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GasLog Ltd (GLOG) Q1 2019 Earnings Call Transcript

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GasLog Ltd  (NYSE: GLOG)
Q1 2019 Earnings Call
May. 03, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, my name is Stephanie and I will be your conference operator today. At this time, I would like to welcome everyone to GasLog Limited's First Quarter 2019 results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answers session.

As a reminder, this conference call is being recorded. Today's speakers are Paul Wogan, Chief Executive Officer; Alastair Maxwell, Chief Financial Officer; and to commence the call, Phil Corbett, Head of Investor Relations.

Mr. Corbett, you may begin your conference.

Phil Corbett -- Head of Investor Relations

Good morning or good afternoon to everyone, and thank you for joining GasLog Limited's First Quarter 2019 Earnings Conference Call. For your convenience, this webcast and presentation are available on the Investor Relations section of our website, www.gaslogltd.com, where a replay will also be available.

Please now turn to slide two of the presentation. Many of our remarks contain forward-looking statements. For factors that could cause actual results to differ materially from these forward-looking statements, please refer to our first quarter earnings press release. In addition, some of our remarks contain non-GAAP financial measures as defined by the SEC. A reconciliation of these is included in the appendix of the presentation.

I will now hand over to Paul Wogan, CEO of GasLog Limited.

Paul Wogan -- Chief Executive Officer

Thank you, Phil. Good morning or good afternoon, and thank you for joining our first quarter earnings call.

I'll begin by outlining why I think GasLog offers a compelling investment case. In large part due to the continued execution of our strategy throughout the quarter. I'll then hand over to Alastair who will take you through our financial position and performance. I will then review the current trends in the LNG and LNG shipping markets, before opening the call for questions.

Turning to Slide 3, let me explain to you why I believe GasLog today presents a compelling investment case. Firstly, we continued to execute on our strategy and deliver on our promises. During the first quarter we chartered up to previously uncommitted newbuildings to JERA and Endesa; two new high-quality customers. We took delivery of the GasLog Glasgow a state of the new building which immediately commenced this 10 year charter to Shell. We dropped down the GasLog Glasgow to GasLog Partners as we continued the strategy of using our MLP to recycle capital to the parent. GasLog Partners refinanced its upcoming debt maturity on better terms. We also made further progress on the Alexandroupolis FSRU project in Greece.

Secondly, we believe that spot shipping rates will increase markedly from the seasonal lows and deliver a significant increase in earnings and cash flows from our six spot ships. And finally, if our expectations of a strong recovery in spot shipping rates during the second half of 2019 is correct, we should be well positioned to further enhance shareholder returns. Following on from the special dividend we paid in November last year, and recent buybacks of almost $5 million in aggregate by Gaslog and Gaslog partners.

Slide 4 illustrates our continued progress during Q1 2019 toward our target of more than doubling run rate EBITDA over the 2017 to 2022 period. Whilst the spot market was weak in the first quarter on an annual basis spot rates more than doubled in both 2017 and 2018. We believe this longer-term trend is symptomatic of a tightening LNG carrier market.

As a result, we remain confident that a recovery to at least mid cycle spot rates remains on track, all vessels in our 2018-2021 newbuilding program now have term charters, providing value enhancing returns. We also remain committed to further reductions in OpEx and G&A and improvements in our financing terms, following our successful efforts over the past 12 months.

Please turn to Slide 5.

In the first quarter, we continued to execute on our customer diversification strategy. We agreed a 12-year time charter with Japan's JERA, one of the world's largest LNG buyers for one of our state of the art newbuildings, the charter commences on vessel delivery in April 2020 and is particularly noteworthy as GasLog is one of the first non-Japanese LNG owners to secure a long-term charter with a Japanese energy company.

We also chartered the GasLog also to Endesa a leading European utility, the charter will commence in May 2021, as the vessel is due to deliver to GasLog in July this year it will be available during an expected stronger spot market spanning the next two winters. The vessel's extremely competitive transportation costs should make it particularly attractive to potential short term charterers, and we've received several inquiries about her availability since the Endesa announcement.

We've been developing these and other new customer relationships for some time. We are proud to add both JERA and Endesa to our list of high quality customers, which already include Cheniere, Centrica, Total and Trafigura. In addition into our largest customer, Shell.

Turning to Slide 6, we continue to execute on our newbuilding program. In March, we took delivery of the GasLog Gladstone, the fourth of our vessels with XDF propulsion and Mark III Plus containment and she immediately commenced a 10-year charter with Shell. GasLog has been responsible for the construction of 26 out of the 27 vessels in our consolidated on the water fleet, with an enviable track record of delivering these ships safely, on time, and on budget. This does not happen by chance, it is achieved by excellent coordination between our highly experienced, newbuilding and operations teams along with numerous other people in the company.

Our experience and knowledge provide our stakeholders with confidence that our eight newbuildings will also deliver safely on time and on budget and seamlessly commence their long-term charters. As concerns the broader GasLog team we also look forward to welcoming Paolo Enoizi when he joins us as COO Designate in August this year. Now, let me hand over to Alastair to take you through the quarter's financials.

Alastair Maxwell -- Chief Financial Officer

Thank you, Paul and good morning or good afternoon to you all. I'm delighted to report another strong quarter in terms of our operating and financial performance and our progress toward achieving our financial objectives. Please turn to slide 7. Where I'd like to take you through our first quarter results. Operationally, on fleet performed exceptionally well with 100% uptime and the delivery of our latest newbuilding the GasLog Gladstone.

During the quarter, despite the expiry of the initial charters on three of our TFDEs and a slightly weaker spot market in Q1, 2019 compared to Q1, 2018. Our revenues net of voyage expenses and commissions increased by 8% compared to the same period last year, driven primarily by fleet growth. As you can see from the chart on the left, our EBITDA growth was even stronger at 15% year-on-year, largely as a result of continued success in reducing our unit cost per vessel per day with first quarter unit OpEx and unit G&A declining by 12% and 21% year-on-year respectively. The reduction in unit OpEx was driven by a combination of a decrease in vessel taxes of $0.5 million and a decrease of $0.6 million in employee costs crew wages and technical maintenance expenses, due in part to the favorable movements of the Euro-Dollar exchange rates.

The reduction in unit G&A costs was due to cost control, fleet growth, and the same movements in FX rates. In full year 2019 we continue to anticipate that unit OpEx will be around $15,000 per vessel per day, which excludes minor one-off costs associated with tank cleaning activities to comply with IMO-2020. We expect unit G&A costs in 2019 to be slightly below 2018 levels, as always, our OpEx and G&A costs will be subject to movements in FX rates, particularly the euro dollar exchange rates.

Please turn to Slide 8 where I'll discuss our financial position.

Although we saw net debt to trailing 12 months EBITDA increase at the end of Q1 as we took delivery of the GasLog Gladstone. The increase was modest and our leverage continues to trend downwards with our current ratio 6.3 times EBITDA, being markedly down on the March 2018 level of 7.6 times. While our total debt will continue to increase as we take delivery of our new build vessels through to 2021. We still anticipate that the overall deleveraging trend will continue as these vessels, start to generate EBITDA and as we amortize our debt over $200 million per annum.

On Slide 9, during the quarter, we signed and completed the new 2019 GasLog partners facility for $450 million, replacing the existing facility which was due to mature in November of this year. The new facility provides incremental liquidity of $90 million. Materials in 2024 had significantly more favorable covenants and the spread to LIBOR, which is approximately 50 basis points lower than the previous facility.

As you can see on the slide, the low in syndicate includes two leading Japanese banks, taken together with our new charter to JERA, we are extremely proud to be developing meaningful and mutually beneficial relationships with key industrial and financial players in the world's largest LNG market. Moving to Slide 10 we've updated the chart illustrating our capital commitments, we currently forecast cumulative future cash payments for the equity in the ships, represented by the light blue tranches at the top of each column to be $305 million assuming 70% loan to value for the financing of each new vessel.

We plan to fund this from unrestricted cash balances of approximately $80 million and available RTS capacity of $190 million at the end of Q1. As shown by the thick green line plus free cash flow generation from our growing one-the-water fleet, a stronger spot market and further dropdowns. We're also well advanced in discussions for the financing of the GasLog Warsaw, which delivered in July of this year.

Turning to Slide 11 this chart shows the evolution of our contracted revenue backlog with the inclusion of the JERA and ENDESA charters. Our backlog at the end of the first quarter increased about $4 billion for the first time, this represents approximately 19% compound annual growth since the end of 2012 year in which we IPO'd this backlog underpins our future earnings and cash flow generation, as well as our unrivaled access to cost effective capital as both GasLog and GasLog partners.

Slide 12, sets out the backlog and contracted EBITDA which our 2018 to 2021 newbuild program is expected to deliver. In total, our on-the-water X-DFs and newbuildings account for $2.6 billion of our existing backlog, and should generate approximately $260 million in annualized EBITDA by 2022. In line with our strategy, our current priority is to continue to deliver our existing newbuilding program and in future, we will look to balance carefully further growth with our strong focus on balance sheet strengthening and shareholder returns.

Slide 13 updates our data on the capital raised and recycled by partners to GasLog Partners to GasLog, following the sale of the GasLog Glasgow in early April. In total, since its IPO, GasLog Partners has raised nearly $1.2 billion of equity from diverse sources and GasLog has received over $2.3 billion of gross proceeds from the partnership including debt transferred on drop down and the consideration for the modification of the IDRs in November last year.

GasLog Partners remains our preferred source of equity and we continue to have confidence in its ability to raise funding for growth through both traditional and nontraditional pockets of debt and equity capital. Finally, turning to Slide 14, which illustrates our leverage to the spot market with 6 ships now trading spot.

All other factors have been equal, each $20,000 per day increase in TCE rates over and above Q1 2019 results in $44 million of aggregate incremental consolidated EBITDA and cash flow for spot ships on an annualized basis. As Paul will discuss shortly, we anticipate a significantly stronger market in the second half of 2019 and through 2020, which should facilitate the funding of our committed CapEx, continued deleveraging, the rechartering of our open ships, and the potential for additional returns to shareholders, as evidenced by our recent buyback activity at both GasLog and GasLog partners. Now, let me hand back to Paul.

Now, let me hand back to Paul.

Paul Wogan -- Chief Executive Officer

Thank you, Alastair. Turning to Slide 15 which shows LNG imports by country on a trailing 12 month basis, LNG demand grew by 31 million tons year-over-year, a 10% increase. China posted the largest absolute increase importing over 13 million tons more LNG, a 31% increase year-on-year. However, LNG growth was broad-based, particularly in Europe, with France, the UK, the Netherlands and Belgium increasing their combined imports by 14 million tons. Year-on-year.

Slide 16 focuses in on Q1, '19 versus Q1, '18 and shows year-on-year demand growth of 11%, despite a warm Northern Hemisphere winter in both Europe and Asia. The European figures demonstrate clear evidence of a price-led LNG demand response, further supported by declines in indigenous gas production. We believe that competitively priced LNG will continue to remain attractive and find markets, maintaining production levels and stimulating the need for shipping.

Slide 17, shows how consensus LNG demand forecasts continue to rise. The green band is the LNG demand forecast range of the time of our Investor Day last year. The solid grey, dark blue, and light blue lines represent the updated analysis, which has increased as LNG consumption continues to surprise to the upside. As a result, the consensus forecast is for 6% compound growth in LNG demand between 2018 and 2025 from a broad range of countries.

Slide 18, demonstrates how US exports continue to positively impact shipping demand. According to Poten, the US exported 110 cargoes in Q1, 45% of these cargoes, which is very much in line with the contracted uptake, delivery to -- North Asia, a destination requires more than two ships for each million tonnes of LNG exported per annum. This was the case despite there being periods when there was little or no arbitrage opportunity to in the Atlantic and Pacific markets. Since 2016 when US export commenced an average of 1.8 ships have been required each million tonnes of LNG per annum, positively impacting shipping demand.

In total, approximately 90 million tons of new capacity is scheduled to stop production in 2019 through 2024 with 56 million tonnes of this capacity in the US. Furthermore, Wood Mackenzie forecasts, an additional 50 million tonnes of LNG capacity will reach FID this year. Based on this demand picture. Slide 19, illustrates our view of shipping supply and demand on a quarterly basis through the end of 2020 based on underlying data from Wood Mackenzie and Poten. If there is a key messages from today's presentation then is the one on this slide -- the market is expected to tighten significantly as we go through the second half of 2019 and into 2020 which will be very positive for ship demand, for GasLog, and for our shareholders. Slide 20 illustrates a number and average duration of spot fixtures since the beginning of 2018. A number of factors exacerbated the usual spot market seasonalities so far this year including pre-buying ahead of last winter by Chinese importers, a warmer than average winter in Asia, unplanned downtime at several LNG export terminals and the majority of newbuildings delivering in the first half of 2019 as only one uncommitted vessel delivery remains between now and year-end.

Taken together, these dynamics significantly impacted both the number and average duration of spot fixtures, Poten estimates that the average duration in February was 13 days, down from 94 days in November last year. These trends will also impact spot vessel earnings during the current quarter of 2019, which are unlikely to exceed the level of the first quarter however, in recent weeks market activity has begun to pickup with both the number of fixtures and the average duration beginning to increase. In our view, a leading indicator of stronger spot vessel earnings in the months ahead.

Slide 21, reinforces this point the grey line on this chart shows the weekly average headline TFDE spot rates and the blue line shows the number of immediately available ships in the spot market. As you can see that clear inverse relationship where spot rates tend to rise as shipping availability declines. You can also see that over the last few years following the seasonally weak period in the late winter and early spring, the number of available prompt ships in the spot market has declined. Despite the growth in the global LNG shipping fleet. Importantly, fewer ships now need to be removed from the spot market at this point in the year relative to previous years, to lead to a significant recovery in rates.

As the dotted green circle highlights as available prompt shipping capacity has declined in recent weeks spot rates for LNG carriers have stabilized in response, and we anticipate they will begin to move higher in the coming weeks. So turning to Slide 22. Let me reiterate why I believe GasLog is a compelling investment case. Irrespective of the market backdrop, GasLog has continued to deliver on all aspects of the strategy, and through our continued focus on operational excellence and very confident a further commercial and financing success throughout 2019 and 2020, the trends we have highlighted in this presentation lead us to believe we are on the cusp of a significant spot market recovery, which would lead to a materially positive impact on our earnings and cash flow. In turn, this could pave the way for further enhancement of shareholder returns later this year.

With that I'd like to ask the operator to open the call for questions.

Questions and Answers:

Operator

Thank you. (Operator Instructions)

Our first question comes from Michael Webber of Wells Fargo. Please proceed.

Michael Webber -- Wells Fargo Securities -- Analyst

Hey, good morning guys. How are you,

Paul Wogan -- Chief Executive Officer

Hi Mike, doing great.

Michael Webber -- Wells Fargo Securities -- Analyst

Paul I wanted to start off with active tenders, there is lot of headlines around non-US projects, specifically starting to come out with some pretty large tenders, and at the same time, we've seen, it seems like a pretty healthy escalation in pricing for term business as always, I think you mentioned some longer terms and some interesting kind of options strings in the back of it.

So if you could maybe give a little bit more detail around just the amount of -- number of ships that are available for tender right now, how you guys are attacking kind of attacking that without having necessarily formal foothold in the yard at the moment. And then I guess, I'll say my follow-up for kind of that option pricing structure. But just a bit of color on the tenders would be helpful.

Paul Wogan -- Chief Executive Officer

Yeah. Thanks, Mike. As you say, it remains very active. We still have the build out of the US production. Not all of which has taken vessels at this point and I think they'll will be the opportunity for existing vessels to take some of that slack up but looking forward there so much interest in LNG and we're starting to -- in LNG at the commodity and you're starting to see the pickup in FIDs, LNG Canada, Mozambique, Golden Pass the Qataris, all of which are going to need new vessels.

From our point to view, I think we're in a very comfortable place, having got all our newbuildings put away on what we believe are good charters. We remain very much open to looking at business with good counterparties at good rates, but we don't feel compelled at the moment to be in the shipbuilding market. I think we want to see when those new projects will come out. We do think there will be a hiatus in projects potentially for a year or two '20 and '22 and '23, as before the new production comes in. So, while we be very happy to look at them and there's plenty of time for us to do that. We don't feel compelled to go out and order speculatively at the moment we, but we don't think that's the right thing to do.

Michael Webber -- Wells Fargo Securities -- Analyst

Got you. Okay, that's helpful. And it's just in terms of some of the structures we're seeing in the market again, I think you guys signed a plus 6 with kind of a delayed start, which seems like it's about as good as you could possibly hope for. We've seen I believe 3 plus, 2 plus, 2 and in the past you've talked about, you've been pretty outspoken about your expectations are from 2019 and a from 2020 very seasonally and then maybe getting a bit more measured in your -- in terms of what you want your exposure to be to 2021. Are you seeing that reflected in the term structures in some these option structures that we're hearing about in the market or, and if not, is that an opportunity maybe I guess maybe what kind of escalators, are we seeing, if any, on those options strings and a bit of color there would be helpful.

Paul Wogan -- Chief Executive Officer

Yeah, I mean you, your definitely see increases in on the optional periods. But we are, we have to be sort of I think also realistic about that because those options are usually at the behest of the charter so those options are out of the money they wouldn't necessarily take them. But what that does, do I think is, I like to have have the discussion -- if there in the money they definitely will. So, and we're always realistic about those options. But the fact that you're able I think to put them into place at higher rates covers you if the market continues to be very, very strong because you're happy with the returns, but also gives you that opportunity I think to talk to your customers in terms of the length of the charters that are available, I think it's really interesting to see a real range of charter periods, as you said, we just did the 12 year with JERA but there are other people who are then looking for sort of three year periods. I think a lot of it backs into what the customer needs in terms of them feeling comfortable that they've got coverage on their SBA's that they have. You know, JERA are very comfortable state longer term, some of the traders taking trying to look for sort of 3 plus years because they've got a shorter SBA's et cetera. So I think we'll continue to see that sort of wick available of charter availability, which actually is quite positive for shipowners because it allows you to then say, well, how do you want to place our ship, how do we want to place our portfolio because we don't want to ships coming up at the same time and I think having the ability to be a bit choosy on it is I think -- is helpful.

Michael Webber -- Wells Fargo Securities -- Analyst

Okay, great. I'll hope back in the queue. Thanks for time guys.

Phil Corbett -- Head of Investor Relations

Thank you.

Operator

Thank you and our next question comes from Jon Chappell with Evercore. Please proceed.

Jon Chappell -- Evercore. -- Analyst

Thank you. Afternoon guys.

Paul Wogan -- Chief Executive Officer

Good afternoon Jon.

Jon Chappell -- Evercore. -- Analyst

Alastair first one for you, I think Slide 10 is incredibly important as you lay out pretty limited equity requirements to fulfill the new build program. But I just wanted to be clear about one point, the drop downs to GasLog partners clearly at the current yield it seems that may be prohibitive from the MLP to go out and raise funds for new drop downs.

So this sub $50 million of equity commitments through 2021, is that under the assumption that there is no further dropdowns to GasLog partners or is there an assumption that you do one or 2 more and that's how you get to that lower level.

Alastair Maxwell -- Chief Financial Officer

So, Jon the chart doesn't assume any drop-downs that this if you like it, based on the existing available cash balances -- both cash balances and RTS capacity that is the gap if you like, it doesn't assume any drop-downs in that. We, as we said on the right of that chart, we think we have a number of different options to fund that delta, which is pretty modest delta, as you think about it.

And we're not counting on GasLog partners. We do think that the market will come back to GasLog partners. We think as we said on the call last week that there we are caught a little bit in the eye of the storm of what's going on in the broader MLP space at the moment, in the performance of some of our peers as well as the current softness in the spot market.

All those factors that had an impact and we believe that they will all go away and that the headwinds will turn into tailwinds, but funding the gap that we show on the page is not predicated on being able to do more drop downs. We have other options in terms of funding that difference, including for example taking the LTV on new builds up from 70% to 75% that would effectively deal with that is in one go, and the ships with 8 year charters into 12 year charters. I see no reason why we wouldn't be able to do that.

Jon Chappell -- Evercore. -- Analyst

That makes sense.

And the follow-up question a little bit of a lead into that. On slide 14, then we talk about the leverage on the ships in the comment in the bar at the bottom, about further enhancement of shareholder returns. Obviously, last year in a super strong winter market you decided to go the special dividend route, but now it seems like you've been a bit more active on the buyback. So if we were to have a winter similar to one of the last two, maybe not as great as last year's, but maybe in line or better than two years ago and you think about capital return. How do you feel about that special dividend route, maybe a little bit more Monday-morning-quarterback on how that work, versus buyback, versus maybe deleveraging or building that liquidity buffer, so you don't need to raise the LTV to meet the equity requirements on new ships.

Alastair Maxwell -- Chief Financial Officer

Yeah, good question, Jon. So I think you're quite right, there were three factors that led into the payments of the special dividend in Q4 of last year. I think that those were, first of all, the strong spot market which you referenced.

Secondly, we did a dropdown to GasLog partners in November. And thirdly, we reached agreements on a modification of the IDRs and there was a small payment of consideration -- cash consideration between GasLog Partners and GasLog, as you will recall of those factors went into us feeling comfortable with the payment of a special dividend last year.

I think instinctively we probably would lead more toward special dividend as supposed to buybacks. We have bought buybacks -- and bought back shares recently in the partnership since the results last week, in part, that was the cover LTC vesting this year or next year GasLog , but I definitely think again we said on the call in reference to GasLog partners last week, I definitely don't think that GasLog is being paid for the current competitive positioning growth prospects of the business in terms of where the shares are trading today and so I certainly wouldn't rule out further share repurchases as well as though instead of special dividends.

You're also right to say, and I said in my remark,s that we are also focused on the balance sheet and I think we would like to see leverage continue to trend down over time. I've also got one eye on the balance sheet and one eye on the charter portfolio, and I think as we said we pick ships over time, ships that are open today or coming back from charter at the end of this year and into next year. Again, that plays into how we feel about both the balance sheet and ability to make -- pay special dividends or repurchase shares.

Jon Chappell -- Evercore. -- Analyst

All right. That's a great answer. Thanks so much for the details.

Alastair Maxwell -- Chief Financial Officer

No worries.

Operator

Thank you and our next question comes from Randy Giveans with Jefferies. Please proceed.

Randall Giveans -- Jefferies LLC -- Analyst

How are you gentlemen, how are you doing?

Unidentified Speaker --

(Multiple Speakers) Very good, thank you.

Randall Giveans -- Jefferies LLC -- Analyst

So, Asian LNG prices have clearly come under some significant pressure in recent months. Although has risen recently around on 550 per mmBTU. Now do you describe this solely to seasonality or is it also due to some structural weaknesses maybe Chinese regas infrastructure is not expanding as fast as expected or desired.

Paul Wogan -- Chief Executive Officer

Yeah, hi Randy its Paul. I think a lot of it -- I think are seasonal factors here we saw 2017 very good cold winter and the move from coal to gas and not enough gas available for some of the residential and industrial uses. So the Chinese moved really quickly last year, to make sure that they had enough gas and definitely a driver in the really high rates of the last quarter of 2018 was that movement. They then had an unseasonably warm weather and so you saw them if you like, taking the cargo they had and not having to bring more in. And so, I don't think those two things necessarily play out over the coming year. I think the second thing is, that in terms of, you say in terms of pricing we've seen it come off the bottom last few weeks between 15% and 25% up from the bottom that we saw earlier in the year, as the sort of it's normalizing. This year, I think we've seen already, yes, quarter-on-quarter, 11% increase in Chinese demand from the Q1, 2018. So, the demand continues that certainly I think from the work that we've done and from our time in China, I think it's almost like you have an infinite demand there so getting the infrastructure is definitely going to play a part in that as well. And I think if we see more, more infrastructure going in then you will see more demand, but I think in terms of the actual pricing right now it's more around some of the seasonal factors than just the, just the fact that they can't -- haven't got the infrastructure to bring it in.

Randall Giveans -- Jefferies LLC -- Analyst

Sure. Okay. That all make sense. And then clearly short term spot rates have fallen in recent months, around 35,000 a day or so. But one-year time charter rates are still on let's call it mid $70,000 a day range. So how many deals are actually getting done at these kind of one-year levels -- is it a pretty robust time charter market, and then to use specifically is GasLog looking at moving some of its maybe spot vessels out of the Cool Pool and into one to three-year time charters?

Paul Wogan -- Chief Executive Officer

And. Great question. Yes, I think I, to be honest, branded as a mid-March right now, you're exactly right. The lower headline spot rates against the future rates, and there is and there have been I think a bit of a Mexican standoff between owners and shippers in terms of where they see the market. I think what's happening, what we're seeing anecdotally in the last couple of weeks is the market is starting to pick up, the amount of inquiries going through on the spot charters etcetera is picking up, and I think the one-year rates are moving very quickly toward where the owners see them, so hasn't been a great amount of transactions done I think in the first quarter true to say. But I think you're going to see that changing and we've again anecdotally had a couple of reports to us which I can't give -- other companies, who have actually started to, where their transactions have been done at markedly high prices for the period, especially as you getting to cover this coming winter.

Randall Giveans -- Jefferies LLC -- Analyst

Sure. Yeah, I can imagine it's a pretty large bid-ask spread at this point. Thanks so much.

Phil Corbett -- Head of Investor Relations

Thanks Randy.

Paul Wogan -- Chief Executive Officer

Thanks Randy.

Operator

Thank you. And our next question comes from Ben Nolan with Stifel. Please proceed.

Ben Nolan -- Stifel. -- Analyst

Yeah, hi, thanks guys. So I wanted to follow up on Mike's question as it relates to the tenders a little bit and specifically as you look at it, it does seem like there is an awful lot of -- be it Exxon, or Qatar, or the Russians, people who are looking to lock in equipment for their longer-term projects. I was curious what you think is your real capacity to be able to do that without needing incremental equity capital, and maybe at the risk of throwing an enormous number of questions, one question, would you maybe do business with the Russians as kind of an aside?

Paul Wogan -- Chief Executive Officer

Yeah, Ben. I'll take that. I think what's interesting is, of course, that the projects that we're talking about Mozambique, Qatar, the Russian Arctic, et cetera. These are all projects which are going to be taking FID and needing that, and being up and running and needing shipping '23, '24, '25. So it's not something that's kind of there immediately. I think you've seen, we've been fairly disciplined in our growth and making sure that we able to fund that, we've been very, it's been very helpful having the MLP to help us fund that growth. But I think as you see us looking forward, we will be very again very careful to make sure that any growth that we have for those sort of future projects out, out in '23, '24, '25 that we're able to fund those without necessarily having to go for the common equity, that's the last thing. We think we look at the growth that we have inbuilt into the company right now. We've got $2.6 billion worth of backlog from our newbuilding program from 2018 to '22.

That's going to throw off about $260 million worth of EBITDA per year, whereas the ships deliver. We've got a lot of inbuilt cash flow coming into this business, which if we decide that the growth is the right thing to do in that we're able to place that long-term fixed rate definite cash flow to do that, we do have quite a lot of options for those kind of the, for the forward-looking projects that we're talking about, Ben.

Alastair Maxwell -- Chief Financial Officer

I'll add one thing that Ben, which is we have a number of different sources of capital and people often focus on common units of common shares, as you I think the other way to raise equity in, and I think the other ways to raise equity both for GasLog and GasLog Partners. And so keep that in mind.

Ben Nolan -- Stifel. -- Analyst

Okay, helpful. Appreciate it. And I'll leave the Russian bid for contemplation. But to just switch gears for my second question, obviously the Alexandroupolis project, FSRU project is kind of taking time and I realize that's somewhat out of your control and when it happens, it happens. But just thinking through perhaps the FSRU market in general. I believe that you guys ordered equipment for FSRU conversions several years ago and I don't know whether this happened with that. But if there are any, is there any discussion about or thoughts about maybe stepping back into that in terms of conversions with some of the older either steam powered ships or TFDEs, good long-term employment on those in a market where you're not really seeing at least long duration business for those kind of assets?

Paul Wogan -- Chief Executive Officer

Remember Ben that we still have (Technical Difficulty) for the conversion of the ships, our view is having those long lead items puts us in a good position for the Alexandroupolis project when it takes FID. And as you say, creates the ability for us to put long-term business on one of our existing ships. So, yeah, that I think all placed for good. We haven't been as active in the FSRU market over the last 12 to 18 months because, we just feel that that market is over tonnage, we see a number of people committing capital to it, ordering vessels speculatively, and then driving down the pricing to a point where we don't think the risk-reward is necessarily good when we compare to what we can do by putting our money to work on LNG carriers.

However, I do think over time that will change. I do think that what we're seeing in terms of the low pricing for LNG will stimulate demand and FSRU is a quick way to get access to that. So I, having our hand in that market. I think and and be able to, as you say quite rightly convert some of our ships for that I think is very useful. We are not going to chase that market at any price.

Ben Nolan -- Stifel. -- Analyst

Okay, Appreciate it. Thank you.

Phil Corbett -- Head of Investor Relations

Thank you.

Operator

Thank you. And our next question comes from Chris Wetherbee with Citi. Please proceed.

Chris Wetherbee -- Citi. -- Analyst

Hey, thanks for taking the question to want to come back to an earlier conversations you're having about the spot market and sort of how you're thinking about deploying assets out of the Cool Pool potentially into maybe the one to three-year market. It sounded like you're talking a little bit more generally about what you might think could happen across the industry. Wanted to get it maybe get a little bit more specific, do you think there is an opportunity, whether it be in the next six or maybe even up to 18 months for you guys to deploy some of those assets out of the Cool Pool for some of the short-term charters.

Paul Wogan -- Chief Executive Officer

Yeah, it's Paul Wogan here. We -- in the past we've talked about how we'd like to have some play in the spot market, some exposure to it gives us the opportunity to showcase our capabilities to a large number of customers, and I think that's been helpful as we increase our customer base over the last few years will be able to show that. So we'd like I think to have to at least two or three ships in the spot market. But at the moment we have six ships. I think if we see opportunities for some of those ships in the one to three-year market, we would certainly look at that very closely, but we will, we will keep to one, two, three ships trading in that market as well. To give us that showcase and that window on it.

Chris Wetherbee -- Citi. -- Analyst

Okay that makes sense. Certainly and adding incremental charters to the portfolio has been I think pretty helpful. Over the course of the last couple of years. So that definitely makes sense from my perspective. Maybe a follow-up here just on the leverage -- helpful chart in the deck there. Wanted to get a sense of if you could think out assuming the market plays out according to plan, because I know that was sort of the comment, you have to take the market dynamic in consideration when thinking about where you want to be from a financial leverage perspective. If I were to look out into a potentially robust market into 2020 or beyond. What would you like that number to be, what do you sort of think it is, you give us sort of intermediate term leverage target it would be helpful.

Alastair Maxwell -- Chief Financial Officer

Yeah, we don't have a set target Chris, clearly there, the factors which are going to play into this is I said in my remarks, first of all, we will, we will take on incremental debt as we take delivery of new ships and we have one more to deliver this year, we then have five ships delivering in 2020. So if you think about five ships will finance, roughly 70%-75% debt-to-equity, so I think we will see a little bit of a step up in the total amount of debt in 2020. Most of the debt that we paid for our last two deliveries in '21 is probably likely to be offset largely by amortization during '21. So you will see the total debt go up, that will be offset by the EBITDA from those ships as they hit the water, and generate cash flow, and as you rightly say another one of the significant swing factors is spot ships are trading in the spot market or at what rates they are recharted but over time as I said in my remarks, we would expect those numbers to trend downwards, so maybe a tick up during 2020 particularly Q2. But then after that and into 2021 and beyond that I'd expect them to continue to trend downwards, and we'd like to head well down into the 5x range.

Chris Wetherbee -- Citi. -- Analyst

Okay, that's very helpful. Thanks for the time. I appreciate it.

Operator

Thank you.

Phil Corbett -- Head of Investor Relations

Thank you.

Operator

And our question comes from Fotis Giannakoulis with Morgan Stanley. Please proceed.

Fotis Giannakoulis -- Morgan Stanley. -- Analyst

Yes, hi gentlemen, and thank you, Paul, I would like to ask you about the structure of the market and how do you see that developing, how many vessels out of the five hundred ships have yet arrived now in the water and the 120 under construction, they operate under long-term contracts, and how many vessels, they are operating under the up to one year employment or in the spot market and how do you view these developing in the future as the new liquefaction capacity comes online and especially what how LNG prices, actual LNG prices, given the reduction in the cost of construction of these new projects, impact the LNG shipping markets?

Paul Wogan -- Chief Executive Officer

Yeah hi Fotis. Yeah, on the ships if you look out the order book, right now, I think as you go through '19 and '20, the vast majority of the ships, which are due to come out against projects. So for example, in '19. We have just one uncommitted ship delivering in. If you go further out into '22. There are a number of open ships. I think of the order book, then it's something like 65% are against committed, 35% are non-committed and I think that's where we as owners are saying we need to be a little bit careful, which is why we would not be going out and ordering speculative ships right now. Now those, I don't believe we've necessarily over tonnaged the market now, but there is the opportunity for us as ship owners to do so if we're not careful in how we look at the market, there are number of ships operating in the spot market right now, and I don't know the exact figure who are waiting for their projects to come online. So for example, Cameron and Freeport, which is due to come on this year. Those ships we taken up and into their projects as those projects get up and running and expand. So over time, you see a natural decrease in the amount of available spot tonnage. And I think the supply the demand that we showed, shows you that as these new projects are coming on actually there's an amount of volume that's coming is actually much greater than the ships that are available. So we see that spot market and the number of ships available in the spot market tightening quite quickly and we think that forces other charterers to want to take ships on one, two, three-year charters at that point.

Fotis Giannakoulis -- Morgan Stanley. -- Analyst

And can you also discuss about the residual risk when you buy vessels and you put them in five to seven years charter for a vessel that they will come off or charters from the legacy projects. What, how do you view their earning capacity of the vessels in the second stage of its useful life and what kind of returns on your capital are you expecting to get when you make the decision to invest in a newbuilding vessel?

Paul Wogan -- Chief Executive Officer

Yeah, I mean I think in terms of residual value, it really comes down to, do we think we have a use for that ship at the end of its contract in week. I think if you've seen in the last few years, we haven't done five-year charters. We've only done seven years plus and as I said the last one that we did was a 12-year charter, which I think is helpful, but in terms of, if you look at the shipping market right now and how we see this coming that panning out we need all the ships that we have in the fleet to meet the demand that's coming, that's coming down the track. And so if we start to see ships being taken out of the market as people are talking about. Then we going to have a much, much, much tighter market than we have now. So there is a home for those ships without a doubt. And so as we look at our returns, I think we've been fairly open in the past.

If you imagine a ship which is say roughly $200 million give or take. And you're throwing off $21 million, $23 million of EBITDA, that gets you into the high single figures for unleveraged return, and gets you into sort of the mid-low to mid teens in the levered returns and that's how we look at the investment, we think given the charters we have is a very nice risk-reward return.

Alastair Maxwell -- Chief Financial Officer

Sorry, the single thing I'd add to that is on the residual risk in the earnings, our ships 12 years out, the ship is delivered. It's been on long-term charter, clearly the breakeven on that ship are significantly lower at the end of that charter than they are once you both delivered.

Fotis Giannakoulis -- Morgan Stanley. -- Analyst

Thank you, Alastair, and thank you Paul, appreciate your answers.

Phil Corbett -- Head of Investor Relations

Thanks Fotis.

Operator

Thank you. And our next question comes from (ph) Donald Lee with (inaudible) Donald McLee, Berenberg. Please proceed.

Donald McLee -- Berenberg. -- Analyst

Could you talk a bit about your order book financing strategy. And is there any factors that prevent you from more proactively raising financing ahead of the vessel deliveries given the long-term charters attached to them.

Alastair Maxwell -- Chief Financial Officer

Hi, this is Alastair, So as I said in my remarks, we're well on the way toward putting in place a financing for the GasLog Warsaw, which delivered in July of this year. The GasLog Gladstone which delivered in the middle of March was the last to be financed by our 8-times new build ECA facility. The next ship to deliver. It's not until 2020 and you've obviously you need to get the right balance between paying commitment fees on the one hand, but on the other hand, ensuring that you have financing in place for the pipeline of the new deliveries that we have coming over 2020 and 2021, which is why we decided to do GasLog Warsaw as a stand-alone financing. But we're not standing still, we've already started working on finance full the remaining newbuilds in 2020 and 2021, and I would anticipate having something further to report later on this year in terms of that financing. But I think we're not concerned about it. I think what we're really focused on is making sure that we optimize the terms of that financing.

Donald McLee -- Berenberg. -- Analyst

Okay, that's helpful. And then one more follow-up to Jon's earlier question around dropdowns. Could you talk more a bit more about some of the alternatives you would consider at the parent level. In the event that the MLP continue to trade near the current yield for an extended period.

Paul Wogan -- Chief Executive Officer

So, first of all Don, just to make a point I think where GasLog Partners units are trading today excluding what's helpful in terms the raising common equity with GasLog Partners. But as we demonstrated with our pref-issue in November of last year and with the refinancing of the full 50 facilities, just now. We believe that GasLog monetized other sources to other pockets of capital both in the private and in the public markets. In addition to common units, so just to making a point, you know that we're certainly not ruling out further dropdowns but is probably in today's conditions not funded by dropdowns, so that's funded by common equity. In terms of opportunities for the parent, as I say, we amortize $200 million per year of debt. The debt amortizes roughly twice as fast as the ships depreciate that create balance sheet capacity over time. We have bonds trading in the NOK bond market we have bond trading in the US market, we have a preference shares at the parent. I think we have multiple pockets, but we can potentially tap into if we need to.

Donald McLee -- Berenberg. -- Analyst

Okay. I appreciate the color. Thank you.

Operator

Thank you. And our next question comes from Chris Snyder with Deutsche Bank. Please proceed.

Chris Snyder -- Deutsche Bank -- Analyst

Hey, guys. Thanks for squeezing me in. So the first question is around the uptick in market activity. Is the result of I mean, just low Asian LNG prices driving a new round of inventory building, or charters maybe trying to take advantage of counter seasonality to take on more vessels?

Paul Wogan -- Chief Executive Officer

I think it's actually the underlying demand for LNG. This is, we're really what we would always call the shoulder months at this point Chris, where you've got, you come off the winter demand you haven't seen the summer cooling season in Northern Hemisphere cooling season demand kick in, but that's starting to pick up again. So this is if you look at this is almost exactly following the same trend that we saw last year around the same time, we'll start to see the activity pick up. So I think it's more just the normal seasonal trends driving it at this point. And then I think what you're seeing is the customers saying, my goodness, last year this moved so quickly that some of us got caught at the wrong end of it when we were trying to take ships. So people I think are anticipating that and saying, OK, let's stop talking about and the ships now so that we don't get caught out if we see this market moving in the same way that it did last year.

Chris Snyder -- Deutsche Bank -- Analyst

Yeah, it certainly feels like we have a peak season and can get pulled forward. So, just following up, has this uptick in activity I'm showing through to improved utilization in the Cool Pool relative to maybe two or three months ago and could this allow for a better capture rate compared to Q1. Even if just maybe Q2 average headline rates are lower, just kind of because it's starting from much lower point?

Paul Wogan -- Chief Executive Officer

I think it's, we're early in the second quarter. But so far no it hasn't happening it an increased in the utilization rate. I think that will feed through, but at this point I wouldn't see the higher utilization rate that we saw in Q1.

Chris Snyder -- Deutsche Bank -- Analyst

Okay, thank you for that. And then just lastly, I guess, find that I'm a little surprised that maybe you guys don't sound more interested on the newbuild market, just in light of all the success you've had marketing your existing programs, and it seems like newbuild rates, maybe are kind of picking up a little bit in the, certainly a lot of demand with all the FID momentum, is this impacted at all by just that the drop down pipeline getting a little more difficult?

Paul Wogan -- Chief Executive Officer

I think there are two things, actually. Whilst we try to make it look fairly effortless taking in a huge number of new ships, it actually takes a lot of work we need to employ the seafarers. Making sure we have the high quality seafarers that we want to have on the ships. We need to have and make sure we have the right people at shore, and of course we have all the fantastic operational team in Greece, really good seafarers on our vessels, we want to make sure that we keep our quality up. So there is a certain amount of actually just making sure that we have absorb that inbuilt growth that we have. We believe there are going to be huge opportunities for us in this great secular growth trends for LNG. We don't have to rush into doing all that growth over period and potentially putting our operational excellence at risk. So I think you'll see us in lots of ways we've been very measured. But we talked a lot this quarter about execution, and execution is around commercial success, financial success. But it's also around safety and operational success as well. We won't put that at risk just to chase after growth.

Chris Snyder -- Deutsche Bank -- Analyst

Yeah, it certainly feels like the operational side is somewhat overlooked from our seat, but I appreciate that. And thanks for the time.

Paul Wogan -- Chief Executive Officer

Thank you.

Operator

Thank you. And this concludes our Q&A session for today. I would like to turn the call back over to Mr. Paul Wogan for closing remarks.

Paul Wogan -- Chief Executive Officer

Thank you, Tiffany. And thank you to everyone for listening and your continued interest in GasLog Limited. We certainly appreciate it and we look forward to speaking next quarter. In the meantime, if you have any questions, please contact the Investor Relations team. Thank you.

Operator

Ladies and gentlemen, thank you for your participation in today's announcement, this concludes the program. You may now disconnect. Everyone have a great day.

Duration: 59 minutes

Call participants:

Phil Corbett -- Head of Investor Relations

Paul Wogan -- Chief Executive Officer

Alastair Maxwell -- Chief Financial Officer

Michael Webber -- Wells Fargo Securities -- Analyst

Jon Chappell -- Evercore. -- Analyst

Randall Giveans -- Jefferies LLC -- Analyst

Unidentified Speaker --

Ben Nolan -- Stifel. -- Analyst

Chris Wetherbee -- Citi. -- Analyst

Fotis Giannakoulis -- Morgan Stanley. -- Analyst

Donald McLee -- Berenberg. -- Analyst

Chris Snyder -- Deutsche Bank -- Analyst

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