HMLP WACC - Weighted Average Cost of Capital
The WACC of Hoegh LNG Partners LP (HMLP) is 8.7%.
| Range | Selected | |
| Cost of equity | 12.9% - 16.7% | 14.8% |
| Tax rate | 11.1% - 12.1% | 11.6% |
| Cost of debt | 4.0% - 5.5% | 4.75% |
| WACC | 7.5% - 9.9% | 8.7% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 2.29 | 2.39 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 12.9% | 16.7% |
| Tax rate | 11.1% | 12.1% |
| Debt/Equity ratio | 1.34 | 1.34 |
| Cost of debt | 4.0% | 5.5% |
| After-tax WACC | 7.5% | 9.9% |
| Selected WACC | 8.7% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| HMLP | Hoegh LNG Partners LP | 1.34 | 1.38 | 0.63 |
| CMG.TO | Computer Modelling Group Ltd | 0.06 | 1 | 0.95 |
| DWSN | Dawson Geophysical Co | 0.07 | 0.25 | 0.24 |
| ENG | ENGlobal Corp | 0.8 | 0.39 | 0.23 |
| ESN.TO | Essential Energy Services Ltd | 0.21 | 0.64 | 0.53 |
| NCSM | NCS Multistage Holdings Inc | 0.1 | 0.74 | 0.68 |
| PSI.TO | Pason Systems Inc | 0.02 | 0.95 | 0.93 |
| SMHI | SEACOR Marine Holdings Inc | 2.59 | 2.23 | 0.68 |
| SOI | Solaris Oilfield Infrastructure Inc | 0.02 | 0.78 | 0.76 |
| VTOL | Bristow Group Inc | 0.81 | 1.29 | 0.76 |
| Low | High | |
| Unlevered beta | 0.66 | 0.71 |
| Relevered beta | 2.93 | 3.07 |
| Adjusted relevered beta | 2.29 | 2.39 |
HMLP's CAPM model and how its cost of Equity is calculated
The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.
This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.
Here’s how we figure out the cost of equity for HMLP:
cost_of_equity (14.80%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (2.29) + risk_adjustments (0.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.