Navios Maritime Partners LP (NMM) 2017 Q4 法說會逐字稿

Thank you for joining us for Navios Maritime Partners' Fourth Quarter and Full Year 2017 Earnings Conference Call. With us today from the company are Chairman and CEO, Ms. Angeliki Frangou; Chief Financial Officer, Mr. Stratos Desypris; and SVP of Commercial Affairs, Mr. Tom Beney.

As a reminder, this conference call is being webcast. To access the webcast, please go to the Investors section of Navios Partners' website at www.navios-mlp.com. You'll see the webcasting link in the middle of the page, and a copy of the presentation referenced in today's earnings conference call can also be found there.

Now I'll review the safe harbor statement. This conference call could contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Navios Partners. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are based upon the current beliefs and expectations of Navios Partners' management and are subject to numerous material risks and uncertainties, which could cause actual results to differ materially from the forward-looking statements. Such risks are more fully discussed in Navios Partners' filings with the Securities and Exchange Commission, including the company's most recent 20-F. The information discussed on this call should be understood in light of such risks. Navios Partners does not assume any obligation to update the information contained in this call.

The agenda for today's call is as follows: first, the team will offer remarks, and then we'll open the call to take your questions.

Now I'll turn the call over to Navios Partners' Chairman and CEO, Mrs. Angeliki Frangou. Angeliki?

Thank you, Laura, and good morning to all of you joining us on today's call. I am pleased with the results for the fourth quarter and full year of 2017. For the fourth quarter, Navios Partners reported revenue of $59.3 million and adjusted EBITDA of $37.1 million. For the full year, Navios Partners reported a revenue of $211.7 million and adjusted EBITDA of $133.1 million.

As you can see on Slide 4, today, NMM owns 39 vessel fleet consisting of 32 drybulk vessels and 7 container vessels. NMM also has a significant investment in Navios Maritime Containers, a growth vehicle created to leverage the weakness in the container sector. Navios Maritime Containers now has a fleet of 21 container ships.

Slide 5 provides some of Navios Partners' highlights. NMM expects to generate significant cash flow and has no near-term debt maturities and low leverage. We have about $603 million in contracted revenue. More than 90% of this is through charters longer than 3 years. In addition, our credit ratios are strong with 36.8% net debt to book capitalization as of Q4 of 2017.

Slide 6 highlights NMM's dynamic growth platform. Navios Partners' strong balance sheet and opportunistic approach has allowed it not only to weather challenging markets, but emerge as a vibrant growth platform. To date, NMM has no near-term cash requirements whether for CapEx or debt maturity. Therefore, any free cash flow can be deployed for growth or, if conditions warrant, returned to shareholders.

For 2018, in the current charter rate market, we expect to generate about $90 million of free cash flow. If the market were to reach 20-year average charter rate, we would generate about $160 million in free cash flow.

As I mentioned a moment ago, we are investing in the future by renewing and enlarging our drybulk fleet. From the beginning of 2017 up to date, we have grown our fleet by 8 vessels. We did this by selling 2 older vessels and purchasing 9 younger vessels and entering into 1 long-term drybulk charter. In 2017, we acquired 7 vessels with an average age of 7.4 years and sold 2 with an average age of 20 years. This materially decreased the average age of our fleet by 12%.

In 2018, we added 3 vessels. First, we acquired 2 2006-built Panamax vessels for $22 million. These vessels should be delivered in Q1 of 2018. We also entered into a favorable bareboat charter for a Kamsarmax newbuild vessel with a purchase option, expected to be delivered to our fleet in the second half of 2019.

The table to the right details the vessels we acquired. Our enlarged fleet in the recovering markets creates opportunity of generating significant free cash flow. We expect to generate about $90 million of free cash flow at current market rates and about $160 million if rates equal to 20-year averages.

We also leveraged the prolonged weakness prevailing in the container sector by creating Navios Maritime Containers to develop critical mass in the container sector. We did this after we opportunistically agreed to acquire a 14-vessel container ship fleet in a distressed sale. To date, Navios Containers has raised $150.3 million of equity and purchased 21 container ships. Navios Partners invested $50 million and received 34% equity stake, plus an additional 6.8% of equity in the form of warrants.

Slide 7 provides further light to our fleet renewal and expansion program. We added 8 vessels to our fleet on a net basis. As a result, we increased our fleet by 37% on a deadweight ton basis. We also decreased the average age of our drybulk fleet by 12%.

Slide 8 illustrates our low daily breakeven per open day. For 2018, our estimated daily breakeven per open day is only $4,767. Therefore, our fleet is expected to generate significant free cash flow through our $8,313 open and index days. At current rate, our fleet has the ability to generate about $90 million of free cash flow. As charter rates recover towards the 20-year averages, our fleet can generate an additional $160 million in free cash flow.

Slide 9 shows our liquidity. As of December 31, 2017, we had total cash of $29.9 million and a total debt of $493.5 million. We have a low net debt to book capitalization ratio of 36.8% and no significant debt maturities until 2020.

At this point, I would like to turn the call over to Stratos Desypris, Navios Partners' CFO, who will take you through the results of the fourth quarter of 2017. Stratos?

Thank you, Angeliki, and good morning all. I will briefly review our unaudited financial results for the fourth quarter and year ended December 31, 2017. The financial information is included in the press release and is summarized in the slide presentation on the company's website.

Before I start the discussion on the highlights, I would like to turn your attention on certain one-off items that are listed in Slide 10 that affected both the quarter and the year ended December 31, 2017, and 2016. As part of our 2017 annual impairment review, we recognized a $30.3 million impairment loss on one of our vessels. Further to the above, in Q4 2017, we recognized a $2.4 million loss on the sale of one of our vessels. For simplicity, the discussion of the financial results below exclude the effect of the one-off items discussed above and those listed in the slide.

Moving to the financial results. Revenue for Q4 of 2017 increased by 19.3% to $59.3 million compared to $49.7 million for Q4 2016. The increase was mainly due to the 18.3% increase in available days as our fleet size increased by 5 vessels compared to the same quarter of last year.

Adjusted EBITDA for the fourth quarter of 2017 increased by 10.3% to $37.1 million compared to $33.6 million in Q4 2016, primarily due to the increase in revenues, which was mitigated mainly by the $2.3 million increase in management fees due to our increased fleet.

Adjusted net income for Q4 2017 amounted to $10.4 million, 30.8% higher than the corresponding quarter of last year. Operating surplus for the fourth quarter of 2017 amounted to $25.5 million. Replacement and maintenance CapEx reserve was $4.1 million. Fleet utilization for the fourth quarter of 2017 was almost 100%.

Moving to the 12-months operations. Time charter revenue for 2017 increased to $211.7 million compared to $190.5 million in 2016, mainly due to the 7.9% increase in available days as well as a $12.4 million revenue from Navios Containers, which was consolidated in our results until August 2017.

Adjusted EBITDA for 2017 increased to $133.1 million compared to $123.5 million for 2016. The increase was mainly due to the increase in revenue discussed and was mitigated mainly due to the $4.7 million management fees of Navios Containers and $3.4 million increase in management fees as a result of Navios Partners' increased fleet.

Adjusted net income for 2017 amounted to $21.8 million. Operating surplus for the year ended December 31, 2017, was $92.6 million.

Turning to Slide 11, I will briefly discuss some key balance sheet data as of December 31, 2017. Cash and cash equivalents was $29.9 million. We do not have any debt maturities until 2020. Net debt to book capitalization remain at low levels to 36.8%. This is a decrease of approximately 13% compared to the end of last year. Long-term debt including the current portion decreased by approximately $30.2 million in 2017 and amounted to $493.5 million on December 31, 2017.

Slide 12 shows the details of our fleet. We have a large, modern, diverse fleet with a total capacity of 4.3 million deadweight tons and an average age of 9.9 years. Our fleets consist of 39 vessels, 13 Capesizes, 16 Panamaxes, 3 Ultra-Handymax and 7 Container vessels.

In Slide 13, you can see the list of our fleet with the contracted rates and their respective expiration dates per vessel. Our charters have an average remaining contract duration of approximately 2 years. Over 90% of our contracted revenue is from charters longer than 3 years. Currently, we have contracted approximately 63.5% of our available days for 2019, including days contracted at index-linked charters. The expiration dates extend to 2028.

As shown in Slide 14, we are an efficient, low-cost operator. We are benefiting from the economies of scale of our sponsor. We have agreed to extend our management agreement until December 31, 2022, and fix our operational cost until December 2019.

Based on the new agreement, the fixed fees for Capesize and Container vessels remain the same at $5,250 per day for Capesize vessels; $6,700 per day for 6,800 TEU Container vessels; and $7,400 per day for 8,200 TEU Container vessels; while the fixed fees for our Panamax and Ultra-Handymax vessels increased by 3% to $4,325 and $4,225 per day per vessel, respectively. There is no additional charge for commissions for technical and commercial management, nor any fees for S&P in financing transactions. For 2016, our total costs were approximately 10% below the average cost of our listed peer group. This translates in estimated savings of approximately $7.6 million.

In Slide 16, you can see the ownership structure of Navios Containers. This entity completed its listing in the Oslo OTC market in June 2017 and has raised a total of $150.3 million of equity since its inception. Currently, Navios Partners has a 33.7% ownership interest in Navios Containers, plus 6.8% warrants. Navios Containers has a fleet of 21 Container vessels.

I now pass the call to Tom Beney, Senior Vice President of Business Development, to discuss the industry section. Tom?

Thank you, Stratos. Please turn to Slide 17. With all the major economies around the world growing, the IMF has increased its forecast for world GDP by 0.2% in 2018 to 3.9% and continued that pace for 2019. Accordingly, they have increased the advanced economies' forecasted GDP growth by 0.3% to 2.3% in 2018 and the emerging markets' growth by 0.3% to 4.9% in 2018.

On the back of synchronized global economic growth, drybulk trade grew by an impressive 4% in 2017 and is initially expected to rise by 2.7% in 2018. At current BDI levels, the drybulk market still has substantial upside. It remains 48% below the 20-year average.

Going to Slide 18. Data from the IMF shows further evidence of the global economic expansion as all major economies are growing simultaneously. This phenomenon rarely occurs and was last experienced during the period 2004 to 2007, and previous to that, in the late '80s. Important for seaborne trade, the percentage of countries showing export growth has risen to 85%, the highest on record and a positive sign for drybulk trade going forward.

Turning to Slide 19. In 2017, steel production in China rose by 5% and the rest of the world by 5.2%. High Chinese domestic demand has translated into a 4-year high in steel prices. Subsequently, Chinese steel mills continue to enjoy high margins. Substitution of Chinese expensive, low-quality iron ore with higher-quality and lower-priced imports, particularly from Australia and Brazil, continues. Iron ore imports into China for 2017 rose 5% or 50 million tons and are forecast to rise further in 2018.

Higher Chinese domestic steel demand has been stimulated by large infrastructure projects and recovery in the housing market. The One Belt, One Road project is a cornerstone of the Chinese economic plan for the next 5 years and support steel and power demand inside and outside China.

Of note, on Brazilian iron ore exports, which are forecast to grow by 20 million tons in 2018, Vale's flagship mine S11D reaches its 90 million-ton annual capacity; and the Samarco mine restarts production, which will further help ton miles.

Power consumption in China grew alongside steel production as the Chinese economy grew by 6.9% in 2017. Up to the end of November 2017, total electricity consumption in China continued to rise by over 6%, with thermal power generation rising by over 5%. In 2017, Chinese seaborne coal imports were up about 10%. The Chinese government continues to rationalize domestic coal production, closing down small inefficient mines and encouraging consolidation of large mining groups. It is expected that the restructuring of the Chinese coal industry will continue to keep domestic coal prices high and encourage imports as inefficient polluting mines are closed.

With the ban on North Korea coal imports into China and weather-related problems in Australia and Indonesia, seaborne coal had to be sourced from further afield, aiding ton miles. During the peak winter season, stocks of thermal coal at power plants in both India and China reached uncomfortably low levels, prompting both governments to allow additional coal imports to maintain power supply.

Turning to Slide 21. Agricultural production worldwide continues to increase. After a strong 6.9% growth in 2017, forecast for 2018 are for a further increase. Worldwide grain trade has grown by 5.4% CAGR since 2008, mainly driven by Asian demand. After 4 years of record harvest, wheat, corn and soybean prices remain low, encouraging trade.

Demand increase have focused on Asian economies and especially China, where incomes are rising and diets changing. Chinese imports of soybeans in 2017 were up 15%. Most of the increases in grain production are based in the Americas or European regions increasing ton miles for longer trips to Asia.

Moving to Slide 22. In 2017, about 38 million deadweight of new buildings delivered versus an expected delivery of 58 million tons, maintaining a 34% nondelivery rate. As of January 1, the 2018 order book stood at 34 million deadweight. Using a 25% nondelivery rate for the year, it is estimated that about 26 million tons will deliver. With a low order book and continued high scrap prices, forecasts are for fleet growth in 2018 of 1.7%, the lowest since 1999.

Uncertainty over new Tier III designs incorporating new SOx/NOx requirements as well as new ballast water systems, making ordering new buildings risky and encourages scrapping of older vessels. Most shipyards are unable to offer new ships before mid-2020, therefore, the order book looks very likely to stay low.

Turning to Slide 23. 2017 ended with another low net fleet growth of 2.9%, about half of the long-run average fleet growth of 5.8% and below the drybulk trade growth of 4%. Total scrapping in 2017 was 14.9 million tons, lower than 2016, but reflective of cost of additional regulations and higher scrap prices.

The current drybulk order book before nondeliveries is about 10% of the total fleet, and we note that vessels over 20 years of age currently equal about 7.5%. Given forecasted trade growth, there is balance between new expected deliveries and potential scrap candidates. With the new IMO regulations soon to come into effect, older ships should continue to scrap.

The fundamentals for 2019 and beyond remain positive, and the balance between supply and demand supports higher charter rates going forward. In fact, forecast for 2018 show that demand growth of 2.7% will be more than the level of supply growth at 1.7%. As a result, we expect the recovery in drybulk rates will continue.

Moving to Slide 25 in the container market. As world GDP grows, consumption grows and so does container demand. Over the past 20 years, container trade has expanded at a 7% CAGR. In 2017, container trade grew by 5.2% and is expected to grow a further 5% in 2018 and by 4.7% in 2019. Recently, the Wall Street Journal published data showing that a record 85% of the world's economies are growing with exports increasing, an all-time high, as previously discussed.

Turning to Slide 26. At the beginning of January 2017, the container fleet consisted of about 5,100 vessels with about 20 million of TEU capacity. At the start of January 2018, the fleet consisted of also 5,100 vessels, but the capacity grew to 20.8 million TEU, reflecting scrapping of older smaller units and delivery of larger ships.

In 2017, 1.1 million TEU delivered versus an expected 1.7 million TEU, giving a nondelivery rate of about 32%. About 80% of the TEU capacity that delivered during the year was in vessels over 10,000 TEU capacity.

As of January 1, the 2018 order book stood at about 1.7 million TEU before nondeliveries. The order book declined significantly in 2019 and 2020 to 0.5 million TEU in each year. I would like to point out that over 80% of the order book is focused in the larger over 10,000 TEU ships, with minimal order book for the smaller sizes.

Moving to Slide 27. Scrapping of older vessels continued in 2017 with about 400,000 TEU scrapped, resulting in a net fleet growth of about 3.7%. Over 1 million TEU has been scrapped over the last 24 months, focused mainly on the smaller sizes. Forecast for 2018 net fleet growth are approximately the same as 2017, under expected container trade growth of 5%.

The expected deliveries in 2018 will focus -- will continue to focus on the over 10,000 TEU bigger ships, with minimal growth in the sub-10,000 TEU categories. Furthermore, in 2019, demand growth is forecasted at 4.7%, while fleet growth is expected to be 2.3%, which will mean that 2019 will be the fourth straight year that demand growth exceeds supply growth. With little incentive to order new buildings in the current environment and continued global economic recovery, the container fundamentals continue to improve.

This concludes my presentation. I would now like to turn the call over to Angeliki for her final comments. Angeliki?

Thank you, Tom. We'll now open the call to questions.

(Operator Instructions) And your first question comes from the line of Noah Parquette, JPMorgan.

I wanted to ask about the charter market, what you guys are seeing? And there's been quite a bit of liquidity in like the 1-year type period, but I know you guys would like to look further out before the dividend is increased. Can you talk about like what you're seeing in your discussions with charters?

This is true. I mean, actually, the 1-year rate is very liquid. We have seen $18,500 been done, and you see that there is -- this has returned to some normality. The other very important thing that we have seen, even though during the order received, the yearly low, I mean, for the drybulk, we have seen that the period market still remains. And you see that even though you can have a spot market even being as low as $11,000, $12,000, you can still have a quite significant forward curve and interest for a period. So this is a return to normalized situation. I mean, we are in the low part of the Q1, that's before the Chinese New Year, but we see signs of more normal market reaction. It has started from Q4 last year, and we see coming in a more normalized situation. Tom, I don't know if you have something.

Yes. I think that there is certainly a liquid 1-year market. We have yet to see flat price charters going into the 2 and 3 years. There is some index, but flat price isn't there at this stage.

Okay. And then I just wanted to get a good sense from you guys, you were very active last year renewing your fleet. How do you see yourselves now? Is there more work to be done? Or are you kind of happy with what you've done? And then how does that kind of play into your thoughts for a dividend increase?

One of the things we did is we [raised], last year, in Q1 money, we saw that it was a good time in anticipation of this recovery. We bought all the vessels, and we've got delivery of the vessels prior to Q4, so we were able to have a strong Q4 market. And I think what we're seeing now is you really need to see this market after the Chinese New Year coming to a more normalized level. We have seen optimism coming. You don't see a selloff in the forward curve, the moment you have a little bit of a spot hiccup. I think that's a very healthy market, and it looks that we are moving to that direction. So we are patient, but I think we are seeing some very nice trends in the market.

And your next question comes from the line of Espen Landmark, Fearnley.

I just wanted to touch a bit more on the question from Noah. I mean, you say you do $90 million of free cash flow this year and probably you can do even more next year. You're still able to access bank financing, so maybe you can invest $150 million, $200 million this year, which is, you know, maybe 5, 6 modern Capes. Is that how you think you will employ the cash? Or do you also have other considerations?

I mean, clearly, we have done 37% increase of our fleet. Clearly, we have -- we are still in an early part of the recovery. I mean, we have seen a nice healthy 1 quarter, but there is still quite some time. We -- in the current market environment, we are generating about $90 million if we fixed everything for 1 year. And we see that the market is going -- it should go on a higher lows and higher highs coming to a better level last year. We averaged about $1,200, and going from $900 to $1,500 during the year. So you see that the market is recovering. Our strategy, there is some acquisitions to be done, nice lockdowns. But we also are starting a return of capital for our investors, and this is something that we are working, and we are thoughtful about it. It's a process that is not just buying one vessel; it's a long term. So we are seeing -- expanding our fleet and replacing a fleet as one target, but we are starting also the return of capital.

Okay. And on the quarter, there was an impairment, I think, $30 million for one Panamax, which it seems a bit high given it's built in 2005. Was there any particular reason for this?

No, actually, this was a vessel that was bought back in 2008, 2009, with the respective high prices and also, it has a charter attached. So the acquisition prior price was high, although we got very good customers from the vessel over its years of operation. The book value was high, so that's why the impairment was also high also.

Okay. And just the final one, NMCI didn't have an own conference call, so I'd take the liberty to ask a question here. In the past, you've spoken about merging maybe some of the NMM Container vessels into NMCI, but you also have quite a lot of Container vessels within the Navios Europe structures, I think, in the tune of 12. Are those relevant for drop-down this year? And if so, how would that go about?

Navios Containers is the natural home of all the Container vessels under the Navios Group. On the Navios, in NMM, is the naturalized vessels come without rolling off charters. That would be a natural period to be considered. And on the Navios Europe structures, depends on the financial demands and how it is assigned, what period is it allowed under the agreement, but it is a natural home eventually.

And your next question comes from the line of Randy Giveans, Jefferies.

This is Chris Robertson calling in for Randy. With regards to the Chinese iron ore inventory levels, do you have a sense of how much more physical storage at the ports there is? And do you have any sense on how much of that inventory is the higher-quality versus lower-quality ore? I'm just kind of looking for commentary around additional storage capacity for the inventory there.

I think that -- I think there's plenty of storage capacity because one of the things that's happened over the last couple of years is they moved stockpiles from the mills actually to the ports. So the mills are taking every day off the port capacity. You've also had the Vale building stockpiles in China by investing in the port's stockpile facilities. And you have stockpiles outside of China, which is feeding Chinese demand in Malaysia, et cetera. So I don't think there's any possibility at this stage that we are going to exceed the stockpile capacity. I don't think that's -- there's any probability to that.

That's really helpful, Tom. Sorry?

Regarding the quality of the iron ore, there's been a lot of speculation around that. It would make some sense that the lower-quality ores make up a larger part of the stockpiles because, whilst with the higher-priced, higher-quality ore, which is in better demand at the moment, particularly during the winter when the steel mills want to make as much steel but have been asked to reduce their capacity. So the steel mills are still making pretty good margins in the current environment in China, and they're under a fair amount of environmental pressure, so they want to use the higher-quality ores and the higher-quality coking coals to produce steel. So one would expect the stockpiles to be, let's say, of a larger percentage of the lower-quality ore.

And your next question comes from the line of Herman Hildan, Clarksons.

My first question is the, returning of capital to investors. Angeliki, you mentioned that that's obviously a big focus now. But also, with your valuation, kind of as you said, the free cash flow is effectively on current market rates, 3x your market cap, and the break [even] of value of NMM is [50%] above current share price. I'm just curious whether buybacks -- share buyback is on the table at this point in time? Or would you prefer to kind of use liquidity to grow and pay dividends rather than buying back shares?

I think as the market returns to normalized level, let's face it, I mean, we only had a quarter into this recovery from Q4, and we're starting a little bit of more normalized levels. We are starting and I mean, return of capital has different forms, and we're studying what is the best for our investors and in the long-term view.

Sure. And also, a final follow-up question on something that was discussed earlier. NMCI obviously is the natural home for all the Container ships in the group, and I guess the drybulk vessels in the group also has a natural home in NMM. Is that kind of the long-term strategy? And the question, obviously, is at what time do you expect to be able to, call it, consolidate all the different assets in the different Navios companies?

I think that on Navios Partners, I can say that they're focused on the drybulk. We are here to enlarge our fleet and renew our fleet. And as the vessels that are coming off charters on the Container segment, we have 2 that are coming in Q3, that eventually that we will see that this [indiscernible] will go to a company that, if agreement exists on Navios Containers where it can have a natural home, I think the focus of NMM is in the drybulk, and we think we are in an early stage of a recovery.

Yes. Though, so kind of just understanding the process that once, call it, long-term contracts expire on different asset types around the group, that's when it makes sense to kind of do the consolidation of the assets because then there's, call it, the undisputable charter free value attached to it, or is that kind of why you're doing it that way?

Yes, it also makes more sense. I mean, there's a -- it makes sense, I think, on long lockdown.

And we have time for one more question. Our final question comes from the line of Amit Mehrotra, DB.

Stratos, I had a few specific ones, given all the previous questions have pretty asked on the macro front. The breakeven cash flow numbers that you guys presented, the data is a bit different this time around than what you presented in the past, so I just wanted to ask a few specifics. First, the 63.5% of the revenue days that you're covered for 2018, I think based on kind of my back of the envelope, it looks like that's contracted about $12,000 per day, is that correct? Or is that different?

I mean, you have to understand, Amit, that the contract, the 63.5% that we are showing, approximately 40% is on fixed rates and around 25% is on index-linked days, so what you see in the table relates only to the fixed contracted days.

Okay. So the revenue -- the contract revenue of $108 million is just related to the contracted, not the open days or the index-linked days?

That's correct. That's right.

Okay. So it would be quite a bit higher than that?

The fixed rates are quite higher than your calculation.

Okay, that makes sense. And then just the breakeven that you guys talked about, for the total fleet, it's around $11,000 per day. Is that correct?

Actually, we're giving you the breakeven per open day, so it's easier, I think, to calculate what is the breakeven for the full fleet. So you see that...

Okay, yes. I think, yes, I think it's $11,000. Well, the point I'm trying to ask you is, is that the $90 million number that you guys talked about, obviously, that's an annualized number based on today's rates, not really obviously, anywhere close to what you're going to report in 2018 given the majority of the days are fixed. So can you just help us think about how much below that...

Actually, Amit, this is the one thing that maybe we should have done a better job of explaining. You have about 23 days that are indexed and about, overall, about 50% of your days are indexed and open. So the majority of your vessels are, yes, fixed index and index plus a premium to the index, which gives you visibility that automatically you have the money. And in some of the contracts, in the majority of the contracts, we also can convert to fixed rates, meaning we can convert on the forward curve immediately to fixed. But you also have a quite significant upside, so 40%, 39% of your days are fixed, so the reason that you cannot change the numbers; and 60% are really either open 23%, or indexed or open. So in reality, you have 2/3 -- almost [60%] able to achieve a much higher -- to reset on a higher rate. The reason we did that is we are not trying to fix long. But as we are in the early part of recovery, we see basically 1 good quarter last quarter with a healthy market. We will try to do a flexible structure for the company in order to capture the upside. As the rate move to the high teens and to low 20s, and we see more period, we're of course going to be moving more to a fixed rate environment.

Yes, no, that makes complete sense...

Amit, just one clarification also in the numbers that we are mentioning. The $90 million we are referring is based if you apply the current rates on the open and index days, not for the full fleet. So the fixed days in whatever the year, it's a fixed amount, as Angeliki explained. So you have to apply the current market, [add] the open and index days to arrive when the calculations [are made].

Got it. Okay. That was my question. So the $90 million is actually a realistic earnings power number this year if the current rates stay for the proportion that's actually exposed to the variable rates, correct?

Yes. If the remaining [indiscernible] 1-year rate, which is a very -- let's not forget, guys, this is the low part of the drybulk market, Q1, we are 1 week before the Chinese New Year.

Okay, no, and I'm sorry to get into too many details on the call, but that's really helpful. One quick one, maybe more higher level for you, Angeliki, is you and the team have been very successful sourcing, I would say, sourcing transactions or maybe capitalizing on the weak market generally for the less well-capitalized players. But I would imagine the deals are somewhat harder to come by today given the prices have also increased. Of course, that also helps your sale of your vessels, some of the older vessels. But how does that enter your thinking in terms of, as you're balancing -- I mean, Navios Maritime Partners is an MLP, one of the few in the world that does not pay a distribution, but yet, you've justified that in the past by saying that there's a lot of more accretive opportunities, and that's been absolutely correct. But as you look out prospectively, there's -- the market's definitely better, the deals are not as accretive clearly over a longer term. So how do you balance deploying cash and accretive transactions with actually doing something that MLPs are structured to do, which is paying a distribution? Just balancing those 2 in your mind in the current market would be very helpful.

Amit, you have seen the deals we are finding. I mean, even in 2018, we did deals with the banks and different transactions on the Panamax as you saw. Reality is that we understand that any decision on returning of capital is a long-term decision. We were [tweaking] 2015 on rebalancing. 2016 happened to be one of the worst years in drybulk in recorded history, at least on BDI level. And in 2017, we raised money in anticipation of a market recovery, deployed the money and had everything in place in order to have vessels in the water in Q4. So we are watching, we are starting and we are there to return capital in the best possible way for our investors.

I would now like to turn the call over to Angeliki Frangou for any additional comments or closing remarks.

Thank you. This completes our Q4 results.

Thank you for joining today's conference call. You may now disconnect your lines.