Hoegh LNG will stop paying a dividend to investors as it looks to hoard cash in the face of uncertainty caused by coronavirus.
The Oslo-listed floating storage and regasification unit specialist said future dividends were “suspended in full until further notice”, in a statement issued late on Monday.
Several companies in the maritime space have already scrapped or reduced their dividends. The most high-profile is Clarksons.
Hoegh LNG said it would also implement a cost-saving plan with special focus on overhead and vessel operating costs, targeting $9m to $11m in savings for 2020.
Measures will include the elimination of bonuses and other costs, as well as deferring costs, scheduled maintenance and projects.
Hoegh LNG said one-third of the estimated effect relates to “costs being postponed to 2021”.
It warned that further measures to reduce costs and preserve liquidity could be implemented at future dates.
In addition, chairman Morten W Hoegh and director Leif O Hoegh have waived their board remuneration for 2019, payable in 2020. In Morten's case that includes board remuneration payable by Hoegh LNG Partners.
Hoegh LNG chief executive Sveinung J S Stohle said that while operations and business development activities are running “close to normal”, the Covid-19 virus crisis is unprecedented in scale and uncertainty.
“Therefore, the board and management are taking steps to preserve both the liquidity and solidity of Hoegh LNG through these challenging times.”
Separately, Hoegh LNG said it has “executed and signed” a new revolving credit facility of up to $80m, which was announced in January this year.
Cash burn eased
It has been provided by three of its relationship banks, and $65m of the amount is earmarked for repaying the company’s HLNG02 bond loan, which matures in June 2020.
The facility is secured with a pledge of all the company’s common units and its shares in the general partner of Hoegh LNG Partners.
Fearnley Securities calculated total savings at around $20m to help reduce cash burn from having five FSRUs in the spot market. The dividend cut will save $8m of this.
"With all of HLNG’s activities running ‘close to normal’ this is seemingly precautionary measures," it added.
The spot FSRUs have a cash breakeven of $85,000 per day against rates of $50,000 per day, Fearnley said, leading the company to burn through $75m per year.
By 2023, it expects most if not all of the FSRUs to be on term deals.
It reiterated a buy rating on the stock.
Fearnley estimated Hoegh LNG has liquidity of $250m.
"It’s also important to mention that HLNG has no outstanding newbuilding commitments," it added. "This leaves the company in good shape, effectively able to sustain what we expect to be a weak LNG carrier rate environment for the next 2-3 years."
