Capital Clean Energy Carriers Q2 2025 Earnings Call Transcript

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July 31, 2025

Key Takeaways

  • Positive Sentiment: Net income from operations in Q2 was approximately $30 million, and the company maintained its fixed distribution of $0.15 per share for the 73rd consecutive quarter.
  • Positive Sentiment: CCEC secured financing for two new LCO₂ carriers—around $51 million per vessel with higher advance rates and lower margins if chartered for three years or more.
  • Negative Sentiment: With only 12 LNG carriers and no container vessels contributing this quarter, earnings generation was softer compared to prior periods that included container ship revenue.
  • Positive Sentiment: Global LNG demand remains strong, with about 47 million tonnes sold under SPAs since January, including 25 million tonnes in Q2 versus a historical quarterly average of 12 million tonnes.
  • Positive Sentiment: Market rebalancing is accelerating as 10 LNG carriers were scrapped year-to-date (a new record) and only four newbuild orders were placed, down sharply from 58 in all of 2024.
AI Generated. May Contain Errors.
Earnings Conference Call
Capital Clean Energy Carriers Q2 2025
00:00 / 00:00

There are 7 speakers on the call.

Operator

Thank you for standing by, and welcome to the Capital Clean Energy Carriers Corp. Second Quarter twenty twenty five Financial Results Conference Call. We have with us Mr. Jerry Caligaratos, Chief Executive Officer Mr. Brian Gallagher, Executive Vice President, Investor Relations and Mr.

Operator

Nikos Trepodakis, Chief Commercial Officer. At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session. I must advise you that this conference is being recorded today, 07/31/2025. The statements 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 unit buyback amounts capital reserve amounts distribution 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.

Operator

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 speakers today, Mr. Brian Gallagher.

Operator

Please go ahead, sir.

Speaker 1

Thank you, operator. Good morning or afternoon to you wherever you are, and thank you for listening to the Capital Clean Energy Carriers Q2 twenty twenty five earnings call. As a reminder, we will be referring to supporting slides available on our website as we go through today's presentation. So for kickoff of the highlights slide on Slide four, you can see that after a very busy Q1 with new contracts, charter extensions and vessel sales, Q2 has been much more routine for the company. Net income from operations, primarily from our 15 vessels on the water, 12 LNG carriers and three container vessels, came in for the quarter at just under $30,000,000 From this, our ongoing fixed distribution of $0.15 per share was paid out to shareholders, meaning the company has now paid a cash dividend for every single quarter since our listing in March 2007.

Speaker 1

Importantly, CCEC secured some financing on two of our LCO2 carriers, which we start to take delivery over next year. The company is also continuing to look at organic methods to improve the trading in our shares offer shareholders maximum optionality for their investments. This is reflected in a dividend reinvestment program, DRIP, being offered for the first time in Q2. The results of this quarter allow investors to see what the core drivers are for the company and what they look like. This has often been overshadowed in recent quarters by other developments such as asset sales and new contracts.

Speaker 1

And as we pivot towards our stated objective and goal of an LNG and gas transportation focused company, you can see clearly how the company is performing. Our Head of Commercial will guide us through the key company drivers and interesting sector dynamics within the LNG market later on. But I'll now hand over to Jerry Kalogyatjaridis, our Chief Executive, to take us through the first financial highlights.

Speaker 2

Thank you, Brian, and good morning to everyone listening in today. Indeed, the results of the 2025 fully reflect all our team that has been deployed under their respective long term charters. And unlike previous quarters, we do not have any container vessels. This is quite a negative quarter in terms of the earnings generation of our fleet at this stage prior of course to the expansion of our asset base with the newbuilding LNG and other gas vessels that start coming from the 2026. Despite an ongoing capital investment program of over $2,300,000,000 in this number, the dividend payout remains a core component of the company's value proposition to shareholders.

Speaker 2

The $0.15 dividend to be paid on August 8, makes this quarter the seventy third consecutive quarter that the company has paid a cash dividend. Provincial is strong, which is important in the business we operate. And we can see that our capital base continues to consolidate as we await

Speaker 3

the next schedule of ships to be delivered next year.

Speaker 2

There is a little more to report here as investors will remember 80% of our cutting costs are floating rates hence we expect the benefit should the Fed start cutting rates in the 2025. During the quarter, we continue to build out the financing of our newbuilds on order and we look at a little more detail on Slide eight. So we have secured financing for two of the LCO2 carriers that will be delivered to us during 2026. The financing amount is approximately $51,000,000 per vessel and provides for an increased advance amount up to $58,700,000 and a lower margin, if any of the vessels secure period deployment three years or longer. We're also making progress in financing of some of our other new builds on order and the sale of our quarterly growth by the next quarterly earnings.

Speaker 2

Moving on to slide 10, with our average target duration of seven point one years across the fleet and our LNG fleet showcasing a charter backlog of we will look to further expand our charter book as we work towards fixing the term enrollment for the remaining assets on fleet. Turning now to Slide 11 and look at the contracted revenue base in more detail. Sheet, From our newbuilding program of $2,300,000,000 underway, we have already paid advances by quarter end to the tune of $539,000,000 Taking into account the two vessels financing we discussed earlier and assuming 70% net financing of million the acquisition price of the LNG carriers and 50% of the other gas vessels, we estimate the total new debt finance of these vessels to amount to approximately 1,600,000,000.0 Thank you, Jerry, and good morning or afternoon everybody. Q2 has shown positive signs both on the supply and on the demand side for the LNG freight. Following the demand side, one of the most positive signs has been a significant number of new LNG SPA signed.

Speaker 2

This has been true not only for the second quarter, but throughout the year so far since the Trump administration took office in late January. Approximately 47,000,000 tons of LNG have been sold under SPA since January with around 25 of those in Q2 alone. This compares to historical average per quarter of around 12,000,000 tons indicating the scale and pace of this new LNG signing activity. Moreover, still on the demand side, Q2 has been a significant uptick in mid and long term tenders and requirements for various deliveries from 2026 all the way to 2028 with nine tenders running simultaneously at some point in Q2. In summary, the increase in LNG SPA is concluded as well as freight requirements in Q2 indicates the demand both for LNG as a product and for LNG freight remain very strong.

Speaker 2

Moving on to the supply side, a similar story of positive signs per basis. On the supply side, we had a quarter of two positive records, which could lead to a faster market rebalancing. The first one is a record pace at which vessels have been removed from the fleet in Q2 and and throughout the year. And the second one is the record low number of newbuilding orders placed so far this year. The combination of this record high removal and record low ordering is only positive towards a quicker rebalancing of the market.

Speaker 2

If we focus on the right hand side of Slide 15, which shows the total number of vessels scrapped per year, we can see that another four vessels were removed from the fleet. This takes the total number of LNG carrier demolitions in 2025 to 10, surpassing the previous all time high full year record of eight vessels scrapped in 2024. Prior to this, there are rumors of an addition of two older LNG carriers being under advanced discussions for removal. And in the same slide, the graph on the left is reflective of the commercial pressure on older and lower technology tonnage. The dark blue line shows the trend of increasing idle older vessels with the percentage of idle steamships around 17%.

Speaker 2

Given that the majority of the remaining 83% still operates under long term charters, which are set to expire in the following years, this trend can be felt as representing a pipeline of future vessels to be scrapped. Vessels will not be very good at this scrap yard, but the rovers will look at this option after sustained period of bisonness or when the time for a cost mix special survey counts. Indeed, some analysts expect as many as 35 older vessels to be exiting the engine fleet each year from now until 02/1930. While this number might end up being optimistic, the trend set in 2025 is very strong and set to continue. Moving now to the other major supply side development, when we look at slide 16.

Speaker 2

As you can see, there has been only one third order in Q2, which brings the total number of orders in 2025 year to date to just four. This compares with 58 orders in the 2024. And to put things further in perspective, the only first half of a single year that has seen fewer orders over the past fifteen years was 2020 at the peak of the global pandemic when U. S. Production was being shot in.

Speaker 2

In terms of rebalancing the currently well supplied market, this provides another positive data point for the energy shipping sector. The order book to fleet ratio for a large LNG carrier now stands at just below 44%, reflecting the very rapid slowing of new energy orders, especially since October 2024. General, the run rate of total orders made over the past twelve months slowed fewer than 20 And as the dark blue bars show, there have been several individual months where no new LNG orders were made. This is an encouraging setup for the industry, participants like ourselves, given the FDA development we have seen in the past six months and also the lead time for ordering LNG vessel delivery remains between three and four years. I will now turn to our summary on slide 17.

Speaker 2

The slide graph shows where CCC may leave the energy market is currently positioned and its updated version of the same slide we used for Q1's call. An inflection point for the energy market between supply and demand is still forecast in 2027. In our view, there is one key trend that could potentially bring the interrelation point forward and that is the acceleration of steam vessel removal. Moreover, there are two other trends that increase the magnitude of how undersupply the market is beyond that inflection point and those are the very strong energy supply growth and the absence of new energy sea orders. In any case, CCC is ideally positioned benefit with open fleet positions into 2026 and 2027 into what we believe will be a strengthening market both in terms of long term time charter development and industry dynamics.

Speaker 2

I will now hand the presentation back to Jay for a summary of Q2 and the company positioning going forward. Thank you, Nikos. Focusing on our present and future fleet on Slide 19 provides an opportunity to and we expect to have more color with regard to the deployment closer to the delivery. As discussed earlier, we have started to finance this delivery that expects our more usual in this regard in the coming quarters. Finally, our three legacy container vessels are well under big long term charters, potentially out to the end of the next decade, but provide optionality for CCEC going forward.

Speaker 2

In short, the company specific progress we made with contract originations and extensions during Q1. Importantly, this company has and will continue to is expected to control the largest LNG two stroke carrier fleet available to investors upon delivery in addition to the other 10 multi gas vessels. The company has considerable contract coverage of over seventy years already and strong visibility of cash flows, while we believe that we have an advantage over many of our peers in only being invested in the latest generation gas vessels. And with that, I will now pass it back to the operator for questions. Thank you.

Operator

Thank you. We will now be conducting a question and answer And our first question will come from Alexander Bidwell

Speaker 4

So taking a look at the coming wave of merchant capacity, Could you walk us through how these increased merchant volumes may impact the carrier market in comparison to volumes tied to long term agreements? Do these larger merchant books have a, I guess, a potential to drive carrier demands more than, I guess, fixed SPAs?

Speaker 2

Yes, it's a good question. Well, the main story here is that most of those contracted volumes and the SPAs we're seeing and also these projects that have been taking FID one after the other so far this year do not have secure shipping on the back of those FIDs or the SPAs. So you're looking at an order book that has 16 or 17 vessels available still left all the way to 2029 and demand for approximately well, under conservative assumptions, 1.5 vessels per MTPA, you're looking at a demand for around 300 ships. That's the number last time. So obviously, there's still yard capacity for obviously for 2029 and there's also yard capacity for 2028.

Speaker 2

But given the 50% growth in the LNG market commodity side, there is simply not enough rate to cover that 2027 or 2028 onwards. And that's the thesis.

Speaker 4

All right. And then taking a look at the multi gas carriers and the LCO2 carriers. With delivery just around the corner in 2026, How are near term employment prospects looking? And what sort of conversations are you having around longer term fixtures as well as LCO2 transportation?

Speaker 2

Yes, it's a third question. And the LCO2 market is obviously a new space for us, but we have been looking at it. And what we did realize recently is that it's very different from the LNG space. In the LNG space, you fix a vessel two years in advance and for much longer periods, whereas this multi gas carrier markets, it's CO2, LPG or ammonia, are more the fixing window is much closer to the delivery timing. So I would say in this market, we expect within the next three to four months to have more concrete commercial discussions because basically the commentary and what we've seen so far is that it's too far out to discuss these vessels on a firm basis.

Speaker 2

Both the time charter period and the timeframe for

Speaker 1

fixing those ships is just

Speaker 2

shorter compared to LNG. So now we are seven months or six months prior to the first delivery. Within the next quarter, we will have something to update on this.

Speaker 4

All right. Thank you very much. I'll turn it back over.

Operator

Our next question comes from Omar Nokta with Jefferies.

Speaker 5

Did actually just want to maybe follow-up on the last question on the MGCs and the CO2 carriers. Obviously, you mentioned the window gets shorter in terms of fixing. Is the plan, do you think, still to deploy them on, say, medium term or long term contracts? Or do you think these will ultimately be destined for spot trading?

Speaker 3

Omar. It's Jerry. So the I think we will be quite opportunistic about the fixing of the ships and will be also driven by the opportunity. Of course, as far as the LCO2 carriers, we want to be mindful of positioning the vessels to get into the LCO2 business in the medium to long run. So unless

Speaker 2

it's

Speaker 3

LCO2 business, I don't think we will go for very long term on those ships. We will just want to make sure that we have potentially spot to medium term, call it up to two or three years in order to be able to take on projects from 2028, 2029 onwards. There is also a bundle of customer charters that are have a portfolio of products. Some of them they would, for example, trade LPG, gray ammonia. They are looking to take on volumes of blue ammonia and then also have LCO2 business.

Speaker 3

This would be an ideal customer because they can take the ship for five, ten years and they can trade it around their different products. And this vessel is ideal, I mean, has the ability to take on all these cargoes. Now with regard to the MGCs, slightly different. There you have, let's say, a short to medium term time charter structure and not so liquid spot market. So there, we will take a view on the market.

Speaker 3

Depending on the opportunity, we might fix shorter term, which is more likely at this point, when I say shorter term, months to a year. But we are also very focused on some longer term opportunities that are being discussed. And as Nico said, hopefully over the next quarter or two, we can update you on that. So it might be a mix of, let's say, shorter term charters as well as longer term.

Speaker 5

Great. Thanks, Gerry. Obviously, was very helpful and very detailed. So appreciate that color. And then maybe just kind of perhaps bigger picture, we've seen sentiment in the LNG sector here maybe over the past week ever since The U.

Speaker 5

S. EU deal. Sentiment has gotten better. Have you at least in terms of the equities and investor interest, have you seen any of that optimism thus far translate into the charter markets? Has it prompted any more discussions for charters?

Speaker 5

Or is it still too early?

Speaker 2

Yes. This deal between The U. S. And Europe, obviously, is a good thing. Now it remains to be seen how exactly it will play out because we're talking about a massive increase in terms of purchases from the EU towards from The U.

Speaker 2

S. LNG. But the point is it has certainly had some ripple effect on shipping as we have seen multiple term requirements coming out and surfacing over the past month, month and a half. So we currently we mentioned in the presentation that there are live nine requirements live simultaneously in Q2. Right now, there's three multiple of them and some of them are from The U.

Speaker 2

S. And all I can share at this stage is that we are involved in those actively. So yes, it has affected the sentiment and the demand for LNG shipping. And we expect that it will continue to do so, especially as we see more and more LNG SPA signed from European counterparties like ENI, like the Germans, CEFA and all that, which have surfaced in the news over the past two weeks. Mentioning these companies mentioning these companies, just to complement this last comment, we have seen a long term requirement from these companies on the back of those volumes signed.

Speaker 5

Okay. Interesting. Well, look forward to seeing how those develop. Appreciate the insight and color. I'll pass it back.

Operator

We'll go next to Liam Burke with B. Riley Securities.

Speaker 6

Jerry, it looks like you have a significant first mover advantage on the medium gas carriers and the liquid CO2. Do you anticipate any followers or any kind of growth in the order book anytime soon?

Speaker 3

In the order book, there is only a handful of vessels, it's our vessels as well as some vessels that are in order for Northern Lights project. There is a lot of activity in the background and a number of discussions ongoing for a number of different types of liquid CO2 carriers in different sizes, which is all very encouraging. If I had to guess, I think we will definitely see more ordering in that direction over the next six to twelve months as a lot of these projects are reaching the level of maturity needed to result into orders. But overall, I think what we see is that if you were to look at the projects that are maturing or under development today compared to the shipping needs that this would generate. And then you look at shipyard capacity.

Speaker 3

I think that's going to be a very tight market because I think as we have discussed in previous calls, these type of vessels are quite sophisticated. They have sophisticated equipment, but more importantly, the specialized steel that is required to build tanks to carry liquid CO2. And their processing is not readily available. There's only a limited number of subcontractors, especially in Korea, but also in China. So that would mean that the capacity of shipyards to generate or to produce ships as they're required will be quite restricted.

Speaker 3

So we believe that if projects continue to mature at current volumes, we will have a bit of a tight market there But again, we're still quite a bit far away from having full visibility.

Speaker 6

Great. Thank you, Jerry. And on the financing of the first two vessels, do you anticipate being able to finance the new builds as they come online? Was it an easy process? Or is this something where it's a newer asset and lenders are a little hesitant?

Speaker 3

I think it was an easy process. If anything, I would say they were quite popular given their potential to trade in this type of this part of the economy, the energy transition part of the economy. And I have to stress also the fact that they have the optionality to trade in a normal hydrocarbon and gray ammonia market. So these vessels have the perfect flexibility. So they were quite popular with financiers.

Speaker 3

As I said in the call, I expect that we will have more news in the coming months in this direction as well as on other newbuilding vessels. Given the current financing market and the prospect of these vessels as well as LNG carriers, I don't foresee any issues with the financing.

Speaker 6

Great. Thank you, Jerry.

Speaker 2

Thank you.

Operator

Thank you. This does actually conclude our question and answer session. I would like to turn the floor back over to our CEO for closing comments.

Speaker 3

Thank you, and thank you, everyone, for dialing in today.

Operator

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.

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