Capital Clean Energy Carriers Corp (CCEC) 2024 Q3 法說會逐字稿

Thank you for standing by and welcome to the Capital Clean Energy Carrier Corp third quarter, 2024 financial results conference call we have with us, Mr. Jerry Kalogiratos, Chief Executive Officer, Mr. Brian Gallagher, Executive Vice President, Investor Relations and Mr. William Bjorn Vice President Commercial. At this time. Excuse me, all participants are in a mode. (Operator Instructions). The statements in today's conference call that are not historical facts, including our expectations regarding acquisition transactions and their expected effect on us.

Cash generation equity, equity returns and future debt levels. Our ability to pursue growth opportunities, our expectations or objectives regarding future distribution amounts or unit buyback amounts, capital reserve amounts, distribution coverage, future earnings, capital allocation, as well as our expectations regarding market fundamentals and the employment of our vessels including redelivery dates and charter rates may be forward-looking statements as such as defined in section 21 E of the Securities Exchange Act of 1,934.

As amended, these forward looking statements involve risks and uncertainties that could cause the stated or forecasted results to be materially different from those anticipated unless required by law. We expressly disclaim any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in our views or expectations to conform to actual results or otherwise, we make no prediction or statement about the performance of our common shares. I would now like to hand the call over to your speaker today. Mr Brian Gallagher. Please go ahead, sir.

Thank you, operator. Good morning or afternoon to wherever you are listening to the capital Clean Energy Carriers. Q3 2024 earnings call as a reminder, we will be referring throughout the presentation to the supporting slides available on our website as we go through the presentation today.

Let's start with slide 3, the third quarter, highlights. The third quarter of 2024 was an important and a busy quarter for the company. As you know, we've changed our name to capital clean energy carriers. This reflects our new focus on gas transportation and there's and we've also moved from an MLP corporate structure to [AC Corp] status with its customary and transparent corporate governance.

We continued our strategic repositioning with the sale of five containers in September releasing nearly $300 million in cash. Our finance team have continued their excellent work this quarter, refinancing an additional two LNG vessels and releasing another $73 million of additional liquidity. This has also reduced further the cost of our debt and also extended their maturities to 2031.

If we turn now to slide 4, we can see the wider progress the group has made with the recent container sales. We are now left with just three very modern container vessels on very long-term time charters following the sale of 12 container ships in total since March indeed, since 2021.

As the slide shows, the group has been very proactive in selling noncore assets, generating in excess of $600 million in proceeds. That is without taking the latest five vessel sale of containers into account. A large part of these proceeds has gone towards funding our pivot towards LNG carriers and other gas assets.

Moreover, we continue to make progress not just strategically within our name change but also in terms of our corporate governance, which has been reflected in a recent increase in our ranking in terms of ESG criteria and scorecards. We intend to build on these credentials going forward with our gas focused strategy.

We are of course, though very conscious of our need to focus on other objectives, we recognize that share liquidity is a key issue for current and prospective investors. The group has moved quickly and on a significant scale over the last 12 months to pivot to where it is operationally and strategically, we appreciate the need to continue to work hard to ensure our corporate side and our investability matches these significant changes to that end.

We are looking at tools that can help enhance our trading liquidity such as putting an ATM in place to satisfy both potential and incoming demand from investors.

We hope that such initiatives will facilitate liquidity in the trading of our shares and we tend to back this up with further raising of the company profile as we have done in recent quarters. Research coverage for instance has doubled in the last four months and we expect to expand our coverage going forward. We know and appreciate that this will take time.

But we are aware that this is a necessary process to provide the group with a trading currency in the future and also progress our further strategic optionality. Part of this change is my appointment as a full-time dedicated investor relations manager. I'm excited by the challenge of delivering on the company's ambitions and I'm here to assist investors in any way I can.

I will now turn it over to our chief executive Jerry Kalogiratos to run through the financials.

Thank you, Brian. It's good to have you on board and I'm sure our listeners are glad to hear a new voice on the call. Now turning to the financials on slide 6 on a technical level. The sale of the 12 container vessels following the announcement of our strategic shift towards gas shipping means that we now report on these containers as discontinued operations on a continued operation basis.

The quarter was a fairly mechanical quarter with five new LNG carriers making a full contribution to the revenue and expenses driving operating income from continuing operations higher to $57.2 million from $30.5 million on the comparative quarter. Last year, the interest charges rose as the fleet increased in size to $40.7 million compared to $25.6 million during the same quarter last year, net income from continuing operations rose to $15.8 million from $5 million. The comparative quarter in 2023 while the dividend was held flat at $0.15 for the quarter.

Turning to slide 7, our balance, it continues to grow with the addition of new vessels and with our asset base over $1 billion higher from the start of this year.

The mix of our asset base has clearly changed in the past year, but our mix of funding has not been 80% floating based. This has obviously turned into an advantage for the group now with interest rates in the US and globally beginning to fall and forecasted to move lower progressively in 2025 our funding base would benefit with around $21 million lower interest costs for every 100-basis point move lower in rates.

We expect our capital base to consolidate now for a period as we have no delivery schedule until early 2026.

Now turning to slide 8, as mentioned in our highlights, we have refinanced year-to-date certain of our facilities. Thus, improving our liquidity position by $130 million. And at the same time reducing our annual debt amortization under these facilities by $4 million.

Importantly, we have also improved our funding cost by 56 basis points when comparing the nine months of 2024 to the same period last year and taken our average floating rate margin to 190 basis points.

Where does this leave the group in terms of funding for its new building commitments? Slide 9 looks at our funding sources and commitments out of a total CapEx of $2.3 billion. We have already advanced 420 towards these acquisitions.

Our cash at hand as of quarter end was $183 million. While we expect to generate nearly $300 million from the agreed sale of the five container vessels less the repayment of $42 million of an outstanding seller's credit and conservative debt assumptions. We expect to raise more than $1.5 billion in debt, which is more than enough to cover our remaining CapEx program and actually leave some additional liquidity on the balance sheet.

This of course, without taking into account an incremental cash flow generated by the company which as you can see in the next slide is well underpinned by our existing fleet and its contracted revenues.

So, on slide10, you can see a revenue backlog of $2.6 billion remaining highly diversified with no counter party having more than 20% share.

$2.3 billion of this backlog will come from LNG assets. Our remaining’s duration is over 70 years, and we expect to add to this strength as we start again, taking the levers of our new builds in 2026 onwards and fixing long term employment for these assets.

Now moving to slide 12, the current spot, LNG market deserves commentary. Given its pronounced weakness in recent weeks, the extent of the drop in spot rates has come as a surprise but reflects certain key factors at play such as a lack of LNG arbitrariness opportunities, limited contango storage plays again driven by warmer than usual weather patterns, oversupply of vessels put simply there has been more ships available than has been required.

A situation which of course has been further exacerbated by delays in certain LNZ projects. And as a result, charters end up long shipping due to the delays and then seek and blow them into the spot market at any cost.

All of these factors have helped create something of a perfect storm in pushing rates lower. However, it is important to stress that our company CCEC has no exposure to spot markets.

We have one existing LNC vessel coming up for Tata Renewal in the third quarter of 2026. And while the current market is certainly challenging in the short term, it will if it stays at such levels put extreme pressure on all their donuts.

We look to address this on the right-hand side of slide 13 illustrating that there are currently around 40 turbine investors that are trading in the spot market, and this number will increase to almost 100 seats by the end of 2026.

Our view remains firm that these vessels will find it very difficult to compete in a market like this and will be led to exit the market either in the form of conversion to alternative uses such as FSU's or FSRU's lay ups and more likely than not over time to recycling yards, moving now to slide 13 and the longer term potential on drivers on the L&G market.

Our thesis regarding the strong long-term fundamentals driving the market remain intact, asset prices for the latest two stroke technologies remain firm underpinned by limited seated capacity competition from other segments. A robust long term time charter market pipeline and high volume of liquefaction projects in the medium to long term.

Clearly as the chart on slide 13 at the top right shows there is some oversupply of vessels in the short term. And that's discussed, this is a contributory factor to the current spot rate environment.

However, the focus on this pressure will be on the older technology portion of the global fleet. And as the chart also makes clear, once projects come online, the market will begin to require additional shipping to manage the higher volumes.

Turning now to slide 14 on the longer-term charter market.

While as discussed, we see a challenging spot market in the short to medium term, the lands increase in L&G liquefaction action capacity on the back of projects that have taken FID and licensing bodes well for the long term charter market, even if there are slight delays when it comes to projects with the incoming administration in the US, we expect more tailwinds ahead in terms of regulatory approvals. As President elect Trump has clearly stated that his administration will support all energy, all energy projects including LNG liquefaction projects.

From the third quarter onwards, we saw a corroboration of this thesis as a number of charters have come or are in the market to charter donuts on a long-term basis with a focus from 2026 deliveries onwards.

They are seeking to both cover additional LNG volumes that they will need to trade from these new projects but also looking to replace steam turbine vessels that are coming off charter over the next three years.

Almost all of these inquiries are for charter periods of 70 years to 15 years and the overwhelming majorities for more than one vessel.

Hence, we remain constructive on the LNG market going forward and we see the short-term pain in the spot charter market as a catalyst for the removal of all the technology vessels which in turn will help the market balance over the coming years. As the new Liqui faction capacity comes online with potential to have even greater upside from new projects yet to take FID.

But today we intend to take advantage of the fact that we have no energy market exposure until 2026 and take a break from our core market and Q3 commentary to focus on our Liquid Co two vessels currently under construction in Korea. As you can see on the next slide, we believe that spending some time on this sector would be interesting to our investors as it is a new segment and wanted to share a bit of what we are seeing in this nascent market.

So on slide 16, you can see another gas fleet made up of six midsized gas carriers and four liquids are two carriers.

As the slide shows. These are all due for delivery within an 18-month period starting early 2026.

At this point, I want to hand over to William Bjorn our Vice President of commercial projects for energy transition to run through this next section. And we will of course be happy to take questions at the end of the call on this and all other discussion points after our prepared remarks, William over to you.

Thank you, Jerry, and thank you for inviting me to speak on this call. So hi, everyone, thank you for joining today's earnings call. It's a pleasure for me to present have clean energy carriers planning investment in the future.

As I spend most of my time on energy transition shipping such as C two and low carbon enrolment rates today. The focus is going to be on the LCO2 vessels, and I hope that on another call, we can call it a low carbon monitor trade in more details. So for those listening on the call, I will refer to Liquidify CO2 as L CO2.

Let's jump to the next slide of the presentation to understand the overall dynamics of the sketching industry as well as setting the scene, the contract for the company investment. So moving to slide number 17, starting from the top of the site, it's evident there are central demand drivers propelling the carbon capture industry forward.

First decarbonization in hard to sectors, sectors like the lime and cement production refineries and chemical manufacturing have increasingly focused on carbon capture and storage. These industries are constrained by emissions into their production processes with limited realistic to decarbonize CCS representatives are not the only viable solutions to emission reduction targets.

Secondly, the rising carbon credit. So the market for carbon credit is growing rapidly with the surge in agreements between emitters and large Corporates aims to offset emissions. For example, Arst in Denmark and Microsoft recently signed an agreement for 400,000 tons of carbon removals while Stockholm Xeg secured a carbon renewal contract value close to $50 million.

So 228 to 2030 leading corporations like Shopify meta JP Morgan, H&M and mckensey sustainability have committed to this initiative showing proven signs of an emerging carbon dioxide removal market e fuel production. So the production of E fuels such as ESA and EOL carbon molecules to create fuels that retain carbon based properties. Importantly, this carbon must come from green sources such as Biogen’s.

Further growing the need for carbon capture technologies and concepts.

Lastly, oil and gas production via the carbon capture concept. So carbon capture technologies can significantly reduce emissions from oil and gas production as exemplified by recent recips under the US Inflation Reduction Act, such regulatory frameworks including the US provide substantial incentives to adopt CCS as a core part of emission strategies.

So these factors create a vast untrap molecule transport to fire ships which are indispensable in the limitation of pipelines. So based on current plan volumes and net zero volumes, analysts expect that the industry between 30 to 90 ships by 2030 high triple digit numbers of ships by 2050.

This number 18, the CO2 market aligns with the carbon capital utilization and storage ecosystem. Broadly utilization refers to using CO2 in E fuels and other products. While storage focuses on the permanent sequestration of CO2 in the underground. It's an outline of CCS and chain. First, we see capture. So CO2 is captured at the emission source. Then secondly, CO2 is then transported by a pipelines or grid support facility.

Then load onto ships for maritime transport ships. Did the co two and designated port facilities or terminals. And lastly, we see that the C2 and applications such as fuel or sequestered in the underground. So the bottom line here is that much of the ecosystem depends on shipping without dedicates to carriers, [large] scale CCS becomes technical [tman].

The supply, the current fleet profile for co two carriers includes far over 1,500 m LC2 ships for the food and beverage industry. Two additional small test vessels, four 7,500 cubic meters carriers related to this LC2 storage project called Northern Lights.

And then our 22,000 [kometer] vessels in order as labour freedom, let's say approximately 10 to 14 highlights a major supply constraint. Looking forward numerous CCS projects are expected to reach final investment decision and commence operations within this decade, creating a potential on the market for the LCO2 period.

Turning to slide. 19. If you work full time, 22,000 cubic meter, low pressure LC2 gas carriers currently under construction at Shinba Nepo South Korea and set for delivery for about 2026.

In terms of LC2 storage technology, we are the low-pressure low temperature technology which offers lower unit costs through increased carbon density, maximizing ship capacity utilization. These vehicles are designed with fib mind site for both inter and intra-regional trades and capable of handling gravis project requirements.

This transfer of current type such as G and all colors, tires and gras and petrochemicals. This multi gas capability is possible due to change of science and carbon and energy systems being similar to similar refrigerated gas carriers.

All this also features state of the art capabilities such as free onboard, remake plans to minimize carbon loss to change. Motor gas cargo handling and power and connectivity enhancements such as increase in the output for the onboard carbon capture plans and also A&P control power further bone regularization, ice class and anything else.

So these ships are truly state of the art and provide CCEC with a unique acid capability in the growing market of low carbon solutions including CCUS, low carbon ammonia and other gasses and turn to slide number 20.

If we dive into the global market and the emerging trade, it will help to simplify the model into following co two storage hub is to be permanently stored. Then we have co two usage which will be predominantly located in locations with access to cheap renewable energy. For example, hydro energy in the northern area, solar power in the Middle East or Australia or energy in South America.

Lastly, the leaders on the so-called emission points where C2 will be captured. And so this leave us with three key trade museums.

First, the Infra Europe will be dominated by shoulder voltages. Whereas the APEC region will be characterized by longer voyages due to great distances imbalances between emissions and available storage fields. And then lastly, storage capacity for assembled in the US can lead to competitive pricing of storage to cater for interregional trades.

The sorry the unknown global targets from various agencies for carbon capture and storage with significant implications for maritime transport. In Europe alone, projected CCS volumes for 2030 are estimated at approximately 60 to 90 million tons per annum. So even with conservative estimates on the maritime transport is translated to a domain for 20 to 30 LC.

Two carriers in the European market and known by 2030 in the APEC region. CCS will likely be characterized by longer transport distances or higher TRS creating a need for larger vessels. Projections suggest demand for an additional 20 to 30 shifts by 2030 in this region to accommodate both volume and distance requirements. Effectively, all these forecasts are strong growing demand for dedicated and C2 carriers in both Europe and with requirements to increase significantly in the coming years. So these are slide number 21.

Now that's number shading the carbon capture utilization and storage industry. Recently, Morgan Stanley included CS as item number six in their big them of 2024. Recognizing it as a one of the last viable technologies to realize climate goals. The research estimates that the total addressable market for sea shares could reach $30 billion by 2030 expand to $225 billion by 2050.

These projections align closely with scenarios outlined by key research agencies including the IEA and what we can see as well as insight from other agencies and Intergovernmental Organizations.

It's a consensus that reinforces the importance of CCUS in a broad strategy, climate targets. However, achieving a true material scenario will demand far greater CCUS capacity. On the right side of July 21, we can see protections from IEA and show which indicate a need for exponential growth in CCS capabilities to new climate objectives which represents a significant challenge but also sizable and tender market opportunity. Well, I said that to like number 22 supply sites specifically the blood which will be critical in this emerging demand.

So let's begin by examining the left graph which illustrates the decline in number of shipyards capable of building gas carriers. It's essential to understand that this decline impacts all gas tires and vessel prices. Meaning that only a select few equipped to build specialized LCO2 carriers.

Adding to this challenge, we need to consider the capacity constraints of specialized suppliers and equipment manufacturers who serve multiple gas segments. For example, a native tank manufacturer in South Korea currently has a production capacity to supply tanks for only about four vessels annually. This limitation underscores the global supply chain constraints that affect the entire sector from change to cargo handling equipment.

Furthermore and consider the ship will be across all segments. Slots are extending out to 2028, and the new building is at a historic high, not a significant slowdown in inside.

This raises a crucial question. Will there be sufficient shipbuilding capacity to meet the rapidly growing demand for LC2 carriers within the [X US] market which we've just reviewed in light of these market conditions, we decided to invest into the structural growth area for shipping.

It was highly negative for CO2 will commence their life in 2026 as [LP and] but able to supply the main dynamics. They will be very well positioned to capitalize on opportunities for the [transportation of CO Two] in a potentially undersupplied market. So that was it from my side. Thank you. And now I'll hand it back over to Jerry.

Thank you, William. I hope this was overall a useful introduction to CO2 shipping. We will of course take questions on this following my summary remarks which I will give now.

So turning to the conclusion and slide 24 we have talked at length about our growth plans and fleet, but it is always clearer with the diagram that you see on this slide.

Our LNG fleet on the water will be augmented by six new vessels growing the coral and Z fleet by 50% by Q3, 2027. 10 midsized gas carriers will be on the water. By that final LNG delivery reflecting in full or pivot towards a gas transportation and solution company.

For the moment, we still retain three containers which have long term employment in place for the next nine years. With options to extend by a further six years beyond that, these vessels give us strategic optionality which we will consider going forward.

So that is the fleet, our investment proposition for investors. And on the next slide, slide 25 we discussed the earnings power of this fleet while this chart is a performer and only illustrative and with rather conservative assumptions behind it described at the end of the slide deck, it should be evident that there is considerable earnings power from the delivered fleet which is only 10 or so quarters away.

The performer in this scenario will be capable of delivering over $630 million of EBITDA per year upon delivery with adjusted free cash flow of $180 million or over $3 per share.

To put that into context, if only 50% were distributed as a cash dividend, then on the current share price, our stock would have a sustainable dividend yield between 8% to 10%. And that is without taking into account additional growth that could come from our strong liquidity position that we are building over the next year or two.

Importantly, this platform will have a very young fleet. This is critical in the gas transportation sector where the latest shipping technology will be key to success. So to conclude, and before we take questions, please turn to the summary slide number 26.

In short, the platform for capital clean energy carriers will be the largest LNG two store car fleet available to investors upon delivery. In addition to the other 10 multi gas vessels, the platform has considerable contract coverage of over 70 years already and strong visibility on cash flows.

We have an advantage over many of our peers in only being invested in the latest gas technology vessels with almost all having dual fuel capabilities. Our growth is largely financed already with our focus now in ensuring the investable platform listed on NASDAQ starts to have sufficient liquidity for investors to participate.

We appreciate this and building our profile will take time but we are pleased and proud of the progress we have made in last 12 months and look forward to making further gains on our objectives going forward.

With that. I will hand it back to the operator for Q&A Thank you for your attention.

Thank you, ladies and gentlemen. The floor is now open for questions. (Operator instructions).

Alexander Bidwell, Weber Research.

Hello, Alexander. Please make sure your phone is not on mute.

Can you guys hear me?

Yeah, we can hear you. Hi.

Sorry about that guys. So, I just wanted to take a look at the [LCO2] market real quick. So looking at that potential disparity between the global fleet and the future shipping demand, how has that been influencing commercial discussions as you guys seek employment for these ships?

I think that part of the thesis is that as many of these projects start to only take form today including FYD, and many of the incumbents not necessarily being very experienced with shipping. They are more focused today on getting these projects across the line rather than secure shipping.

Some of the more advanced projects, especially the ones that have received EU funding. They have been coming to us lately as well as to other counterparties and trying to better understand the shipping markets and what it means in terms of availability of vessels. But overall, I think the market only now starts to appreciate that this is not finding LCO2 carries is not going to be as easy as finding a tanker or a dry vessel. William. Do you agree any comments to that?

No, I fully agree and no further comment on these further questions.

Thank you, appreciate the color there and a quick follow up.

So looking at that with or rather with most of these companies focused on the projects themselves and I guess less focus on the shipping side. Are you seeing any other LPG players or gas shipping players looking into ordering LCO2 vessels? Are you seeing any uptick in interest in booking some motor book slots?

Yeah, I think there is quite a few players looking into the segment, understanding the strong demand and supply fundamentals.

We have been the only ones that follow a slightly different business model. I mean, the traditional business model which you also find in the LNG business is I'll secure the long-term employment and then I will order the back of that.

Our business model is building scarcity value around our new building positions. So, you know, most of the other players and many actually very experienced gas players have been more following the traditional route.

We have been following more closely our business model which we have quite a bit of success in in L&G shipping as well as other parts of the business by ordering in advance because as that demand squeeze or rather supply squeeze in this specific case comes up, you can then capture oversized returns, but definitely there is a lot of interest and a lot of movement in this business.

All right, Thank you very much. I'll turn it back over.

Thank you, Alex.

Omar Nokta, Jefferies.

Thank you. Good afternoon. Just a couple of questions for me and maybe just kind of maybe more broadly on the L&G stock market. What would you say has changed here over the past couple of months? I know you talked about it, Jerry in your opening remarks, but it felt like rates had been building momentum back in July and August.

And then just sort of all, all of a sudden came under a lot of pressure and just wondering, you know, was there a trigger to cause this, you know, sell off in the spot market or has it been a combination of things all coming together at the same time? And then, so that's the spot market and then any kind of any kind of spill over into the term market as you would from your vantage point?

Absolutely. I think it's more the latter. So it's more a confluence of circumstances. And in actually, in July, we had a pretty strong market for that very early in decision, but I think with the warmer temperatures, the lack of arbiter's cargoes, the delay of certain projects that is also for sure, weighing on the market and then ships being delivered often without having captive volumes.

We saw increasingly all these factors weighing on rates and then there is also a bit of psychology, right? As we also highlighted in the prepared remarks, there's also the older ships TFT'S but the specialist in turbine vessels if you know continuously, you see those being redelivered and many of these vessels have been paid off.

So and given also the unit freight economics delta, they will take any business, or they have been dragging the market down. And then many of the charters that do not have volumes because of project delays, you know, they for them shipping is the same cost. So then they will take any business that they find and all that created a bit of an avalanche effect.

So you know, we see it obviously it's never good to have a market like this, but I think it will flash out to the older technology vessels.

You know, already many of these vessels are struggling to find employment. I mean steam turbine vessels, and this is in the high season. So from February March onwards, many of the owners that have uncommitted vessels, they will have to take a decision as to what they do. There are certain FSU's of floating storage inquiries FSRU conversions.

But I think there is also talk of warm and cold lay up for these vessels and you know, depending on the market conditions, if you have a cold lay up of a vessel like this for more than 56 months, then it becomes increasingly a challenging economic decision as to whether you reactivate it and at what cost. So I think that's probably the important silver lining to this market.

Okay. thanks, Jerry. That's a good, a good sense of things. And then maybe perhaps just kind of sticking with, you know, the fundamental backdrop of the market, you know, or maybe just kind of switching perhaps then to the asset values, you know, it seems like you've obviously been very busy, you've refinanced two vessels. So you've got a pretty good sense of kind of where values are, has there been any change? We've seen values obviously have risen quite a bit here over the past couple of years.

And I'm sensing just at least looking at the two refinancings and how much you've been able to extract from that are values still firm? And has there been any shift in LNG pricing and LNG shift pricing?

Yeah, and we have had recently data points to this effect. So we have seen at least three vessels recently ordered and between the 250 low two 50s, $260 million mark, all these vessels were delivered over the last month or two. So and in different shipyards. So we know we have a pretty good feeling as we knew building prices are and this determine the wider if you want the curve for both the asset prices as well as the long term charter market.

So yeah, I think values have been pretty steady and we expect them to remain range bound. There is very limited capacity overall, especially for larger vessels and there are projects there are charters that come from time to time to the market as we have seen over the last few months to take vessels on long term basis, which then leads to inquiry for more new builds. So I think there is values are well supported where probably we will see more pressure again, is on older technology vessels, especially if they are utilization falls consistently over the coming months.

Okay. Yeah, that makes sense. All right, Jerry. Thank you so much. I'll turn it over.

Thank you, Omar.

Thank you. The next question is coming from Ben Nolan of Stifel Nicolaus. Please go ahead.

Yeah. Hi, this is Frank Galanti on for Ben. Thanks for taking our questions.

I wanted to sort of double down on the demand for energy carriers, right? Obviously, shorter term market. Throwing over pretty heavy. Is that sort of affected the sort of six LNG carriers that are currently unchartered? Has that sort of changed the conversations on getting those locked up.

So I think what we have seen over the last quarter is that we have seen more long-term inquiries that we have seen in, let's say in the first half of 2024 and mostly people coming to the market to cover new offtakes or replace older technology ships over and we had some recent data points or charter in the in the market.

I think what we see is probably a 10% reduction in long term charter rates compared to the peak. So we are, you know, on a 10-year deal, we are probably more in the low 90s area than in the hundreds of thousands that we were maybe 12 months ago or 6 months ago. But we also believe that this is probably where the market is going to stay also for charter rates quite range bound because in the end the determinant of what owners will ask is the replacement value or new build values and new build values have been pretty steady.

But I think the encouraging thing is that we have seen quite a bit of new inquiries coming to the market and some of them they were scheduled because this is when people wanted to come to the market to secure TS. But some of them, they were encouraged by the slightly lower charter rates compared to last year.

And they said, well, given the fundamentals that we see that is long term. This market is expected to be tight. If your capacity is going to be tight, it's better to take cover now rather than wait later on. So we are quite constructive for the 2026-2027 deliveries.

Of course, as I said earlier on, we like to take our time when it comes to fixing the vessels at what we consider to be the right time. We will be of course looking at developments and gradually we will start getting coverage. Again, the idea is to secure long-term coverage for these assets at a creative rate, potentially also a part of explorations. We don't want everything to expire at the same time, but hopefully we can be able to share more over the coming quarters.

Great, that's really helpful. And then sort of on the decision to split out the containers into discontinuing operations this quarter.

Can you talk about the rationale to do so? And that what that sort of implies or not to the remaining three container vessels?

So yeah, the remaining three vessels will stay in the continued operations and the discontinued operations financials will apply only to the 12 vessels sold over the last year or so or since the announcement that we will be focusing on gas assets. So you should expect the three container vessels to stay in the continued operation financials.

Unless at some point we decide to divest from those assets. In which case we will then of course notify the market, and they will belong to these cops.

Okay. Yeah, that clarification is really helpful and thanks for taking our questions.

Thank you, Frank.

Liam Burke, B. Riley Securities.

Thank you, Hi Jerry how are you?

I'm well, how are you?

Good. Thank you. Could we talk about the, I mean, the long-term demand for the LBT is great, but how do you feel about the timing of the delivery of the vessels and how you would charter those? I mean, you're comfortable enough. You've had enough inquiries on the on the counterparties.

Yes, absolutely. I think this is really when we start to see most of the demand for long term chapters starting in '26 and into 2027. This is also coincides with when a lot of the new liquid fashion projects come online. So, yeah, it is, and it is a liquid market and hopefully we will be able to share more over the coming quarters.

That’s great. Rates are low. Omar discussed the pressure on asset values. I know that you're you only take assets with long term charters attached. But do you see anything potentially outside your traditional drop downs? That might be interesting if asset values get softer.

We are always open to new additions. And as, as I said, during our prepared remarks, I think we will be building up liquidity given where we stand. But to be honest, in the two stroke LNG vessel class where we are focused, I don't expect to see any serious discount on asset values given where new building prices are and the overall healthiness of the long term market where I think there will be pressure on asset price is on TFT's vessels as well as steam turbine vessels utilization will weigh on them because of the of the weakness in the spot market.

But also, environmental regulations, especially EUETS and now [fuel eu] will have a big effect. As increasingly as we move, for example, in the UETS framework from 40% to 70% payment of CO2 emissions. Increasingly these vessels will be more and more expensive in terms of unit freight cost. Plus of course, the fact that especially steam turbine vessels tend to be smaller vessels that do not really fit cargo stems in this market. So I think there we will see a lot more pressure on our focus asset class. I don't expect to see large drops, but of course, we will keep our eyes open for opportunities.

Thank you, Jerry.

Thank you, Liam.

Thank you. At this time, I'd like to turn the floor back over to Mr. Kalogiratos for closing comments.

Thank you and thank you all for joining us today.

Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.