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spk02: Hi everybody and welcome to FlexLNG's second quarter result presentation. It's August 14th and I'm Øystein Karl-Ecklef, CEO of FlexLNG Management and I will be joined here as usual by our CFO Knut Rohold, who will run you through the numbers a bit later in the presentation. Before we begin, just want to highlight we will do a presentation and followed by a Q&A session where the best question today can win a summer pack consisting of the Just FlexIt t-shirt. We are already preparing for Oslo Marathon in September. I might be on Gaztech and not able to attend this year, but Knut will run this year, he promised me. Flex on the beach, street, no beach, flex on the beach sandals and then of course the FlexCap. Before we start the presentation, I just remind you that we will be providing some forward looking statements, so there are limited details and we will be using some non-GAAP measures. Please also read the earnings report together with the presentation. Let's kick off with the highlights, revenues for the quarter 84.7 million, which was in This resulted in net income and adjusted net income of 21.8 and 30.4 million respectively. Just a reminder, the difference here is in adjusted net income we only include the realized gains and losses on derivatives, while in the net income figure we are also including unrealized numbers. So earnings per share came in at a healthy 41 cents or 56 cents on an adjusted basis. Of the major recent events, we also touched upon this in our earnings report back in May. We have fixed one ship on a 10 month charter, so we had as some of you might recall, we had flex constellation being re-delivered back from our three year firm charter, end of Q1 last year and we then decided to take it in DOC early as this is a low period of the market. We completed the DOC according to plan and budget and took it back in the market in the middle of April where we traded our spot for a while. We managed to get a cool down slot so we could get the ship back in cool condition and then after our spot voyage we fixed her on this 10 month charter with a large Asian LNG buyer. Where the re-delivery then is end of Q1 2025 but where the charter has the option to extend this time charter by one year to 2026. So that means we are fully covered, 100% charter cover for the remainder of the year, also very high coverage going forward as I also will touch upon a bit later in the presentation. As some of you also recall, we have been doing an extensive balance sheet optimization phase for some time and we had one phase where aim was 100 million, we did our balance sheet optimization 2.0 and then 2.1 and correct me if I'm mistaken Knut, I think we raised 387 million dollars on those refinancing and we actually have a very good financing situation but you know we are not idling because of a good financial structure, we try to optimize and find better terms. As I said in the Q1 presentation we had an extension of Lex Endeavour from 2030 to 2032 and with that attractive backlog on that ship we were able to secure a very attractive Japanese operating lease on that company and we also amended our bank loan and we have thus secured 430 million of new financing with a net proceeds from these financing of 97 million dollars which Knut will tell you more about. During this quarter Q2 is more or less always the softest quarter we try to plan or dry docking during this quarter so we had flex constellation as I mentioned in dock and flex corages also taken out from a TC out of operation in dock and back on TC. Both ships were done at 17 days each, three days below our guidance of 20 days, cost of docking around 5 million dollars according also to our budget. That means we do expect revenues and earnings to pick up in Q3, we have all the ships back in operation, two ships were out of the market for some time in Q2 so with all ships back in operation somewhat better spot market affecting the one ship on variable hire we do expect revenues to pick up to around 90 million dollars, time charter equivalent earnings also to increase a bit and the same then goes with EBITDA as most of our costs are fixed in the short term. So with our very healthy backlog which I will touch upon very strong financial position good outlook once again we are declaring 75 cents of quarterly dividend, dividend last 12 months is three dollars 12.5 cents per share implying a running yield of around 12 percent. So just a reminder here on the on the guidance we guided between 70-75 thousand on the TCE rate delivered in the middle of that we delivered spot on the revenues we said close to 85 million 84.7 million is as close as you get to 85 million and then adjusted EBITDA we said close to -63.2 a bit lower because OPEX is slightly higher in Q2 than Q1 due to timing effects that Knut will tell you more about and then as I said we expect higher revenues and earnings for Q3 and probably you know usually Q4 is the strongest quarter for us we have one ship on index linked to the spot market and Q4 tend to be the high season in the spot market as mentioned the dry dockings we had scheduled for this quarter was completed according to both plan and budget. I mentioned the backlog so there's been one change from or recently you know we have some core ships here on very long duration charters Flex Rainbow 2033 we recently extended Flex Endeavor from 2030 to 2032 where the option the the charter has the option to extend to 2033 and we utilize that kind of added backlog on that ship to refinance the ship on better terms Vigilant we last year extended to 2031 where the option is to 2033 and then we have two ships to 29 we have the Flex Freedom to 27 with option 29 Resolute and Courageous we announced in Q1 that those two ships were extended from 25 to 27 as expectation and we do expect these ships also to be declared until 29 due to the contract structure of these ships where you have a front-loaded firm rate compared to the option rate which you will also find more details about in our earnings report where the remaining ships in our portfolio have a higher about 18 percent higher option rate though this doesn't apply for these two ships and it has a bit revenue recognition effect although not a cash flow effect. Flex Voluntary Aurora 2026 with option to 28 then we have Flex Ranger fully open 27 and then as I mentioned Constellation Fixed Now until end of Q1 25 where the charter has the option to keep until end of Q1 26 so that's our first fully open ship with Ranger coming back of that in 27 then we have some ships in 28 29 which we think is a very good window of having ships open for reasons I will explain a bit later in the presentation then the last ship Flex Artemis it's on a variable higher index charter where it's linked to the spot market where typically revenues are highest in Q4 and then Q1 Q3 tend to be a bit similar and Q2 being the quarter here the charter has the option to keep that ship until 2030. So with the healthy backlog a high level of income visibility 47 years of firm backlog which may go to 66 years is we have a fairly predictable cash flow last three years now we paid out 528 million dollars of dividends consisting of the ordinary dividend 75 cents per quarter plus some special dividends in the past topping those dividends up and as we have said and touched upon a lot of times in the past the dividend decision factors I'm not going to go into too much details the change we have here we upgraded market outlook for reasons I will tell in the market section spot rates are up but that's not really the driver here it's really the fact that term rates have been picking up where we take this back to green as I said in last presentation we were intending to have the color yellow also in Q4 23 when we reported in February but we got a bit colorblind here by all the green lights and forgot to do it but we're upgrading this again to green so green colors on most of the decision factors in terms of the dividend and 75 cents once again declared bringing the trailing 12 months dividends to three dollars 125 and then I think I hand it over to you to start with the question on the financials
spk01: thank you Sten revenues for the quarter came in at 84.7 million slightly down from the first quarter but as explained by Einstein this is due to the seasonal lower period impacting the variable for flex Artemis and also the spot operations for flex constellation in addition we had fewer operating days as we had a number of ships in dry docking reduce resulting in enough fire that returns into a time charter equivalent per day of 72,400 and if you look at the vessel opex as we commented on the q1 presentation we were a bit low compared to budget but that is timing effects of our expenses so we're slightly higher this quarter but please note the full six months average of 14,600 and we are in that sense in in line with our budget when we look at the net income net income at 21 million 800 that is 41 cents per share in the report you will see that we had realized gains from a derivative portfolio of 6.8 million and we had unrealized losses of 3.4 million in the adjusted numbers we adjust out the unrealized and also the slight FX gain and then we also add back the cash gains that we realized on the amendment of a interest rate derivative swap in april as announced in the first quarter presentation we reduced the duration of two swaps one for q1 and one for the second quarter and that's adjusted into the numbers so we get an adjusted net income of 30.4 million or 56 cents per share looking at our cash balance we have 38 million from operations and 9 million of change in networking capital we reduced our depth by 27 million in schedule installments and they have also the cash from the termination of the swap and then paid dividends of 40 million that ends up at the cash balance at the end of the quarter 370 million and as we note here as the mentioned refinancing are expected to be concluded in the second half of the year we will free up 97 million and i'll come back to the refinancing a bit later on our derivative portfolio we have reduced the duration of it maintain the short term the short term high coverage which is in in line with our expectations of the long-term interest rate development when we now add a japanese operating lease we will also have a fixed rate element of that and in august we also amended a so-called mirror swap structure where we now have added 100 million dollars and use the positive value from the mirror swap structure and to reduce the fixed rate interest rate and as you see there it's the six years starting in 2026 at attractive 82.5 basis points on the refinancing they started off with a new contract or the extension of the flex endeavor contract which made sure attractive for a lease financing and in particular these jolco financing structures we will we have raised them 160 million dollars for that it's at near about 10 years lease financing and that will release about 48.5 million dollars this is a structure where we have a fixed rate element and a floating rate element and on a blended basis we have a a loan margin here of about so for plus 130 basis points which is very attractive on the back of that we are then refinancing the two remaining vessels of the 375 million facility we are extending the duration and also increasing the leverage somewhat that will release 48 million as you see we are matching the terms of the recent 290 million facility where we have now is a margin of sofa plus 185 basis points in total this will release 97 million dollars and we expect to conclude these transactions in q4 if we look at the depth maturity profile we see that we are now prematurely addressing our 2028 maturities we are pushing them now so we have remaining a maturity in 28 of a 103 million dollars and then spreading out the remaining maturities and with that i hand it back to you guys then
spk02: okay thank you to show you don't want the summer kit for your holiday with madonna so um okay let's look at the market so this is the overall product market for lng quite muted growth in the quarter up just about one percent year over year compared to last year with austria now us being the main go to engine no solidly behind night ahead of australian katar 43 million tons in the first half of the year versus 41 and 44 australian katar interesting to see that despite the conflict in ukraine russia is still growing and expect them grow even more so now with we have seen two loadings on the arctic lng2 the new liquefaction plant where they have been able to source older steam tonnage for this project to do the loadings as we alluded to in our may presentation where we said that we thought that a shadow fleet of lng ships would develop based on you know the discussion we had with different market actors and interest in the s&p market so not really surprising for us to see that rather a bit surprising that some people didn't expect this to happen russia have had a lot lot of time to prepare for this and we are basically they basically following the recipe for the petroleum market where they have been successful in keeping oil barrels flowing to friendly nations typically india china brazil so it's really the bricks so we do think that the russians will find also willing buyers for these lng volumes on the import side we have mature asia being japan korea taiwan growing four percent driven mostly by coal shutdowns and of course lower prices also helps europe had a mild winter with high inventories coming out of the season somewhat muted the energy demand and then reducing its imports by 20 percent year over year which means more cargoes are flowing again back to asia china growing very steadily 10 driven by low prices compared to to other feedstocks india even more so 25 impressive growth in india thailand been growing for a long time now 11 percent and rest of world also very good growth 28 percent so so we do see more shift of cargoes to asia which i will come back to here shortly if you look at it graphically you will see the us lng export share going to europe which kind of increased dramatically once once you had the uncertainty with russian flows to europe and even more so when you had invasion stayed at very elevated levels the energy situation in europe is more manageable these days and prices have come down which enticing asian buyers back to the market with now the asian importers being bigger again than europe which used to be the case in the past as you can see here in european gas demand here over a year change we do see some pickup in industry but power generation residential is quite muted and also gas storage levels at around 85 percent is quite high compared to the past the 10 year average solidly ahead of of that and then as i mentioned asia is where we see the growth which is generally positive for shipping shipping flexible cargoes all the way to asia via panama is almost yeah it's about twice the distance than going to europe but few lng ships utilize the panama canal panama authorities have had discussions with the lng exporter to try to find ways to entice them to use the panama canal but a lot of people are trading rather the cape of good hope which means that ton mile grows even more quicker since suez is not really a feasible route this time time so so if you have a u.s cargo going from u.s to europe typically rule of thumb is about 5000 nautical miles going to china 10 000 nautical miles going to china via cape of good hope 15 500 nautical miles so it's really a big driver of ton mileage which is good for the shipping market and which is also why shipping market have the sentiment has turned in the recent months so you do see here on the right hand side asian lng imports is up in the high range of historical demand and much higher than last year recent trend here lately again about russia we have had a somewhat surprising invasion of ukrainian troops into quite far into russia all the way to kursk not that far away from moscow and these are creating uncertainty about russian pipeline volumes that going to europe is still quite a lot it's also still a lot ukrainian transit as you can see here on the left side of the graph affecting you know potential purchasers like austria slovakia moldova and that's been firing up the european gas prices recently as there's more concerned about supply situation but then we also see a a similar response in asia asia also want the lng they have been through a heat wave where cool demanding has shot up and we actually see a similar increase then in the jkm which is the japan korea marker or the asian spot price and this really needs to be higher than the european gas price ttf in order to make the cargo economic so that you are willing to take the longer route to asia rather than just selling the the cargo into the european market henry hub prices still low levels making this spread between us domestic gas prices and international gas prices very attractive for those people with a contract that can ship the cargo from us to either europe then or asia so as i mentioned spot market has also turned up recently we do follow the seasonal pattern here so coming from fairly good levels at the start of the year when we are in the winter and then you have the the lull in the shoulder months let's say march april where you hit the bottom and then trending upwards right now two stroke the modern type of lng ships 80 85 000 and the dotted line here represent the future prices where we do see levels of 130 140 000 in the peak winter season that's why we also think that our numbers will be the best in q4 affecting the one chip we have although levels are lower than we've seen in the past it's still historically very high levels once you're getting above hundred thousand dollars most chip owners with a spot chip is quite quite happy but you know what we have been more which we think is a more positive sign is the trend up in the term rates so for some time now we have had a soft spot market which dragged down the rate curve where short term rates been lower than long term rates but that has changed so while long term rates 10 year charters these are typically for new builds economics around 95 000 a day which is needed in order to defend an investment of let's say 260 million at yard sticker price plus the lead time typically three and a half four years and they kind of financing cost of of of that kind of lead time so five year rates now ticked up slightly ahead of the the 10 year rate which i think bodes well also then for the chips we have coming open 26 27 28 where we can re-contract chips hopefully at better levels than what we have today and thereby increasing our revenues down the road in terms of the order book still it's a quite a lot of new builds for delivery in near term this is one of the reason or the main reason why we have taken protection by having a very long backlog in near term until 26 27 28 where we think market condition looks better because then we've been through this massive order book of course the order book is for two reasons it's a lot of new projects coming to the market which needs and require ships and then it's the general phase of out of the older steam ships that are uneconomically which needs to be replaced and there's still a lot of these ships which eventually will be phased out of the market positive to see now that with the high prices of new builds and the long lead time very seldom you see any speculative contracting the contracts being done are mostly for catar for their planned expansion and renewal and then adnok was recently in the market securing quite a few lng ships for their expansion and renewal project so less than seven percent of these ships in order around 350 of those are speculative or open if you look at the steam ships we just on the left hand side here have like a scatter graph where you will see the redelivery of these steam ships so as we said in the past most of these steam ships were built against 20 25 year charters back to back typically with the lng purchasing contract and typically these ships were built around 2000 so these ships are now coming off a rolling of existing legacy contracts and we do not expect the vast majority of these ships being able to extend those contracts so these ships will be you know phased out of the market because they are not economically because of the inefficiency and the size of these ships so here we see all the ships being redelivered near term and the age of this ship and these ships some of these ships are are rather old and then as i touched upon we have seen buyers linked to russia picking up a couple of these ships for their trade uh in order to lift the volumes from the sanction article and g2 if we look at the right hand side is economics for these ships given their inefficiency the rates for these ships are much lower than for the modern tonnage in terms of the product market despite the moratorium by a white house on us export licenses coming into force in january we still see a lot of activity in terms of buyers committing to long-term off-take agreements and even doing so in u.s because most buyers feel confident that the moratorium will be lifted regardless of who will win the election as there is a lot of projects ready can create economic value for the country in exports which generate the trade surplus and not really trade surplus in general for us but at least an improved trade situation and also jobs so so we do see people signing up not only to qatari volumes but also in u.s for u.s projects that are being put in a bit of a limbo right now but where people are signing up because they think this moratorium will be lifted depending i've been a bit on who wins election either later this year or probably next year if the democrats win so so good to see the volumes are quite healthy 48 million tons contracted in first half of the year which is not far off the previous year despite this moratorium and the duration of these contracts on average 14 years so as i mentioned then there is a lot of project in the u.s ready for being green lighted once the moratorium is lifted despite not any u.s project being sanctioned in first half of year we saw project other places of course north field north field west in qatar 16 million tons which is why they are contracting more ships in the united arab emirates the 10 million tons which we also expected and why adnok abu dhabi national oil company is out in the market also contracting lng ships one project in canada and one in uman bringing the fid volume to 30 million tons in the first half of the year and once we get the moratorium lifted there's a lot of volumes that can be sanctioned very quickly in the u.s and and you know while we are waiting for this as i mentioned these projects are signing up more off-take agreements which means that once the moratorium is lifted they are ready to go because they have the required contract coverage to fid those projects so that is kind of underpinning the third wave of lng we will see a lot of growth in the market from 26 27 28 where we have most of our ship open so we can benefit from this growth in the market we can benefit from the replacement of steam ships and the fact that the term rates today are higher than what we have in our portfolio today so we can reprice the portfolio and as you mentioned interest rates are also on the way down expectations so interest expenses is actually our biggest cost component so if interest rate drops that will also be beneficial for free cash flow so growth will then come from qatar and u.s and and i think we are well positioned to capture that growth so with that i think we just summarized presentation we delivered numbers according to our guidance 56 cents of adjusted earnings per share which is the measure which takes out the unrealized effects of the derivatives we have secured one new contract for flex constellation we have some new financing that knut have talked about which are very attractive in our view we have done the dry docking schedule for this year next year we will have four ships for dry docking three in 26 and then zero in 27 so we we have this on a regular basis every five year we take the ship out of service this year we've been able to do that on 17 days in average revenues expected to pick up in q3 driven by all ships back in operation higher spot rate on one ship and then we think numbers will be probably better in q4 we'll come back with the guidance on that when we are reporting november and once again we're declaring an ordinary quarterly dividend of 75 cents per share giving you three dollars twelve and a half cents on a trailing 12 month basis 12 percent yield and we are well covered to pay that dividend with our pro forma cash balance of 467 i believe it was and then of course the backlog i i i i showed you earlier today so with that i think we conclude the presentation and knut might have some questions on his laptop
spk01: yes thank you all for the questions you have provided we have a number of them but maybe start with the market and the sentiment for long-term contracts have you seen any change in sentiment or activity and how do you then view the opportunities for types of flex constellation and flex ranger
spk02: yeah i think which you know it's a it's easy to say something and but you know we are a bit data driven as well so we do see that rates have picked up on the term rates spot rates of course it's not unusual that spot rates picks up they usually pick up they bottom out typically march april and then they go up but we do see also the term rates picking up here and and we are once in a situation where shorter term rates or five year rates are higher than 10 year rates which is how the market should be in a balanced way you know if somebody can commit to taking a chip for five years at the same rate as a 10 year most people will commit to taking five years rather than 10 years typically people want a discount if they're taking a commitment of 10 years rather than five years so we are getting a bit better balance in the market we do see increased inquiries for term rates we it's not really surprising because there is this roll off of steam tonnage i shown earlier today the steam ships on legacy contracts being rolled off people don't want to keep those ships they want to renew them with much more efficient ships we've shown in the past fuel efficiency per cargo ton lifted on our ships is about 58 percent better than a steam ship so so that means that it's only good the economics is also good for the environment so so when people are committing for a five 10 year charter they don't want steam technology they want the new ships so we do see more inquiries for that for fleet renewal and also some of these projects where are now signing up spa contracts are also starting to look in lock to look at locking in shipping so i think that is well for our strategy here trying to fix that window near term where we have seen muted the growth of the market in terms of volumes and then having our ships available ready for the next wave of lng
spk01: we touched upon in the presentation on the the russian shadow fleet so a number of question here how do you see that impacting the lng shipping market if that their ability to grow to a large fleet and how that will impact the global trade yeah
spk02: this is not like a new phenomenon this is a well developed situation on the tanker side both the crude tankers and the product tankers but also the on the lpg side you are an advanced as well the shadow fleet on the vlgc is very big there we're talking up to 15 percent of the fleet being in this captive shadow trade so so it's it's for that particular trade it's iran china on the petroleum products typically russia india china maybe brazil on the crude it could be venezuela iran and then russia so so this it's a lot of read through from the other markets it's basically the same thing happening older ships are being taken up by the affiliates with the russian counterparties and they go into a captive trade once that ship goes into that trade it will never come back to the regular trade it will stay in that trade if they have insurance at all it's with a shady counterparty and this is a way of the sanction party to avoid the the sanction and being able to generate revenues on the products so it means that you know you could have some steam tonnage that we thought might be scrapped will go into that trade but this is basically also then to replace those ships that the russians were trying to buy a lot of ice breaking arc seven ships which were sanctioned and they are not delivered so they have to find a way to to to to arrange that logistics without those ships that they contracted so it doesn't really affect the net fleet growth because some ships are not being delivered and some ships that thought we thought would be scrapped they might go into this trade and we will never be in this kind of trade most serious actors will not be in that trade but it just changed the dynamics because we haven't had the shadow fleet in lng in the past but it seems like this is something that will happen now and and with a lot of similarities to the tankers and the real gc side but you know it's not good in the sense of you have a lot of ships trading around the wall without proper insurance and maybe not proper maintenance and these ships are old so it's a you know it's a time bomb before one of these ships end up in a situation where you will have spills and ships sinking breaking whatever which will be an environmental catastrophe it's not that serious on the lng side because the lng is cooled methane so if something happens that gas or the lng on that ship will heat up become gas vapor or basically methane vapor and it will evaporate but that is not the case if we look at the crew tankers or the petroleum tankers then you have product that's not going to evaporate but it's going to be landing on somebody's shores
spk01: then we are transitioning over to more to the trading pattern of the of the global fleet and a normalization in the panama canal operations but still most of the the ships are trading to the cape of good hope do you see any trend back to a normalization with the transit to panama canal or continued that the cape of good hope will be the preferred route i think the
spk02: booking schedule in panama is not really always suitable to the lng's trade it's very rigid a lot of things can happen in the market you book a slot and you have a cargo suddenly prices moves and you rather want to send that cargo somewhere else or in terms of your ballasting a ship and you if you're going pacific ocean when you're ballasting on that ship there's really no place to pick up a cargo except for us if you're ballasting from china to the atlantic you can pick up a cargo in australia you can pick up a cargo in the middle east west africa so it gives you a lot more optionality to fix that ship on a cargo while if you're going the pacific route you only have just one option so so the canal authorities have been in dialogue with lng players to try to find a system that incentivize them to use the canal more but we still see that people just don't you know they don't they don't like the rigidity and and also there are costs associated with using the panama canal if you have a lot of slack in your program for example you have a commitment to deliver cargo you have a natural boil off so kind of some of the fuel here is sunk cost so if you are using the panama you're paying them the toll you go through you come to china and then you are waiting for 10 14 days in order to discharge you will not stop the boil off so you have to kind of consume that and then you know it's not really any cost of going the longer route you save the panama fees and you're just burning the same basically amount of of of lng there are some differences there because some ships are have equipped relic system we have four ships with a partial relic three ships with the full relic so if you have those kind of ships very advanced ships you can use the panama you can go to china you can idle there and you can reliquify part of the boil off and then get that back to cargo so so you to reduce your fuel so it really a bit also dependent on the specification of the the ship in that trade
spk01: and then the follow-up to that as we see in more and more cargo going to asia and also taking the long route through the panama canal and also with the good hope the the ton mile effect of that versus the fleet supply coming over the next yeah
spk02: so of course in general of course we always like when you have a pull to asia especially if you have a pull to asia with congestion in panama because as i mentioned these numbers in nautical it really drives up the requirement for ships so we've seen that now in the lately often if you have ships from us going to asia not utilizing the panama they will typically use the suez canal better weather and shorter route today nobody is using that except for those taking cargo into egypt which has switched from being a exporter to importer recently and then jordan except for that nobody's using the suez canal for transit except for these two ships linked to russian buyers for arctic too so so it's it's positive we want as much lng to flow to to asia in general because it drives up from the mind and that's one one of the reasons why i would say spot markets been surprisingly good this summer because we didn't really expect that much pull to asia and then on top of that you have the suez crisis which also adds some some extra ton mileage then
spk01: to europe in eu ets how do you see that play out for the modern two strokes versus the steamers and the tri fuels
spk02: yeah i you can i can start with question you are more more in charge of the implementation on all side for it but i can just give you some broad idea so of course for this year ships trading into europe will have to buy co2 carbon permits or basically the ets to to for the emissions they are creating and of course this is being implemented over a couple years with with a higher threshold you have to buy every year eventually this will be 100 of the kind of documented emissions you have on 50 of the trade so if you're going from us to europe there's two legs in that trade it's the laden leg and then it's the ballast back so that's why you're getting to 50 because you are 50 in europe and 50 in us which don't have this ets so the price of this is of course is volatile it can be 100 euros or 60 so you have to measure that kind of emission you are creating and then it's not offsetting it because it's not a carbon offset but you have to pay for that permit of of the documented co2 so that will create a cost of emissions which i think is the best way of of dealing with global warming if people pay for it they have a real monetary incentive to do it much better than having bureaucrats making a lot of rules and giving out a lot of subsidies better put a price on it and behavior will change so we are generally in favor of this we like our co2 and we think it should be implemented more worldwide it will be a competitive advantage for us as i said we have a fuel consumption per ton cargo transported about 58 percent lower than a steamship that means the steamship has to buy a lot more of this carbon credits in europe to off not offset but to pay for the permit of of emitting so that you know in first you have the steamships they are uneconomically as i mentioned on the fuel consumption they are small and then you have this carbon penalty on top of it so so generally we like it it's good for us and then knut her has been in charge with adapting our time charters because this is not our cost so we this is a cross pass through we gross up on on these taxes so this is for the charters account which has to pass it on to the consumer who eventually pays for this so that means all our time charter under a time charter the time charter we get paid a fixed we run the ship and they will pay for all costs associated with that trade being panama canal ports and fuel so we guarantee a fuel consumption and that is what we are allowed to utilize and then when taxes come on top of it taxes related to the trade they will also pay for that so we implemented that so that we are sending them documents this is the co2 we are meeting this co2 we have to buy here is the invoice please either refund us or provide us with those carbon credits so we can hand them over to you organ in charge of this or do you have something to add then no
spk01: i think we're doing a reporting uh we are and we are passing this on to our charters as long as we are on a time charter base um slight geopolitical question uh u.s elections do you see how that will impact the lng market and i assume here in particular the permitting process in the in the u.s yeah
spk02: now i think of course if trump wins it will have the positive effect for lng that we think this moratorium will be lifted very quickly of course a judge already in texas who have decided that this is not allowed so of course that decision in a court in texas don't really will affect this but i think if trump wins it will be repelled quite quickly if harris wins it will take some more time but i think it's in event in any event it will happen it they they kind of put this in in january in order to attract more votes from kind of green votes this is a good case for them especially after permitting permitting oil drilling in alaska they had to do something and this looks good on a tweet or whatever and then eventually there are so much gas in the u.s this can create so many jobs that you know we do think that the reason will prevail and eventually they will slowly say that okay you can start issuing permits again and of course there is a lot of pressures from other nations as well to on u.s politicians to allow this both allies in europe and japan are pressing on the u.s politicians to repel this moratorium and i think that will happen regardless and once that happen a lot of these projects have been filling up with the new lng off-take agreements so once it lifted they are more or less ready to go and we'll kick off the next wave of us lng
spk01: then we'll round up a couple of questions on on flex and strategy how do you view the outlook for growing the fleet and the company being m&a second and tonnage in new buildings
spk02: yeah i thought you were gonna say how to spend it that's usually that's the next one we get okay now as we said repeatedly we are we are 13 ships the last ship we got delivered was may 30 2021 flex vigilant so of course we are happy to grow but we have to grow profitable we are not going to grow just to have a bigger fleet and a bigger revenues it has to be a creative it has been hard to find good growth prospects the last couple of years because of the skyrocketing new building prices going from the low when we purchase the chip at 180 to 260 so it's a very big ramp up in prices not only have the prices gone up but also lead time gone out from two and a half years to suddenly four years and that cost a lot of money when interest rates is about five percent so so that i just have to repeat what we said in the past i think we demonstrated for some time now that we are not going to pay to grow we're going to do a discipline if we find right now i think the order book is already so sizable that we don't really need more orders and and and i don't find it very attractive 260 million having to wait to 2028 i don't find that attractive compared to paying dividend in this period of time so i think if we are to grow it's more natural to do that through consolidation we are the world's biggest listed lng shipping company by far we have a modern fleet we have a good track record more or less all the ships or the lng ships in the world it's about 650 on the water 350 on the construction that's thousand lng ships almost all of them are owned privately we have 13 ships coolco have 13 ships avilco has 12 ships the rest of the ships are in private hands if you are a private owner you have a good fleet you want to go public cash in have a better position having a stock rather than a private ownership you should reach out to us don't call morgan stanley or jp morgan they will charge you a hefty fee to take your company public rather call us and we can maybe consider giving you some shares and flex for the share for the ships you have in your private account then
spk01: there's a questions on balance sheet optimization and what you can expect going forward are there more in the pipeline i guess i can take it on the two financing we are contract with chineer and also availability of an attractive financing package in japan concluding that that means that we also then have to address the two other vessels or have the opportunity to address them as they are fairly low levered this was the first transaction we did in the balance sheet optimization program for the bank financing so they have amortized and values has also improved with the banking market so that concludes those three ships as you also saw we are then also in discussions with some of the banks to convert a term loan trans to an rcf so we maintain our 400 million dollar of the bullet on non-amortizing rcf capacity for a next refinancing that will most likely be subject to two contracts and the long-term contracts and the availability of attractive financing we are very pleased with the package we have today and i also want to mention that with the jolco we are introducing a new bank to us which we are very pleased with working with in this process and look forward to expand business with as well so for now we are able to trigger for more refinancing is probably a new contract yeah
spk02: i think it has to be interest rate derivatives optimization which is next now we have run through we were way ahead of fed we started doing a lot of swaps early 21 22 when rates were low well ahead of a year before fed started to hike rates that trade have generated 127 million dollars of profit since 2021 we have monetized and crystallized most of it i believe balance sheet now is around 35 million of unrealized gains so 127 million so most of the gains have been realized and crystallized rates are now picking down again we have plenty of trading limits so we will be opportunistic to have to see if there are levels which are attractive to lock in a higher hedge ratio we have been anticipating a pivot from fed peaking our hedge ratio in q2 long-term interest rates have fallen a lot since the employment figure in us one and a half two weeks ago so we will monitor that development and see if there are opportunities to hedge rates at attractive levels as they have been going down quite a lot recently and typically we try to use windows where there are distress in the market like when silicon valley bank full collapsed to secure good terms for our shareholders
spk01: that's concludes the q a and announcement of who is the flex kit yeah you can have a look at the we have one very active shareholder investor asking questions and it's a number of questions reaching all of the topics and it's patas veum
spk02: okay better then
spk01: you
spk02: will have the flex lng kit before concluding then i just want again thanks to the our technical team and our crews who have fantastic once again a fantastic dry docking of constellation encourages is the sixth dry docking we have done now the last two years or actually one half year all according to time and budget so we're very happy with that very high technical quality on on our team and then we will be back in november with our q3 numbers which we have guided today so we don't expect any prices in november and in the meantime you can enjoy the 75 cents per share of dividends which i think will be payable at the end of the month okay thank you everybody for listening in thank you
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