Protagonists of 2010

The most successful IPO of 2010 was that of Crude Carriers Corp, a company which was established by Evangelos Marinakis, a recognized and bold young Greek shipowner. It must be noted that Crude Carriers opened a new wave of shipping listings in the U.S. capital markets. Crude Carriers Corp. successfully completed in March its Initial Public Offering on the New York Stock Exchange and it was listed under the ticker “CRU”, raising proceeds of 296 million. Within a short period of time since the completion of its IPO, Crude Carriers was able to expand its fleet to a total of five vessels, comprised of two newbuildings VLCCs (Very Large Crude Carriers) and three suezmaxes with total carrying capacity of approximately 1.1 million dwt and an average weighted age of approximately 1.5 years. Also, the company secured a no-cost, no-risk option to acquire a third newbuilding VLCC in order to further expand the fleet.

The vessel named M/T “Atlantas” and currently is employed in the spot market. The option is excersible until June 1st, 2011 for $108m. Crude Carriers is a pure-play, crude oil tanker company that allows investors to gain direct exposure to the spot crude oil charter market. The company acquired its vessels at attractive prices taking advantage of the low asset valuations, at levels below their historical averages.

As Jerry Kalogiratos, CFO of Crude Carriers told to ELNAVI exclusively “Crude Carriers brought this deal to the market at no premium over the net asset value of its fleet, a compelling valuation, especially when compared to other crude tanker companies who trade at significant premiums. We intend to follow a minimal debt strategy, which lowers our break-even point and gives the capability to grow the business and pay attractive dividends in any rate environment. This strategy translates to having no covenant issues, no amortization of debt and minimal financial expenses”. In addition to these, Capital Maritime is a significant competitive commercial manager for Crude Carriers fleet, and performs other administrative functions. Having the access to Capital Maritime’s expertise, synergies and economies of scale, puts Crude Carriers in a very advantageous position, compared to competitors. Capital Maritime is one of the few companies worldwide that is approved and vetted for business with a number of oil majors. Capital Maritime’s award winning commercial and technical performance has been recognized widely in the industry.

Crude Carriers recently announced that four out of the Company’s five vessels are now trading under index-related time charter arrangements with Shell, which provide exposure to the tanker spot market, ensuring high fleet utilization and reflect the Company’s continued ability to leverage its network of relationships with oil majors. Describing the dividend policy of Crude Carriers Jerry Kalogiratos points out “dividend policy is to distribute to investors all net cash flow less operating reserves, and this, we find, is fairly straightforward. We have found that larger crude tankers on the spot market have produced higher returns on a historical basis, and this can boost our returns and the dividend payout. For example, over the past five years, a spot chartering strategy resulted in a 40% premium in revenue versus a 3-year time charter strategy”. The company’s board of directors has declared a dividend of $0.50 and $0.20 per share for the second and third quarter respectively, which implies an annualized yield of approximately 8% given a $17 share price.

The Fleet The company’s fleet is the youngest crude tanker fleet among its public peers. The two VLCCs were built at Universal Shipbuilding Corporation in Japan. The M/T “Alexander the Great” was delivered on March, 2010 and M/T “Achilleas” was delivered in June, 2010.

The first Suezmax delivered to the Company is the M/T “Miltiadis M II”, was delivered on March, 2010. It was built in 2006 by Daewoo Shipbuilding and Marine Engineering Co. in Korea, and includes high specification features such as Ice Class 1A notation, a bow thruster and controllable pitch propeller resulting in increased maneuvering capacity and fully coated cargo tanks which enable the vessel to transport or store clean petroleum products. It is one of only four suezmax vessels with similar features built to date. Crude Carriers also acquired two 2008-built sistership suezmaxes, built at Universal Shipyard in Japan, the M/T “Amoureux” and M/T “Aias”. These joined the Company’s fleet in May and June 2010 respectively.

StealthGas Inc. /stealth petroleum

In the oil and gas market, one of the greatest names of the Greek shipping industry is Stealth Maritime, the company that was established in 1999 by Harry N. Vafias, a talented and decisive Greek shipowner. Stealth manages 11 aframaxes, 9 product tankers, 1 stainless steel chemical tanker and 42 LPGs (commercial management) owned by StealthGas Inc which is listed in Nasdaq since 2005. As Harry Vafias says “the majority of Stealth’s tankers trade worldwide. The management has decided to focus and invest on Aframaxes and product tankers only. These vessels are mainly fixed with first class charterers like: SHELL, AET, HEIDMAR, NAVIG8, VITOL, Glencore, Reliance and many others.

The management however since it maintains these vessels in “tip-top” condition does not hesitate to trade them worldwide including U.S.W.C. and Alaska. Oil major approvals is in essential priority for the management and that is why the vessels are visited on a frequent basis by the internal vetting team to ensure that they comply with oil major requirements”. Currently all the tankers operated by STEALTH MARITIME CORPORATION S.A. hold oil major approvals. In 2010, Stealth Maritime has taken delivery of the following vessels: three aframax tankers and two product tankers.

- The “V8 STEALTH” was delivered from New Times Shipyard in China, she is a crude carrier of 114.000dwt and flies the Marshall Islands flag. She is on a 5 year charter to a European shipowner.
- The “ALPINE ENDURANCE” was delivered from Hyundai Mipo Shipyard in Korea, she is a product/chemical tanker of 47.000dwt and flies the Marshall Islands flag. She is on a 3 year charter to a European oil trader.
- The “STEALTH ARGENTINA” was delivered from GSI in China, she is a product/chemical tanker of 51.000dwt and flies the Marshall Islands flag. She is on a 3 year charter to a European shipowner.
- The crude aframax tanker “V8 STEALTH II” from New Times Shipyard in China. She is a 114.000dwt aframax flying the Marshall Islands flag and starts a long charter to a European owner/operator. She is the last of a series of 4 sister vessels initially ordered by the Schulte Group of Germany but were all resold to Stealth.
- Finally, Stealth Maritime paid $56m to secure a crude aframax tanker of 115.000dwt delivering out of Samsung in Korea this July which will be named “SPIKE”. She also starts a long charter to a well known tanker owner.
Stealth also secured a second purchase of an aframax resale ex yard Samsung August 2010 from GEDEN. This is the 2nd aframax resale that Stealth buys from the Karamehmet Group, both are 115.000dwt and both are under construction in Samsung Shipyard in South Korea. The total cost for both units is region $115m. After these latest moves the Vafias Group controls 21 double hull tankers evenly split between aframaxes and product tankers.

Until recently BRAVE maritime, an affiliate of Stealth, had a 20 strong dry cargo fleet but due to the dry bulk market uncertainty the management decided to sell its whole dry bulk fleet except two just delivered capsize bulkers , one built in Daewoo korea and one built in SWS china. The management expects that the dry bulk market will weaken due to the excessive order-book which now reaches to 65% of the existing fleet but this depends on China’s and other developing countries 2011 growth.

Navios Maritime Holdings

Another fast growing company of 2010 was Navios Holdings which is a NYSE listed group and is involved in the dry bulk cargoes transportation and transshipment. Navios is incorporated with another two affiliated companies, Navios Maritime Partners and Navios Maritime Acquisition. In 2010 the group diversified in the tanker sector and completed successfully three follow-on offerings. Navios Maritime Partners L.P. completed three follow-on offerings in February, May and October 2010 raising $62.4m, $92.3m and $111.6m. These offerings were made to facilitate the company’s expansion program. Navios Maritime Partners L.P. purchased the “Navios Hyperion”, a 2004 Japanese-built Panamax vessel with a capacity of 75,707 dwt, for $63.0 million from Navios Maritime Holdings Inc. The vessel is chartered out until April 2014 at $37,953 until the expiration of the charter.

Navios Partners also exercised the option to acquire the Navios Sagittarius, a 75,756 dwt Panamax vessel built in 2006. The vessel’s exercise price was approximately $25.0 million and charter free market value is estimated at approximately $38.0 million. The company purchased “Navios Aurora II”, a 2009 South Korean-built capesize vessel with a capacity of 169.031dwt for $110.0m from Navios Maritime Holdings Inc. The vessel is chartered out until November 2019 for $41.325 (net) per day. $20.0m of the purchase price is funded by the issuance common units of Navios Partners. Also, the company purchased from Navios Maritime Holdings the “Navios Pollux”, a 2009 South-Korean-built capesize vessel with a capacity of 180.727dwt for $110.0. The vessel is chartered out at $42.250 (net) per day until July 2019. This charter contract has also been insured by an AA+ rated European Union governmental agency. Navios Maritime Partners average chartered out period fleet is 4.4years and the average age of the vessels is 5.6years. The company anticipates its newly enlarged fleet of 14 vessels will further develop its ability to maintain and increase distributions to unitholders over time.

The third affiliated company of Navios Holdings is Navios Maritime Acquisitions which was formed in 2008 to acquire through a merger, capital stock exchange, asset acquisition, stock purchase or other similar business combination one or more assets or operating businesses in the marine transportation and logistics industries. In April, 2010 Navios Maritime Acquisition Corporation signed a definitive agreement pursuant to which it will acquire a 13-vessel fleet, comprised of 11 product tankers and two chemical tankers. The aggregate purchase price was $457.7 million, of which $123.4 million were paid from existing cash and $334.3 million from debt financing. Navios Acquisition will also have options to purchase two additional product tankers for $40.5 million per vessel.

Angeliki Frangou, Chairman and Chief Executive Officer of Navios Acquisition, commented, “Navios Acquisition will be a platform for building a world-leading operator of modern, high-quality product and chemical tankers. We are excited about building another company in the shipping sector and believe that the attractive market dynamics make this an ideal opportunity for leveraging our global network of relationships and world-class skills developed in building Navios Holdings into one of the preeminent dry bulk shipping companies.”

It must be noted that Angeliki Frangou took control of Navios Holdings in August of 2005, and grew the fleet from six owned and 22 chartered-in vessels, representing 1.8 million dwt, to 32 owned and 27 chartered in vessels, representing 6.4 million dwt. Navios Holding’s grew its fleet by 256%, in dwt. In addition, in 2007 Navios Holdings launched Navios Partners on the New York Stock Exchange, and Navios Partners currently has a fleet of 13 vessels. In total, the Navios group now controls 72 dry bulk vessels, with an aggregate of 7.5 million dwt, representing 317% fleet growth by dwt. Today, the Navios group has a combined current enterprise value of $3.0 billion as compared to Navios Holdings’ enterprise value in August 2005 of $0.6 billion, representing 414% growth. Now, the Group aims to replicate these achievements in the tanker sector through Navios Acquisition.

Costamare Inc.

In Greek shipping it is an uncommon practice for a traditional company to go public in order to finance company’s expansion plan. This myth now has been broken down. In November, 2010 one of the biggest containership companies in the world, Costamare Inc, completed successfully its public offering and raised $160m from its IPO offering 13,300,000 shares of common stock at a price of $12.00 per share. The underwriters were granted a 30-day option to purchase up to 1,995,000 additional common shares from Costamare at the initial public offering price. The shares began trading on the New York Stock Exchange under the ticker symbol “CMRE”. Costis Constantakopoulos, Chairman of Costamare Inc told ““We are very pleased to begin Costamare’s next chapter together with our new investors, despite a very challenging IPO market.”

The Constantakopoulos family will retain a 75% stake in Costamare following the float, assuming the exercise of the underwriters’ 30-day over-allotment option. Costamare has a current fleet of 41 vessels aggregating 211,882 TEUs. Costamare has contracted to acquire four 3,351 TEU secondhand containerships, two to be delivered by December 2010 and two by February 2011, and to purchase, subject to certain conditions, three 9,000 TEU newbuilds to be delivered in 2013 and 2014. Costamare plans to use the proceeds of the offering for potential future vessel acquisitions and for general corporate purposes.

Alma Maritime

Stamatis Molaris’ Alma Maritime built a young and solid mixed fleet during 2010 Alma Maritime is controlled by Stamatis Molaris, commodities baron Hans Mende and ABN Amro affiliate Maas Capital. The company was able to secure a $387m syndicated loan. This means that Alma has secured enough capital to finance its further investments. At present, Alma is owning the 170,000-dwt Cape Maria (ex-Cape Pioneer, built 2005), bought in February for a reported $54.m, and the 175,000-dwt Cape Elise (ex-China Venture, built 2005), which was picked up in April for $53.m. The Cape Maria is on an eight-year charter to EDF Trading with floor and profit sharing structure, a subsidiary of Electricite de France, and Cape Elise will start a similar charter after she completes an existing commitment in July 2011. Alma will soon acquire the 180,000-dwt Lillie, which is due to be delivered from STX Offshore & Shipbuilding in January. The Lillie will also be locked into long-term employment with EDF.

The management of Alma’s vessels are carried out by privately owned Empire Navigation, which is also doing the technical supervision of the Lillie and was until now managing a quartet of medium-range (MR) products tankers that it took on after they were handed back last year to New York-based Icon Capital by Top Ships. In addition to its bulkers, Alma also has four 158,000-dwt suezmax tankers on order at Hyundai Heavy Industries, all for delivery in 2011 and all chartered to Sanko Steamship of Japan at $35,400 per day with a 50% profit-sharing agreement in place. Given the average seven-and-a-half-year time charters in place on Alma’s vessels and the fact that all include a profit-sharing agreement, Mr. Molaris believes the company is a unique vehicle with a very good platform — fully funded, cash-flow secure, upside exposure and downside protection.

Mr. Molaris is a firm proponent of a mixed fleet, noting that it can weather the market better. Speaking recently to Athens Marine Money Forum Mr. Molaris said that “shipping companies should not go to the market to raise less than $300m”. Mr. Molaris also said “Shipping IPOs is still a young financing activity. The majority of IPOs took place after 2004 – 2005 and we will keep learning because we are experiencing a very volatile and challenging market. We have first to take our lessons and we will perform better. The capital market will always be there to facilitate our investments program”.

Mr. Molaris also added “that the shipping companies must be more disciplined to create more value for their shareholders”. An example was when Mr. Molaris exited from Quintana and merged with Excel Maritime because the valuation of the company had reached to a peak. The management of the company had decided to create more value for their shareholders. He does not believe there is currently an appetite for shipping initial public offerings (IPOs), despite compatriot Costamare’s ongoing bid to raise $260m.

Almi Tankers

2010 was a year of massive newbuilding orders as the prices of building a new ship fell considerably. Amongst the first shipping companies to benefit from the market fundamentals was Almi Tankers, a newly established oil tanker management company. Almi has followed up its entrance into the LR2 market with impressive future fleet expansion, following recent newbuilding contracts with Daewoo Shipbuilding & Mechanical Engineering (DSME) for ten Suezmax tankers and two VLCCs. The company’s existing fleet is made up of two modern Aframax vessels that fly the Liberian flag; the “Almi Star” and the “Almi Spirit”. Almi Tankers operates and charters the vessels from the company’s office in Athens. Both are currently traded on a time charter basis.

It has now been confirmed that the company expects to take delivery from DSME of ten 158.000dwt Suezmax tankers from 2011 to 2013 and two 320.000dwt VLCCs in August and November 2013. When asked to comment on the expansion of the company’s fleet, Capt. Panayiotis Drosos, CEO of Almi Tankers remarked “We are committed to the market fundamentals of gaining our profit through achieving strong charter contracts and following an effective fleet management and maintenance plan. Although the fleet will grow considerably, we will not allow our high quality, safety and environmental standards to be compromised”.

EuroSeas Ltd.

Nasdaq listed company Euroseas Ltd. has invested decisively in the containership sector during 2010. Euroseas commenced a joint venture agreement with two recognised private investment firms “Eton Park” and Rhone Capital to form Euromar LLC with the aim to acquire and manage ships. Euromar Joint Venture purchased 6 vessels since June 2010 investing almost half of its committed capital of $175million. Euroseas has committed $25million to the venture. More specifically Euromar joint venture created a modern containership fleet in line with Euroseas original investment thesis by purchasing and taking delivery within 2010 a total of 6 containerships, four in the 2.500-2.800teu range and 2 in the 1.700-1.800teu range. All 6 vessels are geared and built post 2000 with an average age of approximately 7 years.

Aristidis Pittas, Chairman and CEO of Euroseas commented: “We believe that this arrangement is beneficial to our shareholders as it will give us access to a greater number and larger size of opportunities, allow our investments to be spread over a more diversified portfolio of vessels, and enable us to achieve overhead and operating costs savings. In addition, we will have the opportunity to earn incremental returns if our joint investments perform well. We are very proud to work with such well-reputed and successful partners and believe their decision to work with us is a vote of confidence for the management and strategy of our Company. We plan to exploit other attractive investment opportunities either through our Euromar joint venture, by investing our own funds as we did with the purchase of M/V “Aggeliki P” in June 2010”.

It is reminded that Euroseas purchased the vessel as M/V Oder Trader, an intermediate containership of 30,360 dwt and 2008 twenty foot equivalent units (teu) built in 1998 in Poland, for approximately $15.85 million.More than 90% of Euroseas total containership fleet days in 2010 and about 60% for 2011, are fixed under period charters, already concluded spot charters, or, otherwise protected from market fluctuations. Finally, regarding First Nine Month 2010 Highlights Euroseas announced: Net loss of $5.7 million or $0.18 loss per share basic and diluted on total, net revenues of $39.7 million, adjusted EBITDA was $13.4 million, an average time charter equivalent rate of $11.645 per day and declared three quarterly dividends for a total of $0.17 per share during the first nine months of 2010.

The Company has a fleet of 16 vessels, including 4 Panamax drybulk carriers and 1 Handymax drybulk carrier, 3 Intermediate containership, 5 Handysize containerships, 2 Feeder containerships and a multipurpose dry cargo vessel. Euroseas` 5 drybulk carriers have a total cargo capacity of 331,808 dwt, its 10 containerships have a cargo capacity of 17,787 teu and its multipurpose vessel has a cargo capacity of 22,568 dwt or 950 teu.

Cyprus Maritime

A quite remarkable development has marked the fleet of Cyprus Maritime the last few years. Andreas Hadjiyiannis, a self made Greek-Cypriot shipowner, founder of Cyprus Maritime has proceeded since the end of 2008 to the renewal of the company’s fleet. More specifically in the next 12 months (during 2009) he exploited the fall of the freight rate market and according to S&P market reports he replaced almost half of its existing fleet 28 ships in total. ELNAVI has monitored with the great interest the last deals of Cyprus Maritime such as the replacement of five old tween-deckers managed by the company since 1999. Cyprus seems to have sold for scrap 5 tween-deckers ignoring the negative comments of the market including the foreign shipping press and proceeded to the acquisition of 7 modern containers.

The company resold two of these vessels to Grand China and took advantage of the accumulated profit from this deal plus the sales price of the five old tween deckers in order to replace them with five modern containers 3.000-4.5000teus built ’93-’97. Therefore, the replacement took place without any charge for Cyprus Maritime. ELNAVI estimated that Cyprus would have paid more than $100m if the same project was attempted during 2006 with 2008. Cyprus Maritime followed the same policy in the renewal of its bulk carrier fleet. The company sold three old capes (“Cape Maria”, “Maxim” & “Cosmos”), the panamax “Oter” and “Lake Superior” and replaced them in 2009 with five modern panamaxes, one capesize and one supramax.

According to a Tradewinds article the cost of this purchase didn’t exceed $100m. After a careful examination of S&P records we believe that 80% of the purchase price came out from the above sales. For example Cyprus Maritime sold the capesize “Cape Maria” for the outstanding price of $45m. A company’s spokesman told us that Cyprus will complete the renewal program of its fleet as planned, and reported on previous ELNAVI’s article. As he said, our only deviation in our policy is that the remarkable rise of the prices in the second hand market of containers and bulk carriers has directed us to order newbuilding ships for the replacement of the older vessels in our fleet. For this reason the company monitors the shipbuilding prices and expects that they will fall in the next few months following the trend of the supply & demand order.

Pyxis Maritime Corp

Pyxis Maritime Corp. was founded by Valentios “Eddy” Valentis in May 2007 to manage and operate a modern fleet of product tanker and chemical vessels. The company now manages high specification IMO3 and IMO2 product tankers. Eddy Valentis continues a long tradition in shipping as he is the grandson of the late Loucas Matsas one of the greatest tug & salvage vessel owners in the world. Pyxis has created its fleet acquiring in 2007 3 resale product tankers 50.000dwt all built at SPP Plant & Shipbuilding in S. Korea. The first vessel “Miss Lucy” is employed under a 10-year bareboat charter to Italy’s Perserevanza SPA and the other two vessels “Navig8 Malou” and “Navig8 Loucas” are under a 5-year time charters to Navig8 Pte. Pyxis has under its management another 3 vessels including two recently delivered chemical tankers “Pyxis Alpha” & “Pyxis Beta” 8.615dwt each built at Kejin Shipyard of China.

Earlier in 2010 Pyxis acquired the 2006 built IMO2 product tanker “Pyxis Delta” (46,600 dwt, Hyundai Mipo) for $25.5m expanding the company’s fleet to six modern tankers. Mr. Valentis points out that Pyxis Maritime will exploit more opportunities to expand its fleet taking advantage of the attractive ship prices in the sector. All MR tankers are secured with charter coverage, while the short range Product/Chemical vessels operate in the spot market.

The executives comprising Pyxis Maritime’s management have a demonstrable history of originating, structuring, financing and executing shipping investments in both the bulk and tanker sectors.

Enterprises Shipping and Lloyd’s Register explore nuclear power for maritime use

Shipping and power experts join forces to explore the potential for nuclear power to propel future generations of commercial tankers Members of new research consortium, which includes Lloyd’s Register, Enterprises Shipping and Trading, Hyperion Power Generation and BMT, to examine the marine applications for small modular reactors (SMRs) A consortium of British, American and Greek interests have agreed to investigate the practical maritime applications for small modular reactors as commercial tanker-owners search for new designs that could deliver safer, cleaner and commercially viable forms of propulsion for the global fleet.

The Strategic Research Group at Lloyd’s Register, Hyperion Power Generation Inc, British designer BMT Nigel Gee and Greek ship operator Enterprises Shipping and Trading SA are to lead the research into nuclear propulsion, which they believe is technically feasible and has the potential to drastically reduce the CO2 emissions caused by commercial shipping. “This a very exciting project,” said Lloyd’s Register CEO, Richard Sadler. “We believe that as society recognises the limited choices available in the low carbon, oil scarce economy and land based nuclear plants become common place we will see nuclear ships on specific trade routes sooner than many currently anticipate.”

The agreement for the joint industry project was signed today at the offices of Enterprises Shipping and Trading in Athens, Greece. Enterprises’ Victor Restis, commenting at the signing said, “Despite the fact that shipping is the industry that contributes much less in the World’s atmospheric pollution compared to other shore based industries, we believe that no effort is enough towards safeguarding a better world for the future generations. We are extremely honored and proud to be part of this consortium at this historic event as we strongly believe that alternative power generation is the answer for the shipping transportation.”

The consortium believes that SMRs, with a thermal power output of more than 68 megawatts, have the potential to be used as a plug?in nuclear ‘battery’. The research is intended to produce a concept tanker-ship design based on conventional and ‘modular’ concepts. Special attention will be paid to analysis of a vessel’s lifecycle cost as well as to hull-form designs and structural layout, including grounding and collision protection. “We are enthusiastic about participating in the historic opportunity presented by this truly groundbreaking consortium,” said John R. ‘Grizz’ Deal, the CEO of Hyperion Power. “In addition to fitting the basic requirements as the model for studying the application of SMRs in commercial naval propulsion, the Hyperion Power Module [HPM] can also help to set new nuclear maritime standards. The HPM’s design includes a non-pressurised vessel, and non-reactive coolant. These features, among others in the HPM, should encourage the industry to strive for even higher levels of inherent safety in their models.”

International shipping has been identified as a significant global contributor to greenhouse gas emissions, and it is under mounting pressure to contribute to overall emission reductions. There is an ongoing debate about how much the sector will be able to reduce those emissions, while continuing to support the forecast expansion in world trade that it enables.

“Nuclear propulsion offers the opportunity for an emissions-free alternative to fossil fuel, whist delivering ancillary benefits and security to the maritime industry,” said Dr Phil Thompson, Sector Director — Transport, for the BMT Group. “We look forward to using our wide range of maritime skills and expertise to identify the through-life implications, risks and potential for developing and using SMRs in the civilian maritime environment and to provide a framework for its safe and reliable introduction and utilisation.”

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