Good day and thank you for standing by. Welcome to the Q3 2022 Earnings Call of MPC Container Ships. This time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to slowly press star one and then one on your telephone. You will then hear an automated message advising your hand is raised. If you wish to ask a question via the webcast, please use the Q&A box available on the webcast link at any time during the conference. Please note that today's call is being recorded. I would now like to hand over to Mr. Constantin Baack, CEO. Please go ahead.
Thank you, operator. Good afternoon and good morning, everyone. This is Constantin Baack, CEO of MPC Container Ships, and I would like to welcome you to our Q3 2022 earnings call. Thank you for joining us today to discuss MPC Container Ships third quarter earnings. This morning, we have issued a stock market announcement covering MPCC's third quarter results for the period ending September 30, 2022. The release, as well as the accompanying presentation for this conference call, are available on the investor and media section in our website. Please be advised that the material provided in our discussion today contain certain forward-looking statements and indicative figures. Actual results may differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with our business. Today's agenda covers three sections.
Firstly, we will have a Q3 2022 in review, then a short market update, followed by a company outlook. I would like to start my presentation with a few highlights of the third quarter. Please turn to page three of the presentation. We are very pleased to report another strong quarter for MPC Container Ships in which we have been able to show another solid financial and operational performance amidst macro uncertainty. As per end of Q3 2022, we look at a very robust -evenue backlog of $1.7 billion, as well as an industry low financial leverage and high balance sheet flexibility with more than 50% of the fleet being unencumbered. Furthermore, today we have announced a dividend for the third quarter of 2022 of $84 million.
Year- to- date, MPCC has declared dividends of around $440 million, emphasizing our commitment to return capital to shareholders. In terms of market developments, the global economy has experienced quite some headwinds, resulting in hampered GDP growth. In an environment with high interest rates, high inflation, and the war between the Ukraine and Russia, the headlines and consequently, the overall market sentiment has turned rather negative. The container charter market has also slowed down quite a bit over the past few weeks and months, and we see a normalization of market parameters from the historic highs that we have observed between 2021 and the first half of 2022. Yet, charter rates and asset prices are still at elevated levels and certainly well above 2019 and historical averages.
Overall, in particular when looking at the intra-regional container market, the outlook is not only negative in our view, it will also include some positive ingredients, and I will provide a more nuanced market update later in the presentation. As a result, on the back of our Q3 earnings announcement, we have today upgraded our guidance for the full year 2022, both in terms of revenues and EBITDA, due to the high visibility and solid operational performance. Our revenue guidance for 2022 is now in the range of $595 million-$605 million in terms of revenue and EBITDA around $500 million. Let me turn to slide 4, which provides further details on Q3 in terms of operational and financial KPIs.
Almost all KPIs are significantly improved year-on-year, both in terms of performance indicators as well as balance sheet items, illustrated by the multiples and trends shown in the table on the slide. Starting on the top left, all key P&L items, for example, revenues, EBITDA, and net profit, are significantly up compared to Q3 2021. Looking at the balance sheet, we have continued to deleverage the company significantly and now operate with a very low financial leverage, providing us with a high discretion regarding capital allocation decisions and significant balance sheet flexibility. Moving on to the right-hand side, key financial KPIs such as dividend per share, earnings per share, and operating cash flow have also improved significantly.
On the operational KPIs, utilization has been in line with the previous quarters, whilst time charter equivalent has increased steeply compared to Q3 2021, in particular due to the strong charter fixtures concluded during the latter part of 2021 and the first half of 2022. The increase in OpEx is mainly due to the general rise in costs, inflation and other elements, but also a consequence of investing into our fleet in order to ensure the most reliable operations to our customers, but also to operate in a way that we maximize EBITDA by having the highest possible operational uptime.
Please turn to the next slide, page 5, where we illustrate the development of distributions year-to-date 2022, demonstrating our commitment to returning capital to shareholders as we continue to deliver on our distribution strategy. The chart shows the dividends declared and or paid since the beginning of 2022. For Q3 2022, we have declared a recurring dividend of $0.16 per share and an event-driven distribution of $0.03 per share, totaling $0.19 per share, which reflects yet another increase in our recurring dividend by around 7%. Overall, year-to-date, we have declared $440 million in dividends or around NOK 9.40 per share in distributions, of which $337 million have already been paid out until this date.
The additional dividend for Q3 in the amount of $84 million have been announced today for payout in December 2022. Cumulatively, this represents a yield of almost 60% on that basis. Let me continue with an update on our portfolio and portfolio measures that we have undertaken during the third quarter. We have continued with executing portfolio measures. Firstly, during Q3, we have sold two vessels at what we think have been attractive prices, and that was ahead of the softening of the market. The market is obviously moving quickly, but at present we are rather looking into selling second-hand vessels rather than buying, and we will consider further vessel sales if accretive. Furthermore, we have concluded five new fixtures in Q3 and until today. These are shown in the lower left part of this slide.
As you can see from the chart on the top left, which shows market data from Clarksons, both periods and charter rates have come down, but are still well above the level seen between 2017 and 2020. We have basically divided the chart on the top left into three periods. Firstly, the period until 2020. Let's say the very high market, including, you know, Q1, Q2, Q3 of this year and the most recent market development since October. What is worth noting that whilst the market has dropped, we, for example, have just recently fixed AS Emma, a Panamax vessel, as you can see at the very bottom of this slide, at a rate that is actually higher than last done for a similar vessel.
It is certainly too early to derive a generally positive shift in the market from this data point, but it is a data point that clearly suggests a slowdown of the market softening, if not possibly a bottoming out of rates. In sum, the market has come down substantially, but from levels from which it had to come down at some point. Overall, the charter market is still in pretty good shape. See our most recent fixtures at the bottom here, and that means the market is not as bad as the perception out there suggests. Furthermore, as communicated to the market previously, we have continued our selective fleet renewal program by ordering two 1,300 TEU dual-fuel methanol vessels with 15-year charters attached in what I would refer to as doing newbuildings the rational way.
Rational because similar to the first two 5,500 TEU methanol-ready newbuildings that we announced in March 2022, the contracted EBITDA exceeds the construction CapEx, i.e., the selective fleet renewal goes hand in hand with our strategy to mitigate residual value risk. As mentioned previously, I'm excited about the order of two carbon-neutral newbuildings with long-term time charters, together with our partners, NCL and Elkem, as this project allows us to possibly establish a green transportation corridor in Northern Europe. It proves our ability to identify and execute on opportunities that are accretive whilst allowing us to make the right move towards a further decarbonization of the fleet. It also demonstrates that we can meet ambitious environmental goals by joining forces with like-minded partners, and we are looking forward to facilitating a green container shipping supply chain along the Norwegian coastline.
We believe that regional container trades with their specific features, such as predictable trading profiles and manageable investments in fuel infrastructure, will likely become the first truly green shipping trades. With this project, we continue to execute our selective growth strategy whilst mitigating residual value risk and renewing our fleet. The economics of this deal will support MPCC's distribution potential from 2024 onwards. Furthermore, we have also executed a number of portfolio upgrades and have further progressed in making our fleet compliant with the upcoming regulations. For EEXI, we are going down the route of implementing shaft power limitations on board of all ships, and in preparation of CII, we are working closely with zero44, with whom we have developed a digital CO2 monitoring solution, which we will be rolling out on the entire fleet.
Whilst there are a number of open questions with regards to the new regulation, we already see that the degree of collaboration between liner operators and in particular larger owners like ourselves in terms of vessel efficiency improvements is gaining momentum. As a consequence, we have executed a number of efficiency measures in close cooperation with charterers, such as the application of silicon-based paint or the implementation of VDF pumps and LED lighting on board of a number of vessels. We have also, in close combination with charterers, conducted a number of test runs with B30 biofuels, and we are presently also exploring possible bulbous bow propeller modifications. Overall, we believe that the new regulation is actually a way to continue to even increase the collaboration among the players in the market. Moving on to the market section, please turn to slide number eight.
First of all, one can say that the overall macro environment is characterized by uncertainty, and GDP forecasts have been downgraded as a result of the war between the Ukraine and Russia and surging food and commodity or energy prices, which have exacerbating inflationary pressures. Let's have a look at the container market in terms of freight markets as well as charter and S&P markets in a bit more detail. Starting off with some observations from the container freight market. The graph on this slide on the left-hand side shows the key indicators for ocean freight, namely the freight rate index. In this case, this is the contract rate index, CCFI, and annual TEU throughput. The key freight indices, SCFI for the spot market and in this case, CCFI for the contract market, have come down quite a bit.
The SCFI, the spot market, has come down by somewhat 70% on specific trades from peak levels. As you can see on the left-hand chart, the CCFI has also come down significantly from peak levels by around 50%. However, and that is worth noting, it is still significantly up compared to historical averages and pre-COVID levels. Volumes have been fairly stable. For next year it remains to be seen, but overall, the market is still intact. Freight rates on other trade lanes, as can be seen on the right-hand side, are still up compared to January 2022 levels. As can be seen on this graph, where we don't only look at the CCFI or intra-Asian trades, but certain trades like intra-Europe, trans-Atlantic or intra-South Central America are actually up year to date.
Very important for us is that our customers, the liner companies, continue to have very strong balance sheets. Most of them look at a net cash position, and they will post record earnings this year. I expect also solid earnings for next year. Moving from the freight market to the charter market and SP market developments, please turn to page number 9. On the left-hand side, you see the Harpex charter rate index, as well as the secondhand price index from Clarksons. As one can see, there has been a significant drop from the peak, just like in the freight market, but we are still well above historical averages and pre-COVID levels. It is worth noting that the drop in charter rates is based on way fewer transactions.
In the month of October, there was rather 40 transactions in that month versus commonly 150 per month pre-COVID, and therefore the market is pretty dry. One has to see also that drop on the basis of fewer data points. At the same time, vessel availability is obviously dried out. As mentioned earlier, some of the recent fixtures, also our fixtures, but fixtures in the market as well, suggest a slowdown of the softening. Again, it is still too early to conclude on this. Asset prices have been lagging behind, but it can be expected that they will adjust to reflect the charter market levels. I would now like to focus a bit more detail on the intra-regional trades and supply-demand dynamics on the next slide 10.
Given the high number of deliveries planned for 2023 and the slower demand development, a disbalance of supply and demand is expected for the overall market. However, we do foresee a somewhat more balanced outlook for certain subsectors, both in terms of supply and demand developments. Therefore, on the left-hand side, we have illustrated a matrix showing on the Y-axis the order book to fleet for the different sizes. As an example, at the very top left, you see 12,000 TEU-17,000 TEU having basically an order book to fleet ratio in the vicinity of 70%. Whilst, you know, 3,000 TEU-6,000 TEU vessels basically have an order book to fleet ratio of more in the vicinity of 2%.
On the X-axis, we have shown the percentage of vessels above 20 years for each of these size brackets. As one can see, the segments we are involved in, more on the bottom right, have the most favorable supply dynamics when looking at the parameters average age or age in general and order book to fleet. That, in our view, will be a very positive support for the development of intra-regional tonnage going forward. More generally, we see the dynamics for intra-regional trades and tonnage also as more favorable, as you can see on the right-hand side, because we simply have a low rate of fleet growth, a CAGR of less than 1% for 2021-2025.
The intra-regional trades in general have grown disproportionately stronger than the mainlane trades over the last 10, 15 years. We see that of the overall vessels globally, roughly 50% of all container vessels actually sail on intra-regional trades, and 99% of these vessels are actually below 5,000 TEU. There's hardly any cannibalization of larger ships into the key intra-regional trades, and we haven't observed that over the last 10, 15 years. Furthermore, there's a more favorable demand outlook for intra-regional trades. In particular, you know, for next year, or for the next 3-4 years, we see a CAGR of about 4%.
That, in our view, underlines also certain market dynamics like relocation of production, other measures that shippers take in order to make the supply chains a bit more resilient after the experiences of the last three to four years. Furthermore, we believe that there will be a more significant CII impact on the smaller tonnage, simply by virtue of the main engine design versus the basically size of the vessel and speeds of the vessels. We believe that the impact will be more pronounced in that segment. Overall, we believe therefore that, you know, there will be more favorable dynamics for the smaller sizes and for intra-regional trades, and that makes us look forward with quite some optimism into the next year and years ahead.
Now let me continue with the company outlook section. Please turn to page 12. Our value approach, as presented also in the past, is based on three strategic pillars. At this time of the market, our capital allocation emphasis continues to be on distributions supported by our strong EBITDA backlog. At the same time, we operate on an industry-low financial leverage, providing highest financial flexibility going forward, whilst also continuing to deleverage the existing fleet on the water. When it comes to our fleet composition, we feel very comfortable with the existing fleet and will continue to follow our chartering strategy and optimize our fleet composition by selectively investing into the existing fleet, into upgrades, et cetera. As conducted in the past, and we are accretive, we are also considering selective asset sales, which in turn will result in event-driven distributions.
At the same time, we also continue to explore selective fleet renewals, such as before, as I said, I would say rational newbuildings that we have conducted this year. These kind of projects contribute to our distribution capacity from 2024 onwards without affecting our short-term distribution capacity. In principle, these type of projects take longer, and we will be very selective and not rush into it at this time in the cycle. Whilst we will continue with our low leverage strategy on the existing fleet, we may also consider for opting for slightly higher leverage on our newbuildings as they are backed by significantly longer charter contracts. Moving on to slide 13, where we show the charter backlog and forward coverage.
Overall, we have a revenue backlog of around $1.7 billion and the projected EBITDA backlog of around $1.3 billion. From left to right here, you see the different columns. The remaining open dates. The lighter blue color represents the fixed days, and the darker blue color in the columns represents the open days. That means for this year, Q4, we basically just have a few days left still open as we still have one or maybe two vessels, depending on the redelivery, open for charter renewal this year. Furthermore, if you look at 2023, we have 87% of the operating days covered and 13% open.
If you then compare, as you see at the top of the second column, $560 million, which is the contracted forward revenues of $560 million. This compares with our guidance, full year guidance for this year of $600 million, very favorably, as we still have 13% of the days open and to be covered in the course of next year. Going forward, obviously, the coverage is reducing, but also for 2024 and even 2025, we are looking at quite some revenue backlog that makes us look forward very positively. Now, if we then move on to slide number 14, we have also illustrated here the various players that we are engaged with on a counterparty side.
The various players in the container market in general have never been in a better shape, with most key players looking at record earnings and very healthy balance sheets, mostly, as I said earlier, with a net cash position. What the chart shows is the MPCC pie, basically, in terms of counterparty volume, contractual volume, differentiated in the top 10, where we have roughly 2/3 of our backlog. We have the top 20, around 8%. We have cargo-backed contract very big shippers in the back for around 13%. We have the top 14 others with 8% and 5% respectively.
Our backlog stretches over an average duration of around 2.4 years, which is fairly short given the significance of this backlog, and makes us, next to the fact that, you know, the counterparties are all in very good shape. It makes us very comfortable with a rather short backlog duration moving forward to the next couple of years. Now let me move on to the next slide 15. We firmly believe in our strong value proposition in terms of solid contract backlog, full commitment to our distribution policy, combined with low financial leverage. On slide 15, we have shown basically two schemes. Firstly, on the top left, a graph which shows the significant downside protection on the current EV.
From left to right, we have looked at the net interest-bearing debt position end of Q3 2022 of around $50 million, added the market cap, and then looked at an enterprise value of around $800 million, deducting the scrap value at a moderate assumption of around $400 per lightweight ton. The projected EBITDA backlog of around $1.3 million. That shows that we have a significant excess value above the current enterprise value from that very math, which makes us believe that, you know, there's a very high degree of protection. Secondly, on the right-hand side, we have a sensitivity on open rates or open days. That open rate sensitivity is based on the fixed and open days as illustrated two pages earlier on page 13.
We have run basically two scenarios. One is applying the time charter equivalent for Q3 2022, which is our current TCE of around $30,500 per day, and the 10-year average of around $15,000 per day. You can see that, you know, both the operating revenues as well as net profit development is somewhat sensitive to open rates. Yet regardless of rate development, we have given our strong backlog a very solid fundament in terms of contracted revenues for the years ahead. At the bottom right, we have then derived the implied dividend yield, applying our dividend policy, not assuming any vessel sales or anything. This is just deriving 75% of the net profit as per our distribution policy.
As you can see, that suggests a very significant dividend yield potential going forward. Now, let me conclude and open the floor for question in a few minutes, and I would like to wrap up the presentation. Please turn to page 16. In terms of Q3, I mean, as I mentioned, we continue to provide what we believe is a very strong financial and operational performance with another very solid quarter. We operate on low leverage with high flexibility, as I mentioned before, so 50% of the fleet being unencumbered. Yes, we have seen a slowdown or rather normalization of charter market, but it's still at significantly elevated levels in terms of rates, as evidenced by our charters, which we, to some extent, only concluded last week.
It is a very fresh from the press data point. We believe that, you know, the markets might soften a bit further, but we still see, let's say, elevated market parameters, particularly on the rate side. Going forward at MPC Container Ships, we will continue based on our strong backlog and the high earnings visibility to place a key emphasis on returning capital to shareholders whilst performing well both on an operational and commercial level, and selectively execute value-accretive portfolio optimization measures. For example, vessel sales or potentially even a few newbuildings as long as they do not negatively affect our short-term distribution capacity.
Due to our strong backlog and the high earnings visibility for the quarters and years ahead, we look forward very positively, and we are in a solid financial state with our industry-low leverage. Therefore, we look forward to the years ahead, and we are confident in our ability to continue to create value for our shareholders while utilizing our financial flexibility to possibly act on attractive market opportunities as they arise. On that note, I would like to hand back to you, operator, and open the floor for questions.
Thank you, sir. As a reminder, to ask a question, you will need to slowly press star one and then one on your telephone and wait for your name to be announced. Once again, it's star one and then one on your telephone and wait for your name to be announced. If you wish to ask a question via the webcast, please use the Q&A box available on the webcast link or on your screen. Thank you. We are now going to proceed with our first phone question. The questions come from the line of Frode Mørkedal from Clarksons. Please ask your question. Your line is opened.
Thank you. Hi, guys. First question.
Hi, Frode.
The slide 15 is a really interesting one. The natural question here is, how confident are you in the backlogs? You know, do you anticipate a line of companies knocking on your door seeking discounts in the future?
Well, as I mentioned, I mean, we are very confident in our backlog. I mean, the counterparties have never been in better shape in history. I mean, you know, the vast majority of them are net cash, as I mentioned. You know, of course, people, you know, tend to look at history and consider whether history will repeat itself. The way we see the market at present is firstly, markets are not that bad. To the contrary, they are still at elevated levels, and that both applies to freight markets as well as charter markets. I don't see any counterparty with a net cash position actually renegotiating rates. If you go back in history, it has happened, of course, across sectors.
That was mainly driven by banks and debt providers putting a lot of weight and challenges on liner operators. We don't see that going forward, certainly not over the next two and a half, three years, which is the average duration of our backlog. I am extremely confident that we will not be exposed to any of these discussions going forward. Therefore, you know, we will continue to execute our strategy. We will continue to dividend out, to deleverage, and we believe there's a lot to gain. Therefore, I mean, no big concern on our end, at least.
Okay. Secondly then, how committed are you to paying out 75% of EPS in dividends?
Very committed.
Expand in the future?
No, we're very committed to it. I mean, you know, the numbers this year speak for themselves, right? I mean, we have not just paid out 75% of net profit. We have, in addition, paid out very significant, also event-driven distributions, which obviously, as you know, in our policy is actually at the discretion of the Board. We have basically paid out 75% of net profit, adjusted net profit, and pretty much close to 75% of sales proceeds across the year, at least. Therefore, I mean, there has been a very significant dividend distribution delivered this year, and we will continue to do that. I certainly believe that, you know, in this time of the market, that's the way to go about it.
We still have enough capacity to also deleverage. We compare to all our peers. We have by far the highest dividend yield by far, and we have by far the lowest net debt to EBITDA, for example. I think we are well on track and we will continue that path.
That's perfect. Great. I had one last question on the market. I found it interesting what you said about the feeder sector being protected. How related to that, how do you anticipate cascading potentially affecting the market this time around versus historically?
Well, I mean, cascading is the buzzword that has been around for a very long time. If you look at the data, right? You will see, and I made that point earlier, that, you know, 99% of the vessels employed in intra-regional trades are below 5,000 TEU. It is the trade that has grown most substantially, or let's say the trade scheme that has grown most substantially over the last 10 years. That is evidenced by data. There has been very limited cascading. We have seen obviously some new hubs being established, and you have some kind of knock-on effect, but you still need to feed the hubs, right?
I would actually say to the contrary, the most recent trades that have been opened, for example, Maersk just opened a new service, are opened with smaller vessels because, you know, now relocation of production, there are various measures that actually lead to a shifting trading pattern and to actually new services rather being opened with smaller vessels. We are positive. I mean, obviously if volumes in general go down, there will be an effect also on feeding or centralizing, decentralizing cargo. Doesn't mean that, you know, intra-regional trades are fully protected. Yet there are shifts in trading pattern. It will take a longer period. I mean, it will probably take five years to really see that footprint.
We strongly believe in, you know, looking at the supply side and the demand dynamics, that this will certainly be favorable for intra-regional trades.
Great. That's good color. Thank you very much.
Thanks, Frode. Operator, are there any further questions through the line?
We have no further questions for the phone lines. Once again, as a reminder, please slowly press star one and then one on your telephone. Thank you.
All right. If there are no questions, then I would start kind of moving on to the questions posted on the web. There is a first, I would say comprehensive question from Frode Mørkedal asking about our current game plan. Is returning capital to investors and strengthening the balance sheet, what is the game plan through the market cycle for the company? What will your emphasis be with regards to fleet growth, fleet renewal, dividends and share buybacks? That's the first part of the question. I think I touched on quite a few of these elements during the presentation. Firstly, yes, the emphasis will continue to be on returning capital investors.
However, based on our backlog and our distribution policy, that means we still have enough capacity left to also deleverage financially and to make accretive acquisitions to the extent it is favorable for us. As you can see, you know, we have sold a number of vessels. We have dividend out this year. We have used the operating cash flow for dividends, but also to lock in for newbuildings, which are, as I said earlier, rational newbuildings in my view, because they immediately de-risk from mitigating the residual value risk perspective. That means also growth. We don't necessarily need to grow in this phase of the market, in my view, right? I mean, we have bought vessels at historically low prices.
We are now benefiting from harvesting that through either selling the assets or harvesting the cash flow from chartering out. If we would use that cash and immediately invest at a rather high point in the cycle into new tonnage, that should be done very selectively, and we will do that. Growth, I would say we're not on a complete growth track at this stage. We are more on a track of potentially fleet renewal and replacing tonnage as we have done, and certainly to continue with our distribution plan and execute on that as laid out throughout the presentation. There's a second part of that question from Frode Mørkedal, which is how robust is MPCC with regards to dividend payouts in different market conditions? How low can rates go before you have to stop the dividends?
Well, for next year, we have, you know, as I said, $560 million in revenues locked in. This year, our guidance is $600 million, and this year we have paid out more than $400 million in dividends. I mean, for next year, whatever happens, I mean, unless the world goes down, there will be a significant dividend. Even for the year to come. Of course, you know, we have seen the world going upside down over the last two years in some instances. You never can rule that out. If it's just a question about how the rates can go, I mean, we could even lay up all the vessels that are coming open, and we would still be able to pay out a very significant dividend.
That is illustrated actually on our sensitivity slide, where everyone can basically punch in numbers. Very happy to provide further color on that on a bilateral basis if that is of interest. There are two further questions on that part. One is, how do you see the new environmental regulations will impact the intra-regional container market and MPCC in particular? On that, I alluded during the presentation that I believe that, you know, looking more generally at the vessel types operating there, those vessel types will be more or early affected by the new regulation. I do believe that there will be an impact. We will see slower speeds. We will see inefficiencies in service compared to prior years, where you could simply, you know, address that by speeding up.
Um, so on a net basis, this will be a positive, um, at least, uh, during the next couple of years. In the long run, that will obviously mean, um, the competitiveness of, uh, of all the vessels have to be, uh, reassessed. But to the point I made earlier on different age profile, um, there's clearly a different age profile, um, for the smaller vessels. Hence, there is, um, also need to keep those vessels operating in order to maintain the same schedules. So on a net basis, I would say it is not a negative for MPCC. Last question here on that, on that section here is, have you seen, uh, many smaller vessels serving intercontinental trades in the last two years, which can return to intra-regional markets and thereby impact intra-regional rates?
Yes, we have seen quite a number of, let's say, vessels south of 5,000 TEU being employed as extra loaders. Certainly, when the volumes were up and high. We will see a reshuffling, for sure, that will potentially have an effect on intra-regional trade, but I'm not overly concerned about that. I'm also not able to give you an exact answer on how that will play out given the market dynamics and the uncertainties in the market. That's the first question. There's the next question by Jacob Balon. If rates become low, will you take active steps to renew the fleet fast, or will you try ride it out by layups idling? I'm not actually thinking in those categories at this stage.
We are actually earning rates that, you know, with the exception of the last 18 months, we haven't seen in a very long time. As you can see from the charters that we have concluded just recently, these rates are very, very attractive still. I don't see us being exposed to any layups at this stage. Obviously, time will tell, but I don't see that as a measure. Of course, if the market is down, we would consider all options in order to maximize value. It's a bit of a crystal ball question to be frank that is very difficult to answer given that the market is still very strong as we speak. There's another question from Friedrich Koesters.
Dividends have so far been declared as return of capital. This can continue into Q3 2023, but not thereafter because the share premium account will be depleted by then. Will MPCC's dividend next year be regular dividends, which will be subject to taxation for foreign shareholders, or will MPCC at least in part switch from dividends to share buybacks, which are more tax efficient? It's a fair question, and it's a question that we will answer at that point in time. A solution could indeed be to also consider share buybacks. However, share buybacks have always to be considered in context of where the share is trading. We have that as an instrument in our toolbox.
We believe so far, you know, dividends have been very tax efficient for all investors, and we will definitely continue with a significant dividend going forward. We might, on a selective basis, for example, for event-driven distributions, also consider share buybacks. There's a question by Harry Sanders. Current distributions are paid. Oh, it's the same question, basically. We plan to take action. Okay. Sorry, that's the same question. I think I answered that already. There's Niels Söderberg. I don't know if it's just me, but I don't have any audio from there. Okay. Trond Goldbakken asked a question. How do you look at the time ahead, softening in the market and lower rates? Is more fixed rates on the table?
Are there good rates to get fixed for fixed rates at this time? What are your thoughts about all the newbuilding activities starting from next year? Well, first of all, the rates are still good. I think, yes, softening, I would call it normalization. I mean, the levels were unsustainable. That was clear from the beginning. That's also why we, in Q1, very proactively entertained forward fixings. As you will recall from probably some of the previous presentations, we have fixed the vast majority of our vessels in the first two months of this year, as we were expecting a softening in the market. That has played out. Yet levels are still very good. Periods are obviously way shorter. Time will tell. You know, the market might soften a bit more.
As I suggested earlier with a few data points, there are also signs that there's maybe potentially bottoming out. I mean, I don't know at this stage. Time will tell, but there are some positive signals to that effect. In terms of newbuildings, the second part of the question, well, I made that point on slide 10 it was, where we looked at the order book to fleet and the order book and specifically in context of the vessel age. I truly believe that yes, there is a significant order book. Of course, there will be a disbalance of supply and demand coming to the market next year. However, this will be very much geared towards the large tonnage.
We will not see the same dynamics in the smaller sizes simply by virtue of the lower order book and the implications of, for example, potentially scrapping if the market is low and potentially slower steaming. It is something to be, I would say, cautiously aware of, but I don't think that this will completely change the picture next year. There's a question by Balazs Szabo. Hi, good afternoon, Constantin. I have a question about a potential share buyback program. According to your presentation, the amount of EBITDA backlog you have makes it possible to buy your shares with 40%-50% discount. This is 80%-100% upside with very high confidence.
I see it as a no-brainer decision, an extremely good opportunity to create value compared to paying dividends or making any other investments. Are there any barriers not to make share buybacks, taking this extreme situation into account? Firstly, I doubt that that volume of shares will be available at that pricing to start with. Secondly, I mean, we obviously also have blackout periods, so you need to be cautiously aware of that. Lastly, we believe that, you know, paying a very straight dividend is very reliable to our shareholders. Nevertheless, we would consider share buybacks, as I've mentioned. So far we have sticked to our dividend policy and focused on dividends. Again, that doesn't mean we will rule out share buybacks, but it will mean at this stage there is an emphasis on dividends going forward.
There is a question of Even Kolsgaard. What is the estimated CapEx for your portfolio upgrades? That's roughly around $5 million-$10 million. Again, please note that some of the costs are actually borne by the charterer. We have, as I said, collaborated a lot with charterers in order to make certain joint investments. That number might even go up, but only, you know, if we have a benefit from it, either a significant participation by the charterers or maybe even longer or extended charter duration. Another question is, will the shaft power limitations force the vessels to go slower than the current speed? And what do you think of the wider impact of slow steaming next year for the supply/demand balance?
First of all, on our vessels, the effect will be very limited. We probably had 1% or 2% of all days where we were actually exceeding that potential limited speed. It's a very negligible effect on our fleet as they are not trading at the very high speeds. In general, on a net basis, it will lead to, you know, more supply being utilized less efficiently than they were utilized over the last couple of years. There will certainly be a supply effect, meaning supply will be affected in that way. There's a question by Klaus Teichart. Whilst the dividend policy is most satisfying, the share price development leaves me puzzled.
All indicators look fine, and yet the stock performance is way behind the market, even considering the circumstances. Do you have any explanations for this? Thank you. Well, of course. I mean, the container market in general is in the media basically on a daily basis at this stage and not necessarily on a positive note. Recession fears, high inflation, all contributing factors that will rather affect demand on the negative side. Therefore, I think it's a lot about sentiment, right? People don't necessarily look through sentiment into the essence of it, meaning the cash flows, et cetera. We believe by just continuing our path, especially also compared to peers, we have dividend out NOK 9-NOK 10 this year.
We believe there will be very strong dividend next year, and we believe that will be very satisfying to all shareholders. To fight against sentiment in a market like this is very challenging. If you add back the dividend, we haven't performed that bad this year, in fact, so that needs to be done if you look at the share price. Again, it's sentiment, and fighting against sentiment is an uphill battle in a market environment as we are in today. There's a question by Anders Jimenez. Do you plan to use your buyback program? I think we touched on that. Asa Sauk, have you considered establishing a new company that buys new ships so that MPCC can acquire it when the said company gets new ships?
This will avoid having a negative impact on the MPCC stock. Well, I'm not sure I fully get the question whether that means secondhand ships or new builds. On secondhand ships, in my view, the cheapest ship that we can buy would be our own stock. I think secondhand, buying secondhand ships doesn't really make a sense from my standpoint at this point in time. For investors, it would actually make then sense to buy our stock. That is part of the question. If it's about new buildings, we have obviously done that by doing what I said or I called rational newbuildings. We have done that as well. Ralf Gluckau, congrats on a very good quarter. What are the current market prices for the 63 vessels?
Um, I mean, the question is it charter-free or is it with charter? Um, obviously with charter, you can look at the EBITDA backlog plus scrap plus upside. Um, so that's a very significant amount, um, of r- of at least one point five million. That is assuming scrap after the charter. So a, a way too low price in my view. Otherwise, if you look at, um, you know, our pool, it's probably market vessels value, but again, this is charter free valuation, so it also lacks some details. It's around one point eight billion. Um, but again, somewhere, you know, a mix of, you know, the underlying vessel values and the charter backlog is probably a, a viable, um, guesstimate on valuation.
In a market like this, I tell you all the broker valuations are always wrong, especially the charter-free ones, because we do have this very significant backlog, and therefore that needs to be factored in as well. Question by Trond Gualdbakken, level of rates before COVID, was that healthy rate for MPCC? Well, it was certainly above cash break-even rate, yes. Nine and a half thousand dollars is above cash break-even. Obviously it was a completely different market environment, but it was. Ray Bruna, from your viewpoint, are we now at the end of this cycle, or do you foresee the market to pick up some momentum and stay at an somewhat elevated level for still some years to come? Very good question. Very difficult to answer.
What I would say in any event is that in my book, the cost of transportation will rather go up in general. It doesn't necessarily only mean charter rates, it also means freight rates. It means costs that have to be borne in connection with the decarbonization of the industry. In my book, the cost of transportation over the last 10-15 years have been way too low, and that they will stay at elevated levels. Therefore, I do believe that, you know, the market will not continue to drop very significantly. It will stay at a level, whether that is this level or whether that is softening a bit more. Time will tell, and it's very difficult to foresee.
In general, I think that, you know, we are certainly at a rather, you know, decreasing point in the cycle compared to where we were the last 18 months. As I said, we are still at an elevated level compared to historic averages in pre-COVID. There's a question by Ray Bruna. Are you preparing a strategy on scrapping of ships for the coming year, and in which point will this be attractive? Well, at the moment, I mean, we are generating very good cash flow with the locked-in cash flows. We are chartering vessels out at very attractive rates still. I think we're nowhere near scrapping. I mean, the vessels are on average 15 years age. I think we will continue to operate them probably until 25 years, if not longer.
I'm not necessarily in my mind thinking about any scrapping anytime soon. There's a question by Jesper Sand. A certain analyst has recently discussed counterparty risk, effectively removing some of the fixed charter backlog in the analysis to account for increased risk. Given the market conditions, what are your view on this? I think we touched on that on the counterparty slides in the deck. I can just repeat what I said, you know. We have a counterparty, let's say a healthiness of the balance sheets of the counterparties that we have never seen in history. Most of them are net cash. They earn more than Apple and Google these days.
I mean, they have $ billions of cash on their balance sheet, and we have a charter backlog of 2-2.5 years. I'm not concerned about that at this point in time for all the reasons that I've mentioned. There's a question by Yannick Glatthar. Is there danger in the new CII regulation, how will it affect operations and charter periods? Well, CII regulation is still a bit in limbo. There is certainly effects on the market. There's effects on our fleet. The implementation and also, you know, regime under which the CII regulation will be imposed and will be monitored, et cetera, is still somewhat uncertain. There are certainly potential, you know, implications on vessel operations, on vessel values maybe even, on chartering options, et cetera.
I think it's at this stage a bit early. What it will do in any event, as I said earlier, in my view, it will lead to slower speeds, which will in turn have a positive impact on the supply side. Operator, are there any further questions through the telephone line? Because at least on the web, this was the last question.
We have no further questions on the phone lines. Thank you.
We might want to wait one more minute whether anything else comes in. Seems that is not the case, operator. I thank everyone for listening in, for the interest, for the questions, and we look forward to the next quarterly presentation. We are, as I said, in a fairly challenging market environment as far as the macroeconomy is concerned, very positive about the development and outlook for MPC Container Ships, and we look forward to catching up soon. Thank you very much. Take care. Bye-bye.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect your lines. Thank you.