Capital Product Partners L.P. (Nasdaq: CPLP) is an international, shipping company engaged in the seaborne transportation of natural gas, containerized goods and dry cargo. As a publicly traded master limited partnership, CPLP has elected to be treated as a C-Corp. for tax purposes which is most beneficial for U.S. investors (as they receive the standard 1099 form). The Partnership is well-positioned to benefit from the long-term growth dynamics of the global shipping industry and to capitalize on potential acquisition opportunities in the fragmented shipping market.
The Partnership has agreed to acquire six 174,000 cubic meter (“cbm”) latest generation X-DF LNG carriers for total consideration of $1.22 billion with long-term time charter employment in place with BP Gas Marketing Limited, Cheniere Marketing International LLP and Engie Energy Marketing Singapore Pte Ltd. Two LNGs were delivered in early September while the remaining four vessels are expected to be delivered in the fourth quarter of 2021.
Modern High Specification Fleet
After the delivery of all LNG carriers and the disposal of the M/V ‘Adonis’, the CPLP fleet will consist of 21 high specification vessels, including six LNG carriers, 14 container carrier vessels and one Capesize bulk carrier.
The average age of the CPLP fleet is 7.8 years (as of September 30, 2021).
CPLP vessels have been designed and equipped to the highest specification.
The International Maritime Organization (IMO) new regulations, effective January 1, 2020, have limited the sulfur in fuel used by ships to 0.5% from 3.5%. In consideration of these new regulations, the Partnership has equipped seven of its vessels with an exhaust gas cleaning system (“scrubber”).
Fleet Employment -- Visible & Stable Cash Flows with High Quality Counterparties
CPLP’s modern LNG and containership assets and multi-year time charters are highly suitable for the Partnership’s business model.
CPLP vessel charters have an average revenue weighted remaining term of 5.1 years (as of September 30, 2021), with staggered expirations. The Partnership’s charter coverage for 2022 stands at 93% (as of September 30, 2021).
CPLP’s vessels are chartered to reputable counterparties worldwide including major operators and liner companies. Over the years, CPLP vessels have secured long term employment among others with BP, Cheniere, CMA-CGM, Engie, HMM, MSC, Maersk Lines, ONE and ZIM.
Distribution - Growth Strategy & Financial Strength
The Partnership’s common unit distribution for the third quarter of 2021 was $0.10 per common unit. The common unit distribution coverage for the three-month period ended September 30, 2021 was 5.7x.
Following our agreement to acquire six LNGs, of which two were delivered in September 2021 and four are expected to be delivered within the fourth quarter of 2021, the acquisition of three 5,100 TEU sister container vessels in February 2021 and depending on our access to the financial markets, our objective is to pursue additional accretive transactions going forward and expand our asset base, with a view to further increasing the long-term distributable cash flow of the Partnership.
Capital Maritime & Trading Corp. (“Capital Maritime”), CPLP’s sponsor, owns significant LNG, tanker (including VLCCs and Chemical/Product tankers) and container tonnage which could potentially be dropped down to the Partnership. Some of these vessels are contracted under medium to long term charters.
As of September 30, 2021, the Partnership has repurchased 379,660 common units since the launching of the unit repurchase plan on February 19, 2021, at an average cost of $11.73 per unit.
CPLP’s sponsor, Capital Maritime, is a large, financially strong and diversified shipping company with a long, successful track record.
Capital Maritime owns a 17.1% stake in the Partnership (as of September 30, 2021).
Capital Maritime has an extensive network of relationships with oil majors, traders, liners and other major charterers.
Last updated November 10, 2021