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Table of Contents

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 June 30, 2020

Commission File Number 001-36588

Höegh LNG Partners LP

(Translation of registrant’s name into English)

Wessex House, 5th 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                 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    

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    

Table of Contents

HÖEGH LNG PARTNERS LP

REPORT ON FORM 6-K FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2020

Table of Contents

Page

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

3

 

FORWARD LOOKING STATEMENTS

28

 

INDEX TO FINANCIAL STATEMENTS

F-1

 

Unaudited Condensed Interim Consolidated Statements of Income for the Three and Six Months Ended June 30, 2020 and 2019

F-2

 

Unaudited Condensed Interim Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2020 and 2019

F-3

 

Unaudited Condensed Interim Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019

F-4

 

Unaudited Condensed Interim Consolidated Statements of Changes in Partners’ Capital for the Six Months Ended June 30, 2020 and the Year Ended December 31, 2019

F-6

 

Unaudited Condensed Interim Consolidated Statements of Cash Flows for the Three and Six Months Ended June 30, 2020 and 2019

F-7

 

Notes to Unaudited Condensed Interim Consolidated Financial Statements

F-9

 

EXHIBITS

29

SIGNATURE

30

2

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 six months ended June 30, 2020 and 2019. 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 Höegh LNG Lampung Pte Ltd., a wholly owned subsidiary of our operating company. References in this report to “Höegh Cyprus” refer to Höegh LNG Cyprus Limited including its wholly owned branch, Höegh LNG Cyprus Limited Egypt Branch (“Egypt Branch”), a wholly owned subsidiary of our operating company and the owner of the Höegh Gallant. References in this report to “PT Höegh” refer to PT Höegh 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 Annual Report to “Global LNG Supply” refer to Global LNG Supply S.A. and references to “Total Gas & Power” refer to Total Gas & Power Ltd, subsidiaries of Total S.A. (“Total”). References in this Report to “PGN LNG” refer to PT PGN LNG Indonesia, a subsidiary of PT Perusahaan Gas Negara (Persero) Tbk (“PGN”), a subsidiary of PT Pertamina. 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 June 30, 2020 and for the periods ended June 30, 2020 and 2019 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 3, 2020 (our “2019 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

·

Implemented measures to mitigate the risks from the COVID-19 pandemic and ensure health and safety of crews and staff, whose wellbeing is our highest priority

·

100% availability of FSRUs for the second quarter of 2020

·

Reported total time charter revenues of $34.4 million for the second quarter of 2020 compared to $33.8 million of time charter revenues for the second quarter of 2019

·

Generated operating income of $27.7 million, net income of $19.7 million and limited partners interest in net income of $16.0 million for the second quarter of 2020 compared to operating income of $15.3 million, net income of $6.2 million and limited partners interest in net income of $2.8 million for the second quarter of 2019; operating income, net income and limited partners interest in net income were impacted by unrealized gains on derivative instruments for the second quarter of 2020 compared with unrealized losses on derivative instruments for the second quarter of 2019 mainly on the Partnership's share of equity in earnings (losses) of joint ventures in the second quarter of 2020 and 2019

·

On April 30, 2020, entered into a lease and maintenance agreement (the Subsequent Charter) with a subsidiary of Höegh LNG for the time charter of the Höegh Gallant. The Subsequent Charter commenced on May 1, 2020 and expires on July 31, 2025

·

On August 14, 2020, paid a $0.44 per unit distribution on common units with respect to the second quarter of 2020, equivalent to $1.76 per unit on an annualized basis

3

·

On August 17, 2020, paid a cash distribution of $0.546875 per 8.75% Series A cumulative redeemable preferred unit ("Series A preferred unit"), for the period commencing on May 15, 2020 to August 14, 2020

On August 6, 2020, we announced that Mr. Steffen Føreid intends to step down from his position as the Partnership's Chief Executive Officer and Chief Financial Officer. On August 19, 2020, we announced that Mr. Føreid’s resignation will take effect on August 21, 2020 (the “Effective Date”). The President & CEO of Höegh LNG Holdings Ltd., Sveinung J.S. Støhle, will become the Partnership's Chief Executive Officer.
In addition, as of the Effective Date, Håvard Furu will become the Partnership’s Chief Financial Officer. Mr. Furu also serves as the Chief Financial Officer of Höegh LNG. Håvard Furu has served as Chief Financial Officer for Höegh LNG since March 2019. From 2017 until February 2019, Mr. Furu served as the chief financial officer of the law firm Wikborg Rein. From 2009 to 2017, he was the chief financial officer of Western Bulk, a drybulk carrier operator. From 2005 to 2009, Mr. Furu was employed by BW Gas in various positions within the finance area, including Assistant Director Strategy and Finance. From 1997 until 2005 he held various positions within auditing with PriceWaterhouse Coopers. Mr. Furu holds a BSc Economics and Business Administration as well as being a Chartered Accountant from the Norwegian School of Business and Administration (NHH) in Bergen, Norway.

4

Our results of operations

Three months ended

Six months ended

June 30,

June 30,

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

    

2020

    

2019

    

2020

    

2019

Statement of Income Data:

Time charter revenues

$

34,436

 

33,777

 

71,122

$

69,852

Other revenue

 

 

 

 

64

Total revenues

 

34,436

 

33,777

 

71,122

 

69,916

Vessel operating expenses

 

(5,776)

 

(9,064)

 

(11,283)

 

(14,957)

Administrative expenses

 

(2,155)

 

(2,272)

 

(4,583)

 

(4,848)

Depreciation and amortization

 

(5,234)

 

(5,589)

 

(10,516)

 

(10,912)

Total operating expenses

 

(13,165)

 

(16,925)

 

(26,382)

 

(30,717)

Equity in earnings (losses) of joint ventures

 

6,475

 

(1,575)

 

(3,572)

 

(1,223)

Operating income (loss)

 

27,746

 

15,277

 

41,168

 

37,976

Interest income

 

163

 

297

 

335

 

496

Interest expense

 

(6,322)

 

(7,148)

 

(12,833)

 

(13,984)

Gain (loss) on debt extinguishment

 

 

 

 

1,030

Other items, net

 

(487)

 

(759)

 

(1,134)

 

(1,806)

Income (loss) before tax

 

21,100

 

7,667

 

27,536

 

23,712

Income tax expense

 

(1,419)

 

(1,511)

 

(2,381)

 

(3,421)

Net income (loss)

$

19,681

 

6,156

 

25,155

$

20,291

Preferred unitholders' interest in net income

 

3,668

 

3,378

 

7,337

 

6,742

Limited partners’ interest in net income (loss)

$

16,013

 

2,778

 

17,818

$

13,549

Earnings per unit

 

  

 

  

 

  

 

  

Common unit public (basic and diluted)

$

0.47

$

0.07

$

0.51

$

0.38

Common unit Höegh LNG (basic and diluted)

$

0.50

$

0.10

$

0.56

$

0.44

Subordinated unit Höegh LNG (basic and diluted)

$

$

0.10

$

$

0.44

Cash Flow Data:

 

  

 

  

 

  

 

  

Net cash provided by (used in) operating activities

$

23,325

$

17,706

$

37,336

$

39,581

Net cash provided by (used in) investing activities

 

(8)

 

(140)

 

(8)

 

(140)

Net cash provided by (used in) financing activities

$

(25,380)

$

(23,791)

$

(53,133)

$

(36,868)

Other Financial Data:

 

  

 

  

 

  

 

  

Segment EBITDA(1)

$

35,984

$

30,960

$

72,110

$

67,080

(1)

Segment EBITDA is a non-GAAP financial measure. Please read “Non-GAAP Financial Measure” for a definition of Segment EBITDA and a reconciliation of Segment EBITDA to net income, the comparable U.S. GAAP financial measure.

5

Six Months Ended June 30, 2020 Compared with the Six Months Ended June 30, 2019

Time Charter Revenues. The following table sets forth details of our time charter revenues for the six months ended June 30, 2020 and 2019:

Positive

Six months ended June 30,

(negative)

(in thousands of U.S. dollars)

    

2020

    

2019

    

variance

Time charter revenues

$

71,122

$

69,852

$

1,270

Time charter revenues for the six months ended June 30, 2020 were $71.1 million, an increase of $1.2 million from $69.9 million for the six months ended June 30, 2019. The increase was mainly due to higher time charter revenue for the Höegh Gallant for the six months ended June 30, 2020. During the second quarter of 2019, the Höegh Gallant had a scheduled drydock for which it was off-hire and had reduced hire to cover certain payments to the charterer for LNG consumption related to the drydock. For the Höegh Gallant, the increase in revenues was due to the vessel being on-hire for the full six months ended June 30, 2020 compared with the equivalent of approximately 16 days of off-hire due to the scheduled drydock for the six months ended June 30, 2019.

Time charter revenues for the PGN FSRU Lampung consist of the lease element of the time charter, accounted for as a 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 and current income 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.

On April 30, 2020, the Subsequent Charter was executed with a subsidiary of Höegh LNG for the time charter of the Höegh Gallant. The hire rate under the Subsequent Charterer is equal to 90% of the rate payable pursuant to the prior charter of the Höegh Gallant, subject to certain adjustments for i) avoided FSRU related costs only when operating in LNG carrier mode and ii) higher incremental taxes and operating expenses when operating in FSRU mode. The Subsequent Charter commenced on May 1, 2020 and expires on July 31, 2025.

Other revenue. The following table sets forth details of our other revenue for the six months ended June 30, 2020 and 2019:

Positive

Six months ended June 30,

(negative)

(in thousands of U.S. dollars)

   

2020

   

2019

   

Variance

Other revenue

$

$

64

$

(64)

Other revenue for the six months ended June 30, 2019 consists of insurance proceeds received for a claim related to the PGN FSRU Lampung's warranty work from prior periods.

Vessel Operating Expenses. The following table sets forth details of our vessel operating expenses for the six months ended June 30, 2020 and 2019:

Positive

Six months ended June 30,

(negative)

(in thousands of U.S. dollars)

    

2020

    

2019

    

Variance

Vessel operating expenses

$

(11,283)

$

(14,957)

$

3,674

Vessel operating expenses for the six months ended June 30, 2020 were $11.3 million, a decrease of $3.7 million from $15.0 million for the six months ended June 30, 2019. The lower expenses mainly reflected a decrease in maintenance expense of approximately $3.0 million included in vessel operating expenses principally for the Höegh Gallant but also for the PGN FSRU Lampung. During the scheduled drydock of the Höegh Gallant and the on-water survey of the PGN FSRU Lampung in 2019, maintenance procedures were also performed. The remaining decrease was due to lower ongoing vessel operating expenses during the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

6

Administrative Expenses. The following table sets forth details of our administrative expenses for the six months ended June 30, 2020 and 2019:

Positive

Six months ended June 30,

(negative)

(in thousands of U.S. dollars)

    

2020

    

2019

    

Variance

Administrative expenses

$

(4,583)

$

(4,848)

$

265

Administrative expenses for the six months ended June 30, 2020 were $4.6 million, a decrease of $0.3 million from $4.8 million for the six months ended June 30, 2019. The decrease mainly reflects lower administrative expenses for partnership expenses.

Depreciation and Amortization. The following table sets forth details of our depreciation and amortization for the six months ended June 30, 2020 and 2019:

  

Positive

Six months ended June 30,

(negative)

(in thousands of U.S. dollars)

    

2020

    

2019

    

Variance

Depreciation and amortization

$

(10,516)

$

(10,912)

$

396

Depreciation and amortization for the six months ended June 30, 2020 were $10.5 million, a decrease of $0.4 million from $10.9 million for the six months ended June 30, 2019. In the second quarter of 2019, a drydock was completed for the Höegh Gallant. As a result, the remaining depreciation for the drydock component of the vessel was expensed.

Total Operating Expenses. The following table sets forth details of our total operating expenses for the six months ended June 30, 2020 and 2019:

Positive

Six months ended June 30,

(negative)

(in thousands of U.S. dollars)

    

2020

    

2019

    

Variance

Total operating expenses

$

(26,382)

$

(30,717)

$

4,335

Total operating expenses were $26.4 million for the six months ended June 30, 2020, a decrease of $4.3 million from $30.7 million in the six months ended June 30, 2019. The decrease is principally a result of the lower vessel operating expenses and depreciation mainly due to maintenance performed during the drydock for the Höegh Gallant and the on-water class renewal survey for the PGN FSRU Lampung during the second quarter of 2019.

Equity in Earnings (Losses) of Joint Ventures. The following table sets forth details of our equity in earnings (losses) of joint ventures for the six months ended June 30, 2020 and 2019:

Positive

Six months ended June 30,

(negative)

(in thousands of U.S. dollars)

    

2020

    

2019

    

Variance

Equity in earnings (losses) of joint ventures

$

(3,572)

$

(1,223)

$

(2,349)

Equity in losses of joint ventures for the six months ended June 30, 2020 was $3.6 million, an increase of $2.4 million from equity in losses of joint ventures of $1.2 million for the six months ended June 30, 2019. Unrealized losses on derivative instruments in our joint ventures significantly impacted the equity in losses of joint ventures for the six months ended June 30, 2020 and 2019.

Excluding the unrealized losses on derivative instruments for the six months ended June 30, 2020 and 2019, the equity in earnings of joint ventures would have been $5.9 million for the six months ended June 30, 2020, compared to $6.0 million for the six months ended June 30, 2019.

Our share of our joint ventures’ operating income was $11.9 million for the six months ended June 30, 2020, compared with $12.0 million for the six months ended June 30, 2019. Our share of other financial expense, net, principally consisting of interest income and interest expense, was $6.0 million for the six months ended June 30, 2020 and 2019. For the six months ended June 30, 2020, there was lower interest expense due to repayment of principal on debt between the two periods which was largely offset by lower interest income compared with the six months ended June 30, 2019.

7

Our share of unrealized loss on derivative instruments was $9.5 million for the six months ended June 30, 2020, an increase of $2.3 million from an unrealized loss of $7.2 million for the six months ended June 30, 2019.

There was no accrued income tax expense for our joint ventures for the six months ended June 30, 2020 and 2019. Our joint ventures did not pay any dividends for the six months ended June 30, 2020 and 2019.

Operating Income (Loss). The following table sets forth details of our operating income for the six months ended June 30, 2020 and 2019:

Positive

Six months ended June 30,

(negative)

(in thousands of U.S. dollars)

    

2020

    

2019

    

Variance

Operating income (loss)

$

41,168

$

37,976

$

3,192

Operating income for the six months ended June 30, 2020 was $41.2 million, an increase of $3.2 million from operating income of $38.0 million for the six months ended June 30, 2019. Excluding the impact of the unrealized losses on derivatives impacting the equity in losses of joint ventures for the six months ended June 30, 2020 and 2019, operating income for the six months ended June 30, 2020 would have been $50.7 million, an increase of $5.5 million from $45.2 million for the six months ended June 30, 2019. Excluding the impact of the unrealized losses on derivatives, the increase for the six months ended June 30, 2020 is primarily due to higher time charter revenue as a result of off-hire related to the drydock for the Höegh Gallant during the second quarter of 2019 and lower vessel operating expenses as a result of the maintenance performed for the Höegh Gallant and the PGN FSRU Lampung during the second quarter of 2019.

Interest Income. The following table sets forth details of our interest income for the six months ended June 30, 2020 and 2019:

Positive

Six months ended June 30,

(negative)

(in thousands of U.S. dollars)

    

2020

    

2019

    

Variance

Interest income

$

335

$

496

$

(161)

Interest income for the six months ended June 30, 2020 was $0.3 million, a decrease of $0.2 million from interest income of $0.5 million for the six months ended June 30, 2019. Interest income is mainly related to interest on cash balances and accrued interest on the advances to our joint ventures for the six months ended June 30, 2020 and 2019. The interest rate under the joint venture 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 six months ended June 30, 2020 and 2019:

    

    

    

    

Positive

Six months ended June 30,

(negative)

(in thousands of U.S. dollars)

2020

2019

Variance

Interest expense

$

(11,482)

$

(12,801)

$

1,319

Amortization and gain on cash flow hedge

 

(112)

 

192

 

(304)

Commitment fees

 

(69)

 

(260)

 

191

Amortization of debt issuance cost and fair value of debt assumed

 

(1,170)

 

(1,115)

 

(55)

Total interest expense

$

(12,833)

$

(13,984)

$

1,151

Total interest expense was $12.8 million for the six months ended June 30, 2020, a decrease of $1.2 million from $14.0 million for the six months ended June 30, 2019. 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 $11.5 million for the six months ended June 30, 2020, decreased by $1.3 million compared to $12.8 million for the six months ended June 30, 2019. The decrease was principally due to repayment of outstanding loan balances for the loan facilities related to the PGN FSRU Lampung (the "Lampung facility") and the commercial and export credit tranches of the $385 million facility financing the Höegh Gallant, the Höegh Grace and the Partnership's liquidity needs (the "$385 million facility").

8

Amortization and gain on cash flow hedge were a loss of $0.1 million and a gain of $0.2 million for the six months ended June 30, 2020 and 2019, respectively. For the six months ended June 30, 2020, the loss solely related to amortization of amounts excluded from hedge effectiveness for discontinued hedges and the initial fair values of interest rate swaps. For the six months ended June 30, 2019, the gain was mainly due to the inclusion of a gain on the settlement of the interest rate swaps terminated when the Gallant/Grace facility was extinguished.

Commitment fees were $0.1 million for the six months ended June 30, 2020, a decrease of $0.2 million from the six months ended June 30, 2019. For the six months ended June 30, 2020 and 2019, the commitment fees relate to the undrawn $63 million revolving credit facility under the $385 million facility.

Amortization of debt issuance cost and fair value of debt assumed for the six months ended June 30, 2020 were $1.2 million, an increase of $0.1 million from $1.1 million for the six months ended June 30, 2019. The increase in amortization of debt issuance cost and fair value of debt assumed was mainly a result of the refinancing and repayment of the Gallant/Grace facility with the $385 million facility on January 31, 2019. Debt issuance costs of $5.8 million were deferred and are amortized on an effective interest rate method over the term of the $385 million facility.

Gain (Loss) on Debt Extinguishment. The following table sets forth details of our gain (loss) on debt extinguishment for the six months ended June 30, 2020 and 2019:

    

    

    

    

Positive

Six months ended June 30,

(negative)

(in thousands of U.S. dollars)

2020

2019

variance

Gain (loss) on debt extinguishment

$

$

1,030

$

(1,030)

Gain on debt extinguishment for the six months ended June 30, 2019 was $1.0 million. Gain on debt extinguishment for the six months ended June 30, 2019 related to the repayment of the Gallant/Grace facility on January 31, 2019. The unamortized amounts related to the fair value of debt assumed, or premium, recognized in relation to the acquisitions of the entities owning the Höegh Gallant on October 1, 2015 and the entities owning the Höegh Grace on January 1, 2017, of approximately $1.0 million, was recognized as a gain on January 31, 2019 due to the extinguishment of the Gallant/Grace facility.

Other Items, Net. The following table sets forth details of our other items, net for the six months ended June 30, 2020 and 2019:

    

    

    

    

Positive

Six months ended June 30,

(negative)

(in thousands of U.S. dollars)

2020

2019

variance

Foreign exchange gain (loss)

$

214

$

(55)

$

269

Bank charges, fees and other

 

(127)

 

(138)

 

11

Withholding tax on interest expense and other

 

(1,221)

 

(1,613)

 

392

Total other items, net

$

(1,134)

$

(1,806)

$

672

Other items, net for the six months ended June 30, 2020 were $1.1 million, a decrease of $0.7 million from $1.8 million for the six months ended June 30, 2019. The decrease is mainly due lower withholding tax on interest expense of $0.4 million for the six months ended June 30, 2020 compared to same period last year.

Income (Loss) Before Tax. The following table sets forth details of our income (loss) before tax for the six months ended June 30, 2020 and 2019:

    

    

    

    

Positive

Six months ended June 30,

(negative)

(in thousands of U.S. dollars)

2020

2019

variance

Income (loss) before tax

$

27,536

$

23,712

$

3,824

Income before tax for the six months ended June 30, 2020 was $27.5 million, an increase of $3.8 million from $23.7 million for the six months ended June 30, 2019. The income before tax for both periods was impacted by the unrealized losses on derivative instruments mainly on our share of equity in losses of joint ventures. Excluding all the unrealized losses on derivative instruments, income before tax for the six months ended June 30, 2020 would have been $37.1 million, an increase of $6.2 million from $30.9 million for the six months June 30, 2019. Excluding the unrealized losses on derivative instruments, the increase is primarily due to higher time charter revenue and lower vessel operating expenses and total financial income (expense), net.

9

Income Tax Expense. The following table sets forth details of our income tax expense for the six months ended June 30, 2020 and 2019:

    

    

  

    

Positive

Six months ended June 30,

(negative)

(in thousands of U.S. dollars)

2020

2019

variance

Income tax expense

$

(2,381)

$

(3,421)

$

1,040

Income tax expense for the six months ended June 30, 2020 was $2.4 million, a decrease of $1.0 million compared to $3.4 million for the six months ended June 30, 2019. The main reason for the decrease was the reduction of the tax rate in Indonesia which was enacted on March 31, 2020. The tax rate decreased from 25% for 2019 to 22% for 2020 and 2021 with further reduction to occur thereafter. The effect of changes in tax rates on deferred tax assets and liabilities is recognized at the date of enactment. We are not subject to Marshall Islands income taxes. However, we are subject to tax for earnings of our subsidiaries incorporated in Singapore, Indonesia, and for certain Colombian source income. The charterer in Colombia pays certain taxes directly to the Colombian tax authorities on behalf of our subsidiaries that own and operate the Höegh Grace. The tax payments are a mechanism for advance collection of part of the income taxes for the Colombian subsidiary and a final income tax on Colombian source income for the non-Colombian subsidiary. 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 $0.4 million for each of the six months ended June 30, 2020 and 2019.

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 each of the six months ended June 30, 2020 and 2019, there were increases in uncertain tax positions of $0.2 million. As of June 30, 2020, the unrecognized tax benefits were $2.5 million.

Net Income (Loss). The following table sets forth details of our net income for the six months ended June 30, 2020 and 2019:

    

    

  

    

Positive

Six months ended June 30,

(negative)

(in thousands of U.S. dollars)

2020

2019

variance

Net income (loss)

$

25,155

$

20,291

$

4,864

Preferred unitholders' interest in net income

 

7,337

 

6,742

 

595

Limited partners’ interest in net income (loss)

$

17,818

$

13,549

$

4,269

As a result of the foregoing, net income for the six months ended June 30, 2020 was $25.2 million, an increase of $4.9 million from net income of $20.3 million for the six months ended June 30, 2019. For the six months ended June 30, 2020, net income of $7.3 million was attributable to the holders of the Series A preferred units, an increase of $0.6 million from $6.7 million due to additional preferred units issued as part of our at-the-market offering program (“ATM program”). Our limited partners' interest in net income for the six months ended June 30, 2020 was $17.8 million, an increase of $4.3 million from limited partners’ interest in net income of $13.5 million for the six months ended June 30, 2019.

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 (gain (loss) on debt extinguishment, gain (loss) on derivative instruments and other items, net). 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, interest income from advances to joint ventures, and interest expense related to the outstanding balances on the $85 million revolving credit facility and the $385 million facility are included in “Other.”

For the six months ended June 30, 2020 and 2019, Majority held FSRUs includes the financing lease related to the PGN FSRU Lampung and the operating leases related to the Höegh Gallant and the Höegh Grace.

For the six months ended June 30, 2020 and 2019, Joint Venture FSRUs include two 50% owned FSRUs, the Neptune and the Cape Ann, that operate under long-term time charters with one charterer.

10

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) internal interest income and interest expense between the Partnership's subsidiaries that eliminate in consolidation are not included in the segment columns for the other financial income (expense), net line. 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.

Majority Held FSRUs. The following table sets forth details of segment results for the Majority Held FSRUs for the six months ended June 30, 2020 and 2019:

    

Six months ended

    

Positive

Majority Held FSRUs

June 30,

(negative)

(in thousands of U.S. dollars)

2020

2019

variance

Time charter revenues

$

71,122

$

69,852

$

1,270

Other revenues

 

 

64

 

(64)

Total revenues

 

71,122

 

69,916

 

1,206

Vessel operating expenses

 

(11,283)

 

(14,957)

 

3,674

Administrative expenses

 

(1,563)

 

(1,626)

 

63

Segment EBITDA

 

58,276

 

53,333

 

4,943

Depreciation and amortization

 

(10,516)

 

(10,912)

 

396

Operating income (loss)

 

47,760

 

42,421

 

5,339

Gain (loss) on debt extinguishment

 

 

1,030

 

(1,030)

Other financial income (expense), net

 

(4,781)

 

(6,926)

 

2,145

Income (loss) before tax

 

42,979

 

36,525

 

6,454

Income tax expense

 

(2,381)

 

(3,421)

 

1,040

Net income (loss)

$

40,598

$

33,104

$

7,494

Time charter revenues for the six months ended June 30, 2020 were $71.1 million compared to $69.9 million for the six months ended June 30, 2019. As discussed above, the increase was mainly due to higher time charter revenue for the Höegh Gallant. The Höegh Gallant was on-hire for the full six months period ended June 30, 2020 compared with an equivalent of 16 days of off-hire due to the scheduled drydock for the six months ended June 30, 2019. The PGN FSRU Lampung and the Höegh Grace were both on-hire for the full six months periods ended June 30, 2020 and 2019.

Other revenue for the six months ended June 30, 2019 consists of insurance proceeds received for a claim related to the PGN FSRU Lampung's warranty work from prior periods.

Vessel operating expenses for the six months ended June 30, 2020 were $11.3 million, a decrease of $3.7 million from $15.0 million for the six months ended June 30, 2019. The lower expenses mainly reflected a decrease in maintenance expense of approximately $3.0 million included in vessel operating expenses principally for the Höegh Gallant but also for the PGN FSRU Lampung. During the scheduled drydock of the Höegh Gallant and the on-water survey of the PGN FSRU Lampung in 2019, maintenance procedures were also performed. The remaining decrease was due to lower ongoing vessel operating expenses during the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

Administrative expenses for the six months ended June 30, 2020 and 2019 were $1.6 million.

Segment EBITDA for the six months ended June 30, 2020 was $58.3 million, an increase of $4.9 million from $53.3 million for the six months ended June 30, 2019. The Segment EBITDA was positively impacted by no off-hire days for the Höegh Gallant and lower vessel operating expenses for the six months ended June 30, 2020 compared with the six months ended June 30, 2019.

11

Joint Venture FSRUs. The following table sets forth details of segment results for the Joint Venture FSRUs for the six months ended June 30, 2020 and 2019:

    

Six months ended

    

Positive

Joint Venture FSRUs

June 30,

(negative)

(in thousands of U.S. dollars)

2020

2019

Variance

Time charter revenues

$

22,666

$

21,081

$

1,585

Vessel operating expenses

 

(5,223)

 

(3,374)

 

(1,849)

Administrative expenses

 

(589)

 

(738)

 

149

Segment EBITDA

 

16,854

 

16,969

 

(115)

Depreciation and amortization

 

(4,984)

 

(5,005)

 

21

Operating income (loss)

 

11,870

 

11,964

 

(94)

Gain (loss) on derivative instruments

 

(9,490)

 

(7,190)

 

(2,300)

Other income (expense), net

 

(5,952)

 

(5,997)

 

45

Income (loss) before tax

 

(3,572)

 

(1,223)

 

(2,349)

Income tax expense

 

 

 

Net income (loss)

$

(3,572)

$

(1,223)

$

(2,349)

Total time charter revenues for the six months ended June 30, 2020 were $22.7 million, an increase of $1.6 million compared to $21.1 million for the six months ended June 30, 2019. Higher time charter revenues for the six months ended June 30, 2020 reflects higher reimbursement of costs incurred for maintenance and projects of the charterer.

Vessel operating expenses were $5.2 million for the six months ended June 30, 2020, an increase of $1.8 million compared to $3.4 million for the six months ended June 30, 2019. The increase in vessel operating expenses was mainly due to higher maintenance expenses for the Cape Ann for the six months ended June 30, 2020. In addition, there were higher expenses due to the charterer's project in India, which was partially offset by the reversal of accrued indirect taxes due to the charterer’s decision during the second quarter of 2020 not to deploy the Cape Ann in India.

Administrative expenses for the six months ended June 30, 2020 were $0.6 million, a decrease of $0.1 million from $0.7 million for the six months ended June 30, 2019.

Segment EBITDA was $16.9 million for the six months ended June 30, 2020 compared with $17.0 million for the six months ended June 30, 2019.

Other. The following table sets forth details of other results for the six months ended June 30, 2020 and 2019:

    

Six months ended

    

Positive

Other

June 30,

(negative)

(in thousands of U.S. dollars)

2020

2019

variance

Administrative expenses

$

(3,020)

$

(3,222)

$

202

Segment EBITDA

 

(3,020)

 

(3,222)

 

202

Operating income (loss)

 

(3,020)

 

(3,222)

 

202

Other financial income (expense), net

 

(8,851)

 

(8,368)

 

(483)

Income (loss) before tax

 

(11,871)

 

(11,590)

 

(281)

Income tax expense

 

 

 

Net income (loss)

$

(11,871)

$

(11,590)

$

(281)

Administrative expenses and Segment EBITDA for the six months ended June 30, 2020 were $3.0 million, a decrease of $0.2 million compared to $3.2 million for the six months ended June 30, 2019.

Other financial income (expense), net, which is not part of the segment measure of profits, includes interest incurred, commitment fees and amortization of debt issuance costs, related to the $385 million facility. In addition, other financial income (expense), net also includes the interest income accrued on the advances to our joint ventures and interest expenses related to the $85 million revolving credit facility from Höegh LNG.

12

Other financial income (expense), net was an expense of $8.9 million for the six months ended June 30, 2020, an increase of $0.5 million from an $8.4 million expense for the six months ended June 30, 2019. The increase was principally due to higher interest expense on the $385 million facility for the six months ended June 30, 2020 compared with June 30, 2019. Since the facility was drawn on January 31, 2019, interest expense, including amortization of debt issuance cost, was only recognized for five months for the six months ended June 20, 2019.

Three Months Ended June 30, 2020 Compared with the Three Months Ended June 30, 2019

Time Charter Revenues. The following table sets forth details of our time charter revenues for the three months ended June 30, 2020 and 2019:

    

    

  

    

Positive

Three months ended June 30,

(negative)

(in thousands of U.S. dollars)

2020

2019

variance

Time charter revenues

$

34,436

$

33,777

$

659

Time charter revenues for the three months ended June 30, 2020 were $34.4 million, an increase of $0.6 million from $33.8 million for the three months ended June 30, 2019. The increase was mainly due to higher time charter revenue for the Höegh Gallant for the three months ended June 30, 2020. During the second quarter of 2019, the Höegh Gallant had a scheduled drydock for which it was off-hire and had reduced hire to cover certain payments to the charterer for LNG consumption related to the drydock. For the Höegh Gallant, the reduction in revenues was equivalent to approximately 16 days of off-hire for the three months ended June 30, 2019. The impact of increased time charter revenues from the Höegh Gallant for the three months ended June 30, 2020 was partially offset by lower revenues for reimbursable costs mainly for the PGN FSRU Lampung. The Höegh Gallant, the PGN FSRU Lampung and the Höegh Grace were all on-hire for the full three months period ended June 30, 2020.

Vessel Operating Expenses. The following table sets forth details of our vessel operating expenses for the three months ended June 30, 2020 and 2019:

Positive

Three months ended June 30,

(negative)

(in thousands of U.S. dollars)

    

2020

    

2019

    

variance

Vessel operating expenses

$

(5,776)

$

(9,064)

$

3,288

Vessel operating expenses for the three months ended June 30, 2020 were $5.8 million, a decrease of $3.3 million from $9.1 million for the three months ended June 30, 2019. The lower expense mainly reflected a decrease in maintenance expense of approximately $3.0 million included in vessel operating expenses principally for the Höegh Gallant. During the scheduled drydock in 2019 of the Höegh Gallant, maintenance procedures were performed. The remaining decrease was due to lower ongoing vessel operating expenses during the three months ended June 30, 2020 compared to the three months ended June 30, 2019.

Administrative Expenses. The following table sets forth details of our administrative expenses for the three months ended June 30, 2020 and 2019:

Positive

Three months ended June 30,

(negative)

(in thousands of U.S. dollars)

    

2020

2019

variance

Administrative expenses

$

(2,155)

$

(2,272)

$

117

Administrative expenses for the three months ended June 30, 2020 were $2.2 million, a decrease of $0.1 million from $2.3 million for the three months ended June 30, 2019.

Depreciation and Amortization. The following table sets forth details of our depreciation and amortization for the three months ended June 30, 2020 and 2019:

Positive

Three months ended June 30,

(negative)

(in thousands of U.S. dollars)

    

2020

    

2019

    

variance

Depreciation and amortization

$

(5,234)

$

(5,589)

$

355

13

Depreciation and amortization for the three months ended June 30, 2020 were $5.2 million, a decrease of $0.4 million from $5.6 million for the three months ended June 30, 2019. In the second quarter of 2019, a drydock was completed for the Höegh Gallant. As a result, the remaining depreciation for the drydock component of the vessel was expensed.

Total Operating Expenses. The following table sets forth details of our total operating expenses for the three months ended June 30, 2020 and 2019:

Positive

Three months ended June 30,

(negative)

(in thousands of U.S. dollars)

    

2020

    

2019

    

variance

Total operating expenses

$

(13,165)

$

(16,925)

$

3,760

Total operating expenses were $13.2 million for the three months ended June 30, 2020, a decrease of $3.7 million from $16.9 million in the three months ended June 30, 2019. The decrease is primarily a result of the lower vessel operating expenses mainly due to maintenance performed during the drydock for the Höegh Gallant and the on-water class renewal survey for the PGN FSRU Lampung during the second quarter of 2019.

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 June 30, 2020 and 2019:

Positive

Three months ended June 30,

(negative)

(in thousands of U.S. dollars)

    

2020

    

2019

    

variance

Equity in earnings (losses) of joint ventures

$

6,475

$

(1,575)

$

8,050

Equity in earnings of joint ventures for the three months ended June 30, 2020 was $6.5 million, an increase of $8.1 million from equity in losses of joint ventures of $1.6 million for the three months ended June 30, 2019. Unrealized gains and losses on derivative instruments in our joint ventures significantly impacted the equity in earnings (losses) of joint ventures for the three months ended June 30, 2020 and 2019.

Excluding the unrealized gain on derivative instruments for the three months ended June 30, 2020 and the unrealized loss on derivative instruments for the three months ended June 30, 2019, the equity in earnings of joint ventures would have been $4.2 million for the three months ended June 30, 2020, an increase of $1.1 million from $3.1 million for the three months ended June 30, 2019.

Our share of our joint ventures’ operating income was $7.0 million for the three months ended June 30, 2020, compared with $6.1 million for the three months ended June 30, 2019.

Our share of other financial expense, net, principally consisting of interest income and interest expense, was $2.9 million for the three months ended June 30, 2020 compared with $3.0 million for the three months ended June 30, 2019.

Our share of unrealized gain on derivative instruments was $2.3 million for the three months ended June 30, 2020, an increase of $6.9 million from an unrealized loss of $4.6 million for the three months ended June 30, 2019.

The income tax benefit for the three months ended June 30, 2020 was $0.1 million. There was no corresponding income tax for the for the three months ended June 30, 2019. Our joint ventures did not pay any dividends for the three months ended June 30, 2020 and 2019.

Operating Income (Loss). The following table sets forth details of our operating income for the three months ended June 30, 2020 and 2019:

Positive

Three months ended June 30,

(negative)

(in thousands of U.S. dollars)

    

2020

    

2019

    

variance

Operating income (loss)

$

27,746

$

15,277

$

12,469

14

Operating income for the three months ended June 30, 2020 was $27.7 million, an increase of $12.4 million from operating income of $15.3 million for the three months ended June 30, 2019. Excluding the impact of the unrealized gains (losses) on derivatives impacting the equity in earnings (losses) of joint ventures for the three months ended June 30, 2020 and 2019, operating income for the three months ended June 30, 2020 would have been $25.5 million, an increase of $5.6 million from $19.9 million for the three months ended June 30, 2019. Excluding the impact of the unrealized gains (losses) on derivatives, the increase for the three months ended June 30, 2020 is primarily due to higher time charter revenue as a result of off-hire related to the drydock for the Höegh Gallant in 2019, lower vessel operating expenses as a result of the maintenance performed for the Höegh Gallant and the PGN FSRU Lampung in 2019 and improved results for the equity in earnings of joint ventures.

Interest Income. The following table sets forth details of our interest income for the three months ended June 30, 2020 and 2019:

Positive

Three months ended June 30,

(negative)

(in thousands of U.S. dollars)

    

2020

    

2019

    

variance

Interest income

$

163

$

297

$

(134)

Interest income for the three months ended June 30, 2020 was $0.2 million, a decrease of $0.1 million from interest income of $0.3 million for the three months ended June 30, 2019. Interest income is mainly related to interest on cash balances and accrued interest on the advances to our joint ventures for the three months ended June 30, 2020 and 2019.

Interest Expense. The following table sets forth details of our interest expense for the three months ended June 30, 2020 and 2019:

Positive

Three months ended June 30,

(negative)

(in thousands of U.S. dollars)

    

2020

    

2019

    

variance

Interest expense

$

(5,688)

$

(6,337)

$

649

Amortization related to cash flow hedge

 

(22)

 

(24)

 

2

Commitment fees

 

(34)

 

(148)

 

114

Amortization of debt issuance cost

 

(578)

 

(639)

 

61

Total interest expense

$

(6,322)

$

(7,148)

$

826

Total interest expense was $6.3 million for the three months ended June 30, 2020, a decrease of $0.8 million from $7.1 million for the three months ended June 30, 2019. Interest expense consists of the interest incurred, commitment fees and amortization of debt issuance cost for the period.

The interest incurred of $5.7 million for the three months ended June 30, 2020, decreased by $0.6 million compared to $6.3 million for the three months ended June 30, 2019. The decrease was principally due to repayment of outstanding loan balances for the Lampung facility and the commercial and export credit tranches of the $385 million facility.

Amortization related to cash flow hedge was a loss of $0.02 million for the three months ended June 30, 2020 and 2019 and solely related to amortization of the amounts excluded from hedge effectiveness for discontinued hedges and the initial fair values of interest rate swaps.

Commitment fees for the three months ended June 30, 2020 decreased by $0.1 million compared with $0.1 million for the three months ended June 30, 2019. The commitment fees relate to the undrawn portion of the revolving credit facility under the $385 million facility.

Amortization of debt issuance cost for the three months ended June 30, 2020 and 2019 was $0.6 million.

15

Other Items, Net. The following table sets forth details of our other items, net for the three months ended June 30, 2020 and 2019:

Positive

Three months ended June 30,

(negative)

(in thousands of U.S. dollars)

    

2020

    

2019

    

variance

Foreign exchange gain (loss)

$

166

$

(36)

$

202

Bank charges, fees and other

 

(41)

 

(85)

 

44

Withholding tax on interest expense and other

 

(612)

 

(638)

 

26

Total other items, net

$

(487)

$

(759)

$

272

Other items, net for the three months ended June 30, 2020 were $0.5 million, a decrease of $0.3 million from $0.8 million for the three months ended June 30, 2019. The decrease is mainly due to foreign exchange gain for the three months ended June 30, 2020 compared to foreign exchange loss for the three months ended June 30, 2019.

Income (Loss) Before Tax. The following table sets forth details of our income (loss) before tax for the three months ended June 30, 2020 and 2019:

Positive

Three months ended June 30,

(negative)

(in thousands of U.S. dollars)

    

2020

    

2019

    

variance

Income (loss) before tax

$

21,100

$

7,667

$

13,433

Income before tax for the three months ended June 30, 2020 was $21.1 million, an increase of $13.4 million from $7.7 million for the three months ended June 30, 2019. The income before tax for both periods was impacted by the unrealized gains (losses) on derivative instruments mainly on our share of equity in earnings (losses) of joint ventures. Excluding all the unrealized gains and losses on derivative instruments, income before tax for the three months ended June 30, 2020 would have been $18.8 million, an increase of $6.5 million from $12.3 million for the three months June 30, 2019. Excluding the unrealized gains (losses) on derivative instruments, the increase for the three months ended June 30, 2020 is primarily due to higher time charter revenue as a result of off-hire related to the drydock for the Höegh Gallant in 2019, lower vessel operating expenses as a result of the maintenance performed for the Höegh Gallant and the PGN FSRU Lampung in 2019, improved results for equity in earnings of joint ventures and lower interest expense.

Income Tax Expense. The following table sets forth details of our income tax expense for the three months ended June 30, 2020 and 2019:

Positive

Three months ended June 30,

(negative)

(in thousands of U.S. dollars)

    

2020

    

2019

    

variance

Income tax expense

$

(1,419)

$

(1,511)

$

92

Income tax expense for the three months ended June 30, 2020 was $1.4 million, a decrease of $0.1 million compared to $1.5 million for the three months ended June 30, 2019. The main reason for decrease was the lower tax rate in Indonesia for the three months ended June 30, 2020 compared with the three months ended June 30, 2019. The amount of non-cash income tax expense was $0.2 million for each of the three months ended June 30, 2020 and 2019.

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 each of the three months ended June 30, 2020 and 2019, there was an increase in uncertain tax positions of $0.1 million.

Net Income (Loss). The following table sets forth details of our net income for the three months ended June 30, 2020 and 2019:

Positive

Three months ended June 30,

(negative)

(in thousands of U.S. dollars)

    

2020

    

2019

    

variance

Net income (loss)

$

19,681

$

6,156

$

13,525

Preferred unitholders' interest in net income

 

3,668

 

3,378

 

290

Limited partners’ interest in net income (loss)

$

16,013

$

2,778

$

13,235

16

As a result of the foregoing, net income for the three months ended June 30, 2020 was $19.7 million, an increase of $13.5 million from net income of $6.2 million for the three months ended June 30, 2019. For the three months ended June 30, 2020, net income of $3.7 million was attributable to the holders of the Series A preferred units, an increase of $0.3 million from $3.4 million due to additional preferred units issued as part of our ATM program. Our limited partners' interest in net income for the three months ended June 30, 2020 was $16.0 million, an increase of $13.2 million from limited partner’s interest in net income of $2.8 million for the three months ended June 30, 2019.

Segments

Majority Held FSRUs. The following table sets forth details of segment results for the Majority Held FSRUs for the three months ended June 30, 2020 and 2019:

    

Three months ended

    

Positive

Majority Held FSRUs

June 30,

(negative)

(in thousands of U.S. dollars)

2020

2019

Variance

Time charter revenues

    

$

34,436

    

$

33,777

    

$

659

Total revenues

 

34,436

33,777

 

659

Vessel operating expenses

 

(5,776)

(9,064)

 

3,288

Administrative expenses

 

(840)

(821)

 

(19)

Segment EBITDA

 

27,820

23,892

 

3,928

Depreciation and amortization

 

(5,234)

(5,589)

 

355

Operating income (loss)

 

22,586

18,303

 

4,283

Other financial income (expense), net

 

(2,236)

(2,689)

 

453

Income (loss) before tax

 

20,350

15,614

 

4,736

Income tax expense

 

(1,419)

(1,511)

 

92

Net income (loss)

$

18,931

$

14,103

$

4,828

Time charter revenues for the three months ended June 30, 2020 were $34.4 million compared to $33.8 million for the three months ended June 30, 2019. As discussed above, the increase was mainly due to higher time charter revenue for the Höegh Gallant as a result of off-hire related to the drydock in 2019. The impact of increased time charter revenues from the Höegh Gallant for the three months ended June 30, 2020 was partially offset by lower revenues for reimbursable costs mainly for the PGN FSRU Lampung. The PGN FSRU Lampung and the Höegh Grace were both on-hire for the full three months periods ended June 30, 2020 and 2019.

Vessel operating expenses for the three months ended June 30, 2020 were $5.8 million, a decrease of $3.3 million from $9.1 million for the three months ended June 30, 2019. The lower expense mainly reflected a decrease in maintenance expense of approximately $3.0 million included in vessel operating expenses principally for the Höegh Gallant. During the scheduled drydock in 2019 of the Höegh Gallant, maintenance procedures were performed.

Administrative expenses for the three months ended June 30, 2020 and 2019 were $0.8 million.

Segment EBITDA for the three months ended June 30, 2020 was $27.8 million, an increase of $3.9 million from $23.9 million for the three months ended June 30, 2019. The Segment EBITDA was positively impacted by all three vessels being on-hire during the three months ended June 30, 2020 compared with the equivalent of 16 off-hire days for the Höegh Gallant for the three months ended June 30, 2019. In addition, lower vessel operating expenses for the three months ended June 30, 2020 contributed positively to Segment EBITDA compared with high maintenance expenses for the three months ended June 30, 2019 which negatively impacted the Segment EBITDA.

17

Joint Venture FSRUs. The following table sets forth details of segment results for the Joint Venture FSRUs for the three months ended June 30, 2020 and 2019:

Three months ended

Positive

Joint Venture FSRUs

June 30,

(negative)

(in thousands of U.S. dollars)

    

2020

    

2019

    

variance

Time charter revenues

$

12,139

$

10,752

$

1,387

Total revenues

 

12,139

 

10,752

 

1,387

Vessel operating expenses

 

(2,438)

 

(1,845)

 

(593)

Administrative expenses

 

(222)

 

(388)

 

166

Segment EBITDA

 

9,479

 

8,519

 

960

Depreciation and amortization

 

(2,490)

 

(2,452)

 

(38)

Operating income (loss)

 

6,989

 

6,067

 

922

Gain (loss) on derivative instruments

 

2,295

 

(4,649)

 

6,944

Other income (expense), net

 

(2,921)

 

(2,993)

 

72

Income (loss) before tax

 

6,363

 

(1,575)

 

7,938

Income tax expense

 

112

 

 

112

Net income (loss)

$

6,475

$

(1,575)

$

8,050

Total time charter revenues for the three months ended June 30, 2010 were $12.1 million, an increase of $1.3 million compared to $10.8 million for the three months ended June 30, 2019. For the three months ended June 30, 2020, the increase in time charter revenues reflects higher reimbursement of costs incurred for maintenance and projects of the charterer compared with the three months ended June 30, 2019.

Vessel operating expenses were $2.4 million for the three months ended June 30, 2020, an increase of $0.6 million compared to $1.8 million for the three months ended June 30, 2019. The increase in vessel operating expenses was mainly due to higher maintenance expenses for the Cape Ann for the three months ended June 30, 2020. In addition, there were higher expenses due to the charterer's project in India, which was partially offset by the reversal of accrued indirect taxes due to the charterer’s decision in the second quarter of 2020 not to deploy the Cape Ann in India. The increase in vessel operating expenses for the Cape Ann were partially offset by lower vessel operating expenses for the Neptune. The vessel operating expenses were lower for the three months ended June 30, 2020 in part due to not incurring travel costs associated with crew changes and lower activities as a result of the Coronavirus compared with higher expenses from deployment as an FSRU for the three months ended June 30, 2019.

Administrative expenses for the three months ended June 30, 2020 were $0.2 million, a decrease of $0.2 million from $0.4 million for the three months ended June 30, 2019. The lower administrative expenses for the three months ended June 30, 2020 were mainly due the reduced project activities for the three months ended June 30, 2020 compared with the corresponding period of 2019.

Segment EBITDA was $9.5 million for the three months ended June 30, 2020 compared with $8.5 million for the three months ended June 30, 2019.

The income tax benefit of $0.1 million related to the India project. The charterer’s decision in the second quarter of 2020 not to deploy the Cape Ann in India resulted in the reversal of income tax expense accrued in the first quarter of 2020.

Other. The following table sets forth details of other results for the three months ended June 30, 2020 and 2019:

Three months ended

Positive

Other

June 30,

(negative)

(in thousands of U.S. dollars)

    

2020

    

2019

    

variance

Administrative expenses

$

(1,315)

$

(1,451)

$

136

Segment EBITDA

 

(1,315)

 

(1,451)

 

136

Operating income (loss)

 

(1,315)

 

(1,451)

 

136

Other financial income (expense), net

 

(4,410)

 

(4,921)

 

511

Income (loss) before tax

 

(5,725)

 

(6,372)

 

647

Income tax expense

 

 

 

Net income (loss)

$

(5,725)

$

(6,372)

$

647

18

Administrative expenses and Segment EBITDA for the three months ended June 30, 2020 were $1.3 million, a decrease of $0.2 million from $1.5 million for the three months ended June 30, 2019.

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 interest expense related to the $85 million revolving credit facility from Höegh LNG. In addition, other financial income (expense), net also includes interest incurred, commitment fees and amortization of debt issuance costs, related to the $385 million facility entered into and drawn at end of January 31, 2019.

Other financial income (expense), net was an expense of $4.4 million for the three months ended June 30, 2020, a decrease of $0.5 million from $4.9 million for the three months ended June 30, 2019.

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, funding on-water surveys or drydocking 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 on-water surveys, funding the settlement of the boil-off claim and maintaining cash reserves against fluctuations in operating cash flows.

Our sources of liquidity include cash balances, cash flows from our operations, interest payments from our advances to our joint ventures, our undrawn balance under the $85 million revolving credit facility from Höegh LNG and our undrawn balance under the $63 million revolving credit tranche of our $385 million facility. In addition, liquidity can also be supplemented, from time to time, by net proceeds of the ATM program, depending on the market conditions. 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. The advances to our joint ventures (accrued interest from prior periods on repaid shareholder loans) 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 boil-off settlement" to the unaudited condensed interim consolidated financial statements, the joint ventures reached final settlement and release agreements for the boil-off claim under the time charters to be paid in instalments during 2020. As a precaution, the joint ventures suspended payments on the shareholder loans as of September 30, 2017 pending the outcome and settlement of the boil-off claim. The suspension of payments on the shareholder loans will be re-evaluated as the claim is settled. The suspension of the payments on the shareholder loans reduces cash flows available to us. 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 (refer to note 8 of the unaudited condensed interim consolidated financial statements); 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 June 30, 2020, PT Höegh is in the process of establishing the required statutory reserves and therefore is currently unable to make dividend payments under Indonesia law. Under the Lampung facility, there are limitations on cash dividends and loan distributions that can be made to the Partnership. 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 IV and Höegh Colombia Holding may only pay distributions out of profits or capital reserves if the entity is solvent after the distribution. Dividends from Höegh Cyprus may only be distributed out of profits and not from the share capital of the company. Dividends and other distributions from Höegh Cyprus, Höegh Colombia and Höegh FSRU IV may only be distributed if after the dividend payment, the Partnership would remain in compliance with the financial covenants under the $385 million facility. For a description of our credit facilities and revolving credit facilities, please see notes 13 and 15 to the audited consolidated financial statements contained in our 2019 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.

19

As of June 30, 2020, the Partnership has no material commitments for capital expenditures. However, the joint ventures have a liability for a boil-off claim under the time charters totaling $6.5 million as of June 30, 2020. The Partnership’s 50% share of the liability is $3.3 million as of June 30, 2020. In February 2020, each of the joint ventures and the charterer reached a commercial settlement addressing all the past and future claims. The final settlement and release agreements were signed on and had an effective date of April 1, 2020. Among other things, the settlement provides that 1) the boil-off claim, up to the signature date of the settlement agreements, will be settled for an aggregate amount of $23.7 million, paid in instalments during 2020, 2) the costs of the arbitration tribunal will be equally split between the two parties and each party will settle its legal and other costs, 3) the joint ventures have or will implement technical upgrades on the vessels at their own cost to minimize boil-off, and 4) the relevant provisions of the time charters were amended regarding the computation and settlement of prospective boil-off claims.

The first instalment of the settlement of $17.2 million was paid by the joint ventures in April 2020. The Partnership’s 50% share was $8.6 million. The joint ventures expect to pay the remaining instalment with accumulated cash balances on the joint venture’s respective balance sheets as of June 30, 2020 and with cash from operations in 2020. Refer to note 14 in our unaudited condensed interim financial statements.

The Partnership is indemnified by Höegh LNG for its share of the cash impact of the settlement, the arbitration costs and any legal expenses, the technical modifications of the vessels and any prospective boil-off claims or other direct impacts of the settlement agreement. On April 8, 2020, the Partnership was indemnified by Höegh LNG for its share of the joint ventures boil-off settlement payments by a reduction of $8.6 million on its outstanding balance on the $85 million revolving credit facility from Höegh LNG. The remaining amount of the indemnification for the boil-off claim will be settled when the amount is paid to the charterer. Refer to note 14 in our unaudited condensed interim financial statements.

Höegh LNG’s ability to make payments to us under the indemnification for the boil-off settlement, the Subsequent Charter and funding requests under the revolving credit facility may be affected by events beyond the control of Höegh LNG or us, including opportunities to obtain new employment for the Höegh Gallant and prevailing economic, financial and industry conditions. If market or other economic conditions deteriorate, Höegh LNG’s ability to meet its obligations to us may be impaired. If Höegh LNG is unable to meet its obligations to us under the indemnification for the boil-off settlement, the Subsequent Charter or meet funding requests, our financial condition, results of operations and ability to make cash distributions to unitholders could be materially adversely affected.

The recent outbreak of Coronavirus (COVID-19) has negatively affected economic conditions in many parts of the world which may impact our operations and the operations of our customers and suppliers. Although our operations have not been materially affected by the Coronavirus outbreak to date, the ultimate length and severity of the Coronavirus outbreak and its potential impact on our operations and financial condition is uncertain at this time. We believe our primary risk and exposure related to uncertainty of cash flows from our long-term time charter contracts is due to the credit risk associated with the individual charterers. Payments are due under time charter contracts regardless of the demand for the charterer’s gas output or the utilization of the FSRU. It is therefore possible that charterers may not make payments for time charter services in times of reduced demand. As of August 20, 2020, we have not experienced any reduced or non-payments for obligations under our time charter contracts. In addition, we have not provided concessions or made changes to the terms of payment for our customers. Furthermore, should there be an outbreak of the Coronavirus on board one of our FSRUs or an inability to replace critical supplies or replacement parts due to disruptions to third-party suppliers, adequate crewing or supplies may not be available to fulfill our obligations under our time charter contracts. This could result in off-hire or warranty payments under performance guarantees which would reduce revenues for the impacted period. To date, we have mitigated the risk of an outbreak of the Coronavirus on board our vessels by extending time between crew rotations on the vessels and developing mitigating actions for crew rotations. As a result, we expect that we will incur somewhat higher crewing expenses to implement the appropriate mitigation actions to minimize risks of outbreaks. To date, we have not had service interruptions on our vessels. Management and administrative staffs have transitioned to working remotely from home to address the specific COVID-19 situation in the applicable geographic location. We have supported staffs by supplying needed internet boosters and office equipment to facilitate an effective work environment. In addition, if financial institutions providing our interest rate swaps or lenders under our revolving credit facility are unable to meet their obligations, we could experience a higher interest expense or be unable to obtain funding. Since implementing our Prior ATM program in January 2018 until January 2020, we have sold preferred units and common units for total net proceeds of $59.5 million which has supplemented our liquidity. In current market conditions with lower unit prices, sales under the new ATM program is a less viable and more expensive option for accessing liquidity. If our charterers or lenders are unable to meet their obligations to us under their respective contracts or if we are unable to fulfill our obligations under time charters, our financial condition, results of operations and ability to make cash distributions to unitholders could be materially adversely affected. We do not have long term debt maturing in the next twelve months. However, the Lampung facility must be refinanced in October 2021. Should we be unable to obtain refinancing for the Lampung facility in 2021, we may not have sufficient funds or other assets to satisfy all our obligations, which would have a material adverse effect on our business, results of operations and financial condition.

20

As of June 30, 2020, the total outstanding principal on our long-term debt was $448.5 million related to the Lampung facility, the $385 million facility, including the associated $63 million revolving credit tranche, and the $85 million revolving credit facility. The book value of our total long-term debt was $440.6 million as of June 30, 2020. On April 8, 2020, our outstanding balance on the $85 million revolving credit facility from Höegh LNG was reduced by $8.6 million for the settlement of our indemnification claim for our 50% share of the joint ventures’ payment of the first instalment under the settlement and release agreement for the boil-off claim. On April 24, 2020, we drew $4.5 million on the $85 million revolving credit facility. On August 7, 2020, we drew $6.6 million on the $85 million revolving credit facility. For a description of our credit facilities and revolving credit facilities, please see notes 13 and 15 to the audited consolidated financial statements contained in our 2019 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.

We have not made use of derivative instruments for currency risk management purposes. We had interest rate swaps contracts for the Lampung facility ("Lampung interest rate swaps") and the $385 million facility ("$385 million interest rate swaps") as of June 30, 2020. As of June 30, 2020, we had outstanding interest rate swap agreements for a total notional amount of $344.0 million to hedge against the floating interest rate risks of our long-term debt under the Lampung facility and the $385 million facility. 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 August 20, 2020, we had an undrawn balance of $14.7 million on the $63 million revolving credit tranche of the $385 million facility and an undrawn balance of $73.6 million on the $85 million revolving credit facility from Höegh LNG, respectively.

As of June 30, 2020, we had cash and cash equivalents of $25.6 million. Current restricted cash for operating obligations of the PGN FSRU Lampung was $6.0 million and long-term restricted cash required under the Lampung facility was $12.4 million as of June 30, 2020.

As of June 30, 2020, the Partnership's total current liabilities exceeded total current assets by $15.0 million. This is partly a result of the current portion of long-term debt of $44.7 million being classified as current while restricted cash of $12.4 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. The Partnership does not intend to maintain a cash balance to fund the 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. We believe our available undrawn balances on the $85 million revolving credit facility from Höegh LNG and the $63 million revolving credit tranche will provide us with adequate sources of liquidity reserves to supplement funding of our distributions and other general liquidity needs. We believe our current resources, including the undrawn balance on the $85 million revolving credit facility from Höegh LNG and the undrawn balance on the $63 million revolving credit tranche, are sufficient to meet our working capital requirements for our current business for the next twelve months.

On April 7, 2020, the joint ventures paid the charterer a total of $17.2 million as part of the settlement of the boil-off claim. The Partnership’s 50% share was $8.6 million. The remaining amount of the settlement of $6.5 million is due no later than December 15, 2020.

On April 8, 2020, the Partnership was indemnified by Höegh LNG for its share of the joint ventures boil-off settlement payments by a reduction of $8.6 million on its outstanding balance on the $85 million revolving credit facility from Höegh LNG.

On May 15, 2020, the Partnership paid a distribution of $15.0 million, or $0.44 per common unit, with respect to the first quarter of 2020, equivalent to $1.76 per unit on an annualized basis.

On May 15, 2020 the Partnership paid a distribution of $3.7 million, or $0.546875 per Series A preferred unit for the period commencing on February 15, 2020 to May 14, 2020.

On August 14, 2020, the Partnership paid a cash distribution of $15.0 million, or $0.44 per common unit, with respect to the second quarter of 2020, equivalent to $1.76 per unit on an annualized basis.

On August 17, 2020, the Partnership paid a cash distribution of $3.7 million, or $0.546875 per Series A preferred unit, for the period commencing on May 15, 2020 to August 14, 2020.

21

For the period from July 1, 2020 to August 20, 2020, no Series A preferred units or common units were sold under our ATM program. We did not issue Series A preferred units or common units under the ATM program in the second quarter of 2020. From the commencement of the Prior ATM program in January 2018 through June 30, 2020, we have sold 2,107,999 Series A preferred units and 306,266 common units and received net proceeds of $53.9 million and $5.6 million, respectively. The compensation paid to the Agent for such sales was $1.0 million.

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:

Three months ended

Six months ended

June 30,

June 30,

(in thousands of U.S. dollars)

    

2020

    

2019

    

2020

    

2019

Net cash provided by (used in) operating activities

$

23,325

$

17,706

 

37,336

$

39,581

Net cash provided by (used in) investing activities

 

(8)

 

(140)

 

(8)

 

(140)

Net cash provided by (used in) financing activities

 

(25,380)

 

(23,791)

 

(53,133)

 

(36,868)

Increase (decrease) in cash, cash equivalents and restricted cash

 

(2,063)

 

(6,225)

 

(15,805)

 

2,573

Effect of exchange rate changes on cash and cash equivalents

 

102

 

(13)

 

(1)

 

8

Cash, cash equivalents and restricted cash, beginning of period

 

45,974

 

54,273

 

59,819

 

45,454

Cash, cash equivalents and restricted cash, end of period

$

44,013

$

48,035

 

44,013

$

48,035

Six Months Ended June 30, 2020 Compared with the Six Months Ended June 30, 2019

Net Cash Provided by (Used in) Operating Activities

Net cash provided by operating activities was $37.3 million for the six months ended June 30, 2020, a decrease of $2.3 million compared with $39.6 million for the six months ended June 30, 2019. Before changes in working capital, cash provided by operating activities was $45.1 million for the six months ended June 30, 2020, an increase of $5.9 million compared to $39.2 million for the six months ended June 30, 2019. The increase of $5.9 million was primarily due to maintenance expenses in the Majority held FSRU segment and the capitalized expenditure for drydocking related to the Höegh Gallant for the six months ended June 30, 2019 compared with no similar expenditures for corresponding period of 2020. The positive impacts from operations including higher time charter revenues and lower vessel operating expenses for the six months ended June 30, 2020 compared to the same period in 2019 were partly offset by the cash flow impact of a decrease in accrued interest expense.

Changes in working capital decreased net cash provided by operating activities by $7.8 million for the six months ended June 30, 2020, a decrease of $8.2 million from a contribution of $0.4 million for the six months ended June 30, 2019. The decrease from positive to negative contribution in changes in working capital was mainly due to the use of cash for the decreases in the amounts due to owners and affiliates, value added tax and accrued liabilities and other payables.

Net Cash Provided by (Used in) Investing Activities

Net cash used in investing activities was $0.1 million for the six months ended June 30, 2019.

Net Cash Provided by (Used in) Financing Activities

Net cash used in financing activities for the six months ended June 30, 2020 was $53.1 million compared with $36.9 million for the six months ended June 30, 2019.

Net cash used in financing activities for the six months ended June 30, 2020 was mainly due to the repayment of long-term debt of $22.3 million which includes repayment of $9.5 million on the Lampung facility and repayment of $12.8 million on the $385 million facility, and our payment of cash distributions to our common unitholders of $30.1 million and our payment of cash distributions to the holders of our Series A preferred units of $7.3 million. This was partially offset by the receipt of $4.5 million under the $85 million revolving credit facility and proceeds of $2.1 million for the issuance of Series A preferred units under our ATM program.

22

Net cash used in financing activities for the six months ended June 30, 2019 was mainly due to the repayment of long term debt of $320 million which includes repayment of $9.5 million on the Lampung facility, repayment of $6.4 million on the $385 million facility, repayment of $0.9 million on the export credit tranche of the Gallant facility on January 29, 2019, and a settlement of $303.2 million of the remaining outstanding balance on the Gallant/Grace facility on January 31, 2019, our payment of $5.8 million in debt issuance costs under the $385 million facility, our payment of cash distributions to our common and subordinated unitholders of $30.0 million and our payment of cash distributions to the holders of our Series A preferred units of $6.8 million. This was partially offset by receipt of $320.0 million in proceeds under the $385 million facility drawn on January 31, 2019 and by receipt of $3.5 million under the $85 million revolving credit facility and proceeds of $1.0 million and $1.3 million for the issuance of common and Series A preferred units, respectively, under our ATM program.

As a result of the foregoing, cash, cash equivalents and restricted cash decreased by $15.8 million for the six months ended June 30, 2020, while cash, cash equivalents and restricted cash increased by $2.6 million for the six months ended June 30, 2019.

Three Months Ended June 30, 2020 Compared with the Three Months Ended June 30, 2019

Net Cash Provided by (Used in) Operating Activities

Net cash provided by operating activities was $23.3 million for the three months ended June 30, 2020, an increase of $5.6 million compared with $17.7 million for the three months ended June 30, 2019. Before changes in working capital, cash provided by operating activities was $21.8 million for the three months ended June 30, 2020, an increase of $8.2 million compared to $13.6 million for the three months ended June 30, 2019. The increase of $8.2 million was primarily due to maintenance expenses in the Majority held FSRU segment and the capitalized expenditure for drydocking related to the Höegh Gallant for the three months ended June 30, 2019 compared with no similar expenditures for corresponding period of 2020. These positive impacts from operations including higher time charter revenues and lower vessel operating expenses for the three months ended June 30, 2020 compared to the three months ended June 30, 2019.

Changes in working capital increased net cash provided by operating activities by $1.6 million for the three months ended June 30, 2020, a decrease of $2.5 million from a positive contribution of $4.1 million for the three months ended June 30, 2019. The decrease of positive contribution of changes in working capital was mainly due to cash used to fund an increase in prepaid expenses and other receivables and decrease in cash provided by amounts due to owners and affiliates for the three months ended June 30, 2020 compared to the three months ended June 30, 2019.

Net Cash Provided by (Used in) Investing Activities

Net cash used in investing activities was $0.1 million for the three months ended June 30, 2019.

Net Cash Provided by (Used in) Financing Activities

Net cash used in financing activities for the three months ended June 30, 2020 was $25.4 million compared with $23.8 million for the three months ended June 30, 2019.

Net cash used in financing activities for the three months ended June 30, 2020 was mainly due to the quarterly repayment of $4.8 million on the Lampung facility, the quarterly repayment of $6.4 million on the $385 million facility, our payment of cash distributions to our common unitholders of $15.0 million and our payment of cash distributions to the holders of our Series A preferred units of $3.7 million. This was partially offset by the receipt of $4.5 million under the $85 million revolving credit facility.

Net cash used in financing activities for the three months ended June 30, 2019 was mainly due to the quarterly repayment of $4.8 million on the Lampung facility, the quarterly repayment of $6.4 million on the $385 million facility, our payment of cash distributions to our common and subordinated unitholders of $15.0 million and our payment of cash distributions to the holders of our Series A preferred units of $3.4 million. This was partially offset by receipt of $3.5 million under the $85 million revolving credit facility and proceeds of $1.0 million and $1.3 million for the issuance of common and Series A preferred units, respectively, under our ATM program.

As a result of the foregoing, cash, cash equivalents and restricted cash decreased by $2.1 million for the three months ended June 30, 2020, while cash, cash equivalents and restricted cash decreased by $6.2 million for the three months ended June 30, 2019.

23

Qualitative and Quantitative Disclosures About Market Risk

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

Interest Rate Risk

The Partnership is exposed to fluctuations in cash flows from floating interest rate exposure on its long-term debt used principally to finance its vessels. Interest rate swaps are used for the management of the floating interest rate risk exposure. The interest rate swaps have the effect of converting a portion of the outstanding debt from a floating to a fixed rate over the life of the interest rate swaps. Interest rate swaps exchange a receipt of floating interest for a payment of fixed interest which reduce the exposure to interest rate variability on its outstanding floating-rate debt over the life of the interest rate swaps. As of June 30, 2020 and 2019, there were interest rate swap agreements related to the Lampung facility ("Lampung interest rate swaps") and the commercial tranche of the $385 million facility floating rate debt ("$385 million interest rate swaps") that are designated as cash flow hedges for accounting purposes.

As of June 30, 2020, the following interest rate swap agreements were outstanding:

    

    

    

    

    

Fair

    

    

    

    

 

value

Fixed

 

Interest

carrying

interest

 

rate

Notional

amount

rate

 

(in thousands of U.S. dollars)

 

index

 

amount

 

liability

 

Term

 

(1)

LIBOR-based debt

 

  

 

  

 

  

 

  

 

  

Lampung interest rate swaps (2)

 

LIBOR

$

107,491

 

(7,011)

 

Sep 2026