Good morning or good afternoon, ladies and gentlemen, welcome to the Nakilat Third Quarter 2020 earnings results. My name is Abby, I'll be moderating the call today. Before I hand over to your host, I would like to remind you that if you wish to ask a question during the Q&A session at the end of the call, please press star followed by one on your telephone keypad. If you're joining us via the web, please use the flag icon. I have the pleasure handing the call over to your host to begin, Ahmed Hazem from EFG Hermes. Ahmed, please go ahead.
Thank you, Abby. Good morning and good evening, ladies and gentlemen. Hope everyone is staying safe and healthy. This is Ahmed Hazem from EFG Hermes Research, We are pleased to invite you today and welcome you today on Nakilat Third Quarter 2020 Results Conference Call. We have with us on the line Mr. Hani Abuaker, CFO of Nakilat, and Mr. Fotios Zeritis, Head of Investor Relations. I'd like to start off by congratulating management on the strong set of results for the third quarter. With that, I hand over the call to Fotios. Fotios, please go ahead.
Thank you, Ahmed. Good afternoon, everyone, welcome to Nakilat's Third Quarter 2020 Results Conference Call. For your convenience, the transmission of this call and presentation will be available on the company's investor relations section of our website. As a reminder, this conference call is being recorded. Many of our remarks contain forward-looking statements. For factors that cause actual results to differ materially from these forward-looking statements, please refer to the Slide 2 of our investor relations presentation. In addition, some of our remarks contain non-IFRS financial measures. A reconciliation of this is included in the note of this presentation. Nakilat CFO, Hani Abuaker, will begin today's call with a discussion of company's highlights, it will be followed a brief discussion of group's great earnings results. After, I will give you an overview of LNG shipping market.
Finally, Nakilat CFO, Hani Abuaker, will walk you through the company's business outlook. We will then be happy to address any of your questions or any clarification that you need. Now, I would like to hand it over to the CFO of Nakilat, Mr. Hani Abuaker. Hani, please go ahead.
Thank you, Fotios. Thank you, everyone, welcome to Nakilat Third Quarter 2020 Earnings Results Conference Call. I hope that all of you and your families are safe and follow precautions measures against COVID-19 pandemic. Before we get into our great financial results for the September year-to-date, we will take a moment to thank all of our seafarers, our shore-based staff for their continued dedication and perseverance to maintain business continuity and bringing clean and reliable energy to the world. As we continue to navigate through this challenging and uncertain environment, this quarter performance once again demonstrates to all of us the benefits of our defensive business model. Nakilat's long-term contract with our high-quality customers has ensured a minimal impact on Nakilat LNG shipping operations and long-term visibility for our cash flow and financial performance.
We have a number of slides to get through this quarter, each of which we believe is important for current and future investors to consider when evaluating our financial performance and Nakilat equity story. We will only briefly touch on each slide, which will provide more information or more time, maybe during the question and answer. It will allow you to ask the questions that can provide you some clarification that is needed. Well, although the COVID-19 pandemic continues to present challenges and uncertainties for our shipping industry, I'm pleased to report Nakilat solid operational and financial performance in the first nine months of 2020. If we go to page five, we can see that Nakilat continues to have in place COVID-19 preventative measures. Our personnel safety remains our first priority. We remain fully focused on delivering the reliable and high-quality service to our customers.
This focus has allowed us to maintain a high degree of uptime and fleet utilization, which has also translated into better results compared to even last year. The toll for COVID-19 continues to rise and the global economy is largely at the same, vaccine remains some time off. We don't know when exactly that will come in. We continue to monitor the global developments for COVID-19 pandemic and its potential implications on global LNG transportation. We're going to go to page eight and nine of the presentation. We can see some of Nakilat recent financial highlights. Nakilat resilient business model and our constant efforts for operational excellence as well as cost efficiency supported us to generate an increase in revenue, EBITDA, and eventually better earnings per share results compared to last year.
I'm pleased to report that Nakilat has achieved the landmark financial results for the nine months of 2020 despite the challenges that we faced because of the COVID-19, which has had maybe a minor or smaller impact on our operating costs. However we will still be able, through the initiatives that the management has taken to reduce our costs compared to last year. The company has achieved QAR 900 million compared to QAR 728 million last year in 2019, which is translating to a remarkable increase of 23.6%. In a similar positive trend, Nakilat EBITDA has also gone up by 13.6% year-over-year, which has reached to QAR 2.4 billion. This continues to be aligned with Nakilat's goal to maximize sustainable bottom line growth and value to our shareholders.
The company's strong financial performance is firmly attributed to operational excellence and execution of our strategy across each of our segments of reporting, whether it is in our entire fleet and also in our cost optimization initiatives, which is translated by itself in our G&A of a reduction of almost 18.7% compared to last year of 2020. Structural improvements in our expenses have come from our cost optimization initiatives and the delivery of the six vessels under the management of Nakilat Shipping Qatar, NSQL, since the beginning of 2020, which has improved our economy of scales in a way that we can deliver our services very cost effective and efficiently. Again, all of the above emphasize our ability to deliver the required earnings, operating cash flow during favorable or unfavorable economic environments and volatile LNG shipping market. I would like to elaborate more about the financial position.
If we turn to slide number nine, we maintain strong balance sheet with a total asset of QAR 52.6 billion, as well as cash balance of QAR 2.9 billion. Repayment of Nakilat scheduled debt amortization continue to boost our position and free up our balance sheet and capacity and equity value for the future ventures that potentially they might be on the horizon. Also, reducing the debt balances will lower our company's cash flow and income breakeven over time and improving our economic competitiveness of our fleet. This also has contributed to the strong results that we have seen in this nine months of 2020. I go to slide 11. We can see that our net borrowing has been reduced by QAR 4.9 billion debt repayment that happened since 2014.
Due to the acquisition of the four Q-Flex and the change of accounting treatment from equity to fully consolidated, our net borrowing reached QAR 21 billion in total as of September 2020. While a significant portion of our interest rate exposure has been hedged, the interest cost on our floating debt declined, which have contributed to better financing costs. We believe now we will go back to Fotios, and we will go through the overview of the LNG shipping market before we start and open the questions related to our financial performance in 2020.
Thank you.
If you can please.
Yes. Thank you very much. Let's talk a little bit about LNG shipping market. The coronavirus has shaken up the global economy and the LNG shipping markets could not be the exception on this. However, Nakilat's prudent strategy and resilient business model has assisted us to navigate smoothly this unprecedented global economic conditions. On a bigger picture, global energy demand continues to grow, driven by increasing prosperity and living standards in the emerging world. A transition to lower carbon energy system is likely to lead to fundamental restructuring of the global energy system with a more diverse energy mix, greater consumer choice, more localized energy markets, and increasing levels of integration. Global energy shipping demand is set to grow in the long term, despite the setback in demand for all kinds of energy due to the coronavirus pandemic.
Coal to gas switching from North America to Europe and Asia, as well as increased use of natural gas in the industrial sector, will drive the demand for LNG over the next two decades. The growing demand for LNG will produce a growing demand for LNG shipping requirements now and in future. Wood Mackenzie expects LNG demand to grow approximately 2% for this year. The economic recession as a result of the coronavirus pandemic has taken a toll on the consumption of LNG, with year-on-year growth remaining in the single digits. China is the only country to see strong growth from a recovering industrial and residential consumption, putting it on track for 10% year-on-year increase by the end of the year.
I will give you an overview of the global LNG shipping market for the third quarter of 2020, which can be seen in our presentation from the slide 13 to the slide 14. In the third quarter of 2020, we saw a meaningful improvement of spot LNG shipping charter rates due to some arbitrage opportunities, seasonality, and the restart of the global economies around the world. According to SSY, the current spot charter rates for modern two-stroke tonnage is around $72,000 per day. For DFDEs, it is approximately $62,000 per day, and for the steams, it is approximately $42,000 per day right now. On the term contracts, there is not so much volatility as it is on the spot shipping market, as we have mentioned previously in our calls.
Poten & Partners assess the one-year LNG shipping charter rates at approximately $60,000 per day for MEGI and X-DF, $48,000 per day for DFDEs, and $26,000 per day for steams, which is a helpful benchmark when we're discussing term opportunities. Please turn to the slide 14 of our presentation. The positive sign for the LNG shipping market is that we are not seeing many new LNG carriers to have been placed as orders in 2020. As of third quarter of 2020, we have approximately 19 LNG carriers, new build orders with a size of conventional size ships, compared to 50 vessels which have been placed for orders in 2019. In 2020, the LNG new build costs have been stabilized at the average price of approximately 185, 86.
Furthermore, you can see that the global LNG fleet has approximately 538 vessels in operation and another 113 vessels on the order book until 2024 as per Clarksons. This implies an increase of 21% of the total LNG fleet in terms of number of vessels as of September 2020. As a final market note, market participants accept that LNG shipping market will continue to be volatile in the upcoming quarters due to the fact that COVID-19 pandemic still is ongoing and creates an economic uncertainty in almost every industry. In a long-term point of view, LNG is a clean, reliable fuel, and for this reason, we see an accelerated rate of switch from coal to gas consumption driven by the increased industrial output. The demand for LNG shipping requirements will increase, and it will be very positive sign for Nakilat's future prospects in the future.
Now, I would like to hand it back to Mr. Hani Abuaker to give you an insight into Nakilat business outlook. Hani, please go ahead.
Okay. Thank you, Fotios. I will move to slide 16. I will shortly discuss the Nakilat business outlook, so I can give you guys the chance to ask questions if necessary. I will try to be very brief here. Our strategy is maximization of our vessel utilization, and thus, the revenue of our LNG fleet is set to continue. We continue to engage in business discussion with world-class charterers to ensure that we secure charter contracts agreement if there's any available vessel in our fleet. In this way, we smoothly navigate through this unprecedented storm and to maintain sustainable and long-term return to our shareholders. Regarding the Nakilat LNG shipping business, we took the delivery for Global Energy without any delay and on budget, and currently the vessel is on multi-month charter hire with international first class charterer until we conclude our long-term charter for that vessel.
In regard to our OpEx optimization, as you guys can see with the taking over six more vessels from currently from our ship managers, Stasco to NSQL, it has really helped us in optimizing and streamline our operating costs, which has translated into saving, and eventually, provided us with a good bottom line results in the growth in our earnings compared to last year. In regard to our shipyard business, we expect more positive momentum going forward. I think the first two quarters of this year were not good performance for our shipyard due to the pandemic of COVID-19.
However, in the third quarter, we have seen almost 180 degrees change in results and in momentum, which has significantly helped in the better results that we have seen compared to the first two quarters, the first and the second, which has made our third quarter become a better result for the company or for the group itself. In summary, we have a strong liquidity balance, very manageable debt maturity, and all of the above will provide us, again, a compelling investment proposition for our new and existing shareholders. I think I will open the floor for any questions, and we can address it.
Ladies and gentlemen, if you wish to ask a question, please press star followed by one on your telephone keypad. If you're joining us via the web, please use the flag icon. If you change your mind, please press star followed by two. When preparing to ask a question, please make sure that you are unmuted locally. Our first question comes from Bobby Sarkar from QNB Financial Services. Please go ahead.
Hi, Hani. Hi, Fotios. This is Bobby, QNB Financial Services. Quick question or a couple of questions. If you could just let us know what contribution or percentage growth you saw in your income from JVs from the shipyard in the third quarter versus maybe the second quarter. What, if any color you can lend on terms of the run rate of the shipyard. I see last year it was about QAR 44 million in net income from the shipyard JV. What is it so far this year, nine months? Secondly, on the finance charges, what percentage of your debt now is floating versus fixed? Were there any major refinancing or anything that would move the financial charges number for this third quarter? Thank you.
Thanks, Bobby. I will start with the shipyard results. The shipyard result is basically the first two quarters, they were not good quarters for us. We have incurred financial losses. What happened in the third quarter is basically when the results were good, where there were not losses. They were just almost more or less, in some of them, they were breakeven, and some of them they made money. This is why you have seen the swing between quarter two or maybe the first two quarters and the third quarter. Less financial exposures that we have seen in the shipyard business translated in the third quarter has contributed to our better results in our third quarter. I hope that I answered that question. In relation to the finance, as we have mentioned it before, usually it is including the joint ventures, including Nakilat, the wholly owned.
You would assume 75% is hedged and 25% is exposed, including definitely the corporate loan that we have. This has also contributed to lower interest or lower interest cost in our financial performance. In addition, the repayment, the amortization of debt, which will always be with us going forward, even for the remaining 11 years. As we pay off our debt, our interest expense will become lower year-over-year, just by virtue of paying the debt itself. In regards to potential saving or financial performance that could have been translated, yes, definitely. If there's any refinancing that happened in one of our joint ventures, as their debts comes for maturity before the end of our 25 years contract, that will translate into better results in securing lower interest expense. We have seen it in one of our joint ventures, the LNG.
That's helped in contributing to a better result from the LNG. However, the LNG segment or the LNG JV segment, has also benefited from the amortization of our debt, because as we pay the debt, as they have also, let's say, some of the portion of their debt is not hedged, as both factors have translated into lower interest costs. As well, we have seen for this year, a well-managed and disciplined and optimization across, even in our joint ventures in the operating costs, which has also translated for us to have a better result from our LNG JV. I hope I did answer your question, Bobby.
Yeah. Thank you, Hani. Just a quick follow-up on this JV income. Was there any one-off in the third quarter, or this is on a normalized basis, please? Thank you.
I want to be as clear and transparent. The one-off you could say is that the third quarter for the shipyard was significantly way better than the first and the second quarter of this year because of pandemic, which is not normal, where our shipyard has really had very low activities. They had financial losses. I don't want to say that the third quarter was abnormal. It is just the first and second quarter, they were not abnormal because of our shipyard activities and the pandemic and the slow activities. I hope I really answered it very well.
Great. Thank you so much.
Thank you.
Thank you. Our next question comes from Santosh Gupta from Drewry. Santosh, please go ahead.
Yeah, sure. Thanks. My first question is, we have seen 18.7% YoY decline in G&A expenses. Do we think that this is sustainable going forward in, say, coming two to three quarters? Should we expect similar kind of decline? This is my first question. My second question is, can you please throw some light on your LPG business? Like how this has done this quarter, and what is your view going forward? Thank you.
Sure. I'm going to answer the first question about the G&A and the LPG from a financial point of view, and maybe if Fotios would like to shed more light about the rates, I leave it up to him. In regard to the G&A, again, we as a company, and we have said this before, we are evolving over time. As a company, we started as ship owners, then we start to take the operation. During that time and over the years, there's a lot of infrastructure has been built within this company to become a world-class ship operator. Now we're reaping that benefit. How we're doing that, because now as we have more vessels being managed in-house, a lot of these costs and the infrastructures that we've built over time for this moment, for this time, is being utilized.
A lot of these costs is being absorbed by taking over the operation and operating it in-house. That provide us the optimization. In addition, due to the COVID-19, and due to the uncertainty, despite the fact that our resilient business model, we as a management and our CEO has really emphasized on us that we need to become more resilient because the things are still unfolding. We don't know what could happen in the future with this pandemic. This has translated into initiatives and decisions and actions and reviewing potential costs and optimize it, contracts, which is translated to this saving. Now, I know you mentioned the percentage. The percentage is not the case. The level of achieved G&A, we should really expect, going forward, to maintain that efficiency. The level where our G&A should be more or less where it is.
Maybe it will go 1%, 2%, 3%, 4% higher than the level right now, but that still means 15% lower than historically what was the rate last year. Yes, the level where we are, we expect it is sustainable for the future, even if there's 1% or 2%, 3% regain, but that level of, let's say, 10%-15% lower than 2019 will sustain going forward, hopefully. That's what we wish. In relation to the LPG business, yes, the first quarter was great. We had the dip with the pandemic in the second quarter, and then in the third quarter, it's actually a trump up again up, and it's doing very well for us. Also that was one of the contributor to our better results compared to nine months in 2019, as our contribution from this segment was really good, too, as well.
In relation to the future rates and the LPG, I think Fotios can elaborate briefly about that.
Yes. Actually, I want to add, as the CFO said, it was actually a year, this COVID-19, that has created generally to the markets a kind of volatility and fluctuation. At the beginning it was good. COVID-19 came, we reached like in June, the lowest levels of $11,000 per day in LPG in the market. Now it is back to $45,000 per day. As per Clarksons, that assess right now, actually, we are $45,000 per day. For this year, you can see our kind of improvement. It is normal to expect volatility because still the market, let's say, with this COVID-19 crisis that we have, it is ongoing. Nothing has been back to normal. However, the fundamentals for LPG shows that there is a growth fundamentally the long term. Because of the new limited vessels supply that is coming on the market as well.
Plus, also you have to know that our vessels are in time charter, linked to the market. As long as we see improvement in the market, you can see actual improvement results from this business. Again, when you have a COVID-19 crisis, pandemic, we monitor the situation, and we are careful what we are doing, and we try to see. The fundamentals for long-term is there. I hope I answered your question.
Sure. Thanks, Hani, thanks Fotios.
Thank you. Our next question comes from Verity Ratcliffe from Bloomberg. Please go ahead.
Hi. My question is about fleet growth. There's some information about up to, I think it's the end of 2021. Can you talk up to ideally 2025, just how you anticipate that changing? Thanks.
Can you repeat a little bit the question about for 2025? I did not fully understand.
Sure. Sorry. My question is about fleet growth. There's some information about your expected growth through new builds up to the end of 2021. I'm wondering what happens after that. Thanks.
Okay. Yes. As I spoke to the call earlier, there is a current order book of approximately 135 vessels currently until 2024. All these vessels have been placed in yards from shipyard in China as well. This is all the orders actually are placed back up to the upcoming LNG supply that is coming, because as you understand, more LNG supply that is coming to the market, all this LNG needs to be transported because otherwise there is no way to transport LNG. As you understand, the fundamentals are very healthy for the LNG market in the next 10 - 15 years. We can see actually a growth of LNG trade. For example, I can tell you that Wood Mackenzie expect, for example, more than 130,000 million tons that come until 2025.
After that, there are many pending projects that will have to be approved and to bring supply of LNG. All these things are very favorable for LNG ship owners like us, because more LNG in the market create more demand for LNG shipping market. I hope I answered your question.
Verity, your line is still open.
Yes. Thank you very much.
Thank you. As a reminder, ladies and gentlemen, if you wish to ask a question, please press star followed by one on your telephone keypad. If you're joining us via the web, please use the flag icon. Our next question is from [Mohamed Adel] from [Alpha Islam Investment]. Please go ahead.
Hi. Thanks for taking my question. I have only one question about the charter. You said that the ships on the time charter is linked to the market. This means in case of the time charter rates going down, the current vessels on contracts rate will go down as well? Thank you.
No. Actually, what I spoke, I spoke for LPG contracts. No, specifically for LNG. It's practice in LPG actual industry to have actual time charter to be inked with LPG Baltic index, which is a global acceptable index in the shipping world, and actually track the LNG. For LPG, yes, it is true, nothing to do about LNG. I just want to make this clarification.
Okay. Thank you. Thank you very much.
Thank you, Mohammed. As a reminder, ladies and gentlemen, if you wish to ask a question, please press star followed by one on your telephone keypad. If you're joining us via the web, please use the flag icon. We currently have no further questions. I hand back to the management team. One of our participants has just registered another question. Onkar Jambhale from Decimal Point, please go ahead.
Thanks for call. I have just one question. Just wanted to confirm the delivery of the remaining vessels for JV vessels. Are they on time, or there is any delay? Could you please throw some color on that?
Do you mean the new build vessels you're asking, just for clarification?
Yes.
Okay. Yes. The next vessel that we are expecting is coming actually in December in 2020. The following two vessels at the end of actually 2021.
Oh, thank you.
Thank you. Our next question comes from Anas Al-Yahyaei from Giannakis Asset Management. Please go ahead.
Thank you for squeezing in my question. Just you mentioned before you are freeing now balance sheet in order to utilize it for new vessels. Could you give us a feel of how much you believe you can lever existing equity or EBITDA according to existing contractual agreements? Whether in the equity we should consider the swap mark-to-market or excluded. Thank you.
If I can understand the question is that, I think freeing up our balance sheet will always allow us an opportunity in case we need to really provide some sort of funding for new potential opportunities. Usually in the shipping business, it depends on the contract, it depends on the charter, and the party that's in front of you. It could range between 70, 75, 85, and even for Nakilat Inc, our wholly owned, we did 90%. We usually prefer to swap a minimum 50% to almost 75% of our debt. That has usually been the strategy over the last almost 12 years. In aggregate, you can say that. Thank you.
Thank you.
We currently have no further questions. Ahmed, I hand back to you.
Thank you, Abby. Thank you, Mr. Hani, and thank you, Fotios. If there are no further questions, Mr. Hani, would you like to make a closing statement?
Well, I would like to thank you all for taking the time to participate in today's conference call. We are always committed to improve our practices and make them better quarter after quarter and year after year. Also, we are committed as a company to provide good results for our shareholders, existing one and for the future. There's one thing that I would like to emphasize as we do all the time, all kind of questions, comments, even after the call that you guys convey to us, rest assured it does go to the management of this company to ensure that we really assess them and take the right actions and response. I would like to encourage you if you have any questions or answers, I think Fotios has done a great job over the last couple of years to address these questions or inquiries.
With that, I'll leave it up to Fotios just to say anything if he has.
Thank you so much guys for taking time out to join us. Always, we appreciate your feedback and participation in this call. As always, me and Hani always happy to accommodate any kind of question or clarification that you need us. Please contact us anytime. Thank you so much. Have a great afternoon.
Ladies and gentlemen.
Thank you so much, Abby.
Thank you. This concludes today's call. Thank you for joining. You may now disconnect your lines.