Welcome to the third quarter results presentation of Klaveness Combination Carriers. Today, I'm Engebret Dahm. Together with me, I have Liv Dyrnes, CFO of the company. Let me first start by reminding you who we are. We are a one-of-a-kind shipping company, world leader in combination carriers, which are ships that can transport both dry bulk and wet cargoes with a safe and efficient cleaning in between.
While we have unique solutions, they are competing in the standard markets against standard dry bulk and tanker vessels. Our business is to develop and operate transportation systems that ship in wet tanker cargoes to dry bulk export regions in the most efficient manner with minimum ballast in between.
Our well-established business is the CABU business, where we ship caustic soda southbound to Brazil and Australia to the large alumina refineries located there, and we ship various kind of dry bulk commodities northbound. Our new and growing business is the CLEANBU business, where vessels have the capability of transporting more cargoes for the petroleum, petrochemical, and biofuel industries, and thereby can trade in a much larger number of trades and can also cater for the needs of more customers in more regions.
Our business model is future-proof in the sense that it addresses the three main concerns that investors have to shipping. We provide the lowest carbon emission transportation solution in the dry bulk and tanker space. We have, over time, shown that we have a much lower earnings volatility than the standard markets, which are mainly characterized by boom and bust.
Over time, we also show that we have higher earnings at marginally lower operating costs. Jump over to the third quarter results. As all shipping companies, we are facing operational challenges in the current COVID-19 situation. We are doing fine, thanks to the hard work and dedication of our crew. We never forget that our first priority is to ensure the health and safety of our seafarers.
The third quarter results show the value creation of our combination carrier concepts. Both the CABUs and CLEANBUs deliver time charter earnings more than 2x the earnings of the standard markets. The CABUs $18,800 per day, and the CLEANBUs $24,200 per day.
Coming from a very strong result in the second quarter, the KCC delivers an EBITDA of close to $10 million and then a result after tax of $ 1.3 million, which, given the fact we have had two dockings, we have taken delivery of a new build and also some COVID-19 effect, is satisfactory. We continue in the third quarter to pay dividends.
We pay the same dividend as we have done the last two quarters of $ 0.03 per share. Otherwise, it's important to note that we have progressed well in the contract negotiations for the CABUs for 2021 for the caustic soda. Far, we have booked 83% of the CABU capacity for first half and 66% for the second half. We are also progressing well with the phasing of the CLEANBUs and are expanding combi trades and also have added a contract for the CLEANBUs.
The biggest challenge for the shipping industry today is how to decarbonize, how to reduce emissions to meet the targets set by the Paris Climate Change Agreement. Over the last two months, there has been two main events which shows that the decarbonization of shipping is speeding up.
The first is the fact that the EU Parliament decided in September to include shipping in the Emissions Trading Scheme, effectively introducing a carbon tax on shipping in Europe, increasing the fuel cost in Europe by around $100 per ton or around 25%. We believe that this is the start of more to come. The shipping needs carbon taxes to bridge the gap between the current fuels and the new zero-emission fuels that the shipping eventually have to change over to. The KCC's solutions are resilient to carbon taxes and higher fuels.
In fact, we are positively correlated to higher fuel costs and carbon taxes by the fact that our efficiency makes it possible for us to spread out the cost of higher fuels when more cargo is transported. The second initiative is the fact we see customers are taking more responsibility to drive the decarbonization of shipping.
In October, there was a Sea Cargo Charter initiative released, which is a major milestone, where 14 of the world's biggest charterers in tanker space and dry bulk space agreed a standardized method of reporting their emissions from shipping based on the carbon intensity, the so-called EEOI, which is a measure which takes into account the actual transportation works, a measure where KCC's solutions excels. Furthermore, this is the framework for their work to decarbonize their shipping activities.
In our mind, when charterers are tracking and reporting and seeking to reduce emissions, they will include the CO2 emission targets into their chartering activities, and they will seek the most cost-competitive way of reducing CO2 emissions. This is a fantastic business opportunity for KCC, as we today provide the most carbon efficient and lowest cost way of reducing emissions existing today.
The graph to the right shows again that while our solutions can reduce emissions by 40% compared to the standard ships burning heavy fuels, we see LNG ships and ships burning biofuel would have a substantially higher cost and in fact reduce emissions less than our solutions can do. We are focused on improving our solutions further and have set ambitious decarbonization targets. We will reduce the carbon intensity by 25% up to 2022, and the CO2 emissions by 15%.
You will see from the reporting that you cannot yet see the results from this work we are doing, but we hope coming into next year that we will start to see results of all the initiatives that we do to reach our targets. We have over time shown that we deliver earnings that are much more stable and have much less volatility than the standard markets. We do this in two ways.
Firstly, our business generates earnings from three different markets. From the tanker markets, from the dry bulk markets, and from fuel prices, which are fairly uncorrelated, and by this reduce risks and even so the cycles and earnings. Looking at what's happening in the market over the last year, you see the MR tanker market earnings in blue, and you see the dry bulk earnings in dark blue.
You see again after the spectacular boom this spring, tanker earnings fell back and has been very weak over the third quarter and so far in the fourth quarter, while the dry bulk market strengthened considerably over late spring and summer, pulling back lately, but still at historically strong levels.
Secondly, we are also having an industrial approach to our shipping business, meaning that we make contracts with our counterparties both in the tanker space and in the dry bulk space. We also have the discipline to ensure that we utilize the stronger markets to increase our hedging like we did this spring, where we sold derivatives and we chartered out our CLEANBUs on time charter.
Looking on the tanker market in the graph to the left, we see the tanker market is very weak and we expect that the destocking in the tanker market, which to reduce inventories both cutting and redelivering ships in the floating storage and cutting storage onshore will take time. This is reflected in the FFA curve you see to the right, where it's fairly flat over the next eight months and increasing slightly in the second half of the year.
We believe there's a considerably upside potential in the second half, but we still have booked quite a bit of contracts for both the CABUs and also for the CLEANBUs for the first half. To date, we have a coverage of 50% for the total fleet when it comes to the tanker exposure. Around two-thirds is fixed rate contracts and one-third is index-linked contracts.
The coverage for second half is less, but we expect that over the next month we will increase the contract coverage for the tanker capacity further. Looking on the dry bulk market, after the strengthening during the summer, the market has fallen back a little bit. The forward market, as the graph shows, is fairly flat, but still at quite interesting levels.
We see that the record high grain shipments and strong shipments of iron ore to China is keeping up the market and gives an optimism for the market for next year. This is part of the reason why we have chosen to have a lower contract coverage in the dry bulk space. We are, for total fleet, around 20% covered for first half 2021 and a little bit more than 10% covered for second half 2021.
We expect also to increase the contract coverage in 2021, over the next months or two. We've also consistently delivered earnings higher than the standard markets and a higher profitability than the standard markets at the marginally higher operating costs. Looking at first, the CABUs. We are happy to see that the part of the strong earnings generated by the CABUs this year is made through operational improvements.
We have managed to increase the bookings of the CABUs by close to 25% compared to 2019. This makes it possible for us to substantially increase the share of the capacity we have in combination trades, reaching close to 90% in 2020. We know that when we employ the ships in combination trade, we create value, and our earnings exceeds the standard markets.
Looking at the CABU earnings, we at the $18,840 for third quarter, which is a bit more than twice the earnings for MR tankers. The earnings are negatively impacted by positioning of two vessels between trading areas, generating lower earnings. Still, year to date, we have earned close to $20,200 per day for the MR tankers, which exceeds the standard tanker market by 1.1. Looking ahead for the fourth quarter, we are guiding at earnings at between $18,500 and $19,500 per days.
Compared to the current weak tanker market, that's a multiple of more than three. Looking ahead, you will see that the multiple compared to the standard markets for the year as a whole will increase up to 1.2, 1.3 at least. We are pleased also with the progress we make in the CLEANBUs. We have had strong performance for the larger number of shipments made.
We have increased the number of customers, and the number of successful terminal operations. We have succeeded to increase the number of combination trades. In September, we completed the round from Middle East to Europe and back again. We are very pleased to say that we, in October, completed the first shipment to Australia with gas oil after completing a dry shipment from Australia with alumina.
As this is critical for the CLEANBUs to get the ship into combination trade where we can earn superior earnings compared to the standard markets. The earnings for the CLEANBUs for the third quarter of close to $24,200 per day is positively impacted by the time charters we had on the fleet, but also satisfactory earnings on the combination trades we have had since the redelivery from time charter of two of the three vessels.
This generates earnings of 2.4 x the standard markets, which has been in the quarter around $10,000 per day. To date, in 2020, we are at $25,300 per day, which evens the indices for LR1 tankers for the period. The guiding for the fourth quarter is between $19,000-$20,000 per day, which includes the partly lower earnings for the two ships, new builds delivered that we will phase in during the quarter.
As mentioned, we took delivery of two ships, one in October and one in August. These ships will start trading now in the fourth quarter. The last three CLEANBU new builds will be delivered from January to April next year and be phased in during the first half of the year. We have had challenges with bringing the ships out of the shipyard in China due to the COVID-19 restrictions.
We are pleased to see that we have managed to cut substantially the time from delivery to start of trading for the fifth ship compared to the fourth new build by about 20 days, so 35%. We expect to improve that further for the next ships delivering.
Despite weaker tanker markets, increased off-hire, and somewhat higher costs for the quarter, it was a profitable quarter. Adjusted EBITDA ended at $9.8 million, down 38% from a record strong second quarter. Profit after tax ended at $1.3 million, $0.03 per share, while year to date profit is a strong $14 million.
In addition to lower TCE earnings, we experienced increased off-hire, both scheduled and unscheduled, somewhat higher operating expenses for the CABU vessels, and we also had some negative impacts of the delivery of CLEANBU number four as we took delivery of the vessel in early August while it only started trading in late September. If we go back to the top of the table, you will see that net revenue is down approximately $5 million QoQ, or approximately 20%. 70% of this is related to weaker TCE earnings, while 30% is related to off-hire.
We dry docked two vessels this quarter. In addition, we had close to 50 days unscheduled off-hire, a large part related to COVID-19. We had to deviate vessels to make two crew changes. We had one COVID incident on board. We as well had some waiting time prior to going into port. Operating expenses increased by $1.3 million, approximately 15% compared to second quarter.
As you can see in the graph to the right, operating expenses per day for the CABU vessels is up from $7,200 per day in second quarter to approximately $7,850 per day in third quarter. We believe these effects are temporary and mainly COVID related. This effect accounts for approximately 40% of the increased operating expenses. As mentioned, we took delivery of the fourth CLEANBU vessel, which of course impacts operating expenses as well.
On a positive note, you will see in the graph as well that CLEANBU operating expenses is down approximately $1,000 per day from second to third quarter. Part of this is periodization effects, but of course it's nice to see the positive development. Adjusted EBITDA is up 17% year-on-year. A large part of this is higher TCE earnings in average, approximately $1,500 per day.
We have as well one more vessel in operation in Q3 this year compared to Q3 last year. EBITDA QoQ is, as mentioned, down 38%, mainly related to lower earnings. However, it's important to emphasize that KCC TCE earnings multiple to tanker vessel is about two for both vessels. We have estimated the impact of COVID-19 to be approximately $2.5 million for the quarter, 50% costs and 50% lost earnings.
However, we see a positive development related to this going into fourth quarter. We took delivery of the fifth CLEANBU vessel in mid-October, and as Engebret mentioned, time from delivery to start of trading has improved considerably compared to the fourth CLEANBU vessel. Far this quarter, we have had 10 off-hire COVID-19 related days, hence a strong development from third quarter. Return on capital employed year to date is 7% and 4% for the quarter.
Remember, we still have four vessels under construction, and we took delivery of the fourth vessel in August. As you can see from the graph to the right, EBITDA year to date is $38 million, and we have estimated EBITDA for the vessels under construction to be approximately $20 million for the first three quarters.
If we had had a full fleet on water for the three first quarters this year, EBITDA would have been approximately $60 million. We have unproductive capital on our balance sheet, which implies lower return figures than with a full fleet in operation. Cash is down $15 million during the quarter. Cash flow from operations was $7.4 million, where we took delivery of a new build and we have had dry dockings amounting to approximately $35 million.
We in September raised NOK 200 million through a bond tap issue, and we have as well had regular interest and debt repayments as well as dividends of approximately $9 million in total. Cash for end of third quarter ended at $57.7 million.
When we took delivery of the fourth CLEANBU vessel, we did not draw on the mortgage debt related to this vessel as we had excess cash on our balance sheet. We will draw $30 million related to this vessel in late November. We have as well called the remaining outstanding part of the KCC03 bond that will be repaid December 1st, and net remaining new build CapEx is estimated to be approximately $20 million.
Adjusted for these events or future payments, we have a cash position of $43 million. In addition to the financials we have been through, equity ratio ended at 43% at the end of third quarter, quite stable compared to second quarter. We pay $0.03 per share in dividends. As mentioned, we had a profitable quarter with a profit after tax of $1.3 million.
To wrap up, 2020 will be a strong year for KCC, which is good in the very difficult market circumstances which has been, especially in the second half of the year. The guiding for the CABUs are between $18,500 and $19,500, and the CLEANBUs between $19,000 and $20,000 per day in the fourth quarter, which is very strong in the current market.
We expect lower off-hire in the fourth quarter than in third quarter, meaning that we are optimistic that the results for the fourth quarter will be stronger than the third quarter. Looking at 2021, all indicators point to a weak tanker market in the first half, and hopefully a recovery and a stronger market in the second half. We have good contract coverage in the tanker space, which partly will offset the negative effects from the expected weak spot market.
We have positive expectations for the dry bulk market, and given that 50% of our capacity is in the dry bulk market, will stabilize earnings and have a positive effect. We have positive development in the phasing of the CLEANBUs. With the full fleet in the water in the second quarter, we are all set for an expected improvement in the market for second half of 2021. That summarizes our presentation, and we are then ready to take the questions from the listeners.
The question from Dennis in ABGSC is, "Can you guide at which levels you have concluded your 2021 fixed rate coverage for both dry and wet legs?" I think on the dry side, I think the average is, relative to the time charter, the standard market, that means on a round trip level, is around between $10,000 and $11,000 per day.
For the CABUs, I would expect that the average earnings on leg would be in the region of around $20,000 per day. Again, give and take. The second question from Dennis is, "Do you expect the normal caustic soda volumes in 2021 and 2022 to remain at similar levels to 2020?" That is, I can confirm that all our customers expect to produce full capacity in 2021, despite the difficult circumstance in the aluminum industry.
As the trade flows are moving at the moment, we are seeing increased volumes in the trades where our CABUs and CLEANBUs have competitive advantage. Yes, we expect the caustic soda volumes to remain at the same levels as in 2020 and 2021. 2022 is a bit too early to say what will happen. The third question is also from Dennis.
From your understanding, how will the EU's ETS implementation work for shipping? Would an owner pay for allowances for all emissions that has performed in getting to Europe, or will it only be for emissions within the EU's maritime zones? I think the answer there is we don't know. I think it is discussions on the way in the EU to draft the final regulations.
I think both outcomes are possible. It may also be a two-step model where they start with implementing this internally in EU's maritime zones and then expand at a later stage for shipments from and to Europe. Let's see. I have a question from Magni Christiansen. "Could you comment on options for additional CLEANBUs and are you thinking on exercising versus not exercising?" We have two options remaining for the declaration in late January.
As we have told you before, while we have a strong balance sheet, we do not have much spare investment capacity, meaning that to declare options, we would need to raise additional equity. With the current pricing in the market, that is unlikely. If you ask me, and of course this is up to the board of the company, I believe it's unlikely that we'll raise money in the current market and declare these options.
We have started discussions with the shipyard to extend the date for option declaration and hopefully we can succeed that we have options for going well into next year in a couple of months. That seems to be all questions. Thank you for joining this webcast and please do not hesitate to contact us should you have questions directly. Thank you.