Atlas Corp (ATCO) 2020 Q3 法說會逐字稿

Welcome to the Atlas Corp. Third Quarter 2020 Earnings Conference Call. I would like to remind everyone that this conference call is being recorded today, November 10, 2020.

I would now like to turn the call over to Robert Weiner, Head of Investor Relations of Atlas Corp.

Thank you. Good morning, everyone. Thank you for joining us today to discuss Atlas Corp.'s Third Quarter 2020 Earnings. I am new to these calls as I joined Atlas in early September. I look forward to working with all our stakeholders to ensure the company's performance is well understood and appreciated by members of the investment community. We have a terrific company, which is performing very well, as noted in our earnings release. Please note, we released our earnings at a new time this quarter after the close of trading yesterday. Please refer to the Investor Relations page on the company's website to reference the third quarter release or any other investor materials.

On the call with me today is Bing Chen, President, Chief Executive Officer and Interim Chief Financial Officer of Atlas Corp. Joining Bing on the call, during the Q&A session are Atlas Corp.'s Chairman, David Sokol; Seaspan's Chief Commercial Officer, Peter Curtis; and Seaspan's Chief Operational Officer, Torsten Pedersen.

I would now like to remind you that our discussion today contains forward-looking statements, which are noted on Slide 2 in the accompanying earnings presentation. Actual results may differ materially from those stated or implied due to risks and uncertainties associated with our business. Our known risk factors are discussed in our Form 20-F and our reports on Form 6-K filed from time to time and in connection with our quarterly financial results, which are available on our website as well.

With this quarterly report, you will note that we continue to report non-GAAP measures, which we believe provide investors a clearer understanding of the performance of our businesses. These third quarter earnings release -- this third quarter earnings release contains supplemental financial tables. And information pertaining to our third quarter earnings report includes definitions of non-GAAP financial measures and reconciliations of such non-GAAP measures to the most closely comparable U.S. GAAP measures. These definitions may also be found in the appendices at the back of the earnings presentation, which we will refer to in our call discussion and can be found on our website. In addition, we have also provided historical reconciliations through 2018, which are available on our website.

During today's call, Bing will discuss, please turn to Slide 3, Atlas' key investment attributes, highlights of our third quarter operating performance and business developments. This will be followed by an industry update and what we expect to see in the fourth quarter. We will conclude prepared remarks with a review of our financial results, an update on our balance sheet and liquidity, a summary of Q3 and comments on our guidance. Separately, I would like to note that our team will be conducting virtual investor meetings in November on the 12th, 18th and 30th; and in December on the 7th and 14th. Please contact Investor Relations to inquire about the meetings.

I am now pleased to turn the call over to Atlas Corp.'s President, CEO and Interim CFO, Bing Chen.

Thank you, Rob, and good morning, everyone. I want to welcome Rob to the Atlas team as our new Head of IR, and he will be working closely with all our investors and analysts.

Please turn to Slide 4. Let me begin by saying I'm thankful that during these difficult times, the Atlas team are doing well and staying safe. I'm also proud that our team is driving solid performance, while many industries and companies continue to face challenges. Atlas is uniquely positioned as a long-term investment opportunities with 3 key attributes: first, our resilient business model with $4.4 billion of long-term contracted revenue and a scalable platform, delivering fully integrated customer-centric solutions. Second, our core competencies of consistent operational excellence, creative customer partnerships, solid financial strength, quality growth and disciplined capital allocation. This is what drives our execution and the results and differentiate us from our peers. Third, we have been delivering quality growth, enhancing fleet composition and creating greater diversification of our customers through the addition of quality assets with long-term charters.

Our third quarter performance clearly depicts a divergence of Atlas performance as compared to our peers. Our customers are the strongest in the industry. Our cash flows are of much higher quality with long-term charters. Our fleet is younger, larger and more fuel efficient. We've seen increased demand for our scalable, reliable and flexible services that are unique and unmatched. This greatly reduced our risk, especially when you compare our profile with our peers who have shorter duration contracts, smaller vessels, older fleet, less balance sheet strength and liquidity. Overall, the uniqueness of our strategies and the results from our consistent execution makes us the solution provider of choice. However, as our competitive advantage seems to be overlooked by the investment community, we view our Q3 as clear evidence of the value creation for both customers and shareholders through our platform, strategy and execution, which were adopted by this management team about 3 years ago.

Now let's look at our results. Please turn to Slide 6. Our third quarter results demonstrate the resiliency of our business model and delivery of consistent operational excellence. We continue to strengthen creative customer partnerships, prudently manage our liquidity, continue to return value to shareholders through payments of the 61st consecutive dividend. We delivered quality growth with the acquisition of 4 more large vessels, all on long-term charter, growing our fleet to 127 vessels. And most gratifying is our team's commitment to consistent execution, achieved through our ownership culture. Our team's performance was excellent and impressive despite the persistent pandemic challenges.

Now let's look at our third quarter financial results. We have a very stable revenue profile with $4.4 billion of long-term contracted revenue, including $4.1 billion at Seaspan and $324.4 million at APR. In the third quarter, Atlas delivered total revenue of $386.2 million with Seaspan contributing revenue of $305.9 million and APR contributing revenue of $80.3 million. This represents total revenue growth of 36.6% compared to Q3 of 2019. Adjusted EBITDA was $249.8 million in the third quarter; and funds from operations, FFO, was $173.5 million or $0.68 per share. FFO increased by 96% and FFO per share increased by 70% compared to Q3 2019, which represents industry-leading growth and significant value creation. We announced our 61st consecutive dividend payment. Atlas is reaffirming financial guidance for the full year 2020 and tightening our ranges to reflect increased confidence as we progress through this final quarter with a great finish to the year. Again, these results depict a much different stories when compared to the peers in our industry. This is an important distinction and differentiator.

Please turn to Slide 7. Now let's look at growth. Quality growth enables us to invest in customer solutions, technological innovation, scale, flexibility and our people. More importantly, it creates sustainable value for our shareholders. By quality, we mean successful growth and win-win outcomes for our customers and us. That is quality growth, growth financed with favorable terms for top-quality assets at discounted fair market value and with strong cash flow while maintaining a disciplined capital allocation and strong liquidity. That is quality growth. These are just 2 examples. We have added 2 13,000 TEU and 2 12,000 TEU vessels, which expanded our fleet to 127 total from 112 vessels since the end of November 2019, representing an additional USD 1.1 billion of long-term contract revenue, over 13% growth in the number of vessels and 18% growth on a TEU basis.

We have expanded the fleet through long-term charters, adding newer and larger vessels while diversifying our customer base. And with much of the growth coming during a global pandemic, this is quality growth. Part of our distinguished attributes is our financial strength and the access to the capital markets during the challenging environment. This year, we have continued to make significant strides in improving our balance sheet. I'm proud of our team for aligning our commitment to the environment and sustainability with our capital structure. We completed our sustainability-linked financing, which is the industry's first. This financing added $200 million to our capital structure and is another innovative milestone. We relentlessly focused on improving our credit rating and cost of borrowing. We have also received a BBB- facility rating from Kroll Ratings.

Now I will comment on operations. Utilization remains very strong at 98.6% at Seaspan and increased to 80% at APR in the third quarter. Utilization is an important measure for Seaspan, however, less so for APR as the equipment is often transitioning to fulfill new contracts. For Seaspan, we continue to develop stronger creative customer partnership to achieve win-win outcomes. APR is facing some headwinds, primarily as a result of the global effects on energy consumption due to the pandemic. Yet, during this period, we continue working with customers and focusing on aligning APR for long-term growth.

Now let's look at the industry. Please turn to Slide 9. The container shipping industry continues to operate in a challenging environment, yet we have seen a resurgence in charter rates since late February, March. Since then, we have seen a steady improvement in charter rates, with a pronounced uptick in Q3. In past periods of uncertainty, you didn't see this type of a rapid recovery. We attribute this to greater sophistication in the market combined with 4 positive drivers. First, today's balance of supply and demand; second, an increasing global demand profile; third, the increasing credit health and operating performance of the liners; and fourth, the ongoing maturity of the market. With Seaspan contributing about 85% of total business, Atlas is fairly insulated from short-term market fluctuations. Our entire 127 vessel fleet has secured charters in place, and we have performed consistently well through 2020, despite a global idle fleet that peaked at 12% in May and has now contracted to less than 2%.

With some tailwinds in the market, the credit quality and operating performance of our customer base is improving. Major rating agencies switched their views from a negative to positive outlook on the industry and upgraded the credit ratings of many major liners. You can see on Slide 9, the projection of global recovery in 2021 is fairly strong with forecasted growth in the range of approximately 6% to 9%, which should support a continuing strong performance for Seaspan. We are now seeing many analysts become more positive about industry's rising demand and rates, limited supply of large vessels, lower order book, expanding charter tenors and with some analysts calling for higher equity multiples, supported by a general favorable outlook over the medium term. As the industry leader with key differentiators and consistent performance, Atlas should be a leading benefactor over the long-term from all the tailwinds I just mentioned.

Now I would like to review our financial performance for the third quarter. Please turn to Slide 11. We delivered again this quarter. Atlas reported consistent solid performance driven by execution, the addition of APR and the significant growth of our fleet compared to Q3 2019. These are the company's key performance metrics. FFO of $173.5 million, an increase of 96% compared to the third quarter of 2019. FFO per share was $0.68 per common share. FFO represents Atlas' performance after interest and tax. Adjusted EBITDA was $249.8 million, with an increase of 38.8% compared to the third quarter of 2019. These are unparalleled results.

Please turn to Slide 12. We are very pleased with our performance and continued progress. We executed very well on our initiatives and stayed focused on leveraging our 5 key competencies to deliver sustainable value to our customers and shareholders. Revenue increased by 36.6% to $386.2 million for the third quarter when compared to the same period in 2019. 77.6% of the increase in revenue was due to the contribution from APR, while Seaspan's revenue increased 8.2% to $305.9 million due to the expansion of our fleet. The 38.8% year-over-year increase of adjusted EBITDA was driven by revenue increase, as I just described, and also benefited from lower-than-expected G&A. The 96% year-over-year increase of FFO also reflects the revenue contributions and the lower interest expense.

Seaspan's vessel utilization remained strong at 98.6%. APR's utilization was 80%, reflecting the Mexicali project for the full quarter. Seaspan's fleet capacity, as measured by TEU, increased by 18% compared to the third quarter of 2019. We continue to see opportunities to execute quality growth of our fleet. A very important point in this table, our long-term contracted revenue at the end of the third quarter was $4.1 billion for Seaspan and $324.4 million for APR for the total contract revenue of $4.4 billion, with Seaspan having an average remaining lease period of approximately 4 years. These are key points that investors should take note of as we do not see others in our space equally positioned with such resiliency.

Please turn to Slide 13. Our focus is on disciplined capital allocation. Our balance sheet is strong with capacity and flexibility to ensure quality growth. We made significant strides by improving our balance sheet and capital structure. Specifically, the sustainability-linked loan consists of $200 million of term loan with a tenor of 6 years. The expanded portfolio financing program is now comprised of $300 million of revolving credit facility and approximately $1.5 billion of term loan commitments, with staggered maturity between 2024 and 2026.

We have strong liquidity of over $427.6 million, including undrawn credit facilities. You will see on this slide that we have made meaningful financial improvements since the new Board and management team were installed at Seaspan and now continuing in Atlas. We have improved 2 key balance sheet measures, which is debt to assets and net debt to adjusted EBITDA. It is important to note that our performance, which has been very consistent and resilient was not matched with similar results in the industry. We believe this is a very important milestone, illustrating our outstanding results which were clearly evident by this quarter.

Please turn to Slide 14. With our continued solid performance in Q3, we are reaffirming our financial guidance for 2020. Please recall that we had revised our guidance upwards during our Q2 earnings. Today, we reaffirm our guidance and tighten our ranges for expected revenue and adjusted EBITDA. For Seaspan, not only 99% of the midpoint of 2020 guidance are contracted revenue as of today, highlighting our minimal spot exposure but also about 85% of the revenue for 2021 is also contracted. This is different than others who may rely on continued rising rates, longer tenors and favorable renewals. Our guidance for the full year 2020 is the revenue in the range of $1.21 billion to $1.22 billion for Seaspan and $195 million to $215 million for APR; adjusted EBITDA in a range of $770 million to $795 million for Seaspan and $115 million to $135 million for APR.

Please turn to Slide 15. Our last topic today is the one we hope our listeners will note and come to appreciate, especially those of you who may be joining our call for the first or second time. We believe Atlas represents an excellent investment opportunities across all market cycles. Our business model is resilient, stable and consistent, with $4.4 billion of long-term contracted revenue, with Seaspan having an average remaining lease period of approximately 4 years. We have developed and consistently executed our core competencies, which uniquely position Atlas within its industries, these competencies combined with our deep customer partnership where we worked hand-in-hand to solve their needs and grow together. Our strong financial position with a solid balance sheet and full access to capital enables us to partner with our customers for quality growth opportunities. Quality growth, as I spoke about, enables us to invest in customer solutions, technological innovation, scale, flexibility and our people. More importantly, execute on the right opportunities to create sustainable shareholder value.

I will close my remarks by saying that I'm very proud of our teams, excited by our collaborative ownership culture and look forward to reporting on our continued quality growth and creation of the value for all our stakeholders. Our team is now available to take your questions. Operator, we would now like to open the line to questions.

(Operator Instructions) Our first question comes from the line of Chris Wetherbee from Citi.

I guess I wanted to start a little bit on the bigger picture about the containership fleet and sort of where you see that going. So we've talked a little bit about this in the past, but I wanted to get a sense. You're growing at close to a 10% clip, at least in 2020. As you think out to 2021, 2022, with a constrained order book, supply demand, arguably, in a very reasonably good balance or maybe as good as it's been in quite some time, can you talk about sort of how aggressively you think you can grow the fleet and how you might pursue that? Is there a target that we should be thinking about in terms of maybe 10%? Is it customer dependent? Can you just talk a little bit more in detail about that?

Thank you, Chris. Yes, in terms of Seaspan, as we have demonstrated over the past 12 months, that we will be able to growing our fleet by 18% in terms of TEU. In looking at the market, we see that we will be able to continue to grow in a similar even more in a sense that we today are very well positioned for that growth. First of all, today, we have a platform, and a platform which is very scalable. As of today, with the acquisition of 15 vessels, we actually had a net of 1 head count reduction from an operational standpoint. So that you can see the scalability of our platform.

And secondly, in looking at the type of growth opportunities, just really driven by our customers, it's a customer-driven growth because all of these acquisitions are driven by the demand of our customers. None of them are on a speculative basis. And thirdly, if you're looking at the -- our owner-operator space today, Seaspan, as the world's largest owner-operator, we only still account for less than 9% of the market. With the increasing demand from the liner customers looking for scale, flexibility and quality as well as looking at the increasing regulations, from whether IMO or from ESG perspective, I think it really requires a lot of investments in terms of people, systems, processes. And this is where I think our industry that really requires to have the scale and Seaspan today has that scale.

So with that being said, I think that today, we are very well positioned in looking at the pipelines for opportunities. I think whether it's from our peers, looking at from liners, looking at from the financial institutions, I think today, they're all, I think, looking for Seaspan as the market leader and also the consolidator to continue to provide the scale, flexibility, quality to our customers.

And in terms of the specific numbers, we don't really set up a number, rather, we are very disciplined in looking at the quality growth. What I mean by quality growth is, first of all, we're looking at the asset quality. If you're looking at what we have done over the past 12 months, those are the top-quality assets. And then secondly, we're looking at is the value that you paid for. We, in general, I think, we are paying at a discount to the fair market value. Thirdly, we're looking at is the attached quality cash flow. All of those vessels are attached with quality long-term contract. And fourthly, if we're looking at, these assets have actually a very high residual value because that is very important. As an asset operator, you need to have a strong cash flow and also you need to have a strong residual value. And from those perspective, I think today, we're going to continue to enhance our investment criteria and continue to looking at the opportunities that present to ourselves. Overall, we are very, I would say, encouraged by what is the -- what is out there.

Okay. Okay. That's helpful. And then when you think about the Seaspan fleet, is there an ability to -- in the current market, is there an ability to potentially increase duration on the average charter remaining? I guess, in other words, what does the charter market look like right now, just given the relative tightness that we're seeing and sort of where demand is? Are you starting to see these depths return to the time charter market for maybe vessels that are coming off of contract?

Yes. In the current market, obviously, when the market becomes tighter, there's more tendency to enter into the long-term contract. But if you're looking at what we have done over the past 12 months in the height of the COVID, we were able to actually sign all those 15 vessels on a long-term contract with about 1/2 of those vessels between the 10 years to 18 years. And the other 1/2 is between 5 to 8 years. So that is in the most difficult time, we were able to actually sign these vessels with long-term contract. When the market environment improves, as we see right now, yes, that will be even, I would say, have a higher tendency, I think we'll be able to enter into longer-term contract.

Okay. And then last question for you, just kind of dovetails into the first question, which is, do you -- how do you think about sort of the capital available for potential acquisitions? And I guess I'm thinking both in containers, but maybe outside of containers. I don't know if there's interesting opportunities outside of the container shipping market that you see today. But sort of how much capital roughly do you think you have to put to work? And would it most likely end up staying in container or going elsewhere?

Yes. I think that's a very good question. For Atlas today, we have about -- over $650 million of cash from the operations. And then if we're looking at FFO, the numbers is even higher. If we're looking at what we have done over the past 3 years, I'm very proud to say that we were able to actually strike a very fine balance between returning the capital to the shareholder, deleveraging, at the same time, we're growing our business. So if we -- looking at the past as a reference in the future, in terms of the continued strong cash flow that's generated by the business, I think today, we have ample capital that's required to grow the business. At the same time, today, I think, as we continue to grow our business, we're also taking advantage of the favorable financing terms that today Seaspan is receiving from the market in general. As you can see, what -- we recently just closed $200 million of sustainability-linked loan. And also, in general, our financing, the secured financing cost, it's very competitive at -- with the low LIBOR plus the spread, it is very, very competitive.

So it is a very favorable financing environment for us plus that we have a strong cash flow from our existing business. So we see that we have a strong liquidity and also a very diversified access and capital to the market. So therefore, I think in terms of the growth that -- for sure that we have the ample liquidity and the capital to grow.

Now in terms of the silos, whether we're looking at other verticals, I think today, with Atlas in place, we have 2 very scalable platforms. One is the container shipping, which is in the maritime. The other one is the energy, the power platform. These are the 2 platforms that we have, each of them in market leader position. So if we're looking at today, Seaspan, as I said it earlier, there's a lot of opportunity for us to continue to consolidate in the market and have those quality growth.

It's the same thing with APR. APR today is the leader in the fast power. But I think as we continue to grow the business, there's -- APR will have more opportunity to broaden its offering in the marketplace. So with these 2 platform, today, we have ample capital allocation opportunity for the quality growth. But if we have other verticals that opportunities come up, and I believe that those opportunity has to be at the right opportunity in the right time with the right return. But in general, when we're looking at capital allocation, we do hold ourselves in a very strict criteria with very strict discipline. So any investment that we make, we don't make the investment or make the growth for the sake of growth. We were looking at them from a strictly, I think, the quality and return perspective.

Our next question comes from the line of Randy Giveans from Jefferies.

This is Chris Robertson on for Randy. I just wanted to follow-up on Chris' question regarding fleet growth. So you talked about the opportunities in the platform for growth, but kind of on the flip side of that, when you're thinking about fleet renewal and the average fuel efficiency across the fleet in kind of a pre-IMO 2030 world, do you have any plans to divest some of the older vessels that are maybe approaching 15 years or older and will be ending their time charters in the next year or 2? What's the strategy with regards to that aspect of the fleet?

Sure. Sure. Thanks, Chris. As we highlighted in our previous earnings call, Seaspan is very proud of being the best-in-class operator. We are the best, operating the assets under any market cycles as you can see over the past 3 years through the different economic, political cycles and also now with the pandemic. So the answer to that is that we intend to continue to operate all vessels in the best way that differentiates ourselves in the marketplace. And this is also evidenced today by our customers. The liner customers today really consider Seaspan as the top premier operator. So in terms of those vessels, not only we have the best operations, but also, we actually actively improve those assets -- these vessels through the modifications of these vessels.

For example, we do the bulbous bow optimization, we do the propeller redesign. We equip them with APMs, we install the ballast water treatment. So overall, with these vessels, while they are aging, but we also continue to improve to modify the vessels through our technology expertise to be able to ensure that these vessels, although they're age wise might be older, but they will remain in the top operational condition. And this is what we do for living, and this is what we're good at it. So therefore, that is why, today, with the 127 vessel fleet, all of these vessels are managed by Seaspan ourselves. So we are very confident and able to managing these vessels in the most competitive, efficient way.

Got you. On the APR Energy side of things, so I mean, roughly half of the assets are on the longer-term charter. Looks like the 3 projects ending in the Mexicali region in September. So can you talk to your expectations for utilization in coming quarters and how we should think about that?

Sure. Absolutely. I think this is a good question. And I'm sure that many of you want to have a better understanding of APR because this is new to the Atlas family. So maybe it would be best for me to give an overview as to who's APR now and what APR wants to be and how do we get to where we want to be.

So APR today provides the turnkey aero-derivative gas turbine rental solutions to principally suited for emergency and peaking power requirements. APR primarily serves as a gas turbine rental company in addition to providing operations and maintenance services, which effectively is a power bank for utilities and industrial companies. APR also develops and operates quasi-IPP projects which is the currently projects that we have on the long-term contract in Argentina and Bangladesh with a contracted revenue of $325 million. So this is where we are right now. As you correctly point out, half of the business is under long-term contract, half of it is on the spot. But going forward, we really want to expand our offering and to become the leading provider of the bridge to long-term power solutions. That's where we want to be.

Then the question is how do we get there? First of all, today, as we can see, the APR has a platform. So we're going to leverage the existing structure, so that we will continue to be the best, the market leader in delivering the fast power. And at the same time, we expand our scope of our offerings to provide this bridge to long-term power solutions. Specifically, in the short term, I think we're going to continue to working on existing assignment of the contracts by extension. And also we continue to both reactively and also proactively looking for those power demands that is asking for high capacity, asking for reliable quality and also the fast power, but also with a very high emission standards because, let's remember, we have the technology that's far advanced compared to our peers.

So then at the same time, we're going to also to build, strengthen our commercial organization because to develop the long-term power project, we would need to have the strength and the complementary skill sets for our business development team. And also, we're going to be looking at other ways of expanding the cooperations, partnership, joint ventures with the other industry players to leverage their, I would say, the skills and resources, including Seaspan itself, because as you know, Seaspan is the leader in maritime. And I think we are also potentially kind of looking at exploring those types of maritime power solutions to the customer. And over the longer-term that we will be also exploring long-term projects that will be using the renewable solutions, which will ultimately transition APR to a fossil-free energy company with a long-term project.

So in general, looking at the utilization for specifically, next year, I would think that at least half of those contracts -- half of this capacity is already under the long-term contract. And in looking at the overall energy demand, let's assume that will be the same as what we have this year, and I think that we should be able to have the similar, if not higher utilization rate and in terms of the specific guidance that we're going to be providing them during our Q4 earnings release. Okay.

Okay. And one final question on APR for me. It's a little bit of a detailed question, but can you speak to the tax consideration differences between APR Energy and Seaspan?

Yes. That's a good question. In Seaspan, because it's maritime, in general, as you know, that there's such tax advantage so that we do not pay taxes. This is legal, that's just the tax rules are set up in such a way. In APR, of course, because the operation is in a different jurisdiction, each different jurisdictions has different sets of -- different type of import, export, VAT and also income taxes. So therefore, APR's tax is fully subject to the local jurisdiction taxation as well as APR's own corporate tax that is subject to whatever the jurisdictions it's in. So that is the difference between APR and Seaspan.

Our next question comes from the line of Ben Nolan from Stifel.

This is Frank Galanti on for Ben. I wanted to follow-up on APR, specifically dig into the unit economics of the mobile gas turbines. I understand you guys are trying to do some longer-term power projects that are more permanent, on a more permanent basis. But specifically, the mobile gas turbines, what is the turbine cost? And what range of utilization do you expect over the life of the asset? And what are those returns that you expect?

Yes. Thank you, Frank. In terms of the gas turbines, the utilization, because of the nature of mobilization and demobilization, so the utilization is largely depends on the term duration of the contract if -- this is similar to the vessels. If you have the vessels on a short-term charter, you will have this kind of positioning or repositioning. Same thing with the gas turbine, that if we have a shorter-term assignment, the contract, then you have a mobilization and demobilization. So from an industry standpoint today, if we're looking at some other participants in the industry, they might use the different technology that is different from gas turbine. And I think the utilization rate is somewhere between 50% to 80%, that will be the average range. And I think today APR is right in that range.

In terms of the -- in terms of our -- you're asking the question of the range, right, the range of the power generating? I think that the range of these turbines can generate somewhere between 25 to 35 megawatts per turbine. And today, we have a total of 30 of them, and of which about 16 is on long-term contract and 14 is on the short-term contract basis.

Okay. And so to that end, if you guys have 30, how big do you expect to grow that business? I guess more importantly, how big is that market? Because you get to 100 turbines, is that feasible, right? APR is only 15% of ATCO at the moment. Are there aspirations of growing that 30%, 40%? Or I guess that's kind of a bigger question on where do you allocate between APR and Seaspan?

Yes. In terms of the capital allocation, as we said it before, we're really looking at each every investment opportunities, whether it's within the industry of, for example, Seaspan or across the different business between APR and Seaspan. We're always looking at what is the best way to allocate the capital that generates the maximum return for our shareholder. Specifically on the gas turbine, your question is, are we going to grow the turbine to 100 or we're going to grow into some other technology? The answer to that is really, as we said it before, we're going to try to broaden our product offering. So while we continue to focusing on the gas turbine, which is what we're doing the best in the market. At the same time, for us to be able to broaden our offering so that we can diversify and provide a broader offering to our customers, similar to the way of we're looking at our Seaspan fleet. If I only have 10,000 TEU vessels without have 14 -- 12,000, 14,000 or 8,000, so my offering is pretty limited.

So if you apply that to APR, we will be looking at, you have a different type of maybe technologies with the different type of fuel solutions. It all depends on what our customer ultimately wants and what the investment return that it will bring to us. And that's what the basis we're going to look at growing the business. But ultimately, as we said, our goal is to broaden our offering so that we can get, I would say, longer-term solutions, power solutions to our customers. And that is our goal. And of course, any of these kind of investments is subject to the same return requirement.

Our next question comes from the line of Ken Hoexter from BofA.

Bing, can you talk a little bit about, just sticking on APR for a second, if we look at your revenue forecast and the kind of decline you're expecting into the fourth quarter, maybe talk about what's built into that and the exposure you've got on APR?

Thank you, Ken. As I mentioned earlier, the fourth quarter will be slightly different from the third quarter because we just finished the Mexicali project, which it was a full quarter utilization for 8 turbines during the third quarter. As we are in the process of demobilizing those turbines, so the utilization for the fourth quarter will be lower than what we have in the third quarter. That is why you see the revenue numbers will be lower than the third quarter.

Perfect. And when you think about the moving the turbines or future utilization, are there geographic regions you're focused on for APR? Is there a large emerging market exposure? Any thoughts of diversifying the end markets?

Yes. We don't specifically focusing on a particular geographic location. Rather, we do look at each, every opportunities with the same criteria. The criteria is looking at economic return, risk-adjusted return, looking at what the specific counterparty risk. We have to look at the timing they require, looking at the compliance, environmental, looking at the safety of our people. So those are the things that we really take into consideration. And the one thing that is very different from before is that with the APR being part of the Atlas family, we definitely much more focusing on risk and risk-adjusted return of any opportunities.

Bing, it's David. If I might make a comment to point out to the investor world as well that one of the things the Board is particularly impressed with this year and exemplified in the third quarter is that the company, Atlas, has actually outperformed original guidance and increased the guidance and has, in fact, even tightened it now going forward in the year of COVID. And I think what Bing has always and his team have maintained the belief that it's the company's obligation to find a way. When we make a commitment, we will find a way to get there.

And a reason I emphasize that is they've had to absorb on the order of $40 million to $50 million of COVID costs. And yet they're still performing. When I watch a lot of companies in the market who have basically just slashed their earnings, blamed it on COVID and I get that, in certain cases, they couldn't overcome it. But it's pretty impressive given the downturn that the shipping industry had in the first half of the year, all of the complexities that came with COVID, crew changes, things of that nature, dry docking issues and, Bing, I think your team is to be really credited with the fact that you're actually going to exceed earnings this year, notwithstanding, absorbing that amount of cost. So it's -- I know you wouldn't say it, Bing, but from a Board perspective, I think it needs to be pointed out.

Thank you, David.

Thanks, David. I appreciate the improving outlook as well. And just obviously, as Bing mentioned at the start, kind of a newer line of business for the historical Seaspan followers. Bing, maybe just switching over to the Seaspan side. Can you talk a bit about -- utilization really ramped up, obviously, given the tightness now, over 99%. What do you view as kind of healthy operating normalized level? Your thoughts on how you can capitalize on those higher spot freight rates, if at all? And then maybe I think you kind of touched on a bit of this earlier, but not really all the way, but your thoughts on acquisitions. As you see others struggle, do you look to acquire large-scale fleets that might be -- is that something you think might be in the offing in terms of as opposed to kind of the couple of vessels you've been doing maybe? Are there others that are struggling where you can really consolidate a little bit more faster in the industry? Is that a thought at all?

Sure, sure. In terms of utilization, as Seaspan actually have a very long-standing track record of high utilization, I believe that if we're looking at utilization today, we have about 98.6% of the utilization. And this has actually been on average for the past, I would say, 10, 15 years, has always been between 97% to 99%. So given the improving market environment, we anticipate that our utilization will continue to improve. And I think last year, at one point, we had about close to 99.5% of the utilization. One specific, I think, characteristics of our fleet, as we highlighted before, is that we have a majority of our vessels on long-term contract. And if we're looking at -- as I said it earlier, if you're looking at 2021, we have already about 85% of our revenues under long-term contract. So therefore, as the market continued to improve, for sure, that we will be able to continue to also improve the utilization and improve more than I think the -- our peers because that -- we have longer-term contract basis, higher longer-term contract basis.

In terms of the spot rate, the rate right now is very high. And I think that, that is a good news for the industry as a whole. But at the same time, again, we also have a reasonable amount of spot that is for next year. As I said, it's about 15% of our fleet is on the spot charter. And I think as the rate goes up and then we will be able to take the benefit of those increased rate as well.

On the acquisition side, today, as I said, that Seaspan really have a very scalable platform. The way realistically for us to grow our fleet is most likely to looking at acquiring a fleet instead of a business and then depends on the opportunities, whether we're going to buy a fleet of few vessels. Really, for us, not much of a difference because we do have a very standardized process that allows us to be able to execute on these type of acquisition in a very effective way. Once again, this year, we actually acquired 15 vessels. Some of them is in a fleet. Some of them, it's on a 1 or 2 vessel basis. But all these vessels are actually being executed while we're managing our business. As I said it earlier, we actually have a net 1 head count reduction. So today, our platform is very well positioned to consolidate and continue to grow our fleet. And as I said it earlier, that we really see a lot of opportunities in the coming months and year.

Our next question comes from the line of Michael Goldie from Bank of Montreal.

I was wondering if there were any kind of updates for us on CFO search?

Sure, Michael. Yes, we started this global search of a CFO at the end of September. We actually received a very strong interest from the marketplace. The quality and the interest of the candidates is very encouraging. We are right on schedule in making decisions in due course, and we will inform you and the market once that decision has been made.

Okay. And then just returning to APR for one second. Obviously, utilization is going to come down in the fourth quarter. But can we also expect kind of revenue per megawatt or revenue per turbine to come down as well given that the Mexicali projects, I think, were quite profitable contracts?

No, on a revenue per megawatt basis that whatever those are actually in operation, those -- in terms of the revenue, it stays the same. Only because the -- those turbines that is currently on a demobilization mode, those are the ones that's out of the deployment. But once they come in back, again, any of those deployments, we have a certain required -- requirement in terms of the revenue per megawatt, similar to the way we're looking at the charter rates. So to answer your question is that we do not expect that to change.

Our next question comes from the line of [Luke Collier] from Capital Management.

This is [Luke Collier] from [Campa Capital Management]. I guess I had 2 questions on sort of deploying capital. You talked about that you're very disciplined in terms of the returns that you're looking for. I was wondering whether you could elaborate a bit on the level of marginal return you're targeting or whether there is a certain minimum level of return that you're targeting there?

Sure. In terms of return, we don't -- I think if you're looking at what we have acquired the vessels over the last 11 months, I think you can see the purchase price that we paid, the charter rate we have been able to achieve. And if you're looking at the vessel type, that you will be able to get an idea as to what kind of return. But in general, if we're looking at the last 4 vessels we acquired in the third quarter, I think the amount of the charter revenue that is provided through the long term charter, the amount of revenue actually is equal to the -- roughly equal to the purchase price. So therefore, if we're looking at the -- if you look at it from a return of the invested capital perspective, those capital has already been returned. Then anything above that is a return -- is the additional marginal return on those investments. So in general, the other reference you can see is that, as I mentioned earlier, if we have not made the quality investments, we would not be able to have the growth, meanwhile, deleverage, at the same time still return the capital to the shareholder. So overall, we do hold a very, relatively, for sure, far above the industry average in terms of what the return on a levered and unlevered basis.

And maybe one follow-up question. So actually, I was wondering what is keeping you actually from growing faster than you're currently doing? Like you mentioned yourself, you're actually delevering while growing at the same time. So what is keeping you from being more aggressive on the growth side? Is it the lack of opportunities? Or is the lack of attractive opportunities?

It's the discipline. It's the discipline because we -- because we hold a very high standard. So therefore, for those opportunities, it doesn't come very often and to the contrary, most of -- or all these opportunities is actually created by ourselves. It's not -- we don't go to the market and taking an auction and saying that because there's plenty of assets for sale. But those are not our targets. We are looking for those type of opportunities where there are really, as I've mentioned earlier, from an asset perspective, it has to be good assets, specifically, it's the large asset, young assets and has a good value, which we're going to buy them at a discounted fair market value. And also, we have to look at these assets have a strong demand from our customers. That's why we're going to be able to get a long-term contract attached to it. And that's why from risk-adjusted return basis, this is what the criteria we're holding to. And so therefore, because we are very disciplined, and we only making those investments when those opportunity arises.

And maybe one last question in terms of market share. So I believe you mentioned that for the Seaspan business, you currently have a market share of around 8%. So I was wondering whether -- are the chartering companies structurally gaining market share compared to the shippers over the long run? And could you give any sort of idea on where you see that market share going to in 5 years' time?

Luke, you mean the market share of Seaspan?

Yes. So I mean, both the market share of Seaspan, but I was also wondering whether the leasing companies actually are gaining market share compared to the shippers in terms of owning assets? Or do you actually see that -- because that's what you're seeing in the container leasing industry, for example, that the leasing companies are structurally gaining market share. But I was wondering what that is on the vessel, the container vessel chartering industry?

Okay. Yes. Thank you. Thank you for clarifying that. I think today, if you're looking at the overall container shipping market, I think the total capacity is still around 22 million, 23 million TEUs. And the split is still roughly about 50-50 between the liners owned versus the third party, whether it's a leasing company or owner-operator like ourselves or some of the legacy KG structures. I think it looks like the leasing company is increasing its market share. But at the same time, and I think that because of some sale leasebacks from -- whether from the liners themselves or from some other owners, for example, so on a net basis, I think that because the new build was relatively low, so a lot of the changes is shifting between the owners and also the liners in terms of the sale leasebacks.

On the Seaspan side, in terms of our market share today, we are slightly below 9%. Going forward, I believe that we will continue to, as we said that, continue to grow. As we grow, we would expect that our market share will grow accordingly. And I think that's what we see as a future.

At this time, I'm showing no further questions. I would like to turn the call back over to Bing Chen, CEO, for closing remarks.

Yes. Thank you, everyone, for your time, and we appreciate your time and questions. So on behalf of the Board and management team, I hope you all stay safe and energetic. Have a great weekend -- week ahead of you, and I look forward to speaking to you again in the next quarter. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.