Q4 2024 FLEX LNG Ltd Earnings Call
[music].
Hi everybody and welcome to FLEX LNG's fourth quarter 2024 result presentation, where we will also go through the numbers for the full year.
Knut Traaholt: My name is Øystein Kalleklev. I'm the CEO of Flex LNG Management and as usual I'm joined by our CFO, Knut Traaholt, who will walk you through the numbers a bit later in the presentation.
Knut Traaholt: Our cargo is cold, minus 162 centigrade, or 260 minus Fahrenheit. Our investor can have warm feet because we have a lot of backlog which can weather us through this difficult market in the LNG market the last couple of months.
Knut Traaholt: Disclaimer, we will be utilizing some non-GAAP measures like TC and adjusted EBITDA and adjusted net income.
Knut Traaholt: And of course, there are limits to how much detail we can cover in the presentation. So, let's begin with the highlights.
Knut Traaholt: So we had a derivative income of 20.1 million, 5.1 of the derivatives was realized during the quarter as a positive carry, resulting in adjusted net income of 30.8 million, where we only include the realized gains and losses, not the unrealized gain and losses.
Knut Traaholt: That means our earnings per share came in at a healthy $0.84 or $0.57 on the adjusted basis.
Knut Traaholt: Recent events we were reporting back in November, we informed you then about the extension of two of our ships, Flex Resolute, Flex Courageous.
In November, we announced that the Charter
Knut Traaholt: has amended the Charter where they have a new firm period for 2029 to 2032 with options all the way to 2039. So we are pretty sure these shifts are at least gone to 2032, possibly a bit longer.
Knut Traaholt: Following our Q3 presentation in November, we also announced, end of November, our new 15-year time trial for Flex Constellation.
Knut Traaholt: 15-year takes the shift to 2041, so we are adding a lot of backlog through these recent new charters. At a very good time, I would say, given how the market has experienced the last couple of months.
Knut Traaholt: We also done some refinancing as we mentioned in our presentation in November, adding more attractive debt 430 million, releasing 97 million in cash while extending our debt maturities and lowering the interest costs.
expected to be somewhere in the mid 70s
Knut Traaholt: giving revenues of 340 to 360 million. You should note that we have four ships where we are planning to do the special five-year survey in 2025 while we only took two ships out of operations last year.
Knut Traaholt: Ebitda, we also expect this number to be fairly in line with last year, 250 to 270 million. So it's pretty good and steady sailing from Flex LNG.
Knut Traaholt: So once again, we are declaring then our dividend of 75 cents.
Per share, taking the dividend for 2024 to $3
Knut Traaholt: implying a running yield of about 12% and this we can do given the fact that we have a fortress balance sheet and backlog 437 million of cash and as I will touch upon minimum 62 years of backlog which is about five years each ship.
Knut Traaholt: I so I have had a lot of conversations with people around the country and people were asking me questions and I was trying to answer them but I
Just a kind of summary of the 2024 results.
Knut Traaholt: Revenue 355 million, we were guiding 353 to 355, a very narrow range, and then I just did a bit there, smack in the middle of the range, 271 to 274, we're delivering 273, and I think for the first...
Knut Traaholt: Time here we do see Q4 numbers below Q3 Given the slumping rates from end of September into Q4 and into 2025 for that matter
Bye!
Just to touch upon our contract coverage
Knut Traaholt: We have Flext Constellation, which was pictured on the front slide. She's on a 312 days time charter. We expect to get her re-delivered end of February, early March.
She will then have a 12-month gap.
Knut Traaholt: where we will have to trade her in the spot market which will be a bit challenging and reflected in the guidance but once she come into Q1 2026 she will commence our 15-year charter to 2041 where the charter also have the option to extend that ship to 2043
Knut Traaholt: As I mentioned, the Resolute and Courageous we extended in November all the way to 2032 where the Charter can extend those ships to 2039 and then we have two ships with Cheniere which we have
So, leaving us with FlexFreedom fixed until...
Knut Traaholt: Q1 2027 which we think is a good window where the market will be much tighter than it is today and then FlexVolunteer and Aurora also with Cheniere fixed until Q1 2026 where they have the option to take those ships to 2028
Knut Traaholt: Flex Ranger. Again, I think it's a good window of re-delivery. This ship is switching year to 2027. And then we have one ship on index. She's getting close to her firm period. She was fixed.
Knut Traaholt: And then we will see whether the Charter utilized their options. They can extend the ship by five single one years. Those options are also on index, which makes it probably a bit more possible that they utilize their extension options, since they are not fixed rate higher.
Knut Traaholt: So, all together, 62 years of minimum firm backlog, which then might grow to 96 years if the charters utilize older extension options.
Knut Traaholt: Guiding for 2025, I already touched upon it. It's going to be déjà vu all over again. We expect numbers to be very much in line with the numbers we delivered in 2024. And with stable business, stable outlook, we are also having stable dividends.
Knut Traaholt: and all together this number is now 610 million of dividends the last three and a half years which I think gives our investors a stable and good income being invested in Flex.
So, before...
Knut Traaholt: So we think that we can pay out slightly higher than the earnings per share. The decision factors mostly have green lights except for the market outlook, where short-term outlook is poor.
Knut Traaholt: So with that, I think I hand it over to Knut before just reminding you about one number you will not find in this report, and it's actually the most impressive number. It's our lost time injury frequency.
So this is our main safety KPI.
Knut Traaholt: Lost Time Injuries Frequency for 2024, which I think is impressive and shows that we are delivering superb service to our customers. So with that, Knut, I'll hand it over to you and I'll come back with a market update. Thank you.
Knut Traaholt: So let's start off since it's Q4 with a bit of a review of the full year and in particular here
The operational days, as you may recall,
Knut Traaholt: 33 days of dry docking, which is actually 7 days below our budget, and a net of off-fire days for dry docking. We are delivering 99.7% technical uptime, which is a very strong performance.
Knut Traaholt: On the TC, you see here a stable TC, 75,300 for the fourth quarter and close to 75 for the full year. This shows also the stable revenue streams that we have.
Knut Traaholt: So, in combination with higher crew cost, and that is crew cost for crew changes, in particular crew changes in Asia, we are now guiding an OPEX per day of 15,500 for the year.
Knut Traaholt: And as a reminder, we are subject to EU ETS when our ships are in Europe and having port calls to Europe.
Knut Traaholt: This is a cost for the ship owner, but under our time charter agreements, we can reimburse and get that reclaimed from our charters.
Knut Traaholt: Revenues received there from the charters will be booked as operating revenues, while we correspondingly will book the same amount as voyage expenses.
EBTA, we are delivering SNACON guidance
Knut Traaholt: Non-cash items and for the fourth quarter, we are just staying
Knut Traaholt: And as we presented also on the Q4 presentation, we concluded some refinancing in Q3.
Knut Traaholt: that refinance tree shift leaving the flex endeavor unencumbered so therefore you would also see a lower depth balance and also cash balance on the Q3 numbers
Knut Traaholt: The long-term lease for Flex Endeavor was concluded on the 3rd of October and then releasing the full amount of 160 million.
Knut Traaholt: So during the quarter we had 52 million on cash flow from operations, then the scheduled debt amortizations, and then close to 41 million we paid out in dividends. That leaves us with a very strong cash balance of $437 million.
Knut Traaholt: This is a reminder of how we keep our balance sheet. It's fairly clean. It's chips and cash.
Knut Traaholt: and then we have Deft on the other side and the book Equity.
Knut Traaholt: As we show here, our book values are more or less reflecting all-time low values, but we still maintain a fairly decent book equity ratio of 30% given our backlog.
Knut Traaholt: And most importantly, our debt funding portfolio, a very attractive mix of both bank debt and leases.
and Knut of the RCF.
Knut Traaholt: On our interest rate exposure, the 530 million in the dark blue is basically our net debt exposed to the floating rate market. Remaining here is fixed rate debt and hedge debt, which I will cover in the next slide.
Knut Traaholt: And given that we announced a contract extension for her on the Q3 presentation, that is a very manageable residual to refinance.
Speaker Change: We see here a gun fishing sticker, you see three hooks
Speaker Change: We did announce three contracts for three ships on last quarter. Even though we have a very attractive debt funding portfolio, we will consider refinancing of these three ships, in particular given the long duration of those contracts.
Speaker Change: We have been managing our interest rate risk very actively. Last quarter we did some amendments and added more duration to secure coverage.
during these high interest rate environments.
Speaker Change: So we have extended duration, which is also yielded very well, which is shown in both realized and unrealized gains during the fourth quarter.
Speaker Change: So in conclusion and also this we get a lot of questions about dividend sustainability
Speaker Change: This slide can be read in conjunction with the decision factors for our dividend. We have stable cash flow. We have a very healthy balance sheet with $437 million in cash.
Speaker Change: So with that, I hand it back to you, Einstein. Okay, thank you, Knut. Let's dig into the market a bit.
Speaker Change: Yeah, 2024 was a year with record low growth in export volumes. We put in a recent history. On our Kepler platform, we couldn't find any year with less growth than 2024. But I can't rule out that this could have happened sometimes in the 70s or 80s. So I just put in recent history. Actually, growth in the market was lower than 2020 when you had this wave of US cargo cancellation. In 2020, the export market actually grew
Speaker Change: on liquefaction plants. And then, of course, it's been the sanction on the expansion of Russian capacity, particularly the Arctic LNG2, which I will come back to later. But despite the sanction on Russian LNG plants, Russia managed to grow their exports 4%.
Speaker Change: last year, and Europe was one of the big takers of Russian LNG. U.S., only 1% growth.
Speaker Change: In 2024, Nigeria have resolved some of their issues with feed gas problems and managed to show healthy growth both in Q4 2024 and for the full year.
On the import side, it's been a year where...
in a row prior to this winter.
Speaker Change: resulting in Europe coming out of the winter season last year with very high inventory levels
Speaker Change: and they stepped back from the market, giving more room for Asian countries, particularly than China.
Speaker Change: Ukraine. So I believe they ended up at 78.5 or 79 million. The record high is 80 million tons.
Speaker Change: and then India up actually 14%. This has changed a bit in the past with the cold winter and the big inventory draws in Europe. Europe has been making a comeback in the market.
Speaker Change: During this energy crisis of 2022, they really were the buyer of first and last resort, increasing their imports all the way to 127 million tons, primarily sourcing a lot of spot US LNG at that time.
Speaker Change: Imports stayed stable in 2023, but then given the two-mile winter, they came out of last winter season with high inventory, so imports in 2024 slumped to 103 million tons.
Speaker Change: The inventories in Europe are well below the last couple of years, and we do expect Europe to come out of the winter with low inventories with a big need for restocking during the summer months, and this is also reflected in the price of LNG.
Speaker Change: So, we have this graph here showing the three main indices for natural gas prices. It's the Henry Hub in the US, which is the main benchmark price for natural gas, hoovering around three to four dollars.
Speaker Change: one of the cheapest gas sources you can have. Then JKM, meaning Japan-Korea marker. So this is more like the spot LNG price in Asia, although most of the Asian players, the big nations like Japan.
Speaker Change: China, Korea, they have a lot of LNG they buy on long-term contracts linked to oil price. So this is the spot price.
Speaker Change: And then you have the more like deregulated European market where the main benchmark for Northwest Europe is TTF, Title Transfer Facility.
So, generally, what we have seen now is that...
Speaker Change: Prices have been picking up and picking up to a level where LNG becomes expensive for 15 million dollars per million BTU meaning oil prices above 80 dollars.
resulting in more of the Asian nations.
Turning to more affordable energy like coal.
Speaker Change: kind of killing off the arbitrage, meaning it's more profitable to send the US cargoes to Europe rather than Asia, despite actually shipping being now more or less for free.
Speaker Change: So this change in trading pattern in the latter part of 1924 and into 1925 have resulted in a big slump in the freight market, which I will also cover later.
looking at...
looking at Asia
Speaker Change: we see a bit lower growth from Asia at the end of the year as Europe came for full force into the market. Stable market in the mature markets being JKT meaning Japan, Korea, Taiwan. Taiwan did grow their imports quite a lot but Japan and Korea are fairly stable. China as I mentioned growing fairly steady and the same goes with South Central Asia.
Then going, turning back to Russia and the sanctions.
Speaker Change: Two of them are not sanctioned. This is Sakhalin, primarily exporting to Japan, Korea, China, and then Yamal, which generally can export cargoes to
Speaker Change: Some of the newer projects, as I mentioned, have been sanctioned, particularly the Arctic LNG 2.
It's a big plant, the first strain.
Speaker Change: is up and running, but they have not been successful in placing those cargos in the market. And the second train is also ready for commissioning. So we'll see how this develops, whether there will be a grand bargain with EU, Trump.
Speaker Change: A lifting of the sanctions on Russian gas and LNG, then some of these cargoes might come back into the market at least, seems to be some signals from part of the EU that they are willing to make certain concessions in order to leave this war behind us.
Speaker Change: Then, looking at the export market, there is a lot of volume coming to the market, a lot of volume which were already sanctioned or given the green light prior to Biden putting in the moratorium on new export licenses January 2024.
Speaker Change: And of course, as we expected and mentioned when we had our Q3 presentation in November,
Speaker Change: So, there is a lot of new projects in the U.S. ready to be FID.
Speaker Change: We see on this lower, on the right hand side here, we have picked out some of the key contenders to get FID either this year or next year, being Lake Charles, Delphine LNG, Sabine Pass Expansion, Woodside Louisiana, CP2 and possibly as well Alaska LNG.
There's a lot of trade disputes going on.
Speaker Change: We saw overnight China coming in, putting a tariff on US LNG, similar to what they did back in 2018-19.
Speaker Change: Made contracts with a lot of these U.S. expansion projects, and in case this tariff stays in place, we would expect them to resale those cargoes possibly to European buyers, and rather source more LNG from Qatar, Australia, Russia.
Speaker Change: West Africa. So this is still up in the air a bit. These trade wars are volatile. Suddenly there is a terrorist and then there are...
Speaker Change: Touching upon the freight market, which is the market which we are active in, as I mentioned, the market was behaving quite normal during 2024, actually a bit firmer during the summer months than we expected. But once we came into the winter season, rather than the market or the freight rates shooting up, which is usually the case,
Speaker Change: They slumped, and they have continued to slump throughout 2025, where they are now at a rock-bottom level at around $10,000 per day, which makes it very uneconomically, especially for the older tonnage.
Speaker Change: In around 35 ships available in the market, this is softening the freight rates.
Speaker Change: We also saw, during last year, a big grow in spot fixtures.
Speaker Change: And then we have the modern ships, the two-stroke, which has, of course, better economics, given that they are larger and has a much more efficient propulsion system. Rates for steam tonnage, we pegged it here on the Affinity and Clarkson numbers at $2,500 per day. If we look at the Fearnley number today, the rate for steam tonnage is actually zero.
Speaker Change: So, we have been talking about this for a long time, it's an overdue scrapping cycle for steam tonnage. These ships have been surviving because you have had generally quite good markets, especially in 22 and 23, and into at least the first quarter of 24. So given the slump in the market and making these ships unattractive, we do expect to see a big uptick in scrapping this year, next year, and the coming years.
Speaker Change: Driven not only by economics, but also by environmental rules, which put a disadvantage on these ships, except for the fuel EU maritime, which I'm going to cover also lately.
Speaker Change: So, longer-term rates are holding up for those contracting ships for delivery 2028 and onwards.
Speaker Change: Looking at the order book, it's a big wall of new buildings hitting the market and it's one of the reasons why we try to fix our ships until 27-28 where we think the market looks better balanced.
Speaker Change: for 24 we were expecting 68 ships for delivery given the soft market there's been some slippage which usually happen in a soft market so only 60 ships for delivery last year meaning there will be more ships for delivery in 2593 we expect
and then 83 ships for delivery, 26 and 27.
Speaker Change: As you should note here, most of the ships, or almost all of them, are built towards long-term charters.
Speaker Change: which are uncommitted for delivery in 2025, 2026, 2027 and then from 2028 onwards all those ships are either for long-term projects and also the Qatari which has expanded their fleet by more than 120 ships in order to renew their fleet and also to have more ships for the big expansion going on in Qatar.
Speaker Change: Continues to grow in 2026-2027 onwards, which will rebalance the market together with scrapping of older ships.
Speaker Change: So, when it comes to older ships, we put out the different types of ships here. As I mentioned, less efficient ships being the steam turbine ships.
Emission Trading System
Speaker Change: Cost per day for a steamship 7200 euros per day. This tax is paid in euro. Euro and dollar is more or less the same today, so you don't really need to have a FX conversion to calculate the dollar amount.
Speaker Change: EU has also implemented this year what they call the Fuel EU Maritime, which is a system for decarbonizing maritime fuel.
Since LNG is a cleanup burning fuel
Speaker Change: Very low sulfur oil or heavy fuel oil with a scrubber.
Speaker Change: There is a huge penalty if you are not complying with the Fuel-EU Maritime Regulation.
Speaker Change: So we've taken the numbers from the ship broker Affinity and calculated what will that benefit be. So you can see on our ships we will get a pretty big benefit from the fuel EU maritime, more so on the Maggie, which we have nine of, because they have hardly any methane slip.
Speaker Change: dual fuel diesel electric and tri-fuel diesel electric due to the high methane slip.
Speaker Change: meet and slip. They do however have a huge fuel consumption that's why they are being penalized by the EU ETS but they also get a huge benefit from the fuel EU maritime.
Speaker Change: I don't really think that they can, it's inconceivable that they will be able to sell these kind of rewards to others, but they can enter into certain pooling arrangements where they can reduce the penalty or kind of swapping costs.
Speaker Change: favouring the steamships because they are burning a lot of LNG, which is a clean fuel. So we just put up a good old quote from Ronald Reagan and modified it to 2025. The nine most terrifying words in the English language in 2025 is not the government, but I'm from the EU, and I'm here to help.
Speaker Change: So, more about the EU, they like to make a lot of rules, some of these rules are also driving business costs.
This is driving up cost for us.
Speaker Change: provided our ESG report every year since 2018, where we give full disclosures on a lot of numbers according to the Sustainability Accounting Standard Board. On top of that, we have added the Global Reporting Initiative.
Speaker Change: and based on feedback from investors, we also added the Carbon Disclosure Project.
Speaker Change: NRI ESG report for 2024 will also be available probably around April. However, having to deal with two sorts of regulation, which is quite costly in terms of consultants, auditors and such.
Speaker Change: And given the fact that 95% of our trading today is on New York Stock Exchange
Speaker Change: and the fact that New York Stock Exchange is planning to...
Speaker Change: for the approval of the annual general meeting in May to delist in Oslo and rather save that money so we can rather spend that on focusing on one set of reporting requirements instead of having to deal with two conflicting sets of reporting requirements.
Speaker Change: So with that, I just think we're going to run through the summary before going for our Q&A session. As mentioned, revenues...
Speaker Change: In line with guiding, we are delivering very strong results, 45 million or 31 million depending on whether it's a net income or just a net income, giving a EPS of 84 or 57 cents.
We have added a lot of new backlog during Q4.
Speaker Change: putting us in a very good position to deal with the slump in the freight market during 2025, as we are guiding very similar results for 2025, as we achieved in 2024, and with a big backlog, a big cash position.
Speaker Change: Once again, we are paying out 75 cents, giving you guys $3 in dividend per share, or a yield of 12%. So with that, I think we head over to the Q&A session.
Speaker Change: Looking at the natural gas market, we use abbreviation for certain pricing hubs, JKM, TTF and also Henry Hub. There's a question here if we can explain more.
Speaker Change: The gas prices with Henry Hub being the main index in the US, JKM being the spot price for LNG in Asia, meaning Japan-Korea marker, and then TTF being the virtual gas hub in the Netherlands, which is a big importer and a kind of a central hub in the pipeline network in Northwest Europe.
Speaker Change: In the UK, for example, you have the National Balancing Point, but these three indexes, Henri Hoeb, TTS, JKM, are the most relevant.
Speaker Change: Do you see pricing on TTF and JTM? When do you see cargo moving the other way around? Yeah, we had a good question earlier today about that, you know, what is the sweet spot for these kind of prices?
Speaker Change: So, I think in a sweetpot scenario we would have Henry Hubbett around where it is today, three dollars or so.
Speaker Change: Generally, there is a liquefaction toll, so you need to have a certain margin to move that cargo to Europe.
Speaker Change: in Europe and then maybe $8 to $9 in Asia, because then you would incentivize people to send the cargoes to Asia rather than sending them all the cargoes to Europe. And at the same time, you would like to have gas prices coming down. $15 is at a level where people would rather like to burn coal.
Speaker Change: If we are to replace coal with natural gas, we need to get prices lower. If you have $10...
Speaker Change: These FIDs being taken and new projects can progress? There is a lot of projects now, so the people who have these projects, they have not been idling now for 13 months since the Biden moratorium. So while this moratorium has been in place, I think everybody understood that this moratorium would be removed.
whether or not Trump won.
Speaker Change: So even with Kamala Harris, we would expect the moratorium to be lifted, although probably it would take a bit more time. With Trump, it was removed immediately.
Contracted LNG
Speaker Change: which means that a lot of the projects are also ready to push the button this year on green light for expansion and then typically it takes 3-4 years.
for FIRST Cargo to be produced.
Speaker Change: Placamina Snow, which is owned by Venture Global, which recently did an IPO in the US market. They managed to do the first cargo after 30 months, after the FID.
Speaker Change: On the previous project, Calcius Pass, it was also something similar. I believe it was 28 months.
Although, it's not like...
Speaker Change: As we also shown in the graph where we expect the growth to come from those projects. So first we will have growth from the pipeline of projects already under construction.
Speaker Change: being mostly Qatar and US, and then there's a new wave of FIDs. However, it's not very constructive with the trade rhetoric from Trump.
Speaker Change: That might make it uneconomically to take those LNG cargos to those import nations who have acquired them. So we would like to see a toning down of the trade rhetoric. That would be very helpful for the LNG market, for sure.
Yeah, that leads into the next question because there
Push forward one week and Trump introduces tariffs and
slapping on a tariff 15% on LNG.
Speaker Change: Last time this happened, 18-19, they started with 10% tariff, increasing it to 25%, and you had this 13-month window where they didn't import a single LNG cargo from the US.
Speaker Change: And then finally they had like a trade phase one, where China again started to import a lot of LNG and actually committed to import a lot more LNG from US together with soybeans and oil.
Speaker Change: So, I'm not surprised that they're coming with that retaliation. As I understand, Trump will talk to Xi Jinping.
Speaker Change: Donald Trump is a very mercantilist in terms of trade. He thinks that the trade deficit with every country should be more or less zero.
Speaker Change: which doesn't really make sense from an economic perspective. So we would expect this to last for some time, whether there will be a grand bargain, maybe a trade agreement phase two. Let's see.
I think for Trump, his favorite president is Reagan.
Speaker Change: He made certain similar agreements with the Japanese in the 80s, and I think that is the plan, and we'll see how that develops. I think in general, anyway, the cargoes, they will be produced, and it's just where they will end up.
Speaker Change: Thailand other countries will import more also Europe and then China will just have to substitute the US LNG with other LNG and very soon they will also have the alternative of sourcing LNG from Canada from the LNG Canada project
attractive acquisitions or M&A opportunities
Speaker Change: Very happy customers, who are repeating customers, comes back and extends the ships with us for longer periods.
As I mentioned, lost time, injury, frequency are key.
Speaker Change: Buying ships is very easy, you just pay the highest price, the higher than anybody else, then you will be able to grow your fleet. What we try to be is disciplined, so we are paying the right price and a price that makes sense for the Flex LNG shareholders.
Speaker Change: Fleet balancing questions that you we've talked about The steam tankers and scrapping and the question here relates more to you see conversion projects to import terminals
Knut Traahl, Knut Traahl
Speaker Change: I think really a lot of these older ships, typically they were put on a 20-25 year charter when they were built. We have shown in the past, we have had certain graphs about this on the role of steam tonnage on existing legacy contracts.
Speaker Change: Lot of steamships coming open and they will find a very hard time in the spot market. Nobody wants to fix those ships. As I mentioned, Fernlis is quoting rate for steamships today at zero.
So, we do think that scrapping will certainly pick up.
State prices are still pretty well.
Speaker Change: A lot of these ships will be scrapped. Some might be converted to floating storage.
ships, some maybe F-series, some maybe power ships.
Speaker Change: Which actually will drive demand for LNG as those needs to be fueled by LNG
Speaker Change: On the steam tankers, we talked about scrapping due to high cost for the 20-25 year special surveys.
Speaker Change: and they are earning zero today. So Claire Pennington asks, so the cash burner, what kind of opex levels are they for either cold storage or in operations? For how long will they survive?
Speaker Change: You know, the OPEX is quite similar, so a steamship, let's call it $15,000 a day in OPEX.
Speaker Change: So if you have a crew on board, basically you will have those running costs. Then there is the cost of layup that really depends on where you are laying up the costs.
This varies.
Speaker Change: But in general, these ships have lived out their life. They are not economically so...
Speaker Change: I think that it's better probably to retire those ships. Time value of money is quite high today, you know, even after the Fed has cut their interest rates. The interest rate is like four and a half percent. So if you are delaying that, kind of, if you scrap the ship, you get the $15 million.
payout if you are instead waiting and incurring costs.
Speaker Change: And then if you incurring those costs with the lay-up, they will also have other implications. You will lose your certificates, generally what we call the Seire certificate.
You might have extra costs for rebooting the ship.
Speaker Change: which will drive also up the cost of reactivation, so in general, you know, I think.
Speaker Change: The steamships really aren't layup candidates, they are scrapping candidates today, which...
Speaker Change: It's going to be helpful in terms of bringing back the market balance.
Speaker Change: to develop where we see that the market going back to a better balance in 2027 and where they then are assuming 53 steamships to be scrapped within that time frame. Last year it was eight ships.
Speaker Change: Market was okay last year. Now the market is not okay. So we think that this number of Steamships, 50 or so ships to be scrapped, It seems actually a bit low now, given the outlook.
Speaker Change: Then moving over to our fleet, there are basically questions related to two of our ships.
Speaker Change: related to or linked to a particular liquefaction project or an SBA? No, it's really linked to a portfolio. So we haven't disclosed the charter. I think trade winds have done that for us. But what we have said is a huge Asian industrial LNG buyer or agglomerator.
Speaker Change: finding the most efficient ships and this ship will go into their portfolio where they source LNG worldwide from various projects.
Speaker Change: and then following up on a 15-year contract in this in this period other another or a lot of other 10-year opportunities
Speaker Change: or similar tenders out there? Right now it's a pretty slow market. It's really the cargo owners or the charters who can pick and choose what ships they want.
Speaker Change: Given where the rates are today, most people are doing, as I've shown on the graph earlier today, spot fixtures have gone up a lot.
Speaker Change: That typically happens when there are too many ships in the market. Nobody really is in any rush to fix ships on longer term contracts. They rather just tap into the sport market whenever they have a need for a ship.
Speaker Change: jump on the wagon before it leaves and try to fix some ships on longer term charters before the rates pick up. So that is something that, not sure that's going to happen this year, but probably when we are getting into 26 and 27.
Another ship is the...
Speaker Change: Flex Artemis on a Variable Higher Contract. I believe the question is more of a reminder. How does this Variable Higher Contract work? We fixed that chip on a Variable Higher Contract. It was the first term deal we did. We did that at the end of 2019. And we announced it was with Gunvo, which is one of the big LNG traders.
for Håndelivre.
Speaker Change: That ship was delivered August 17th from D.S.M.E., which is now called Hanva, 2020. So the ship goes on a variable charter where the rate is set for each voyage with a certain floor. So the rate cannot be lower than a certain floor and it cannot be higher than a certain ceiling.
Speaker Change: So, in that range, we will get a rate, and the rate will be pegged depending on the spot rates observed for modern tonnage, meaning MAGGI®, XTF®, MEGA®, the two-stroke chips.
This...
Speaker Change: Firm period is coming to an end then in August 2025.
Speaker Change: The charters do have five single year options. All of those options are also at a similar index.
Speaker Change: at the floor, maybe not too surprisingly. And once we're getting closer to August, we will know whether they will extend that ship. If not, we will do the five-year special survey of that ship and have it ready for the winter market. It's a very attractive ship.
form a ship which is a thermos.
Speaker Change: creates gas vapor. We utilize that gas vapor to burn as fuel on the ship. On these three ships, we have a full reliquic system where you can basically reliquify almost all of the boil of gas.
Speaker Change: We also have four ships which are partial relic systems, so it's one of the best ships. So hopefully they will continue with the ship as a happy customer, but we will know once we're getting closer to the final maturity of that contract.
Speaker Change: I think that concludes the Q&A session, so it's time to announce the winner.
Speaker Change: Also known as Isis, but it's not the Isis. It's the friendly one. Yeah, it's the friendly Isis, yes. So, okay, thank you. Then, Clare, you have been asking me a lot of questions during the year, so you will have these swanky socks.
Speaker Change: As I mentioned, cold cargo, but you will keep your warm feet. I will send you two of these pairs.
Speaker Change: And that concludes today's presentation. It's my 30th quarterly presentation. So I'm looking forward to presentation 31 in May. So thank you everybody for listening in and I hope to see you soon again.