Genco Shipping & Trading Limited. Genco s Comprehensive IMO 2020 Plan October 2018

Transcription

1 Geco Shippig & Tradig Limited Geco s Comprehesive IMO 2020 Pla October 2018

2 Forward Lookig Statemets "Safe Harbor" Statemet Uder the Private Securities Litigatio Reform Act of 1995 This presetatio cotais forward-lookig statemets made pursuat to the safe harbor provisios of the Private Securities Litigatio Reform Act of Such forward-lookig statemets use words such as aticipate, budget, estimate, expect, project, ited, pla, believe, ad other words ad terms of similar meaig i coectio with a discussio of potetial future evets, circumstaces or future operatig or fiacial performace. These forward-lookig statemets are based o maagemet s curret expectatios ad observatios. Icluded amog the factors that, i our view, could cause actual results to differ materially from the forward lookig statemets cotaied i this report are the followig: (i) declies or sustaied weakess i demad i the drybulk shippig idustry; (ii) cotiuatio of weakess or declies i drybulk shippig rates; (iii) chages i the supply of or demad for drybulk products, geerally or i particular regios; (iv) chages i the supply of drybulk carriers icludig ewbuildig of vessels or lower tha aticipated scrappig of older vessels; (v) chages i rules ad regulatios applicable to the cargo idustry, icludig, without limitatio, legislatio adopted by iteratioal orgaizatios or by idividual coutries ad actios take by regulatory authorities; (vi) icreases i costs ad expeses icludig but ot limited to: crew wages, isurace, provisios, lube, oil, bukers, repairs, maiteace ad geeral, admiistrative, ad maagemet fee expeses; (vii) whether our isurace arragemets are adequate; (viii) chages i geeral domestic ad iteratioal political coditios; (ix) acts of war, terrorism, or piracy; (x) chages i the coditio of the Compay s vessels or applicable maiteace or regulatory stadards (which may affect, amog other thigs, our aticipated drydockig or maiteace ad repair costs) ad uaticipated drydock expeditures; (xi) the Compay s acquisitio or dispositio of vessels; (xii) the amout of offhire time eeded to complete repairs o vessels ad the timig ad amout of ay reimbursemet by our isurace carriers for isurace claims, icludig offhire days; (xiii) the completio of defiitive documetatio with respect to charters; (xiv) charterers compliace with the terms of their charters i the curret market eviromet; (xv) the extet to which our operatig results cotiue to be affected by weakess i market coditios ad charter rates; (xvi) our ability to maitai cotracts that are critical to our operatio, to obtai ad maitai acceptable terms with our vedors, customers ad service providers ad to retai key executives, maagers ad employees; (xvii) the completio of documetatio for vessel trasactios ad the performace of the terms thereof by buyers or sellers of vessels ad us; (xviii) the terms of defiitive documetatio for the purchase ad istallatio of scrubbers ad our ability to have scrubbers istalled withi the price rage ad time frame aticipated; (xix) our ability to obtai fiacig for scrubbers o acceptable terms; (xx) the relative cost ad availability of low sulphur ad high sulphur fuel, (xxi) worldwide compliace with IMO 2020 regulatios ad other factors listed from time to time i our public filigs with the Securities ad Exchage Commissio icludig, without limitatio, the Compay s Aual Report o Form 10-K for the year eded December 1, 2017 ad its subsequet reports o Form 10-Q ad Form 8-K. Our ability to pay divideds i ay period will deped upo various factors, icludig the limitatios uder ay credit agreemets to which we may be a party, applicable provisios of Marshall Islads law ad the fial determiatio by the Board of Directors each quarter after its review of our fiacial performace. The timig ad amout of divideds, if ay, could also be affected by factors affectig cash flows, results of operatios, required capital expeditures, or reserves. As a result, the amout of divideds actually paid may vary. We do ot udertake ay obligatio to update or revise ay forward-lookig statemets, whether as a result of ew iformatio, future evets or otherwise. 2

3 Executive Summary O Ja 1, 2020, the maximum sulphur emissios limit for vessels globally will be reduced from.5% to 0.5% IMO 2020 Focus New IMO regulatios will have sigificat impact o the marie fuel market Geco coducted a extesive aalysis to optimize compliace with regulatios with a focus o: Reducig its evirometal footprit Maximizig shareholder returs Lowerig fuel costs Formulated balaced strategy based o evolvig marie fuel markets ad fuel spreads: Geco s Strategy Istall scrubbers o 17 Capesizes Cosume compliat fuel o mior bulk vessels Optios for scrubbers o 15 mior bulk vessels Exercise of optios will deped o evolutio of fuel spreads Cotiue executig previously aouced fleet reewal program Potetial Impact o Drybulk Shippig Market Icreased 0.5% sulphur compliat fuel costs could lead to: A slowdow i the world fleet Higher scrappig of older, less fuel efficiet vessels Therefore potetially improved rate eviromets

4 Evolutio of Marie Fuel Fudametals Several factors that will affect the ecoomics of scrubbers o vessels are developig i the market ahead of the 0.5% sulphur cap itroductio, icludig: Availability of high sulphur fuel globally potetial displacemet of HSFO i smaller ports as 0.5% compliat fuel is itroduced i the market Duratio of spread betwee high ad low sulphur fuel Global fleet-wide compliace Sulphur Cap Developmet (2000 to 2020) Fuel Price Forward Curve* Sulphur Cap 5.0%.5%.0%.5%.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Emissio Cotrol Areas (ECA) IMO 2020 represets a immediate ad sigificat reductio i the sulphur fuel cap Global $800 $700 $600 $500 $00 $00 $200 $100.5% Rott Barges FO 0.1% ARA FOB Rott Barges GO Spread Post Ja 1, $- Oct-18 Nov-18 Dec-18 Ja-19 Feb-19 Mar-19 Apr-19 May-19 Ju-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Ja-20 Feb-20 Mar-20 Apr-20 May-20 Ju-20 Jul-20 Aug-20 Sep-20 *Spread is based o 0.1% gas oil, as 0.5% sulphur compliat fuel does ot curretly have a forward curve published. Forward curve for.5% FO ad 0.1% GO as preseted above is provided by World Fuel Services as of October 5, 2018

5 Portfolio Approach Provides Optimal Solutio i Evolvig Market Istall Scrubbers o Capesize Vessels Optios o Select Mior Bulk Vessels Greatest beefit likely to occur i the early stages of compliace Shorter payback period o larger vessels, reducig risk profile Geco s Comprehesive Pla Istall scrubbers o 17 Capesize vessels due to: Log-haul ature of trades maximize sailig days ad scrubber utilizatio Istall Scrubbers o Capesize Vessels Portfolio Approach to IMO 2020 Cosume Compliat LS Fuel o Mior Bulk Ships > Greater degree of certaity of HSFO availability at major ports Higher fuel cosumptio of larger assets Optios o 15 mior bulk vessels Bur Compliat Fuel i Mior Bulk Fleet Immediate compliace Does ot require upfrot capex Cotiue to Execute Fleet Reewal Program Cotiue Previously Aouced Fleet Reewal Program Executio Sell older, less fuel efficiet vessels Use proceeds towards purchase of high specificatio, fuel efficiet vessels Improve fleet-wide fuel efficiecy Reduce emissios 5

6 Curret Fleet-Wide Distributio for IMO 2020 Compliace Balaced Approach to IMO 2020 Istall Scrubbers Scrubber optios Use Compliat Fuel (icl optios / ex optios) # of Vessels % of Fleet % of Fuel Cos. 17 Vessels 15 Vessels 0/5 Vessels 27% 2% 9%/ 7% 1% 20% 9%/ 59% To bur HSFO Istallatio of scrubbers o Capesize vessels provides a atural hedge agaist wideig fuel spreads for over 0% of our fleet s total fuel cosumptio Optios to istall scrubbers o 15 mior bulk vessels expected to provide flexibility to react to market coditios that develop i the ear future Could hedge up to 60% of total fuel cosumptio Complemetary to New Commercial Strategy Focus o direct cargo ad voyage busiess eables beefits to accrue to Geco Lack of log term charters allows flexibility towards evolvig market coditios 6

7 Istallatio Costs ad Ivestmet Returs

8 Favorable Scrubber Payback Period for Capesize Vessels Mai variables Capesize vessels are ideal cadidates 1 Spread betwee HSFO ad LSFO 1 Spread betwee HSFO ad LSFO does ot eed to remai wide for exteded period 2 Sailig days of the vessel 2 Capesize vessels sped a sigificat portio of time tradig at sea as opposed to waitig i port due to loger trade routes Percetage of time i which the beefit of the scrubber ca be realized (ie ability to bur HSFO) Capesize vessels primarily buker at major ports which will most likely stock HSFO Fuel cosumptio characteristics Capesize vessels cosume the most fuel of all vessel classes 5 Charterig strategy 5 Fleet wide emphasis o voyage charters eables beefits to accrue to Geco s bottom lie Favorable payback period for Capesize vessels Potetially loger payback o mior bulk vessels Aticipated payback period (years) Assumes 100% beefit of scrubber to Geco Favorable payback periods i all spread scearios preseted below $200 $00 $00 $500 $600 Spread betwee high ad low sulphur fuel Aticipated payback period (years) Beefit of scrubber to Geco % 75% 50% $200 $00 $00 $500 $600 Spread betwee high ad low sulphur fuel Key Assumptios: Scrubber cost plus istallatio of approximately $2m, 20 day istallatio time, icremetal opex ad fuel cosumptio due to scrubber operatio, vessels sail at eco-speed, sailig days of 285 days per year for Capesize ad 20 days per year o mior bulk. 8

9 Aticipated Scrubber Istallatio ad Costs Expect to have all 17 Capesize vessels fitted with scrubbers ahead of Jauary 1, 2020 Vessels with scrubbers istalled aticipated to see the maximum beefit i the early days of compliace Cost per scrubber (icludig istallatio) Approximately $2 millio 17 Capes Plaed Drydockig Schedule # of Capes Per Year Istallatio Prior to Jauary 1, 2020 for 17 Capesize vessels Accelerate 2020 DDs to Optios Optios for systems o a additioal 15 vessels Istall i 2019 utilizig ridig crews o board to miimize dowtime durig Type of scrubber Ope loop, hybrid ready system protects agaist potetial additioal evirometal regulatios i the future To miimize dowtime, we pla to Istall scrubbers o vessels with scheduled DD Istallatio time 7 vessels scheduled to drydock: weeks i shipyard 10 vessels ot scheduled to drydock: ridig crew o board to miimize dow time, 2 weeks i shipyard Utilize ridig crews o vessels ot scheduled to DD i 2019/20 Work closely with experieced shipyards Fiacig Curretly i discussios with existig leders Pursuig traditioal bak fiacig structure Udertake pipig prep ahead of time Beefit from istallatio of scrubbers o sister vessels 9

10 Summary

11 Summary: Geco s IMO 2020 Comprehesive Pla Geco believes a portfolio approach to the upcomig evirometal regulatios is prudet give ecoomics o larger vessels ad the cotiuous evolutio of the marie fuel market Geco s Portfolio Approach to IMO 2020 Compliace Istall scrubbers o 17 Capesize vessels coverig over 0% of total fleet fuel cosumptio Optios for istallatio o 15 additioal mior bulk vessels coverig a additioal 20% of total fleet fuel cosumptio Expect to istall scrubbers o all 17 Capesize vessels by Jauary 1, 2020 Miimize dowtime for istallatio by utilizig ridig crews The balace of the fleet is to cosume compliat low sulphur fuel Cotiue to execute commercial strategy Emphasis o direct cargo ad voyage busiess eables fuel savigs to flow to the bottom lie Cotiue to execute the Compay s fleet reewal program to: Improve fleet-wide fuel efficiecy ad, Reduce emissios 11