Atlas Corp. (ATCO) Q3 2021 Earnings Call Transcript

Welcome to the Atlas Corp Third Quarter, 2021 earnings conference call. I would like to remind everyone that this conference call is being recorded today, November 9th, 2021. I would now like to turn the call over to Robert Weiner, Head of Investor Relations at Atlas Corp. Please go ahead, sir.

Thank you, . Good morning, everyone. Thank you for joining us today to discuss Atlas Corp 's Third-Quarter, 2021 earnings. We issued our earnings release yesterday evening after market close. We will refer to our quarterly earnings release, Company earnings presentation, and earnings supplemental workbook today in this conference, call can be found on the Investors tab on our website, Atlas Corp.com. I would like to remind you that our discussion today contains forward-looking statements, and I draw your attention to the disclaimer on slide number two, and the Company Earnings presentation. Please note that we report non-GAAP measures, which we believe provide investors a clearer understanding of the performance of our businesses. The earnings release contains supplemental financial tables and information pertaining to our quarterly earnings report, and includes definitions of non-GAAP financial measures and reconciliations of such non-GAAP measures to the most closely comparable U.S. GAAP measures. These definitions may also be found in the appendices at the back of the earnings presentation, which we may refer to in our call discussion, and can also be found on our website. Please turn to Slide Number 3. On the call with me today are Bing Chen, President and Chief Executive Officer of Atlas Corp and Graham Talbot, Chief Financial Officer of Atlas Corp. Joining us on the call during the Q&A session, is Seaspan's Chief Commercial Officer, Peter Curtis, and Seaspan's Chief Operating Officer, Torsten Pedersen. We're also pleased that David Sokol will join us on the Q&A session as well, our Chairman of the Board. Following our prepared remarks, we will open up the form to a question-and-answer session. I am now pleased to turn the call over to Atlas Corp CEO, Bing Chen.

Thank you, Rob, and good morning, everyone? Thank you for joining our call. Today I will focus on the differentiation of our business model, market dynamics, and recent achievements of Seaspan and APR Energy. Then I will hand over to Graham Talbot to present our Q3 2021 results and financial update. Please turn to slide 4. Now, let's turn to Atlas third quarter performance highlights. I'm very pleased to report continued strong performance in the third quarter of 2021. We continue to benefit from a robust container shipping market and a deployed APR's assets in new contracts and regions. In Q3, Atlas delivered robust revenue growth of 17%, adjusted EBITDA growth of 29%, and adjusted earnings per share growth of 107.4%, compared to the same quarter last year. All of Seaspan's vessels were chartered for the full quarter, achieving a utilization rate of 99%. As up to 15% of our fleet is exposed to floating index rates, we were able to benefit from the current market high. This, together with our continued strong cost control, drove our strong Q3 performance. APR executed 2 grid stabilization projects and achieved a Q3 utilization of 92%. It is also in progress of building a pipeline of quality, long-term growth opportunities. During the quarter, we continued to deliver quality growth through our customer partnerships. Driven by our customers' demand, Seaspan strategically added 25 new builds to its fleet in Q3. We have now invested in total of 70 new-build vessels in the past year, backed by 11.5 years of average charter term, and generating $11.3 billion U.S. of gross contracted cash flows. We also continued creating consistent value for stakeholders across all aspects of our business. We paid our 65th consecutive dividend, advanced our ESG goals by issuing our inaugural sustainability report, executed ongoing improvements to our capital structure and continue to add new talent to our team, including board member, Katie Wade and APR CEO, Benjamin Church. I would now like to talk about some of the operational drivers of our third quarter performance. Please turn to Slide 5. As one of our key competencies and differentiators, consistent operational excellence continues to drive our organizations performance. Seaspan achieved an asset utilization rate of 99% in both Q3 and since its IPO in 2005. This is evidence of consistently delivered industry-leading excellence, especially as it has been maintained throughout the unprecedented global pandemic. Despite the difficult operating environment, Seaspan also successfully managed the fleet of 132 vessels, with best-in-class operating safety, with a historically low average monthly LTIF of 0.37 over the last 12 months, and over 5,800 -- I repeat, 5,800 crew changes made year-to-date, despite all logistic restrictions. Our excellence in vessel operation and chartering is indeed a competitive differentiator. We partner with our customers to understand their needs and overcome their challenges through creative win-win solutions. For example, we analyze their vessel size needs, fuel adoption plans, and supply-demand forecast to craft our solutions and foster deeper partnership. Another example of this partnership is Seaspan' s forward fixing of 60 charters year-to-date with our customers. This has resulted in 0 charter roll-offs in 2021, with just 6 in 2022, and 19 in 2023. I'm proud of our team's execution on our newbuild program and the power project deployment. We recently took delivery of the MSC CAROLE, the first of 5 12,200 TEU newbuilds, about 2 months ahead of the schedule. This marks Seaspan's successful delivery of a total of 110 newbuilds in its 20-year history. We anticipate the remaining 4 sister vessels to follow the same ahead of the scheduled delivery with two vessels, the MSC ALAINA (ph) and MSC RASHIMI (ph), expect to be delivered in November. Our team's fierce execution and decades of expertise ensure the long-term consistent delivery of best-in-class vessels. APR successfully completed 2 mobile turbine deployments in Q3, including APR's Third Consecutive Annual Project in Mexicali. Please turn to slide six, the container shipping market continues to experience favorable conditions thanks to a strong recovery in the trade volumes combined with ongoing supply chain disruption, which has absolutely no impact to our business. Global trade has rebounded and surpassed pre - COVID level across all trade lanes attributed to stronger than expected improvements in global economics, penned up purchasing demand, economic stimulus, and changes in consumer spending patterns. The charter market is also thriving. The charter rates are at historical highs due to a lack of tonnage across all vessel classes. Port congestions around the world, particularly in the U.S. and China, which is a large contributor to the historically low of 0.7 idle fleet. Land freight is also experiencing its own challenges with logistics difficulties limiting container distribution from the ports. Seaspan continues to take advantage of this market upswing, are working with our customers to develop long-term solutions through strategically these new builds, which all backed by long-term charters and forward fixing of charters at improved rates for long duration. Please turn to Slide 7. Market consensus does not expect these conditions to persist. As supply chain issues, are resolved and newbuild order book, it's delivered over the next 4 years rates. I expect it to normalize to a more balanced equilibrium. While many of our peers take advantage of the current high rates through the short-term chartering at the expenses for long-term cash flow certainty. Seaspan continues to focus on building long-term customer partnership with the focus on creating sustainable, value and quality growth. We prioritized predictability over the short-term gains through long-term charters with quality counterparties. Which is why our business model is resilient in all market conditions, such as the trade war and current pandemic. Our 70 vessel newbuild program is a perfect example, contributing $11.3 billion of gross contracted cash flow over weighted average charter duration of 11.5 years. The Atlas business model is showcased by a set of industry-leading matrix such as our $17.9 billion of gross contracted cash flow, nearly 2 million TEU fleet, average charter duration of 7.5 years and average age of fleet of 4.7 years. These are unique in the market and insulates us from market volatility and provides long-term predictable performance. Please turn to Slide 8. Our competitive differentiation in the market is clearly demonstrated when analyzing Seaspan's history of being a trusted partner to the world's leading liners. Seaspan has partnered with this customer for over 20 years, defining the industry's future pathway. We've built a reputation based on our operating excellence and newbuild expertise supported by our track record of developing the most fuel-efficient designs and new vessel classes. We continue leveraging our expertise in the third quarter with the addition of 25 newbuilds of 7,000 TEU vessels. They are all backed by a weighted average charter duration of 11.2 years, producing over $4 billion of gross contracted cash flow. We've seen strong demand in a 7,000 TEU segment as they are well-positioned to replace and to redefine the aging 4,000 to 9,000 TEU segments. These segments currently make up approximately 40% of the existing global capacity, but represents less than 8%, of the Newbuild Orderbook. Please turn to slide 9. We continue to focus on optimizing our best-in-class fleet composition and portfolio of top customers. Year-to-date, while we continue to develop our fleet in the high demand 10,000 TEU and larger segments, more recently, we strategically expanded our presence in the 7,000 TEU segments. We also continue to deepen and diversify our customer base amongst the top 10 liner accompanies. We partnered with ZIM through numerous newbuilds and deepened our relationships with our existing customers. Seaspan is pleased to partner with industry-leading customers who have proven their credit quality through record earnings and ample liquidity, with several also recently receiving rating upgrades. While the industry has financially strengthened, we have reduced concentration of our top 3 customers by 19% over the past 3 years. This results in further increasing our credit quality profile. Please turn to slide 10. I would like to summarize with this slide which illustrates the progress and transformation Atlas has achieved under the leadership of this management and their dedicated teams. Recapping on our year-to-date progress through Q3, 2021, growth contracted cash flow increased by $12.8 billion. These are long-term predictable cash flows secured by quality customers. Fully delivered fleet grew by 58% adding 17 newbuilds and 4 secondhand vessels, increased the TEU capacity by 83% to nearly 2 million TEUs on a fully delivered fleet basis. This is approximately 4.5 times larger than the industry average. Decreased our fleet average age by 2.9 years to 4.7 years, less than 0.5 the average age of our competitors. And increased our fleets' remaining charter duration to 7.5 years, more than double the average duration of our competitors. These metrics are truly unique and substantially exceed our nearest competitors. No other Company has delivered performance with the consistency and transparency as Atlas has. These results are continuous evidence of Atlas ' this unique and highly differentiated business model within our markets. We are confident to extend our leading position and return increasing value to all stakeholders. I will now turn it over the call to our CFO Graham Talbot.

Thank you, Bing and good morning, everyone. If you could please turn to slide number 11. Our Q3 results were strong and continued to reflect the high-performance of our team. During Q3, Atlas achieved performance relative to Q3 2020, revenue growth of 17% to $451.9 million, adjusted EBITDA growth of 29% to $322.2 million, FFO growth of 42.9% to $248 million and FFO per share growth of 36.8% to $0.93 per share. Adjusted earnings per share diluted was $0.56, an increase of 107.4%. And our closing liquidity was up by 123.8% to $957.1 million. We're pleased to report APR's strong asset utilization of 91.9% for the third quarter, driven by previously announced grid stabilization projects in Mexicali in California. Both of these projects have now concluded and we're actively working on redeployment of the turbines. We continue to demonstrate the resilience of our business model by delivering strong fulfillments through all market conditions. While the industry is impacted by operational challenges presented by the pandemic and ongoing supply chain disruption, our revenues remained unaffected as we focus on supporting our customers in the efficient execution of their business. Both businesses remain well-positioned for the future, giving our team the confidence to reaffirm our 2021 financial guidance, which we increased following our strong performance in the first-half of 2021. Please turn to Slide 12. We continue to show these metrics as their improvement showcases the substantial progress this organization has achieved over the past 4 years. Atlas has had a relentless focus on continuous improvement, operational excellence, creative customer partnerships, and quality growth, which are bound by disciplined capital allocation and driven by our financial strength. Our improvements in the quality of our fleet and operations enhances our service to our customers, provides predictable performance, and extends our industry-leading position in the market. This quality growth has been delivered alongside considerable increases in our unencumbered asset base and available liquidity during continuous improvements in our capital structure. We have managed down growth effectively from a credit perspective as we continue to pursue an investment grade credit rating and lower our cost of capital. Please turn to slide 13. During the third quarter, we continued our focus on strengthening and optimizing our Balance Sheet. Specifically, we completed the upsized $750 million, 5.5% blue transition notes offering in the U.S. high yield market, which was well over-subscribed by top global institutional investors, and priced to reflect our substantial credit improvements. This was our inaugural issuance in this market, something we've worked tirelessly towards, and is a key element of the evolution of our capital structure. During the quarter, we redeemed the remaining $300 million of Fairfax notes. This completes the restructuring of the debt position with Atlas. Similar to when we exchanged $300 million of Fairfax notes for 7% preferred shares last quarter, this quarter's completed redemption comes with a debt discount extinguishment of $71 million. So, I'd like to reiterate this is a non-cash charge and represents the accelerated amortization of the debt discount, which would have previously been recognized as interest over the tenor of the notes. Through redemption of 600 million of Fairfax notes highlights their continued support by removing debt with preferential terms, which enables us to simplify and create additional flexibility in our capital structure. Fairfax continues to be a key and supported investor in the Atlas group. Furthering our progress towards achieving investment grade rating, we were upgraded recently by Kroll Bond Rating Agency to double B+ along with the double B range of ratings from Fitch and Standard These agencies commonly referred -- reference Seaspan's improvement in business risk management, our increasingly diversified customer base and funding sources as key drivers for their ratings. I also highlighted that an increasing unencumbered asset base and proportion of unsecured debt was supporting factors. We continue to assess opportunities to strengthen and simplify our Balance Sheet as we progress towards an investment grade credit rating. Please turn to Slide 14. This slide contains details of the progress of funding for our 70 newbuilds. We received considerable interest from the financing community to participate in these transactions, and have leveraged our extensive banking relationships to title these financings to our requirements. We're happy to report that we have secured $5.3 billion of financing on attractive terms and an additional $1.6 billion of financing is in advanced stages and on target to close before year-end. This diverse and attractive portfolio of 10 financings is evidenced of our industry-leading agility, creativity, and overarching operational excellence. Our financing team has been meticulous in delivering competitive costs, , and flexibility across these facilities to make our capital structure objectives. This is being delivered well ahead of our planned timelines and securing financing of this quality and magnitude in such a short timeframe is a testament to Atlas ' dominant position in the capital markets, access to capital, and world-class execution from the Seaspan team. This is a key element underpinning our growth strategy and I'm pleased with secured base competitive financings ahead of schedule. Please turn to slide 15. In our Q2 results we presented a slide similar to this one. This is now being updated to include all 70 new build vessels announced to date, which resulted in an additional 839,000 TEU and $11.3 billion of gross contracted cash flow. Now that the delivery process is underway, we have updated the table to include details of vessel delivery status and we plan to provide ongoing updates on the program's progression quarterly. To date, we've received the first of our 70 newbuilds. This 12,200 TEU vessel was delivered approximately 2 months ahead of schedule, and we forecast that the other 4 sister vessels will also be delivered ahead of schedule. Please turn to Slide 16. This slide illustrates the superior returns delivered by this leadership team, where along with our teams around the globe, have achieved dramatic growth and financial performance over the past 4 years. This has been achieved through a diverse set of market conditions, which is further evidence of our resilient business model that delivers value through all market cycles. I'd like to highlight those adjustments makes performance metrics are one-off by nature and are excluded to assist the market in understanding the underlying performance of our business. Our organization continues to focus on delivering consistently strong performance, and we look forward to demonstrating this through our updated 2022 guidance, which we will present during our fourth quarter earnings call. Now, please turn to Slide 17, and I'll provide my summary comments, before opening the line for questions. I would like to leave you with 4 key takeaways. 1.First, Atlas continued delivering quality growth, driving a $17.9 billion long-term gross contracted cash flow balance with industry leading counterparties. We do this by deepening our relationships and developing win-win solutions to meet customer needs. Whether that be through newbuilds, secondhand acquisitions, forward fixtures, general re-chattering, or daily operational excellence, Second, the delivery of our newbuild vessels and associated financings are ahead of schedule. We've secured $5.3 billion of funding, ahead of the planned schedule, a $91.6 billion of financing remains outstanding, which we're well-advanced and expect to close before year-end. We also took delivery of our first 12,000 -- 12,200 TEU vessel ahead of schedule and expect that to be the case for the other 4 sister vessels. Third, we're making significant progress on our journey to achieving investment grade credit rating, obtain continues to strategically optimize our Balance Sheet, and we're now achieving double-B range corporate writings from 3 accredited rating agencies. One of which was an upgrade to double-B plus in the third quarter. And thirdly -- and finally, our financial performance is on track to achieve the updated 2021 guidance that we shared with the market at the end of Q2. Given our continued quality growth in the third quarter and multiple newbuild vessels expected to be delivered ahead of schedule, we're confident in surpassing our previously stated long-term guidance. Not only is our team confident in our future, but we have also recently had a strong indication of confidence from the Washington Family and Affiliates, who recently purchased $2.5 million shares of Atlas at an average price of $15.34 in September. This is a great signal in vote of confidence from a smart and capable investor. And we continue to appreciate their support as the original founding shareholder. Thank you for your interest today. Operator, we'd now like to open the line to questions. Thank you.

And please stand by while we compile the Q&A roster. Your first question is from Chris Whetherbee of Citi. Your line is open.

Good morning. James Ong for Chris. Just wanted to get your view on the broader new -- appetite for newbuilds. There is -- I guess the best way to think about it is there's a lack of supply chain fluidity, and it's set -- and deteriorated more recently, and rates have taken it higher. Do you think that's a headwind necessarily the newbuilding ordering in the near-term, and once that clears, do you think there is an appetite for significant fleet growth? Just trying to get -- understand your outlook in terms of the newbuilding’s longer-term. Thanks.

Good morning, James. That's a good question. In terms of the newbuilding, I believe that we talked about during the last quarter and in general, what we say back then is demand and supply in general are balanced. Over the past quarter, I believe that the newbuild, although continued, but the pace is slowing down. We, however, added 25 newbuilds with the demand from the -- our customers from 2 leading global line of customers. All these newbuilds are backed by long term contracted cash flow. Specifically, I think they asked about full billing, U.S. dollars gross contract cash flow and with average of 11.4 years of duration. But from the overall industry perspective, I think the newbuild actually still is in control, meaning that there is very almost to none, speculative orders. So that means that any new build that has been put in over the past quarter, they are all coming from the real demand and going forward, I do see that the market continues to be under control, meaning that I think they are still some interest -- specific interest in new build, but they're in a different segment. They are in a different time frame in terms of delivery. But I see that overall, the newbuild demand are very cautious and very -- I think very much under control. In terms of the supply chain -- supply chain congestion. I think this is really depends on two things: 1. is the global coordination and control of the pandemic. Currently, the supply chain congestion is largely caused by the uncoordinated standards amongst different countries. That's the one thing and the other is its condition is depends on actually how the COVID is going to be under control. Meaning that with the vaccine, with the different ways to protect the people and I think that that's going to have the impact in terms of how quickly we will be able to return to some kind of normality. In terms of headwinds as I said it earlier, that overall, I think the market consensus, I still believe that the current strong market will last at least until, I will say, the first quarter to second quarter of 2022. Some optimistic views are going to be last until the end of 2022. But eventually, I believe that the market will go back to some kind of normality. And I think at that time, actually Seaspan's business model -- it will come to really differentiate in the marketplace in the way that as we mentioned earlier, we actually have very little charter roll off for the next 3, 4 years. Specifically, for example, we have 0 for 2021, we have 6 vessels for 2022, 19 vessels for 2023, and 31 vessels for 2024. This is assumed that we do not do any forward fixing between September 30th to the next 4 years. But in reality, we actually have already forward fixed some of the vessels in between. And as I mentioned earlier, also, regardless of the headwinds, it's very important to highlight that with our existing fleet, we have already forward fixed 60 of them, and that's why we have very little roll-off in the next years. But at the same time, our new built, all these newbuild, as I said before, 70 out of that, 1 is already delivered ahead of the schedule, 2 is to be delivered this month. Again, it's going to be ahead of the schedule. And also, the remaining 2 is also expected to be delivered ahead of schedule in 21, 22, 2022. But all of our new build vessels are backed by long-term contracted cash flow, meaning that none of them are speculative, and all these newbuild has backed by long-term charter. So, from a headwind perspective, I think Seaspan's actually best positioned. If and when the market happens. And I think that is really the highlights of our business. And we're very pleased with what we have achieved.

Got it. Just to clarify, given the congestion to there's a lot of the longer-term visibility, do you think that's been a headwind to additional newbuild orderings and Seaspan's fleet growth and sort of that once it clears, do you expect another round of orders to come through?

Well, I think it really depends on how quickly the demand from the liner's side that they would like to replace or increase the capacity of the fleet. As I mentioned earlier, today the fundamental change in the container shipping industry is the landscape of the market in the way that liner Company are very much consolidated. There, in general, very disciplined. With that discipline in place, I would anticipate even with the returning to the normality, I believe that the growth of the newbuild will be primarily driven. If that's going to be happened, I will be thinking that they will be driven by those continued newbuild vessels that -- with the better design and with different fuel intakes, the type of vessels. In other word, primarily it's going to be driven by those carbon reduction initiatives and environmentally improved newly designed vessels. But I think that will be -- still be under control. It would not be in the speculative manner because the industry is very much transparent and the demand has to come from the liner companies.

And then just really quickly, I just wanted to touch on capital structure in your asset base. You've mentioned unencumbered assets and unsecured risk. How should we -- or unsecured debt, rather. How should we think about the mix of those in terms of target percentages, absolute amounts? Just wanted to understand how you're thinking about that. And that's all for me. Thanks.

I think on the unencumbered assets, there isn't an absolute target there. It's a matter of just continuing to grow that base. Obviously, it's providing unsecured assets in the business to which we can use unsecured credit lines. On the unsecured mix, there's a number of targets out there. We've progressively sort of working up to 35+%. Obviously, it's a matter of balancing it out over time. And as we've discussed before Chris, the journey to investment grade is not an imperative that we have to do tomorrow, and we've got to balance it out. A number of different things here, which is also continuing to fund our growth, continuing to return capital to our shareholders, and maintaining all of our debt covenants. So, it's a finely tuned balance and we're confident about our ability to manage those attributes as we move towards an investment grade rating over the next few years.

Thank you

Your next question is from Randy Giveans of Jefferies. Your line is open.

Bing Chen and Graham, how's it going?

Very well. Thank you.

Good. Thank you. Randy.

Good. I guess look at the newbuilding program. You have 69 newbuilding to be delivered. Are all these giving new vessels or some of the maybe a replacement for older vessels, I guess put another way. Any updates on potential vessels sales to raise liquidity given the strong secondhand market?

Yeah. Randy, to answer your question, all the 69 new build vessels are brand new vessels. They're really new vessels. In terms of are we looking to sell any vessels? As I said it before, we are opportunistically looking at opportunities. The challenge of selling the vessels at the current market is that as all our vessels are under long-term contract. So, we need to take into consideration of our customer relationship that the needs at the -- also at the same time, and I think that with the long-term contracts that's already in place that we have to be very selective in looking at the right counter-party with the right opportunities, then we would also consider selling of those vessels to those selective counter-parties, but that will be very much opportunistic.

I'd just add to that, Randy. As we've discussed before, this is just a matter of economic devaluation. The market is high in terms of vessel valuation so it is tempting to recycle certain vessels in the fleet. But at the same time, we've got customers that have got some very high demand at the moment for tonnage. Therefore, when you run the economics itself and it's difficult to justify a sale, when you can actually put them back on contract for a term. So, it then comes down to customer relationships and making sure that we look after our customers and take the right economic decision.

Okay. Fair. And then you have $5.3 billion in the financing secured for the newbuilding program. Another, I think you said, $1.6 billion in the advanced stages. So, you'll have $6.9 billion against the $7.6 billion in assets. So that's 90% financing on the newbuilding’s, not overall. Are there certain leverage ratios required for an investment-grade rating? And with that investment-grade rating or another pursuit of that, any dividend constraints during this time? It seems like the dividend might be capped here for the next few years during the delivery period; is that fair?

Yeah. There are specific covenants, Randy, from the ratings agency in relation to this. But there is a number of different ways to view our business, whether you're viewing it as a shipping business or a leasing business, which gives the rates to certain views and perspectives from the rating agencies. As you correctly point out on our newbuild financing, were looking at an average LTB of around 90%, so that's an average as some 10 different packages involved with the 70 vessels. And that's -- it's a fairly complex package of 20 or so different counter parties that we've worked with. And there's some very exciting elements in there, but we're just working with the counter parties to organize press releases around those, which we will do in due course. So obviously, the pod about journey to investment grade is actually rising more unsecured capital. And then using that to pay down secured capital. So over time, we will be progressively looking to access the market again, to raise relatively cheap capital through the high yield market, for example. And then use that to recycle out of secure and capital. But the package that we've put together here is very, very competitive and has some very unique elements to it. And I'm hopeful in the next few weeks that we'll be out to communicate more details around the uniqueness of these financings. Randy, you still there or Operator?

Your next question is from Benjamin Nolan of Stifel. Your line is open.

Hello, everybody. My name is Makela Rogers (ph) from Stifel, asking a question on behalf of Ben Nolan. Thank you all for the update. And our question revolves around APR. Is there any update on how you are thinking about the long-term strategic positioning of APR? Pre - COVID, the plan was to grow the gas fleet and focus more on long-term contracts. Is that still the idea and is the market getting back to the point at which that is possible? Thank you.

Thanks, Makela. Great question. over to you. Dave. I'm just going to say to Makela, that our strategy hasn't changed there. As you're aware, we had a very successful quarter last quarter with the turbine deployments, so our top priority is still to make sure that the current asset fleet is fully utilized or maximized as much as possible. But as we've stated previously, our ambition is to pivot the business to include more longer-term fixed price contracting , generation, and supply. Through those gas turbine business, but also through renewable energy. And as you are aware, we've now got some new management in place and we are currently working on building out that pipeline of opportunities. And I would say that, yes, the market has shifted and there's certainly a lot more opportunities in the market we're seeing today than we had previously. And we're building a fairly robust portfolio of opportunities, which we're working on maturing at the moment.

Thank you very much. Very helpful.

Thanks, Makela.

Your next question is from Omar Nokta of Clarkson Securities. Your line is open.

Thank you. Hey guys. Good morning. I just want to --

Hi, Omar.

I wanted to follow up on Bing's comments and obviously one of the biggest topics in the industry today is the disruption and delays and all the port logistical issues. And I wanted to ask in terms of as operators of the ships, is there anything that the liners have asked you to do recently to help alleviate some of the logistical logjams? Is there anything that could possibly be done from your side? Just looking for any color you can give on that.

Good morning, Omar. I think the one thing that has been constantly -- we see increasingly from the liner companies that the demand for the ship owner and operator is the quality of service, the reliability. Given the current challenge of the logistics, and I think as we mentioned earlier, we actually have been able to achieve a very high utilization rate of our vessels in this quarter's 99%, as I mentioned, the year-to-date, we actually changed our crew in the number of 5,800. And that is very, very significant in the way to alleviate or provide the kind of a reliable service to our line of customers, while they are dealing with a lot of port and logistical congestions. As you also note, there are several incidences that's been happening over the past months and many of these incidences is due to the quality of the ship management and operators that cause a lot of additional, I would say, difficulty or challenges for the liner customers. So that's what the one area I see that has been consistently demanding from our customers -- from our liner customers, and also increasingly in the period during this -- the logistical challenge at time. I don't know, Peter, if you have anything else to add?

Thanks, Bing. Well, Omar, I think that the -- essentially the unwinding of the disruption would take some time more, excuse me. That the impact really as we've said several times before, is that it doesn't impact us in regards to our improvement. The real essence that we can provide to our customers is as they say, is the operational excellence. What we see in the -- probably the past six months, an increase of speed, all vessels, which of course demands reliability. That's essentially the primary area that we can support.

Yeah. And the one -- the other aspect, this is also something that we've been -- always been very proud of is the load ability. I think our vessels actually last month, achieved the maximum load ability of I think, 10,000 TEU s, meaning a vessel of 10,000 TEU actually load up 10,000 boxes -- 10,000 TEU boxes. So, in a very, I would say, high demand environment, that the load ability difference will provide additional capacity to our customer, so in the way to help them to alleviate the demand shortage. And that is also something that differentiates the owners in the marketplace like ourselves, where we have reliable quality of service at the same time with this type of load ability. I think it also helped alleviate their demand.

Thank you. That's very helpful. Good color. Follow up question, and you also talked about this in your opening remarks, and also in the Q&A. Just about the charger appetite for new buildings, I just want to understand from your perspective, given your very involved and at the forefront, really at lot of the newbuilding’s, you're very active and you've got deliveries coming at '23 and '24. As it is today, do you get the sense that liners are taking kind of a wait-and-see approach for 25 and 26 deliveries, or is there still a good amount of demand there, just all in the planning phases. What do you think about that?

As I said earlier, I think we do work regularly with liner customers. In general, I think liner customers are looking into the newbuild opportunities from the size, from the fuel proportion systems, and from the design. This is something that is constantly in dialogue, and this is where we provide a lot of our own insight, views, as well as being able to work with all of the stakeholders, whether it's a shipyard, whether it's a class society, or the line of customers. Generally, I believe that line r customers are very cautious about the newbuild because right now if you're looking at the slots, mostly the slots will be only available in 2025 and beyond. So therefore, realistically, if you put in any order, most of the orders has to come for delivery in 2025. That is about 4 years down the road. At the same time, and I think it's still there's a certain uncertainty about how the demand is going to be look like and what are the potential other fuel systems -- fuel sources could be used for the newbuild. So overall, I would say it's cautious and wait - and -see. But there are some liners are still looking at potentially some newbuilds as they are pretty certain about certain directions with the design and also the fuel they can adopt.

Great. Thanks, Bing, for that. I'll pass it on now.

Thank you.

Your next question is from Ken Hoexter of Bank of America. Your line is open.

Bing, Graham, and team -- congrats on being well-positioned to take advantage of the market. You noted some accelerating -- you accelerated your targets back in 2Q and rates have risen exponentially since then, yet you didn't really tweak this year's targets even at this point. You mentioned maybe you'll look at '22 next quarter, maybe give your updated thoughts on this year as we close out the year and then thoughts on that 3-year outlook, given the market exposure.

Sure. Thank you, Ken. Yeah. You are right. We are not raising our guidance for 2021, but we strongly reaffirm our increased 2021 full-year guidance, which is published in Q2 earnings. However, the increase -- the guidance is very certain as we have all revenue -- have secured, as I said, for 2021. According to our policy as Graham mentioned earlier, we will provide a revised guidance for 2022 at our Q4 and also at our Investor Day, we will provide a revised long-term projection for 2022 all the way to 2024 and beyond. The reason is that we're not adjusting because our policies is only adjusted twice a year. But as we mentioned earlier, that the -- our significant growth over the quarter is really driven by a variety of factors. One is that we have three ahead of the schedule, newbuild deliveries, we have 15% of the index-based TC rates, we have 99% of the fleet utilization, we have 60 forward fixing. And also, while our crew changes, obviously, the logistic-wise, the costs are increased. But that cost has been offsetted by our continued operational excellence in driving down the processes in automations. So, net-net, our OpEx only marginally increase -- immaterial increase over the quarter. And looking forward, obviously, I'm not providing the long-term projections here, but the one thing as I highlighted earlier, our business is very well-positioned or is best positioned in the coming years, if you believe there are headwinds in those years. Simply because as I said, we have very little charter that's going to be rolling off. Okay. As I said, again, I repeat, we have nothing for '21. We only have 6 for 2022 and we have 19 vessels for 2023. We have 31 for 2024. That is as of September 30th. This is assuming we don't do any four-wall fixing. But -- and at the same time for all of those newbuilds, that is 60 -- the 70 newbuild, all of them up backed by long-term charter. So, in terms of our business, both in the current year, next year, and the year after, it's the most the certain business because the way our business model -- because the way our contract is structured, it's exactly countered those economic and industry cycles. And that's why we are very certain about our future performance in the years to come, despite the fact of the market volatility or some general economic cycles.

Great. Thanks, Bing. , .

I was just going to add, it's been mentioned and we've discussed previously, we do have a small portion of our fleet which we have on shorter-term contracts. And for us short-term is actually still three to five years. So, it's not like spot. And those contracts, some of them are on context and some of them on broker rights. And I raise set on 3- and 6-months sort of risks. So, I know we've discussed previously about the uptick in the market. And when do we see it on that portion of our fleet, and you're definitely saying that in Q3 of this year. So there has been a significant uptick in the rights for that portion of the fleet. And the details of all of that's included in the supplemental data that's loaded up on the website for Q3.

Great, thanks. Thanks, guys. If I can do a follow-up on APR, you had some projects that ended. Graham, you threw out there in the quarter, they were more short-term. So, can you talk to us about utilization, expectations as you move to the fourth quarter? And then maybe you mentioned David Sokol is on the line, so David since So, you acquired APR within the Seaspan family and now Atlas Corp, every move has been to add more container ships, which obviously great timing and great for the Company. But what is the point now of having the conglomerate? Why not spin out APR to allow the refined focus? Sounds like management's turned over a couple of times there to allow a refined focus, given really the truly disparate entities and Seaspan now establishing its self-funding.

Yeah, Ken, great question. But let me start with the fact that the focus of our board and our management team is to build an organization that last s. Historically, the small owner-operator support mechanisms of the -- in the shipping sector, if you look back, 5 and 10 years, it was very short-term oriented, trying to take advantage of price spikes, and trying to avoid, when possible, the trough that occurs. That's not a game that we want to play. And so, the team led by Bing and Graham and Torsten in operations, etc., have recognized that our liner companies need long-term support and we want to be a Company that is sustainable over the decades in the future, not just a year or two, and that transition has really taken place and it started in mid '17 -- 2017 -- mid 2017. And this really unfolded with clarity the last year - and -a-half as these newbuilds have come along. I emphasize that before getting to your question with APR because if you look at Seaspan today, and we are intending to do something similar at APR. But if you look at Seaspan today, it's long-term contracts, nearly $18 billion of long-term contract. No one in this industry's ever even approached numbers like that. And these charter links run as long as 18 years. With financing that match those long-term charter rates. Torsten, and Peter, and the team have moved operational excellence to literally unheard-of levels in the past. Long-term injury rates down below 0.4. When for many in the industry, numbers like 2 to 5 are not uncommon. On-time delivery for our customers have gotten to extraordinary numbers. Again, the business is built around taking risks that we can manage and not taking risk we can't. So, the port congestions, for instance, that you are seeing on the West Coast, that's not a lot of problem we can manage. It's ultimately a political subdivision problem, if you will, and so we don't take those risks. So, the fact that there is a lot of congestion is affecting a lot of shippers and that's unfortunate. People trying to move product, getting them ready for Christmas, etc. But our economics don't change because we get paid whether the ships are waiting in line to get to the port, or whether they are being unloaded and reloaded in the port. Again, emphasizing the fact that driving the Company to be built to last, to get our credit, where it needs to be on a long-term basis which dramatic improvements have taken place. So, APR on the energy side is something that we want to do the same with. Unfortunately, from what's happened through COVID a month after we closed on APR, globally, COVID largely shutdown emerging markets, largely shutdown developed markets. So, it has taken us longer, although I will say that the team that's in place now is highly focused, doing an excellent job of both keeping the short-term utilization rate high and moving to longer-term contracts that got a significant backlog of opportunities that are now being progressed. They've got significant opportunities that we're analyzing in some of the renewable fields around the world. But it's going to take time. Just as it took time to get Seaspan to where it's clearly a differentiated organization in the shipping industry, it's going to take us time for APR to get where it needs to be. Having said that, they've substantially outperformed our own expectations for 2021 and we expect the continued performance in the future. But to get APR to the level of Seaspan, and it take time and we haven't been shy about that. We've urge d investors to look at Seaspan on a flat basis going for perhaps our APR on a flat basis going forward because we don't want to over-promise and under-deliver. But the same dynamics are going to take place on the energy side when you see such dramatic transitions in energy policy taking place globally, and some very inconsistent energy policies that also provide opportunity. So, getting rid of APR, frankly, wouldn't make sense from our perspective. We still look to long-term have multiple platforms where we can run high-quality businesses in the infrastructure world, continue to grow them, and make them very sustainable and very built-to-last, rather than just short-term oriented. So long-term -- long answer to your question, Ten. But really perspective, notwithstanding the fact that we view this stock is substantially undervalued. We've all been around enough to know that when you perform at this level, consistently long enough, people pay attention. And we certainly have too large shareholders that believe in the future of the business, and a management board that does it well.

Great. Thanks, David. Thanks, Ten. Appreciate the time.

Yeah. Thank you.

Your next question is from Michael Goldie of BMO Capital Markets. Your line is open.

Thanks, guys. And good morning. Hi guys. We've been touching on this a little bit, but looking out longer-term and shift towards carbon-free container shipping, do you expect us to eventually drive another wave of new building and when might that be, 2030-time frame, further out? Any thoughts there?

Hey, good morning, Michael. I will answer that question and Peter, feel free -- Peter Torsten, feel free to jump in. The answer to that is, I don't think so because if we looking at the carbon free initiatives, it is true that the vessels have to improve from two aspects. One is from the vessel design to improve the efficiency. The other one is looking at the fuel selections. The way we're looking at is -- is that ultimately, it's not going to be one solution. It will be multiple solutions in the 2 categories. One will be in the areas of light gas, the other one will be in the liquid. So, if you looking at the newbuild that we have done out of the 70, we have actually -- have these two categories. One is LNG, the other one is the conventional one which is using the liquid fuel. And these vessels potentially could also be modified to take the future green fuel, whatever those fuels are. So as the industry today still try to looking for the final solutions still, I believe that even though there's no exact solution yet, but I think in terms of the path, it's probably there and in terms of the newbuild assets, I will say still we'll be in these 2 categories, and also, I think if that is the case, I would think there are some more potential retrofits of those vessels that could be used for future fuel, whether it's hydrogen methanol, ammonia, or any other potential fuels. And the other part is looking at the carbon neutral, is to looking at potentially the CO_2 capture on the vessels. So, there's many different ways I would think they're similar to what we looking at -- initially looking at the high sulfur in putting on the scrubber or burning the low-sulfur fuel. So, in general, I would think that they will be the newbuilds and those newbuilds will take whatever the new, I would say, the fuel possibilities going forward. But I do not anticipate a massive wave of newbuild vessels adopting whatever the new solution, which today we still do not have.

Something I'll add on to that, Michael, I think, that's a good question. I think building on what Bing has mentioned about the future in terms of fuel choices, which I think will precipitate some degree of newbuilds into the future. Bearing in mind that the finals today are very disciplined. I work within the Alliances, which are very disciplined. So, if we don't see any of the reason for some of the more sort of volatile , or a number of years ago. So, on top of that, we also believe that the growth of these fleet is still sustainable in regards to global GDP growth. When you have a look at the curves of global GDP, they're not greatly volatile. Of course, we've had a few shocks in 2008, 2009 and more recently. But generally, there's a consistent growth and containerization as the meaningful globalization will follow suit. So, the fundamentals we believe will require replacement of this whole addition to the fleet capacity. And then last but not least is when you look at global trades, it's not just what many of us tend to think of the main east-west trades like Asia, Europe, or the Transpacific. Those two combined are called daily 25% of global moves. There are other traits that have grown significantly. Intra -Asia, for example, inter-regional trades off well over 35% of global trade. And as these different trade lanes grow, and the ports associated with those trade lanes improve their facilities, so there's demand for additional vessels and vessels of different types and sizes to note, 7,000 TEU, recently, 25 units. So, I hope that provides some color to you.

That's helpful.

just add another comment to Peter's . I think suddenly it's important to think about when you think about container shipping from a CO2 standpoint. You start with the fact that there is no more efficient way to move goods around the world from the CO2 perspective than shipping today, already. Now, there's definitely going to be changes in fuel types and efforts, significant efforts, that both we're making and others are to become more CO2 efficient and to find solutions in the future. But I think the industry is now gone through a couple of years of thinking about this problem along with governments that are represented in this discussion. And it's becoming clear that there's some uncertainty as to what the right fuel is for say, 2050, to get to full carbon-neutral. But that makes sense in the sense that it's already in the industry that's highly efficient. There is no way to move products around the globe, anywhere near as efficiently as container shipping does, which speaks to its rapid growth over the years. But this transition to what the ultimate solutions will be, whether they're methanol's or hydrogen or others, it's going to take time in the meantime, as Bing said, enormous efficiency improvements are being made, shifts to lower carbon fuels are being made. That ultimate transition is going to take time for the technology to exist both to produce the fuel storage and use it efficiently. So, the -- there will come a time obviously when there will be a lot of either retrofits or newbuild that use those fuels. But they're certainly not 2 or 3 years out.

Okay. That's helpful. And also, on that same topic. As we overtime move towards better CO2 efficiency, is there further opportunity for consolidation in the lessor space as maybe some of the smaller players who are less sophisticated, can't offer the same solutions?

That's absolutely right. Because as the further requirements on the CO_2 emissions that will put a lot of pressure on the less to be able to have won the team, the human resources, the expertise to work with the industry participants, the customers to develop the solution. The other part is it also needs to make the investments. Both the human capital and financial capital, and also the business the business platform required for those who are able to meet these challenging requirements. So, for those owners that will just provide the vessels and I think they would have a difficult time to be able to provide that kind of solutions to the customer, whether it's from a human capital expertise perspective, as well as from a capital perspective.

Great. Thank you.

And no further questions. I would like to turn the call over to the presenters for further remarks.

Yes. So, thank you everyone for taking the call and thank you for the questions. We are now closing the Q3 earnings call and if you have any further questions, please feel free to reach out to Graham, myself in addition to Rob. So, we look forward to meeting you all in the next quarter. Thank you all.

And this concludes today's conference call, thank you for participating. You may now disconnect.

Thank you.