# Excelerate Energy, Inc.: Form 10-Q for the period ended Mar 31, 2022

- Company: [Excelerate Energy, Inc.](/companies/ee.md) (CIK 1888447)
- Form: 10-Q
- Filed: 2022-05-26
- Accepted by EDGAR: May 25, 2022, 18:01 ET
- Period: 2022-03-31
- Accession: 0000950170-22-010683
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1888447/000095017022010683/ee-20220331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1888447/000095017022010683/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-01-01 to 2022-03-31 | $591.7m | us-gaap:Revenues |
| Operating income | 3 months, 2022-01-01 to 2022-03-31 | $39.1m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2022-01-01 to 2022-03-31 | $3.7m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-01-01 to 2022-03-31 | $13.9m | us-gaap:NetIncomeLoss |
| Operating cash flow | 3 months, 2022-01-01 to 2022-03-31 | −$31.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2022-03-31 | $82.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-03-31 | $307.2m | us-gaap:AssetsCurrent |
| Total assets | at 2022-03-31 | $2.30bn | us-gaap:Assets |
| Current liabilities | at 2022-03-31 | $250.1m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-03-31 | $1.27bn | us-gaap:Liabilities |
| Long-term debt | at 2022-03-31 | $209.7m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2022-03-31 | $19.9m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2022-03-31 | $1.03bn | us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest |

## Management's discussion and analysis

As filed, 59,156 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes thereto included in this Form 10-Q and for the year ended December 31, 2021 included in the Prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” included in the Prospectus, this Form 10-Q and our other filings with the SEC. Please also see the section titled “Forward-Looking Statements.”*

### Overview

Excelerate is changing the way the world accesses cleaner, more affordable and reliable energy by delivering regasified natural gas, benefitting hundreds of millions of people around the world. From our founding, we have focused on providing flexible LNG solutions to markets in diverse environments across the globe, providing a lesser emitting form of energy to markets that often rely on coal as their primary energy source. At Excelerate, we believe that access to affordable energy such as LNG is critical to assisting emerging markets in their decarbonization efforts, while at the same time promoting economic growth and improving quality of life.

We have grown our business significantly since our first FSRU charter in 2003, and today, we are a profitable energy company with a geographically diversified business model. Our business spans the globe, with regional offices in eight countries and operations in the United States, Brazil, Argentina, Israel, United Arab Emirates, Pakistan and Bangladesh. We are the largest provider of regasified LNG in Argentina and Bangladesh and one of the largest providers of regasified LNG in Brazil and Pakistan, and we operate the largest FSRU in Brazil. We also lease an LNG terminal in Bahia, Brazil from Petróleo Brasileiro S.A. (“Petrobras”) and in December 2021, we started importing LNG and selling regasified natural gas to Petrobras. In addition to Petrobras, we have plans to sell regasified natural gas to other downstream customers in Brazil, Albania, the Philippines and Bangladesh. In each of these countries, we offer a cleaner energy source from which power can be generated consistently. The high value our customers place on our services has resulted in a reliable source of revenues to us, while our global reach helps balance seasonal demand fluctuation among the geographies in which we operate. For the three-month period ended March 31, 2022, we generated revenues of $591.7 million, net income of $12.8 million and Adjusted EBITDAR of $71.4 million. For the three months ended March 31, 2021, we generated revenues of $164.8 million, net income of $38.0 million and Adjusted EBITDAR of $96.6 million. For more information regarding our non-GAAP measure Adjusted EBITDAR and a reconciliation to net income, the most comparable GAAP measure, see “How We Evaluate Our Operations.”

Our business focuses on the integration of the natural gas-to-power LNG value chain, and as part of this value chain, we operate regasification terminals in growing global economies that utilize our FSRU fleet. Our business is substantially supported by time charter contracts, which are effectively long-term, take-or-pay arrangements and provide consistent revenue and cash flow from our high-quality customer base. As of March 31, 2022, we operate a fleet of ten purpose-built FSRUs, have completed more than 2,300 ship-to-ship transfers of LNG with over 40 LNG operators since we began operations and safely delivered more than 5,540 billion cubic feet of natural gas through 15 LNG terminals. For the three months ended March 31, 2022 and March 31, 2021, we generated revenues of $97.6 million and $125.9 million, respectively, from our FSRU and terminal services businesses, representing approximately 16% and 76% of our total revenues for each of those periods.

We also procure LNG from major producers and sell regasified natural gas through our flexible LNG terminals. For the three months ended March 31, 2022, we generated revenues of $494.1 million from LNG and natural gas sales, representing approximately 84% of our total revenues for that period. For the three-month period ended March 31, 2021 we generated revenues of $39.0 million from LNG and natural gas sales, representing approximately 24% of our total revenues for that year. The commercial momentum that we have established in recent years and the increasing need for access to LNG around the world, have resulted in a significant portfolio of new growth opportunities for us to pursue. In addition to our FSRU and terminal services businesses and natural gas sales, we plan to expand our business to provide customers with an array of products, including LNG-to-power projects and a suite of smaller-scale natural gas distribution solutions. We are currently developing a set of integrated LNG projects in Albania, the Philippines and Bangladesh. We consider these projects to be in advanced development and estimate that these projects together represent greater than $1 billion in future capital investment opportunities. We are evaluating and pursuing additional early-stage projects with opportunities in Europe, Asia Pacific, Latin America and the Middle East.

### Recent Trends and Outlook

Increased aspirations for carbon neutrality and energy transitions away from coal may cause countries to rely more on lower carbon fuels such as LNG, as evidenced by expected LNG demand growth. Global LNG demand is estimated by the Shell LNG Outlook for 2021 to almost double from 360 metric tons (“MT”) in 2020 to about 720 MT in 2040, supported by strong demand growth in emerging Asian markets. As economic development and urbanization spur demand for electricity, LNG will be a critical solution for bridging the supply/demand imbalance in regions like Southeast Asia, where LNG demand is expected to increase 56% by 2030, underpinned by the power sector. On the supply side, we believe there is a robust pipeline of projects that can meet this new demand. Limitations on energy import infrastructure, particularly in developing countries that need to move away from coal and oil, make LNG adoption difficult, but as a pioneer in flexible LNG solutions, we believe that we are well positioned to address these limitations and support society’s transition to a lower-carbon energy future. Given the appetite for cleaner energy, we expect these industry trends to continue, and we plan to capitalize on this growing global demand and create new markets for natural gas by providing a fully integrated LNG delivery model.

Across the world, a combination of extreme weather events, Covid-19 related energy market distortions, the invasion of Ukraine by Russia, and a failure to transition to renewables has increased, in the short term, both the cost of energy and the risk of energy supply disruptions. For example, as a result of not procuring a sufficient level of LNG imports and lower than expected wind power availability, the United Kingdom has seen natural gas prices rise more than fivefold over the past year according to Bloomberg. In 2021, the Brazilian federal government began seeking to intervene in the power markets to minimize the effects of a historic drought on the country’s hydroelectric power supply and has indicated its support for our efforts to increase LNG imports as a viable strategy for improving power generation availability. The current energy market volatility supports LNG as a reliable bridge to the sustainable growth of renewables in the world’s energy mix. We believe the past year’s events underscore the value that LNG offers by providing energy supply stability for any government looking to implement a sustainable, reliable and cost-effective energy transition plan.

Due to recent geopolitical events, including the invasion of Ukraine by Russia, we are seeing an increase in inquiries for our FSRU and integrated terminal services. This interest is mainly coming from countries that have historically been dependent on imports of Russian natural gas. Given the increased emphasis on security of supply, we believe LNG will be an attractive solution to these customers over the near to mid-term. In May 2022, we announced the signing of a 10-year time charter party agreement with a subsidiary of Gasgrid Finland Oy (“Gasgrid Finland”). In addition to this new firm commitment, we continue to explore other opportunities in European markets. At this time, we do not believe any economic sanctions or other actions taken against Russia will adversely affect our current business and operations or the potential opportunities discussed above, and we will continue to monitor new developments in this area.

While we have the potential to benefit from increased LNG and natural gas opportunities related to the increased appetite for alternative energy sources in the European market, there have been some headwinds in the current market environment. As the Japan Korea Marker to Dutch Title Transfer Facility price spread began to flatten in December 2021, demand for vessels to transport cargos from the Atlantic to the Pacific decreased and resulted in fewer opportunities to sub-charter our available vessels to third parties early in 2022, which affected our first quarter results. Current market dynamics, including these recent geopolitical events, have also driven an increase in spot LNG prices early in 2022, which could potentially reduce the opportunities for spot LNG cargo sales and additional short-term natural gas sales.

In addition to increased LNG industry activity levels, we expect to benefit from our strategy to pursue opportunities in the downstream market, expand into new markets and increase our activity in selling natural gas downstream. In 2021, we began to sell LNG into Bangladesh, expanded our business in Brazil through the lease of a terminal in Bahia to support the import of LNG and began the sale of natural gas to the local markets in Brazil. In the first quarter of 2022, we also sold gas into the New England market through our Northeast Gateway facility in Boston harbor. A portion of the benefits we expect to achieve from these opportunities will be offset by the release of our one conventional LNG carrier (“LNGC”) from short term charter operations, which occurred in December 2021.

We expect these and similar business opportunities to drive incremental revenue and profits in the near term while we continue to develop additional long-term growth opportunities, such as:

- In April 2022, the government of Finland announced its intention to stop purchases of Russian pipeline natural gas and instead to utilize an FSRU to meet its natural gas consumption needs by year end 2022. The government of Estonia has made a similar decision. Due to the proximity and good relations between the two countries, Estonia will participate in the Finnish project rather than pursuing a project of its own. In May 2022, Excelerate and Gasgrid Finland signed a 10-year, time charter party agreement for Excelerate to provide LNG regasification services starting in the fourth quarter of 2022. Gasgrid Finland has initiated the development of a new jetty in Southern Finland, near the Balticconnector pipeline, for the FSRU *Exemplar* to moor.
- In May 2022, the Payra LNG project was approved in principle by Bangladesh Oil, Gas & Mineral Corporation and Bangladesh’s Energy and Mineral Resources Division, a significant milestone in the approval process. Excelerate has commenced negotiations of the integrated deal, which includes an LNG supply agreement that would allow the Company to sell three to four million tons per annum of LNG to the country. The Payra LNG project will represent Excelerate’s largest deployment of capital to date and has the potential to significantly increase the scale of the Company’s operations from a global perspective.
- In February 2022, the Moheshkhali LNG (“MLNG”) expansion project was approved in principle by the government of Bangladesh. MLNG is one of Excelerate’s three E-FIT integrated terminals. Excelerate has commenced commercial

negotiations for the expansion of the terminal, the extension of our regasification agreement by five years to 2038, and an LNG supply agreement to sell up to 1.5 million tons per annum.

- In January 2022, Excelerate received approval from the Albanian government to proceed with the second phase of the feasibility study for the Vlora LNG terminal and power plant. Under the previously announced memorandum of understanding with Albgaz Sh.a,, Albania’s natural gas transmission system operator, and Snam S.p.A, one of the largest energy infrastructure owner and operators in the world, Excelerate is continuing to explore solutions to connect the Vlora LNG Terminal with other European natural gas infrastructure.
- In March 2022, Excelerate was awarded a seasonal charter for the FSRU *Exemplar* at the Bahia Blanca GasPort terminal in Argentina. Following regasification services at the Northeast Gateway Deepwater Port, the Exemplar sailed to Argentina. The vessel arrived at Bahia Blanca in May 2022 and will provide regasification services during the winter in Argentina.

### Components of Our Results of Operations

#### Revenue

We generate revenue through the provision of regasification services using our fleet of FSRUs and LNG terminal assets, as well as physical sales of LNG and natural gas, that are made primarily in connection with our regasification and terminal projects. We provide regasification services through time charters and operation service contracts primarily related to our long-term charter contracts. Most of our time charter revenues are from long-term contracts that function similar to take-or-pay arrangements in that we are paid if our assets and teams are available and ready to provide services to our customers regardless of whether our customers utilize the services. A portion of our revenue attributable to our charters for the use of our vessels is accounted for as lease revenue, and the revenues attributable to the services provided under those charters are accounted for as non-lease revenue. We generally charge fixed fees for the use of and services provided with our vessels and terminal capacity plus additional amounts for certain variable costs.

#### Expenses

The principal expenses involved in conducting our business are operating costs, direct cost of gas sales, general and administrative expenses, and depreciation and amortization. A large portion of the fixed and variable costs we incur in our business are in the operation of our fleet of FSRUs and terminals that provide regasification and gas supply to our customers. We manage the level of our fixed costs based on several factors, including industry conditions and expected demand for our services and generally pass-through certain variable costs.

We incur significant equipment costs in connection with the operation of our business, including capital equipment recorded as property and equipment, net on our balance sheets and related depreciation and amortization on our income statement. In addition, we incur repair and maintenance and leasing costs related to our property and equipment utilized both in our FSRU and terminal services and gas sales. Property and equipment includes costs incurred for our fleet of FSRUs and terminal assets including capitalized costs related to drydocking activities. Generally, we are required to drydock each of our vessels every five years.

#### Cost of revenue and vessel operating expenses

Cost of revenue and vessel operating expenses include the following major cost categories: vessel operating costs; personnel costs; repair and maintenance; and leasing costs. These operating costs are incurred for both our FSRU and terminal services revenues and Gas sales revenues.

#### Direct cost of gas sales

Direct cost of gas sales includes the cost of LNG and other fuel and direct costs incurred in selling natural gas and LNG, which are significant variable operating costs. These costs fluctuate in proportion to the amount of our natural gas and LNG sales as well as LNG prices.

#### Depreciation and amortization expenses

Depreciation expense is recognized on a straight-line basis over the estimated useful lives of our property and equipment assets, less an estimated residual value. Certain recurring repairs and maintenance expenditures required by regulators are amortized over the required maintenance period.

#### Selling, general and administrative expenses

Selling, general and administrative expenses (“SG&A”) consist primarily of compensation and other employee-related costs for personnel engaged in executive management, sales, finance, legal, tax and human resources. SG&A also consists of expenses associated with office facilities, information technology, external professional services, business development, legal costs and other administrative expenses.

#### Restructuring, transition and transaction expenses

We incurred restructuring, transition and transaction expenses during the three months ended March 31, 2022, related to consulting, legal, and audit costs incurred as part of and in preparation for our initial public offering (the “IPO”). There were no restructuring, transition or transaction expenses incurred during the three months ended March 31, 2021.

#### Other income, net

Other income, net, primarily contains interest income, gains or losses from the effect of foreign exchange rates and gains and losses on asset sales.

#### Interest expense and Interest expense – related party

Our interest expense is primarily associated with our finance leases liabilities and loan agreements with external banks and related parties.

#### Earnings from equity-method investment

Earnings from equity-method investment relate to our 45% ownership interest in the Nakilat joint venture, which we acquired in 2018.

#### Provision for income taxes

EELP is treated as a pass-through entity for income tax purposes and, as such, is not subject to U.S. federal and most state income taxes. Instead, EELP’s U.S. income tax activity is allocated to individuals and entities affiliated with EELP. We also have international operations that are subject to foreign income tax requirements and U.S. corporate subsidiaries subject to U.S. federal tax.

#### Net income (loss) attributable to non-controlling interest

Net income (loss) attributable to non-controlling interests includes earnings (losses) allocable to the third-party equity ownership interests in our subsidiary, Excelerate Energy Bangladesh, LLC, which was formed in 2016.

#### Net income attributable to non-controlling interest – ENE Onshore

Net income attributable to non-controlling interest – ENE Onshore includes the loss allocable to the equity ownership interests in Excelerate New England Onshore, LLC (“ENE Onshore”). We consolidate ENE Onshore since we determined that although we have no ownership interest we are the primary beneficiary.

### Factors Affecting the Comparability of Our Results of Operations

As a result of a number of factors, our historical results of operations may not be comparable from period to period or going forward. Set forth below is a brief discussion of the key factors impacting the comparability of our results of operations.

#### Impact of the Reorganization

Following the completion of the IPO in April 2022, we are a corporation for U.S. federal and state income tax purposes. Excelerate’s accounting predecessor, EELP, is treated as a flow-through entity for U.S. federal income tax purposes and, as such, has generally not been subject to U.S. federal income tax at the entity level. Accordingly, unless otherwise specified, the historical results of operations and other financial information set forth in this Form 10-Q do not include any provision for U.S. federal income tax. The reorganization undertaken in connection with the IPO, as described under “Organizational Structure—The Reorganization” in the Prospectus (the “Reorganization”), will be accounted for as a reorganization of entities under common control. As a result, our consolidated financial statements will recognize the assets and liabilities received in the Reorganization at their historical carrying amounts, as reflected in the historical consolidated financial statements of EELP. In addition, in connection with the Reorganization and the IPO, we have entered into the Tax Receivable Agreement (the “TRA”) with Excelerate Energy Holdings, LLC (“EE Holdings”) and the Foundation (or their affiliates) (together, the “TRA Beneficiaries”) pursuant to which we will be required to pay the TRA Beneficiaries 85% of the net cash savings, if any, that we are deemed to realize as a result of our utilization of certain tax benefits described under “Certain Relationships and Related Person Transactions—Proposed Transactions with Excelerate Energy, Inc.—Tax Receivable Agreement” in our Prospectus.

Also, included in the transactions is our acquisition of all of the issued and outstanding membership interests in Excelsior, LLC and FSRU Vessel (Excellence), LLC (f/k/a Excellence, LLC) (collectively, the “Foundation Vessels”) that is expected to be accounted for as an acquisition of property and equipment at the completion of the transaction. The Foundation Vessels have historically been accounted for as a finance lease in our historical financial statements.

#### Public Company Costs

We have incurred and expect to continue to incur incremental, non-recurring costs related to our transition to a publicly traded corporation, including the costs of the IPO and the costs associated with the initial implementation of our Sarbanes-Oxley Section 404 internal control reviews and testing. We also expect to incur additional significant and recurring expenses as a publicly traded corporation, including costs associated with compliance under the Exchange Act, annual and quarterly reports to common stockholders, registrar and transfer agent fees, national stock exchange fees, audit fees, incremental director and officer liability insurance costs and director and officer compensation.

#### Impact of Covid-19

In March 2020, the World Health Organization declared the Coronavirus Disease 2019 (“Covid-19”) a global pandemic. The Covid-19 outbreak has reached across the globe, resulting in the implementation of significant governmental measures, including lockdowns, closures, quarantines, and travel bans intended to control the spread of the virus. While some of these measures have been relaxed in certain parts of the world, ongoing social distancing measures, and future prevention and mitigation measures, as well as the potential for some of these measures to be reinstituted in the event of repeat waves of the virus and any variants, are likely to have an adverse impact on global economic conditions and consumer confidence and spending, and could materially adversely affect the timing of demand, or users’ ability to pay, for our products and services.

In response to the Covid-19 pandemic, we took several precautions that may adversely impact employee productivity, such as requiring many office employees to work remotely, imposing travel restrictions, and temporarily closing office locations. In addition, we instituted additional procedures and precautions related to our crews on our FSRU vessels. We incurred incremental costs during the three months ended March 31, 2022 and 2021, of approximately $0.8 million and $1.5 million, respectively, related to these precautionary measures.

We continue to monitor the evolving situation and guidance from international and domestic authorities, including federal, state and local public health authorities, and there may be developments outside our control requiring us to adjust our operating plan. As such, given the unprecedented uncertainty around the duration and severity of the impact on market conditions and the business environment, we cannot reasonably estimate the full impact of the Covid-19 pandemic on our operating results in the future.

For additional information, see “Risk Factors—Risks Related to Our Business—Outbreaks of epidemic and pandemic diseases and governmental responses thereto could adversely affect our business.” and other risk factors included in the “Risk Factors” section of our Prospectus that describe risks to us attributable to the Covid-19 pandemic.

### How We Evaluate Our Operations

We operate in a single reportable segment. However, we use a variety of qualitative, operational and financial metrics to assess our performance and valuation. Among other measures, management considers each of the following in assessing our business:

Adjusted Gross Margin;

Adjusted EBITDA;

Adjusted EBITDAR; and

Capital Expenditures.

#### Adjusted Gross Margin

We use Adjusted Gross Margin, a non-GAAP financial measure, which we define as revenues less direct cost of sales and operating expenses, excluding depreciation and amortization, to measure our operational financial performance. Management believes Adjusted Gross Margin is useful because it provides insight on profitability and true operating performance excluding the implications of the historical cost basis of our assets. Our computation of Adjusted Gross Margin may not be comparable to other similarly titled measures of other companies, and you are cautioned not to place undue reliance on this information.

#### Adjusted EBITDA and Adjusted EBITDAR

Adjusted EBITDA is a non-GAAP financial measure included as a supplemental disclosure because we believe it is a useful indicator of our operating performance. We define Adjusted EBITDA, a non-GAAP measure, as net income before interest, income taxes, depreciation and amortization, and items such as charges and non-recurring expenses that management does not consider as part of assessing ongoing operating performance.

Adjusted EBITDAR is a non-GAAP financial measure included as a supplemental disclosure because we believe it is a valuation measure commonly used by financial statement users to more effectively compare the results of our operations from period to period and against other companies without regard to our financing methods or capital structure. We define Adjusted EBITDAR, a non-GAAP measure, as Adjusted EBITDA adjusted to eliminate the effects of rental expenses for vessels and other infrastructure, which are normal, recurring cash operating expenses necessary to operate our business.

We adjust net income for the items listed above to arrive at Adjusted EBITDA and Adjusted EBITDAR because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA and Adjusted EBITDAR should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as an indicator of our operating performance or liquidity. These measures have limitations as certain excluded items are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDA and Adjusted EBITDAR. Adjusted EBITDAR should not be viewed as a measure of overall performance or considered in isolation or as an alternative to net income because it excludes rental expenses for vessels and other infrastructure, which is a normal, recurring cash operating expense that is necessary to operate our business. Our presentation of Adjusted EBITDA and Adjusted EBITDAR should not be construed as an inference that our results will be unaffected by unusual or non-recurring items. Our computations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. For the foregoing reasons, each of Adjusted EBITDA and Adjusted EBITDAR has significant limitations which affect its use as an indicator of our profitability and valuation, and you are cautioned not to place undue reliance on this information.

#### Capital Expenditures

We incur capital expenditures as part of our regular business operations. Capital expenditures are costs incurred which expand our business operations, increase efficiency of business operations, extend the life of an existing asset, improve an asset’s capabilities, increase future service of an asset, repair existing assets in order to maintain their service capability, and provide upkeep required for regulatory compliance. Costs related to prospective projects are capitalized once it is determined to be probable that the related assets will be constructed.

The tables below reconcile the financial measures discussed above to the most directly comparable financial measure calculated and presented in accordance with GAAP:

*(In thousands)*

|  | Three months ended March 31, 2022 | 2021 |
| --- | ---: | ---: |
| FSRU and terminal services revenues | $97,592 | $125,863 |
| Gas sales revenues | 494,081 | 38,950 |
| Cost of revenue and vessel operating expenses | (50,063) | (39,205) |
| Direct cost of gas sales | (463,352) | (23,338) |
| Depreciation and amortization expense | (23,743) | (26,109) |
| **Gross Margin** | **$54,515** | **$76,161** |
| Depreciation and amortization expense | 23,743 | 26,109 |
| **Adjusted Gross Margin** | **$78,258** | **$102,270** |

*(In thousands)*

|  | Three months ended March 31, 2022 | 2021 |
| --- | ---: | ---: |
| **Net income** | **$12,844** | **$38,023** |
| Interest expense | 19,227 | 20,842 |
| Provision for income taxes | 3,719 | 4,512 |
| Depreciation and amortization expense | 23,743 | 26,109 |
| Restructuring, transition and transaction expenses | 2,753 | — |
| **Adjusted EBITDA** | **$62,286** | **$89,486** |
| Vessel and infrastructure rent expense | 9,094 | 7,098 |
| **Adjusted EBITDAR** | **$71,380** | **$96,584** |

### 34

### Consolidated Results of Operations

### Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

*(In thousands)*

| Revenues | Three months ended March 31, 2022 | 2021 | Change |  |
| --- | ---: | ---: | ---: | ---: |
| FSRU and terminal services | $97,592 | $125,863 | $(28,271) | -22% |
| Gas sales | 494,081 | 38,950 | 455,131 | 1169% |
| Total revenues | 591,673 | 164,813 | 426,860 | 259% |
| Operating expenses |  |  |  |  |
| Cost of revenue and vessel operating expenses | 50,063 | 39,205 | 10,858 | 28% |
| Direct cost of gas sales | 463,352 | 23,338 | 440,014 | 1885% |
| Depreciation and amortization | 23,743 | 26,109 | (2,366) | -9% |
| Selling, general and administrative | 12,634 | 13,345 | (711) | -5% |
| Restructuring | 2,753 | — | 2,753 |  |
| Total operating expenses | 552,545 | 101,997 | 450,548 | 442% |
| Operating income | 39,128 | 62,816 | (23,688) | -38% |
| Other income (expense) |  |  |  |  |
| Interest expense | (7,054) | (8,292) | 1,238 | -15% |
| Interest expense – related party | (12,173) | (12,550) | 377 | -3% |
| Earnings from equity-method investment | 778 | 804 | (26) | -3% |
| Other income, net | (4,116) | (243) | (3,873) | 1594% |
| Income before income taxes | 16,563 | 42,535 | (25,972) | -61% |
| Provision for income taxes – foreign | (3,719) | (4,512) | 793 | -18% |
| Net income | 12,844 | 38,023 | (25,179) | -66% |
| Less net income (loss) attributable to non-controlling interests | (816) | 759 | (1,575) | -208% |
| Less net (loss) attributable to non-controlling interests – ENE Onshore | (237) | (1,995) | 1,758 | -88% |
| Net income attributable to EELP | $13,897 | $39,259 | $(25,362) | -65% |
| **Additional financial data:** |  |  |  |  |
| Gross Margin | $54,515 | $76,161 | $(21,646) | -28% |
| Adjusted Gross Margin | 78,258 | 102,270 | (24,012) | -23% |
| Adjusted EBITDA | 62,286 | 89,486 | (27,200) | -30% |
| Adjusted EBITDAR | 71,380 | 96,584 | (25,204) | -26% |
| Capital expenditures | 11,029 | 5,185 | 5,844 | 113% |

### Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

#### Net income

Net income was $12.8 million for the three months ended March 31, 2022, a decrease of $25.2 million, or 66%, as compared to $38.0 million for the three months ended March 31, 2021. Net income was lower primarily due to fewer opportunities to sub-charter our available vessels to third parties during the three months ended March 31, 2022 ($23.6 million), increases in cost of revenue and vessel operating expenses ($9.4 million), primarily due to the commencement of the Bahia terminal lease in the fourth quarter of 2021, a foreign currency exchange loss ($4.4 million), and restructuring, transition and transaction expenses incurred during the three months ended March 31, 2022 ($2.8 million). These decreases were partially offset by direct margin earned on gas sales in Brazil and New England during the three months ended March 31, 2022 ($30.7 million), which exceeded direct margin earned on an LNG sale that occurred in China during the three months ended March 31, 2021 ($15.6 million).

#### Gross Margin and Adjusted Gross Margin

Gross Margin was $54.5 million for the three months ended March 31, 2022, a decrease of $21.7 million, or 28%, as compared to $76.2 million for the three months ended March 31, 2021. Adjusted Gross Margin was $78.3 million for the three months ended March 31, 2022, a decrease of $24.0 million, or 23%, as compared to $102.3 million for the three months ended March 31, 2021. Gross Margin and Adjusted Gross Margin were lower primarily due to fewer opportunities to sub-charter our available vessels to third parties during the three months ended March 31, 2022 ($23.6 million) and increases in cost of revenue and vessel operating expenses ($9.4 million), primarily due to the commencement of the Bahia terminal lease in the fourth quarter of 2021. These decreases were partially offset by direct margin earned on gas sales in Brazil and New England during the three months ended March 31, 2022 ($30.7 million), which exceeded direct margin earned on an LNG sale that occurred in China during the three months ended March 31, 2021 ($15.6 million).

#### Adjusted EBITDA and Adjusted EBITDAR

Our Adjusted EBITDA was $62.3 million and $89.5 million for the three months ended March 31, 2022 and 2021, respectively. Our Adjusted EBITDAR was $71.4 million and $96.6 million for the three months ended March 31, 2022 and 2021, respectively. The decrease in our Adjusted EBITDA and Adjusted EBITDAR was primarily due to the variances discussed above in Gross Margin and Adjusted Gross Margin, as well as a foreign currency exchange loss ($4.4 million), as discussed below.

For more information regarding our non-GAAP measures Adjusted Gross Margin, Adjusted EBITDA and Adjusted EBITDAR, and a reconciliation to their most comparable GAAP measures, see “—How We Evaluate Our Operations.”

#### FSRU and terminal services revenues

FSRU and terminal services revenues were $97.6 million for the three months ended March 31, 2022, a decrease of $28.3 million, or 22%, as compared to $125.9 million for the three months ended March 31, 2021. FSRU and terminal services revenues were lower primarily due to fewer opportunities to sub-charter our available vessels to third parties during the three months ended March 31, 2022.

#### Gas sales revenues

Gas sales revenues were $494.1 million for the three months ended March 31, 2022, an increase of $455.1 million, as compared to $39.0 million for the three months ended March 31, 2021. The increase was primarily due to gas sales that occurred in the three months ended March 31, 2022 related to our terminal operations in Brazil and New England, partially offset by LNG that was sold to a customer in China during the three months ended March 31, 2021.

#### Cost of revenue and vessel operating expenses

Cost of revenue and vessel operating expenses was $50.1 million for the three months ended March 31, 2022, an increase of $10.9 million, or 28%, as compared to $39.2 million for the three months ended March 31, 2021. The increase in cost of revenue and vessel operating expenses was primarily due to additional cost of operations in Brazil as we began operations in Bahia during the fourth quarter of 2021 and higher maintenance at one of our terminal locations.

#### Direct cost of gas sales

Direct cost of gas sales was $463.4 million for the three months ended March 31, 2022, an increase of $440.0 million, as compared to $23.3 million for the three months ended March 31, 2021. The increase was primarily due to gas sales that occurred in the three months ended March 31, 2022 related to our terminal operations in Brazil and New England, partially offset by costs related to LNG that was sold to a customer in China during the three months ended March 31, 2021.

#### Depreciation and amortization expenses

Depreciation and amortization expenses were $23.7 million for the three months ended March 31, 2022, a decrease of $2.4 million, or 9%, as compared to $26.1 million for the three months ended March 31, 2021. Depreciation and amortization decreased primarily due to the release of our one conventional LNGC from short term charter operations in December 2021.

#### Selling, general and administrative expenses

Selling, general and administrative expenses were $12.6 million for the three months ended March 31, 2022, a decrease of $0.7 million, or 5%, as compared to $13.3 million for the three months ended March 31, 2021. Selling, general and administrative expenses were essentially flat.

#### Restructuring, transition and transaction expenses

Restructuring, transition and transaction expenses of $2.8 million were incurred during the three months ended March 31, 2022 due to consulting, legal, and audit services utilized as part of and in preparation for the IPO. No restructuring, transition and transaction expenses were incurred during the three months ended March 31, 2021.

#### Interest expense

Interest expense was $7.1 million for the three months ended March 31, 2022, a decrease of $1.2 million, or 15%, as compared to $8.3 million for the three months ended March 31, 2021. Interest expense decreased primarily due to lower balances remaining on our finance leases and long-term debt.

#### Interest expense – related party

Interest expense – related party was $12.2 million for the three months ended March 31, 2022, a decrease of $0.4 million, or 3%, as compared to $12.6 million for the three months ended March 31, 2021. Interest expense – related party decreased primarily due to lower balances remaining on our finance leases and long-term debt.

#### Other income (expense), net

Other income (expense), net was $(4.1) million for the three months ended March 31, 2022, a decrease of $3.9 million, as compared to $(0.2) million for the three months ended March 31, 2021. The decrease was primarily due to foreign currency exchange losses related to our operations in Brazil.

#### Provision for income taxes

The effective tax rate for the three months ended March 31, 2022 and March 31, 2021 was 22.5% and 10.6%, respectively. The increase in the effective tax rates for the three months ended March 31, 2022 is driven by the change in geographical mix of book income in certain taxable entities and jurisdictions, as well as withholding tax accruals.

EELP is treated as a pass-through entity for income tax purposes and, as such, is not subject to U.S federal and most state income taxes. Instead, EELP’s U.S. income tax activity is allocated to individuals and entities affiliated with EELP. The Company also has international operations that are subject to foreign income tax requirements and U.S. corporate subsidiaries subject to U.S. federal tax. Therefore, our effective income tax rate is dependent on many factors, including the Company’s geographical distribution of income, a rate benefit attributable to the portion of the Company’s earnings not subject to corporate level taxes, and the impact of nondeductible items. In one jurisdiction, the Company’s tax rate is significantly less than the applicable statutory rate as a result of a tax holiday that was granted. This tax holiday will expire in 2033 at the same time as our contract and revenue with our customer ends.

#### Net income attributable to non-controlling interest

Net loss attributable to non-controlling interest was $(0.8) million for the three months ended March 31, 2022, a decrease of $1.6 million, or 208%, as compared to net income attributable to non-controlling interest of $0.8 million for the three months ended March 31, 2021. The increase in net loss attributable to non-controlling interest was primarily due to higher maintenance at one of our terminal locations.

#### Net loss attributable to non-controlling interest – ENE Onshore

Net loss attributable to non-controlling interest – ENE Onshore was $(0.2) million for the three months ended March 31, 2022, a decrease of $1.8 million, or 88%, as compared to $(2.0) million for the three months ended March 31, 2021. Net loss attributable to non-controlling interest – ENE Onshore decreased primarily due to additional capacity sales revenue in the three months ended March 31, 2022.

### Liquidity and Capital Resources

We believe we will have sufficient liquidity for the next 12 months based on our cash positions, cash flows from operating activities and borrowing capacity on our debt facilities for ongoing operations, planned capital expenditures, other investments and debt service obligations and payment of tax distributions and our expected quarterly dividend, as described in “Dividend Policy” in the Prospectus. As of March 31, 2022, we had $82.9 million in unrestricted cash and cash equivalents.

Our proceeds from the IPO in April 2022 were approximately $416.2 million, after deducting underwriting discounts and commissions, but before deducting estimated IPO-related expenses of $8.2 million. Approximately $50.0 million of the IPO net proceeds were used to fund in part EELP's purchase of the Foundation Vessels. The remaining proceeds are expected to be used to fund our growth strategy, working capital, and other general corporate purposes.

During the third quarter of 2021, we signed a lease on an LNG terminal in Bahia, Brazil from Petrobras, and in December 2021, we started importing LNG and selling regasified natural gas to Petrobras. In addition to Petrobras, we have plans to sell regasified natural gas to other downstream customers in Brazil, Albania, the Philippines and Bangladesh. We anticipate buying additional LNG to import into Brazil and expect to need additional working capital for LNG inventories. Given the price of LNG and the size of each cargo, we expect to significantly increase our LNG purchases. Some of these purchases could potentially exceed cash on hand at certain times through 2022. We plan to fund any cash shortfalls with borrowings under the EE Revolver (as defined herein), which replaced the KFMC Note, a promissory note with Kaiser-Francis Management Company, L.L.C. (“KFMC”), an affiliate of Kaiser, upon consummation of the IPO. For more information regarding the KFMC Note, see Note 11 – Long-term debt – related party to the Consolidated Financial Statements of EELP. Management believes the EE Revolver will provide sufficient liquidity to execute the purchases under the contract. In the event sufficient funds were not available under the EE Revolver, we would seek alternative funding sources.

We have historically funded our business, including meeting our day-to-day operational requirements, repaying our indebtedness and funding capital expenditures, through debt financing, capital contributions and our operating cash flows as discussed below. Following the IPO, we expect that our future principal uses of cash will also include additional capital expenditures to fund our growth strategy, pay income taxes and make distributions from EELP to fund income taxes, fund our obligations under the TRA, and pay cash dividends. Any determination to pay dividends to holders of our common stock will be at the discretion of our board of directors and will depend upon many factors, including our financial condition, results of operations, projections, liquidity, earnings, legal requirements, covenant compliance, restrictions in our existing and any future debt and other factors that our board of directors deems relevant. In the future we may enter into arrangements to grow our business or acquire or invest in complementary businesses which could decrease our cash and cash equivalents and increase our cash requirements. As a result of these and other factors, we could use our available capital resources sooner than expected and may be required to seek additional equity or debt.

#### Cash Flow Statement Highlights

#### Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

*(In thousands)*

| Net cash provided by (used in): | Three months ended March 31, 2022 | 2021 | Change |
| --- | ---: | ---: | ---: |
| Operating activities | $(31,353) | $47,277 | $(78,630) |
| Investing activities | (11,029) | (5,184) | (5,845) |
| Financing activities | 53,774 | (53,711) | 107,485 |
| **Net increase (decrease) in cash, cash equivalents, and restricted cash** | **$11,392** | **$(11,618)** | **$23,010** |

#### Operating Activities

Cash flows used in operating activities decreased by $78.6 million for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021, primarily due to:

- a $242.3 million decrease in accounts payable, primarily due to payments related to December 2021 LNG purchases for December 2021 and January 2022 natural gas sales;
- a $25.2 million decrease in net income, as described in “— Consolidated Results of Operations—Net income”;
- partially offset by a $156.7 million decrease in accounts receivable, primarily due to payments received related to December 2021 through February 2022 natural gas sales; and
- partially offset by a $36.1 million decrease in inventories, primarily related to natural gas sales in the three months ended March 31, 2022.

#### Investing Activities and Capital Expenditures

Cash flows used in investing activities were composed of capital expenditures made for the purchases of property and equipment, which increased by $5.8 million for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021. The increase in cash used for purchases of property and equipment was primarily due to the timing of vessel drydocking related invoicing.

#### Financing Activities

Cash flows provided by financing activities increased by $107.5 million for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021, primarily due to $49.1 million of additional net borrowings on the KFMC Note, $45.0 million of cash outflows in the three months ended March 31, 2021, to KFMC from EELP on a promissory note which was terminated in November 2021, $6.6 million of repayments on the Kaiser Note Receivable during the three months ended March 31, 2022 and a $4.4 million decrease in finance lease payments. For more information regarding the Kaiser Note Receivable, see Note 15 – Related party transactions to the Consolidated Financial Statements of EELP.

### New Credit Facility

On April 18, 2022, EELP entered into a senior secured revolving credit agreement (“Credit Agreement”), by and among EELP, as borrower (the “Borrower”), Excelerate, as parent, the lenders party thereto, the issuing banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent, pursuant to which the lenders and issuing banks thereunder have made available a revolving credit facility (the “EE Revolver”), including a letter of credit sub-facility, to EELP. The EE Revolver enables us to borrow up to $350 million over a three-year term which expires in April 2025 and is expected to be used primarily for letters of credit, working capital, and other general corporate purposes.

Borrowings under the EE Revolver will bear interest at a per annum rate equal to the term Secured Overnight Financing Rate reference rate plus 0.10% (or alternate base rate) for such period plus an applicable margin, which applicable margin will be based on the Borrower's consolidated total leverage ratio as defined and calculated under the Credit Agreement. The unused portion of the EE Revolver will be subject to an unused commitment fee calculated at a rate per annum ranging from 0.375% to 0.50% based on the Borrower's consolidated total leverage ratio.

The EE Revolver contains customary representations, warranties, covenants (affirmative and negative, including maximum consolidated total leverage ratio and minimum consolidated interest coverage ratio covenants), and events of default, the occurrence of which would permit the lenders to accelerate the maturity date of amounts borrowed under the EE Revolver.

Also, on April 18, 2022, the Company borrowed under the EE Revolver, on the closing day of such facility, and used the proceeds to repay the KFMC Note in full. The KFMC Note was terminated in connection with such repayment. As of May 20, 2022, the Company had letters of credit issued of $52.0 million and no outstanding borrowings under the EE Revolver.

As of March 31, 2022, the Company was in compliance with the covenants under its debt facilities.

### Other Contractual Obligations

#### Operating Leases

We lease a vessel and offices in various locations under noncancelable operating leases. As of December 31, 2021, we had future minimum lease payments of $120.2 million. As of March 31, 2022, we had future minimum lease payments totaling $113.4 million and are committed to, $27.7 million in year one, $65.3 million for years two and three, $18.6 million for years four and five and $1.8 million thereafter.

#### Finance Leases

Certain enforceable vessel charters and pipeline capacity agreements are classified as finance leases, and the right-of-use assets are included in property and equipment. As of December 31, 2021, we had future minimum lease payments totaling $784.8 million. As of March 31, 2022, we had future minimum lease payments totaling $766.1 million and are committed to $59.4 million in payments in year one, $150.8 million for years two and three, $125.3 million for years four and five, and $430.6 million thereafter.

#### Foundation Vessels Purchase

In exchange for (i) 7,854,167 shares of Class A common stock with a fair market value of $188.5 million, (ii) a cash payment of $50.0 million and (iii) $21.5 million of estimated future payments under the TRA, EELP purchased from Maya Maritime LLC, a wholly owned subsidiary of the Foundation, all of the issued and outstanding membership interests in the Foundation Vessels. In 2018, EELP entered into an agreement with a customer to lease the *Excellence* vessel with the vessel transferring ownership to the customer at the conclusion of the agreement for no additional consideration. Historically, EELP, as a lessor, has accounted for the *Excellence* vessel contract with our customer as a sales-type lease in the consolidated balance sheet in accordance with Accounting Standards Codification 842, Leases (“ASC 842”). The *Excellence* vessel will continue to be accounted for as a sales-type lease and thus will not result in an adjustment to property and equipment. Any difference between the consideration given to acquire the *Excellence* and the historical finance lease liability will result in a loss on the income statement.

#### Tax Receivable Agreement

In connection with the IPO, we entered into the TRA with the TRA Beneficiaries. The TRA will provide for payment by us to the TRA Beneficiaries of 85% of the amount of the net cash tax savings, if any, that we are deemed to realize as a result of our utilization of certain tax benefits resulting from (i) certain increases in the tax basis of assets of EELP and its subsidiaries resulting from exchanges of EELP partnership interests in the future, (ii) certain tax attributes of EELP and subsidiaries of EELP (including the existing tax basis of assets owned by EELP or its subsidiaries and the tax basis of certain assets purchased from the Foundation) that exist as of the time of the IPO or may exist at the time when Class B interests of EELP are exchanged for shares of Class A common stock, and (iii) certain other tax benefits related to us entering into the TRA, including tax benefits attributable to payments that we make under the TRA. See “Certain Relationships and Related Person Transactions—Proposed Transactions with Excelerate Energy, Inc—Tax Receivable Agreement” in the Prospectus for more information about the TRA.

The payments that we will be required to make under the TRA, including those made if we elected to terminate the agreement early, have the potential to be substantial. Based on certain assumptions, including no material changes in the relevant tax law and that we earn sufficient taxable income to realize the full tax benefits that are the subject of the TRA, we expect that future payments to the TRA Beneficiaries (not including Excelerate) will equal $71.2 million in the aggregate, although the actual future payments to the TRA Beneficiaries will vary based on the factors discussed in “Certain Relationships and Related Person Transactions—Proposed Transactions with Excelerate Energy, Inc—Tax Receivable Agreement” in the Prospectus and estimating the amount of payments that may be made under the TRA is by its nature imprecise, insofar as the calculation of amounts payable depends on a variety of factors and future events.

### Off Balance Sheet Arrangements

As of March 31, 2022, EELP, certain of its subsidiaries and other affiliates of George B. Kaiser (together with his affiliates other than the Company “Kaiser”) were guarantors to a Kaiser revolving loan facility, and EELP provided a first lien against one of EELP’s vessels to collateralize this facility. The facility was a committed line of credit of $600 million with a third-party bank that would have expired on September 30, 2022 (the “Kaiser Credit Line”). EELP utilized the Kaiser Credit Line to issue letters of credit or bank guarantees to counterparties to guarantee its performance. As of March 31, 2022, EELP and certain of its subsidiaries had $81.5 million in letters of credit outstanding under the Kaiser Credit Line. In connection with the IPO, the first lien against an EELP vessel and other collateral and guarantees provided by EELP and its subsidiaries was released by the lender under the Kaiser Credit Line and certain credit support previously provided to EELP by Kaiser under the Kaiser Credit Line was replaced with credit support under the EE Revolver.

### Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements in conformity with GAAP requires significant judgments from management in estimating matters for financial reporting that are inherently uncertain. For additional information about our accounting policies and estimates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical accounting policies” in the Prospectus and the notes to the audited financial statements included therein.

There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in the Prospectus.

### Recent Accounting Pronouncements

Refer to Note 2, “Summary of significant accounting policies,” to the notes to Consolidated Financial Statements of EELP included in Part I, Item 1 of this Form 10-Q for information regarding recently issued accounting pronouncements.

### Implications of Being an Emerging Growth Company

As a company with less than $1.07 billion in revenue during our last fiscal year, Excelerate qualifies as an emerging growth company (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). For so long as Excelerate remains an EGC, it is permitted, and has elected, to rely on exemptions from specified disclosure requirements that are applicable to other public companies that are not EGCs. These exemptions include:

- being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;
- not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting under the Sarbanes-Oxley Act, for up to five years or until we no longer qualify as an emerging growth company;
- not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;
- reduced disclosure obligations regarding executive compensation pursuant to the rules applicable to smaller reporting companies, which means we do not have to include a compensation discussion and analysis and certain other disclosures regarding our executive compensation; and
- exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and obtaining stockholder approval of any golden parachute payments not previously approved.

Excelerate may take advantage of these provisions for up to five years following completion of the IPO or such earlier time when it is no longer an EGC. Excelerate will cease to be an EGC if it has more than $1.07 billion in annual revenue, has more than $700 million in market value of its capital stock held by non-affiliates as of the prior June 30th or issues more than $1 billion of non-convertible debt over a three-year period. Excelerate may choose to take advantage of some, but not all, of the available exemptions. Excelerate has taken advantage of some reduced reporting burdens in its filings. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you may hold stock.

The JOBS Act provides that an EGC may take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an EGC to delay the adoption of accounting standards until those standards would otherwise apply to private companies. Excelerate may elect to take advantage of this extended transition period and, as a result, will comply with new or revised accounting standards on the relevant dates on which adoption is required for private companies.

## Market risk

As filed, 2,596 characters.

In our normal course of business, we are exposed to certain market risks, including changes in interest rates, natural gas and LNG commodity prices and foreign currency exchange rates. In order to manage these risks, we may utilize derivative instruments. Gains or losses on those derivative instruments would typically be offset by corresponding gains or losses on the hedged item.

#### Interest Rate Risk

We have entered into long-term interest rate swap agreements in order to hedge a portion of our exposure to changes in interest rates associated with our external bank loans. We are exposed to changes in interest rates on our other debt facilities as well as the portion of our external bank loans that remain unhedged. We may enter into additional derivative instruments to manage our exposure to interest rates.

As of December 31, 2021, the fair value of our interest rate swaps was $(4.4) million. As of March 31, 2022, the fair value of our interest rate swaps was $(1.2) million. Based on our hedged notional amount as of March 31, 2022, a hypothetical 10% change in the three-month and six-month LIBOR forward curves would change the estimated fair value of our existing interest rate swaps by $0.1 million.

#### Commodity Price Risk

In the course of our operations, we are exposed to commodity price risk, primarily through our occasional purchases of or commitments to purchase LNG. To reduce our exposure, we may enter into derivative instruments to offset some or all of the associated price risk. We did not hold any commodity derivative instruments as of March 31, 2021 or March 31, 2022.

#### Foreign Currency Exchange Risk

Our reporting currency is the U.S. dollar and the functional currency of each of our subsidiaries is the U.S. dollar. Gains or losses due to transactions in foreign currencies are included in “Other Income (Expense)” in our consolidated statements of income. Due to a portion of our expenses being incurred in currencies other than the U.S. dollar, our expenses may, from time to time, increase relative to our revenues as a result of fluctuations in exchange rates, particularly between the U.S. dollar and the Euro, Argentine Peso, Brazilian Real and the Bangladesh Taka. In the future, we may use financial derivatives to hedge some of our currency exposure. We did not hold any foreign currency derivative instruments as of March 31, 2021 or March 31, 2022. For the three months ended March 31, 2022 and 2021, we recorded $(4.4) million and $(0.2) million, respectively, in foreign currency gains/(losses) in our consolidated statements of income.

## Controls and procedures

As filed, 6,839 characters.

#### Evaluation of Disclosure Controls and Procedures

The Company's disclosure controls and procedures are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms, and that such information is accumulated and communicated to management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, management, including our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2022. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of March 31, 2022, due to the material weaknesses in internal control over financial reporting described below.

#### Material Weaknesses in Internal Control over Financial Reporting

We did not design and maintain an effective control environment commensurate with public company financial reporting requirements. Specifically, we did not maintain a sufficient complement of personnel with an appropriate degree of internal controls, accounting, tax and information technology (“IT”) knowledge, experience and training to appropriately analyze, record and disclose accounting matters commensurate with accounting and financial reporting requirements.

This material weakness contributed to the following additional material weaknesses:

- We did not design and maintain effective controls over period end financial reporting processes and procedures, controls over significant accounts and disclosures to achieve complete, accurate and timely financial accounting, reporting and disclosures, including segregation of duties and controls related to the preparation and review of journal entries.

Additionally, we did not design and maintain effective controls to identify and account for the elimination of certain intercompany revenue and expenses;

- We did not design and maintain effective controls over the proper timing of revenue recognition for drydock revenue contracts;
- We did not design and maintain effective controls to analyze compliance with non-financial debt covenants and conditions; and
- We did not design and maintain effective controls to verify the completeness and accuracy of our income tax provision.

These material weaknesses resulted in adjustments to FSRU and terminal services revenue, selling, general and administrative expenses, cost of revenue and vessel operating expenses, provision for income taxes and related account balances and disclosures as of and for the years ended December 31, 2020 and 2019 and a misstatement to current and long-term debt as of December 31, 2020, which has since been corrected.

We did not design or maintain effective controls over IT general controls for information systems that are relevant to the preparation of our financial statements. Specifically, we did not design and maintain: (i) user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications, programs and data to appropriate company personnel; (ii) program change management controls to ensure that IT program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately; (iii) computer operations controls to ensure that critical batch jobs are monitored and data backups are authorized and monitored financial data can be recovered from backups; and (iv) testing and approval controls for program development to ensure that new software development is aligned with business and IT requirements. This material weakness did not result in a material misstatement to the financial statements; however, the deficiencies, when aggregated, could impact maintaining effective segregation of duties, as well as the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness of system-generated data and reports) that could result in misstatements potentially impacting all financial statement accounts and disclosures that would not be prevented or detected.

Additionally, each of the above material weaknesses could result in a misstatement of our account balances or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected.

#### Remediation Efforts

To address the material weaknesses, we are continuing to implement, measures designed to improve internal control over financial reporting, including expanding our accounting, tax, IT and finance team to add additional qualified resources, which may include third-party consultants, and implementing new financial processes and controls. We have hired new experienced accounting leadership team members in the following positions: Vice President, Controller and Chief Accounting Officer; Vice President of Tax; Director of Financial Reporting; Senior Manager over International Accounting Operations; and Senior Manager over Income Tax Provision. In addition, we have hired a new Vice President over IT and a new Treasurer. We intend to continue to take steps to remediate the material weaknesses through the formalizing of documentation of policies and procedures and further evolving the accounting processes, including designing and implementing appropriate segregation of duties, period end financial review controls, including system controls over journal entry approvals, controls to identify and account for the elimination of certain intercompany revenue and expenses, controls over the timing of revenue recognition over drydocks, controls to analyze compliance with non-financial debt covenants and conditions, and controls over the completeness and accuracy of our income tax provision. We are working to remediate the material weaknesses as efficiently and effectively as possible and are continuing to design and implement the additional controls. These material weaknesses will not be remediated until we have completed the design and implementation of the additional controls and the controls have been in place and operating for a sufficient period of time and confirmed through testing to be effective.

## Risk factors

As filed, 124 characters.

There have been no material changes from the risk factors previously disclosed in “Risk Factors” included in the Prospectus.

Filed May 26, 2022.
Source: SEC EDGAR, the filing index for accession 0000950170-22-010683. Last ingested by Listed: Nov 5, 2026, 20:26 ET. No prices; not investment advice.