net income for the three months ended September 30, 2018 was $16.6 million, an increase of $14.1 million from net income of $2.5 million for the three months ended September 30, 2017.

Segments

Majority held FSRUs. The following table sets forth details of segment results for the Majority held FSRUs for the three months ended September 30, 2018 and 2017:

Time charter revenues for the three months ended September 30, 2018 were $37.3 million, an increase of $1.4 million from the three months ended September 30, 2017. As discussed above, higher time charter revenue for the PGN FSRU Lampung for the three months ended September 30, 2018 was partially offset by reduced time charter revenue for the Höegh Grace which was off-hire for one day.  

Vessel operating expenses for the three months ended September 30, 2018 were $5.8 million, a decrease of $0.1 million compared to $5.9 million for the three months ended September 30, 2017. The decrease is mainly due to lower vessel operating expenses for the Höegh Gallant which is partially offset by increased vessel operating expenses for PGN FSRU Lampung.

Administrative expenses for the three months ended September 30, 2018 were $0.7 million, a decrease of $0.1 million from $0.8 million for the three months ended September 30, 2017, mainly due to lower administrative expenses for the Höegh Gallant.

Segment EBITDA for the three months ended September 30, 2018 was $30.8 million, an increase of $7.0 million from $23.8 million for the three months ended September 30, 2017 mainly due to no longer having a non-controlling interest in Segment EBITDA because of the acquisition of the remaining 49% interest in the Höegh Grace entities, which closed on December 1, 2017. In addition, Segment EBITDA was positively impacted by higher time charter revenues.

Joint venture FSRUs. The following table sets forth details of segment results for the Joint venture FSRUs for the three months ended September 30, 2018 and 2017:

Total time charter revenues were $10.5 million for each of the three months ended September 30, 2018 and 2017. Time charter revenues for the three months ended September 30, 2018 reflected lower recovery of costs incurred related to the operations of the Neptune in Turkey and certain of the project expenses incurred for the Cape Ann.

For the three months ended September 30, 2017, the joint ventures recorded accruals for boil-off claims made by the charterer under the Neptune and the Cape Ann time charters as described above. Refer to note 14 under "Joint ventures claims' and accruals" to the unaudited condensed interim consolidated financial statements contained in this Report on Form 6-K for additional information.

Total revenues for the three months ended September 30, 2018 were $10.5 million compared to a negative revenue of $1.4 million for the three months ended September 30, 2017. The increase in total revenue is due to the accruals for the historical boil-off claim impacting the revenues negatively for the three months ended September 30, 2017.

Vessel operating expenses were $3.2 million for the three months ended September 30, 2018 compared to $1.6 million for the three months ended September 30, 2017. On-going vessel operating expenses related to the operations of the Neptune in Turkey increased. However, the majority of the increase in vessel operating expenses related to the Cape Ann. The Cape Ann commenced the drydock and modifications work in August 2018 and left the shipyard close to the end of September 2018. Approximately $1.3 million of the expenses were incurred for normal maintenance that was completed during the drydock and other maintenance upgrades to resolve performance issues or enhance safety which were not required by class requirements. Approximately $1.0 million of the expenses incurred during the drydock are not reimbursable by the charterer. The Cape Ann was on-hire during the drydock period.

The other drydock and vessel modifications costs for the charterer were capitalized as components of the vessel and will be depreciated over the period to the next drydock or over the useful live for the modifications. The majority of the capitalized drydock and modification costs are reimbursable by the charterer. The revenue for such reimbursements is deferred and will be amortized over the period to the next drydock or over the remaining time charter contract life.  

Administrative expenses for the three months ended September 30, 2018 were $0.3 million, an increase of $0.2 million compared to $0.1 million for the three months ended September 30, 2017 reflecting higher project expenses for both the Neptune and the Cape Ann.

Segment EBITDA was $7.0 million for the three months ended September 30, 2018 compared with a loss of $3.1 million for the three months ended September 30, 2017. Excluding the impact of the boil-off accruals for the three months ended September 30, 2017, Segment EBITDA decreased by $1.7 million due to higher vessel operating and administrative expenses for the three months ended September 30, 2018.

Other. The following table sets forth details of other results for the three months ended September 30, 2018 and 2017:

Administrative expenses and Segment EBITDA for the three months ended September 30, 2018 were $1.4 million, an increase of $0.1 million from $1.3 million for the three months ended September 30, 2017.

Other financial income (expense), net, which is not part of the segment measure of profits, is related to the interest income on cash balances and accrued on the advances to our joint ventures and interest expense for a seller’s credit note which was fully repaid in October 2017 and the $85 million revolving credit facility.

Other financial income (expense), net was an expense of $0.6 million for the three months ended September 30, 2018, a decrease of $0.5 million from $1.1 million for the three months ended September 30, 2017 principally due to lower interest expense, including commitment fees.

Liquidity and Capital Resources

Liquidity and Cash Needs

We operate in a capital-intensive industry, and we expect to finance the purchase of additional vessels and other capital expenditures through a combination of cash from operations, the utilization of borrowings from commercial banks and debt and equity financings. Our liquidity requirements relate to paying our unitholder distributions, servicing interest and quarterly repayments on our debt (“debt amortization”), funding working capital and maintaining cash reserves against fluctuations in operating cash flows. The liquidity requirements of our joint ventures relate to the servicing of debt, including repayment of shareholder loans, funding working capital, including drydocking and maintenance, and maintaining cash reserves against fluctuations in operating cash flows.

Our sources of liquidity include cash balances, cash flows from our operations, our current undrawn balance of $45.7 million as of September 30, 2018 under the $85 million revolving credit facility from Höegh LNG and net proceeds from our ATM program. Cash and cash equivalents are denominated primarily in U.S. dollars. We do not currently use derivative instruments for other purposes than managing interest rate risks. Historically, interest payments from our advances to joint ventures were a source of liquidity. The advances to our joint ventures (accrued interest from prior periods) are subordinated to the joint ventures’ long-term bank debt, consisting of the Neptune facility and the Cape Ann facility. Under terms of the shareholder loan agreements, the repayments shall be prioritized over any dividend payment to the owners of the joint ventures. As discussed in note 14 under "Joint ventures' claims and accruals" to the unaudited condensed interim consolidated financial statements, the joint ventures have recorded accruals for the probable liability for boil-off claim under the time charters. As a precaution, the joint ventures have suspended payments on the shareholder loans pending the outcome of the boil-off claim since the amounts and timing of a potential settlement are not clear. The suspension of the payments on the shareholder loans reduce cash flows available to us. In addition, as discussed in note 8, certain conditions apply to making distributions for the shareholder loans or dividends, including meeting a 1.20 historical and projected debt service ratio. As of September 30, 2018, the debt service ratio requirements were not met by either of the joint ventures. As a result, no distribution can be made unless the debt service ratio is met in future periods. Dividend distributions from our joint ventures require a) agreement of the other joint venture owners; b) fulfilment of requirements of the long-term bank loans; and c) under Cayman Islands law may be paid out of profits or capital reserves subject to the joint venture being solvent after the distribution. Dividends from Höegh Lampung may only be paid out of profits under Singapore law. Dividends from PT Höegh may only be paid if its retained earnings are positive under Indonesian law and requirements are fulfilled under the Lampung facility. In addition, PT Höegh, as an Indonesian incorporated company, is required to establish a statutory reserve equal to 20% of its paid up capital. The dividend can only be distributed if PT Höegh’s retained earnings are positive after deducting the statutory reserve. As of September 30, 2018, PT Höegh did not have adequate positive retained earnings to establish the required statutory reserves and therefore cannot make dividend payments under Indonesia law. However, subject to meeting a debt service ratio of 1.20 to 1.00, PT Höegh can distribute cash from its cash flow from operations to us as payment of intercompany accrued interest and/or intercompany debt, after quarterly payments of the Lampung facility and fulfilment of the “waterfall” provisions to meet operating requirements as defined by the Lampung facility. Under Cayman Islands law, Höegh FSRU III, Höegh FSRU IV and Höegh Colombia Holding may only pay distributions out of profits or capital reserves if the entity is solvent after the distribution. In addition, Höegh FSRU IV would also need to remain in compliance with the financial covenants under the Gallant/Grace facility. Dividends from Höegh Cyprus may only be distributed (i) out of profits and not from the share capital of the company and (ii) if after the dividend payment, Höegh Cyprus would remain in compliance with the financial covenants under the Gallant/Grace facility. Dividends from Höegh Colombia may only be distributed if after the dividend payment, Höegh Colombia would remain in compliance with the financial covenants under the Gallant/Grace facility.

For a description of our credit facilities and revolving credit facility, please see notes 14 and 17 to the audited consolidated financial statements contained in our 2017 Form 20-F as well as notes 9 and 11 to the unaudited condensed interim consolidated financial statements contained in this Report on Form 6-K. 

As of September 30, 2018, we do not have material commitments for capital expenditures for our current business. In the third quarter of 2018, the conclusion of an audit by the charterer of the PGN FSRU Lampung resulted in the recognition of $1.0 million of revenue related to 2016 costs to be reimbursed by the charterer. The Partnership had been indemnified for these costs and expects to refund Höegh LNG for the previous indemnification in the fourth quarter of 2018. For the joint ventures, the charterer of the Cape Ann plans to use the vessel for a new project. The vessel was drydocked and fitted with certain modifications during the third quarter of 2018 which will be compensated by the charterer. Additional expenses and capital expenditure will be incurred in the fourth quarter for the deliveries of certain equipment, the competition of service deliverables, including required documentation, and the replacement of spare parts for those used in the drydock. The majority of such expenditures are expected to be compensated by the charterer. As discussed in note 14 under "Joint ventures' claims and accruals" in our unaudited condensed interim consolidated financial statements, the joint ventures have a probable liability for a boil-off claim under the time charters. Our 50% share of the accruals was approximately $11.9 million as of September 30, 2018. The joint ventures will continue to monitor this issue and adjust accruals, as might be required, based upon additional information and further developments. The parties have referred the claim to arbitration. To the extent that excess boil-off claims result in a settlement, we would be indemnified by Höegh LNG for our share of the cash impact of any settlement. However, other concessions or capital improvements, if any, would not be expected to be indemnified. In addition, the joint ventures expect to incur costs for certain capital improvements and maintenance that will not be reimbursed by the charterer or Höegh LNG for which the Partnership's 50% share is approximately $1.8 million and $1.2 million for the years ended December 31, 2018 and 2019, respectively. As of September 30, 2018, the Cape Ann had completed a drydock and the Neptune had completed certain upgrades and the Partnership's share of the capital improvements and maintenance incurred was approximately $1.5 million. The capital improvements are expected to reduce boil-off in certain modes of operation and other maintenance upgrades address safety and other performance improvements.

On October 15, 2018, the Partnership announced that Höegh LNG and the government-owned Egyptian Natural Gas Holding Company (“EGAS”) have agreed to amend the time charter for the Höegh Gallant between Höegh LNG Egypt LLC, a wholly owned subsidiary of Höegh LNG ("EgyptCo"), and EGAS whereby EgyptCo will charter the Höegh Gallant on an LNG carrier time charter to a third party, and EGAS will compensate for the rate difference between the original FSRU charter and the new LNG carrier time charter. The amended contract structure became effective in October 2018 and expires in April 2020, the termination date of the original FSRU charter. A subsidiary of the Partnership, as the owner of the Höegh Gallant, has a lease and maintenance agreement ("LMA") with EgyptCo until April 2020. As a result of the amendment to EgyptCo's contract with EGAS, the LMA may become subject to amendment. All existing guarantees and the option provided by Höegh LNG to the Partnership would remain in place under any amendment to the LMA. Any such amendment will be subject to approval by the Conflicts Committee of the Board of Directors of the Partnership and would not be expected to have a material effect on the Partnership.

In January 2018, we entered into a sales agreement with B. Riley Inc. (the "Agent"). Under the terms of the sales agreement, the Partnership may sell up to $120 million aggregate offering amount of common and Series A preferred units (the "ATM program"), from time to time, through the Agent. During the three months ended September 30, 2018, we had sold 568,200 Series A preferred units at an average gross sales price of $25.67 per unit and received net proceeds, after sales commissions, of $14.3 million. During the three months ended September 30, 2018, we had sold 81,731 common units at an average gross price of $18.34 per unit and received net proceeds, after sales commissions, of $1.5 million. The Partnership has paid an aggregate of $0.3 million in sales commissions to the Agent in connection with such sales for the three months ended September 30, 2018. As of September 30, 2018, we had sold a total of 1,356,226 Series A preferred units at an average gross sales price of $25.77 per unit and received net proceeds, after sales commissions, of $34.3 million. As of September 30, 2018, we had sold a total of 253,106 common units at an average gross price of $18.26 per unit and received net proceeds, after sales commissions, of $4.6 million. The Partnership has paid an aggregate of $0.7 million in sales commissions to the Agent in connection with all such sales as of September 30, 2018. We used the net proceeds from sales under the ATM program for general partnership purposes, including repayment of the revolving credit facility and unit distribution payments.

As of September 30, 2018, we had cash and cash equivalents of $24.2 million and an undrawn portion of $45.7 million of the $85 million revolving credit facility. Current restricted cash for operating obligations of the PGN FSRU Lampung was $7.4 million and long-term restricted cash required under the Lampung facility was $13.2 million as of September 30, 2018.

The Partnership’s book value and outstanding principal of total long-term debt was $486.0 million and $490.9 million, respectively, as of September 30, 2018, including long-term debt financing our FSRUs and the revolving credit facility due to owners and affiliates. The long-term debt is repayable in quarterly installments of $11.4 million. For a description of our credit facilities, please see notes 14 and 17 to the audited consolidated financial statements contained in our 2017 Form 20-F, as well as note 9 to the unaudited condensed interim consolidated financial statements contained in this Report on Form 6-K.

As of September 30, 2018, the Partnership had outstanding interest rate swap agreements for a total notional amount of $386.0 million to hedge against the interest rate risks of its long-term debt under the Lampung, Gallant and Grace facilities. For additional information, refer to “Qualitative and Quantitative Disclosure About Market Risk” and note 13 to the unaudited condensed interim consolidated financial statements. As of September 30, 2018, the Partnership’s total current liabilities exceeded total current assets by $9.4 million. This is partly a result of the current portion of long-term debt of $45.5 million being classified current while the restricted cash of $13.2 million associated with the Lampung facility is classified as long-term. The current portion of long-term debt reflects principal payments for the next twelve months which will be funded, for the most part, by future cash flows from operations. We do not intend to maintain a cash balance to fund our next twelve months’ net liabilities. We believe our cash flows from operations, including distributions to us from PT Höegh, Höegh Cyprus, and Höegh FSRU IV as payment of intercompany interest and/or intercompany debt or dividends, will be sufficient to meet our debt amortization and working capital needs and maintain cash reserves against fluctuations in operating cash flows. In addition, we require liquidity to pay distributions to our unitholders. Our available balance on the $85 million revolving credit facility provides a source of liquidity reserve to supplement funding of our distributions and other general liquidity needs. In addition, liquidity can also be supplemented, from time to time, by net proceeds of the ATM program, depending on the market conditions. We believe our current resources, including the undrawn balance on the revolving credit facility, are sufficient to meet our working capital requirements for our current business for the next twelve months. Further as discussed below, the Partnership has commitments to refinance the Gallant/ Grace facility well in advance of its first maturity in November 2019.

On August 14, 2018, the Partnership paid a quarterly cash distribution with respect to the quarter ended June 30, 2018 of $0.44 per common and subordinated unit. The total amount of the distribution was $15.0 million.

On August 15, 2018, the Partnership paid a quarterly cash distribution of $0.546875 per Series A preferred unit. The total amount of the distribution paid on August 15, 2018, was $3.2 million

On August 21, 2018, we repaid $6.0 million on the revolving credit facility using part of the net proceeds of the ATM program.

On November 14, 2018, the Partnership paid a quarterly cash distribution with respect to the quarter ended September 30, 2018 of $0.44 per common and subordinated unit. The total amount of the distribution was $15.0 million.

On November 15, 2018 the Partnership paid a quarterly cash distribution of $0.546875 per Series A preferred unit. The total amount of the distribution paid on November 15, 2018 was $3.4 million.

For the period from October 1, 2018 to November 27, 2018, we sold 172,844 Series A preferred units under our ATM program at an average gross sales price of $25.52 per unit and received net proceeds, after sales commissions, of $4.3 million. For the period from October 1, 2018 to November 27, 2018, we sold no additional common units under our ATM program. We have paid an aggregate of $0.1 million in sales commissions to the Agent in connection with all such sales in the period from October 1, 2018 to November 27, 2018. From the commencement of the ATM program, the Partnership has sold 1,529,070 Series A preferred units and 253,106 common units, and received net proceeds of $38.7 million and $4.6 million, respectively. The compensation paid to the Agent for such sales was $0.7 million.

In November 2018, the Partnership received commitment letters from a syndicate of banks for refinancing of the outstanding balances of the Gallant /Grace facility. The new facility will include a senior secured term loan and revolving credit facilities of up to the lesser of $385 million and 65% of the fair market value of the Höegh Gallant and 75% of the fair market value of the Höegh Grace as of the initial borrowing date. The new facility is structured as a term loan with commercial and export credit tranches for each vessel to refinance outstanding amounts under the existing facility of approximately $320 million and a revolving credit facility for the Partnership with a drawing capacity of approximately $65 million. With respect to the export credit tranche, the new facility may be utilized by way of continuation of the export credit tranches under the existing Gallant /Grace facility. The term loan will be repayable in quarterly installments with a balloon payment at final maturity of seven years for the commercial tranches. The outstanding balance on the revolving credit facility will be payable in full at the final maturity date in seven years. The export credit tranches will be fully repaid on October 30, 2026 and March 30, 2028 for the Gallant facility and the Grace facility, respectively, assuming the balloon payments of the commercial tranches are refinanced. If not, the export credit agent can exercise a prepayment right for repayment of the outstanding balance upon maturity of the commercial tranches. The commercial tranches and revolving credit facility will bear interest at a rate of LIBOR plus a margin of 2.30%. The export credit tranche will bear interest at a fixed interest rate of 2.38% and have a guarantee commission of 1.6%. The Partnership expects to swap the floating element of the interest rate for the commercial tranches. The revolving credit facility under the new facility will be drawn to repay the outstanding balance under the revolving credit facility provided to the Partnership by Höegh LNG. The remaining balance on the revolving credit facility will be available to be drawn for general partnership purposes. The commitment fee on the undrawn portion of the revolving credit facility will be approximately 1.6%. The new facility is expected to be drawn in January 2019.

Cash Flows

The following table summarizes our net cash flows from operating, investing and financing activities and our cash, cash equivalents and restricted cash for the periods presented:

Nine Months ended September 30, 2018 Compared with the Nine Months ended September 30, 2017

Net Cash Provided by (Used in) Operating Activities

Net cash provided by operating activities was $65.4 million for the nine months ended September 30, 2018, an increase of $3.7 million compared with $61.7 million for the nine months ended September 30, 2017. Before changes in working capital, cash provided by operating activities was $64.2 million for the nine months ended September 30, 2018, an increase of $3.2 million compared to the $61.0 million for the nine months ended September 30, 2017 primarily due to increased earnings in the Majority held FRSU segment which was partially offset by the reduction on interest payments on advances to joint ventures for the nine months ended September 30, 2018 compared with the nine months ended September 30, 2017. Changes in working capital increased net cash provided by operating activities by $1.2 million for the nine months ended September 30, 2018, an increase of $0.5 million from a contribution of $0.7 million for the nine months ended September 30, 2017.

Net Cash Provided by (Used in) Investing Activities

Net cash provided by investing activities was $2.8 and $6.0 million for the nine months ended September 30, 2018 and 2017, respectively. The decrease in net cash provided by investing activities of $3.2 million was primarily the result of $3.8 million in cash acquired in the purchase of the initial 51% interest in the Höegh Grace entities for the nine months ended September 30, 2017 partly offset by the cash settlement of working capital adjustment for the 51% interest in the Höegh Grace entities of $0.4 million for the nine months ended September 30, 2017. For the nine months ended September 30, 2018, cash provided by investing activities included $2.8 million in receipts of repayment on principal on the direct financing lease since the PGN FSRU Lampung charter is accounted for as a financial lease compared to $2.6 million for the corresponding period of 2017. 

Net Cash Provided by (Used in) Financing Activities

Net cash used in financing activities for the nine months ended September 30, 2018 was $66.6 million compared with net cash used in financing activities of $66.1 million for the nine months ended September 30, 2017.

Net cash used in financing activities for the nine months ended September 30, 2018 was mainly due to the repayment of $14.3 million on the Lampung facility, $9.9 million on the Gallant facility, $9.9 million on the Grace facility and $17.5 million on the revolving credit facility, payment of $3.7 million on a customer loan for funding of VAT on import in Indonesia, payment of cash distributions to our common and subordinated unitholders of $44.4 million, payment of cash distribution to the holders of our Series A preferred units of $9.7 million and payment of a refund for indemnifications received from Höegh LNG of $1.1 million due to receipt of insurance proceeds. This was partially offset by receipt of $5.4 million under the revolving credit facility and net proceeds of $4.5 million and $34.0 million for the issuance of common units and Series A preferred units, respectively, under our ATM program.

Net cash used in financing activities for the nine months ended September 30, 2017 was mainly due to the repayment of $14.3 million on the Lampung facility, $9.9 million on the Gallant facility, $9.9 million on the Grace facility, payment of $1.3 million on a customer loan for funding of VAT on import in Indonesia, payment of cash distributions to our common and subordinated unitholders of $42.6 million and cash distributions to non-controlling interest of $5.9 million. This was partially offset by receipt of $15.7 million under the revolving credit facility and $2.1 million from Höegh LNG for the indemnification claimed for non-budgeted expenses and losses. 

As a result of the foregoing, cash and cash equivalents and restricted cash increased by $1.6 million for the nine months ended September 30, 2018 and 2017.

Three Months Ended September 30, 2018 Compared with the Three Months Ended September 30, 2017

Net Cash Provided by (Used in) Operating Activities

Net cash provided by operating activities was $25.4 million for the three months ended September 30, 2018, an increase of $2.3 million compared with $23.1 million for the three months ended September 30, 2017. Before changes in working capital, cash provided by operating activities was $22.7 million for the three months ended September 30, 2018, an increase of $1.5 million compared to $21.2 million for the three months ended September 30, 2017. The increase was primarily due to increased earnings in the Majority held FRSU segment which was partially offset by the reduction on interest payments on advances to joint ventures for the three months ended September 30, 2018 compared with the three months ended September 30, 2017. Changes in working capital increased net cash provided by operating activities by $2.7 million for the three months ended September 30, 2018, an increase of $0.8 million from a contribution of $1.9 million for the three months ended September 30, 2017.

Net Cash Provided by (Used in) Investing Activities

Net cash provided by investing activities was $1.0 and $0.9 million for the three months ended September 30, 2018 and 2017, respectively. The increase in net cash provided by investing activities of $0.1 million was primarily the result of increase in receipts of repayment on principal on the direct financing lease since the PGN FSRU Lampung charter is accounted for as a financial lease. 

Net Cash Provided by (Used in) Financing Activities

Net cash used in financing activities for the three months ended September 30, 2018 was $21.9 million compared with $22.7 million for the three months ended September 30, 2017.

Net cash used in financing activities for the three months ended September 30, 2018 was mainly due to the quarterly repayment of $4.8 million on the Lampung facility, $3.3 million on the Gallant facility and $3.3 million on the Grace facility, repayment of $6.0 million on the revolving credit facility, payment of $1.2 million on a customer loan for funding of VAT on import in Indonesia, payment of cash distributions to our common and subordinated unitholders of $15.0 million, payment of cash distribution to the holders of our Series A preferred units of $3.2 million and payment of refund for indemnifications received from Höegh LNG of $1.1 million. This was partially offset by receipt of net proceeds of $1.6 million and $14.4 million for issuance of common units and Series A preferred units, respectively, under our ATM program.

Net cash used in financing activities for the three months ended September 30, 2017 was mainly due to the quarterly repayment of $4.8 million on the Lampung facility, $3.3 million on the Gallant facility and $3.3 million on the Grace facility, our payment of cash distributions to our common and subordinated unitholders of $14.4 million and cash distributions to non-controlling interest of $2.0 million. This was partially offset by receipt of $4.0 million under the revolving credit facility and $1.1 million from Höegh LNG for the indemnification claims.

As a result of the foregoing, cash and cash equivalents and restricted cash increased by $4.5 million and $1.2 million for the three months ended September 30, 2018 and 2017, respectively.

Qualitative and Quantitative Disclosures About Market Risk

We are exposed to various market risks, including foreign exchange risk, interest rate risk, credit risk and concentrations of risk.

Foreign Exchange Risk

All financing, interest expenses from financing and most of the Partnership’s revenue and expenditures for vessel improvements are denominated in U.S. dollars. Certain operating expenses can be denominated in currencies other than U.S. dollars. For the three and nine months ended September 30, 2018, and 2017, no derivative financial instruments have been used to manage foreign exchange risk. The Gallant time charter provides that revenues are denominated 90% in U.S. dollars and 10% in Egyptian pounds, or as otherwise agreed between the parties from time to time. For the three and nine months ended September 30, 2018 and 2017, the revenues from the Höegh Gallant were denominated 97% in U.S. dollars and 3% in Egyptian pounds. A limited amount of operating expenses was also denominated in Egyptian pounds. Due to restrictions in Egypt, exchangeability between Egyptian pounds and other currencies was more than temporarily lacking or limited during 2017. There are two official published rates for Egyptian pounds. The lower rate is applied in the Partnership’s consolidated financial statements for revenues, expenses, assets and liabilities. For all of 2017 and for the three and nine months ended September 30, 2018, the Partnership agreed to the payment of monthly revenues denominated in Egyptian pounds that aligned with its working capital needs for the next month which reduced its foreign exchange rate exposure and the risk of loss to a minimal amount in the event Egyptian pound was devalued.  

Interest Rate Risk

Interest rate swaps are utilized to exchange a receipt of floating interest for a payment of fixed interest to reduce the exposure to interest rate variability on our outstanding floating-rate debt. As of September 30, 2018, there are interest rate swap agreements on the Lampung, Gallant and Grace facilities floating rate debt that are designated as cash flow hedges for accounting purposes. As of September 30, 2018, the following interest rate swap agreements were outstanding: 

Credit Risk

Credit risk is the exposure to credit loss in the event of non-performance by the counterparties related to cash and cash equivalents, restricted cash, trade receivables and interest rate swap agreements. In order to minimize counterparty risk, bank relationships are established with counterparties with acceptable credit ratings at the time of the transactions. Credit risk related to receivables is limited by performing ongoing credit evaluations of the customers’ financial condition. In addition, Höegh LNG guarantees the payment of the Höegh Gallant time charter hire by EgyptCo under certain circumstances. PGN also guarantees PGN LNG's obligations under the PGN FSRU Lampung time charter. The other time charters do not have parent company guarantees.

Concentrations of Risk

Financial instruments, which potentially subject the Partnership to significant concentrations of credit risk, consist principally of cash and cash equivalents, restricted cash, trade receivables and derivative contracts (interest rate swaps). The maximum exposure to loss due to credit risk is the book value at the balance sheet date. The Partnership does not have a policy of requiring collateral or security. Cash and cash equivalents and restricted cash are placed with qualified financial institutions. Periodic evaluations are performed of the relative credit standing of those financial institutions. In addition, exposure is limited by diversifying among counterparties. There are three charterers so there is a concentration of risk related to trade receivables. Credit risk related to trade receivables is limited by performing ongoing credit evaluations of the customer’s financial condition. In addition, Höegh LNG guarantees the payment of the Höegh Gallant time charter hire by EgyptCo under certain circumstances. No impairment loss was recorded for the three and nine months ended September 30, 2018 and 2017 and the year ended December 31, 2017. While the maximum exposure to loss due to credit risk is the book value of trade receivables at the balance sheet date, should any of the time charters for the PGN FSRU Lampung, the Höegh Gallant or the Höegh Grace terminate prematurely, there could be delays in obtaining a new time charter and the rates could be lower depending upon the prevailing market conditions.

Non-GAAP Financial Measure

Segment EBITDA. EBITDA is defined as earnings before interest, depreciation and amortization and taxes. Segment EBITDA is defined as earnings before interest, depreciation and amortization, taxes and other financial items less non-controlling interest in Segment EBITDA. Other financial items consist of gains and losses on derivative instruments and other items, net (including foreign exchange gains and losses and withholding tax on interest expense). Segment EBITDA is used as a supplemental financial measure by management and external users of financial statements, such as the Partnership's lenders, to assess its financial and operating performance. The Partnership believes that Segment EBITDA assists its management and investors by increasing the comparability of its performance from period to period and against the performance of other companies in the industry that provide Segment EBITDA information. This increased comparability is achieved by excluding the potentially disparate effects between periods or companies of interest, other financial items, depreciation and amortization and taxes, which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which items may significantly affect net income between periods. The Partnership believes that including Segment EBITDA as a financial and operating measure benefits investors in (a) selecting between investing in it and other investment alternatives and (b) monitoring its ongoing financial and operational strength in assessing whether to continue to hold common units. Segment EBITDA is a non-GAAP financial measure and should not be considered an alternative to net income, operating income or any other measure of financial performance presented in accordance with U.S. GAAP. Segment EBITDA excludes some, but not all, items that affect net income, and these measures may vary among other companies. Therefore, Segment EBITDA as presented below may not be comparable to similarly titled measures of other companies. The following tables reconcile Segment EBITDA for each of the segments and the Partnership as a whole to net income (loss), the comparable U.S. GAAP financial measure, for the periods presented:

FORWARD LOOKING STATEMENTS

This report contains certain forward-looking statements concerning future events and our operations, performance and financial condition. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words “believe,” “anticipate,” “expect,” “estimate,” “project,” “will be,” “will continue,” “will likely result,” “plan,” “intend” or words or phrases of similar meanings. These statements involve known and unknown risks and are based upon a number of assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which are beyond our control. Actual results may differ materially from those expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially include, but are not limited to:

All forward-looking statements included in this report are made only as of the date of this report. New factors emerge from time to time, and it is not possible for the Partnership to predict all of these factors. Further, the Partnership cannot assess the impact of each such factor on its business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement. The Partnership does not intend to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.

HÖEGH LNG PARTNERS LP

INDEX TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

HÖEGH LNG PARTNERS LP

UNAUDITED CONDENSED INTERIM CONSOLIDATED
STATEMENTS OF INCOME

(in thousands of U.S. dollars, except per unit amounts)