Title

Presentation

Operator: Hello, everyone, and welcome to the Excelerate Energy Fourth Quarter and Full Year 2022 Earnings Conference Call. My name is Bruno, and I’ll be the operator of today. I would now hand over to your host Craig Hicks, Vice President of Investor Relations. Please go ahead.

Craig Hicks: Thank you, and good morning, everyone. Yesterday afternoon, we released our fourth quarter and full year 2022 earnings press release, along with the presentation that our President and Chief Executive Officer, Steven Kobos; and our Chief Financial Officer, Dana Armstrong, will speak to this morning. I would like to remind everyone that we will be making forward-looking statements on this call that involve a number of risks and uncertainties. Our actual results may differ materially from those expressed in these forward-looking statements, and we make no obligation to update or revise them. During the call, we’ll also discuss several non-GAAP financial measures. We have provided a reconciliation to the most directly comparable GAAP financial measures at the back of the presentation. With that, it’s my pleasure to pass the call over to Steven Kobos.

Steven Kobos: Thanks, Craig, and thank you all for joining us this morning. Excelerate Energy delivered strong financial results in the fourth quarter is capped off an impressive year as we continued to demonstrate the strength of our business model. Our proven ability to deliver consistent earnings growth across market cycles gives us even more confidence in our plan to maximize value for shareholders. As this past year has shown, having flexible access to cleaner and more reliable energy has never been so critical. At Excelerate, we play a unique role in delivering essential energy solutions for our customers, while at the same time supporting the decarbonization efforts of countries across the globe. Today, we are well-positioned to build on this momentum and capitalize on the increased demand for LNG.

You’re seeing this play out with our recently announced 20-year LNG Sales and Purchase Agreement with Venture Global, with the commencement of downstream gas sales in Europe, and with the extension of our agreement with the Dubai Supply Authority. Material progress we’re making on LNG procurement and downstream gas sales, this syncs well with the timing of our new build FSRU order with Hyundai Heavy Industries. We’re currently marketing that ship as part of an integrated infrastructure offering. The 2023 financial guidance, which we announced yesterday, Dana’s going to cover this in more detail, but it reflects the confidence we have in the business and our value creation strategy. On this morning’s call, I want to focus my remarks on our strategic growth outlook and the progress we are making on our commercial opportunities.

As a global energy company, we are focused on enhancing energy security and accelerating the transition to a clean energy future. Our strategic goals at Excelerate include operating a profitable and growing fleet of FSRUs, growing our existing regasification business, expanding our downstream gas sales and our customer base in existing markets, while leveraging our global presence to enter new markets and managing a diversified portfolio of LNG supply. We are executing this strategy. We’re doing it in markets across our global footprint. Since 2022, this clearly includes Europe, a region that we expect to influence the LNG supply and demand balance through the end of this decade and beyond. Following Russian’s invasion of Ukraine and in response to the increased focus on energy security and the FSRU asset class, we quickly pivoted our near-term commercial focus to Europe.

In doing so, we expanded our total addressable market and we rebalanced our customer portfolio to include Finland and Germany to highly rated counterparties. Our charter agreement with Gasgrid Finland commenced on October 1 and we deployed our FSRU Exemplar to the port of Inkoo on December 28. The arrival of the vessel was an important milestone for Finland as it seeks to enhance its energy security. In October 2022, we signed an agreement with the German government to charter our FSRU Excelsior for five years. The Germany charter hire commenced at the end of February 2023. With our new FSRU presence in Europe, we have an opportunity to expand our gas marketing business in the region. For example, in conjunction with the deployment of the FSRU Exemplar to Finland Excelerate secured commissioning capacity at the Inkoo terminal.

These sales in late 2022 and in early 2023 represent an important first step towards securing future gas sales opportunities in Finland and the Baltic Sea region. Through our Finnish gas marketing entity, Excelerate can help bridge the gap between the LNG market and the needs of end users in the region. In other parts of Europe, we’re continuing to look at additional integrated opportunities that will allow us to sell natural gas downstream of our terminals. Now, let’s turn to South America. In South America, Excelerate currently has three of our 10 FSRUs in operation. We have two in Brazil and one in Argentina. In Brazil, Excelerate has provided regasification services for Petrobras at the Guanabara Bay terminal since 2012. Our FSRU Sequoia has been supporting our gas sales business at the Bahia regasification terminal since December 2021.

Turning to Argentina. Excelerate has reliably provided regasification services at the GNL Escobar terminal since 2011. We have also provided regasification services at the Bahia Blanca GasPort terminal in Argentina during multiple winter seasons dating back to 2008. Today, we are pleased to announce that we’ve secured a new seasonal agreement to provide regasification services at the Bahia Blanca terminal. Our FSRU Excelsior, which is currently being chartered by the German government will be placed temporarily on a suspension agreement while it is deployed to Bahia Blanca during the Argentina winter. Immediately after the Argentina winter season, the Excelsior will snap back and resume its original charter with the German government. This is going to occur in the third quarter of 2023.

Together with Germany, we are being good corporate citizens by deploying the Excelsior to help Argentina. Argentina after all is one of Excelerate’s valued markets. Our actions in South America underscore our longstanding commitment to regional energy security and to meeting the changing energy needs of our customers. Justifiably, Europe dominates energy security headlines. However, South America is also facing significant gas supply disruptions. In the case of South America, this is driven primarily by the rapid decline of Bolivian natural gas sales to both Brazil and Argentina. In Brazil, we are committed to partnering with Petrobras over the long-term to strengthen security of supply. We believe that our continued presence at the Bahia and Guanabara Bay terminals will help ensure reliable and sustainable energy for all Brazilians.

Meanwhile, in Argentina, the ongoing support we provide to the country’s energy sector strengthens our leadership position in South America, and this provides us with attractive development opportunities in one of the most dynamic energy markets in the world. Now let’s turn to the Asia Pacific region or APAC, a region where almost every country with a coastline has plans to introduce or expand LNG usage and their energy mix. Long-term fundamentals for this region remain robust. This is underpinned by rapidly growing economies, large scale fuel switching to meet net zero targets, and in many instances, dwindling domestic gas reserves. LNG is forecast to comprise a significant portion of South and Southeast Asia’s energy mix over the long-term.

Our approach to regional growth will be driven by the development of integrated infrastructure and LNG supply solutions. In Bangladesh, LNG quite simply remains an integral part of the country’s economy. This is evidenced by the government’s recent decision to restart spot LNG purchases. In fact, I’m pleased that Excelerate was successful in selling a spot LNG cargo to Petrobangla just last week. With domestic gas supply declining rapidly, LNG imports need to increase over time to displace those volumes and maintain natural gas as a critical part of Bangladesh’s energy mix. In 2023, the government also plans to sign new long-term LNG supply agreements to secure more affordable, reliable and predictable LNG pricing. We are continuing to advance the development of our planned Payra project, Payra has the potential to effectively double Bangladesh’s LNG important capacity.

In addition, to finalizing term sheets with Petrobangla, our team is evaluating financing options and is in discussions with potential €“ partners for the project. A critical part of our downstream strategy is to take a very deliberate and structured approach to sourcing LNG supply. As we gain access to new downstream gas sales markets, we believe that there are benefits from having a diversified LNG supply portfolio. Last month, we took our first step towards achieving the strategic goal when we announced the execution of a 20-year LNG Sales and Purchase Agreement or SPA with Venture Global, A top U.S. LNG exporter. Under the terms of the SPA, Excelerate will purchase 0.7 million tons per annum of LNG supply for 20 years starting in early 2027.

This off take will come from Venture Global’s Plaquemines LNG Phase 2 expansion, Plaquemines Phase 2 reached FID earlier this month. This SPA is the first long-term LNG supply agreement in our company’s history. This transformational agreement supports our plan to vertically integrate our business and become the virtual pipeline for the world. I will now turn the call over to Dana and she’s going to walk through our fourth quarter and full year 2022 results and our outlook for 2023.

Dana Armstrong: Thanks, Steven, and good morning. We are very pleased with Excelerate’s performance in the fourth quarter and for the full year 2022. Our fourth quarter adjusted EBITDAR was $98 million, an increase of $12 million are up about 13% over the previous quarter. The sequential increase was driven by the commencement of the Finland Charter and the sale of a partial commissioning LNG cargo into Finland. On a full year basis, adjusted EBITDAR for 2022 was $331 million, well above the high end of our guidance range due to the LNG cargo sale in Finland and over performance in Brazil during the fourth quarter. As compared to the prior year, our adjusted EBITDAR was up $40 million, an increase of 14%, primarily data having a full year of gas sales at the Bahia terminal in Brazil, which was partially offset by LNG marketing and supply activities in 2021 that did not reoccur in 2022 along with higher SG&A to support our transition to public company structure.

We are proud of the success we had during our first year as a public company, which reflects the commitment and dedication of the entire Excelerate team. As of year-end 2022, Excelerate has $517 million of cash and cash equivalents on hand and no outstanding borrowings under our revolver. Our gross leverage ratio was 2.2 times at the end of the year compared to 2.5 times at the end of the third quarter. On a net debt basis, our leverage ratio 0.4 times. Now, I would like to provide a few comments on our recently announced amended credit facility. Last week, we announced the closing of a $600 million amended and restated senior secured credit facility, which consists of a refinanced $350 million revolving credit facility and a new $250 million term loan.

The amended facility has a four-year tenure that matures in March 2027, which is an extension from the original maturity of April 2025. We intend to use a net proceeds from the term loan to purchase the FSRU Sequoia, one of the most capable vessels in the industry for $265 million, which is well below the current market value. Last week, we gave notice to the Sequoia’s owner regarding our intent to exercise our purchase option. We anticipate purchasing the Sequoia in the second quarter of this year, after which Excelerate will no longer incur rental expense for the Sequoia bareboat charter. As a result of the transaction adjusted EBITDAR will increase by about $7 million per quarter starting in the second quarter, and the company will cease reporting adjusted EBITDAR for 2023 and moving forward.

With a $250 million term loan, our pro forma total debt as of year-end 2022 would’ve been $884 million, which is a 2.7 times pro forma gross leverage ratio after adjusting for the Sequoia rent impact to EBITDA. This amended credit facility enhances our financial flexibility and supports our near-term growth and development initiatives. The combination of the amended revolver in our cash on hand will provide ample capital to operate our business and pursuit strategic growth opportunities. We are committed to maintaining a prudent and disciplined approach to capital investments. This means prioritizing investment opportunities that maximize the returns on our assets, given the increased competition globally for FSRUs and LNG infrastructure. We’re currently evaluating additional opportunities to deploy our capital in Europe and other markets across our footprint.

Incremental growth CapEx spend in 2023 beyond the $265 million that will be used to purchase of Sequoia will be disclosed subsequent to the execution of binding agreements. Maintenance CapEx for the year is expected to range between $15 million and $35 million. Now let’s turn to our EBITDA guidance for this year. In 2023, we expect to see the full momentum of our European projects coming online as well as the continued solid performance of our existing contracts in the Middle East, South America and Asia Pacific. For the full year, we expect adjusted EBITDA to range between $320 million and $340 million. Our adjusted EBITDA guidance assumes the Sequoia is purchased in April and includes rental expense for the Sequoia only through mid-April.

Now that the charter hire for our Germany contract has commenced, our FSRU fleet is fully contracted with nine vessels on regasification contracts and the Sequoia vessel continuing to service our gas sales business in Brazil. Growth over the prior year will be driven primarily by having a full year of revenue from our Finland charter, along with revenue from our Germany charter, which commenced in late February. As Steven mentioned earlier, we recently secured a charter to provide seasonal regas services at the Bahia Blanca terminal in Argentina from May 1 to mid-August, which is expected to provide economic uplift beyond our base regas margins this year. We expect our Brazil gas sales margins to be in line or above our 2022 results. As a reminder, although the revenues were recognized from gas sales are influenced by LNG prices.

The margins for our Brazil gas sales are not impacted by LNG prices under our existing contract structures. With that, we’ll open up the call for Q&A.

Operator: We have our first question comes from Devin McDermott from Morgan Stanley. Devin your line is now open. Please go ahead.

Devin McDermott: Hey good morning. Thanks for the helpful of data for taking my questions. So my first one, Steven, you made an interesting point in your prepared remarks about Bangladesh returning to the spot market and buying some LNG. And if we think more broadly high prices over the past year plus of constrained buying across a lot of more price-sensitive to markets. It seems like many of those staring to come back and participate in spot purchases again and resuming some level of demand growth. So my question is, can you talk in a little bit more detail about the Asia Pacific growth opportunity broadly. Are there other markets that you’re looking at or other opportunities that you’re seeing to further the innovative terminal model there.

Steven Kobos: Sure. Thanks for the question, Devin. We remain excited about APAC. Obviously, 2022 was all about the war in the pivot to Europe, but we haven’t taken our eye off of APAC. And we are pleased that €“ to see these markets we enter as buyers. So it’s not to say these are ideal prices for these markets, but they are prices at which it makes sense to enter the market and buy spot cargoes, and that’s great for a number of reasons. First, a couple of them reflect the fact that there really has yet to be demand destruction. You’re seeing the appetite to get as much LNG as they can once prices have moderated. And we do think the lessons learned from 2022 in the region in general, are that they need to enter into longer-term pricing, acquire those molecules.

Yes, we are active in the region. We do have one of our, I guess, in fact, our largest office outside of Houston is in Singapore, and we are scouring the region because people are starting to think about what comes next, and I assure everyone that LNG is still vitally part of the mix in APAC.

Devin McDermott: Great. That’s helpful and good to hear. My follow-up is on Bangladesh. It sounds like we’re getting closer to the finish line on the Payra FID. I was wondering if you could just walk us through the remaining milestones and expected time line there? And then also, where do we stand on a potential expansion at LNG?

Steven Kobos: Sure. The Payra project, I would say anyone wants to hear it, it’s at that point where there are lots of lawyers involved. And we’re trying to get to the term sheet phase as €“ I think never a good thing. But we’re trying to get to the phase where we have the term sheet and hand that lays out the deal. We continue to invest on that project to do the necessary engineering work in the background. We’ve spent roughly about $5 million to date. We remain bullish on that. So, I do think the next thing you’re likely to hear would be as soon as we can actually conclude a term sheet with the government. In terms of Moheshkhali or MLNG our existing project there. It’s really about how much LNG the government is securing.

We remain in negotiations with them for additional volumes my comment in the prepared remarks was simply to say that we expect Bangladesh government to enter into long-term contracts in 2023. But I don’t want to speak necessarily as to when they will conclude those. Those long-term contracts obviously would likely commence in 2026, 2027. But they are thinking about it. And they understand that to be part of that mix and to secure those volumes that are predictable and affordable that they need to act and they need to act this year.

Devin McDermott: Great. Thank you.

Steven Kobos: Thanks, Devin.

Operator: Our next question comes from Craig Shere from Tuohy. Craig your line is now open. Please go ahead.

Craig Shere: Hi thanks for taking the question. First, could you walk us through this German charger suspension in support of the latest Argentine Bahia Blanca deployment. So does this just provide you a temporary higher total return on that FSRU? Or is the German charter basically pushed out. So if it is suspended for three months or so, four months then does the five years get extended? Or just in that short period, you’re just serving a customer when the Germans don’t necessarily need and maybe making an extra $1 or $2?

Steven Kobos: Thanks, Craig. I’ll let Dana speak to the extra $1 or $2, but we do see this as a win-win-win when for the German government in terms it moderates their expense the summer or the southern winter, depending upon where you live, win for us and further uplift for the Excelsior and obviously, a win for Argentina, as further energy security and balance to their system during their Southern Hemisphere winter. So it is an uplift that we’re receiving as part of what we’re doing this summer rather than an extension to the charter, but there is definite uplift. What I’d tell everybody out there though is this is nothing new. We have an effort to optimize fleet over the years, we have routinely, I guess, you could call it, or vessels from customers and put it where there was maximum uplift for Excelerate.

So you should see €“ you should see that optimizing of the fleet as being part of €“ it’s just our core approach to business. Anyway, we’re very pleased about it because that involved Excelerate cooperating with two sovereigns and we are the company that can do that.

Dana Armstrong: Yes. Craig, just to speak to the economics, you’re correct in your assumption that it does provide an uplift. It’s a modest uplift. So it will be a suspension for a couple of months and will return to earning revenue in late Q3 and if we look at what we would have earned in Germany versus what we’ll earn for 2023 with the suspension agreement and with the Argentina project, it’s going to be roughly $5 million to $6 million uplift to our EBITDA by having the seasonal service are. So it’s a good new start. And then, of course, we’ll start the revenue again in late Q3, with Germany.

Unidentified Analyst: Great. Thank you for that. And can you elaborate, maybe I missed it, but could you provide a little more color on the overperformance in Brazil in the quarter?

Steven Kobos: Dana, do you want to take that one?

Dana Armstrong: Yes, I can take that one, Craig. So we renegotiated that contract with Petrobras as we found that in November of 2022. And under our new contract, we have €“ is similar to the other contract where we’re obviously vacant a fixed rate per MMBtu, a fixed capacity fee, regardless of how revenues we’re going to generate stable credible margins under the new structure and the new contracts, depending on the volumes they take that rate per MMBtu may fluctuate. So sometimes you may see higher margins when we see lower revenues. We did that new contact structure. So basically, have some €“ achieved some favorability under the new contract structure that allows us to get more favorable margins even with lower volumes. And so that’s what we saw in the fourth quarter.

Unidentified Analyst: Thanks for the explanation.

Dana Armstrong: Sure.

Operator: Our next question is from David Havens from SMBC Nikko. David, your line is now open. Please go ahead.

David Havens: Hi, good morning everyone. I want to start on CapEx. And the first question on that being, what have you invested to date in the Payra project as well as Vlora and then I know you touched a little bit on CapEx and earlier comments for 2023, but can you kind of give us a little bit more detail or a sense of what 2023 CapEx, organic CapEx could look like with the assumption that Payra does begin to move forward, you get some of those contracts across the goal line.

Steven Kobos: Thanks, David. Dana will be coming to you on this when we get into the specifics. But David, in general, I think, I guess, on an earlier question, I mentioned spin today, but that’s a historical spend, not necessarily this year, last year, any other year are out of pocket on Payra takes about $5 million, as I said. And frankly, we will be limiting the spend on that. So we do have funding that’s enough to really allow us to price and to have a sensible commercial negotiations, we need to, on an informed basis. So that’s just kind of skin in the game. I think, Dana, what we alluded to in the prepared remarks were our views on maintenance CapEx for the year. Is that right? And I don’t know that we are guiding yet on Payra or Vlora anything else until definitive agreements are we?

Dana Armstrong: Yes, that’s correct, David. So the maintenance CapEx, the $15 million to $35 million that we guided that’s dried off and it’s spare parts, vessel equipment, things like that. It doesn’t include any growth CapEx. We’re not yet guiding on growth CapEx. That’s something, we want to have a little bit more certainty about before we guide on that. So as Steven said, for Payra, what we spent year-to-date, it’s a little bit under $5 million. That’s not classified as CapEx. That’s just project development spend. And then I’ll be in a similar situation with the Vlora project development. We did spend some CapEx, gross CapEx last year on the power barges. But on the big overall Vlora project, just like €“ the growth CapEx, it’s something we’ll continue to guide on once we have more visibility and more information.

But we’re not going to start capitalizing on either Payra or Vlora or any of our growth projects until we’ve got more certainty around the projects. So you’ll see that build in a development spend for right now.

David Havens: All right. I’m sure. Thanks. And my follow-up is, as you guys address your need to source LNG, how should we think about the additional long-term SPAs that you might sign? And do you have a geographic presence for the origin of that LNG?

Steven Kobos: I’m sorry, what was the last part of that question, David? Do we have a geographic what?

David Havens: Preference to the origin, whether it be the United States, Qatar, wherever?

Steven Kobos: Sure. Look, we are excited about the opportunity with Venture Global and Plaquemines Phase 2 and the fact that Venture Global took FID on Plaquemines Phase 2 within €“ gosh, within a couple or three weeks of our announcement of the SPA. We’re excited about that. We thought it was a good opportunity. We saw low risk to those volumes. They’ve already executed with the same team before, and we thought it was a good add to our portfolio, the first to add to it that said, you know very well. We have a global footprint. We have global ambitions. And while we may very well wish to source additional U.S. volumes, we want a diversified LNG supply portfolio, and that’s why we remain and continue discussions with suppliers around the world.

We are determined that if we build this diversified LNG supply portfolio, with strong partners, it doesn’t matter where the strong partners are. But with strong partners like VG, it’s going to allow us to offer more flexible, more cost-effective products to existing and new customers. And based upon the locations, we’re somewhat agnostic in geography. I will tell you, in 2021, we sold four spot cargoes into Bangladesh, which were all sourced physically from the United States. So there really is no limit to where we can deliver these recently contracted volumes, but we’re going to keep our eyes open for opportunities that make sense and are accretive around the world.

David Havens: Okay, thank you.

Operator: We currently have no further questions. I would like to hand back to our CEO, Steven Kobos, for final remarks. Please go ahead.

Steven Kobos: Hey, thank you again to everyone who joined on today’s call. I’m proud of the progress we have made to date. And I want to thank the entire Excelerate team for making our first year as a public company a great success. As you’ve heard today, we are continuing to execute the strategic plan that we presented to investors last year. Although we’ve achieved several strategic objectives, we know there is still much work to be done. I’m going to look forward to providing you with additional progress updates in the coming months. But until then, if you have any questions, please feel free to reach out to Craig Hicks, our VP of Investor Relations. Thanks again.

Operator: Ladies and gentlemen, this concludes today’s call. You may now disconnect your lines. Thank you.