Höegh LNG Holdings Ltd has announced that it is to put all floating LNG (FLNG) activities on hold as it increases its focus on its core business: floating storage and regasification units (FSRUs).
The company has decided to allocate all resources and capital to its FSRUs, as this is where it sees the most promising market prospects and the highest return on invested capital.
Although Höegh LNG will not engage in further new FLNG developments, it said that it will complete all of its obligations towards existing FLNG customers.
Oversupplied LNG market
Höegh LNG said that its decision “is a consequence of the oversupplied LNG market and deteriorating energy and financial markets, which mean that investment decisions for new LNG production facilities, including the FLNG segment, will continue to be challenging for the foreseeable future.”
However, the company believes that the market conditions for FSRUs remain favourable in light of strong growth in new LNG supplies at competitive prices. A statement from Höegh LNG said: “The company sees a high level of project activity for new FSRU projects, promoted by both LNG producers as well as LNG importers and downstream gas consumers.”
All of the company’s FLNG employees will be transferred to the FSRU business.
Höegh LNG has decided to impair the book value of its FLNG assets for US$37 million in 4Q15. These intangible assets are substantially all related to the offshore FLNG FPSO FEED study that the company completed in 2009, prior to the IPO in 2011. Furthermore, the strategic change is expected to lead to a reduction in annual net SG&A expenses of approximately US$3 million going forward.
Sveinung J.S. Støhle, President & CEO of Höegh LNG, said: "Given the overall market outlook for LNG and the current state of the financial markets, we believe focusing solely on FSRUs is financially and commercially the best strategy for Höegh LNG. We are fully committed to build on our position as the leading FSRU provider, and will take this opportunity to sharpen our focus and strengthen our FSRU team to ensure that we reach our ambition of growing our fleet to 12 FSRUs by 2019."
Edited from press release by Callum O'Reilly
Read the article online at: https://www.lngindustry.com/floating-lng/16022016/hoegh-lng-puts-flng-activities-on-hold-2003/