2020 Bulkers Ltd. Company Presentation 4th December 2017

Transcription

1 2020 Bulkers Ltd Company Presentation 4th December 2017

2 Disclaimer This presentation (the "Presentation") has been prepared by 2020 Bulkers Ltd. (the "Company") and is made available through the N-OTC system on this 4th day of December 2017 solely for information purposes. The Presentation does not constitute any recommendation to buy, sell or otherwise transact with any securities issued by the Company. No representation, warranty or undertaking, express or implied, is made by the Company and no reliance should be placed on the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. The Company shall have no responsibility or liability whatsoever (for negligence or otherwise) for any loss arising from the use by any person or entity of the information set forth in the Presentation. All information set forth in the Presentation may change materially and without notice. In making the Presentation public the Company undertakes no obligation to provide additional information or to make updates thereto. The information set forth in the Presentation should be considered in the context of the circumstances prevailing at the date hereof and has not been and will not be updated to reflect material developments which may occur after such date unless specifically stated in such update(s). Matters discussed in the Presentation include "forward looking statements". "Forward looking statements" are statements that are not historical facts and are usually identified by words such as "believes", "expects", "anticipates", "intends", "estimates", "will", "may", "continues", "should" etc. These "forward looking statements" reflect the Company's beliefs, intentions and current expectations concerning, among other things, the Company's results, financial condition, liquidity position, prospects, growth and strategies. "Forward looking statements" include statements regarding: objectives, goals, strategies, outlook and growth prospects, future plans, events or performance and potential for future growth, liquidity, capital resources and capital expenditures, economic outlook and industry trends, developments in the Company's market, the impact of regulatory initiatives and the strength of the Company's competitors. "Forward looking statements" involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The "forward looking statements" included herein are based upon various assumptions, many of which, in turn, are based upon further assumptions. This includes, without limitation, the Company's review of historical operating trends, data contained in the Company's records and data available from third parties. Although the Company believes that these assumptions were reasonable when the relevant statements were made, they are inherently subject to significant known and unknown risks, uncertainties, contingencies and other factors which are difficult or impossible to predict and which are beyond the Company's control. "Forward looking statements" are not guarantees of future performance and such risks, uncertainties, contingencies and other important factors which are inherent thereto could cause the actual results of operation, financial condition and liquidity position of the Company or the industry in which it operates to differ materially from those results which, expressed or implied, are contained herein. No representation to the effect that at any of the "forward looking statements" or forecasts will come to pass or that any forecasted result will be achieved are made. The Presentation and the information contained herein does not constitute or form a part of and should not be construed as an offer for sale or subscription or of solicitation or invitation of any offer to subscribe for or purchase any securities issued by the Company. 4. December,

3 Investment highlights Historically low newbuilding prices Opportunistic approach to selling Attractive payment structure and fixed price options Low costs with no management fees or salaries Fuel efficient vessels with large cargo intake 3

4 Summary Attractive entry point Favorable terms for fuel efficient newbuilds Drybulk earnings have recovered and are set to increase further on the back of expected limited fleet growth and continued robust trade growth going forward Despite significantly improved drybulk earnings, newbuilding prices have been around the lowest levels seen in modern times, creating a favorable risk/reward for ordering newbuildings Newbuilding prices are now starting to show clear signs of recovering driven by relevant yards having filled most of their orderbooks for 2018/2019, combined with rising steel prices and a weakening USD Firm contract for 2 x Newcastlemax drybulk vessels to be built at New Times Shipyard for USD million each. Options for further ships, at a fixed price of USD million Favorable payment terms giving significant leverage to an increase in asset values Newbuild vessels with 17,7 tons per day lower fuel consumption than the reference vessel for the Baltic Capesize Index, with 15 % greater cargo lifting capacity yields USD 10,400 higher TCE earnings at USD 9,75/ton West Australia-China 1) Vessels will be delivered scrubber ready USD 10 mill initial equity investment gives exposure to USD ~350 mill of asset values (2 firm ships + 6 options) Significant equity upside 200% uplift on the initial equity based on the 2 firm ships if asset values recover 25% 2) Current Baltic Cape Index 5TC spot rates + 25% premium for modern Newcastlemax would imply TCE of USD 35,000/day, yielding a leveraged cash on cash return of ~40% 3) Lean structure and opportunistic approach 2020 Bulkers will have a pragmatic and opportunistic approach to realizing profits either through asset sales or taking part in consolidation when the anticipated recovery in asset values materializes. Lean corporate structure with all key functions being outsourced to third parties. No salaries and no related party fees Focus on creating shareholder value 1) At 12 knots speed, average between laden and ballast consumption. Cape index vessel 43mt/day, 2020 Newcastlemax 25mt/day, HFO price USD 375/ton 2) Assuming USD 5 mill in equity per vessel. 3) Assuming building supervision USD 500k per ship, working capital USD 350k per ship. 60% LTV, 15 year profile, 5% interest. OPEX USD 5,5k/day, G&A USD 0,75kday, 97% utilization. Assumes ships earn TCE equivalent of 25% premium to Baltic Capesize Index 5TC. A 25% premium is in line with recent deals done on a TC+ basis for Newcastlemax 4

5 Corporate Structure Ownership Newbuildings Magni Partners Titan Opportunities Fund Fredrik Halvorsen 2) Other investors 50% 20% 20% 10% Vessel type: Newcastlemax Size: 208,000 DWT Yard: New Times Design: MARIC 208KBC-DFOC Seaquest Building supervision Third party technical manager (tbd) 2020 Bulkers Ltd [Bermuda] Vessel owning SPVs Fuel consumption 25,3 tons 1) per 12 knots Price firm vessels USD million Price optional vessels USD million Delivery 2 firm vessels Sept 2019 and Oct 2019 Delivery 6 option vessels Dec 2019 May 2020 Payment terms: 5%, 5%, 10%, 5%, 10%, 65% on delivery Ballast water treatment system installed Reserved space for scrubber installation Contract in place for 2 firm vessels with options with fixed price 1) Average between laden and ballast consumption 2) Ownership through Halvorsen s Fabrikk AS 5

6 Sources and uses Sources and uses Uses Total Per vessel % Newbuild price % Building Supervision % Working capital % Total ,1 100% Sources Total Per vessel % Equity raised % Future equity required % Bank debt (60%) 27,0 54,1 60% Assumptions Uses: Newbuild price for the initial 2x Newcastlemax vessels of USD 44.23m each Fixed supervision cost of USD 500k per vessel payable to SeaQuest Working capital of USD 350k to cover pre delivery costs, legal expenses, accounting and auditors Sources: Equity of USD 10 million Bank debt: 1) 60% LTV 15 Year profile 5% interest Total % 1) Company assumtpions. 6

7 USDm Money multiple equity invested (x) Newbuild asset play with asymetric risk/reward 120 Ordering Newcastlemax at historical lows* 100.0x Asset play with attractive equity upside* 10% equity 20% equity 30% equity 40% equity x 13.7x x 6.0x 9.7x 7.6x x 2.0x 1.7x 1.5x 3.6x 2.8x 2.3x Newcastlemax, NB, reported * Newcastlemax, NB inf. Adj 1.0x Bulkers Newbuild price 10 year average (excl ) 10 year average 10 year peak value * Historical data reflects Clarksons Shipping Intellignece Network Capesize resale values + USD 3 mill to reflect premium for Newcastlemax Source: Clarksons Platou 7

8 Cash break even Cash break even Key assumptions All in price USD mill 45,1 Debt (60%) USD mill 27,0 Profile Years 15 Interest % 5,0 % Assumptions Vessel cost and debt as per sources and uses Opex of USD 5,5k/day payable to third party technical ship manager G&A of USD 750/day to cover company overhead, legal, accounting and auditing costs OPEX USD/day G&A USD/day 750 Unlevered break even Debt ammortization USD/day Interest USD/day Cash Break Even

9 Free Cash Flow to Equity Sensitivity 60% FCF to equity yield on various TCE rates 50% Current avg spot rates for Newcastlemax 1) 40% 30% 20% 10% 0% % Assumptions: Building supervision USD 500k per ship, working capital USD 350k per ship. 60% LTV, 15 year profile, 5% interest. OPEX USD 5,5k/day, G&A USD 0,75kday, 97% utilization 1) Based on Baltic Cape Index 5TC of USD 27,725k/day + 25% premium for Newcastlemax 9

10 USD/day Lower fuel consumption and higher cargo intake drives TCE earnings TC Earnings for Maric Design Newcastlemax vs Baltic Cape Index reference vessel West Australia-Qingdao 50,000 45,000 40,000 8, ,147-1,162 40,600 35,000 4,809 30,000 30,200 25,000 20,000 15,000 10,000 5,000 0 Baltic Cape Index Reference Ship Fuel savings Cargo intake Broker cost Port cost Port days Marec Design Newcastlemax Key assumptions: Freight: USD 9,75 per ton. HFO price USD 375 per mt. Baltic reference vessel avg consumption at 12 knots 43 mt/day at sea and180 tons cargo intake. Maric Design Newcastlemax avg consumption 25,3mt/day at sea and 208 tons cargo intake 10

11 YoY growth (%) USD/day Supply / demand history and outlook We expect 3 years of demand outpacing supply not seen since early 2000s 16% Rates up 2,5x 160,000 14% 12% Rates up 4,8x 14% 14% 14% 15% 13% Rates expected to increase significantly again 140, ,000 10% 10% 100,000 8% 6% 4% 2% 6% 4% 3% 2% 9% 2% 8% 6% 6% 6% 7% 7% 7% 7% 6% 7% 9% 9% 6% 5% 5% 3% 2% 2% 6% 4% 4% 3% 4% 2% 80,000 60,000 40,000 20,000 0% 1% - -1% -2% e 17e 18e 19e Capesize rates Net fleet growth Demand growth -20,000 Source: Clarksons Platou Securities AS 11

12 Jan 96 Mar 97 May 98 Jul 99 Sep 00 Nov 01 Jan 03 Mar 04 May 05 Jul 06 Sep 07 Nov 08 Jan 10 Mar 11 May 12 Jul 13 Sep 14 Nov 15 Jan 17 million dwt million dwt Jan 96 Mar 97 May 98 Jul 99 Sep 00 Nov 01 Jan 03 Mar 04 May 05 Jul 06 Sep 07 Nov 08 Jan 10 Mar 11 May 12 Jul 13 Sep 14 Nov 15 Jan 17 Values (USDm) Attractive entry point limited supply growth Asset values at historically low levels % of fleet on order around all time lows 160 Capesize, 5y old, reported Capesize, infl. adj. 100 % 80 % % % % Limited new ordering (quarterly) 0 % Scrapping remains high Source: Clarksons Platou Securities AS

13 Demand growth has been strong Iron ore and coal imports Comments Mill tons Iron ore: Year to date, iron ore imports totalled mill tons, up from mill tons (+ 6.3 %) in the same period last year Coal: Year to date, coal imports totalled mill tons, up from mill tons (+12.1 %) in the comparable period last year Iron ore Coal Source: GTIS/Clarksons Platou Research Services 13

14 And is expected to remain strong driven by iron ore trade Iron ore ex Brazil is 2.5x the distance vs. Australia China Brazil Australia Significant expansion plans for Brazilian miners Rationale for increased Chinese iron ore imports MT Australia Brazil Chinese demand for imported iron ore set stay high due to: Brazilian and Australian iron ore has iron contents of > 62% vs domestic Chinese Iron ore < 20% Environmental focus, imported iron ore is less polluting High quality iron ore is more economic in steel production Source: Fearnleys Securities, Arrow Shipping Record steel production in China leading to heightened demand for high quality seaborne iron ore Chinese implied steel consumption at all time high Chinese production all time high at 75 MT in September Steel inventories at the lowest level in a decade, down 50% from 2017 peak Steel exports in September are down 42% year over year 14

15 USDm Capex schedule Yard installment structure Capital requirement* Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 400 Debt Equity Firm Ship # Firm Ship # Option ship # Option ship # Option ship # Option ship # Option ship # Option ship # ships ships ships ships ships 4 ships 6 ships 8 ships * Assuming 60% debt financing Founding shareholders are committed to take part in future equity offerings 15

16 Conclusion Newbuild orders placed at historic lows for Newcastlemax ships Significant leverage through fixed price options and attractive yard terms Newbuild prices are already rising Clean and low cost structure with no employees or management fees Founders are largest shareholders and committed to creating shareholder value 16

17 APPENDIX 17

18 Management The Company and its subsidiaries will initially be managed administratively by its directors. Quorum Ltd. has been engaged to provide corporate secretary services in Bermuda. Seaquest Marine Project Management Ltd. ("Seaquest") has been engaged to provide newbuilding supervision services. NRP Procurator AS has been angaged to provide accounting services. PricewaterhouseCoopers AS has been appointed as the Company's auditor. 18

19 Board of Directors Magnus Halvorsen Chairman May 2017 current: Magni Partners Partner, focus on investments within shipping, energy and commodities October 2009 April 2016: Clarksons Platou Securities / Platou Markets Partner and Head of Capital Markets Member of Executive committee Lead USD 8bn of equity capital raisings in the shipping and energy sectors March 2003 March 2009: Pareto Securities Partner, Head of US Sales Chairman of the Board for Nordic Partners - Pareto s US Operations John DellaNoce Director May 2016 Current: Titan Capital Management Ltd. Partner and portfolio manager Titan Opportunities Fund hedge funds make credit and equity investments in shipping, energy, and other cyclical sectors Jens Martin Jensen Director November 2016 current: Pillarstone Europe Partner, main responsibility shipping portfolio/investmets May 2017 current Premuda Spa Board Member September 2004 November 2015: Frontline Ltd / Fredriksen group November 2014 November 2015: Director, Frontline Corporate Svcs. Ltd April 2008 November 2014: CEO and Managing Director, Frontline Mgmt AS September 2004 April 2008: Commercial Director, Frontline Mgmt AS Previous Board Member of: Frontline Ltd, Frontline 2012 Ltd, Flex LNG Ltd, Frontline Shipping Pte Ltd, Frontline Mgmt (Bermuda) Ltd, Seateam Shipmanagement Pte Ltd September 1996 September 2004: Island Shipbrokers Pte Ltd Singapore Partner / Director April 1985 September 1986: A.P Moller / Maersk Group Various positions and postings within the group in Copenhagen, Mexico City, Tokyo and Singapore July 2006 October 2015: Goldman Sachs & Co Vice President, Distressed Products Group Lead analyst globally on investments in energy and financial sectors Investments and restructuring included Lehman Brothers Holdings Inc, Energy Future Holdings and LyondellBasell 19

20 Company Facts 2020 Bulkers Ltd. Is incorporated as a limited company in Bermuda. The Company's authorised share capital is USD 75,000,000, represented by 75,000,000 ordinary shares of USD 1 par value. The Company's issued share capital is USD 5,001,000, represented by 5,001,000 shares. The Company is resident in Bermuda for tax purposes and has been granted tax exempt status by Bermuda authorities. The Company's share is listed on the Norwegian OTC list and can be traded within the Norwegian VPS system. The Company has incorporated two subsidiaries, 2020 Bulkers I Inc. and 2020 Bulkers II Inc. in Liberia. Each of these is party to a shipbuilding contract with New Times Shipbuilding Co. Ltd. For the construction and delivery of one Newcastlemax drybulk vessel. 20