Capital Clean Energy Carriers : Q1 2025 Transcript

Published: 2025-05-16 09:42:09 ET CCEC

Published on 05/16/2025 at 09:42

Capital Clean Energy Carriers(Q1 2025 Results)

May 08, 2025

Brian Gallagher; Capital Clean Energy Carriers; Executive Vice President, Investor Relations

Gerasimos Kalogiratos; Capital Clean Energy Carriers; Chief Executive Officer

Nikos Tripodakis; Capital Clean Energy Carriers; Chief Commercial Officer

Jonathan Chappell; Evercore; Analyst

Liam Burke; B. Riley Securities; Analyst

Alexander Bidwell; Webber Research & Advisory; Analyst

Omar Nokta; Jefferies; Analyst

Climent Molins; Value Investor's Edge; Analyst

PRESENTATION

Operator^ Thank you for standing by. And welcome to the Capital Clean Energy Carrier Corp. First Quarter 2025 Financial Results Conference Call. We have with us Mr. Gerry Kalogiratos, Chief Executive Officer; Mr. Brian Gallagher, Executive Vice President, Investor Relations; and Mr. Nikos Tripodakis, Chief Commercial Officer. (Operator Instructions) I must advise you that this conference is being recorded today, Thursday, May 8, 2025.

The statement in today's conference call that are not historical facts including our expectations regarding acquisition, transactions and their expected effect on us, cash generation, equity returns and future debt levels, our ability to pursue growth opportunities, our expectations or objectives regarding future distribution amounts or share buyback amounts, capital reserve amounts, dividend coverage, future earnings, capital allocation as well as our expectations regarding market fundamentals and the employment of our vessels including redelivery dates and charter rates, may be forward-looking statements as such as defined in Section 21E of the Securities Exchange Act of 1934 as amended.

These forward-looking statements involve risks and uncertainties that could cause the stated or forecasted results to be materially different from those anticipated.

Unless required by law, we expressly disclaim any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in our views or expectations to conform to actual results or otherwise.

We make no prediction or statement about the performance of our common shares. I would now like to hand over to your first speaker today, Mr. Brian Gallagher. Please go ahead, sir.

Brian Gallagher^ Thank you, Operator. Good morning and afternoon to wherever you are. And thank you for listening to the Capital Clean Energy Carriers Q1 2025 Earnings Call.

As a reminder, we will be referring to the supporting slides available on our website as we go through today's presentation. Let's start then on Slide 4 with the highlights. First quarter 2025 was an important quarter for the company in many respects.

Firstly, net income from operations for the quarter amounted to just under $81 million including a $46.2 million gain from the sale of two container vessels. This is included in the earnings release in our discontinued operations. These are the last two of the 5, 5,000 TEU containers that we agreed to sell last year and they were delivered to the new owners during this quarter.

Overall, we have raised a total of $472.2 million in net proceeds from the sale of 12 container vessels since December 2023 and have recycled this capital into our focus on gas transportation assets.

Another key development for the quarter is that we have secured employment for two of our newbuilding LNG carriers for five and seven years, respectively, both with an additional 5-year option. My colleague, Nikos will cover that in more detail later.

What is more during the first quarter of the year, the LNG carrier Axios II commenced its 7-year bareboat charter where the charter has the option to extend by an additional three years.

The new charters in addition to certain options exercised by one of our charters has increased our firm charter backlog to $3.1 billion.

We believe that these charters further corroborate our view on the positive fundamentals of the longer-term LNG shipping market and provide our investors visibility into both employment prospects and cash flows, well in advance of our first LNG newbuilding delivery.

With that, I'll now turn it over to Chief Executive, Gerry Kalogiratos; and Nikos Tripodakis, our Chief Commercial Officer, for the remainder of the presentation.

Gerasimos Kalogiratos^ Thank you, Brian. And good morning to everyone listening in today. It has been indeed a very busy quarter across all fronts and is also reflected in our financials, which you will find on Slide 6.

As Brian pointed out, we derived a further $46 million in one-off gains this quarter from completing the sale of the last two out of the five container vessels we agreed to sell last year.

We will continue to be opportunistic about the sale of the three remaining container vessels as these are modern eco vessels with long-term cash flow attached. The dividend, as we discussed on the last call is a core component of the company's value proposition to shareholders and making this quarter the 72nd consecutive quarter that the company has paid a cash dividend.

Turning to Slide 7. We can see that our capital base continues to consolidate, and we await the next schedule of ships to be delivered next year. Our cash position continues to be solid, supported by the completion of two further container sales, bringing total cash to

$420 million.

With a great deal of uncertainty and volatility injected into capital markets in recent months, money markets continue to factor in almost 100 basis points in interest rate cuts by the Fed during 2025. And we take this opportunity to remind investors that CCEC could be a beneficiary of such a move given 80% of our funding is on floating rates.

Finally, our balance sheet is strong, which is important within the business we operate, but the main development for this quarter is a reduction of our open LNG carrier exposure by a third and enhancing the contract length of our existing LNG charter book.

We expect these developments to further enhance our financial flexibility. I will now turn to the more strategic matters on Slide 9. Our average charter duration now stands at 7.3 years across the fleet with our LNG fleet showcasing a charter backlog of 91 years or

$2.8 billion of contracted revenue.

As you can see at the bottom of the schedule, two of our six LNG carriers under construction have now been placed with an energy super major for five and seven years, respectively, with options to extend both charters by a further five years.

This is in addition to certain options exercised by one of our charters for three existing vessels. This translates into an average daily time charter equivalent for our fleet across the time charters of approximately $87,300 or $91,150 that is per day including all options.

In summary, our charter book continues to expand as we work towards fixing the employment for the remaining assets in our fleet.

Turning now to Slide 10 and looking at the contracted revenue base in more detail. The impact of these charter extensions and the new charters has boosted our total contracted backlog including our container vessels to $3.1 billion or $4.5 billion should all options be exercised.

The pie chart illustrates the breakdown of our total time charter revenue base using the firm charter periods. This remains a core strength of our proposition as a company that is counterparty diversity. You will note a slight departure from earlier presentations where we used the names of all our counterparties. As the counterparties increase and also in an effort to preserve confidentiality of certain commercial agreements, we have moved this to a more simplified format.

It is important to highlight here that the industry typically super majors and other national and international energy companies, utilities traders and liquefaction plant operators with high credit credentials.

Overall, when it comes to CCEC, no single counterparty represents more than 20% of the

$3.1 billion of contracted revenue backlog. This diversity provides the company with a very strong framework to build our gas transportation portfolio further with a mix of existing corporate relationships and new customers.

I will finish off this section now with a quick look at our newbuilding CapEx program and our expectations with regard to financing described in more detail on Slide 11.

So we ended the quarter with $420 million of cash on our balance sheet, which provides a solid buffer for the business. Clearly, our recent contract wins and option declarations, as we have stated previously give us further financial flexibility.

From our newbuilding program of $2.3 billion underway, we have already paid advances by quarter end to the tune of $467 million.

Assuming we finance 70% of the acquisition price with the LNG carriers and 60% of the other gas vessels with debt amounting to approximately $1.560 billion, that would leave us with an excess equity of $105 million as Slide 11 shows, that is without taking into account cash flow generation from our existing fleet.

I would like to turn now to our Chief Commercial Officer, Nikos Tripodakis, who will run through our LNG market slides. I will be available to answer your questions at the end of the call. Nikos, over to you.

Nikos Tripodakis^ Thank you, Gerry. And good morning or afternoon, everybody. There are two important issues to deal before I move on to the market focused commentary on LNG.

Firstly, the effect of the U.S. Trade Representative's recently announced port fees. These are the fees that the new Trump administration has proposed to be levied on ships entering U.S. ports and which have been substantially reduced in their potential impact from the original proposals.

As far as LNG shipping is concerned, we expect minimum impact. The U.S. is targeting a rising percentage of U.S. LNG exports to be transported on U.S. flagged operated or built

LNG carriers from 2028 onwards. And until then, LNG shipping is exempted from any such levies.

In any case, CCEC is heavily insulated against this development as none of our LNG fleet on the water was built in China and none of our six LNG carriers under construction are being built in China either. Moreover, we view any theoretical suspension of LNG export licenses as a low probability scenario, the exact mechanisms of such suspension is still unclear.

So as far as the effects of USTR port fees are concerned, in our view, our business model is unaffected for now but we will, of course, continue to closely monitor any developments. Moving on to the impact of tariffs.

As Slide 14 shows, it is perhaps counterintuitive for the U.S., the largest LNG exporter and China, the world's biggest importer to have little direct LNG traffic between them. However this has been increasingly the case as the graph on the left-hand side shows.

Indeed, there have been no direct cargo from the U.S. to China since February and trade has been modest in recent years between the two nations. We summarize our thoughts on the medium and longer-term potential impacts from tariffs on the right-hand side of Slide 14.

A positive development in this situation could be the signing of bilateral agreements between the U.S. and other nations with the aim to alleviate tariffs and balance the trade deficit with the U.S. More sale and purchase agreements from the U.S. -- for U.S. LNG project will facilitate new final investment decisions and as such, significantly boost demand for LNG freight.

A potential headwind if tariffs persist, however, could be the rising cost of LNG projects looking to reach that FID. The financing, operational and capital funding costs for U.S. projects have risen since the pandemic and the effect of tariffs is likely to further increase this cost and potentially delay FIDs. This remains a fast-moving, complicated and very important issue, and we will be looking to update investors going forward. Turning now to the LNG market itself.

On Slide 15, we have highlighted three key areas. Point number one illustrates that newbuilding prices remain firm. There was a single order for an LNG vessel during Q1 for a reported price north of $260 million. Prices for newbuildings have been above $250 million since February 2023, according to brokers and have not been affected by the weakness in the spot market throughout 2024 and 2025. This trend is now further

expected to increase due to Trump's regulatory release for U.S.

LNG projects on the one hand and port fees on Chinese build ships on the other. On the first point, we have seen multiple new sale and purchase agreements signed since the beginning of the year as well as the first final investment decision since 2023 from Woodside on the 16.5 million tons per annum Louisiana LNG project.

Disclaimer

Capital Clean Energy Carriers Corp. published this content on May 16, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 16, 2025 at 13:41 UTC.