Global Ship Lease Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 10, 2023

There are 8 speakers on the call.

Operator

Day, and welcome to Global Shipley's Q1 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. And finally, I would like to advise all participants that this call is being recorded. I'd now like to welcome Mr.

Operator

Ian Weber, Chief Executive Officer to begin the conference. Ian, over to you.

Speaker 1

Thank you. Thank you very much. Good morning, good afternoon, everybody, and welcome to the Global Ship Lease First Quarter 2023 Earnings Conference Call. The slides that accompany today's presentation are available on our website at www.probableshipplease.com. Slides 23 remind you as normal that today's call may include forward looking statements that are based on current expectations and assumptions and are, by their nature, inherently uncertain and outside of the company's control.

Speaker 1

Actual results may differ materially from these forward looking statements due to many Including those described in the Safe Harbor section of the slide presentation. We also draw your attention to the Risk section of our most recent annual report filed on Form 20F, which is for 2023 and was filed on March 23rd this year. You can obtain this via our website or via the SEC's. All of our statements qualified by these and other disclosures in our reports filed with the SEC. We do not undertake any duty to update forward looking statements.

Speaker 1

The reconciliations of the non GAAP financial measures to which we will refer During this call to the most directly comparable measures calculated and presented in accordance with GAAP. Usually refer to the earnings release that we issued this morning, which is also available on our website. As usual, I'm joined today by our Executive Chairman, George Irukos our Chief Financial Officer, Tasos Tsiropoulos And our Chief Commercial Officer, Tom Lister. George will begin the call with a high level commentary on GSL and our industry And then Tassos, Tom and I will take you through our recent activity, the quarterly results themselves and the financials and the current market environment. After that, we'll be pleased to take your questions.

Speaker 1

So turning now to slide 4, I'll pass the call over to George.

Speaker 2

Thank you, Ian, and good afternoon or evening to all of you joining us today. As flagged in recent quarters, Ongoing normalization in the charter market due to macro headwinds had led to downward pressure on charter rates and asset values relative to the record breaking levels of last year. However, in recent weeks, the charter market has shown some signs of stabilization At rates that are still some way above both pre COVID and historic average levels. It is difficult to say Whether these recent positive trends will be sustainable, but we will of course closely monitor the situation. Meanwhile, our extensive contract cover for a large portion of our fleet, much of which was for long durations during the market's hot streak has positioned GSL to weather whatever markets are ahead.

Speaker 2

We have a robust balance sheet with no debt for refinancing requirements before 2026 and an overall low cost of debt. With all of our floating rate debt fully hedged through 2026. From this position of financial strength, We're focused on the sustainability and resilience of our business in the long term and on further improving our competitiveness by investing In our fleet to meet the challenging regulatory requirements and commercial demands for decarbonization. As and when growth opportunities arise that meet our strict and disciplined criteria, we want to be ready to act decisively For the benefit of our shareholders, as with our recently announced commitment to purchase 4 ships with attractive charters attached. More importantly, we've also continuing to pay our sustainable dividend of 0 point $0.075 per common share quarterly, dollars 1.5 annualized and we have returned further capital to shareholders through The buyback of an additional $3,800,000 of shares since our last earnings call, dollars 3,800,000 just to make sure.

Speaker 2

Bringing the total share repurchases since Q3 2021 to $43,800,000 With that, I will turn the call over to Ian.

Speaker 1

Thank you, George. Please turn to Slide 5. Here we show the makeup and diversification of our charter base. This is well spread across the top tier of liner companies. In total, as of March 31 this year, including the 4 ships that we've agreed to purchase that George just mentioned and the other fixtures We've agreed up to yesterday, May 9th.

Speaker 1

We have over $2,100,000,000 of contracted revenue Spread out over a TEU weighted average of 2.5 years, including 12 new charters, which were agreed year to date, Which collectively, those 12 new charters agreed this year, add around $190,000,000 of contracted revenues. On the next slide, Slide 6, as in previous quarters, we show illustrative guidance across different rate scenarios. As always, I want to be very clear that this is not a forecast. We're not forecasting charter rates or our earnings, but we're rather illustrating the extent of our contracted revenues year by year and our very limited spot market exposure through 2024. As you can see from the modest variations across the scenarios, we have very little tonnage coming into the charter market this year.

Speaker 1

In fact, we are over 97% days covered. As we move into 2024, when we have a few more vessels coming open, nevertheless, We're nearly 80% covered on a day's basis. The extensive of the forward charters that we previously signed gives us good momentum for continuing earnings growth across Moving on to slide 7, we show an overview of our dynamic and disciplined capital allocation strategy. Because of our contract cover and therefore forward visibility on cash flows, we've been able to simultaneously pay our quarterly dividend, Engage in share buybacks, delever the balance sheet to derisk and build equity value, deploy CapEx To meet the evolving needs of the market, including the increasing decarbonization requirements of our customers and Build a degree of cash liquidity that makes it possible for us to act quickly when acquisition opportunities arise. Overall, we target a balanced approach to capital allocation with a focus on building long term shareholder value on a sustainable basis In a cyclical industry, we always assess the risks to our cash flows before weighing the various Capital allocation opportunities are available to us and we allocate our capital accordingly.

Speaker 1

As you've seen, when asset values were overheated and growth opportunities didn't meet our strict criteria, We spent almost $44,000,000 on share buybacks, no growth, without which our share count would have been around 7% Higher today. Now as asset values have normalized, we've directed some of our capital to the strongly value adding purchase of ships with attractive charters attached. That brings us neatly to slide 8, Where you can see an illustration of our disciplined timing for acquiring vessels in the market. Having grown substantially prior to the COVID driven spike in asset values, you can see that we went nearly 2 years without acquiring further vessels at the high prices prevailing during that peak period. This was despite the fact that GSL's balance sheet It was as strong as it had ever been.

Speaker 1

And we're just not inclined to make acquisitions simply because we have access to capital. We aim to make acquisitions. When doing so, we'll benefit our business and our shareholders over the long term. On slide 9, we recap the terms under which we've recently agreed to purchase 48,500 TEU vessels built in 2000 and 3, 2004. These are high specification, Enhanced energy efficiency ships that will begin their 2 plus year charters to a leading liner operator upon delivery to us toward the end of Q2, beginning of Q3.

Speaker 1

In aggregate, these vessels will contribute $77,000,000 of aggregate adjusted EBITDA over the minimum firm period of the charters and up to a total in aggregate $95,000,000 of EBITDA if all of the options are exercised by the charterers. We're planning to finance the $123,000,000 purchase price conventionally, combination of cash on hand and senior secured debt, the latter of which will of course be covered by our interesting interest rate caps Of which we have in excess today, capping LIBOR and SOFA at 75 basis points. These are attractive ships, which we believe will have good earnings potential after the initial charters. On Slide 25, the so called EBIT calculator page, we provide some benchmark rates for this size segment. And as you can see, we also provide the lightweight tonnage of the vessels a little under 38,000 tons per ship In case you wish to run downside sensitivity analysis based on scrap values.

Speaker 1

So consistent with our well established track record, In our view, this deal is cash accretive, low risk with attractive upside potential. With that, I'll turn the call over to Tassos to talk you through our financials.

Speaker 3

Thank you, Ian. On Slide 10, we have summarized our year to date financial highlights. Revenue for the Q1 was 159,300,000 up from $153,600,000 in the prior year period. Adjusted EBITDA for the quarter was $104,900,000 up From $90,400,000 in the Q1 of 2022. Our normalized net income, which adjusted for one off items increased from $67,300,000 in the Q1 of 2022 to $75,600,000 in Q1 2023.

Speaker 3

Moving to the balance sheet items. Our gross debt at the end of first quarter was 896,500,000 down from a little under $1,100,000,000 in the prior year period. We had $288,000,000 in cash On our balance sheet at the quarter end of which $143,000,000 is restricted with $126,000,000 of that being receipt of charter hire in advance And $27,000,000 other restricted cash. The remaining $135,000,000 covers minimum liquidity covenants in our debt facility And provides for our working capital requirements together with some balancing flexibility. A portion is also earmarked to fund the acquisition of the 4 8,500 TEU ships.

Speaker 3

As mentioned, we continue to return capital to shareholders Through both our quarterly dividend and our continued use of the share buyback authorization, where we have a little over $6,000,000 of the current authorization remaining. Turning to Slide 11 now. We are delivering, lowering our cost of debt and minimizing our interest rate risk. On the left, you can see our progress derisking our balance sheet from $950,000,000 in outstanding debt At the end of year 2022 to an expected $588,000,000 in outstanding debt by the end of 2024, Based on existing debt and scheduled amortization, which is aggressive and continues to de risk our balance sheet. In the center of the slide, You can see the margin and overall cost of debt.

Speaker 3

Our average margin is now down to just over 3% from 4 point 6% at the beginning of 2022. And as already mentioned, under our current interest rate cap of 75 basis points for LIBOR and similar level for sulfur, all our floating rate exposure is hedged till 2026 And there is still headroom under the cap to cover future floating rate facilities like the one we intend to use for the purchase Of the 48,500 EU vessels. On the right of the slide, you can see that our financial leverage is increasingly robust With our leverage ratio having fallen from approximately 8.4 times at the end of 2018 to only 1.8 times now. With that, I will turn the call over to Tom.

Speaker 4

Thanks, Tassos. As usual and for the benefit of listeners who are new to GSL, Slide 12 is intended to highlight the ship sizes on which our business is focused, which will help put the subsequent slides in context. GSL is focused on midsized and smaller ships, which are ships ranging from about 2,000 TEU up to about 10,000 TEU, so effectively The liquid charter market. The top map on the left shows the deployment of our sizes of ship I. E.

Speaker 4

Ships Under 10,000 TEU and emphasizes their operational flexibility, which is especially valuable in these uncertain times. As you can see, they're deployed everywhere. The bottom map shows where the big ships, those larger than 10,000 TEU are deployed, Which tends to be on the east west main lane or arterial trades where the cargo volumes and shore side infrastructure can support them. And it's important to note that over 70%, seven-zero percent of global containerized trade volumes, in fact, it was 72% in 2022, Are moved outside these main lanes in the north south regional and intermediate trades served predominantly by ships like ours rather than by the big ships. As George remarked at the outset, the macro and geopolitical outlook that we're all currently facing remains challenging and uncertain.

Speaker 4

So as usual, we focus on the supply side where we do have forward visibility and against which listeners can set their own expectations for containerized Trade or GDP growth as they feel appropriate. Slide 13 shows the metrics that tend to be used as a measure of supply side tension. The top chart shows idle capacity, which at quarter end was around 2.5%, although it has since come down a bit. In fact, the latest figure I've seen is about 1.4%. The bottom chart shows containership scrapping and recycling.

Speaker 4

This has still been pretty limited so far in 2023, defying the prior expectations of many industry observers. We'll come back to this when discussing the charter market. But long story short, there's still demand for capacity in liner companies' networks and earnings in the charter market Remain attractive. Slide 14 looks at the order book. Here you can see on the left the composition of the order book by size segment Covering all deliveries currently scheduled to take place not only this year, but also through 2026 and beyond.

Speaker 4

The overall order book to fleet ratio as at quarter end was 30%, three-zero percent. However, It is still heavily skewed towards the very big ships over 10,000 TEU for which the ratio is 52.8%. Meanwhile, our focus segments of 2000 TEU to 10000 TEU highlighted in the gray box have a significantly lower ratio Of 14.5 percent. And there are 2 important points to keep in mind when assessing the order book. 1, This is the relevant metric here is the net change to the absolute fleet size.

Speaker 4

That is deliveries minus scrappings. And 2, that we should consider effective supply, which is a function of capacity and operating speed, slow the fleet down And effective capacity shrinks. So on the first point, the midsize and smaller containership fleet is aging. As you can see from the chart on the right, if scrapping were to continue to be deferred, by the end of 2026, almost 2,000,000 TEU Of the sub-ten thousand TEU capacity currently on the water would be at least 25 years old and potential candidates For the recycling yards in a softening market, net this out against the total order book of sub-ten thousand TEU ships Due to be delivered over the same time frame and you would get implied net growth in these sizes of just 1.1%, which itself would be spread over the coming 3 plus years. On the second point, new decarbonization regulations Are already being rolled out across the industry from January 1 this year with more to follow.

Speaker 4

These regulations, which will tighten over time, are prompting ships to slow down. Illustratively, For the GSL fleet, average operating speeds at sea for the Q1 of 2023 are down over 9% on 2022. Turning to slide 15, the charter market. As you can see from the chart, after falling sharply in late 2022, Rates in the charter market have plateaued in recent weeks. In fact, for the segments in which vessel availability and market liquidity is most limited, Rates have actually firmed a little since the lows of February early March.

Speaker 4

Charter durations have also improved somewhat How long these market dynamics will last, but as you will have seen in the earnings release, we've capitalized on the opportunity to fix a handful of ships for decent terms and rates, Including the forward fixture, which is something unheard of since the Q3 of last year or so of one of our Eco 9000s. The next three slides focus on decarbonization and the evolving regulatory environment. Slide 16, Which is largely self explanatory, I hope summarizes the 3 existing regulations on which there is reasonable clarity, EEXI, CII And EU ETS. The direction of travel is clear. These regulations and more like them We'll only become broader in scope and more demanding in nature over time.

Speaker 4

On the next slide, slide 17, We've laid out some of the expected implications of these regulations for the global fleet. Broadly, these are number 1, reduced operating speeds to reduce emissions. The upside here is that in addition to reducing emissions, a reduction in average operating speed of just 1 knot, 1 nautical mile per hour reduces effective supply by around 6%. 2, vessel operations will be optimized for the CII algorithm and ratings. In addition to slowing ships down, efforts will be made to improve their operational efficiency and thus reduce their fuel burn and emissions.

Speaker 4

And number 3, increasing investments will be made in energy saving technologies and retrofits in developing clean Or at least clean fuels and propulsion and in carbon capture and mitigation technologies. Slide 18 summarizes the actions we are taking to preserve and we hope improve the commercial positioning and trading flexibility of the GSL fleet in 1st, we're ensuring regulatory compliance as you would expect. 2nd, We're installing technologies and applying protocols to our ships, including automated data capture and live performance management systems To enhance cooperation between owners and charterers to facilitate energy optimized vessel operations and reduced fuel burn. 3rd, we're retrofitting energy saving technologies to our ships subject to commercial agreement and in cooperation with the charterers. Such agreements are commercially sensitive and vary on a case by case basis.

Speaker 4

But the underlying rationale is that we will only invest in discretionary retrofits, I. E. Those not required to meet regulatory requirements that will enhance the value and earnings of the corresponding ship. So that's the crux of it. But for those of you who would like to know more, may I refer you to the Climate Strategy section of our latest ESG report, which is available on our corporate website.

Speaker 4

With that, I'll now turn the call back to George to wrap up.

Speaker 2

Thank you, Tom. I will provide a brief summary and then we would be happy to take your questions. Including our recent agreed charter fixtures And the 4 ships we are to acquire, we have excellent contract cover of $2,100,000,000 over an average of 2.5 years, Fully covering our debt service, CapEx and dividends through 2023 2024 without depending at all upon charter renewals. We have built a strong balance sheet with $288,000,000 in cash of which $153,000,000 is restricted With a balance of $135,000,000 covering minimum liquidity, covenants, regular working capital needs and of course the cash earmarked to partially fund the 4, 8.5s. With no refinancing requirements until 2026, we have continued to amortize debt, building equity value in the process And bringing our financial leverage to below 2 times.

Speaker 2

Offloading rate debt is fully hedged with LIBOR and SOFR Capped at only 75 basis points. And we have some additional headroom under the cap to hedge for further future floating rate facilities. And the average margin on our debt is competitive priced at below 3.1%. Now turning to Slide 20, it's clear that macro uncertainty is an overhang on the sector, but we have for the time being Seeing at least a pause to the sharp reductions in charter rates and asset values over recent quarters. And Although the majority of chartering in the market during the Q1 tended to be tactical and short, in recent weeks, We have seen charter terms exceeded somewhat for the right ships.

Speaker 2

Meantime, Liner operators after record earnings last year are providing more cautious guidance for the year ahead. Now against this backdrop and capitalizing upon our high specification fleet, year to date We have added 12 new charters and about $190,000,000 of contracted revenues. Now wrapping up, managing risk And being nimble and prudent in our capital allocation underpins everything we do. Our goal is to maximize long term value for shareholders, while ensuring GSL's continued resilience in a cyclical market. Our EBITDA and net income were both meaningfully up versus the prior year period.

Speaker 2

We remain active in share buybacks, which cumulatively have reduced our share count by about 7% And we maintain a strong sustainable dividend. At the same time, we have returned to selective growth With a well timed acquisition that matches our track record of making disciplined transactions that are cash accretive, low risk and have upside potential. With that, we'll be happy to take your questions.

Operator

Our first question comes from the line of Liam Burke from B. Riley Financial. Liam, please go ahead.

Speaker 5

Good morning, I guess, Good afternoon. How is everybody today?

Speaker 1

Good, Saleem. Thank you. Good.

Speaker 5

Good. Can we talk about The 4 vessel acquisitions and how you thought about the potential return of those assets, They're 20 year old vessels. You have 2 year charter agreements with 1 year option. And so if we get to that 3rd year, are you looking more towards or can you justify the purchase by scrapping it after that point? Or do you need to Charter it out to the full 25 year life of the vessel vessels, excuse me.

Speaker 4

Hi Liam, this is Tom. Thanks very much for the question. We're a little bit constrained in what we can Say about this deal due to commercial sensitivities, but I would say that the way we look at this transaction, It's very asymmetrical in terms of reward or potential reward versus risk. We've provided on the I can't I don't remember which slide it was, but the summary slide for the transaction, the lightweight tonnage of the ships, so people can apply whatever lightweight Or scrap value to that tonnage that they wish and figure out the downside. But I would say that we've got very strong cash flows from the We like the ships and we would expect, attractive onward employment after those initial charters, but we're not dependent upon it.

Speaker 5

Okay, great. And you've got plenty of dry powder in terms of acquisition capital. What Does the pipeline look like in terms of potential asset additions?

Speaker 2

Yes. Let me try to tell you about this, Liam. There is a we always have a pipeline of transactions, which we continuously Evaluate and with cherry pick the ones that meet our strict criteria, there are quite a few Deals that we are evaluating, but that doesn't mean we're going to go ahead and execute any of them unless they make sense. This transaction, for instance, has been in the working for a while. So it's not like we're not like having a machine gun shooting at everything that Comes to us.

Speaker 2

We're very, very selective.

Speaker 5

So you do have additional potential I mean, the pipeline is large enough where there are there is significant potential to add vessels over time, I guess.

Speaker 2

Yes, yes. There is a good pipeline, but we're very selective as well.

Speaker 5

Sure. I understand that. Great. Thank you very much.

Speaker 2

Thank you.

Speaker 1

Thanks Liam.

Operator

Our next question comes from the line of Omar Nochta, Jefferies. Omar, please go ahead.

Speaker 6

Thank you. Hi, guys. Good afternoon. Hi. Just wanted to follow-up on Liam's question and obviously the main topic over the past couple of days being the Select acquisition.

Speaker 6

Clearly, as you guys have highlighted with the lightweight tonnage that you're showing that you're able to earn back To well below the residual value. And so it seems like you're it's a good deal, gives you plenty of optionality. And Yes, they're older, but there's still a good amount of useful life left theoretically. But I just wanted to ask simply, This is a unique deal. It seems to have your it seems to be in the DNA of your company to find these types of deals.

Speaker 6

I just wanted to ask you, how did this opportunity come about? Was this a competitive type of bid? Was this a direct deal with the customer? Any kind of color you're able to give us on how this deal came about?

Speaker 2

Well, It's difficult to answer this question. I would just have to say that we have a strong relationships and Proprietary deal flow, which the company is taking advantage of. And hence, we have a good track record of being able to perform these We have also a very strong track record on operating older ships, something that is not common. It's not for everybody's cup of tea. So that is giving us a competitive advantage.

Speaker 2

And I would just say that One thing that I'd like to mention is that these ships, you have to look very carefully to every ship and realize what's behind the ship. These ships have high reefer capacity, Actually quite high. And they also have some CO2, let's call it, or Fuel enhancements. So they're really special ships. They were built in a very good shipyard, quite unique shipyard And very innovative at that time and they're still in office.

Speaker 2

Okay. Thanks guys. 9,000 TEU ship, Very, very high spec ships.

Speaker 6

Understood. Thanks George for that color. And then just maybe to since these are year old vessels are around there. Is there any special surveys that you have to take on delivery? Or are those already Haven't been taking place and any kind of cost you can give?

Speaker 2

Some have passed and some will be passed, but that's within our normal You know, cycle, nothing crazy. Yes.

Speaker 6

Okay. And then maybe just kind of broadly, the Wanted to ask you, you mentioned that you'll be able to finance this transaction obviously with some cash and then you're going to be able to utilize your borrowing power under The interest rate caps. We wanted to ask going forward, how much capacity do you have available to you to utilize under your borrowing power that is

Speaker 3

We managed with the last deal. First of all, Haitantasos, we managed In the last deal that we have done the previous May to create a very, let's say, substantial Baffin, in order for us to be able to use it, I believe that we will have at least, if I remember correct, around EUR 150,000,000 after this deal more or less. And it depends on the amortization schedule because as you can understand, the Straight cap falls as long as the amortization schedule, but more or less that.

Speaker 6

Fantastic. That's interesting. So obviously, you guys are in unique position, right? You have $150,000,000 of buying power capped at 75 bps. Is that correct?

Speaker 6

It's at that level?

Speaker 3

Correct. Correct.

Speaker 6

Okay, interesting. Well, great. Well, congrats on the deal yesterday and I'll turn it over. Thank

Speaker 2

you.

Operator

Our next question comes from the line of Amit Mehrotra from Deutsche Bank. Please go ahead.

Speaker 7

Hi, good morning. This is Chris Robertson on Amit, thanks for taking our questions.

Speaker 4

Hi, Chris. Hello.

Speaker 7

Hi. So this first question is for Tom, you mentioned the average speed of the fleet kind of slowing down. I was wondering if you could give commentary around where The average speed sit today. And do you think there's further room to the downside on this in terms of slowing down? Or When we're talking about the regulations, is there more of a cap on the potential for speeding up here?

Speaker 4

Okay. I'll try and good question first of all, Chris. Thank you. I don't have in my head the average Operating speed of our fleet at the moment, so I'm afraid I can't really add more details to the percentage of 9% Slowing down in the Q1 versus that of 2022. However, we have recently analyzed fleet speeds April versus the Q1 and we're continuing to see the fleet decelerate not by the same Sort of quantum, but nevertheless, I would say that there still appears to be further slowing down to be done So far.

Speaker 4

Now to your sort of follow-up question, is there a question of the fleet Once it's slowing down, not really being in a position to speed up again, I would say, yes, that's Likely, in our view, particularly as the decarbonization regulations are expected to tighten over time. So not only will ships have to slow down, but they will have to be enhanced to be made more efficient in order to continue steaming at the same speeds. So you either improve the Will you slow it down further?

Speaker 2

Just like the regulation requires every year stricter CO2 emissions, hence slower speeds. The CII calculation is being tightened every year 23, 24, 25 that we know is every year more tight. So that means every year slower.

Speaker 7

Okay. Yes, got it. And this kind of relates to the second question on the 4 vessels.

Speaker 6

You had mentioned previously that they're pretty

Speaker 7

high spec and There were special vessels at the

Speaker 6

time of

Speaker 7

construction. But considering the tightness of the regulations and as they get more strict over time, Is the plan to simply just kind of slow these vessels over time to continue compliance? Or might there be some minimal CapEx required just to have some Slight upgrades over time to keep them running?

Speaker 2

Luckily, these ships have been already upgraded By the previous owners and all these enhancements are existing on board. So Not much from our side to be done, apart from maintaining the ships in the same way and Continuing the operation of publication of silicon paints like the ships have already and so on and so forth. So these ships Are already quite compliant, if I may say that.

Speaker 7

Okay. Yes, that's good to hear.

Speaker 4

Chris, just to add slightly to that. The other comment that we made in the prepared remarks is that in addition technical enhancements to the ships. You can also enhance the way in which they're operated by installing Live data capture and performance management systems. So that's something that we would look to we would look at over time. And fortunately, the CapEx associated with that is rather minimal, by which I mean, dollars 100,000 or less per ship.

Speaker 7

Right. Okay. And just with regards to the financing on those vessels, should we assume something around a 60% LPV?

Speaker 3

Yes, yes, more or less similar with the previous transactions.

Speaker 7

Okay. Yes, fair. And my last question, this is a little bit more forward As you're speaking to your liner partners,

Speaker 6

do you get

Speaker 7

a sense of where their heads are at with thinking around future Propulsion Technologies, I know that we've seen a swath of the LNG dual fuel container ships being ordered, a few methanol capable. But How are they thinking about approaching that transition and maybe helping share the derisking element of that in the future?

Speaker 4

Yes. I mean that's the multibillion dollar question. I think no one yet has Clarity on that. So most recently, I've seen the largest liner company in the world MSC saying, look, We're not an energy provider, but we're having to become energy experts, which is not our core business, but needs must. And even they, a company of tremendous size with a fleet of roughly 7.50 ships, doesn't have a single answer To that question, instead, they're thinking, I believe, in spreading their bets across different Technologies and different fuels until there is more clarity.

Speaker 4

And that's driven not so much by Technological considerations, although that's obviously one big thing, but also the simple availability of fuel. So for example, green methanol, Various lines are placing bets on green methanol, but the availability of green methanol as a fuel It's very, very limited, which necessarily sort of until that changes constrains the number of chips that can be put on that particular counter. So Hard to say. Everyone's waiting for additional clarity. And in the meantime, we think that the lowest risk approach And one which provides the best potential for upside returns is to buy older existing ships with good downside cover with Scope for incremental enhancements and then we milk the cash flows until there is there's great clarity in the market.

Speaker 7

Yes, that all makes sense. Okay. Yes, thanks guys for taking our questions.

Speaker 4

Pleasure. Thank you.

Operator

There are no further questions at this time. I turn the call back over to Mr. Weber.

Speaker 1

Thank you very much. Thanks for listening. Thank you for your questions. We look forward to giving you a further update on our Q2 In about 3 months' time. Thank you.

Operator

This concludes today's conference call.

Powered by Quartr
Earnings Conference Call
Global Ship Lease Q1 2023
00:00 / 00:00