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Edited Transcript of TNP earnings conference call or presentation 29-Mar-19 2:00pm GMT

Q4 2018 Tsakos Energy Navigation Ltd Earnings Call

Athens Apr 12, 2019 (Thomson StreetEvents) -- Edited Transcript of Tsakos Energy Navigation Ltd earnings conference call or presentation Friday, March 29, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Efstratios-Georgios A. Arapoglou

Tsakos Energy Navigation Limited - Chairman of the Board

* George V. Saroglou

Tsakos Energy Navigation Limited - COO, VP & Executive Director

* Nikolas P. Tsakos

Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director

* Paul Durham

Tsakos Energy Navigation Limited - CFO & CAO

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Conference Call Participants

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* Benjamin Joel Nolan

Stifel, Nicolaus & Company, Incorporated, Research Division - MD

* Fotis Giannakoulis

Morgan Stanley, Research Division - VP, Research

* George Hans Burmann

IFS Securities, Inc. - Analyst

* Randall Giveans

Jefferies LLC, Research Division - Equity Analyst

* Nicolas Bornozis

Capital Link Inc. - President

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Presentation

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Operator [1]

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Thank you for standing by, ladies and gentlemen, and welcome to Tsakos Energy Navigation conference call on the fourth quarter and year-end financial results. We have with us Mr. Takis Arapoglou, Chairman of the Board; Mr. Nikolas Tsakos, President and CEO; Mr. Paul Durham, Chief Financial Officer; and Mr. George Saroglou, Chief Operating Officer of the company. (Operator Instructions) I must advise, the conference is being recorded today.

And I now pass the floor to Mr. Nicolas Bornozis, President of Capital Link, investor relation adviser of Tsakos Energy Navigation. Please go ahead, sir.

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Nicolas Bornozis, Capital Link Inc. - President [2]

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Thank you very much, and good morning to all of our participants. This is Nicolas Bornozis of Capital Link, investor relations adviser to Tsakos Energy Navigation. This morning, the company publicly released its financial results for the fourth quarter and full year 2018. In case you do not have a copy of today's earnings release, please call us at (212) 661-7566 or e-mail us at ten@capitallink.com, and we will e-mail a copy to you right away.

Please note that parallel to today's conference call, there is also a live audio and slide webcast, which can be accessed on the company's website on the front page at www.tenn.gr. The conference call will follow the presentation slides, so please, we urge you to access the presentation of the webcast.

Please note that the slides of the webcast will be available as an archive on the company's website after the conference call. Also, please note that the slides of the webcast presentation are user controlled, and that means that by clicking on the proper button, you can move to the next or to the previous slide on your own.

At this time, I would like to read the safe harbor statement. This conference call and slide presentation of the webcast contain certain forward-looking statements within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties, which may affect TEN's business prospects and results of operations. Such risks are more fully disclosed in TEN's filings with the Securities and Exchange Commission.

And before turning the floor over to the company, I would like to mention 2 things. First of all, on Monday, April 1, 2019, next week, the company's management will be participating at the Capital Link International Shipping Conference in New York. Then, on Wednesday, April 3, 2019, the company is hosting an Investor and Analyst Day of its own in New York. Those of you interested to join the Investor and Analyst Day, please contact us at Capital Link, and we will be happy to help you. You can call us at (212) 661-7566.

And now I will turn over the call to Mr. Takis Arapoglou, the Chairman of the Board of Tsakos Energy Navigation. Mr. Arapoglou, please go ahead, sir.

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Efstratios-Georgios A. Arapoglou, Tsakos Energy Navigation Limited - Chairman of the Board [3]

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Thank you, Nikolas. Good morning, everyone. Thank you for joining us today. Coming out of the longest bad market ever with positive operating performance, being able to pay obligations and a steady dividend, it's quite an achievement, confirming our operating model and our supreme industrial platform.

It's important to note that we have managed to repay debt equivalent to $2 per share and to maintain a cash position of $2.50 per share equivalent. And now with a stronger market in the fourth quarter, continuing at an admittedly lower pace in 2019, we're benefiting from profit-sharing arrangements and look forward to a stronger year, positioning for growth and for renewing our fleet and further growing our platform. Once again, I'd like to congratulate, on behalf of the board, Nikolas Tsakos and his colleagues, his team and wish him an equally successful 2019. That's it for me for now.

Over to you, Nikolas Tsakos. Thank you.

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [4]

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Thank you, Chairman. And with you and the board's support, hopefully, 2019 would be a much better year than 2018. 2018, to put it with a few words, was a rough year, as you said, with a happy ending at the later part. The first 3 quarters, we experienced one of the worst spot tanker markets in recent memory. However, the last part of the year and spilling over in the first quarter has been much more rewarding.

Since the beginning of the year and we're very close to the end of the new quarter, the market has -- the rates have normalized, but they have normalized at healthy and accretive levels. The VLCCs have averaged in the -- since the beginning of the year, in the mid-30s, the Suezmaxes in the 20s together with the Aframaxes. The LR2s have done even better than that. Our clean vessels have done significantly better than that. And even the product carriers are enjoying a period of revival with the levels in the mid-20s for the larger vessels, the 50,000 plus category and upper teens for the 37,000 tonners.

So all the levels that we are enjoying in the spot market are accretive levels. And we are looking forward, given we do not exactly believe, hopefully, it's true, the forecast that Mr. Saroglou will take you from various brokers that show a very strong revival of the market after -- in the second half mainly due to the 2020 legislation taking ships out of competition for a significant period of time.

I think the most important thing that we have seen after a very tough year in 2018 was the company has been able again to continue its positive cash flow -- a positive operating cash flow, maintaining our dividend, continuously repaying significant -- reducing our debt significantly. As the Chairman said, we have reduced $2 per share worth of debt, and we are steadily maintaining always a strong liquidity of at least $2.50 per share. For those of you, just to put it, that we are -- we have about 90 million shares outstanding as a company.

But I was -- as I was saying, the most important part is that the psychology has changed. And a big number of our charterers are looking to take up to 3 years or even longer of accretive cover on existing tonnage. We are seeing the same with the LNG market. We have been fortunate to charter our ships out at accretive rates for the next couple of years. So we are looking, I will talk later about this, to grow this business significantly.

And in our strategic relationships, after taking delivery last year of 15 vessels, growing the fleet by 30%, all of them with long-term charters, we are now building 4 ships, all of them against very long employment. So we believe, as we always said, to build responsibly and not to bring tonnage in the market with no employment. The company right now has 14 vessels on the fuel spot and 19 vessels on profit sharing arrangement, which allows us to take advantage of the movements in the market, however, maintaining a very good protection to our bottom line.

And then with this, I would ask Mr. Saroglou to give us the -- his report on the 2018 operating performance of the company and the beginning of the year. Here's George.

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George V. Saroglou, Tsakos Energy Navigation Limited - COO, VP & Executive Director [5]

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Thank you very much, Nikolas, and good morning to all of you. In our last earnings call back in November, we talked about the brighter prospects of the tanker market that was starting to emerge after 3 challenging quarters in 2018. Today, we report the operating and financial results of the fourth quarter of 2018, which are positive again. We are happy to reiterate our beliefs that the prospects for the tanker market continue to be favorable.

Main drivers behind the market strength since the start of the fourth quarter are: strong global oil demand growing year-over-year in excess of 1.3 million, 1.4 million barrels per day; higher OPEC and Russian production during the seasonally strong fourth quarter of 2018; strong crude oil exports from the United States with added tonne miles and global fleet utilization; limited vessel supply, as the global tanker fleet at very little growth in 2018, thanks to the higher scrapping levels since 2012. This environment, we saw and continue to see strong appetite by oil majors to partner with our company in accretive, long-term business projects and also extend charters as improved and profitable for the bottom line rates on existing vessels of the fleet as the company's recent announcements demonstrate.

Moving to Slide #2. The left side presents the all-in breakeven point for the various vessel types that we operate in the company. As you can see, the cost base is low. In addition to the low [shipbuilding port], we must highlight the purchasing power of Tsakos Columbia Shipmanagement, our technical managers, as they continue cost control efforts to maintain a low OpEx average for the fleet while keeping a very highly fleet utilization rate quarter-after-quarter. Again, we reported utilization in excess of 96% that we believe qualifies as full employment.

TEN's diversified fleet with the optionality it offers, combined with its flexible chartering strategy, ensures that TEN continues to maintain an impeccable debt service record and meet all its obligations irrespective of where the market cycle -- where we are in the market cycle. In addition, thanks to the profit-sharing element that is part -- been a big portion of our fleet, TEN benefits when market conditions improve, like now. Based on the current market strength and the number of vessels operating in the spot market and in time charters with profit sharing, for every $1,000 increase in spot market rates, we have a positive $0.06 impact in annual earnings per share.

Here, we see on Slide #3 the pro forma fleet. We have 33 vessels from fixed rate time charters and 35 vessels or 51% of the pro forma fleet with spot market exposure and a combination of pure spot COAs and time charters with profit sharing and min/max formulas. On average, we have 2.3 years of employment fixed forward and a backlog of $1.2 billion in minimum contracted revenue.

Global oil demand continues to be strong. Last year, it grew by 1.3 million barrels per day. The expectation for 2019 is another growth year, adding 1.4 million barrels per day of additional growth. The fourth quarter of 2018, for the first time, global oil demand was above 100 million barrels per day.

The next 2 slides talk about the supply of tankers, and as we see on the supply, scrapping continues to be high. Fleet growth is low as the order book continues to decline. The introduction of new environmental regulations like the IMO 2020 sulfur cap from next year and the water ballast implementation from this year are expected to affect a big part of the tanker fleet that is approaching 20 years and have their next test scheduled special survey before 2020. Therefore, tanker fleet growth in the next 2 to 3 years is expected to remain below 3% and declining.

Last slide, Slide #7. The company announced today a $0.05 dividend. The dividend chart presents the annual dollar value of all the common share dividends the company paid since 2002, which total $475 million or $10.81 per share. The graph on the right side of the slide is a forecast from Fearnleys, a well-known shipbroker from Norway. As you can see, VLCC rates are expected to trend higher from the start of the second half of 2019 and reach multiyear high. We are also positive about the market prospects and expect a strong market for all vessel categories. That concludes the operational part of our presentation.

Paul will walk you through the financial highlights for the fourth quarter and full year. Paul?

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Paul Durham, Tsakos Energy Navigation Limited - CFO & CAO [6]

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All right. Thank you, George. So after 3 difficult quarters, 2018, at last, ended with a strong quarter, generating $26.3 million operating income before impairment charges. Net income was $2.8 million before impairment. But if we were allowed to exclude the unexpected end-of-year noncash bunker hedge valuation, net income would have been $13.6 million.

A positive turn in crude tanker rates helped revenues increase by 14%. 9 Aframaxes on spot earned $20,000 a day. 3 Suezmaxes on spot earned over $26,000 daily. And the 2 VLCCs averaged $34,000. 2 LNG carriers also enjoyed higher daily rates, earning $10,000 to $13,000 more than in the prior quarter 4 and since the year-end, seeing rates increase further.

We also saw meaningful profit share, especially from the Suezmaxes on profit share time charters, which resulted in a doubling of their minimum hire rate. As a consequence, fleet's average daily TCE per ship increased by 17% to over $21,400.

Total OpEx fell by 2% due to tight cost control, as George has mentioned, and to a stronger dollar. As a result, daily average OpEx per vessel was $7,715 with a similar figure for the year, low levels by industry standards. Depreciation, amortization and G&A costs all remained at similar levels to the prior quarter 4 and year.

Five of our older vessels are earmarked for possible sale. This decision affects the future cash flow resulting in impairment charges of $66 million, reducing future depreciation charges by $1 million a quarter. Finance costs increased due to higher interest rates, offset by the effect of lower outstanding debt and the surprise fall in oil prices, hitting year-end bunker hedges, hedge valuations by nearly $11 million. Fortunately, valuations are already strongly back into positive territory as oil prices recover.

However, in quarter 4, there were also cash gains of $3.7 million received from bunker hedges. Actually, bunker hedge cash gains for the year totaled $9.9 million. So the overall impact of such hedges on 2018 net income was only $1 million.

Total Q4 EBITDA was over $66 million, a 25% increase from the prior quarter 4, almost all vessels generating positive EBITDA. And for the year, $190 million EBITDA, the year ending with a cash balance of $220 million. In quarter 4, there were net repayments of $28 million, bringing total debt down to $1.61 billion at year-end, $156 million less than at the prior year-end, adding $2 to the value per share and leaving net debt to capital at 48%.

Finally, we are building 4 vessels for charter. $25 million cash has been paid in this respect to date. Most of the remainder will be paid by debt on excellent terms. And more finally, we believe this will be a good year for the sector and especially for TEN. We expect the sale of vessels will release cash for accretive projects under consideration. And this concludes my comments.

And now I'll pass the call back to Nikos.

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [7]

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Thank you. Thank you all very much. And as we previously said, 2018, thank God, is behind us. It was a difficult year, but it has prepared the ground for an environment that, I hope George is -- confirmed is right on the prediction. But I have said, we are not taking decisions based on this graph. I hope it's wrong, but then we will all be very happy if this comes true, but this is not influencing how we take our decisions.

And with this, I would like to open the floor for any questions. Thank you.

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Questions and Answers

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Operator [1]

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We'll now take our first question. It comes from the line of Ben Nolan.

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Benjamin Joel Nolan, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [2]

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So I -- caught me a little off-guard there. I had a couple of questions, actually. Number one is, as you look -- and obviously, with the Suezmaxes and the Aframaxes before, it seems like almost everything in terms of appetite for long-term charters from your customers has been on the crude tanker market. Was curious if there is any appetite at all on the smaller-sized vessels for long-term to be built and -- or is that not really something that is out there?

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [3]

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Thank you, Ben. We're -- it is building up. I mean, you see companies like Exxon coming out and taking a product, 50s and 37,000 tonners or 53,000 tonners on employment, but I think it starts with the Suezmax and Aframaxes that -- for some reason, that's the flavor of this quarter. And then it trickles down to the smaller sizes. So I would say the biggest interest today are -- that we are seeing today is Aframaxes, which means that with all these embargoes and protectionist measures that are taking -- or owners are look -- charters are looking for is for more flexible size of vessels so they don't have to carry 1 million barrels or 2 million on a ship. So this is the biggest interest as we see today, and it goes to the smaller sizes. But Aframax is, by far, the biggest interest.

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Benjamin Joel Nolan, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [4]

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Okay. Interesting. And then I had just a couple of financial questions, Paul, for you. Could you maybe tell me what is the debt amortization schedule as it stands today for this year or next?

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Paul Durham, Tsakos Energy Navigation Limited - CFO & CAO [5]

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So what are we looking for? For the year, I think we're looking at scheduled repayments of $165 million.

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [6]

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Similar to 2018, very similar.

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Paul Durham, Tsakos Energy Navigation Limited - CFO & CAO [7]

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Yes. And going forward, similar kind of numbers, 2020, about $171 million. As the net debt starts coming down quite rapidly, we see in 2021, it's going down to about $147 million and then following year, $121 million. So it is coming down quite rapidly. And of course, there are balloons as well. No more balloons this year. But in 2020, that will be -- as we -- right about $40 million. 2021 is about $140 million.

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Benjamin Joel Nolan, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [8]

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Yes. No, that's very detailed. I appreciate it, Paul. And then lastly for me, sort of along this -- those lines, the -- obviously, there is the $66 million impairment this quarter related to the 5 vessels that you might be selling. Just curious if you've done any of the math and if looking at the remainder of the fleet, particularly some of those older vessels that might be coming available to sale as you go forward, do you think that there are more of these pretty sizable impairments that might be coming down the line? And if so, how does that, if at all, impact any of your loan covenants?

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [9]

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Well, as you know, we have very -- we have always followed a very conservative debt to equity. So I think we're under 50% as we speak today. And we have a big number of banks competing for TEN's business because we must be one of the very few, at least publicly traded companies, that since 1993, when we have been established, we have not reorganized at all our old structure, but remainder of our debt, we'll be paying debt as scheduled initially at the beginning. And as Paul said that -- 2017 and '18 were the heavy years for our debt repayments after, I think, '19, as we go through '19, debt becomes less. So we do not expect to have any issues with our banks. I think they look at it as a healthy action to allow for transactions to take place. As of your question, I think in the next couple of years, depending on market conditions, we might have a maximum $50 million of impairment as the vessels grow older, but this is something that depends on market conditions.

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Benjamin Joel Nolan, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [10]

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Yes, okay. No, that -- but that's...

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Paul Durham, Tsakos Energy Navigation Limited - CFO & CAO [11]

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Banks are more interested, in any case on the fair market of the value, not so much the book value. So yes, we've been pretty consistent with the banks, they never effectively bother us with regards to potential noncompliance or impairment that might arise. (inaudible) it's still a young fleet, so we don't really anticipate much more. But bear in mind, however, that we are always looking to keep a young-ish fleet, and sell old vessels once they've gone over 10, 12 years. As soon as we start making that kind of decision, you're obliged to really to take that into account in your cash flow testing like we did this time, and that creates a large impairment.

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Operator [12]

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Our next question is from Fotis Giannakoulis from Morgan Stanley.

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Fotis Giannakoulis, Morgan Stanley, Research Division - VP, Research [13]

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Nik, you mentioned about the interest of charters to provide long-term employment. Are you referring to your existing ships or the potential acquisition of additional ships? And if the market is not so cooperative, as George or the brokers and analysts predict for next year, which are the steps that you are willing to take to protect your liquidity? And if you can give us an estimate, what is the minimum cash balance that you will accept to have?

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [14]

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Well, starting on -- with your first question, I think the [bought boats] through right now, we have a lot of appetite for almost all our charter-free Aframaxes for 3- to 5-year employment and at a very interesting rate. We are pushing for profit sharing, and it's something that we always like to get, take advantage the high market. And of course, there are new builds -- for new building vessels. However, we do not consider a 2- or a 3-year employment enough to build a vessel. So we want to see something with 5 years and above that. As you know, we have always -- we always want to maintain a strong liquidity. And I think anything above $150 million is something that we want to continue to maintain. If you look historically, if you go back in 10 years, I don't think we have been under $150 million ever in recent -- in the recent 10 years.

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Fotis Giannakoulis, Morgan Stanley, Research Division - VP, Research [15]

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Allow me to insist a little bit on that, and I know that our outlook as analysts and I assume for a lot of investors is very positive. But if things do not develop as we expect, how are you planning to protect this liquidity? And just to give you some example, give up the growth or give up your dividend or raise new equity or raise additional capital somehow? Can you give us -- can you rank us your preferences of how you think of strengthening your liquidity position especially given the anticipated repayment of the preferred that help escalating interest costs?

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [16]

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Yes. I think first, George is probably -- and the reason we [purged] 5 or 6 of our assets is by same sales of ships that we'll release the sales of the ships we are talking about, we'll release in excess of $100 million to our cash. And these are the ones that we are already in discussions for and that's the reason we have -- we purged , I think, 5 or 6 of the vessels. The fleet -- so that is the first we -- to maintain our liquidity. And our growth right now, we have 4 ships after having a huge growth expansion in the last couple of years. Now we have -- we are down to 4 vessels. So with that, as Paul said, the majority of our investment -- as equity has been already made and the remaining would be conservative debt financed, that what we see very good terms. We're talking about the interest rate under 150 basis points above LIBOR. That -- in that neighborhood. And as you know that we are very -- for us, dividend is an important part, and that's why the company continues to pay dividend. So I think starting with sales of ships, and of course, obviously if the market is not performing as we all hope, it will finally perform.

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Fotis Giannakoulis, Morgan Stanley, Research Division - VP, Research [17]

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And one last question, a little bit of a strategic long-term thinking that you can share with us. A lot of people are concerned about the growing penetration of renewables and the potential decline in oil demand for transportation. I know this is not a 1- or 2- or 5-year discussion. But when you buy assets, you buy for 20 or 25 years. How do you view -- how does this increase in renewables impact your decision to expand your fleet and buy or not buy any assets?

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [18]

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Well, I think this is a very valid point, as we have always been looking to see when these (inaudible) which -- peak [holding] period, now we're talking about 230 -- 2,030, 2,035. And an answer to this is an increased investment on the cash side, which is something that we would like to be doing. So you will see us balancing the fleet going forward also by increasing the investing in LNG.

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Operator [19]

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Our final question is from George Burmann from IFS Securities.

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George Hans Burmann, IFS Securities, Inc. - Analyst [20]

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I have a couple of questions. The new contract announced for your LNG ships on March 15, does that pencil out that you got a lower rate versus what they were on?

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [21]

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A much higher rate, significantly higher. Also, Paul mentioned this in his financial presentation. So it's -- we have a significant increase of the rate.

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George Hans Burmann, IFS Securities, Inc. - Analyst [22]

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And you have fixed the rate basically, for 36 months?

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [23]

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That's right.

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George Hans Burmann, IFS Securities, Inc. - Analyst [24]

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Okay. The valuation charge you took this -- in the fourth quarter for $66 million. In general, this would indicate that your depreciation over the years was not sufficient to cover the final proceeds from when you sell those ships, right?

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [25]

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Yes. I think depreciation in shipping is for all the companies, I guess, like the -- perhaps aviation is similar. It's the residual value, which has to do with the scrap. The -- by about 25-year economical life of an asset. However, and I think if the market drops much more than that, your statement is correct, but the market is very liquid and it has a lot of fluctuations. So the ships in the market, we have a couple of good years, these vessels could double in value. So the reason we're taking this action right now is because we are selling those vessels. We would not have been doing something like that out of the blue.

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George Hans Burmann, IFS Securities, Inc. - Analyst [26]

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Yes. So for various reasons, at this point in time, the values are less than you anticipated than 5 or 10 years ago when you acquired those ships, right?

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [27]

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At this period of time, yes.

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George Hans Burmann, IFS Securities, Inc. - Analyst [28]

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Yes, okay. And it would be fair to state that if rates, as expected, rise in the VLCC Suez and Aframax area, the values of those ships would then increase simply because people say, "Well, if I can get $75,000 for a VLCC voyage, I pay more for the vessel"?

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [29]

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Exactly. It's a liquid market.

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George Hans Burmann, IFS Securities, Inc. - Analyst [30]

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Okay, okay. General questions to your company stock. I've been involved as shareholder of the company for the last 3, 4 years and there's been a consistent drop-down in the value. You have a number of preferred issues, I don't know if they are redeemable or perpetual preferred. You, as the management team, cannot be very happy with the stock price performance. What would you tell an investor why they should invest today in Tsakos? Taking the $66 million impairment charge out, you would have probably earned close to $0.13 a share, above all estimates. You seem to run the company very well. You have a very good handle on the marketplace, a mixture of fixed and spot rates and profit share. What do you think needs to happen for the shipping companies in general and yours in particular to receive a stronger valuation in the market?

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [31]

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Well, the -- I think you hit the point. I think what has happened is that a lot of investors in other -- mainly in other companies, have been disappointed, and there's not enough interest in the energy and tanker sector. We have been -- as we said, the value of the company, and we are the largest -- we are the management and the largest shareholders. So the -- I would say, the pain and the disappointment is twice as big because we own in excess of 40% of the company. Now we've been buying during, the periods that we can buy, almost on a daily basis as investors in the company. So we are looking forward to go to an environment of at least 6- to 9-month positive years. In 2016, our company was at $10 a share, so we had -- and not only ourselves. And nothing really has changed. We have navigated the company, grown at the same time. So my aim is to see the company back at $10 a share that we were over 3 years ago. And we actually used our shares at that time to purchase vessels because you have -- when you are at net asset value or above, you can use shares as a tool to grow your company, something, of course, we cannot do right now because the share price is very low. So we hope we will have a sustainable environment in the tanker market for the next 6 to 9 months that would allow at least the share price to double from what it is today.

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George Hans Burmann, IFS Securities, Inc. - Analyst [32]

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Okay, then one last thing. With the upcoming IMO 2020, could you remind us briefly on how you're positioned for the upcoming low sulfur situation there?

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [33]

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Yes, I mean, we are not one of these companies that is -- we are not selling scrubbers. We are not selling the scrubber dream to anybody. We believe that -- personally, I believe that the open-loop scrubber is something very negative for the environment and for the future of our children. So I'm not -- but this is not a conversation about scrubbers. And this is the reason we have not invested in scrubbers in any of the ships, other than the ones that our charterers are paying for and they're insisting. So we will end up to have perhaps 10% of our fleet, more or less, that will have scrubbers -- that will be run with scrubbers but that would be all paid by and -- by the charterers. Also, all the downtime would be paid by the charterers. And the...

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George Hans Burmann, IFS Securities, Inc. - Analyst [34]

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And then your -- the rest of your fleet would essentially utilize the low sulfur fuel as it becomes available worldwide?

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [35]

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Yes, I think this is true. And having the majority of our fleet, in excess of 70%, on long-term charters, and we are fixing all our vessels on charters to go way after the 2020 deadline, so 2021, 2022. And this means that all the responsibility for the vast majority -- responsibility for bunkers will be supplied by the charterers, by our clients. So the...

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George Hans Burmann, IFS Securities, Inc. - Analyst [36]

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So in other words, if fuel is -- for low-sulfur fuel, it's $200 a ton more than the old type, you are not responsible for it. Your profit margins are not going to be cramped, you have a built-in contract?

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [37]

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Yes, exactly. We have -- we will be affected if this is the case, which I don't believe, I think, we will be seeing a very quick normalization of the prices. I think perhaps, on average, for 2020, it will be perhaps even $100 -- under $100. The difference for them it will be -- it will normalize, but our exposure is very minimal because we have a very small amount of our ships, less than 30% in the spot market.

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George Hans Burmann, IFS Securities, Inc. - Analyst [38]

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And in the spot market, you would then contract that the additional fuel costs would be absorbed by the actual charterer?

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [39]

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In the spot market, at the end, yes. The end user would be absorbing the costs. We have, in the spot market, to pays -- to pay the bunker, but the charterer would pay in the freight.

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George Hans Burmann, IFS Securities, Inc. - Analyst [40]

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Right. And if the charterer wants to pay for your scrubbers, you say go ahead?

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [41]

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Well, yes. I mean, it's -- they are our client. The client is always right, as we say in the service business. So yes.

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George Hans Burmann, IFS Securities, Inc. - Analyst [42]

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Right. In the overall shipping market, who do you -- who would you think are your most immediate competitors? Who do you compete on day to day the most?

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [43]

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Well, this is a huge market. It's a huge global market. So it's not -- competition, of course, is there. I mean, we have -- I would not call them competitors. We can call them our peer group, and I think our peer group are companies, well-run companies like Euronav, which is a very good company; Teekay Shipping which is a very -- on the large ships; Frontline, double hull, and of course, don't forget MAP, which is a very dynamic and colorful also company.

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George Hans Burmann, IFS Securities, Inc. - Analyst [44]

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Yes, yes. Okay. You had mentioned that primarily, when you sell the older ships, you would utilize funds received there to possibly renew or add to your fleet, particularly in the LNG sector. Do you think that there are any opportunities to acquire an existing company and an existing fleet? You just mentioned a few names, some of which are trading at similar to yourself at very distant values. And in general, I've seen reports where all shipping companies trade significantly below their net asset value. So what do you think about availability of one or the other acquisition of an existing shipping line?

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [45]

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Well, I think consolidation, it's positive. However, you do not -- unless you are there to buy a company and immediately liquidate the company -- in shipping, I'm talking -- you don't really have the same effect of consolidation as you have in other businesses because regardless who owns the ships, the ships are in the water and are competing in the same market. So realistically, consolidation, you can have an easier consolidation, I would say, a more effective consolidation, by pooling arrangements. So the synergies really in shipping are not so huge. I mean, we are a part of a larger group that operates about 500 ships -- manages 500 ships. So I want to believe that our running expenses are low and okay, we've try to make that lower. Even if we bought the Frontline or if we merge with another company, I don't think this would have changed that much. The model of huge consolidation, you can achieve it only if you pool, which means you don't have to buy these other ships, but you can pool your commercial activities, so you don't undercut each other.

Thank you very much. Thank you for your support. And again, I would like to -- we're looking very forward, like every year, when we announce our end-of-the-year results and every quarter, parts of the management is coming, the CEO and a big part of the management. We will be in New York next week for Capital Link, the CMA, the Connecticut Maritime Association and various other events that are happening. These and we are arranging a get-together around noon on Wednesday with our shareholders and analysts. We would love to see as many of you, as you would like then ask -- you can ask any more questions. And we want to thank you all with your support, and I'll hope that 2019, we can see at least a share price double to what it is. Let's not forget that we paid -- repaid debt of $2 a share. We have cash of $2.50 a share, so -- and that's $4.50 and our share is just above $3. So we have worked to the right -- to make this -- to correct this. Thank you very much.

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Nicolas Bornozis, Capital Link Inc. - President [46]

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Niko, we have more questions from...

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Operator [47]

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We have one more question from Randy Giveans from Jefferies.

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Randall Giveans, Jefferies LLC, Research Division - Equity Analyst [48]

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Just a few quick ones. So looking kind of bigger picture, just market related. Obviously, have been a lot of news of increasing U.S. crude exports, so the vast majority of these -- [also of] VLCCs to Asia. Have you also seen some increased demand for the Aframaxes?

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [49]

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Yes, I think -- I mean, we have a combined effect of embargo measures, and I think we have a lot of the big vessels, as you said, bringing or taking a lot of exports from the U.S. So as you know, the U.S. harbors are not all of them made for VLCCs, so the Aframaxes are doing a lot of the lighter end, so there is demand on the Aframaxes for that. We are also seeing a lot of -- due to the embargo, India and China, in some cases, are trying -- are taking more cargo from West Africa, so this is more tonne miles. There are quite a few ships blocked in Venezuela, which is a question mark. And of course, we had the unfortunate event then in Houston, with the -- we also have since been blocked there, so this creates more miles. So it's a little bit more than the usual discrepancies happening. And of course, as the year goes on, we have a discrepancy of the 2020 with some ships already being scheduled to get out of the market for -- to be scrubberized.

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Randall Giveans, Jefferies LLC, Research Division - Equity Analyst [50]

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Got it. All right. A few more rapid-fire questions for me here. So looking at dry docking. I know you strategically pulled forward some to get ahead of maybe ballast water treatment regulations and whatnot. So what is your expectation now for dry docking in 2019 and 2020?

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Paul Durham, Tsakos Energy Navigation Limited - CFO & CAO [51]

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So in this first quarter in 2019, we've done Selini and Salamina. In quarter 2, we have another 2 vessels, World Harmony and Chantal. Quarter 3, we'll do Ise Princess and Pentathlon and Asahi. We'll probably have a couple in quarter 4.

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [52]

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So a well measured year for dry docks.

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Randall Giveans, Jefferies LLC, Research Division - Equity Analyst [53]

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So a similar cadence in 2020, or most of it will be done this year?

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Paul Durham, Tsakos Energy Navigation Limited - CFO & CAO [54]

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2020 will be...

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [55]

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A few more.

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Paul Durham, Tsakos Energy Navigation Limited - CFO & CAO [56]

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It will probably be -- yes, similar kind of pattern. Where we tried and spread them evenly over the years. Obviously, when we get towards the end of the year, we'll decide whether to push it one side or the other. And -- but generally, it's evenly spread. So you can count, on an average, about 2 to 3 per quarter.

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Randall Giveans, Jefferies LLC, Research Division - Equity Analyst [57]

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All right. And then I noticed 2 things in your slides. Looking at Slide 5 first. You show only 9 VLCCs to be delivered in 2019 and then 60 in 2020. So do you expect that much, so kind of significant slippage this year and a record number of deliveries next year?

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [58]

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There is quite a number of ships that -- because of 2020 and being scrubberized. They are delaying their deliveries. But I'm not sure it's to that effect -- would be -- so and check -- yes, I think there is a numerical discrepancy, so it could be like -- I think here on the slides.

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Randall Giveans, Jefferies LLC, Research Division - Equity Analyst [59]

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Okay, okay. Yes, I wasn't sure if you were just expecting that many kind of back half vessels just to all get pushed into 2020 or -- because there has already been about 14, I think, delivered -- 14 to 16 in 2019, but okay, that's fine. Looking at Slide 7...

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [60]

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But this is the remaining order book.

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Randall Giveans, Jefferies LLC, Research Division - Equity Analyst [61]

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Sure, okay. One more presentation question, Slide 7. It shows here you paid $13 million in dividends in 2018. So that's basically 3 quarterly payments of $0.05 a share, $4.4 million each. So I guess, what happened, was it a timing issue for the fourth dividend payment? And then going forward, any plans on increasing it? Obviously, your coverage ratios are extremely high in this market.

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [62]

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Well, as I said, we are very interested in increasing the dividends. I think that this dividend coincides with the fourth actual dividend for 2018 in the fourth quarter. And our intention, if you are on this right, we would like very much to increase the dividend in -- because this is something that affects us directly as a company and of course, as shareholders.

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Randall Giveans, Jefferies LLC, Research Division - Equity Analyst [63]

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Okay. And then last question, just to follow up on the previous questions. You mentioned 10% of your fleet will likely have scrubbers. Now will those be installed this year? And would the charterer pay for the scrubber upfront? Or will they pay you back over time via an increase in your daily charter rate?

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [64]

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That's a very, very good question. It's a mixed basket. I think 50%, we will -- they will pay us -- they will pay for everything upfront. And then a couple of ships, we are negotiating with them to increase the rate for the next -- an extended charter so they will repay. So I would say a mixed bag. The majority will be there to cover the total cost upfront.

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Randall Giveans, Jefferies LLC, Research Division - Equity Analyst [65]

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Okay. And then just the timing on that, it looks like you have maybe -- you tell me if you've yet to kind of formalize the order. And if so, will you be able to formalize an order in April and still get it installed by 4Q '19, 1Q '20?

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [66]

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Yes, I think we are looking to have 2 scrubberized vessels for our clients within the third quarter, and then the remaining starting in 2020. I have to say that their enthusiasm also for -- because those are ships that have 5- and 10-year employments. So their enthusiasm has been dropping in -- 6 months ago, they were on the phone every day and making calculations with our technical department, pushing us toward their everything. I think they tend to think that perhaps the spread might not be as aggressive as they initially thought, so they are not calling us to get scrubberized as much right now, so no news, good news. Nico?

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Nicolas Bornozis, Capital Link Inc. - President [67]

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I think we are at the end.

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Nikolas P. Tsakos, Tsakos Energy Navigation Limited - Founder, CEO, President & Executive Director [68]

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Thank you. Well, again, thank you very much for your support and looking forward to see as many of you, I think, and Nick is keeping some slots there in his pocket for Capital Link on Monday. If anybody wants to come close and personal, please talk to Nick, and we're looking forward to seeing you all next week. All the best. Thank you.