Höegh LNG Holdings on Tuesday announced its decision to put all FLNG activities on hold and to allocate all resources and capital to its core business; floating storage and regasification units (FSRUs).
According to Höegh, this is where the company sees the highest return on invested capital and the most promising market prospects.
The company’s 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, Höegh explained in a press release.
However, Höegh said, the market conditions for FSRUs continue to be favorably driven by the strong growth in new LNG supplies at very competitive prices. 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, Höegh said.
Höegh LNG will not engage in further new FLNG developments, however, it will complete its obligations towards existing FLNG customers. All FLNG employees will be transferred to the FSRU business. The company has consequently decided to impair the book value of its FLNG assets for an amount of $37 million in the fourth quarter of 2015. 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 company said, the strategic change is expected to lead to a reduction in annual net SG&A expenses of approximately $3 million going forward.
Sveinung J.S. Støhle, President & CEO of Höegh LNG, stated, “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.”