We can get started. My name is Theresa Chen. I am the midstream and refining analyst here at Barclays. It is my pleasure to welcome our next company, Excelerate Energy, and from Excelerate, we have Steven Kobos, CEO. Welcome!
Thanks, Theresa.
Thank you for being here, Steven. So maybe diving right into the macro landscape of sorts. So from that perspective, what are your near and long-term views on LNG fundamentals? And also, Excelerate's regasification assets, how are they situated within this backdrop?
You bet. Can I take a second, Theresa?
Please.
'Cause I do see some of our existing investors out here who have a good feel for what Excelerate does. I know we have some other folks listening in, but just for the benefit of those who aren't as familiar with the Excelerate story, I think more and more people in the past five years obviously know a lot more about LNG. It's not like five years ago. It's this miracle. It's, it's a virtual pipeline. The ocean's become your pipeline, and all this abundant energy makes it out into the world. Excelerate is probably... It's not probably, it's the only opportunity to invest in that LNG value chain, which is focused or obsessed with going downstream, opening up new markets, and allowing other people, through this flexible virtual pipeline, to, to access affordable, abundant energy. We're the only ones focused on that.
There's a huge TAM out there. Many of the folks here and listening in know, you know, we're expecting another two hundred million tons coming online between the Qatari North Field Expansion, US Gulf, et cetera. Meaning, opening up additional markets is ever going to be more and more important. We think we're good at it. We think we have a great track record at it, and that's why we're pleased to be here. So, but talking about LNG in general, and to your question, I think, was what do we think about, what do we think about market fundamentals? I'd say, just looking at, looking at LNG right now, look at US FOB LNG. You know, so you're talking, like, $5. You're talking 115% times two, plus $2.50.
You throw in some shipping, that is affordable energy from anywhere around the world, no matter how you slice it. So what do we think about the macro? We think the macro is currently very affordable. We think intermediate, the macro will be affordable. And that's, Excelerate is somewhat unique in that we are agnostic. We know that this commodity needs to be affordable for the wider world, for the people who need it. It needs to be competitive with coal in those markets. And as we talk to people, we see more widespread acknowledgment that, yeah, this is affordable. We can build something on this. We can make this a key part of our energy mix around the world.
Makes sense. And then maybe, just on the regasification aspect of it and your contract portfolio specifically. Can you talk about the contract portfolio for your base FSRU and terminal assets? What kind of earnings ratability and cash flow stability do your assets offer?
Thank you for that softball. I mean, I'm so proud of our business. We have $4 billion of contracted future revenues. We've got an average contract length of seven years, and I would say it's actually a lot more than that. There are a couple of evergreens at the end of contracts that are maybe pulling that down, but I know those are going to be sticky. So really, well over seven years, in my view of - and seven years of contracted future length. It's very stable. You know, that's what's generating these very predictable earnings, and we think it's a rock-solid base business, and it's going to provide us the springboard we need.
Understood. And looking at your broader strategy, can you maybe provide an overview of the three pillars of growth for Excelerate going forward?
Well, thanks. The first thing is the base business. Like, you know, operating and optimizing this reliable base business. And this year, it's 98% of that $330 million in EBITDA is coming off of that base business. So it's no wonder that we want to, we want to obsess about it, we want to focus on it, we want to invest in our fleet, we want to have best in class and continue that. So base business first and foremost. Secondly, you know, we want to. Three things we keep talking about are, you know, invest in more LNG import terminals, regasification terminals around the world, Step 1. Step 2, grow your LNG portfolio.
And you saw it just in the past, well, in the year since last year, Barclays conference, we've added. We're up to 1.7 million tons of LNG in our portfolio. We have back-to-back deals on the supply side with QatarEnergy, into Petrobangla. We've reported on that. So we're continuing to focus on the way in which having access to a flexible LNG portfolio is going to allow us to have more of these back-to-back deals. Juice our infrastructure returns, which are always going to be front and center, part of what we do, and go on. And then our third pillar is obviously to find ways to get pull-through into the market. So invest in downstream assets and infrastructure, which we hope will provide pull-through demand for vessels, for LNG, et cetera.
We think we've made some decent proof points along the way this past year.
Yes, and we're definitely going to get to some of those proof points in a bit. Maybe just, you know, more broadly, before we dive into the specifics of your recently announced projects. When you think about, you know, optimizing the base business as pillar one, and also growing your asset footprint, either by acquiring interests in terminals or through organic projects, how do you think about balancing those two needs?
They're both important. You know, which of our children do we love best? Both, you know. But, as I said, that $330 million of stable EBITDA, it is important. It is important. You know, we spend a fair amount on maintenance CapEx because we are determined to maintain a best-in-class fleet. So Step 1 , got to have it. At the same time, we are seeing more and more people want some level of integration, or other types of growth. And so you can't have one without the other. And I do want to remind people, it's natural. Of course, I'm excited about the growth projects. Our developers are excited about the growth projects. It's exciting to talk about opening new markets for LNG. It's important to do all of that.
I'd be doing everybody in the room and everybody listening online a disservice, though, if I don't remind people of our base business, this steady cash flow, steady EBITDA, that's there year over year and has been for many, many years. I just want to make sure people know this ain't a startup. You know, this isn't something we're just coming to you with a development portfolio. This is a work of many years, and we're proud of that, that book of work.
Got it. And, you know, complementing that steady base. This is the infrastructure assets. Can you talk about the other aspect of commercializing your portfolio of infrastructure, which is marketing the LNG volumes? And, you know, specifically into that third pillar, why is it important to diversify your LNG sources?
Hmm. I think, Theresa, I'll take the last part first.
Mm.
You know, we've got 10 projects around the world right now, five are Atlantic Basin, five are Pacific Basin. And at the same time, if you want to talk about you know, the molecule supply, we've got a million tons out of Ras Laffan in Qatar, and point seven million tons from US Gulf. So for us, it seems sensible. Just as it's sensible to have a geographic mix on our projects, it does feel sensible to have a geographic mix on the molecules that we can use to feed those projects. We'll probably want to continue that. You know, whenever I say I should answer the last part of a question first, I should assume that I've got a good enough memory to remember the first part of the question.
But I think we're talking about the relative balance of the molecules with the infrastructure-
Yes.
- in general.
Finding a home downstream for them.
Yeah. But first and foremost, I want everyone listening in today or here to realize we are an infrastructure play. We're going to remain an infrastructure play. That $330 million of EBITDA that's out there, that's almost entirely infrastructure. I am excited. We are all excited at Excelerate about doing things that no one in this space has ever done, and that is linking the molecules in a good way. It's never gonna get out of sequence. You know, we've just added that 1-million-ton back-to-back deal with Qataris and Bangladeshis. I routinely tell our people, I want to see 5 million tons moving through our assets, you know, by the end of the decade. That's never gonna be more than a side dish, and that's going to allow a nice uplift to our infrastructure returns.
But just as we said on that Qatari-Bangladesh deal, that was maybe 18 million a year of EBITDA uplift back-to-back. Okay, so maybe the 5 million tons you're looking, we'd like to see 100-130 million of EBITDA contribution, but at the same time, that 330 million of infrastructure is going to be going up, too. So I don't look for it to ever be the majority of who Excelerate is, but, you know, we're gonna do things others can't do, and we are interested. We do have the balance sheet for that. We do have the reputation with the suppliers who wants to do business on us, who know we can do business. You know, just Qatar, for example, three of our assets regasify over 10% of Ras Laffan's current production. You know, so they know we are a real company.
They know we have the capability to do what we say we're going to do. So it is important. It's important who's recognizing us as suitable to be in this market, but it's always going to be a point of balance and support.
Got it. That makes sense. And I want to turn now to your growth potential and the backlog and many aspects of that you go through. So when you think about Excelerate's long-term potential project backlog, how do you weigh new builds versus conversions? What are the pros and cons of each? Are there project-specific vessel requirements to consider as well and the like?
... This is probably where I say, "Hey, we're an energy company with ships. We're not a shipping company." So let me just put that out there. That's like a Miranda warning I'll just give out there. We are an energy company with ships. We do think we know how to use these. There are 50 of them out in the world right now. You know, we have 10 of them. There are only two on the water. We're starting steel cutting on one of them, Hull 3407, with Hyundai next month. But we have 20% of the world's supply. When you look at regasification capacity, we have 26%-27% of the global fleet's regas capacity.
This means we have a fair amount of big capacity ships, and so our new building is gonna have a billion cubic feet a day of send-out, and it will go to a thirsty hub, but you know, to look at the redundancy, the reliability, the benefits of being purpose-built, there's nothing like a new building. That said, we're not tied to any particular class of asset, so there are definitely going to be conversions where we will take older LNGCs and convert them for different projects. For investors here or listening in, want to know the code for that, that's when we start talking about lower capacity send-out needs for some of the projects that are out there.
That's probably gonna be code for either moving an older FSRU around and sitting it somewhere or doing a purpose-built conversion, just because you don't need to take a billion cubic feet a day ship and show up to a 200 million SCF facility. So there's a place for all of them, and, you know, one of our announcements was for Vietnam, where, spoiler alert, we said that's onshore regas, some small tanks onshore. So we're not tied to being a one-trick pony with one class of assets. We're going to adapt as things go along, and frankly, we just care about getting energy into a system, and we'll find the best way to do that.
Okay, so on the point about your new-built FSRU Hull 3407. So you mentioned, you know, steel cutting with Hyundai. Can you provide just a general update on the status of construction and timeline for delivery? And then I know that, you know, you're still kind of in contemplation phase about what ultimately this asset, what purpose this will serve. But do you have in mind what kinds of projects you think that would be a best fit? Are there unique criteria for this vessel in particular?
Steel cutting next month, Theresa, and I would like to say it does remain on track for June delivery. That's kind of like virtually every other Korean yard project in history that comes out when they say it will come out, and this one's no exception. This will be delivered in June of 2026. We're excited about it. It frankly has all the bells and the whistles that we've learned of from the past 20 years. In terms of what you're looking for here, you're looking for a market that is thirsty and that can have a lot of throughput. We have all sorts of markets. There are markets which take every molecule they can every day. Our asset in Karachi is like that. It's getting a cargo every four days. Just push, push, push.
It's 5.5 million tons per annum, so was at 1.25% of total global LNG production going through one of these assets. It's ultimately gonna find one of the hubs that is thirstier and needs some level of redundancy, and we think there are a number of opportunities for that. I'm excited about that. But again, it's gonna be horses for courses, and some of the projects are gonna require much lower send-out than that.
Understood. And then turning to Vietnam, following up on your earlier comments about this newly announced project. Would you mind talking about the thought process behind this decision to enter into the Vietnamese energy market in general?
Theresa, I think the thought process is, you know, damn, I'm getting tired of waiting to get into Vietnam. I mean, people in energy have been talking about getting into Vietnam and LNG for it seems like over a decade. You know, and I've seen so many projects talked about over the years, and ultimately, of course, I do want to-- we do want to get into it, and part of the reason for that is their ambition. They intend to get up to twenty gigawatts of gas-fired power generation. So that means at some point, Vietnam's gonna be importing twenty million tons of LNG, and they're going to be a very relevant and important part of the global LNG infrastructure.
It occurred to us, we could either sit around waiting until they get everything just perfect to facilitate all that LNG- to- power investment, or we could just get impatient and sneak in the kitchen door, you know, and so we looked in the north. Most of the gas powers in the south. We're looking up near Haiphong, and we told our team to look for industrial demand that can switch right away or can take it on right away, just as a means to get in that market, so we always talk about how we love markets, not projects. We're determined to get into Vietnam, while others are waiting to get into Vietnam, and to take advantage of that early mover capacity, so it's like 0.7 million tons...
By the way, that 200 million tons that's coming. Don't sneeze at 0.7 million tons. Some of it's gonna be 0.7 million tons, some of it's gonna be 0.5 million tons, some of it's gonna be 1 million tons, 2 million tons. That's what the world needs to access this affordable energy. So they've got tremendous ambitions, but we don't want to wait till gas- to- power comes online. We want to get a running start at it.
Okay.
I also want to prove to everybody that we'll do something besides FSRUs.
Fair enough. So with this decision to embrace being an early mover, to get a running start, I'm sure there are plenty of other places that are thirsty for regasification and, you know, gas- to- power. Do you see many other opportunities following Vietnam, the decision to enter into Vietnam, to participate in greenfield LNG import terminal projects in other EM countries from here?
Yeah, I think there are definitely gonna be opportunities, and we go back to your first question on macro. Why are there gonna be other opportunities? These are energy-starved markets, and you're gonna have an affordable source of energy. So connecting that supplier to that consumer is, that's the TAM, and so will that TAM exist in other emerging markets? Absolutely. There are many fundamentals we like. We like places that have, you know, that have access to natural gas already. So they've built, maybe they've built up CNG stations, maybe they've built up some gas-fired power because they had some domestic production. I'm thinking of Pakistan. I'm thinking of Bangladesh, where U.S. companies have been forever onshore, but where there are steep decline curves.
So we're always looking for a basket of market fundamentals that give us confidence in an individual market, but there are gonna be a bunch of those. So yeah, if you worry about anything, don't worry about the TAM.
Fair enough. Okay, maybe turning to the domestic front as part of that global TAM. So you recently also had an announcement relative to in relation to Alaska. Can you provide an update on this project to import LNG into Alaska? How did that project come to fruition, as you know, another part of that question, and just what are the key considerations we should be keeping in mind as this goes forward?
Yeah. Obviously, Alaska is one of the most has lots and lots of resources, but let's not forget that we've also put facilities in Kuwait, in Abu Dhabi, in Dubai, Argentina, Brazil. Energy systems are complex, and though you may be a net exporter of energy, you may still have specific aspects of your system that need to be taken care of. And that's really what Alaska is. So we've had all these counterintuitive projects over the years where someone thinks, "Well, they can't need that." I'm like: Yeah, actually, there is a need. So it may be a bridging need, but what we found is there is an intense interest. There's a concern within the community up there about how long before they need to augment.
Generally, the thought is they're gonna need some support from LNG by 2028, and so it's just been a natural as we look at those fundamentals and have those discussions that we've gotten more and more serious about developing this project. So I guess it's the first thing I'd say, we are developing this project, and we expect intense interest from other offtakers.
Got it. And then just on the base assets, do you have any updated color on the political volatility in Bangladesh? And what is the status of your operations there, and do you have any views on the potential impact to your company over the near and long term?
Thank you. I mean, the serious point of concern, I mean, anything is serious when you have a lot of employees in country, and back in July, there were some very uncertain times. We had folks, you know, working from home. We didn't want anyone out. Our employees, you know, the safety of our mariners going to and from our assets have been paramount concern for us, and everyone's healthy, all their families are healthy, et cetera. Now, with the change in governments, Muhammad Yunus, the eighty-four-year-old Nobel Prize winner, has been installed. Very encouraging about who's been installed in that caretaker government. Lots of American-educated, American, you know, work experience people. What I will tell you is, I think there's opportunity in that country, and I think it's a good time to be a U.S. company.
There's a well of goodwill to the U.S. and the U.S. government there, largely due to the U.S. government's support of democracy leading up to the elections earlier in the year. So what I've seen is there will be geopolitical knockout, but I look for the opportunities for U.S. energy company to remain very robust. And beyond that, you get back to a market, their energy balance is about 3.1 BCF a day of natural gas, including the LNG. Our two assets supply 34% of that. So it's a gas-starved country. They need to find ways to get their hands on more energy, and I think we will be an important part of that moving forward.
Very fair. So shifting gears, in addition to providing a reliable and efficient gas sources for your customers in Bangladesh and elsewhere, can you talk about Excelerate's sustainability efforts, specifically the integration of modular re-liquefaction kits on your vessels? And any color on potential timeline and economics on that?
Thank you. I love this. I kind of geek out on this, and I think I whispered this to the street maybe even before I could, and then I told the guys, "Well, you got to do it now." I mean, 'cause we talked about it, but re-liquefaction, re-liq is a tried-and-true technology. It's on a lot of LNG carriers, but no one's ever put it on an FSRU. So first thing I'll tell you, if you're pushing everything to shore that you can every day, those aren't your projects. Your projects are ones where you're sitting there as a backstop to hydroelectric power. You know, someone whose base is in a country where they get most of their power from renewables, or even a European mix, where your throughput is going to be intermittent, and the reason for that is simple.
Without getting into the specific economics trees, so just think about it like 0.1% of a cargo of LNG is boiling off every day. And, yeah, I know it's kind of funny to think about a minus 158 degrees Celsius cargo boiling, but, you know, that's, that's how it is. That's just the, the thermodynamics of it. And so you can rapidly see if you're losing 0.1% of the value of your cargo every day, it makes sense to put one of these on. I think it's going to be a compelling case for customers that are not sending maximum volumes to shore every day. And we're just very excited about it because it's going to lower emissions. It's gonna make sure that that energy is used for productive purposes.
More than anything, our customers know that we spend time at the drawing board thinking about the economics of their system and their project and how we can improve upon it. So, and it's a nice way to ensure that our assets remain best in class for the long haul. Very excited about that. Very excited about our engineering, ensuring that it's plug and play across the fleet, and you can hear me, I'm sure we'll be talking about that more in the future.
Excellent. So my last question, kind of tying all of this together-
Uh, sure.
You're investing your base business, including sustainability efforts, in growth. You have a buyback program, and the like. So when you think about your broader capital allocation framework, how do you balance all of those endeavors, while also maintaining a healthy balance sheet?
Yeah, well, maybe it's a little too healthy right now, Theresa. But, I mean, it, our balance sheet has allowed us to do things that others in the space have not been able to do. I mean, It's allowed us to go out and be building this LNG portfolio. Beyond that, it allows you to be taken seriously with a sovereign who you're saying, "Hey, I need you to trust me. I need you to know that we will keep your country's energy system upright." And they don't really want to hear that you're levered to the eyeballs. They want to know. It's been one of the great aspects of being publicly listed, you know, that everyone around the world can look us up and have that level of transparency. I'm very proud of that.
We are aware we do need to be getting, capital back to shareholders. Absolutely. I know, I know the portion of that TAM that's in front of us and that we can execute on. So it is a tension, but we are aware. We listen, to our investors. We will continue to reevaluate the dividend as part of that, and we will balance our ability to execute on the TAM in front of us with, being responsive to our investors.
Very clear. Thank you very much, Steven. It's a pleasure.
Thanks, Theresa.