6-K 1 v467127_6k.htm 6-K

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 March 31, 2017

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 MARCH 31, 2017

Table of Contents

	Page

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	3

FORWARD LOOKING STATEMENTS	19

INDEX TO FINANCIAL STATEMENTS	F-1

Unaudited Condensed Interim Consolidated Income for the Three Months Ended March 31, 2017 and 2016	F-2

Unaudited Condensed Interim Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2017 and 2016	F-3

Unaudited Condensed Interim Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016	F-4

Unaudited Condensed Interim Consolidated Statements of Changes in Partners’ Capital for the Three Months Ended March 31, 2017 and the Year Ended December 31, 2016	F-6

Unaudited Condensed Interim Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2016	F-7

Notes to Unaudited Condensed Interim Consolidated Financial Statements	F-9

EXHIBITS

SIGNATURE

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 months ended March 31, 2017 and 2016. 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 “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 51% 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 GDF Suez Cape Ann, respectively. References in this report to “GDF Suez” refer to GDF Suez LNG Supply S.A., a subsidiary of ENGIE. 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 and for the periods ended March 31, 2017 and 2016 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, 2017. 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

Reported total time charter revenues of $35.1 million for the first quarter of 2017 compared to $21.7 million of time charter revenues for the first quarter of 2016

Generated operating income of $25.7 million and net income of $16.2 million for the first quarter of 2017 compared to an operating income of $6.2 million and net loss of $1.0 million for the first quarter of 2016; operating income and net income were impacted by unrealized gains on derivative instruments on the Partnership’s share of equity in earnings of joint ventures in the first quarter of 2017 compared with unrealized losses for the first quarter of 2016

On January 3, 2017, closed the acquisition of 51% interest in Höegh Colombia Holding, the owner of the entities that own and operate the Höegh Grace (the “Höegh Grace entities”). The results of the Höegh Grace contributed to the Partnership’s earnings for the full first quarter of 2017

On May 15, 2017 paid a $0.43 per unit distribution with respect to the first quarter of 2017, equivalent to $1.72 per unit on an annualized basis. This is an increase of approximately 4.2% from the distribution with respect to the fourth quarter of 2016

Our results of operations

	Three months ended
	March 31,
(in thousands of U.S. dollars, except per unit amounts)	2017			2016
Statement of Income Data:
Time charter revenues	$	35,076			21,670
Total revenues		35,076			21,670
Vessel operating expenses		(6,177	)		(3,783	)
Administrative expenses		(2,757	)		(2,305	)
Depreciation and amortization		(5,263	)		(2,630	)
Total operating expenses		(14,197	)		(8,718	)
Equity in earnings (losses) of joint ventures		4,809			(6,708	)
Operating income (loss)		25,688			6,244
Interest income		130			273
Interest expense		(7,736	)		(6,406	)
Gain (loss) on derivative instruments		663			335
Other items, net		(802	)		(1,037	)
Income (loss) before tax		17,943			(591	)
Income tax expense		(1,755	)		(449	)
Net income (loss)	$	16,188		$	(1,040	)
Non-controlling interest in net income		2,744			—
Partners’ net income (loss)	$	13,444		$	(1,040	)

Earnings per unit
Common unit public (basic and diluted)	$	0.40		$	(0.04	)
Common unit Höegh LNG (basic and diluted)	$	0.42		$	(0.04	)
Subordinated unit (basic and diluted)	$	0.42		$	(0.04	)
Cash Flow Data:
Net cash provided by (used in) operating activities	$	19,577		$	11,943
Net cash provided by (used in) investing activities		4,611			2,206
Net cash provided by (used in) financing activities	$	(24,336	)	$	(20,726	)
Other Financial Data:
Segment EBITDA(1)	$	29,453		$	24,128

(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.

Three Months Ended March 31, 2017 Compared with the Three Months Ended March 31, 2016

As of January 1, 2017, we began consolidating the Höegh Grace entities as a result of our acquisition of a 51% interest in the Höegh Grace entities. Refer to note 4 in the unaudited condensed interim consolidated financial statements. The revenues, expenses, gains and losses, including net income, in our consolidated income statement include 100% of the results of the Höegh Grace entities. This is reduced with the non-controlling interest in net income to arrive at the Partners’ interest in net income which reflects our 51% interest in the net income of the Höegh Grace entities. Similarly, all of the assets and liabilities on the consolidated balance sheet include 100% of the Höegh Grace entities’ assets and liabilities. Total equity is split between Partners’ capital (which includes our 51% interest in the net assets of the Höegh Grace entities) and the non-controlling interest.

Time Charter Revenues. The following table sets forth details of our time charter revenues for the three months ended March 31, 2017 and 2016:

					Positive
	Three months ended March 31,				(negative)
(in thousands of U.S. dollars)	2017		2016		variance
Time charter revenues	$	35,076	$	21,670	$	13,406

Time charter revenues for the three months ended March 31, 2017 were $35.1 million, an increase of $13.4 million from the $21.7 million for the three months ended March 31, 2016. The increase mainly relates to the revenue for the Höegh Grace, which was consolidated on January 1, 2017. However, time charter revenues were also higher for the Höegh Gallant. The Höegh Gallant had several days of reduced hire due to unscheduled maintenance for the three months ended March 31, 2017 compared with 15 days off-hire for scheduled maintenance for the three months ended March 31, 2016. The Höegh Gallant has 8 days of scheduled maintenance in the second quarter of 2017.

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 fees for providing time charter services, reimbursement for vessel operating expenses 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. Time charter revenues for the Höegh Grace consist of a lease element accounted for as an operating lease, as well as fees for providing time charter services, reimbursement of vessel operating expenses and certain taxes incurred.

Vessel Operating Expenses. The following table sets forth details of our vessel operating expenses for the three months ended March 31, 2017 and 2016:

							Positive
	Three months ended March 31,						(negative)
(in thousands of U.S. dollars)	2017			2016			variance
Vessel operating expenses	$	(6,177	)	$	(3,783	)	$	(2,394	)

Vessel operating expenses for the three months ended March 31, 2017 were $6.2 million, an increase of $2.4 million from $3.8 million for the three months ended March 31, 2016. The increase reflects approximately $1.9 million higher vessel operating expenses due to the inclusion of the Höegh Grace and $0.5 million in higher operating expenses for the Höegh Gallant and the PGN FSRU Lampung. The Höegh Gallant had higher operating expenses in part due to unscheduled off-hire in the three months ended March 31, 2017.

Administrative Expenses. The following table sets forth details of our administrative expenses for the three months ended March 31, 2017 and 2016:

							Positive
	Three months ended March 31,						(negative)
(in thousands of U.S. dollars)	2017			2016			variance
Administrative expenses	$	(2,757	)	$	(2,305	)	$	(452	)

Administrative expenses for the three months ended March 31, 2017 were $2.8 million, an increase of $0.5 million from $2.3 million for the three months ended March 31, 2016. The main reason for the increase was $0.3 million in additional administrative expenses related to the Höegh Grace.

Depreciation and Amortization. The following table sets forth details of our depreciation and amortization for the three months ended March 31, 2017 and 2016:

							Positive
	Three months ended March 31,						(negative)
(in thousands of U.S. dollars)	2017			2016			variance
Depreciation and amortization	$	(5,263	)	$	(2,630	)	$	(2,633	)

Depreciation and amortization for the three months ended March 31, 2017 was $5.3 million, an increase of $2.6 million compared to the three months ended March 31, 2016. The increase was due to the inclusion of the depreciation of the Höegh Grace in the three months ended March 31, 2017 as a result of the acquisition.

Total Operating Expenses. The following table sets forth details of our total operating expenses for the three months ended March 31, 2017 and 2016:

							Positive
	Three months ended March 31,						(negative)
(in thousands of U.S. dollars)	2017			2016			variance
Total operating expenses	$	(14,197	)	$	(8,718	)	$	(5,479	)

Total operating expenses for the three months ended March 31, 2017 were $14.2 million, an increase of $5.5 million from $8.7 million for the three months ended March 31, 2016. The increase is mainly due to the additional vessel operating expenses and depreciation in the three months ended March 31, 2017 as a result of acquiring the Höegh Grace, with no comparative expenses for the three months ended March 31, 2016.

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 March 31, 2017 and 2016:

						Positive
	Three months ended March 31,					(negative)
(in thousands of U.S. dollars)	2017		2016			variance
Equity in earnings (losses) of joint ventures	$	4,809	$	(6,708	)	$	11,517

Equity in earnings of joint ventures for the three months ended March 31, 2017 was $4.8 million, an increase of $11.5 million from equity in losses of $6.7 million for the three months ended March 31, 2016. 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 March 31, 2017 and 2016.

Our share of our joint ventures’ operating income was $5.9 million for the three months ended March 31, 2017, compared with $6.2 million for the three months ended March 31, 2016. Our share of other financial expense, net, principally consisting of interest expense, was $3.6 million for the three months ended March 31, 2017, a decrease of $0.3 million from $3.9 million for the three months ended March 31, 2016. The reduction was mainly due to lower interest expense due to repayment of principal on debt during 2016.

Our share of unrealized gain on derivative instruments was $2.5 million for the three months ended March 31, 2017, an increase of $11.5 million from a loss of $9.0 million for the three months ended March 31, 2016.

There was no accrued income tax expense for the three months ended March 31, 2017 and 2016. Our joint ventures did not pay any dividends for the three months ended March 31, 2017 and 2016.

Operating Income (Loss). The following table sets forth details of our operating income for the three months ended March 31, 2017 and 2016:

					Positive
	Three months ended March 31,				(negative)
(in thousands of U.S. dollars)	2017		2016		variance
Operating income (loss)	$	25,688	$	6,244	$	19,444

Operating income for the three months ended March 31, 2017 was $25.7 million, an increase of $19.5 million from operating income of $6.2 million for the three months ended March 31, 2016. Excluding the impact of the unrealized gain (loss) on derivatives for the three months ended March 31, 2017 and 2016 impacting the equity in earnings (losses) of joint ventures, operating income for the three months ended March 31, 2017 would have been $23.2 million, an increase of $8.0 million from $15.2 million for the three months ended March 31, 2016. The increase for the three months ended March 31, 2017 is primarily due to the inclusion of the results of the Höegh Grace consolidated on January 1, 2017.

Interest Income. The following table sets forth details of our interest income for the three months ended March 31, 2017 and 2016:

					Positive
	Three months ended March 31,				(negative)
(in thousands of U.S. dollars)	2017		2016		variance
Interest income	$	130	$	273	$	(143	)

Interest income for the three months ended March 31, 2017 was $0.1 million, a decrease of $0.2 million from $0.3 million for the three months ended March 31, 2016. Interest income is mainly related to interest accrued on the advances to our joint ventures for the three months ended March 31, 2017 and 2016, respectively. The decrease in interest income from joint ventures is due to repayment by our joint ventures of the principal due under the shareholder loans between the periods. 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 March 31, 2017 and 2016:

							Positive
	Three months ended March 31,						(negative)
(in thousands of U.S. dollars)	2017			2016			variance
Interest expense	$	(7,259	)	$	(5,582	)	$	(1,677	)
Commitment fees		(264	)		(301	)		37
Amortization of debt issuance cost and fair value of debt assumed		(213	)		(523	)		310
Total interest expense	$	(7,736	)	$	(6,406	)	$	(1,330	)

Interest expense for the three months ended March 31, 2017 was $7.7 million, an increase of $1.3 million from $6.4 million for the three months ended March 31, 2016. 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 $7.3 million for the three months ended March 31, 2017, increased by $1.7 million compared to $5.6 million for the three months ended March 31, 2016, principally due to higher outstanding loan balances. On January 3, 2017, we acquired the Höegh Grace entities and assumed the long-term loan facility related to the Höegh Grace (the “Grace facility”). In August 2016, November 2016 and January 2017, we drew $5.4 million, $3.2 million and $1.6 million, respectively, on the $85 million revolving credit facility. In connection with the 2015 acquisition of the Höegh Gallant, we financed part of the acquisition with a seller’s credit note Accordingly, the interest incurred for the three months ended March 31, 2017 included interest for the Lampung, Gallant and Grace facilities and the seller’s credit note and the outstanding balance on the revolving credit facility.

Commitment fees were $0.3 million for each of the three months ended March 31, 2017 and 2016. The commitment fees relate to the undrawn $85 million revolving credit facility.

Amortization of debt issuance cost and fair value of debt assumed for the three months ended March 31, 2017 was $0.2 million, a decrease of $0.3 million compared to the three months ended March 31, 2016. As a result of the acquisition of the Höegh Grace, the long term debt assumed under the Grace facility was recognized at its fair value which is amortized to interest expense using the effective interest method. The impact for the three months ended March 31, 2017 was a reduction to interest expense of approximately $0.2 million compared to the corresponding period of 2016.

Gain (loss) on derivative instruments.

					Positive
	Three months ended March 31,				(negative)
(in thousands of U.S. dollars)	2017		2016		variance
Gain (loss) on derivative instruments	$	663	$	335	$	328

Gain on derivative instruments for the three months ended March 31, 2017 was $0.7 million, an increase of $0.4 million from $0.3 million for the three months ended March 31, 2016. Gain on derivative instruments for the three months ended March 31, 2017 related to the interest rate swaps for the Lampung facility, Gallant facility and the Grace facility, while the gain for the three months ended March 31, 2016 related to the Lampung facility and the Gallant facility. The increase is mainly due to amortization of the amount excluded from hedge effectiveness for the Grace facility.

Other Items, Net. The following table sets forth details of our other items, net for the three months ended March 31, 2017 and 2016:

							Positive
	Three months ended March 31,						(negative)
(in thousands of U.S. dollars)	2017			2016			variance
Foreign exchange gain (loss)	$	(133	)	$	(335	)	$	202
Bank charges, fees and other		(23	)		(80	)		57
Withholding tax on interest expense and other		(646	)		(622	)		(24	)
Total other items, net	$	(802	)	$	(1,037	)	$	235

Other items, net for the three months ended March 31, 2017 was $0.8 million, a decrease of $0.2 million from $1.0 million for the three months ended March 31, 2016. The decrease is mainly due to a decrease in the foreign exchange loss of $0.2 million.

Income (Loss) Before Tax. The following table sets forth details of our income (loss) before tax for the three months ended March 31, 2017 and 2016:

						Positive
	Three months ended March 31,					(negative)
(in thousands of U.S. dollars)	2017		2016			variance
Income (loss) before tax	$	17,943	$	(591	)	$	18,534

Income before tax for the three months ended March 31, 2017 was $17.9 million, an increase of $18.5 million from loss before tax of $0.6 million for the three months ended March 31, 2016. The income (loss) before tax for both periods was impacted by the unrealized gain (loss) on derivative instruments mainly on the Partnership's share of equity in earnings (loss) of joint ventures. Excluding all the unrealized gain (loss) on derivative instruments, income before tax for the three months ended March 31, 2017 was $14.8 million, an increase of $6.7 million from $8.1 million for the three months March 31, 2016. Excluding the unrealized gain (loss) on derivative instruments, the increase is primarily due to the inclusion of the results of the Höegh Grace.

Income Tax Expense. The following table sets forth details of our income tax expense for the three months ended March 31, 2017 and 2016:

							Positive
	Three months ended March 31,						(negative)
(in thousands of U.S. dollars)	2017			2016			variance
Income tax expense	$	(1,755	)	$	(449	)	$	(1,306	)

Income tax expense for the three months ended March 31, 2017 was $1.8 million, an increase of $1.4 million compared to $0.4 million for the three months ended March 31, 2016. 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. For the three months ended March 31, 2017 and 2016, the income tax expense largely related to the subsidiaries in Indonesia, Colombia and Singapore. The income tax expense for the three months ended March 31, 2016 mainly related to the subsidiary in Singapore.

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 March 31, 2017, the estimated generation of taxable income resulted in the utilization of $0.2 million of tax loss carryforward in Indonesia which was not recognized due to the uncertainty of this tax position. As a result, a long-term income tax payable of $0.2 million was recorded for the uncertain tax position.

Net Income (Loss). The following table sets forth details of our net income for the three months ended March 31, 2017 and 2016:

						Positive
	Three months ended March 31,					(negative)
(in thousands of U.S. dollars)	2017		2016			variance
Net income (loss)	$	16,188	$	(1,040	)	$	17,228
Non-controlling interest in net income		2,744		—			2,744
Partners’ interest in net income (loss)	$	13,444	$	(1,040	)	$	14,484

As a result of the foregoing, net income for the three months ended March 31, 2017 was $16.2 million, an increase of $17.2 million from a net loss of $1.0 million for the three months ended March 31, 2016. Net income of $2.7 million was attributable to non-controlling interest for the 49% interest in the Höegh Grace entities not owned by the Partnership. The Partners’ interest in net income, which includes the Partnership’s 51% interest in the Höegh Grace entities, for the three months ended March 31, 2017 was $13.4 million, an increase of $14.5 million from a net loss of $1.0 million for the three months ended March 31, 2016.

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 three months ended March 31, 2017, Majority held FSRUs includes the direct financing lease related to the PGN FSRU Lampung, the operating lease related to the Höegh Gallant and the operating lease related to the Höegh Grace consolidated on January 1, 2017. For the three months ended March 31, 2016, Majority held FSRUs includes only the direct financing lease related to the PGN FSRU Lampung and the operating lease related to the Höegh Gallant.

As of March 31, 2017 and 2016, Joint Venture FSRUs include two 50% owned FSRUs, the Neptune and the GDF Suez 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 consolidates 100% of the revenues, expenses, assets and liabilities of the Höegh Grace entities and the interest not owned by the Partnership is reflected as non-controlling interest in net income and non-controlling interest in total equity under US GAAP. Management monitors the results of operations of the Höegh Grace entities based on the Partnership’s 51% interest in Segment EBITDA of such entities and, therefore, subtracts 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 below. The following tables include the results for the segments for the three months ended March 31, 2017 and 2016.

Majority Held FSRUs. The following table sets forth details of segment results for the Majority Held FSRUs for the three months ended March 31, 2017 and 2016:

	Three months ended						Positive
Majority Held FSRUs	March 31,						(negative)
(in thousands of U.S. dollars)	2017			2016			variance
Time charter revenues	$	35,076		$	21,670		$	13,406
Total revenues		35,076			21,670			13,406
Vessel operating expenses		(6,177	)		(3,783	)		(2,394	)
Administrative expenses		(1,085	)		(800	)		(285	)
Less: Non-controlling interest in Segment EBITDA		(4,994	)		—			(4,994	)
Segment EBITDA		22,820			17,087			5,733
Add: Non-controlling interest in Segment EBITDA		4,994			—			4,994
Depreciation and amortization		(5,263	)		(2,630	)		(2,633	)
Operating income (loss)		22,551			14,457			8,094
Gain (loss) on derivative instruments		663			335			328
Other financial income (expense), net		(7,455	)		(6,172	)		(1,283	)
Income (loss) before tax		15,759			8,620			7,139
Income tax expense		(1,755	)		(448	)		(1,307	)
Net income (loss)		14,004			8,172			5,832
Non-controlling interest in net income		2,744			—			2,744
Partners’ interest in net income (loss)	$	11,260		$	8,172		$	3,088

The segment time charter revenues and all the expenses, gains and losses include 100% of the results of the Höegh Grace entities which is consistent with our consolidated income statement. However, Segment EBITDA is reduced for non-controlling interest in Segment EBITDA in the Höegh Grace entities to reflect our 51% interest in the Höegh Grace entities.

Time charter revenues for the three months ended March 31, 2017 were $35.1 million, an increase of $13.4 million from the three months ended March 31, 2016. As discussed in more detail above, during the three months ended March 31, 2017, the PGN FSRU Lampung, the Höegh Gallant and the Höegh Grace were operating under time charters while time charter revenues for the three months ended March 31, 2016, related to the operation of the PGN FSRU Lampung and the Höegh Gallant.

Vessel operating expenses for the three months ended March 31, 2017 were $6.2 million, an increase of $2.4 million from $3.8 million for the three months ended March 31, 2016. The increase reflects approximately $1.9 million higher vessel operating expenses due to the inclusion of the Höegh Grace and $0.5 million in higher operating expenses for the Höegh Gallant and the PGN FSRU Lampung. The Höegh Gallant had higher operating expenses due to unscheduled off-hire in the three months ended March 31, 2017.

Administrative expenses for the three months ended March 31, 2017 were $1.1 million, an increase of $0.3 million from $0.8 million for the three months ended March 31, 2016. Higher expenses in the three months ended March 31, 2017 were mainly due to activities associated with the Höegh Grace acquired on January 3, 2017.

Segment EBITDA for the three months ended March 31, 2017 was $22.8 million, an increase of $5.7 million from $17.1 million for the three months ended March 31, 2016 mainly due to our 51% interest in the contribution from the operations of the Höegh Grace. However, higher time charter revenue for the Höegh Gallant for the three months ended March 31, 2017 also improved the Segment EBITDA.

Joint Venture FSRUs. The following table sets forth details of segment results for the Joint Venture FSRUs for the three months ended March 31, 2017 and 2016:

	Three months ended						Positive
Joint Venture FSRUs	March 31,						(negative)
(in thousands of U.S. dollars)	2017			2016			variance
Time charter revenues	$	10,924		$	10,739		$	185
Vessel operating expenses		(2,397	)		(1,944	)		(453	)
Administrative expenses		(222	)		(249	)		27
Segment EBITDA		8,305			8,546			(241	)
Depreciation and amortization		(2,440	)		(2,379	)		(61	)
Operating income (loss)		5,865			6,167			(302	)
Gain (loss) on derivative instruments		2,496			(8,993	)		11,489
Other income (expense), net		(3,552	)		(3,882	)		330
Income (loss) before tax		4,809			(6,708	)		11,517
Income tax expense		—			—			—
Net income (loss)	$	4,809		$	(6,708	)	$	11,517

The segment results for the Joint Venture FSRUs are presented using the proportional consolidation method (which differs from the equity method used in the unaudited interim financial statements).

Total time charter revenues for the three months ended March 31, 2017 were $10.9 million, an increase of $0.2 million compared to $10.7 million for the three months ended March 31, 2016. The main reasons for the increase in revenues for the three months ended March 31, 2017 compared to the three months ended March 31, 2016 was the reimbursement of increased vessel operating expenses and the higher amortization of deferred revenue related to modification for the Neptune, which were partly offset by lower revenue due to reduced hire for the Neptune in its start up phase in Turkey.

Vessel operating expenses were $2.4 million for the three months ended March 31, 2017, an increase of $0.5 million compared to $1.9 million for the three months ended March 31, 2016. The increase in vessel operating expenses was largely due to costs related to the operations in Turkey in the three months ending March 31, 2017.

Administrative expenses were $0.2 million for each of the three months ended March 31, 2017 and 2016.

Segment EBITDA was $8.3 million for the three months ended March 31, 2017 compared with $8.5 million for the three months ended March 31, 2016.

Other. The following table sets forth details of other results for the three months ended March 31, 2017 and 2016:

	Three months ended						Positive
Other	March 31,						(negative)
(in thousands of U.S. dollars)	2017			2016			variance
Administrative expenses	$	(1,672	)	$	(1,505	)	$	(167	)
Segment EBITDA		(1,672	)		(1,505	)		(167	)
Operating income (loss)		(1,672	)		(1,505	)		(167	)
Other financial income (expense), net		(953	)		(998	)		45
Income (loss) before tax		(2,625	)		(2,503	)		(122	)
Income tax expense		—			(1	)		1
Net income (loss)	$	(2,625	)	$	(2,504	)	$	(121	)

Administrative expenses and Segment EBITDA for the three months ended March 31, 2017 were $1.7 million, an increase of $0.2 million from $1.5 million for the three months ended March 31, 2016.

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, on a seller’s credit note issued in connection with the acquisition of Höegh Gallant on October 1, 2015 and the $85 million revolving credit facility.

Other financial income (expense), net was an expense of $1.0 million for each of the three months ended March 31, 2017 and 2016.

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 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 and our current undrawn balance under the $85 million revolving credit facility from Höegh LNG. The advances to our joint ventures (shareholder loans including 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. 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 March 31, 2017, PT Höegh had negative retained earnings 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 the seller’s credit note issued in connection with the acquisition of the Höegh Gallant, please see Notes 14 and 17 to the audited consolidated and combined financial statements contained in our 2016 Form 20-F as well as Note 11 to the unaudited condensed interim consolidated and combined financial statements contained in this Report on Form 6-K.

As of March 31, 2017, we do not have material commitments for capital expenditures for our current business. Our expected expenditures for our current business include funding repairs and replacement parts of approximately $1.3 million for the Mooring for the PGN FSRU Lampung. This expenditure is indemnified by Höegh LNG under the omnibus agreement. Therefore, the funding for this expenditure has been or will be provided by Höegh LNG.

As of March 31, 2017, the Partnership had cash and cash equivalents of $18.8 million and $74.8 million of the undrawn portion of the $85 million revolving credit facility. In May 2017, the Partnership drew $10.1 million on the revolving credit facility. In December 2016, the Partnership completed the sale of 6,588,389 common units in a public offering raising approximately $111.5 million in net proceeds after directly attributable expenses. On January 3, 2017, the Partnership closed the acquisition for a 51% interest in the Höegh Grace entities for a cash payment of $91.8 million. Cash from the proceeds of the public offering to be used for this purpose had been classified as non-current cash designated for the acquisition as of December 31, 2016. In December 2016, the Partnership had used $12.6 million of the proceeds to repay part of the seller’s credit and $6.6 million to settle the working capital adjustment; both of which arose from the 2015 acquisition of the Höegh Gallant.

Current restricted cash for operating obligations of the PGN FSRU Lampung was $8.8 million and long-term restricted cash required under the Lampung facility was $14.2 million as of March 31, 2017.

The Partnership’s book value and outstanding principal of total long-term debt was $513.8 million and $519.8 million, respectively, as of March 31, 2017, including long-term debt financing our FSRUs, and the revolving credit facility and seller’s credit note due to owners and affiliates. This includes 100% of the long-term debt of the Höegh Grace entities which are consolidated. The long-term debt is repayable in quarterly installments of $11.4 million. As of March 31, 2017, the Partnership had outstanding interest rate swap agreements for a total notional amount of $444.6 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 15 to the unaudited condensed interim consolidated financial statements. As of March 31, 2017, the Partnership’s total current liabilities exceeded total current assets by $24.9 million. This is partly a result of mark-to-market valuations of its interest rate swaps (derivative instruments) of $4.2 million and the current portion of long-term debt of $45.5 million being classified current while the restricted cash of $14.2 million associated with the Lampung facility is classified as long-term. We do not plan to terminate the interest rate swaps before their maturity and, as a result, we will not realize these liabilities. Further, 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. The Partnership believes its current resources, including the undrawn balance under the revolving credit facility, are sufficient to meet the Partnership’s working capital requirements for its current business for the next twelve months.

On February 14, 2017 the Partnership paid a quarterly cash distribution with respect to the quarter ended on December 31, 2016 of $0.4125 per unit. The total amount of the distribution was $13.7 million.

On May 15, 2017, the Partnership paid a quarterly cash distribution with respect to the quarter ended March 31, 2017 of $0.43 per unit which corresponds to an annualized distribution of $1.72 per unit. The total amount of the distribution was $14.4 million.

In May 2017, the Partnership drew $10.1 million on the revolving credit facility.

In the first quarter of 2017, the Partnership filed and was paid $0.4 million of claims for indemnification from Höegh LNG for the three months ended December 31, 2016 for non-budgeted expenses under the omnibus agreement related to the PGN FSRU Lampung and losses with respect to the commencement of services under the time charter with EgyptCo pursuant to the contribution, purchase and sale agreement for the acquisition of the Höegh Gallant.

Cash Flows

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

	Three months ended
	March 31,
(in thousands of U.S. dollars)	2017			2016
Net cash provided by (used in) operating activities	$	19,577		$	11,943
Net cash provided by (used in) investing activities		4,611			2,206
Net cash provided by (used in) financing activities		(24,336	)		(20,726	)
Increase (decrease) in cash and cash equivalents		(148	)		(6,577	)
Cash and cash equivalents, beginning period		18,915			32,868
Cash and cash equivalents, end of period	$	18,767		$	26,291

Net Cash Provided by (Used in) Operating Activities

Net cash provided by operating activities was $19.6 million for the three months ended March 31, 2017, an increase of $7.7 million compared with $11.9 million for the three months ended March 31, 2016. Cash provided by operating activities, before changes in working capital, increased by $10.2 million primarily due to inclusion of the operations of the Höegh Grace for the three months ended March 31, 2017 compared to the three months ended March 31, 2016. As discussed further below, increased interest payments of $1.2 million on the advances from the joint ventures for the three months ended March 31, 2017 compared to the three months ended March 31, 2016 were part of the reason for the increase in cash provided by operating activities, before changes in working capital. However, net cash provided by changes in working capital decreased by $2.5 million for the three months ended March 31, 2017 compared to the three months ended March 31, 2016.

Net Cash Provided by (Used in) Investing Activities

Net cash provided by investing activities was $4.6 million and $2.2 million for the three months ended March 31, 2017 and 2016, respectively. The increase in net cash provided by investing activities of $2.4 million between the periods was the result of $3.8 million in cash acquired in the purchase of the Höegh Grace entities, $1.7 million in decrease in the receipts from principal repayments on advances to joint ventures, $0.2 million less expenditure for vessels and other equipment and $0.1 million in increased receipts from repayment on principal on the direct financing lease. The joint ventures have repaid the original principal on the advances and all of the payments for the three months ended March 31, 2017 represent payments of interest, including accrued interest repaid at the end of the loans. Interest payments are treated as return on investment and included as a component of net cash provided by operating activities in the consolidated statements cash flow. For the three months ended March 31, 2017, cash provided by investing activities include $0.8 million in receipts of repayment on principal on the direct financing lease since the PGN FSRU Lampung is accounted for as a financial lease compared to $0.7 million for the corresponding period of 2016.

Net Cash Provided by (Used in) Financing Activities

Net cash used in financing activities for the three months ended March 31, 2017 was $24.3 million compared with net cash used in financing activities of $20.7 million for the three months ended March 31, 2016.

Net cash used in financing activities for the three months ended March 31, 2017 was mainly due to the quarterly repayment of $4.8 million on the Lampung facility, $3.3 million on the Gallant facility, $3.3 million on the Grace facility, payment of $1.3 million on a customer loan for funding of VAT on import in Indonesia, and our payment of cash distributions to our unitholders of $13.7 million. This was partially offset by receipt of $1.6 million under the revolving credit facility and $0.4 million from Höegh LNG for the indemnification claimed for non-budgeted expenses and losses incurred for technical issues related to 2016.

Net cash used in financing activities for the three months ended March 31, 2016 was mainly due to the quarterly repayment of $4.8 million on the Lampung facility and $3.3 million on the Gallant facility, payment of $2.9 million on a customer loan for funding of VAT on import in Indonesia, and our payment of cash distributions to our unitholders of $11.0 million. This was partially offset by receipt of $1.0 million from Höegh LNG for the indemnification claim for non-budgeted expenses related to 2015.

As a result of the foregoing, cash and cash equivalents decreased by $0.1 million for the three months ended March 31, 2017, while cash and cash equivalents increased by $6.6 million for the three months ended March 31, 2016.

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 months ended March 31, 2017, and 2016, 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 months ended March 31, 2017, and 2016, the revenues from the Höegh Gallant were denominated 97% and 90% in U.S. dollars and 3% and 10% in Egyptian pounds, respectively. 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 2016 and 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 most of 2016 and all of 2017, the Partnership has agreed to the payment of monthly revenues denominated in Egyptian pounds that align with its working capital needs for the next month which reduces its foreign exchange rate exposure to a minimal amount and the risk of loss should the Egyptian pound be 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 March 31, 2017 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 March 31, 2017, 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	$	169,443		(5,081	)	Sept 2026		2.8	%
Gallant interest rate swaps (2)	LIBOR		131,625		(721	)	Sept 2019		1.9	%
Grace interest rate swaps (2)	LIBOR	$	143,500		(2,082	)	March 2020		2.3	%

Excludes the margins paid on the floating—rate debt.

All interest rate swaps are U.S. dollar denominated and principal amount reduces quarterly.

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.

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 allowance for doubtful accounts was recorded for the three month periods ended March 31, 2017 and 2016 and the year ended December 31, 2016. While the maximum exposure to loss due to credit risk is the book value of trade receivables at the balance sheet date, should the time charter for the PGN FSRU Lampung 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 expenses). 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 as 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:

	Three months ended March 31, 2017
				Joint venture
	Majority			FSRUs						Total
	held			(proportional						Segment			Elimin-				Consolidated
(in thousands of U.S. dollars)	FSRUs			consolidation)			Other			reporting			ations(1)				reporting
Reconciliation to net income (loss)
Net income (loss)	$	14,004			4,809			(2,625	)		16,188						$	16,188	(3)
Interest income		—			(11	)		(130	)		(141	)		11		(4)		(130	)
Interest expense		6,667			3,545			1,069			11,281			(3,545	)	(5)		7,736
Depreciation and amortization		5,263			2,440			—			7,703			(2,440	)	(5)		5,263
Other financial items(2)		125			(2,478	)		14			(2,339	)		2,478		(6)		139
Income tax (benefit) expense		1,755			—			—			1,755							1,755
Equity in earnings of JVs: Interest (income) expense, net		—			—			—			—			3,534		(4)		3,534
Equity in earnings of JVs: Depreciation and amortization		—			—			—			—			2,440		(5)		2,440
Equity in earnings of JVs: Other financial items(2)		—			—			—			—			(2,478	)	(6)		(2,478	)
Non-controlling interest in segment EBITDA		(4,994	)								(4,994	)						(4,994	)
Segment EBITDA	$	22,820			8,305			(1,672	)		29,453						$	29,453

(1)

Eliminations reverse each of the income statement reconciling line items of the proportional amounts for Joint venture FSRUs that are reflected in the consolidated net income for the Partnership's share of the Joint venture FSRUs net income (loss) on the Equity in earnings (loss) of joint ventures line item in the consolidated income statement. Separate adjustments from the consolidated net income to Segment EBITDA for the Partnership's share of the Joint venture FSRUs are included in the reconciliation lines starting with “Equity in earnings of JVs.”

(2)

Other financial items consist of gains and losses on derivative instruments and other items, net including foreign exchange gains or losses and withholding tax on interest expense.

(3)

There is no adjustment between net income for Total Segment reporting and the Consolidated reporting because the net income under the proportional consolidation and equity method of accounting is the same.

(4)

Interest income and interest expense for the Joint venture FSRUs is eliminated from the Total Segment reporting to agree to the interest income and interest expense in the Consolidated reporting and reflected as a separate adjustment to the equity accounting on the line Equity in earnings of JVs: Interest (income) expense for the Consolidated reporting.

(5)

Depreciation and amortization for the Joint venture FSRUs is eliminated from the Total Segment reporting to agree to the depreciation and amortization in the Consolidated reporting and reflected as a separate adjustment to the equity accounting on the line Equity in earnings of JVs: Depreciation and amortization for the Consolidated reporting.

(6)

Other financial items for the Joint venture FSRUs is eliminated from the Segment reporting to agree to the Other financial items in the Consolidated reporting and reflected as a separate adjustment to the equity accounting on the line Equity in earnings of JVs: Other financial items for the Consolidated reporting.

	Three months ended March 31, 2016
			Joint venture
	Majority		FSRUs						Total
	held		(proportional						Segment			Elimin-				Consolidated
(in thousands of U.S. dollars)	FSRUs		consolidation)			Other			reporting			ations(1)				reporting
Reconciliation to net income (loss)
Net income (loss)	$	8,172		(6,708	)		(2,504	)		(1,040	)					$	(1,040	)(3)
Interest income		—		—			(273	)		(273	)		—		(4)		(273	)
Interest expense		5,155		3,865			1,251			10,271			(3,865	)	(4)		6,406
Depreciation and amortization		2,630		2,379			—			5,009			(2,379	)	(5)		2,630
Other financial items(2)		682		9,010			20			9,712			(9,010	)	(6)		702
Income tax (benefit) expense		448		—			1			449							449
Equity in earnings of JVs: Interest (income) expense, net		—		—			—			—			3,865		(4)		3,865
Equity in earnings of JVs: Depreciation and amortization		—		—			—			—			2,379		(5)		2,379
Equity in earnings of JVs: Other financial items(2)		—		—			—			—			9,010		(6)		9,010
Segment EBITDA	$	17,087		8,546			(1,505	)		24,128						$	24,128

(1)

(2)

Other financial items consist of gains and losses on derivative instruments and other items, net including foreign exchange gains or losses and withholding tax on interest expense.

(3)

(4)

(5)

(6)

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 the Partnership's 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:

FSRU and LNG carrier market trends, including hire rates and factors affecting supply and demand;

our anticipated growth strategies;

our anticipated receipt of dividends and repayment of indebtedness from joint ventures;

the effects of volatility in global prices for crude oil and natural gas;

the effect of the worldwide economic environment;

turmoil in the global financial markets;

fluctuations in currencies and interest rates;

general market conditions, including fluctuations in hire rates and vessel values;

changes in our operating expenses, including drydocking and insurance costs;

our ability to make or increase cash distributions on the our units and the amount of any such distributions;

our ability to comply with financing agreements and the expected effect of restrictions and covenants in such agreements;

the future financial condition of our existing or future customers;

our ability to make additional borrowings and to access public equity and debt capital markets;

planned capital expenditures and availability of capital resources to fund capital expenditures;

the exercise of purchase options by customers;

our ability to maintain long-term relationships with customers;

our ability to leverage Höegh LNG's relationships and reputation in the shipping industry;

our ability to purchase the 49% interest in the Höegh Grace entities or additional vessels from Höegh LNG in the future;

our ability to integrate and realize the anticipated benefits from the acquisition of the 51% interest in the Höegh Grace entities;

our continued ability to enter into long-term, fixed-rate charters;

the operating performance of our vessels;

our ability to maximize the use of our vessels, including the redeployment or disposition of vessels no longer under long-term charters;

expected pursuit of strategic opportunities, including the acquisition of vessels;

our ability to compete successfully for future chartering and newbuilding opportunities;

timely acceptance of our vessels by their charterers;

termination dates and extensions of charters;

the cost of, and our ability to comply with, governmental regulations and maritime self-regulatory organization standards, as well as standard regulations imposed by its charterers applicable to its business;

demand in the FSRU sector or the LNG shipping sector in general and the demand for our vessels in particular;

availability of skilled labor, vessel crews and management;

our incremental general and administrative expenses as a publicly traded limited partnership and its fees and expenses payable under our ship management agreements, the technical information and services agreement and the administrative services agreements;

the anticipated taxation of the Partnership and distributions to its unitholders;

estimated future maintenance and replacement capital expenditures;

our ability to retain key employees;

customers' increasing emphasis on environmental and safety concerns;

potential liability from any pending or future litigation;

potential disruption of shipping routes due to accidents, political events, piracy or acts by terrorists;

future sales of common units in the public market;

our business strategy and other plans and objectives for future operations;

our ability to successfully remediate any material weaknesses in its internal control over financial reporting and its disclosure controls and procedures; and

other factors listed from time to time in the reports and other documents that we files with the SEC, including our Annual Report on Form 20-F for the year ended December 31, 2016 and subsequent quarterly reports on Form 6-K.

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

	Page

Unaudited Condensed Interim Consolidated Statements of Income for the Three Months Ended March 31, 2017 and 2016	F-2
Unaudited Condensed Interim Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2017 and 2016	F-3
Unaudited Condensed Interim Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016	F-4
Unaudited Condensed Interim Consolidated Statements of Changes in Partners’ Capital for the Three Months Ended March 31, 2017 and the Year Ended December 31, 2016	F-6
Unaudited Condensed Interim Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2016	F-7
Notes to Unaudited Condensed Interim Consolidated Financial Statements	F-9

F-1

HÖEGH LNG PARTNERS LP

UNAUDITED CONDENSED INTERIM CONSOLIDATED
STATEMENTS OF INCOME

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

		Three months ended
		March 31,
	Notes	2017			2016
REVENUES
Time charter revenues	5	$	35,076		$	21,670
Total revenues	5		35,076			21,670
OPERATING EXPENSES
Vessel operating expenses			(6,177	)		(3,783	)
Administrative expenses			(2,757	)		(2,305	)
Depreciation and amortization			(5,263	)		(2,630	)
Total operating expenses			(14,197	)		(8,718	)
Equity in earnings (losses) of joint ventures	5,12		4,809			(6,708	)
Operating income (loss)	5		25,688			6,244
FINANCIAL INCOME (EXPENSE), NET
Interest income			130			273
Interest expense			(7,736	)		(6,406	)
Gain (loss) on derivative instruments			663			335
Other items, net			(802	)		(1,037	)
Total financial income (expense), net	6		(7,745	)		(6,835	)
Income (loss) before tax			17,943			(591	)
Income tax expense	7		(1,755	)		(449	)
Net income (loss)	5	$	16,188		$	(1,040	)
Non-controlling interest in net income			2,744			—
Partners’ interest in net income (loss)		$	13,444		$	(1,040	)

Earnings per unit
Common unit public (basic and diluted)	17	$	0.40		$	(0.04	)
Common unit Höegh LNG (basic and diluted)	17	$	0.42		$	(0.04	)
Subordinated unit (basic and diluted)	17	$	0.42		$	(0.04	)

The accompanying notes are an integral part of the unaudited condensed interim consolidated financial statements.

F-2

HÖEGH LNG PARTNERS LP

UNAUDITED CONDENSED INTERIM CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME

(in thousands of U.S. dollars)

		Three months ended
		March 31,
	Notes	2017			2016
Net income (loss)		$	16,188		$	(1,040	)
Unrealized gains (losses) on cash flow hedge	15		1,140			(6,038	)
Income tax benefit (expense)	15		(92	)		(64	)
Other comprehensive income (loss)			1,048			(6,102	)
Comprehensive income (loss)		$	17,236		$	(7,142	)
Non-controlling interest in comprehensive income			2,901			—
Partners’ interest in comprehensive income (loss)		$	14,335		$	(7,142	)

The accompanying notes are an integral part of the unaudited condensed interim consolidated financial statements.

F-3

HÖEGH LNG PARTNERS LP

UNAUDITED CONDENSED INTERIM CONSOLIDATED
BALANCE SHEETS

(in thousands of U.S. dollars)

		As of
		March 31,		December 31,
	Notes	2017		2016
ASSETS
Current assets
Cash and cash equivalents	14	$	18,767	$	18,915
Restricted cash	14		8,840		8,055
Trade receivables			6,901		2,088
Amounts due from affiliates	13,14		4,247		4,237
Advances to joint ventures	8,14		5,730		6,275
Inventory			683		697
Current portion of net investment in direct financing lease			3,563		3,485
Prepaid expenses and other receivables			1,352		609
Total current assets			50,083		44,361
Long-term assets
Restricted cash	14		14,154		14,154
Cash designated for acquisition	4		—		91,768
Vessels, net of accumulated depreciation	9		694,485		342,591
Other equipment			609		592
Intangibles and goodwill	10		27,106		16,241
Advances to joint ventures	8,14		291		943
Net investment in direct financing lease			285,705		286,626
Long-term deferred tax asset	7		52		791
Other long-term assets			12,364		12,400
Total long-term assets			1,034,766		766,106
Total assets		$	1,084,849	$	810,467

The accompanying notes are an integral part of the unaudited condensed interim consolidated financial statements.

F-4

HÖEGH LNG PARTNERS LP

UNAUDITED CONDENSED INTERIM CONSOLIDATED
BALANCE SHEETS

(in thousands of U.S. dollars)

		As of
		March 31,			December 31,
	Notes	2017			2016
LIABILITIES AND EQUITY
Current liabilities
Current portion of long-term debt	11,14	$	45,458		$	32,208
Trade payables			925			972
Amounts due to owners and affiliates	13,14		3,538			1,374
Value added and withholding tax liability			1,360			796
Derivative instruments	14,15		4,185			3,534
Accrued liabilities and other payables			19,565			18,932
Total current liabilities			75,031			57,816
Long-term liabilities
Accumulated losses of joint ventures	12		21,077			25,886
Long-term debt	11,14		468,324			300,440
Revolving credit and seller’s credit due to owners and affiliates	13,14		44,605			43,005
Derivative instruments	14,15		3,699			3,511
Long-term tax liability			2,387			2,228
Long-term deferred tax liability			1,804			1,556
Other long-term liabilities			10,491			11,235
Total long-term liabilities			552,387			387,861
Total liabilities			627,418			445,677
EQUITY
Common units public			320,907			321,091
Common units Höegh LNG			6,915			6,849
Subordinated units			42,992			42,586
Accumulated other comprehensive income (loss)			(4,845	)		(5,736	)
Total partners' capital			365,969			364,790
Non-controlling interest			91,462			—
Total equity			457,431			364,790
Total liabilities and equity		$	1,084,849		$	810,467

The accompanying notes are an integral part of the unaudited condensed interim consolidated financial statements.

F-5

HÖEGH LNG PARTNERS LP

UNAUDITED CONDENSED INTERIM CONSOLIDATED

STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL

(in thousands of U.S. dollars)

	Partners' Capital
	Common Units Public			Common Units Höegh LNG			Subordin- ated Units			Accumulated Other Comprehensive Income			Non- controlling interest		Total Equity
Consolidated balance as of December 31, 2015	$	209,372			6,604			41,063			(7,241	)		—	$	249,798
Net income		18,133			3,221			20,023			—			—		41,377
Cash distributions to unitholders		(18,225	)		(3,554	)		(22,098	)		—			—		(43,877	)
Cash contribution from Höegh LNG		—			532			3,311			—			—		3,843
Other comprehensive income		—			—			—			1,505			—		1,505
Net proceeds from issuance of common units		111,529			—			—			—			—		111,529
Issuance of units for Board of Directors' fees		189			—			—			—			—		189
Other and contributions from owners		93			46			287			—			—		426
Consolidated balance as of December 31, 2016		321,091			6,849			42,586			(5,736	)		—		364,790
Non-controlling interest acquired from the purchase of the Höegh Grace entities		—			—			—			—			88,561		88,561
Net income		7,052			886			5,506			—			2,744		16,188
Cash distributions to unitholders		(7,276	)		(892	)		(5,549	)		—			—		(13,717	)
Cash contribution from Höegh LNG		—			56			348			—			—		404
Other comprehensive income		—			—			—			891			157		1,048
Other and contributions from owners		40			16			101			—			—		157
Consolidated balance as of March 31, 2017	$	320,907			6,915			42,992			(4,845	)		91,462	$	457,431

The accompanying notes are an integral part of the unaudited condensed interim consolidated financial statements.

F-6

HÖEGH LNG PARTNERS LP

UNAUDITED CONDENSED INTERIM CONSOLIDATED

STATEMENTS OF CASH FLOWS

(in thousands of U.S. dollars)

	Three months ended March 31,
	2017			2016
OPERATING ACTIVITIES
Net income (loss)	$	16,188		$	(1,040	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		5,263			2,630
Equity in losses (earnings) of joint ventures		(4,809	)		6,708
Changes in accrued interest income on advances to joint ventures		1,197			(165	)
Amortization of deferred debt issuance cost and fair value of debt assumed		213			523
Amortization in revenue for above market contract		895			598
Changes in accrued interest expense		(189	)		52
Net currency exchange losses (gains)		134			(50	)
Unrealized loss (gain) on derivative instruments		(663	)		(335	)
Deferred tax expense and provision tax uncertainty		1,054			341
Other adjustments		158			26
Changes in working capital:
Restricted cash		(766	)		1,012
Trade receivables		(367	)		(5	)
Inventory		14			17
Prepaid expenses and other receivables		(689	)		(275	)
Trade payables		(249	)		(482	)
Amounts due to owners and affiliates		1,124			2,219
Value added and withholding tax liability		1,257			851
Accrued liabilities and other payables		(188	)		(682	)
Net cash provided by (used in) operating activities		19,577			11,943

INVESTING ACTIVITIES
Expenditure for purchase of the Höegh Grace entities		(91,768	)		—
Cash acquired in the purchase of the Höegh Grace entities		3,774			—
Decrease in restricted cash designated for purchase of the Höegh Grace entities		91,768			—
Expenditure for vessel and other equipment		(6	)		(220	)
Receipts from repayment of principal on advances to joint ventures		—			1,654
Receipts from repayment of principal on direct financing lease		843			772
Net cash provided by (used in) investing activities	$	4,611		$	2,206

The accompanying notes are an integral part of the unaudited condensed interim consolidated financial statements.

F-7

HÖEGH LNG PARTNERS LP

UNAUDITED CONDENSED INTERIM CONSOLIDATED

STATEMENTS OF CASH FLOWS

(in thousands of U.S. dollars)

	Three months ended March 31,
	2017			2016
FINANCING ACTIVITIES
Proceeds from loans and promissory notes due to owners and affiliates	$	1,600		$	—
Repayment of long-term debt		(11,365	)		(8,052	)
Repayment of customer loan for funding of value added liability on import		(1,258	)		(2,869	)
Payment of debt issuance cost		—			(5	)
Cash distributions to unitholders		(13,717	)		(10,967	)
Proceeds from indemnifications received from Höegh LNG		404			965
(Increase) decrease in restricted cash		—			202
Net cash provided by (used in) financing activities		(24,336	)		(20,726	)

Increase (decrease) in cash and cash equivalents		(148	)		(6,577	)
Cash and cash equivalents, beginning of period		18,915			32,868
Cash and cash equivalents, end of period	$	18,767		$	26,291

The accompanying notes are an integral part of the unaudited condensed interim consolidated financial statements.

F-8

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

1. Description of business

Höegh LNG Partners LP (the “Partnership”) is a publicly traded Marshall Islands limited partnership initially formed for the purpose of acquiring from Höegh LNG Holdings Ltd. (“Höegh LNG”) their interests in Hoegh LNG Lampung Pte. Ltd., PT Hoegh LNG Lampung (the owner of the PGN FSRU Lampung and the Tower Yoke Mooring System), SRV Joint Gas Ltd. (the owner of the Neptune), and SRV Joint Gas Two Ltd. (the owner of the GDF Suez Cape Ann) in connection with the Partnership’s initial public offering of its common units (the “IPO”) which was completed in August 2014. As of March 31, 2017, the Partnership has a fleet of five floating storage regasification units (“FSRUs”).

Under the partnership agreement, the general partner has irrevocably delegated to the Partnership’s board of directors the power to oversee and direct the operations of, manage and determine the strategies and policies of the Partnership. Four of the seven board members were elected by the common unitholders at the Partnership’s first annual meeting of unitholders held on September 24, 2014. As a result, Höegh LNG, as the owner of the general partner, does not have the power to control the Partnership’s board of directors or the Partnership, and the Partnership is not considered to be under the control of Höegh LNG for US GAAP purposes. Therefore, the sale of a business from Höegh LNG to the Partnership is a change of control. As a result, the Partnership accounts for acquisitions of businesses under the purchase method of accounting and not as transfers of entities under common control.

In December 2016, the Partnership issued and sold 6,588,389 common units in an underwritten public offering (refer to note 17) to be used primarily to fund the purchase price of the acquisition of a 51% ownership interest in Höegh LNG Colombia Holding Ltd., the owner of the entities that own and operate the Höegh Grace( the “Höegh Grace entities”).

On January 3, 2017, the Partnership closed the acquisition of a 51% ownership interest in the Höegh Grace entities pursuant to a purchase, sale and contribution agreement that the Partnership entered into with Höegh LNG on December 1, 2016. On January 1, 2017, the Partnership entered an agreement with Höegh LNG, under which Höegh LNG granted to the Partnership the authority to make decisions about operations of Höegh LNG Colombia Holding Ltd. from January 1, 2017 to the closing date of the acquisition. As a result, the Partnership has recorded the results of operations of the entities that own and operate Höegh Grace in its consolidated income statement from January 1, 2017. Refer to note 4.

The Partnership’s 50% interests in SRV Joint Gas Ltd. and SRV Joint Gas Two Ltd., collectively, are referred to as the “joint ventures” and the remaining entities owned by the Partnership, as reflected in the table below are, collectively, referred to as the “subsidiaries” in these consolidated financial statements. The PGN FSRU Lampung, the Höegh Gallant, the Höegh Grace, the Neptune and the GDF Suez Cape Ann are FSRUs and, collectively, referred to in these consolidated financial statements as the vessels or the FSRUs. The Tower Yoke Mooring System (the “Mooring”) is an offshore installation that is used to moor the PGN FSRU Lampung to offload the gas into an offshore pipe that transports the gas to a land terminal. PT Hoegh LNG Lampung, Hoegh LNG Cyprus Limited, the owner of the Höegh Gallant, Höegh LNG FSRU IV Ltd., the owner of the Höegh Grace, and the two joint ventures, SRV Joint Gas Ltd. and SRV Joint Gas Two Ltd., are collectively referred to as the “FSRU-owning entities.”

The Neptune and the GDF Suez Cape Ann operate under long-term time charters with expiration dates in 2029 and 2030, respectively, and, in each case, with an option for the charterer, GDF Suez Global LNG Supply SA, a subsidiary of ENGIE, to extend for up to two additional periods of five years each. The PGN FSRU Lampung, operates under a long term time charter which started in July 2014 with an expiration date in 2034 (with an option for the charterer to extend for up to one additional period of ten years or two additional periods of five years each) and uses the Mooring that was constructed and installed and sold to the charterer, PT PGN LNG Indonesia (“PGN LNG”), a subsidiary of PT Perusahaan Gas Negara (Persero) Tbk (“PGN”). The Höegh Gallant operates under a long term time charter which started in April 2015 with an expiration date in April 2020 with Hoegh LNG Egypt LLC (“EgyptCo”), a subsidiary of Höegh LNG. EgyptCo has a charter with the government-owned Egyptian Natural Gas Holding Company (“EGAS”). Pursuant to an option agreement, the Partnership has the right to cause Höegh LNG to charter the Höegh Gallant from the expiration or termination of the EgyptCo charter until July 2025. The Höegh Grace operates under a long term time charter which started in December 2016 with Sociedad Portuaria El Cayao S.A. E.S.P. (“SPEC”). The non cancellable charter period is 10 years. The initial term of the charter is 20 years. However, each party has an unconditional option to cancel the charter after 10 and 15 years without a penalty. However, if SPEC waives its right to terminate in year 10 within a certain deadline, the Partnership will not be able to exercise its right to terminate in year 10.

F-9

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

The following table lists the entities included in these consolidated financial statements and their purpose as of March 31, 2017.

	Jurisdiction of
	Incorporation
Name	or Registration	Purpose
Höegh LNG Partners LP	Marshall Islands	Holding Company
Höegh LNG Partners Operating LLC (100% owned)	Marshall Islands	Holding Company
Hoegh LNG Services Ltd (100% owned)	United Kingdom	Administration Services Company
Hoegh LNG Lampung Pte. Ltd. (100% owned)	Singapore	Owns 49% of PT Hoegh LNG Lampung
PT Hoegh LNG Lampung (49% owned) (1)	Indonesia	Owns PGN FSRU Lampung
SRV Joint Gas Ltd. (50% owned) (2)	Cayman Islands	Owns Neptune
SRV Joint Gas Two Ltd. (50% owned) (2)	Cayman Islands	Owns GDF Suez Cape Ann
Höegh LNG FSRU III Ltd. (100% owned) (3)	Cayman Islands	Owns 100% of Hoegh LNG Cyprus Limited
Hoegh LNG Cyprus Limited (100% owned) (3)	Cyprus	Owns Höegh Gallant
Hoegh LNG Cyprus Limited Egypt Branch (100% owned) (3)	Egypt	Branch of Hoegh LNG Cyprus Limited
Höegh LNG Colombia Holding Ltd. (51% owned) (4)	Cayman Islands	Owns 100% of Höegh LNG FSRU IV Ltd. and Höegh LNG Colombia S.A.S.
Höegh LNG FSRU IV Ltd. (51% indirectly owned) (4)	Cayman Islands	Owns Höegh Grace
Höegh LNG Colombia S.A.S. (51% indirectly owned) (4)	Colombia	Operating Company

(1) PT Hoegh LNG Lampung is a variable interest entity, which is controlled by Hoegh LNG Lampung Pte. Ltd. and is, therefore, 100% consolidated in the consolidated financial statements.

(2) The remaining 50% interest in each joint venture is owned by Mitsui O.S.K. Lines, Ltd. and Tokyo LNG Tanker Co.

(3) The ownership interests were acquired on October 1, 2015.

(4) The 51% ownership interests were acquired on January 3, 2017. Refer to note 4.

2. Significant accounting policies

Basis of presentation

The accompanying unaudited condensed interim consolidated financial statements are prepared in accordance with United States generally accepted accounting principles (“US GAAP”) for interim financial information. In the opinion of Management, all adjustments considered necessary for a fair presentation, which are of a normal recurring nature, have been included. All inter-company balances and transactions are eliminated. The footnotes are condensed and do not include all of the disclosures required for a complete set of financial statements. Therefore, the unaudited condensed interim consolidated financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2016, included in the Partnership’s Annual Report on Form 20-F (the “Annual Report”).

It has been determined that PT Hoegh LNG Lampung, Höegh LNG FSRU III Ltd., Höegh LNG Colombia Holding Ltd., SRV Joint Gas Ltd. and SRV Joint Gas Two Ltd. are variable interest entities. A variable interest entity (“VIE”) is defined by US GAAP as a legal entity where either (a) the voting rights of some investors are not proportional to their rights to receive the expected residual returns of the entity, their obligations to absorb the expected losses of the entity, or both, and substantially all of the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights, or (b) the equity holders have not provided sufficient equity investment to permit the entity to finance its activities without additional subordinated financial support, or (c) equity interest holders as a group lack the characteristics of a controlling financial interest, including decision making ability and an interest in the entity’s residual risks and rewards. The guidance requires a VIE to be consolidated if any of its interest holders are entitled to a majority of the entity’s residual returns or are exposed to a majority of its expected losses.

F-10

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

Based upon the criteria set forth in US GAAP, the Partnership has determined that PT Hoegh LNG Lampung is a VIE, as the equity holders, through their equity investments, may not participate fully in the entity’s expected residual returns and substantially all of the entity’s activities either involve, or are conducted on behalf of, the Partnership. The Partnership is the primary beneficiary, as it has the power to make key operating decisions considered to be most significant to the VIE and receives all the expected benefits or expected losses. Therefore, 100% of the assets, liabilities, revenues and expenses of PT Hoegh LNG Lampung are included in the consolidated financial statements. Dividends may only be paid if the retained earnings are positive under Indonesian law and requirements are fulfilled under the Lampung facility. As of March 31, 2017, PT Hoegh LNG Lampung has negative retained earnings and therefore cannot make dividend payments under Indonesia law. Under the Lampung facility, there are limitations on cash dividends and loans that can be made to the Partnership. Refer to note 11.

The Partnership has also determined that Höegh LNG FSRU III Ltd. is a VIE, as the equity investment does not provide sufficient equity to permit the entity to finance its activities without financial guarantees. The Partnership is the primary beneficiary, as it has the power to make key operating decisions considered to be most significant to the VIE and receives all the expected benefits or expected losses. Therefore, 100% of the assets, liabilities, revenues and expenses of Höegh LNG FSRU III Ltd. are included in the consolidated financial statements. Under Cayman Islands law, dividends may only be paid out of profits or capital reserves if the entity is solvent after the distribution. Under the Gallant/Grace facility, there are limitations on dividends and loans distributions that can be made to the Partnership. Refer to note 11. The Partnership is a guarantor of the Gallant/Grace facility.

Höegh LNG Colombia Holding Ltd. is a VIE since the entity would not be able to finance its activities without financial guarantees under its subsidiary’s facility to finance the Höegh Grace. As of January 1,2017, the Partnership is the primary beneficiary, as it has the power to make key operating decisions considered to be most significant to the VIE and receives the majority of the expected benefits or expected losses. Therefore, 100% of the assets, liabilities, revenues and expenses of Höegh LNG Colombia Holding Ltd., and subsidiaries, are included in the consolidated financial statements with a non-controlling interest is reflected for the minority share. Under Cayman Islands law, dividends may only be paid out of profits or capital reserves if the entity is solvent after the distribution.

In addition, the Partnership has determined that the two joint ventures, SRV Joint Gas Ltd. and SRV Joint Gas Two Ltd., are VIEs since each entity did not have a sufficient equity investment to permit the entity to finance its activities without additional subordinated financial support at the time of its initial investment. The entities have been financed with third party debt and subordinated shareholders loans. The Partnership is not the primary beneficiary, as the Partnership cannot make key operating decisions considered to be most significant to the VIEs, but has joint control with the other equity holders. Therefore, the joint ventures are accounted for under the equity method of accounting as the Partnership has significant influence. The Partnership’s carrying value is recorded in advances to joint ventures and accumulated losses of joint ventures in the consolidated balance sheets. For SRV Joint Gas Ltd., the Partnership had a receivable for the advances of $3.4 million and $3.9 million, respectively, and the Partnership’s accumulated losses or its share of net liabilities were $8.8 million and $11.2 million, respectively, as of March 31, 2017 and December 31, 2016. The Partnership’s carrying value for SRV Joint Gas Two Ltd., consists of a receivable for the advances of $2.6 million and $3.3 million, respectively, and the Partnership’s accumulated losses or its share of net liabilities were $12.3 million and $14.7 million, respectively, as of March 31, 2017 and December 31, 2016. The major reason that the Partnership’s accumulated losses in the joint ventures are net liabilities is due to the fair value adjustments for the interest rate swaps recorded as liabilities on the combined balance sheets of SRV Joint Gas Ltd. and SRV Joint Gas Two Ltd. The maximum exposure to loss is the carrying value of the receivables, which is subordinated to the joint ventures’ long-term bank debt, the investments in the joint ventures (accumulated losses), as the shares are pledged as security for the joint ventures’ long-term bank debt and Höegh LNG’s commitment under long-term bank loan agreements to fund its share of drydocking costs and remarketing efforts in the event of an early termination of the charters. Dividend distributions require a) agreement of the other joint venture owners; b) fulfilment of requirements of the long-term bank loans; c) and under Cayman Islands law may be paid out of profits or capital reserves subject to the joint venture being solvent after the distribution.

Significant accounting policies

The accounting policies used in the preparation of the unaudited condensed interim consolidated financial statements are consistent with those applied in the audited financial statements for the year ended December 31, 2016 included in the Partnership’s Annual Report.

F-11

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

Recent accounting pronouncements

There are no accounting pronouncements effective for the period, whose adoption had a material impact on the consolidated financial statements in the current period.

3. Formation transactions and Initial Public Offering

During August 2014, the following transactions in connection with the transfer of equity interests, shareholder loans and promissory notes and accrued interest to the Partnership and the IPO occurred:

Capital contribution

Höegh LNG contributed the following to the Partnership:

(i)

Its interests in Hoegh LNG Lampung Pte. Ltd., PT Hoegh LNG Lampung, SRV Joint Gas Ltd. and SRV Joint Gas Two Ltd.;

(ii)

Its shareholder loans made by Höegh LNG to each of SRV Joint Gas Ltd. and SRV Joint Gas Two Ltd., in part to finance the operations of such joint ventures;

(iii)

Its receivables for the $40 million promissory note due to Höegh LNG as well as accrued interest on such note and two other promissory notes relating to Hoegh LNG Lampung Pte. Ltd.;

These transactions have been accounted for as a capital contribution by Höegh LNG to the Partnership.

Recapitalization of the Partnership

(i)

The Partnership issued to Höegh LNG 2,116,060 common units and 13,156,060 subordinated units and 100% of incentive distribution rights (“IDRs”), which will entitle Höegh LNG to increasing percentages of the cash the Partnership distributes in excess of $0.388125 per unit per quarter.

(ii)

The Partnership issued to Höegh LNG GP LLC, a wholly owned subsidiary of Höegh LNG, a non-economic general partner interest in the Partnership.

F-12

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

Initial Public Offering

(i)

The Partnership issued and sold through the underwriters to the public 11,040,000 common units (including 1,440,000 common units exercised pursuant to the underwriters’ option to purchase additional common units), representing approximately 42% limited partnership interest in the Partnership. The common units were sold for $20.00 per unit resulting in gross proceeds of $220.8 million. The net proceeds of the offering were approximately $203.5 million. Net proceeds is after deduction of underwriters’ discounts, structuring fees and reimbursements and the incremental direct costs attributable to the IPO that were deferred and charged against the proceeds of the offering.

(ii)

The Partnership applied the net proceeds of the offering as follows: (i) $140 million to make a loan to Höegh LNG in exchange for a note bearing interest at a rate of 5.88% per annum, (ii) $20 million for general partnership purposes and (iii) the remainder of approximately $43.5 million to make a cash distribution to Höegh LNG.

At the completion of the IPO, Höegh LNG owned 2,116,060 common units and 13,156,060 subordinated units, representing an approximate 58% limited partnership interest in the Partnership.

Agreements

In connection with the IPO the Partnership entered into several agreements including:

(i)

An $85 million revolving credit facility with Höegh LNG, which was undrawn at the closing of the IPO;

(ii)

An omnibus agreement with Höegh LNG, the general partner, and Höegh LNG Partners Operating LLC governing, among other things:

To what extent the Partnership and Höegh LNG may compete with each other;

The Partnership’s rights of first offer on certain FSRUs and LNG carriers operating under charters of five or more years; and

Höegh LNG’s provision of certain indemnities to the Partnership.

(iii)

An administrative services agreement with Höegh LNG Services Ltd., UK (“Höegh UK”), pursuant to which Höegh UK provides certain administrative services to the Partnership; and

(iv)

Höegh UK has entered into administrative services agreements with Höegh LNG AS (“Höegh Norway”) and Leif Höegh (U.K.) Limited, pursuant to which Höegh Norway and Leif Höegh (U.K.) Limited provide Höegh UK certain administrative services. Additionally, the operating company has entered into an administrative services agreement with Leif Höegh (U.K.) Limited to allow Leif Höegh (U.K.) Limited to provide services directly to Höegh LNG Partners Operating LLC.

F-13

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

Existing agreements remain in place for provision of certain services to the Partnership’s vessel owning joint ventures or entity, of which the material agreements are as follows:

•

The joint ventures are parties to ship management agreements with Höegh LNG Fleet Management AS (“Höegh LNG Management”) pursuant to which Höegh LNG Management provides the joint ventures with technical and maritime management and crewing of the Neptune and the GDF Suez Cape Ann, and Höegh Norway is a party to a sub-technical support agreement with Höegh LNG Management pursuant to which Höegh LNG Management provides technical support services with respect to the PGN FSRU Lampung; and

•

The joint ventures are parties to commercial and administration management agreements with Höegh Norway, and PT Hoegh LNG Lampung is a party to a technical information and services agreement with Höegh Norway.

4. Business combinations

On January 3, 2017, the Partnership closed the acquisition of a 51% ownership interest in Höegh LNG Colombia Holding Ltd., the owner of the entities that own and operate Höegh Grace pursuant to a purchase, sale and contribution agreement that the Partnership entered into with Höegh LNG on December 1, 2016. The cash consideration was $91.8 million, excluding the working capital adjustment. The working capital adjustment was $0.4 million.

In December 2016, the Partnership sold 6,588,389 common units, representing limited partner interests in an underwritten public offering. The Partnership's net proceeds from the public offering were $111.5 million. The Partnership used $91.8 million of the net proceeds as cash consideration to acquire the 51% ownership interest in the Höegh Grace entities on January 3, 2017. During December 2016, net proceeds of $12.6 million and $6.6 million was used to repay part of the seller’s credit note and to settle the working capital adjustment, respectively, related to the 2015 acquisition of the Höegh Gallant.

The Höegh Grace was constructed by Hyundai Heavy Industries Co., Ltd. (“HHI”) and was delivered to Höegh LNG in March 2016.

On November 1, 2014, Höegh LNG FSRU IV Ltd., a Cayman Islands company, that owns the Höegh Grace, entered into an International Leasing Agreement (“ILA”) with SPEC for the lease of the Höegh Grace. The Höegh Grace will serve as a LNG import terminal in Cartagena, on the Atlantic coast of Colombia. The initial term of the lease is 20 years. However, the Charterer has an unconditional option to cancel the lease after 10 and 15 years. As a result, non cancellable lease period is for ten years. The lease commenced in December 2016. On November 1, 2014 Höegh LNG also entered into an Operation and Service Agreement (“OSA”) with SPEC to operate and provide certain services for the Höegh Grace for SPEC for the duration of the ILA.

Under terms of the Höegh LNG Colombia Holding Ltd.’s memorandum and articles of association, the Partnership has the power to make key operating decisions considered to be most significant to the Höegh Grace entities and, therefore, has control over the Höegh Grace entities through the Partnership’s ownership of the equity interest of Höegh LNG Colombia Holding Ltd. As a result, the Partnership has accounted for the acquisition of the 51% interest in Höegh LNG Colombia Holding Ltd. as a business combination. On January 1, 2017, the Partnership entered an agreement with Höegh LNG, under which Höegh LNG granted to the Partnership the authority to make decisions over the operations of Höegh LNG Colombia Holding Ltd. from January 1, 2017 to the closing date of the acquisition. As a result, the Partnership has recorded the results of operations of the Höegh Grace entities in its consolidated income statement as of January 1, 2017.

The purchase price of the acquisition has been allocated to the identifiable fair values allocated to each class of identifiable assets acquired.

Under the purchase method of accounting when control is obtained, the non-controlling interest is required to be measured at its fair value at the acquisition date. Management has concluded that the pro-rata values of the controlling and non-controlling interests are the same. The fair value of the consideration transferred and the fair value of the 49% interest of the non-controlling interest will be allocated to assets acquired and liabilities assumed as of the acquisition date with any remaining unallocated amount recognized as goodwill.

F-14

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

The following summarizes the fair values of assets and liabilities assumed:

(in thousands of US dollars)
Consideration
Use of proceeds from public offering (issuance of 6,588,389 common units to the public)	$	91,768
Working capital adjustment		407
Total consideration				$	92,175

Assets acquired
Cash and cash equivalents		3,774
Restricted cash		19
Trade receivables		4,446
Prepaid expenses and other receivables		51
Vessel		357,138
Other equipment		30
Intangibles: Above market time charter		11,760
Other long term assets		830
Total long term assets					378,048
Liabilities assumed
Trade payables		(193	)
Amounts due to owners and affiliates		(622	)
Accrued liabilities and other payables		(1,569	)
Total long term debt		(192,286	)
Derivative instruments		(2,642	)
Total liabilities assumed					(197,312	)
Total identifiable net assets					180,736

Non-controlling interest in total identifiable net assets					88,561

Acquired share in total identifiable net asset				$	92,175

F-15

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

One contract related intangible has been identified. The Partnership recorded $11.8 million for the favorable time charter contract with SPEC. The intangible for the above market value of the time charter contract associated with the Höegh Grace is amortized to time charter revenue on a straight line basis calculated per day over the remaining non-cancellable charter term of approximately 9.5 years as of the acquisition date.

The premium arising in a business combination for the difference in the fair value of the debt assumed compared to the outstanding principal is reported in the consolidated balance sheet as a direct adjustment to the outstanding principal of the related debt and amortized on an effective interest rate method over the term of the relevant loan. Amortization of fair value of the debt assumed is included as a component of interest expense.

The fair value of assets acquired and the liabilities assumed approximated the total consideration, therefore, no residual amount has been recognized as goodwill for the acquisition.

All of the excess value associated with the business combination is associated with assets and liabilities of Höegh LNG FSRU IV Ltd., a Cayman Islands company, which is not subject to corporate income taxes. Therefore, there are no deferred tax assets or liabilities included in the purchase price allocation. As of the acquisition date, Höegh LNG Colombia S.A.S. had net deferred tax assets of less than $0.1 million which were fully offset by a valuation allowance.

Total revenues of $12.3 million and net income of $5.6 million have been included in the Partnership’s consolidated statement of income from the acquisition date of January 1, 2017 through March 31, 2017.

The following unaudited pro forma information assumes the acquisition of the Höegh Grace entities occurred as of January 1, 2016. The unaudited information is for illustration purposes only. The Höegh Grace was delivered from HHI on March 30, 2016 and did not begin operations under the time charter until December 2016. Periods prior to December 2016 reflect only costs incurred during the construction and pre-contract period of operations and would not be indicative of the future results of operations or the cash flows that the Partnership will consolidate going forward.

(in thousands of U.S. dollars)	Year ended December 31, 2016
Total revenue	$	96,526
Net income (loss)		23,382
Non-controlling interest in net income (loss)		(8,818	)
Partners’ interest in net income (loss)	$	32,200

F-16

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

5. Segment information

For the three months ended March 31, 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 Höegh Grace. For the three months ended March 31, 2016, Majority held FSRUs includes the direct financing lease related to the PGN FSRU Lampung and the operating lease related to the Höegh Gallant.

As of March 31, 2017 and 2016, Joint venture FSRUs include two 50% owned FSRUs, the Neptune and the GDF Suez 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 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 consolidates 100% of the revenues, expenses, assets and liabilities of the Höegh Grace entities and the interest not owned by the Partnership is reflected as non-controlling interest in net income and non-controlling interest in total equity under US GAAP. Management monitors the results of operations of the Höegh Grace entities based on the Partnership’s 51% interest in Segment EBITDA of such entities and, therefore, subtracts 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 below.

In time charters, the charterer, not the Partnership, controls the choice of locations or routes the FSRUs serve. Accordingly, the presentation of information by geographical region is not meaningful. The following tables include the results for the segments for the three months ended March 31, 2017 and 2016.

F-17

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

	Three months ended March 31, 2017
				Joint venture
	Majority			FSRU’s						Total
	held			(proportional						Segment			Elimin-				Consolidated
(in thousands of U.S. dollars)	FSRUs			consolidation)			Other			reporting			ations				reporting
Time charter revenues	$	35,076			10,924			—			46,000			(10,924	)	(1)	$	35,076
Total revenues		35,076			10,924			—			46,000							35,076
Operating expenses		(7,262	)		(2,619	)		(1,672	)		(11,553	)		2,619		(1)		(8,934	)
Equity in earnings (losses) of joint ventures		—			—			—			—			4,809		(1)		4,809
Less: Non-controlling interest in Segment EBITDA		(4,994	)		—			—			(4,994	)		4,994		(2)		—
Segment EBITDA		22,820			8,305			(1,672	)		29,453
Add: Non-controlling interest in Segment EBITDA		4,994			—			—			4,994			(4,994	)	(2)		—
Depreciation and amortization		(5,263	)		(2,440	)		—			(7,703	)		2,440		(1)		(5,263	)
Operating income (loss)		22,551			5,865			(1,672	)		26,744							25,688
Gain (loss) on derivative instruments		663			2,496			—			3,159			(2,496	)	(1)		663
Other financial income (expense), net		(7,455	)		(3,552	)		(953	)		(11,960	)		3,552		(1)		(8,408	)
Income (loss) before tax		15,759			4,809			(2,625	)		17,943			—				17,943
Income tax expense		(1,755	)		—			—			(1,755	)		—				(1,755	)
Net income (loss)	$	14,004			4,809			(2,625	)		16,188			—			$	16,188
Non-controlling interest in net income		2,744			—			—			2,744							2,744
Partners’ interest in net income (loss)	$	11,260			4,809			(2,625	)		13,444			—			$	13,444

(1)

Eliminations reverse each of the income statement line items of the proportional amounts for Joint venture FSRUs and record the Partnership's share of the Joint venture FSRUs net income (loss) to Equity in earnings (loss) of joint ventures.

(2)

Eliminations reverse the adjustment to Non-controlling interest in Segment EBITDA included for Segment EBITDA and the adjustment to reverse the Non-controlling interest in Segment EBITDA to reconcile to operating income and net income.

F-18

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

	As of March 31, 2017
				Joint venture
	Majority			FSRUs				Total
	held			(proportional				Segment			Elimin-				Consolidated
(in thousands of U.S. dollars)	FSRUs			consolidation)		Other		reporting			ations				reporting
Vessels, net of accumulated depreciation	$	694,485			272,756		—		967,241			(272,756	)	(1)	$	694,485
Net investment in direct financing lease		289,268			—		—		289,268			—				289,268
Goodwill		251			—		—		251			—				251
Advances to joint ventures		—			—		6,021		6,021			—				6,021
Total assets		1,077,292			293,239		7,557		1,378,088			(293,239	)	(1)		1,084,849
Accumulated losses of joint ventures		—			—		50		50			(21,127	)	(2)		(21,077	)
Expenditures for vessels & equipment		—			263		—		263			(263	)	(2)		—
Expenditures for drydocking		—			—		—		—			—		(2)		—
Principal repayment direct financing lease		843			—		—		843			—				843
Amortization of above market contract		895			—		—		895			—				895
Non-controlling interest: amortization of above market contract	$	(149	)		—		—		(149	)		—			$	—

(1)

Eliminates the proportional share of the Joint venture FSRUs’ Vessels, net of accumulated depreciation and Total assets and reflects the Partnership’s share of net assets (assets less liabilities) of the Joint venture FSRUs as Accumulated losses of joint ventures.

(2)

Eliminates the Joint venture FSRUs’ Expenditures for vessels & equipment and drydocking to reflect the consolidated expenditures of the Partnership.

F-19

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

	Three months ended March 31, 2016
				Joint venture
	Majority			FSRUs						Total
	held			(proportional						Segment			Elimin-			Consolidated
(in thousands of U.S. dollars)	FSRUs			consolidation)			Other			reporting			ations (1)			reporting
Time charter revenues	$	21,670			10,739			—			32,409			(10,739	)	$	21,670
Total revenues		21,670			10,739			—			32,409						21,670
Operating expenses		(4,583	)		(2,193	)		(1,505	)		(8,281	)		2,193			(6,088	)
Equity in earnings (losses) of joint ventures		—			—			—			—			(6,708	)		(6,708	)
Segment EBITDA		17,087			8,546			(1,505	)		24,128
Depreciation and amortization		(2,630	)		(2,379	)		—			(5,009	)		2,379			(2,630	)
Operating income (loss)		14,457			6,167			(1,505	)		19,119						6,244
Gain (loss) on derivative instruments		335			(8,993	)		—			(8,658	)		8,993			335
Other financial income (expense), net		(6,172	)		(3,882	)		(998	)		(11,052	)		3,882			(7,170	)
Income (loss) before tax		8,620			(6,708	)		(2,503	)		(591	)		—			(591	)
Income tax expense		(448	)		—			(1	)		(449	)		—			(449	)
Net income (loss)	$	8,172			(6,708	)		(2,504	)		(1,040	)		—		$	(1,040	)

(1)

Eliminations reverse each of the income statement line items of the proportional consolidation amounts for Joint venture FSRUs and record the Partnership’s share of the Joint venture FSRUs’ net income (loss) to Equity in earnings (loss) of joint ventures.

F-20

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

	As of December 31, 2016
			Joint venture
	Majority		FSRUs				Total
	held		(proportional				Segment		Elimin-				Consolidated
(in thousands of U.S. dollars)	FSRUs		consolidation)		Other		reporting		ations				reporting
Vessels, net of accumulated depreciation	$	342,591		274,932		—		617,523		(274,932	)	(1)	$	342,591
Net investment in direct financing lease		290,111		—		—		290,111		—				290,111
Goodwill		251		—		—		251		—				251
Advances to joint ventures		—		—		7,218		7,218		—				7,218
Total assets		698,869		298,712		111,598		1,109,179		(298,712	)	(1)		810,467
Accumulated losses of joint ventures		—		—		50		50		(25,936	)	(1)		(25,886	)
Expenditures for vessels & equipment		537		783		—		1,320		(783	)	(2)		537
Expenditures for drydocking		—		135		—		135		(135	)	(2)		—
Principal repayment direct financing lease		3,192		—		—		3,192		—				3,192
Amortization of above market contract	$	2,405		—		—		2,405		—			$	2,405

(1)

(2)

Eliminates the Joint venture FSRUs’ Expenditures for vessels & equipment and drydocking to reflect the consolidated expenditures of the Partnership

F-21

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

6. Financial income (expense)

The components of financial income (expense) are as follows:

	Three months ended
	March 31,
(in thousands of U.S. dollars)	2017			2016
Interest income	$	130		$	273
Interest expense:
Interest expense		(7,259	)		(5,582	)
Commitment fees		(264	)		(301	)
Amortization of debt issuance cost and fair value of debt assumed		(213	)		(523	)
Total interest expense		(7,736	)		(6,406	)
Gain (loss) on derivative instruments		663			335
Other items, net:
Foreign exchange gain (loss)		(133	)		(335	)
Bank charges, fees and other		(23	)		(80	)
Withholding tax on interest expense and other		(646	)		(622	)
Total other items, net		(802	)		(1,037	)
Total financial income (expense), net	$	(7,745	)	$	(6,835	)

7. Income tax

The Partnership is not subject to Marshall Islands corporate income taxes. The Partnership is subject to tax for earnings of its subsidiaries incorporated in Singapore, Indonesia, Colombia, Cyprus and the UK. The income tax expense recorded in the consolidated income statements was $1,755 and $449 for the three month periods ended March 31, 2017 and 2016, respectively. For the three months ended March 31, 2017, the income tax expense largely related to the subsidiaries in Indonesia, Colombia and Singapore. The income tax expense for the three months ended March 31, 2016 mainly related to the subsidiary in Singapore. The Singapore subsidiary’s taxable income mainly arises from internal interest income.

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 March 31, 2017, the estimated generation of taxable income resulted in the utilization of $159 of tax loss carryforward in Indonesia which was not recognized due to the uncertainty of this tax position. As a result, a long-term income tax payable of $159 was recorded for the uncertain tax position. Refer to note 16.

F-22

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

8. Advances to joint ventures

	As of
	March 31,		December 31,
(in thousands of U.S. dollars)	2017		2016
Current portion of advances to joint ventures	$	5,730	$	6,275
Long-term advances to joint ventures		291		943
Advances/shareholder loans to joint ventures	$	6,021	$	7,218

The Partnership had advances of $3.4 million and $3.9 million due from SRV Joint Gas Ltd. as of March 31, 2017 and December 31, 2016, respectively. The Partnership had advances of $2.6 million and $3.3 million due from SRV Joint Gas Two Ltd. as of March 31, 2017 and December 31, 2016, respectively. The joint ventures have repaid the original principal of all shareholders loans and all of the payments for the three months ended March 31, 2017 represent payments of interest, including accrued interest repaid at the end of the loans. Interest payments are treated as return on investment and included as a component of net cash provided by operating activities in the consolidated statements of cash flow.

9. Vessels, net

				Dry-
(in thousands of U.S. dollars)	Vessel			docking			Total
Historical cost December 31, 2015	$	352,433			3,267		$	355,700
Additions		—			—			—
Historical cost December 31, 2016		352,433			3,267			355,700
Depreciation for the year		(9,687	)		(800	)		(10,487	)
Accumulated depreciation December 31, 2016		(12,109	)		(1,000	)		(13,109	)
Vessels, net, December 31, 2016		340,324			2,267			342,591

Historical cost December 31, 2016		352,433			3,267			355,700
Additions		353,738			3,400			357,138
Historical cost March 31, 2017		706,171			6,667			712,838
Depreciation for the period		(4,844	)		(400	)		(5,244	)
Accumulated depreciation March 31, 2017		(16,953	)		(1,400	)		(18,353	)
Vessels, net, March 31, 2017	$	689,218			5,267		$	694,485

F-23

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

10. Intangibles and goodwill

(in thousands of U.S. dollars)	Above market time charter			Option for time charter extension		Total intangibles			Goodwill		Total
Historical cost December 31, 2016	$	11,000			8,000		19,000			251	$	19,251
Accumulated amortization, December 31, 2016		(3,010	)		—		(3,010	)		—		(3,010	)
Intangibles and goodwill, December 31, 2016		7,990			8,000		15,990			251		16,241
Additions		11,760			—		11,760			—		11,760
Historical cost March 31, 2017		22,760			8,000		30,760			251		31,011
Amortization for the period		(895	)		—		(895	)		—		(895	)
Accumulated amortization, March 31, 2017		(3,905	)		—		(3,905	)		—		(3,905	)
Intangibles and goodwill, March 31, 2017	$	18,855			8,000		26,855			251	$	27,106

The intangible for the above market value of the time charter contract associated with the Höegh Gallant is amortized to time charter revenue on a straight line basis over the remaining term of the contract. The intangible for the above market value of the time charter contract associated with the Höegh Grace is amortized to time charter revenue on a straight line basis calculated per day over the remaining non-cancellable charter term of approximately 9.5 years as of the acquisition date. Höegh LNG and the Partnership have entered into an option agreement pursuant to which the Partnership has the right to cause Höegh LNG to charter the Höegh Gallant from the expiration or termination for the existing charter in May 2020 until July 2025. The intangible for the option for time charter extension will be amortized on a straight line basis over the extension period starting in May 2020, subject to impairment testing for recoverability in the preceding periods.

The following table presents estimated future amortization expense for the intangibles.


	Total
April - December, 2017	$	2,736
2018		3,631
2019		3,631
2020		3,053
2021		2,755
2022		2,755
2023 and thereafter	$	8,294

Goodwill is not amortized.

F-24

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

11. Long-term debt

	As of
	March 31,			December 31,
(in thousands of U.S. dollars)	2017			2016
Lampung facility:
Export credit tranche	$	135,148		$	138,868
FSRU tranche		34,296			35,340
Gallant facility:
Commercial tranche		127,852			130,222
Export credit tranche		35,750			36,667
Grace facility:
Commercial tranche		153,750			—
Export credit tranche		33,000			—
Outstanding principal		519,796			341,097
Lampung facility unamortized debt issuance cost		(8,882	)		(9,357	)
Gallant facility unamortized fair value of debt assumed		818			908
Grace facility unamortized fair value of debt assumed		2,050			—
Total debt		513,782			332,648
Less: Current portion of long-term debt		(45,458	)		(32,208	)
Long-term debt	$	468,324		$	300,440

Lampung facility

PT Hoegh LNG Lampung is the Borrower and Höegh LNG is the guarantor for the Lampung facility.

The primary financial covenants under the Lampung facility are as follows:

	·	Borrower must maintain a minimum debt service coverage ratio of 1.10 to 1.00 for the preceding nine-month period tested beginning from the second quarterly repayment date of the export credit tranche;
	·	Guarantor’s book equity must be greater than the higher of (i) $200 million and (ii) 25% of total assets; and
	·	Guarantor’s free liquid assets (cash and cash equivalents or available draws on credit facilities) must be greater than $20 million.

As of March 31, 2017, the borrower and the guarantor were in compliance with the financial covenants under the Lampung facility.

The Lampung facility requires cash reserves that are held for specifically designated uses, including working capital, operations and maintenance and debt service reserves. Distributions are subject to “waterfall” provisions that allocate revenues to specified priorities of use (such as operating expenses, scheduled debt service, targeted debt service reserves and any other reserves) with the remaining cash being distributable only on certain dates and subject to satisfaction of certain conditions, including meeting a 1.20 historical debt service coverage ratio, no default or event of default then continuing or resulting from such distribution and the guarantor not being in breach of the financial covenants applicable to it. The Lampung facility limit, among other things, the ability of the borrower to change its business, sell or grant liens on its property including the PGN FSRU Lampung , incur additional indebtedness or guarantee other indebtedness, make investments or acquisitions, enter into intercompany transactions and make distributions.

F-25

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

Gallant/Grace facility

The Gallant/Grace facility includes two borrowers, the Partnership’s subsidiaries owning the Höegh Gallant and the Höegh Grace. The Gallant/Grace facility includes two commercial tranches and the export credit tranche related to the Höegh Gallant (the “Gallant facility”) and a commercial tranche and the export credit tranche related to the Höegh Grace (the “Grace facility”).

Höegh LNG, Höegh LNG Colombia Holdings Ltd., Höegh LNG FSRU III Ltd. and the Partnership are guarantors for the facility.

The primary financial covenants under the Gallant/Grace facility are as follows:

Höegh LNG must maintain

Consolidated book equity (excluding hedge reserves and mark to market value of derivatives) equal to the greater of

$200 million, and

25% of total assets

Free liquid assets (cash and cash equivalents, publicly trade debt securities with an A rating with Standard & Poor’s and available draws under a bank credit facility for a term of more than 12 months) equal to the greater of

$20 million,

5% of total consolidated indebtedness provided on a recourse basis, and

	§	Any amount specified to be a minimum liquidity requirement under any legal obligation.

The Partnership must maintain

Consolidated book equity (excluding hedge reserves and mark to market value of derivatives) equal to the greater of

$150 million, and

25% of total assets

$15 million, and

	§	$3 million multiplied by the number of vessels owned or leased by the Partnership

Each Borrower must maintain

Current assets greater than current liabilities as defined in the agreements, and

A ratio of EBITDA to debt service (principal repayments, guarantee commission and interest expense) of a minimum of 115%

In addition, a security maintenance ratio based on the aggregate market value of the Höegh Gallant, the Höegh Grace and any additional security must be at least 125% of the aggregate outstanding loan balance.

If the security maintenance ratio is not maintained, the relevant Borrower has 30 days to provide more security or to repay part of the loan to be in compliance with the ratio no later than 30 days after notice from the lenders.

As of March 31, 2017, Höegh LNG, the Partnership and each Borrower were in compliance with the financial covenants.

Under the Gallant/Grace facility, cash accounts are freely available for the use of the Borrowers, unless there is an event of default. Cash can be distributed as dividends or to service loans of owners and affiliates provided that after the distribution the Borrowers would remain in compliance with the financial covenants and security maintenance ratio. The Gallant/Grace facility limits, among other things, the ability of the Borrowers to change their business, sell or grant liens on their property including the Höegh Gallant or the Höegh Grace, incur additional indebtedness or guarantee other indebtedness, make investments or acquisitions and enter into intercompany debt that is not subordinated to the Gallant/Grace facility.

F-26

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

12. Investments in joint ventures

	As of
	March 31,		December 31,
(in thousands of U.S. dollars)	2017		2016
Accumulated losses of joint ventures	$	21,077	$	25,886

The Partnership has a 50% interest in each of SRV Joint Gas Ltd. (owner of the Neptune) and SRV Joint Gas Two Ltd. (owner of the GDF Suez Cape Ann ). The following table presents the summarized financial information for 100% of the combined joint ventures on an aggregated basis.

	Three months ended
	March 31,
(in thousands of U.S. dollars)	2017			2016
Time charter revenues	$	21,848		$	21,478
Operating expenses		(5,238	)		(4,386	)
Depreciation and amortization		(5,035	)		(4,913	)
Operating income		11,575			12,179
Unrealized gain (loss) on derivative instruments		4,992			(17,985	)
Other financial expense, net		(7,104	)		(7,764	)
Net income (loss)	$	9,463		$	(13,570	)
Share of joint ventures owned		50	%		50	%
Share of joint ventures net income (loss) before eliminations		4,732			(6,785	)
Eliminations		77			77
Equity in earnings (losses) of joint ventures	$	4,809		$	(6,708	)

F-27

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

	As of
	March 31,			December 31,
(in thousands of U.S. dollars)	2017			2016
Cash and cash equivalents	$	2,314		$	9,506
Restricted cash		8,223			8,458
Other current assets		5,307			4,492
Total current assets		15,844			22,456
Restricted cash		25,122			25,107
Vessels, net of accumulated depreciation		562,683			567,187
Total long-term assets		587,805			592,294
Current portion of long-term debt		23,870			23,503
Amounts and loans due to owners and affiliates		11,496			13,654
Derivative instruments		12,769			13,588
Other current liabilities		14,387			20,145
Total current liabilities		62,522			70,890
Long-term debt		447,939			453,957
Loans due to owners and affiliates		582			1,887
Derivative instruments		75,360			79,533
Other long-term liabilities		42,227			42,929
Total long-term liabilities		566,108			578,306
Net liabilities	$	(24,981	)	$	(34,446	)
Share of joint ventures owned		50	%		50	%
Share of joint ventures net liabilities before eliminations		(12,491	)		(17,223	)
Eliminations		(8,586	)		(8,663	)
Accumulated losses of joint ventures	$	(21,077	)	$	(25,886	)

F-28

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

13. Related party transactions

Income (expense) from related parties

The Partnership has several agreements with Höegh LNG (and certain of its subsidiaries) for the provision of services. Höegh LNG and its subsidiaries provide general and corporate management services to the Partnership. Subsidiaries of Höegh LNG provide technical ship management and /or other similar services for PGN FSRU Lampung, the Höegh Gallant and the Höegh Grace.

Amounts included in the consolidated statements of income for the three months ended March 31, 2017 and 2016 or capitalized in the consolidated balance sheets as of March 31, 2017 and December 31, 2016 are as follows:

	Three months ended
Statement of income:	March 31,
(in thousands of U.S. dollars)	2017			2016
Revenues
Time charter revenue Höegh Gallant (1)	$	11,914		$	11,055
Operating expenses
Vessel operating expenses (2)		(5,396	)		(3,310	)
Hours, travel expense and overhead (3) and Board of Directors’ fees (4)		(1,029	)		(617	)
Interest income from joint ventures (5)		128			261
Interest expense and commitment fees to Höegh LNG (6)		(1,069	)		(1,251	)
Total	$	4,548		$	6,138

	As of
Balance sheet	March 31,		December 31,
(in thousands of U.S. dollars)	2017		2016
Equity
Cash contribution from Höegh LNG (7)	$	404	$	3,843
Issuance of units for Board of Directors' fees (4)		—		189
Other and contributions from owner (8)		157		426
Total	$	561	$	4,458

Time charter revenue Höegh Gallant: A subsidiary of Höegh LNG, EgyptCo, leases the Höegh Gallant.

Vessel operating expenses: Subsidiaries of Höegh LNG provides ship management of vessels, including crews and the provision of all other services and supplies.

Hours, travel expenses and overhead: Subsidiaries of Höegh LNG provide management, accounting, bookkeeping and administrative support under administrative service agreements. These services are charges based upon the actual hours incurred for each individual as registered in the time-write system based on a rate which includes a provision for overhead and any associated travel expenses.

F-29

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

Board of Directors’ fees: Effective June 3, 2016, a total of 10,650 common units of the Partnership were awarded to non-employee directors as compensation of $189 for part of directors’ fees under the Höegh LNG Partners LP Long Term Incentive Plan which were recorded as administrative expense and as an issuance of common units. Common units are recorded when issued.

Interest income from joint ventures: The Partnership and its joint venture partners have provided subordinated financing to the joint ventures as shareholder loans. Interest income for the Partnership’s shareholder loans to the joint ventures is recorded as interest income.

Interest expense and commitment fees to Höegh LNG and affiliates: Höegh LNG and its affiliates provided an $85 million revolving credit facility for general partnership purposes which incurs a commitment fee on the undrawn balance and interest expense on the drawn balance and a seller’s credit note to finance part of the Höegh Gallant acquisition which incurs interest expense.

Cash contribution from Höegh LNG: As described under “Indemnifications” below, Höegh LNG made indemnification payments to the Partnership which were recorded as contributions to equity.

Other and contribution from owner: Höegh LNG granted share-based incentives to certain key employees whose services are invoiced to the Partnership. Related expenses are recorded as administrative expenses and as a contribution from owner since the Partnership is not invoiced for this employee benefit. Effective June 3, 2016, the Partnership granted the Chief Executive Officer and Chief Financial Officer 21,500 phantom units in the Partnership. Related expenses are recorded as an administrative expense and as increase in equity.

Acquisition from Höegh LNG: On January 3, 2017, the Partnership acquired from Höegh LNG 51% of the shares of Höegh LNG Colombia Holding Ltd., the owner of the entities that own and operate the Höegh Grace. Refer to note 4. The Partnership’s Board of Directors (the “Board”) and the Conflicts Committee of the Board (the “Conflicts Committee”) approved the purchase price for the acquisition. The Conflicts Committee retained financial advisors to assist with its evaluation of the transaction.

Dividends to Höegh LNG: The Partnership has declared and paid quarterly distributions to Höegh LNG totaling $6.9 million, and $6.4 million to Höegh LNG for each of the three months ended March 31, 2017 and 2016, respectively.

F-30

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

Receivables and payables from related parties

Amounts due from affiliates

	As of
	March 31,		December 31,
(in thousands of U.S. dollars)	2017		2016
Amounts due from affiliates	$	4,247	$	4,237

The amount due from affiliates is a receivable for time charter hire from a subsidiary of Höegh LNG, EgyptCo, for the Höegh Gallant time charter. The time charter hire is due 18 days from the receipt of the invoice. Time charter hire is invoiced at the end of the month in arrears.

Amounts due to owners and affiliates

	As of
	March 31,		December 31,
(in thousands of U.S. dollars)	2017		2016
Amounts due to owners and affiliates	$	3,538	$	1,374

Amounts due to owners and affiliates principally relate to trade payables for services provided by subsidiaries of Höegh LNG. The balance does not bear interest.

Revolving credit and seller’s credit due to owners and affiliates:

	As of
	March 31,		December 31,
(in thousands of U.S. dollars)	2017		2016
Revolving credit facility	$	10,222	$	8,622
Seller’s credit note		34,383		34,383
Revolving credit and seller’s credit due to owners and affiliates	$	44,605	$	43,005

In August 2014, upon the closing of the IPO, the Partnership entered into an $85 million revolving credit facility with Höegh LNG, to be used to fund acquisitions and working capital requirements of the Partnership. The credit facility is unsecured and any outstanding balance is due January 1, 2020. Interest on drawn amounts is payable quarterly at LIBOR plus a margin of 4.0%. Additionally, a 1.4% quarterly commitment fee is due to Höegh LNG on undrawn available amounts.

On October 1, 2015, the Partnership financed part of the acquisition of the Höegh Gallant with a seller’s credit note from a subsidiary of Höegh LNG. The unsecured seller’s credit note is subordinated to the obligations of the Partnership and the Borrower under the Gallant facility, bears interest at 8% and matures on January 1, 2020. In December 2016, the Partnership repaid $12.6 million of the seller’s credit note.

F-31

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

Indemnifications

Environmental indemnifications:

Under the omnibus agreement, Höegh LNG will indemnify the Partnership until August 12, 2019 against certain environmental and toxic tort liabilities with respect to the assets contributed or sold to the Partnership to the extent arising prior to the time they were contributed or sold to the Partnership. Liabilities resulting from a change in law are excluded from the environmental indemnity. There is an aggregate cap of $5.0 million on the amount of indemnity coverage provided by Höegh LNG for environmental and toxic tort liabilities. No claim may be made unless the aggregate dollar amount of all claims exceeds $0.5 million, in which case Höegh LNG is liable for claims only to the extent such aggregate amount exceeds $0.5 million.

Other indemnifications:

Under the omnibus agreement, Höegh LNG will also indemnify the Partnership for losses:

	1.	related to certain defects in title to the assets contributed or sold to the Partnership and any failure to obtain, prior to the time they were contributed to the Partnership, certain consents and permits necessary to conduct the business, which liabilities arise within three years after the closing of the IPO;
	2.	related to certain tax liabilities attributable to the operation of the assets contributed or sold to the Partnership prior to the time they were contributed or sold;
	3.	in the event that the Partnership does not receive hire rate payments under the PGN FSRU Lampung time charter for the period commencing on August 12, 2014 through the earlier of (i) the date of acceptance of the PGN FSRU Lampung or (ii) the termination of such time charter; The Partnership was indemnified by Höegh LNG for certain invoices not paid by PGN for the year ended December 31, 2014;
	4.	with respect to any obligation to pay liquidated damages to PGN under the PGN FSRU Lampung time charter for failure to deliver the PGN FSRU Lampung by the scheduled delivery date set forth in the PGN FSRU Lampung time charter; and
	5.	with respect to any non-budgeted expenses (including repair costs) incurred in connection with the PGN FSRU Lampung project (including the construction of the Mooring) occurring prior to the date of acceptance of the PGN FSRU Lampung pursuant to the time charter.
	6.	pursuant to a letter agreement dated August 12, 2015, Höegh LNG confirmed that the indemnification provisions of the omnibus agreement include indemnification for all non-budgeted, non-creditable Indonesian value added taxes and non-budgeted Indonesian withholding taxes, including any related impact on cash flow from PT Hoegh LNG Lampung and interest and penalties associated with any non-timely Indonesian tax filings related to the ownership or operation of the PGN FSRU Lampung and the Mooring whether incurred (i) prior to the closing date of the IPO, (ii) after the closing date of the IPO to the extent such taxes, interest, penalties or related impact on cash flows relate to periods of ownership or operation of the PGN FSRU Lampung and the Mooring and are not subject to prior indemnification payments or deemed reimbursable by the charterer under its audit of the taxes related to the PGN FSRU Lampung time charter for periods up to and including June 30, 2015, or (iii) after June 30, 2015 to the extent withholding taxes exceed the minimum amount of withholding tax due under Indonesian tax regulations due to lack of documentation or untimely withholding tax filings. The Partnership is indemnified for recovery of the $6.2 million VAT liability related to a Mooring invoice.

In the first quarter of 2017, the Partnership received indemnification payments with respect to non-budgeted expenses of $0.3 million for the fourth quarter of 2016 which were recorded as a contribution to equity. No indemnification claims were filed for the three months ended March 31, 2017. The Partnership received payments for filed claims for indemnification with respect to non-budgeted expenses (including the warranty provision, value added tax, withholding tax, costs related to the restatement of the Partnership’s financial statements filed with the SEC on November 30, 2015 and other non-budgeted expenses) of approximately $0.8 and $2.4 million in the three months ended March 31, 2016 and the year ended December 31, 2016, respectively, which were recorded as a contribution to equity. The Partnership filed claims and was paid $0.3 million in the second quarter of 2016 for indemnification of non-budgeted expenses for the three months ended March 31, 2016. Refer to note 16.

F-32

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

Under the contribution, purchase and sale agreement entered into with respect to the purchase of Höegh LNG FSRU III Ltd., the entity that indirectly owns the Höegh Gallant, Höegh LNG will indemnify the Partnership for:

losses from breach of warranty;

losses related to certain environmental and tax liabilities attributable to the operation of the Höegh Gallant prior to the closing date;

all capital gains tax or other export duty incurred in connection with the transfer of the Höegh Gallant outside of Höegh LNG Cyprus Limited’s permanent establishment in a Public Free Zone in Egypt;

any recurring non-budgeted costs owed to Höegh LNG Management with respect to payroll taxes;

any non-budgeted losses suffered or incurred in connection with the commencement of services under the time charter with EgyptCo or EgyptCo’s time charter with EGAS; and

liabilities under the Gallant/Grace facility not attributable to the Höegh Gallant.

Additionally, Höegh LNG has guaranteed the payment of hire by EgyptCo pursuant to the time charter for the Höegh Gallant under certain circumstances.

In the first quarter of 2017, the Partnership received indemnification payments with respect to losses incurred in connection with the commencement of services under the time charter with EgyptCo due to technical issues of $0.1 million for the fourth quarter of 2016 which were recorded as a contribution to equity. An indemnification claim of $0.6 million was filed for the three months ended March 31, 2017 which was paid in the second quarter of 2017. No indemnification claims were filed for the three months ended March 31, 2016. The Partnership received payments for filed claims of $1.4 million for the year ended December 31, 2016 for indemnification of losses due to start up technical issues and for other costs incurred which were recorded as a contribution to equity. Refer to note 16.

Under the contribution, purchase and sale agreement entered into with respect to the acquisition of the 51% ownership interest in the Höegh Grace entities, Höegh LNG will indemnify the Partnership for:

losses from breach of warranty;

losses related to certain environmental liabilities, damages or repair costs and tax liabilities attributable to the operation of the Höegh Grace prior to the closing date;

any recurring non-budgeted costs owed to tax authorities with respect to payroll taxes, taxes related to social security payments, corporate income taxes (including income tax for equality and surcharge on income tax for equality), withholding tax, port associations, local Cartagena tax, and financial transaction tax, including any penalties associated with taxes to the extent not reimbursed by the charterer;

any non-budgeted losses suffered or incurred in connection with the commencement of services under the Höegh Grace charter with SPEC; and

any losses suffered or incurred in relation to the performance guarantee the Partnership provided with respect to the Höegh Grace charter, up to Höegh LNG’s pro rata share of such losses, based on its remaining ownership interest in Höegh LNG Colombia Holding Ltd.

14. Financial Instruments

Fair value measurements

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Cash and cash equivalents and restricted cash – The fair value of the cash and cash equivalents and restricted cash approximates its carrying amounts reported in the consolidated balance sheets.

Amounts due from (to) owners and affiliates – The fair value of the non-interest bearing receivables or payables approximates their carrying amounts reported in the consolidated balance sheets since the receivables or payables are to be settled consistent with trade receivables and payables.

F-33

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

Derivative instruments – The fair values of the interest rates swaps are estimated based on the present value of cash flows over the term of the instruments based on the relevant LIBOR interest rate curves, adjusted for the subsidiary’s credit worthiness given the level of collateral provided and the credit worthiness of the counterparty to the derivative.

Advances (shareholder loans) to joint ventures – The fair values of the fixed rate subordinated shareholder loans are estimated using discounted cash flow analyses based on rates currently available for debt with similar terms and remaining maturities and the current credit worthiness of the joint ventures.

Long-term receivable – The fair value of long-term receivable approximates its carrying amounts reported in the consolidated balance sheets.

Loans and promissory notes due to owners and affiliates – The fair values of the loans and promissory notes approximates their carrying amounts of the accrued commitment fees reported in the consolidated balance sheets since the amounts are to be settled in the following month. Refer to note 11.

Lampung, Gallant and Grace facilities – The fair values of the debt are estimated based on the present value of cash flows over the term of the instruments based on the estimated currently available margins, LIBOR interest rates or applicable interest rates as of the balance sheet date for debt with similar terms and remaining maturities and the current credit worthiness of the Partnership.

Revolving credit and seller’s credit due to owners and affiliates – The fair value of the fixed rate debt is estimated using discounted cash flow analyses based on rates currently available for debt with similar terms and remaining maturities and the current credit worthiness of the Partnership.

The fair value estimates are categorized by a fair value hierarchy based on the inputs used to measure fair value. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

F-34

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

The following table includes the estimated fair value and carrying value of those assets and liabilities that are measured at fair value on a recurring and non-recurring basis, as well as the estimated fair value of the financial instruments that are not accounted for at a fair value on a recurring basis.

		As of						As of
		March 31, 2017						December 31, 2016
		Carrying			Fair			Carrying			Fair
		amount			value			amount			value
		Asset			Asset			Asset			Asset
(in thousands of U.S. dollars)	Level	(Liability)			(Liability)			(Liability)			(Liability)
Recurring:
Cash and cash equivalents	1	$	18,767			18,767			18,915		$	18,915
Restricted cash	1		22,994			22,994			22,209			22,209
Amounts due from affiliate	2		4,247			4,247			4,237			4,237
Derivative instruments	2		(7,884	)		(7,884	)		(7,045	)		(7,045	)
Other:
Advances (shareholder loans) to joint ventures	2		6,021			6,115			7,218			7,355
Current amounts due to owners and affiliates	2		(3,538	)		(3,538	)		(1,374	)		(1,374	)
Cash designated for acquisition	1		—			—			91,768			91,768
Other long-term receivables	2		6,195			6,195			6,195			6,195
Lampung facility	2		(160,562	)		(178,301	)		(164,851	)		(183,585	)
Gallant facility	2		(164,421	)		(164,832	)		(167,797	)		(168,889	)
Grace facility	2		(188,800	)		(186,378	)		—			—
Revolving credit and seller’s credit due to owners and affiliates	2	$	(44,605	)		(46,294	)		(43,005	)	$	(44,098	)

F-35

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

Financing Receivables

The following table contains a summary of the loan receivables by type of borrower and the method by which the credit quality is monitored on a quarterly basis:

			As of
Class of Financing Receivables	Credit Quality		March 31,		December 31,
(in thousands of U.S. dollars)	Indicator	Grade	2017		2016
Trade receivable and long-term receivable	Payment activity	Performing	$	13,096	$	8,283
Amounts due from affiliate	Payment activity	Performing		4,247		4,237
Advances/ loans to joint ventures	Payment activity	Performing	$	6,021	$	7,218

The Partnership is indemnified for approximately $6.2 million of the trade receivable balance as of March 31, 2017 and December 31, 2016. Refer to note 13. The shareholder loans to joint ventures are classified as advances to joint ventures in the consolidated balance sheet. Refer to note 8.

F-36

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

15. Risk management and concentrations of risk

Derivative instruments can be used in accordance with the overall risk management policy.

Foreign exchange risk

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 its outstanding floating-rate debt. As of March 31, 2017, 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 March 31, 2017, the following interest rate swap agreements were outstanding:

(in thousands of U.S. dollars)	Interest rate index	Notional amount		Fair value carrying amount liability			Term	Fixed interest rate (1)
LIBOR-based debt
Lampung interest rate swaps (2)	LIBOR	$	169,443		(5,081	)	Sept 2026		2.8	%
Gallant interest rate swaps (2)	LIBOR		131,625		(721	)	Sept 2019		1.9	%
Grace interest rate swaps (2)	LIBOR	$	143,500		(2,082	)	March 2020		2.3	%

1) Excludes the margins paid on the floating-rate debt.

2) All interest rate swaps are U.S. dollar denominated and principal amount reduces quarterly.

F-37

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

The following table presents the location and fair value amounts of derivative instruments, segregated by type of contract, on the consolidated balance sheets.

	Current			Long-term
	liabilities:			liabilities:
	derivative			derivative
(in thousands of U.S. dollars)	instruments			instruments
As of March 31, 2017
Interest rate swaps	$	(4,185	)	$	(3,699	)
As of December 31, 2016
Interest rate swaps	$	(3,534	)	$	(3,511	)

The following effects of cash flow hedges relating to interest rate swaps are included in gain on derivative financial instruments in the consolidated statements of income for the three months ended March 31, 2017 and 2016.

	Three months ended March 31,
(in thousands of U.S. dollars)	2017			2016
Interest rate swaps:
Ineffective portion of cash flow hedge	$	4		$	36
Amortization of amount excluded from hedge effectiveness		873			513
Reclassification from accumulated other comprehensive income		(214	)		(214	)
Unrealized gains (losses)		663			335
Realized gains (losses)		—			—
Total gains (losses) on derivative instruments	$	663		$	335

F-38

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

The effect of cash flow hedges relating to interest rate swaps and the related tax effects on other comprehensive income and changes in accumulated other comprehensive income (“OCI”) in the consolidated statements of changes in partners’ capital and other comprehensive income is as follows for the periods ended and as of March 31, 2017 and 2016.

	Cash Flow Hedge
(in thousands of U.S. dollars)	Before tax gains (losses)			Tax benefit (expense)			Net of tax			Accumulated OCI
Balance as of December 31, 2016	$	(6,947	)		1,211			(5,736	)	$	(5,736	)
Effective portion of unrealized loss on cash flow hedge		926			—			926			926
Reclassification of amortization of cash flow hedge to earnings		214			(92	)		122			122
Other comprehensive income for period		1,140			(92	)		1,048			1,048
Balance as of March 31, 2017	$	(5,807	)		1,119			(4,688	)	$	(4,688	)

	Cash Flow Hedge
(in thousands of U.S. dollars)	Before tax gains (losses)			Tax benefit (expense)			Net of tax			Accumulated OCI
Balance as of December 31, 2015	$	(8,830	)		1,589			(7,241	)	$	(7,241	)
Effective portion of unrealized loss on cash flow hedge		(6,252	)		—			(6,252	)		(6,252	)
Reclassification of amortization of cash flow hedge to earnings		214			(64	)		150			150
Other comprehensive income for period		(6,038	)		(64	)		(6,102	)		(6,102	)
Balance as of March 31, 2016	$	(14,868	)		1,525			(13,343	)	$	(13,343	)

F-39

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

Credit risk

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 allowance for doubtful accounts was recorded for the three months ended March 31, 2017 and 2016 and the year ended December 31, 2016. 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 terminate prematurely, there could be delays in obtaining a new time charter and the rates could be lower depending upon the prevailing market conditions.

16. Commitments and contingencies

Contractual commitments

As of March 31, 2017, there were no material contractual purchase commitments.

Claims and Contingencies

Indonesian corporate income tax

In 2015, the Indonesian Minister of Finance issued regulations that provided that Indonesian corporate taxpayers are subject to a limit in claiming interest expense as tax deduction where their debt to equity ratio exceeds 4:1 which was effective from January 1, 2016. Certain industries, including the infrastructure industry, are exempted from the debt to equity ratio requirements. The infrastructure industry is not defined in the regulations; however, additional guidance was expected to be provided in early 2016. As of December 31, 2016 and March 31, 2017, the additional guidance had not been provided. Therefore, it is not certain if additional guidance will be provided to clarify whether the Partnership’s Indonesian subsidiary would qualify as part of the infrastructure industry and be exempted from the requirements. As a result, the limitations on the deductibility of interest expense have been applied for the year ended December 31, 2016 and the three months ended March 31, 2017, increasing the taxable income and the income tax expense of the Indonesian subsidiary. Due to the uncertainty of realizing the benefit of a 2013 tax loss carryforward in Indonesia, no income tax benefit was recognized. As a result of being able to utilize the prior year tax loss, a long-term income tax liability of $2.2 million and $0.2 million was recognized for the year ended December 31, 2016 and the three months ended March 31, 2017, respectively, for the uncertain tax position (refer to note 7). To the extent that the long-term income tax liability becomes payable, the current income tax payable is expected to qualify for reimbursement by PGN LNG under terms of the time charter.

F-40

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

Based upon the Partnership’s experience in Indonesia, tax regulations, guidance and interpretation in Indonesia may not be always be clear and may be subject to alternative interpretations or changes in interpretation over time. The Partnership’s Indonesian subsidiary is subject to examination by the Indonesian tax authorities for up to five years following the completion of a fiscal year. Tax examinations may lead to ordinary course adjustments or proposed adjustments to our taxes or tax loss carryforwards with respect to years under examination. The Partnership has recognized a provision in 2013 related to an uncertain tax position for the 2013 tax loss carryforward. It is reasonably possible within the next 12 months that the Partnership’s Indonesian subsidiary will be subject to a tax examination. Such an examination may or may not result in changes to the Partnership’s provisions on tax filings from 2013 through 2016. To date, there has been no tax audit on the Partnership’s operations in Indonesia.

PGN LNG claims including delay liquidated damages

The Partnership was indemnified by Höegh LNG for non-budgeted expenses (including repair and warranty costs) incurred in connection with the PGN FSRU Lampung project and for certain costs related to the restatement of the Partnership’s financial statements filed with the SEC on November 30, 2015.

Höegh Gallant claims and indemnification

The Partnership was indemnified by Höegh LNG for losses incurred in connection with the commencement of services under the time charter with EgyptCo (including technical issues) incurred in connection with the Höegh Gallant.

In the first quarter of 2017, the Partnership received indemnification payments with respect to losses incurred in connection with the commencement of services under the time charter due to technical issues of $0.1 million for the fourth quarter of 2016 which were recorded as a contribution to equity. An indemnification claim of $0.6 million was filed for the three months ended March 31, 2017, which was paid in the second quarter 2017. No indemnification claims were filed for the three months ended March 31, 2016. The Partnership received payments for filed claims of $1.4 million for the year ended December 31, 2016 for indemnification of losses due to start up technical issues and for other costs incurred which were recorded as a contribution to equity.

F-41

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

17. Earning per unit and cash distributions

The calculation of basic and diluted earnings per unit are presented below

	Three months ended March 31,
(in thousands of U.S. dollars, except per unit numbers)	2017			2016
Partners’ interest in net income	$	13,444		$	(1,040	)
Less: Dividends paid or to be paid (1)		(14,437	)		(10,967	)
Under (over) distributed earnings		(993	)		(12,007	)
Under (over) distributed earnings attributable to:
Common units public		(532	)		(5,038	)
Common units Höegh LNG		(64	)		(966	)
Subordinated units Höegh LNG		(397	)		(6,003	)
		(993	)		(12,007	)
Basic weighted average units outstanding (in thousands)
Common units public		17,639			11,040
Common units Höegh LNG		2,116			2,116
Subordinated units Höegh LNG		13,156			13,156

Diluted weighted average units outstanding (in thousands)
Common units public		17,647			11,040
Common units Höegh LNG (3)		2,116			2,116
Subordinated units Höegh LNG (3)		13,156			13,156

Basic and diluted earnings per unit (2):
Common unit public	$	0.40		$	(0.04	)
Common unit Höegh LNG (3)	$	0.42		$	(0.04	)
Subordinated unit Höegh LNG (3)	$	0.42		$	(0.04	)

(1)

Includes all distributions paid or to be paid in relationship to the period, regardless of whether the declaration and payment dates were prior to the end of the period, and is based on the number of units outstanding at the period end.

(2)

Effective June 3, 2016, the Partnership granted 21,500 phantom units to the CEO/CFO of the Partnership. One-third of the phantom units vest as of December 31, 2017, 2018 and 2019, respectively. The phantom units impact the diluted weighted average units outstanding, however, the increase in weighted average number of units was not significant enough to change the earnings per unit. Therefore, the basic and diluted earnings per unit is the same.

(3)

Includes total amounts attributable to incentive distributions rights of $285,149 for the three months ended March 31, 2017. $39,509 for the three months ended March 31, 2017 was attributed to common units owned by Höegh LNG. $245,640 for the three months ended March 31, 2017 was attributed to subordinated units owned by Höegh LNG. For the three months ended March 31, 2016, includes total amounts attributable to incentive distributions rights of $113,181, of which $15,682 was attributed to common units owned by Höegh LNG and $97,499 was attributed to subordinated units owned by Höegh LNG.

F-42

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

As of March 31, 2017, the total number of units outstanding was 32,911,159. Common units outstanding were 19,755,099 of which 17,639,039 common units were held by the public and 2,116,060 common units were held by Höegh LNG. As of March 31, 2017 Höegh LNG owned 13,156,060 subordinated units. The General Partner has a non-economic interest and has no units.

Earnings per unit is calculated by dividing net income by the weighted average number of units outstanding during the applicable period.

The common unitholders’ and subordinated unitholders’ interest in net income are calculated as if all net income were distributed according to terms of the Partnership’s First Amended and Restated Agreement of Limited Partnership (the “Partnership Agreement”), regardless of whether those earnings would or could be distributed. The Partnership Agreement does not provide for the distribution of net income; rather, it provides for the distribution of available cash. Available cash, a contractual defined term, generally means all cash on hand at the end of the quarter after deduction for cash reserves established by the board of directors and the Partnership’s subsidiaries to i) provide for the proper conduct of the business (including reserves for future capital expenditures and for the anticipated credit needs); ii) comply with applicable law, any of the debt instruments or other agreements; and iii) provide funds for distributions to the unitholders for any one or more of the next four quarters. Therefore, the earnings per unit is not indicative of future cash distributions that may be made. Unlike available cash, net income is affected by non-cash items, such as depreciation and amortization, unrealized gains or losses on derivative financial instruments and unrealized gains or losses on foreign exchange transactions.

During the subordination period, the common units will have the right under the Partnership Agreement to receive distributions of available cash from operating surplus in an amount equal to the minimum quarterly distribution of $0.3375 per unit, plus any arrearages in the payment of the minimum quarterly distribution on the common units from prior quarters, before any distributions of available cash from operating surplus may be made on the subordinated units. Distribution arrearages do not accrue on the subordinated units.

Distributions of available cash from operating surplus are to be made in the following manner for any quarter during the subordination period:

•

first, 100.0% to the common unitholders, pro rata, until the Partnership distributes for each outstanding common unit an amount equal to the minimum quarterly distribution of $0.3375 for that quarter;

•

second, 100.0% to the common unitholders, pro rata, until the Partnership distributes for each outstanding common unit an amount equal to any arrearages in payment of the minimum quarterly distribution on the common units for any prior quarters during the subordination period; and

•

third, 100.0% to the subordinated unitholders, pro rata, until the Partnership distributes for each subordinated unit an amount equal to the minimum quarterly distribution of $0.3375 for that quarter.

In addition, Höegh LNG currently holds all of the IDRs in the Partnership. IDRs represent the rights to receive an increasing percentage of quarterly distributions of available cash for operating surplus after the minimum quarterly distribution and the target distribution levels have been achieved.

If for any quarter during the subordination period:

•

the Partnership has distributed available cash from operating surplus to the common and subordinated unitholders in an amount equal to the minimum quarterly distribution; and

•

the Partnership has distributed available cash from operating surplus on outstanding common units in an amount necessary to eliminate any cumulative arrearages in payment of the minimum quarterly distribution;

F-43

HÖEGH LNG PARTNERS LP

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, unless otherwise indicated)

then, the Partnership will distribute any additional available cash from operating surplus for that quarter among the unitholders and the holders of the IDRs in the following manner:

•

first, 100.0% to all unitholders, pro rata, until each unitholder receives a total of $0.388125 per unit for that quarter (the “first target distribution”);

•

second, 85.0% to all unitholders, pro rata, and 15.0% to the holders of the IDRs, pro rata, until each unitholder receives a total of $0.421875 per unit for that quarter (the “second target distribution”);

•

third, 75.0% to all unitholders, pro rata, and 25.0% to the holders of the IDRs, pro rata, until each unitholder receives a total of $0.50625 per unit for that quarter (the “third target distribution”); and

•

thereafter, 50.0% to all unitholders, pro rata, and 50.0% to the holders of the IDRs, pro rata.

In each case, the amount of the target distribution set forth above is exclusive of any distributions to common unitholders to eliminate any cumulative arrearages in payment of the minimum quarterly distribution. The percentage interests set forth above assume that the Partnership does not issue additional classes of equity securities.

18. Subsequent events

On May 15, 2017, the Partnership paid a quarterly cash distribution with respect to the quarter ended March 31, 2017 of $0.43 per unit. The total amount of the distribution was $14.4 million.

In May 2017, the Partnership drew $10.1 million on the revolving credit facility.

F-44

EXHIBITS

The following exhibits are filed as a part of this report:

Exhibit Number		Exhibit Description

101		The following financial information from Höegh LNG Partners LP’s Report on Form 6-K for the three months ended March 31, 2017 formatted in XBRL (eXtensible Business Reporting Language):

		(i) Unaudited Condensed Interim Consolidated Statements of Income for the Three Months Ended March 31, 2017 and 2016

		(ii) Unaudited Condensed Interim Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2017 and 2016

		(iii) Unaudited Condensed Interim Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016

		(iv) Unaudited Condensed Interim Consolidated Statements of Changes in Partners’ Capital for the Three Months Ended March 31, 2017 and the Year Ended December 31, 2016

		(v) Unaudited Condensed Interim Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2016

		(vi) Notes to Unaudited Condensed Interim Consolidated Financial Statements

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	HÖEGH LNG PARTNERS LP

Date: May 24, 2017	By:	/s/ Richard Tyrrell
		Name: Richard Tyrrell
		Title: Chief Executive Officer and
		Chief Financial Officer