Capital Clean Energy Carriers Corp

NASDAQ:CCEC

Q4-2025 Earnings Call

[Operator]

Thank you for standing by, and welcome to the Clean Capital Energy Carriers Corp. Fourth Quarter 2025 Financial Results Conference Call. We have with us Today, Mr. Jerry Kalogiratos, Chief Executive Officer; Mr. Brian Gallagher, Executive Vice President, Investor Relations; and Mr. Nikos Tripodakis, Chief Commercial Officer.

[Operator Instructions]

I must advise you that this conference is being recorded today, Thursday, March 5, 2026.

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

These forward-looking statements involve risks and uncertainties that could close 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 the call over to our speaker today, Mr. Brian Gallagher. Please go ahead.

[Brian Gallagher, executive]

Thank you, operator. Good morning or afternoon to wherever you are, and thank you for listening to the Capital Clean Energy Carrier's Q4 2025 Earnings Call. As a reminder, we'll be referring to the supporting slides available on our website as we go through today's presentation.

Let's start with the highlights on Slide 4. An exceptionally busy quarter has continued with subsequent events into the current quarter, but it's pleasing to report the companies continue to make progress on multiple fronts. The key highlights from Q4 was our contracting of 3 latest technology LNG carriers. This opportunistic transaction illustrated our capability to act with conviction and speed and capturing what we believe will be valuable and timely additions to our fleet. More details from Jerry on that later on.

Elsewhere, early on in the quarter -- current quarter, we welcome the Active into our fleet, the world's first 22,000 cubic meter liquid CO2 multi-gas carrier, but we also said goodbye to another container vessel as we pressed on with our focus on gas transportation. In terms of our governance and ongoing focus on sustainability, the company was pleased to gain accreditation from CDP in our first submission to that particular platform. Finally, the LNG shipping spot market had a robust if short-lived upturned during Q4 with freight rates touching $100,000 per day. This is an encouraging feature for the future development and potential earnings power from the sector, and there are some key underlying trends, which will require consideration and they'll be covered later on in the presentation.

We are acutely aware of the current and fast-moving dynamic in the Middle East, impacting LNG and gas shipping sectors, which are Head of Commercial, Nikos Tripodakis, will provide some thoughts on later on. And naturally, management will be available to take questions after the formal presentation.

Moving back to Q4 and our reporting net income from continued operations for the quarter came in at $28.4 million from which we fulfilled our commitment to a fixed distribution of USD 0.15 dividend per share to our shareholders, retaining the company record of distributing a cash dividend for every single quarter since our listing in March 2007.

With that, I'll hand it over to our Chief Executive, Jerry Kalogiratos to run through, firstly, the financial highlights.

[Gerasimos Kalogiratos, executive]

Thank you, Brian, and good morning or afternoon to everyone listening in today. It has almost become routine to report further container sales, and the fourth quarter of 25% is no different. As Brian pointed out, we have now classified Buenaventura Express under discontinued operations due to its sale, which nevertheless had a full quarter before being delivered to its new owners in January. The sale of the Buenaventura represents the 14th container carrier sale in 24 months, consistent with the company's strategy to pivot to gas transportation. The classification of the Buenaventura Express under discontinued operations affected our results compared, for example, to the previous quarter. This leaves the company with just 1 container vessel. It continues to generate positive cash flows for the company as it is on the long-term charter with a blue-chip partner to 2033 and options to extend to 2039.

We have made significant progress in our pivot, but we have always remained focused on ensuring value creation for our shareholders. We will only look to sell the last container asset. If it is accretive this strategy has served us well with the 14 other vessels, and we will continue on the same path. The dividend payout remains a core component of the company's value proposition to shareholders. The $0.15 dividend was paid on February 12 to shareholders of record on February 3. This was the 75th consecutive quarter that the company has paid a cash dividend.

Moving now to the balance sheet on Slide 7. We closed the year with a solid cash position of $296 million, including restricted cash and the net leverage ratio just short of 49%. As mentioned earlier, we also finalized the sale of 13,700 TEU container vessel in early '26, continuing our disciplined capital recycling strategy. Finally, just a week ago, we issued a 200 million-euro bond listed at the AtenStock Exchange, further enhancing our balance sheet flexibility. We continue to work closely with different sources of finance and the funding of the 9 LNG carriers still due for delivery, and we are very encouraged with the progress of these discussions. We hope to be able to report much more on this front in the next quarterly call.

Moving to Slide 9. Our LNG fleet continues to provide long-term visibility and stability. We have 90 years of contracted backlog at an average of DCE of approximately 86,800 per day, representing $2.7 billion of contracted revenue. If all extension options are exercised, this increases to 123 years or approximately $3.9 billion in contracted revenues. I recently announced order for 3 new LNG care newbuilds shown at the bottom of this slide, positions us to benefit from increased LNG Cpi demand towards the end of the decade. We continue to be in constant alogue with counterparties regarding our LNG fleet in what has become increasingly a more active period market and looking for the right employment structure for our remaining 6 open new builds.

In terms of fleet update, we will have 4 upcoming dry docks for our LNG fleet. In the first quarter of this year, we have the Adamas. And in the next quarter, we expect to have the dry docking of the Arista House, Tatas and [indiscernible]. In terms of cash cost, the guidance remains the same as in previous quarters at $5 million all-in cost per dry dock and around 20, 25 days of hire. Importantly, we will welcome 2 more vessels during the second quarter of 2026, our second liquid C2 carrier and LPG carrier, the Amadeus at the end of April and also our first dual fuel 45,000 cubic medium LPG carrier various genes in early June.

Turning to the next slide. Funding of our newbuilding program is well supported. We have already paid a portion of the required CapEx supported by -- generated cash flows, asset monetization and attractive debt financing terms. As we progress through 2026 and '27, we expect CapEx to be mostly weighted towards the LNG carriers for which we assume on average approximately 70% debt financing. The picture that you see is before tapping into the proceeds of the EUR 250 million bond issue. This leads neatly to look briefly at the key events for the company during the quarter, namely the contracting of 3 new LNG carriers on Slide 11.

As mentioned earlier, we secured 3 state-of-the-art LNG carriers with deliveries scheduled of 1 vessel in the fourth quarter of '28 and 2 in the first quarter of '29. These vessels include enhancements to fuel efficiency, boil of rates as well as liquefaction capacity, placing them among the highest-performing LNG carriers globally. We secured the spares at HD Hyundai Samho in South Korea on attractive terms. The delivery profile is optimized for a market period where the order book looks particularly undersupplied in view of the anticipated demand giving us significant commercial optionality.

Now after quarter end, we delivered the world's first 22,000 cubic liquid CO2 multi-gas carrier, the Active. This vessel is capable of transporting liquid CO2, LPG and ammonia and other petrochemicals and remains fully competitive in the conventional semi ref gas market. The vessels already employed on a 6-month charter, transporting LPG, an optional extension, demonstrating immediate commercial demand. As mentioned earlier, we successfully raised last month EUR 250 million through a newly issued unsecured bond, take advantage of a favorable interest rate environment. After hedging the currency and interest rate exposure of the new bond, we expect the online cost to be approximately so 1 for $295 million in dollar terms. But to the process of the new bond will be used to refinance our outstanding bond of EUR 100 million -- EUR 150 million issued in 2021, maturing later this year.

The rest of the proceeds will be used to finance our newbuilding program and for general corporate purposes.

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

[Nikolaos Tripodakis, executive]

Thank you, Jerry, and good morning or afternoon, everybody. Currently, of course, the war in the Middle East and how it will affect the energy model. And in our case, the shipping market is in everyone's mind. I will come back to this at the end of my presentation. Please allow me to start with the main highlights of Q4, which has been the unexpectedly strong spot market.

As Slide 14 shows, spot rates rose strongly to exceed $100,000 a day in mid-December, the highest level of the past 2 years. An unexpected surge in LNG production from the U.S. pockets of East West arbitrars and logistical constraints led to an absorption of available tonnage and the significant increase in spot rates. This served as a stark reminder of the fragility of the LNG shipping supply-demand balance during winter months when modest changes in -- economics, production volumes or port and canal logistics can collectively have a disproportionate impact on freight markets. However, as we will see on Slide 15, all vessel types benefit in a similar way from a surge in spot rates.

Turning to Slide 15. As we can see on the left-hand side, we see the 5-year quarterly average freight rates up to 2024. What is interesting is that the charter rates for steam vessels during that period captured around 50% of the rate of a 2-stroke modern vessel. But in 2025, that percentage dropped to 20%, even though the market has been consistently lower compared to the 5-year average. What is also worth noting is that even though 2-stroke charter rates rose by approximately $32,000 a day on average through Q4, steam rates only rose about 7,000 a day and continue to trade below OpEx levels. This clearly indicates that 2 stroke vessels, like the 1 CCF owns and operate capture the lion's share of the benefits in a rising market, while older vessels remain unattractive as long as 2 stroke vessels are available even if the charter rate for 2 strokes is approximately 400% higher as it was during the Q4 of 2025.

This widening rate gap underscores the increasing obsolescence of older technology and supports our strategy for investing exclusively in modern high-efficiency LNG carriers.

Turning now to Slide 16. The challenging market conditions for older vessels described so far have led to 2025 becoming a record year in terms of scrapping with 61 vessels exiting the fleet. Looking at the age, the redelivery profile from current charters and the fact that these vessels would operate below their OpEx breakeven in the spot market, even when the spot market goes through its seasonal spikes, the commercial removal of those vessels either through laying up or scrapping becomes inevitable.

Our attention now turns to the other end of the spectrum and specifically new buildings on Slide 17. As we look at Slide 17, a clear pattern emerge in Q4 with an increase in ordering, something we were part of with a 3-vessel order. In December alone, there were almost as many orders placed as for the rest of the year combined, indicating greater confidence amongst the ship owners regarding the dynamics of the LNG market. This has led to a slight uptick in newbuilding prices as we can see in the right of Slide 17. We expect this trend to continue as limited yard capacity for deliveries in 2028 and 2029, meets the surge in demand for LNG carriers stemming from the doubling of U.S. LNG production from the U.S. This limited capacity for 2028 and 2029 provides a very good opportunity to look at the order book availability and CCEC's market share of open newbuildings.

Turning to Slide 18. It is demonstrated that out of the 30 new buildings in the order book, 6 of those or 20% are controlled by CCEC. This makes us the owner with the largest market share of the open order book and in prime position to capitalize from the increased demand expected in 2027 onwards as charter sick molded tonnage.

Moving on to Slide 19. We would like to summarize our view on the long-term supply and demand picture of LNG freight. As with any shipping segment, there are always a lot of cross current and moving parts. We have tried to incorporate the recent supply and demand developments on this chart. Firstly, to explain the chart, the orange dash line represents the maximum potential growth in demand for LNG carriers and global energy projects extending to 2032. The blue dash line represents the number of LNG vessels required based solely on those projects that have reached an FID status, which is a relatively conservative approach as we expect more projects to reach FID in the months to follow. The gray bar represents the gross number of LNG carrier deliveries expected on a cumulative basis year-on-year with the orange bars being the estimate from CCEC on LNG vessel removals.

The dark gray bars finally represent the net number between vessel deliveries and removals. In summary, we anticipate the LNG shipping market to reach an inflection point in late 2027 or early 2028 with new energy supply requiring a substantial number of additional vessels. Accounting for scrapping of older ships, demand is anticipated to outpace vessel supply, creating a constructive long-term outlook. Now as mentioned at the beginning of my presentation, we need to address the current situation in the Middle East. The U.S. Iran conflict following the coordinated U.S. Israel strikes on Iran on the 28th of February, has significantly increased geopolitical risk in the Persian Gulf and particularly around the strait of Hermosa a critical energy shipping checkpoint. Most commercial vessels are avoiding the area due to security concerns, missile and drone attacks, AIS interference and the withdrawal of more risk insurance.

This has disrupted significantly any normal shipping patterns and the flow of energy commodities and has created a situation where Western affiliated vessels faced particularly high risks and costs when transiting in the region. The conflict has major implications for the global LNG market as roughly 20% of the global LNG exports originate from the Arabian Gulf, mainly from Qatar -- further. Israel has shut down at least 2 major gas due to security concerns, potentially forcing Egypt and Jordan to increase imports by up to 65 cargoes per year to replace lost pipeline gas supply. Combined with the Arabian Gulf export disruptions and the withdrawal of more risk insurance for vessels operating in the region, the situation could significantly tighten global energy markets as a prolonged closure of the strait of -- will lead to increased competition for the limited flexible supply, mainly from the U.S. and result in significant price increases in gas worldwide.

Now the most important unknown right now is the duration of the conflict. We can place lost pipeline gas supply, combined with the Arabian Gulf export disruptions and the withdrawal of more risk insurance for vessels operating in the region, the situation could significantly tighten global energy markets as a prolonged closure of the strait of -- will lead to increased competition for the limited flexible supply, mainly from the U.S. and result in significant price increases in gas worldwide.

Now the most important unknown right now is the duration of the conflict. We cannot speculate on how long the situation will last, but the effect in the gas and shipping markets in less than a week are very clear. Global gas prices for the pro months have more than doubled at some point during this week with Asian gas prices combining a significant premium over TTS. The increase in global prices in combination with the surge in ton mile demand due to an open arbitrars to the East has led to our nonprecedented rise in spot charter rates from circa $40,000 a day last week to around $300,000 per day on a -- basis for March and April loadings at even rates above $100,000 a day for 12 months on modern vessels.

One thing is clear. the longer the situation continues, markets will price the risk accordingly and the rise in commodity prices will further support the rising freight rates.

This concludes our presentation for today, and happy to open the floor to any questions.

[Operator]

[Operator Instructions]

Our first question is from Alexander Bidwell with Webber Research & Advisory.

[Alexander Bidwell, analyst]

I just wanted to see if you guys could give a little bit more color on, I guess, the potential implications of this shutdown of Middle Eastern supplies on the carrier market. We've seen -- I guess, as you mentioned, we've seen spot rates climb pretty drastically over the last couple of days. But what is the -- I guess, the longer-term implications of having a significant amount of supply taken off-line.

[Gerasimos Kalogiratos, executive]

It's probably more than million-dollar question right now, but we'll try to answer it in the best way we can. As we mentioned, the supply for Middle East mainly supplies Asian markets. And unlike what happened in 2022 when Russian gas flows to Europe were cut and Europe into place tight gas with LNG from the U.S. There is no way to replace this Qatar volumes in Asia. So the only way that Asia could replace this, Olivan fuel switching would be to increase the price. That would lead to an increased open arbitrars to the east and the market already now is undersupplied for vessels if this situation were to continue, i.e., an open arbitrage with healthy gas prices to the East. What would mean for freight rates I mean, we already saw the spike in the front, if this were to continue, you could expect term rates to rise significantly. Now how much is something that remains to be seen.

[Alexander Bidwell, analyst]

All right. And then just kind of switching gears. So I believe 1 container vessel left in the fleet. Can you give us a sense of how you're looking at disposal options and just a general idea of what that time line might be?

[Gerasimos Kalogiratos, executive]

Yes. So we have been always quite opportunistic in the way that we have approached the sale of our container vessels and especially these ones, the last 3 that -- these last [indiscernible], the 13,000 EU containers, we have already sold 2 were down to 1. They have a long-term charter and good cash flow visibility, good counterparty. There -- the financing also on this vessel is less flexible than others. So while it's not impossible to transfer or sell this asset, it's more difficult because it has tax equity in the structure. So I think we're going to be quite opportunistic if we see a similarly attractive deal, we will look at selling the vessel or we might simply stick with it until closer to the end of the charter.

Again, we will be driven more by the opportunity and less by a specific time line to divest from this container. I mean we have sold already 14 out of the 15 we feel quite comfortable.

[Operator]

Our next question is from Jon Chappell with Evercore ISI.

[Jonathan Chappell, analyst]

The capital exposure to the conversation and what's happening today, it looks like the more meal becomes open later in '26, 1 newbuild delivers later this year. and 1 in early '27. So is it right to assume that this parabolic move in spot rates does not have any immediate term effect on you? And I guess the follow-on to that would be as some of these new builds become closer to the delivery date. And as mentioned, some of the time charter rates are moving up as well.

Is it kind of a wait and see how this plays out? Or is there any increased inquiry and opportunity to maybe time charter some of the newbuilds even at shorter duration to take it then, I hate to say and take advantage, but to take advantage of the of the move in the charter rates.

[Gerasimos Kalogiratos, executive]

Let me comment on the first part, and then maybe Nikos can pick up the second part with regard to the long-term curve. But -- the -- you are right to point out that in terms of redeliveries, the first vessel that we have is the more in Q3, but we do have some of our newbuilds coming early in much earlier in Q3 and while some of them we have already have employment in place, we have flexibility in swapping this with other later sisters. So there is the potential for us if we see the market interest to be able to offer earlier positions very late Q2 or early Q3. .

I think it will very much depend on how long this lasts Nikos said, which -- and we don't have immense visibility here. Nikos, would you like maybe to say a few words as to how you see the long-term curve being affected right now?

[Nikolaos Tripodakis, executive]

Yes. So as mentioned, this all depends on how long the situation will last. We will need to make something very clear now. There have been a lot of charters out there that were happy to play the spot market given the arbitrage pointing to Europe and a sensible oversupply of vessels in the Atlantic. But now what this situation has created and the longer it lasts, it will make companies that use this strategy more aware and more eager to take the position is that a prolonged arbitraries to the East has made this market very tight. So -- the longer the situation lasts, more and more companies will try to secure shipping even at higher rates, just to be able to lift those volumes.

And we have already seen inquiries for terms for some of our new buildings, obviously, are not at the rates we mentioned for the spot market, but already at higher levels than what we saw let's say, 2 or 3 weeks ago. So it has certainly affected the market, but we need to see the situation last for a bit longer for dealers to be concluded in the 5, 7 years space.

[Jonathan Chappell, analyst]

Okay. And then maybe the terms are a little bit commercially sensitive, but I think it's super important in the context of trying to understand the new market for the LCO2, is there any way to kind of help frame out the charter rate that the active has for the 6 months and then maybe the extension? And then I guess the other thing I'd ask on the LCO2 is, I don't see the delivery schedule in the presentation or the press release anywhere. Just want to make sure that the delivery schedule is last presented was still the same for the remainder of this year and those ships going forward.

[Gerasimos Kalogiratos, executive]

Yes, of course, Jon, yes, the table has not changed, deliveries have not changed. So as I said during my prepared remarks, we are expecting the next LCO2 hand the LPG carrier towards the end of April and the 45,000 cubic fuel [indiscernible] in early June. These are the next couple of deliveries and the delivery schedule for the rest remains as previously described.

Now in terms of the Active, the Active really went directly into the trade as a semi-ref LPG ammonia carrier. It's -- and I think this is how we should be thinking about it until we see a more mature LCO2 market. So in terms of numbers, the -- if you want to think about TC after the ballast days and repositioning from the shipyard into the trade, that's probably for the first 6 months, you can assume close to $21,000 per day. The rate was $25,000, but as I said, the repositioning was in on the first 6 months. And then there is an option for the charter if it's exercised than the headline rate is $32,000 per day. So assuming that option is exercised, the blended average, including repositioning is around $25,000, $26,000 per day for the whole year.

[Operator]

Our next question is from Liam Burke with B. Riley Securities.

[Liam Burke, analyst]

Jerry, I know the timing is not great in light of the shortage of LNG carriers, but what is the general tenor of discussions on the future deliveries of the non-LNG carriers for longer-term charters?

[Gerasimos Kalogiratos, executive]

Yes, this market is a shorter term market. So typically, there, you will find a lot of liquidity anywhere between 6 to 12 months. And then -- there is some demand in the 2- to 3-year type of periods occasionally 5 years. but definitely shorter than the 7, 10, 12 years or more that you see in the LNG market. But I think you could safely say that the most liquid part, the most volume is on the 6 to 12 months TCs.

[Liam Burke, analyst]

The liquid part, okay. if you look on the longer durations that they're kicked around, is there a sufficient return on those rates? Or do you prefer to keep them in on the shorter 6 months to the year.

[Gerasimos Kalogiratos, executive]

With the kind of rate that we see nowadays. I mean, since the delivery of the first vessel market has tightened both for handysize LPG carriers as well as for MGCs, I think the returns are quite decent. And if we see the opportunity, we will try to lock them in for longer. Market today for 45,000 cubic dual-fuel vessel it's probably somewhere around the $40,000 per day mark, give or take, which is quite decent returns.

[Operator]

[Operator Instructions]

Our next question is from Omar Nokta with Clean Securities.

[Unknown Analyst]

Obviously, a lot of stuff I guess I just wanted to ask in terms of the developments in the Middle East, is there any of your vessels that are directly affected by this, specifically, say, the force majeure that was put in by Qatar Energy. I believe you might have 1 ship on contract with them. Does that at all affect the terms of the charter?

[Gerasimos Kalogiratos, executive]

No. So far, we haven't been affected at all. all charters continue with their ongoing charter commitments, and we don't have any vessels in -- within the Gulf. So it's relatively smooth if you can describe it that way given the turmoil in the background.

[Unknown Analyst]

Okay. And then just completely separate, just an accounting question. Just in terms of the remaining newbuild CapEx that's roughly that $2.4 billion. How much of that do you have secured in bank lines? And then how much are you intending to put in place?

[Gerasimos Kalogiratos, executive]

So all the MDCs and LCO2s have been already financed -- and the -- we are in advanced discussions for the remaining LNG carriers as we typically do, you should expect that we will be financing the earlier deliveries and then wait out for later deliveries. I mean we're not going to finance everything this year, simply because we don't want to incur commitment fees. I expect next quarter, we will have a lot more news on the financing of the LNG carriers to be delivered this year and next. In terms of the breakdown, let me suit you an e-mail later on with the exact amounts.

[Operator]

There are no further questions at this time. I would like to turn the conference back over to Mr. Kalogiratos for closing remarks.

[Gerasimos Kalogiratos, executive]

Thank you, operator, and thank you, everyone, for joining us today.

[Operator]

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.