Tsakos Energy Navigation Ltd (TEN) 2009 Q4 法說會逐字稿

Good morning. Thank you for joining us for Tsakos Energy Navigation's Fourth Quarter and Full-Year 2009 Earnings Conference Call. By now, you should've received a copy of the earnings press release. If you have not, please contact Sarah Freeman of CJP Communications at sfreeman@cjpcom.com. She'll be happy to email a copy of the release to you.

Again, this quarter, TEN is providing a supplemental slide presentation with fleet employment and financial data, which can be accessed from the front page of TEN's website at www.tenn.gr. Please note that this is an informational presentation only and will not directly reflect the flow of management's comments on the call this morning. As a reminder, this conference call is also being webcast. To access the webcast, please refer to the press release for the web address, which will direct you to the registration page.

At this time, I'd like to read the Safe Harbor statement. This conference call and the accompanying slide presentation contain certain forward-looking statements within the meaning of the Safe Harbor provision of the Privacy Security Litigation Reform of 1995. And thus, there is caution that such forward-looking statements involve risks and uncertainties, which may affect TEN's business prospects and results of operation. Such risks are more fully disclosed in TEN's filings with the Securities and Exchange Commission. Thank you.

Now I'd like to turn the call over to Mr. Nikolas Tsakos, President and CEO of Tsakos Energy Navigation.

Thank you, Natalie. Good morning and good afternoon to everybody. Happy St. Patrick's Day. We're very glad to be here to announce our 16th consecutive profitable year and being in operation in a very difficult period as 2009 was. 2009 was an important year for the Company because we were able to do a lot of things, place a lot of our tonnage, modernize our fleet -- and I think George, Mr. Saroglou, is going to go into this -- and still be profitable and lay the foundation for the next phase of our growth.

Then, for those of you who may know, we have kept out of trouble and we have tried to avoid the bubble bursting in values for the shipping industry and specifically of our side of the business, the tanker market. And so, we have kept out of trouble from 2007 until 2010. But we currently believe that there are indications that the market -- it's a good time for us to go on with the second phase of our expansion. And we will get into this into details as Mr. Saroglou is going to analyze what happened within 2009 -- it's a difficult year -- and also the beginning of 2010.

In the meantime, I will ask our Chairman Mr. Stavropoulos to give us his thoughts and comments.

Thank you very much, Nikol. I'll join Nikol in wishing everyone a happy St. Patty's Day. The reports from my former home in Chicago is that the celebrations have been in full swing since Saturday. And those who are still sober advise the Chicago River is Irish green. For those who have Bloomberg screen, I want to wish you many, many green days.

As the shipping industry and the general economy goes through hangovers which will last for a very long time, recent natural phenomena, like the earthquakes in Haiti and Chile, remind us that cycles are predictable but their timing intensities are highly uncertain. We're also reminded that the initial shake is only the beginning of the destruction and ensuing pain, that tsunamis and the aftershocks compound the damage.

The recent economic earthquake shook the very foundations of the world's financial systems. Tsunami that followed paralyzed world commerce. As trade finance evaporated, channel party risk became toxic. Despite massive aid from the governments, many firms failed, while others became wards of the state, collectively trading for dollars that flowed from stimulus programs and the band-aids and tourniquets can stop the flow of blood, but the aftershocks keep coming.

Job creation is minimal. Bank credit is scarce. Property values continue to fall. World trade is struggling, and the threat of protectionism hangs in the air. Sovereign debt roams freely and the risk of failure is widespread. The hangover will be painful and long. The banking industry has suffered in this environment. As we know, all consumption contracted in both 2008 and 2009. The IEA forecast the rise in consumption this year, reflecting the growing needs in the emerging markets. But the bad news is they foresee stagnant demand of the developed countries in the years ahead.

Meanwhile, the tanker industry's capacity continues to expand. Hopefully, a new balance will be struck by 2012. The lessons we have learned are many. But basically, they are plan your future with realistic optimism, but be prepared for very unpleasant surprises.

Nikolas, the performance of TEN in 2009 and your financial position today suggests you and your management team followed these principles. You continued to upgrade the fleet with your renewal program, while at the same time you remained profitable and reward your shareholders with continuous dividends. Keep it up. Congratulations on a job very well done and I congratulate you and your entire management team for the job you've done in this most challenging year. Thank you.

Chairman, thank you very much for your good words. And Mr. Saroglou is going to give us a detailed analysis of the happenings of the quarter, some highlights for the year. And then, our CFO Mr. Durham will give us the numbers.

Thank you, Nik. Thank you, Mr. Chairman. It's my pleasure to speak with all of you today to provide you with the details of another quarter and profitable year while operating in the worst economic environment there was since the 1930s.

TEN operated a fleet of 47 tankers during the fourth quarter. The economic environment in which we operated in the fourth quarter and also throughout the year continued to be challenging. The synchronized global economic recession that materialized after September of 2008 continued well into 2009.

And this resulted in the worst reduction for the world trade volume that the International Monetary Fund has ever recorded at 12.3% reduction in 2009, a second consecutive year after 2008 of decreased world oil demand, which according to the International Energy Agency will in 2009 be around 85 million barrels, about the level from the 2006 global oil demand, when the global tanker fleet was smaller in both dead weight and in total size compared to where it is in 2009.

And just to give you some numbers, the tanker fleet was approximately 684 million dead-weight tons at the end of 2006 compared to approximately 435 million dead-weight tons at the end of 2009. The falling commodity prices led to OPEC's decision for production cuts with high compliance level of around 85% during the first quarter of 2009, which later started slipping as oil prices rebounded as the year was progressing.

All we have bought together with sizeable newbuilding inflows put spot rates across the board at levels near or below vessels' operating expenses during the year. This started gradually in the second quarter, and in the typically low demand third quarter spot rate rates reached their year lows.

We have seen a rebound in global economic activity and the sentiment in the latter part of the year, thanks to extraordinary coordinated government-led stimulus support programs that initially stabilized the global economy and subsequently put the global economic recovery to a stronger start than initially many anticipated. However, the recovery in most advanced economies is expected to remain weak by past standards, whereas in many emerging and developing economies relatively vigorous, largely driven by internal demand.

Going forward, we are encouraged by the expert belief, the International Monetary Fund, and the International Energy Agency that the worst is behind us and by their forecast of nearly 4% growth for the global GDP in 2010 and 1.8% or 1.6 million barrels per day for the 2010 global oil demand.

Let's look at the highlights of the fourth quarter, which typically is one of the strongest quarters for energy demand and energy transportation. The freight market improved from the end of November, resulting in a good December. But the improvement was not spectacular since it came from a lower base. The fourth quarter 2009 or December 2009 spot rate rates are clearly at least 45% below the level that sits in the fourth quarter of 2008 and in December 2008 and well below the expected historical average.

We operated a fleet of 47 tankers versus 45 tankers in the prior-year fourth quarter, continued the tight cost-containment program on the expense side of the business, and registered a 10.5% reduction in the daily average OpEx of the fleet for the quarter and the main 8.9% reduction for the year, as Paul will explain.

Charter in three charters during the fourth quarter, eight tankers and through the year nine more for 17 tankers in total in a variety of fixed-time charters, time charters with a minimum base rate and profit sharing, pooling arrangement, and contracts of afreightment. The duration of these charters in all 17 cases is at least for minimum one year if not longer with the maximum period being three years.

Since the sale and purchase of tankers is an integral part of our operations, as we have demonstrated with a series of transactions over the years, in the fourth quarter, we sold a 2002 build Suezmax tanker for a capital gain of $5.1 million, which was part of our first products and series for the Suezmax tankers that we did at the [Sunco] shipyard in South Korea.

Agreed to sell consistent vessel was delivered in March 2010 and also agreed to sell two 2003 build Aframax sister vessels to a government company looking for modern products to transport their own cargoes with scheduled deliveries for these Aframaxes in February and April of 2010.

The two 2002 build Suezmax tankers have been sold for the second time since initially they were sold to a German caged system with TEN having repurchase options, which were exercised back in 2007. These vessels produced an IRR of approximately 56% while being owned and/or operated by the Company. Then as an active newbuilding program, and we'll replace the four vessels that have been recently sold from the current newbuilding Aframax and Suezmax orders.

Continue to preserve a strong cash position during a short-term and typically [fight or freight] quarter and year. The Company entered the year with cash balances of approximately $300 million. We currently have nearly $361 million and expect to have them grow by another approximately $10 million upon delivery of [Madisos] to her new owners in April.

Initiated during the quarter in December, a modest after-market equity offering program of up to 3 million shares. The objective behind this program is to enhance the liquidity of the shares following a buyback program that started back in 2005, where a total of 3.8 million shares had been repurchased, from which 2.75 million have been canceled and 1.05 million shares have been kept as treasury stock. Paid on October 29, the first semi-annual dividend for fiscal 2009 of $0.30 per share, which was followed by the second semi-annual dividend for 2009 of $0.30 announced on March 16, 2010, payable on April 29, 2010.

For the full year, the fleet operated at 97.7% capacity compared with 97.3% in 2008, due primarily to fewer days lost in dry docking requirements, despite the special survey acceleration of five tankers from 2010 in 2009 in order to have a more balanced fleet special survey schedule in 2010 and also to take advantage of our improving pay-trade environment in 2010.

Took delivery of the fifth and sixth DNA Aframax expansion in the Princess series, Ise Princess and Asahi Princess, which the Company built at the Sumitomo shipyard in Japan. Both vessels were chartered ex-shipyard and repositioned inside assigned charters.

Re-entered the newbuilding market in the summer of 2009 by placing orders for two Suezmax tankers at the Sundong shipyard in South Korea for delivery during the second quarter 2011. These orders were placed at a significant discount to the high-priced newbuilding Suezmax tankers established in 2008 and will serve as replacement tonnage to the Company's 2002 Sunco-built Suezmax tankers that have been recently sold.

The contract price has been recently reduced by another $2.5 million per vessel following the Company's agreement with the shipyard for a one-off, lump-sum prepayment of $32 million within March. Continued the balanced employment strategy of the corporate fleet to a mix of four charters contract of afreightments, pooling arrangements, and period charters with fixed rates and period charters with profit-sharing arrangements.

Please turn to slide six on the online presentation to see the current employment details. We have four tankers trading in the spot market, four tankers in CoA, six vessels in pooling arrangements, and 31 tankers in period charters with fixed rates and profit-sharing arrangements. The dead-weight tons being operated during the quarter and end of the year was almost 5 million dead-weight tons with an average age of 6.8 years versus 9.2 years for the whole tanker fleet.

If you turn to slide three and four in the online presentation, you will see the current details of the TEN enterprise fleet. We've said many times that the sale and purchase is an integral part of our operation and philosophy of the shipping company. In this front, we are lately seeing more transactions after the very low-volume 2009. And improving spot rate environment in December and in the beginning of the year for all vessel categories is the reason for the increase in the activity.

Fleet finance capacity continues to be restricted and available primarily to bigger and better capitalized shipping companies with good track records in growing through market downturns and economic recessions. The US capital markets continue to provide an alternative way for shipping companies to finance their projects for capital expenditures as the deal flow indicates since the second half of 2010. And vessel values for both modern, second-hand, and newbuilding tankers have come down from the historical highs of 2008 but seem to have stabilized or with little room to fall further.

Cartridge shipping companies, which are looking since September 2008 for the so-called distressed acquisition opportunities in the tanker universe, are still looking. Approximately 25% of the tanker dead-weight ton capacity originally scheduled for delivery in 2009 has been deferred for delivery in 2010. Ships on order for 2010 delivery are less likely to have had finance fully arranged prior to the downturn.

This means that there is strong probability for the slippage of deliveries and for cancellation of orders to continue and possibly intensify during 2010. As a result, the quality and reliability of the tanker order books will be put to a test. And so, either the overall fleet growth will be more manageable, considering also the phase out of single-hull tankers, or we could finally see attractive acquisition opportunities.

We took delivery, as we said, in July and September of Isa Princess and Asahi Princess the fifth and sixth Sumitomo DNA Aframax tankers in an eight-series order we initiated back in 2008. Following the last Suezmax order, our newbuilding order book stands at four tankers. The two DNA Aframax tankers will be delivered in mid-April 2010, the Sapporo Princess, and in early July 2010, the Uraga Princess, in time to replace the recently sold Parthenon and Marathon.

Slide eight gives details of our newbuilding program, including the CapEx. We have already fixed the finance arrangements for the first of the two 2010 deliveries and have ongoing discussions in entertaining quarters for the second vessels at attractive terms. Let's not forget that we have built that part of the fleet with competitive price orders and options before the newbuilding market took off. And so, our strong balance sheet and strong cash flow position allows the Company to secure finance at competitive terms.

On the commercial front charters, we see that we still have an appetite to fix tankers forward, as TEN's 2009 employment renewal record indicates. As of today, we have fixed 70% of the available 2010 fleet operating base and 50% of the 2011 available fleet operating base. If we exclude the four vessels that are on contract of afreightments and the six in pooling arrangements, whose revenues are market related, and consider only the 31 tankers with fixed-time charter rates or time charters with profit sharing out of an operating fleet of 45 tankers.

And if we assume only the minimum rates for these 31 tankers, TEN has secured today 459 months of forward employment or 1.2 years per vessel and $282 million in minimum gross revenues until the end of their respective charters. The Company's charter partners are reliable first-class counterpartners. For a list of their names, please turn to page five of the online presentation.

The global economy has stabilized, thanks to unprecedented macroeconomic and financial policies at work and it's encouraging to see the periodic upward revision in the GDP figures of 2009 and 2010. The International Monetary Fund in their January 2010 report indicates that the global economy contracted by 0.8% in [Q4 '09] versus the October forecast of a 1.1% contraction and the July forecast quarter of a 1.4% contraction, while in 2010 we'll expand by 3.9%, up from 3.1% prediction in the October report and 2.5% in July.

Emerging and developing economies in Asia and primarily China and India will lead the way. In the same page, the International Energy Agency in their October assessment expects global oil demand in 2010 to rebound by 1.8% to 1.6 million barrels or 86.6 million barrels per day, again led by the emerging and developing economies of the world. We are back at the 2007 global oil demand levels.

The improvement in the global economic confidence is reflected in gains in stock markets around the world as well in commodity prices. Oil is trading again above 80, and this we have said many times has both positive and negative implication.

Negative implication in the sense that an expensive oil price environment threatens the global economic refineries or makes the recovery very sluggish, indefinitely creating balances between developed and developing economies that might not be adept to absorb oil price shocks. Positive in the sense that at these levels, the world will start investing again in exploration and production projects that guarantee additional future oil production capacity.

Another positive for the tanker market is at these levels, producing countries produce more oil. OPEC's latest compliance level is around 50% from 83% in March. And hence, demand for tankers will increase. Vessel conversion projects, like FPSOs and FSOs at these oil levels are coming back to life. And that's another positive variable for the supply of tankers in addition to 2010 phase-out deadline.

Global stock levels are coming down, standing at the end of January at 59.2 days of forward demand cover versus over 62 days [later] in 2009. In today's meeting, OPEC decided to keep production levels as they were before. The market, however, expects OPEC to increase production levels from the fourth quarter of 2010. The contango, the discount of short supplies versus later deliveries for both crude oil and products has narrowed enough and is no longer profitable to sell crude and products onboard a vessel.

Floating storage volumes have started to come down from the level seen early in 2009 but started to still impact the utilization of the global fleet. Crude oil floating storage levels are currently estimated at a little over 30 million barrels, down from 55 million in November of last year and down from 100 million barrels, which was the fixed level of 2009.

Product floating storage, particular in individual diesel and shipping oil are estimated today at 30 million to 40 million barrels, down from 97 million barrels in November, but up from the 30 million barrels back in April 2009. Around 117 vessels, a little over 2% of the current fleet, are used worldwide for storage.

As the spot market improves, we continue to see the big charters, all major government companies to continue having an appetite to fix anchors forward. Their intention is to fix vessels to three-year charters or longer, while owners are trying for shorter periods with a profit sharing element to help them capture the market's anticipated further improvement.

Our 2009 chart renewal record is a testament of Tsakos forward fixing appetite, even during a year that is characterized by many as the most difficult year in the last decades. We have a balanced time charter portfolio of fixed-time charters and charter profit sharing arrangement, CoAs, and spot-related charters, which we actively manage as we continue to develop business opportunities in relationships with the Company's clients.

The Company continues to grow and to operate profitably quarter after quarter and year after year. We have profited every year since our inception in 1993 despite going through some very bad markets, like the 1997-98, 1999, 2001-2002, and in 2008-2009.

The Company's profitable, has a strong cash position, is looking to grow further, and continues the stated policy of dividend distribution. Slide 11 shows our dividend distribution since 2002. Since we listed the Company in the New York Stock Exchange, we paid $8.18 in cash dividends, including the latest April 2010 distribution of $0.30.

On a split-adjusted basis, the last 2002 price that we listed TEN in the New York Stock Exchange was $7.50. Investors for both the Company at the March IPO level had their initial investments fully repaid. Since the listing, we've paid back approximately $308 million in the form of dividends and since 2005, we'll repurchase stock worth $82.6 million.

Going forward, then we'll continue focusing on the day-to-day operation of the fleet, keeping vessels employed at full utilization as possible, in managing cost pressures, controlling costs, in growing the fleet, and in navigating the Company safely through these challenging times. We are confident in the Company's strength and the Company's financial power, strategy, personnel, intense ability to grow in difficult times, as our track record since 1993 indicates.

Without further ado, I would like to turn the call over to Paul Durham for his review of the financials. Paul?

Thank you, George and thank you for joining us today. I'll now say a few words about quarter four and 2009, starting with an overview. Following our record year of 2008, the tanking industry finally became a victim to recession in 2009 and TEN achieved first revenues of $445 million in the year compared to $623 million in 2008. So, what's important news in the reduction of overall expenses at approximately $58 million and I'll talk about this in more detail in a moment.

Capital gains, frequently a major feature of our annual results, were just $5 million on the sale of the Suezmax Pentathlon compared to nearly $35 million gains in 2008. And we suffered an impairment charge of just over $19 million. As a result, our reported net income for 2009 was $28.7 million compared to $202.9 million in 2008. Take out the impairment charge from 2009 and the capital gains from both years to arrive at the analysts' version of net income. We are comparing $42.6 million for 2009 to $168.4 million in 2008.

Why are we incurring an impairment charge in quarter four? Initially, we had expected some uplift in the markets, even for our early '90s double-hull vessels, Hesnes, Victory, and Vergina. But in fact, we saw the earnings capacity of these vessels die and no relief in their operating costs.

Our cash flow test had to take account of these deteriorating circumstances, resulting in a shortfall of future cash against the book value of these vessels and consequently a write-down of their book values. This non-cash amendment therefore obliged us to report for quarter four a negative $16.7 million compared to net income of $27.6 million for 2008.

Quarter four revenue was $98 million compared to $106 million in quarter four 2008. The average TT rate achieved was approximately $18,100 for quarter four 2009 compared to nearly $33,800 in the fourth quarter of 2008. This was clearly a significant fall, which affected all categories except for the LNG carrier. The improvement in the latter part of the quarter came too late.

And for the VLCC's La Madrina and La Prudencia, any profit share above the minimum rate in December cannot be booked until the six-month average is determined in May. That also means that any quarter one profit share on these vessels will not be booked until May. We were pleased, however, not to have lost any days apart from the scheduled dry dockings. So, we did achieve, as George has mentioned, vessel utilization of nearly 98%.

For the year 2009, the average TCU was approximately $22,300 compared to $34,600 for 2008, again affecting all categories apart from the LNG carriers. Total operating expenses in quarter four were $37.4 million. That's 4% decrease from quarter four 2008. However, daily average OpEx per vessel fell to $8,743 from $9,652 between the two fourth quarters, a 10% decrease due to reduced repair and service expenditure. This is also reflected in the average daily cost per vessel for fall of 2009, apart from -- which also fell by over 8%.

Part of the explanation for the reduced repair cost is that those vessels dry docked in 2009 were newer and smaller with minimum extra repair work required and generous incentives provided by the yards for work performed and additional financial benefit for bringing the dry docking forward.

Total daily overhead per vessel, which usually includes G&A, management fees, incentive awards, and stock-compensation expense, fell to $1,081 in quarter four 2009 compared to $1,954 in quarter four 2008, mainly due to the fact that despite extra blood, sweat, and tears, no incentive award was given in 2009. And there was also reduced G&A expenditure and lower amortization of stock.

Total finance costs for the year amounted to nearly $46 million compared to $83 million in 2008. Loan interest net of swap payments fell by $9 million due to the fall in bank interest rates. But rises in long-term interest rates resulted in positive interest rate swap valuation, which in the case of our two non-hedging swaps provided $6 million positive movements, of which $3 million was in quarter four, compared to $15 million negative movements in 2008, of which $11 million was in quarter four 2008.

During 2009, we entered into a number of swaps to provide some cover against rising [puncture] prices. We realized gains of $1.7 million in cash on these swaps and enjoyed a further $6.4 million in non-cash positive movements in valuation. These are included in finance costs. During quarter four, our finance cost amounted to $9 million compared to $31 million in quarter four 2008, again due to swap valuation gains and lower interest rates.

During 2009, we drew down $81 million in loans, mainly relating to the delivery of two newbuilding Aframaxes. Loan repayment amounted to $92 million, bringing outstanding loans at the year end to almost exactly $1.5 billion. Our net debt-to-capital ratio at the year end was 57%, and leveraged that takes account of values was 56%.

We currently have two Aframax tankers and two Suezmax under construction with a total contract price including revisions of $260 million, of which $44 million has been paid, leaving $216 million to be paid, $156 million in 2010 -- actually $38 million of this next week -- and $60 million in 2011.

To cover much of this, we expect new debt of $76 million in 2010, of which $40 million for the first delivery has been arranged, and $86 million in 2011. For the second delivery in July, we are studying loan term proposals and we are currently discussing financing for the two 2011 Suezmaxes.

We still believe we are in a strong and lucrative position. We now have $360 million in cash and quarter one so far of Tsakos operational earnings, we received sales proceeds of over $60 million from the sale of the Decathlon and Parthenon and $11 million from our ATM program, which we expect to resume shortly, albeit for a limited period.

And this concludes my comments and now, I'll hand the call back to Nikolas.

Paul, thank you very much for your very detailed analysis. And with this, we'd like to open the call to any comments, questions that you might have. Thank you.

(Operator Instructions).

Your first question comes from Natasha Boyden with Cantor Fitzgerald.

Hello?

Hi, Natasha.

Hi. Quick question -- very general questions, really -- I mean, you've obviously done a lot so far in terms of selling your older vessels and renewing your fleet. I'm just wondering if there are anymore vessels at this time that you would look to sell or have you pretty much renewed everything you think you can?

One of the reasons I think that we are looking is we have fleet for sale and we're negotiating the old vessel, the oldest, especially the ones we have still in berth, but yet as a victory. We have interest also for our Aframax [double-hull] on the '91. But we have fixed that ship forward in West Africa to one of our traditional clients at a very good trade show. I think she's out of the market.

So, I think, yes, the two older ships are for sale and we're expanding negotiating something. We will have -- within the first six months, we'll be replacing those ships. And then, we will be looking for -- to the placement by model in our Panamax vessels in order to cover their positions.

We have been successful almost to the pursuant to the market, almost to the date to replace our Suezmaxes with new and as George said, very, very well-priced ships that are coming in the first and second quarter of next year. Our Marathon and Parthenon, the Aframaxes ships, we were able to sell those ships, believe it or not, higher than what we actually contracted them eight years ago. So, that's -- and the returns -- the IRR returns on those are in the mid 50s with those transactions, the same with the Decathlon and the Decathlon, the IRRs are also in the 70s.

So, those have been I think adding to the shareholder value significantly. We will -- and as we state in this, we have not convinced you yet, Natasha, perhaps over [Posadonas]. We can revisit every year in and out, we are participating very actively in the sales and purchase market and we look at it as a way to reward and enhance shareholder value and, of course, replenish our fleet. So, we'll done it again this year and we'll be doing it going forward.

Okay. And in terms of acquiring vessels, obviously, there's -- you can model second-hand tonnage also in the shipyard. Are you seeing any interests in the shipyards and them approaching you and trying to get you interested in perhaps vessels that have not been financed yet or require some further financing that the original owner couldn't do?

Yes, and I think some of the owners who made in the middle of the last year at the bottom of the market I would say have those features. We cannot give any details. But we're situated who were not able to either finance or could not afford to buy. They had already made their deposits. And the yard was -- the yard would've been working and have already spent close to $4 billion in replenishing our fleet from 1997, looking at us as the first or one of the first companies to pick up when this occurs.

Okay. And I just wanted to take a look at the impairment charge. It looks like that was for your three oldest vessels in your fleet. Do you anticipate any further impairment charges on the rest of the fleet? And if so, does this have any material impact on your compliance and your credit facilities?

Well, I think this stuff is what Paul is dealing with. I do not understand impairment. He wants to make me an unprofitable quarter with all these changes, apparently.

Well, our cash flow testing indicates that no other vessel is anywhere nears a potential impairment. The cash flow, because they're only tentatively modern vessels, the cash flow to be generated by these vessels over their remaining useful lives is in most cases several times greater than the current book value.

As far as the three vessels that we did impair, it had no impact on our covenant situation. They all belong to the same loan actually. And although it is pretty borderline-ish, it still passes the covenant test. And in any case, because we put the Hesnes and Victory into a held-for-sale category on the balance sheet, we're also obliged therefore to put the related loan on those vessels into current loans, so overall no impact.

Okay. Great. Well, thank you very much.

(Operator Instructions).

Your next question comes from Daniel Burke with Clarkson, Johnson Rice.

Wanted to start with a question about the ATM offering. Paul, right at the end of your commentary, I think you had noted that you all expect to reinitiate that program. And then, you added the comment albeit for a limited period and wanted to understand better what that comment meant.

That means that because of -- by the time we announce our results we filed [with SMS], we make lawyers and accountants very rich. Then, we go into another quiet period so we cannot really leave the program as much as we would like. So, it gives it I guess a couple of weeks' time between the time that you are able to have what they call -- rapidly go to a quiet period. So, that's the comment.

Yes, when we're -- quarter one is about to finish and we will soon be starting with the quarter one closing process. Once you are in a position where you feel comfortable with the quarter one numbers, predicting them, then really you have to stop trading. So, that's the reasons.

I understand. Okay. That's helpful to understand it's for quiet period reasons. I guess more broadly, though, Nik, you all remain committed to advancing the ATM. It seems like the market's been better than you expected. So, maybe cash flow so far this year a little better than expected. But given the priority in terms of improving liquidity, working through the ATM remains a goal this year. Is that fair?

Yes, I think this is a problem. But we actually found it useful in creating liquidity. We have bought back about 4 million shares in the last four or five years with an average of -- excluding the dividend -- about $17.

And we look at it as a way to increase liquidity in the market and also, of course, get some very interesting cash, which we are using much more productively than just sitting in the bank in the sense that, as George said, we have no -- we are going to be -- we have negotiated with one of our very close yards to make an early payment for the delivery of a ship for $32 million, $33 million in order to save $2.5 million within the next three to four quarters. That's [very vessel].

I understand. And then --

Very good return. So, it's good to have the liquidity and when the markets are tough, liquidity -- it's very important then to use it correctly.

Let me stay on the cash side then actually and switch and ask a separate question. Paul, do you have -- I don't think I heard it during your prepared comments. What are your scheduled loan repayments in 2011 and 2012? Do you have that available right now?

Yes, sure.

And maybe if it takes shuffling some paper, my other question, Nik, was going to be on the macro side. Just coming back to the VLCC market, rates have been pretty resilient as of late and I guess I was curious if your feel is that we're going to come down from what has felt like a somewhat seasonally influenced period of strength or whether as we head into Q2 there's some potential for rates to remain at pretty -- all else equal -- healthy levels.

Well, I think the reality is -- seems to be maintaining the good performance. And I think as Paul -- I think this will be also appreciated I guess in our second or third quarter numbers because we have all our VLCCs other than one out on profit-sharing agreements. And they are in the profit sharing as we speak today significantly. So, that will help I think our second and third quarter when that happens.

We expect the market to maintain this balance. I mean, it's nothing for those of us -- all of us who've been around for the three years ago, this is nothing to write home about. But it brings very respectable returns considering that the values on the [March] have been reduced by close to [75%]. So, I think -- and for us, we still have very low values and have booked the very good returns. We think Suezmaxes are also participating in this.

I mean, we had a very good beginning for the year. Then about February 15th, the market wasn't as quiet. I think it was all this Chinese New Year celebrations, et cetera. And then last week, we were seeing the market in the Mediterranean seems to be quite firm again. We're talking about in the upper 30s, 40s time-charter equivalent we fix in our ships today in the contracts here. So, I think it's a better situation than it was a month ago.

So, Daniel, just to get back to your question then, so in 2010 this year we're anticipating approximately $105 million scheduled repayments plus about $55 million prepayments on those vessels which were selling these months, $160 million in total. For 2010, we're back to the $105 million scheduled repayment and for 2012 similarly and that's a similar situation. The big spike in our repayments in midst of our -- a lot of our loans anyway end. We get big balloon payments. It's not until around 2015 or 2016.

And the world will end in 2012. So, we won't have to worry about it.

Okay, great. I think that's all I had. Thank you, all.

Thank you.

Your final question comes from Vernon McCreary, The Stockbroker Club.

Hello. It's Vernon McCreary. I'm a shareholder. Can you hear me?

Hi, Vernon. How are you?

Very good. I've been making notes since you released your earnings this morning. I had so many questions. Your presentation was very thorough. It was tough to jump around and follow the printed page with what you're doing, but I just wanted to clear up a couple of things. This impairment charge, which you don't like the term -- or at least Nikolas said he didn't like the term -- is that a permanent thing or a temporary thing that will change around perhaps if things get better in the second quarter? And what is the opposite term of impairment charge?

We account under US GAAP and under US GAAP, unfortunately, you take an impairment charge, it's forever. You can't revalue the vessels if the market changes. That's one of the unfortunate things and ironically, the last impairment we had was back in -- I think it was 2002 when we had an impairment and then valued amid double change. We sold those particular vessels and made a big capital gain because we had impaired those vessels, which is a bit of a nonsense really.

Yes.

So yes, it is permanent.

It's permanent. But one would expect --

Yes. Under US GAAP. Now however, under IFRS, there is scope to revalue and it's possible that we all have to get under IFRS in a forthcoming year.

But these vessels will be grounded.

Yes, vessels will be -- these vessels will be sold. If not, we have to restate our prior years.

It's a lot of juggling, huh?

Yes.

So, would we expect a capital gain that would be somewhat opposite this impairment charge sometime later this year?

Well, look, as we said, we'd rather like to sell the Victory and Hesnes pretty quickly. It's not likely that we're going to make a capital gain.

All right.

And in fact, the kind of impairment charge is based on the kind of brokers' valuations and then bids that we're getting these days for these vessels. So on those two vessels, unlikely.

Well, unless the Suez Canal closes for some reason and you have a huge geopolitical change that -- then I think then you might see that those do. But we do not expect to have, as Paul said, a significant, significant capital gain.

All right. Again, about the shipbuilder giving you a discounted price on the newbuildings you're getting this year, is that because generally the market -- or does your shipbuilder just need some money? Then, you've got to give them $35 million in cash and they give you a discount on their prices. Can you tell us about how your shipbuilders are doing financially?

It's $32 million, yes, $16 million per vessel. I think it is a combination. Shipbuilders right now -- thank God, and I hope for quite a long time -- I hope there is no [civilian online]. But I hope they will have very, very small order books and keep the supply out of our market in order for our market to return to an equilibrium.

As you know, there are -- most of the shipyards around the world, even the big ones, they want to deal less with ships that their owners cannot afford to purchase or they cannot afford to finance. And they need the cash flow for their ongoing business. It's a combination of both really.

All right. And another phrasing was put aside as an aside by Paul was extra blood, sweat, and tears. And I just want to know maybe physically or emotionally how that -- this terrible market has affected your company. Are you still happy people?

Well, I think our Chairman --

Vernon, if I may as an independent director who can maybe look at this more objectively than maybe the people within TEN itself, spirits are remarkably high. People are -- have their nose to the grindstone in addressing productivity issues. I promise you that whatever morale factor you had for TEN a year ago is even higher today.

Was it very tough to post a -- let's call it a fourth quarter loss with an asterisk. Was that very tough emotionally for your management group?

Well, the answer is no. But we took great pride having a record since 1993 of being profitable every quarter. Yes, it was not taken with pleasure.

Well, in North America, we have different economies. The Canadian market is reasonably buoyant and we clearly can't understand with our strong banks a tough banking situation in Europe. Can you just tell me -- we read about Royal Bank of Scotland. They're individually have their own problems and were taken up by the government. But how about the German banks? Are they still involved in ship lending? I know they have a lot of German limited partnerships.

Maybe it's down to one German bank still with an appetite to finance the shipping. The previous banks were very active in that field. Some of them no longer exist. Sadly, the bank which made TEN its first loan in 1993 has been absorbed by larger banks and no longer is an independent shipping bank. But yes, the availability of bank credit has shrunk dramatically. The good news for TEN is that we're still on the short list of those where they continue to knock on the customers' door.

Can you just tell me, too -- I know you probably have questions about the dividend policy, et cetera. When you gave the dividend for the whole year last year of $0.60 versus -- were you basing that on perhaps the $1.28, excluding the impairment charge?

Well, that was part of the consideration but by definition, the policy, as you know, Vern, is to pay out 25% to 50% of net income and that fell within that parameter. The impairment charge, please keep in mind was a non-cash accounting entry and didn't affect the available resources to pay a dividend. We have every intent as we see the world today to continue this dividend policy that's been in effect since 2002.

All right. I hate to ask --

Thank you.

-- some more general questions. But I just have to ask one more. Somebody said that it was -- it might've been George -- that this is the worst market that you've experienced since -- or maybe the world has experienced since the Great Depression. I haven't heard that before. So, it must be pretty bad, huh?

He was not referring specifically to the shipping market if I can interject. He was talking about the Great Depression that some of us had the displeasure of living through the latter part of.

Sure. Thanks for your patience. I appreciate it. Talk to you soon.

Happy St. Patrick's, Vern.

Thank you.

At this time, we have completed the Q&A. I would now like to turn the call over to Mr. Nikolas Tsakos for closing remarks.

Well, thank you very much. And again, happy St. Patrick's Day to everybody. Please have a beer on us. Thank you for the support to the Company. It's been a tough year, but a profitable year. I think we're looking I think to all our friends, we are looking very positively in the future. Our company has actually used difficult periods to grow and I think we're looking at this as a very exciting period.

We will be participating on the 25th of March in the capital link regarding the Company. [Most of] our shareholders are in New York and I think it's the Thursday, the 25th, we'll be very happy to see them face to face and organize one-on-ones and talk to them further about the goals of the Company. Thank you very much.

This concludes today's conference call. You may now disconnect.