HMLP WACC - Weighted Average Cost of Capital

The WACC of Hoegh LNG Partners LP (HMLP) is 8.7%.

The Cost of Equity of Hoegh LNG Partners LP (HMLP) is 14.80%.

The Cost of Debt of Hoegh LNG Partners LP (HMLP) is 4.75%.

	Range	Selected
Cost of equity	12.90% - 16.70%	14.80%
Tax rate	11.10% - 12.10%	11.60%
Cost of debt	4.00% - 5.50%	4.75%
WACC	7.5% - 9.9%	8.7%

WACC

HMLP WACC calculation

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	12.90%	16.70%

Tax rate	11.10%	12.10%
Debt/Equity ratio	1.34	1.34
Cost of debt	4.00%	5.50%

After-tax WACC	7.5%	9.9%


Selected WACC	8.7%

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.