Capital Product Partners breaks down charter details on newest LNG carriers

US-listed Capital Product Partners has given insight into how charters to BP of two of its newest LNG carriers were drawn up.

The details came after the Greek shipowner bought three of the nine LNG carriers in the fleet of Evangelos Marinakis' Capital Gas Ship Management and lined up the acquisition of other vessels.

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Capital Product chief executive Jerry Kalogiratos explained why the shipowner is bullish that BP will exercise its initial set of options to extend its charters on the vessels as he answered analysts’ questions over the deal in a webcast.

He said BP had originally wanted seven-year charters on the ships.

The executives said the two companies found a “creative solution” in which BP paid a “very high rate” for the first three years with two sets of two-year options agreed at “close to historical lows” on the hire.

Options for six more additional years were agreed at “more normalised” rates, he said.

Getting pricey

Kalogiratos said the company believes it got good prices for its LNG newbuildings.

He pegged prices for LNG carrier newbuildings ordered on speculation at around $205m, with additional features adding a further $3m to $5m per ship.

The cost of supervision, initial supplies and equity costs would push prices “well north of $215m”, he added.

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Capital Gas business development director Spyros Leoussis said the LNG trade is expected to grow significantly in the next decade and play a leading role in the energy transition.

He said analysts estimate that 600 additional vessels above those already on order will be required by 2040.

Of the 134 LNG newbuildings on order, he said, potentially only 20 are available for charter.

Leoussis said increasing Asian demand met by North American LNG supply is expected to create strong demand tonne-mile demand for shipping.

He said the charters on the three vessels acquired by Capital Product are due to expire from 2025 onwards, when analysts expect an increasingly favourable balance of supply and demand in the market.

On 31 August, Capital Product announced that it had agreed to pay $599.5m to Capital Gas' CGC Operating Corp to acquire three 174,000-cbm LNG carriers — the Aristos I (built 2020), Aristarchos and Aristidis I.

Aristos 1 has already started its charter with BP. Artistarchos is scheduled to be delivered to BP on 15 September, the same day the Aristidis 1 is to start a charter with US-based Cheniere.

In addition, Capital Product has the option to acquire a further three sisterships. The Attalos is chartered to BP, the Adamastos is on fixed to Engie and the Asklipios is with Cheniere.

Capital Product, backed by Marinakis, has rights of first refusal on a further trio of LNG carriers scheduled for 2023 handovers. Kalogiratos said all three are charter-free at present.

Kalogiratos described the deal as a “strategic and highly transformative transaction for the partnership”.

He said the acquisitions are not a sign that the partnership is moving away from its core containership fleet but that it wanted to concentrate on deals with that have long-term cash flow and minimise residual risk.

“The LNG carriers tick that box,” he said, adding that 13,000-teu boxships do too.