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spk02: Welcome to Atlas Corp's third quarter 2022 earnings conference call. I'd like to remind everyone that this conference call is being recorded today, November 2nd, 2022. I would now like to turn the call over to Will Kostlevy, Head of Investor Relations at Atlas Corp.
spk01: Good morning, everyone, and thank you for joining us today to discuss Atlas Corp's third quarter 2022 earnings report. We issued our earnings release yesterday evening after market close. We will refer to our quarterly earnings release accompanying earnings presentation and earnings supplemental workbook today in this conference, which all can be found on the investor tab of our website, atlascorporation.com. I would like to remind you that our discussion today contains forward-looking statements, and I draw your attention to the disclaimer on slide two in the earnings presentation. Please note that we report non-GAAP measures, which we believe provide investors a clearer understanding of the performance of our business. The earnings release contains supplemental financial tables and information pertaining to our quarterly earnings report and includes definitions of non-GAAP financial measures and reconciliations of such non-GAAP measures to the most closely comparable U.S. GAAP measures. These definitions may also be found in the appendices at the back of the earnings presentation, which we may refer to in our call discussion. Please turn to slide three. On the call with me are Bing Chen, President and CEO of Atlas Corp, and Graham Talbott, Chief Financial Officer of Atlas Corp. Joining us on the call during the Q&A session is C-SPAN's Chief Commercial Officer, Peter Curtis, and C-SPAN's Chief Operating Officer, Torsten Petersen. Following our prepared remarks, we will open up the forum to a question and answer session. With that, I am pleased to now turn the call over to Atlas Corp's President and CEO, Bing Chen.
spk03: Thank you, Will, and good morning, everyone. Thank you for joining our call. To begin, I would like to quickly cover the developments in the acquisition proposal. received by our Board of Directors on August 4th, 2022, from affiliates of Fairfax, the Washington family, David Sokol, and O&E. Yesterday, we announced that following the recommendations of the Independent Special Committee that was appointed by the Board of Directors to review and negotiate the proposal, Alice has entered into an agreement to be acquired by the Poseidon Consortium. The transaction is subject to several conditions, including approval of a majority of affiliated shareholders, regulatory approvals, and consents. We expect the transaction to close in the first half of 2023. For more information regarding the transaction, please refer to our public disclosures. In the meantime, management is focused on business as usual and continuing to successfully execute on our strategy. Today, my comments will focus on our key developments in our business. Then I will hand it over to Graham Talbot to present our Q3. 2022 results and provide a financial update. Please turn to slide four. I would like to start by reviewing the key developments at C-PLAN. Leveraging our creative customer solutions and partnerships, we forward fixed 14 vessels in the third quarter. These forward fixtures contribute over $1.1 billion of gross contracted cash flow to our total current balance of $18.6 billion. This leads to our fleet having an average TEU weighted charter duration of 6.9 years and being 100% contracted for the remainder of 2022. 99.6% for 2023, and 96.8% for 2024 on a TEU basis. In the quarter, we continued to diligently execute our new build program with the delivery of two 11,800 TEU new builds, which commenced five-year charter upon delivery. In October, we delivered another 11,800 TEU new builds and our first 15,000 TEU new builds, both of which commenced five-year charters. To date, the large majority of the 11 deliveries from our 70-vessel new build program have been ahead of the schedule, delivering incremental value to our customers and shareholders. This further demonstrates our consistent operational excellence and our confidence in delivering the remaining new builds on time and on budget, subject to third party circumstances. In September, we announced the contracts related to our order of four 7,700 TEU dual-fuel LNG new builds become null and void. This was due to the shipyard failing to obtain refund guarantees. In line with our no-risk discipline, refund guarantees are a required condition in all our new-build contracts, and therefore, no capital was deployed. During the third quarter, we continued to maintain a strong vessel utilization rate of 98.6%. We also maintained our industry-leading safety record with a lost time injury frequency of 0.22 delivered through a continued focus on safety of our people. Our team's diligent execution, coupled with our consistent operational excellence, continued to drive our performance in the quarter. Please turn to slide five. Now let's review some key developments at APR. APR successfully completed its four-month Imperial Irrigation District power generation contract in September and Mexicali dry leaf contract in October, with demobilization of a total seven turbines currently underway across both sites. APR also completed mobilization and installation of eight turbines in October under its 44-month contracts in Brazil, and APR's lifecycle contracts are continuing successful operation until early 2023. APR completed its five-year contract in Argentina earlier this year, and as of today, demobilization of the turbines at both sites is complete. During the third quarter of APR, achieved an asset utilization of 80% and achieved a perfect lost time injury rate of zero. Thank you for your time today. I will now turn the call over to our CFO, Grant Talbot.
spk04: Thank you, Bing, and good morning, everyone, and thank you very much for joining us today. Please turn to slide number six. So in Q3 2022, we maintained our consistent operational and financial results. During the quarter, Atlas achieved the following performance relative to Q3 2021. Our revenue decreased by 2.7% to $439.6 million. This is primarily driven by a seasonally high asset utilization in APR in Q3 2021. C-SPAN delivered a small revenue increase over the same period. Our adjusted EBITDA decrease was 9.7% down to $291.1 million, and FFO decrease of 17.2% to $205.4 million. And at the end of the quarter, we had liquidity of just under $1.3 billion. So amongst the backdrop of macroeconomic headwinds, I'm proud of the team's consistent high performance and execution. These results exhibit the strength and resilience of our fully integrated operating model and focus on operational excellence, providing predictable through cycle returns to all stakeholders. Please turn to slide number seven. As discussed previously, the continued optimization of our balance sheet is part of our operational excellence culture. Furthering our progress towards achieving the investment grade rating, C-SPAN had its ratings reaffirmed by Fitch, Standard & Poor's, and Kroll at BB, BB-, and BB+, respectively. In addition to our ratings at C-SPAN, we received our first credit rating for Atlas, which is a BB plus corporate rating from Kroll. These agencies referenced Atlas and C-SPAN's improvements in business risk management and our increasingly diversified funding sources as key drivers for their ratings. They also highlighted that our increasing unencumbered asset base and proportion of unsecured debt were supporting factors. In October, C-SPAN upgraded the financing for 15 of its 7,000 TU new builds from a $1.1 billion bank financing facility up to a $1.5 billion ECA-backed Jolko structure. The upgraded facility has a significantly lower cost, supported by backing from Sinashore, the Chinese export credit agency, and includes a low-cost fixed-rate component. This financing represents the third transaction utilizing our award-winning ECA-backed Jolko structure, which has now been used to finance 33 of our new-build vessels. At the quarter end, C-SPAN remains well-positioned in the current inflationary environment, with approximately 70% of its debt, including preference shares, tied to fixed interest rates as of quarter end. This position was established through issuing a $500 million long-term floating to fixed rate interest swap in Q1 at 1.9%, a $500 million fixed rate U.S. private placement in Q2 used to pay down existing shorter-term floating rate debt, and an additional $75 million long-term floating to fixed rate swap in Q3 of 2.4%. As of quarter end, the mark-to-market valuation of our hedging position was $125 million positive. We feel this position is appropriate given the current market conditions, and we will continue to actively monitor our interest rate exposure. Please turn to slide number eight. Now I'd like to summarize our quarterly performance by leaving with five key takeaways. Number one, Together with our strong underlying performance in the quarter, we're focused on disciplined quality growth that contributes to our resilient business model. Number two, we will continue to optimize our fleet to de-risk our portfolio and recycle capital. Number three, APR continues to focus on generating long-term predictable cash flows through higher asset utilization and redeployment of its fleet. Number four, We continue to diligently execute construction and delivery of our new build vessels to our customers. To date, we've delivered 11 new builds from our 70 vessel new build program, the large majority ahead of schedule. Number five, we're continuing to strengthen our balance sheet in line with our target of achieving the investment grade credit rating, in addition to proactively managing our interest rate exposure amongst inflationary pressures. Finally, I'd like to briefly address the recent announcement about the agreement for the Poseidon Consortium to acquire Atlas. We caution that while an agreement has been reached, as mentioned earlier, it's subject to closing conditions. And there can be no assurances that any transaction will result. Management is focused on running this business and executing on its strategy. As such, I ask that you keep your questions today focused on our financial results and performance. With that operator, we would now like to open the line to questions. Thank you.
spk02: Certainly. Ladies and gentlemen, if you have a question at this time, please press star 1-1 on your telephone. And we have a question from the line of Liam Burke from B. Riley. Your question, please.
spk00: Yes, thank you. Graham, I know we're not supposed to tread carefully on this first question, but presuming the the transaction, the proposed transaction with Poseidon goes through that would the company would go private. But you have publicly traded preferred stock. What happens should this transaction occur? What happens with those preferred shares?
spk04: Good morning, Liam. Always good to hear from you. Thank you. That's an excellent question. And we have now communicated to the market that our preferred shares will remain listed on the NYSE, and hopefully that clarifies any questions that anyone has about their liquidity going forward.
spk00: Great. Thank you. And, Bing, without going into too much detail, you did cancel those four vessels. With your current backlog of orders, do you see any problems with deliveries, delays, or any sort of related problems to what you saw with these four?
spk03: Yes, good morning, Liam. Thanks for the question. For the cancellation of the four 7,700 as we previously announced, This is solely due to the shipyard that is failure to provide the refund guarantee, which is a condition in all of our contracts when we sign any new build. So due to the failure of obtaining this refund guarantee, the contract is void. And so therefore, from our side, that there's no exposure neither to our customer nor to the shipyard. With regard to the remaining delivery of the new build, as my colleague mentioned earlier, so far this year we had 11 new build deliveries ahead of schedule. And as I stated earlier, with the excellent team, of our people working with our shipyard and the customer. We expect the remaining of those new builds to be delivered on time. Of course, they are subject to external factors which are beyond our control.
spk00: Great. Thank you, Beng. Thank you, Graham.
spk02: Thanks, Les. Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Bing Chen for any further remarks.
spk03: Thank you. Once again, thank you, Liam, and all the others attending our call. Appreciate your time. You have a great day. Thank you.
spk02: Thanks, everyone. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program.
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