Oct 27, 2010
Executives
Sai Chu – CFO Gerry Wang – CEO
Analysts
Josh Casevan [ph] – Deutsche Bank Ken Hoexter – Merrill Lynch Michael Webber – Wells Fargo Greg Lewis – Credit Suisse Noah Parquette – Cantor Fitzgerald Urs Dur – Lazard Capital Markets
Operator
Welcome to the Seaspan Corporation call to discuss the financial results for the three months ended September 30, 2010. Hosting the call today is Gerry Wang, Chief Executive Officer of Seaspan Corporation, and Sai Chu, Chief Financial Officer of Seaspan Corporation.
Mr. Wang and Mr.
Chu will be making some introductory comments and then we will open the call to Q&A. I will now turn the call over to Sai Chu.
Sai Chu
Thank you, operator. Good morning, everyone and thank you for joining us today.
Before we begin, please allow me to remind you that this presentation contains certain forward-looking statements as such term is defined in Section 21E of the Securities Exchange Act of 1934, as amended, concerning future events and our operations, performance and financial condition, including in particular the likelihood of our success in developing and expanding our business and our equity capital requirements. These forward-looking statements reflect management's current views only as of the date of this presentation and are not intended to give any assurance as to future results.
As a result, you are cautioned not to rely on any forward-looking statements. Although these statements are based upon assumptions we believe to be reasonable, based upon available information, they are subject to risks and uncertainties detailed from time to time in our periodic reports.
We expressly disclaim any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in our views or expectations, or otherwise. We make no prediction or statement about the performance of our common shares.
I would like to remind you that during this call, we may discuss certain non-GAAP financial measures, including EBITDA, cash available for distribution, normalized net earnings. In regard to such financial measures, please refer to our earnings release, which is available on our website.
We will now begin our presentation. Please refer to our webcast presentation slides as provided on our website.
In addition, you will find further details regarding our Q3 results in our earnings release issued this morning before market open. I will now pass the call over to Gerry, who will provide details on our highlights for the quarter.
Gerry Wang
Thanks, Sai. Good morning to everybody from Vancouver.
Please turn to slide three on the website. Let me cover financings first.
We continue to enter into favorable financing transactions that considerably strengthen our capital structure, while benefiting the long-term interest of our shareholders. For the end of the quarter, we entered into two transactions which we expect will enable Seaspan to fully finance its significant contracted fleet growth and increase its financial flexibility for the future.
We have now eliminated our equity overhand requirements one year earlier than our originally stated timeframe of Q3 2011. First, we are pleased to have entered into a sale and leaseback of one of our previously unencumbered 13100 TEU vessels to Credit Agricole, a leading French bank.
This transaction is similar to the sale and leaseback transaction with a leading Asian bank, closing February of this year. This transaction demonstrates our continued success in funding our contracted fleet growth and represents up to $150 million of financing.
It is worth noting here that Seaspan retains operational rights and it can repay the lease at any time post-delivery. Second, we're also pleased to announce that we amended our $400 million U.K.
Tax Lease Facility with Lloyds Banking Group post quarter-end. Under the terms of the amended lease facility, amount guaranteed by Seaspan Corporation are significantly reduced to a fixed amount of our subsidiary's obligations.
The lease facility will continue to provide financing for the five 4500 TEU vessels on time charter to K-Line. The first of these five vessels, the Brotonne Bridge, was delivered to K-Line this week.
Let me cover the deliveries. In terms of deliveries in the third quarter, we accepted delivery of one vessel, the COSCO Indonesia.
Additionally, we have announced the delivery of the Brotonne Bridge and the COSCO Thailand this week. The Brotonne Bridge is the first of five 4500 TEU sister vessels from Samsung and the third of seven vessels to be chartered by Seaspan's to K-Line.
The COSCO Thailand is the sixth of the eight 8500 TEU sister vessels from Hyundai and the eighth of a total of 18 vessles to be chartered by Seaspan through COSCO. Let's go to the utilization coverage.
For the third quarter, we continued to maintain our high utilization at 98.7%. The utilization included 52 days of scheduled off-hire for the dry-dockings of the CSCL Melbourne, New Delhi Express, CSCL Brisbane and the Dubai Express.
We incurred 10 days of unscheduled off-hire for the quarter due to a combination of small repairs on various ships. All of our operating fleet is performing well.
Sai, can you cover the financial aspects of our business, please?
Sai Chu
Yes. Thanks, Gerry.
Please turn to slide four for our Q3 income statement for 2009 and 2010. For revenues, our overall results for the quarter have increased compared to the third quarter of 2009 due to the delivery of 12 ships since then, including one ship this past quarter.
Q3 revenues increased 50% to $111 million from $74 million in the same period last year. Ship operating expenses were up 42% to $29 million, compared to $21 million for Q3 of last year, consistent with the growth of our fleet.
EBITDA for the quarter increased about 50% to $80 million, compared to $51 million in the third quarter of 2009. We are on track to increase our EBITDA by 60% this year to approximately $290 million, compared to $180 million for last year.
We generated $52 million in cash available for distribution at 34% or $13 million increase from Q3 of last year. Normalized net earnings increased by 29% to $26 million for the quarter, in comparison to $20 million for 2009.
Please turn to slide five for our key per-share metrics. As mentioned on our Q2 earnings call, we gained focus on our normalized converted earnings per share to ensure consistency and comparability in the EPS results, given our highly predictable model.
Normalized converted EPS computes diluted EPS, assuming the Series A preferred shares are converted into common shares at the $15 conversion price. This results in an 83.8 million share count at the end of this quarter.
Our normalized converted EPS for the quarter was $0.30 per share, which is in line with expectations. This compares favorably to the $0.27 per share for Q3 of last year.
EBITDA per share increased 38% since Q3 of 2009 to $0.95 per share for the quarter, versus $0.69 in Q3 of 2009. More importantly, assuming no future equity raises, we expect our EBITDA per share to grow considerably to approximately $3.40 per share in 2010 to $4.90 for 2011 and over $5 per share for 2012, representing approximately a 50% growth for 2011 and 65% growth in EBITDA over the next two years.
For our dividend for Q3, the Board of Directors declared a dividend of $0.125 per share. The dividend will be paid on November 12, 2010, to all Class A common shareholders of record on November 2, 2010.
The Board had previously decided to increase the dividend last quarter by 25%. And they will continue to evaluate the dividend policy each quarter.
Please turn to page six for our September 30, 2010 and December 31, 2009 balance sheets. For cash, we had a cash balance of $146 million.
Our cash balances are higher than usual at quarter end as funds were accumulated for vessel deliveries and other cash requirements post-quarter. Current assets were approximately $159 million, while total assets were nearly $4.3 billion, of which $3 billion is comprised of operating vessels and $1.1 billion for vessels under construction.
We've drawn $1.8 billion for our operating fleet for debt, $583 million to fund our vessels under construction and $489 million for other long-term liabilities relating to our newbuild vessels financed using the U.K. tax lease and the February, 2010 sales-leaseback transaction.
I would now like to discuss our expectations for the upcoming quarter. Please turn to slide seven for forward guidance.
For revenues and OpEx, please refer to our website under tab Seaspan Fleet for details on our upcoming delivery dates, charter rates and OpEx rates, as disclosed in our 20-F. For deliveries, after the recent deliveries of the Brotonne Bridge and the COSCO Thailand, we expect to take delivery of 14 newbuild vessels through to approximately April, 2012.
For 2010, there were a total of 13 deliveries, with no further deliveries expected for the rest of the year. Three were delivered in Q1, seven in Q2, one in Q3 and two in Q4.
For 2011, 11 vessels are expected to be delivered, and our final three of our current newbuild fleet are expected to be delivered in 2012. All deliveries are subject to further changes based on customer scheduling requirements.
In terms of dry-dockings, we expect approximately four days for Q4 to complete the dry-docking of the Dubai Express, which began in Q3. We expect 45 days of dry-docking in Q1, 15 in Q2 and Q3, and 30 days in Q4.
These estimates are subject to change. In terms of CapEx, our expectation for the fourth quarter is approximately $140 million, for a total of $810 million in 2010.
2011 CapEx is expected to be around $780 million and about $230 million for 2012. Our distributable cash flow will grow significantly in the years to come as we continue to deliver our fleet and begin to receive deliveries of our large ships on charter to COSCO.
In particular, we expect our cash flows to be $190 million in 2010, $260 million in 2011 and to exceed $300 million in 2012. Diluted share count.
I'd like to now review our expected share count for 2010. This is relevant to the accurate calculation of our normalized converted diluted EPS, as discussed earlier.
Based on no-planned equity raises and a conversion price of $15 per share for our Series A preferred shares, we expect for Q4 approximately 84 million shares, for 2011, 85.2 million, 85.8 million, 86.4 million, and 87 million for each quarter, sequentially. For 2012, 88.2 million, 88.8 million, 89.9 million, and 90.1 million for each quarter sequentially.
Please note that these projections are subject to change. In terms of EPS and other per-share metrics, it is important to note that 2009 and 2010 figures reflect the $200 million Series A preferred shares last year and our $26 million Series B preferred issued this year.
As previously mentioned, EPS, along with other per-share metrics, are expected to grow dramatically. This is due to the deliveries of large ships to COSCO and the remaining vessels to K-Line.
Again, this is based on the assumption of no future equity raises. I'd now like to turn the call back over to Gerry for a discussion on our company business model and general industry fundamentals.
Gerry Wang
Thanks, Sai. Please turn to slide eight for company fundamentals.
I would like to reiterate our company fundamentals and the conservative business model, which we believe positions Seaspan to perform well in both good and challenging periods. As you know, Seaspan is a leading independent container ship owner.
We have a very large modern, fully contracted fleet of 69 vessels of over 400,000 TEU carrying capacity. Including our most recent deliveries, 55 ships are in operation and 14 are to be delivered.
Worth mentioning here, all 14 newbuilding vessels to be delivered are under long-term charter contracts with COSCO and K-Line. Our focus has been to produce sustainable and stable cash flows from our primary long-term fixed rate charters of our fleet.
Our key differentiators include our conservative business model, which has been stress-tested by the recent downturn, our high-quality customers, which consist primarily of leading Asian liner companies, our dedicated and experienced ship managers, our strong sponsor support with long-term commitment to the company, which has been demonstrated through their investment of approximately U.S.$700 million, our history of prudent decisions to raise capital to support a strong capital structure, our history of seizing attractive growth opportunities and our experience and dedicated management team. For the building growth, please move to slide nine.
We can see that Seaspan has strong building growth. The company has more than tripled its contracted fleet capacity since IPO, representing a compounded annual growth rate of 30%.
All of our 14 remaining ships are to be delivered by approximately April 2012, for which we believe we have fully secured financing. In total, we have approximately $7 billion in contracted revenues, based on our projections, we expect to exceed approximately $700 million per year of contracted revenues, $500 million of EBITDA and $300 million of cash available for distribution to common shareholders, beginning annually in 2013, at which point all of our current newbuilding programs will be complete.
For market and industry review, please turn to slide 10. I would like to briefly overview our industry fundamentals.
2010 has been a very good year for the industry. We expect freight rates, charter rates and the volumes to moderate into 2011 and 2012, and not reach 2010 highs a demand remains stable and supply increases or moderates.
However, we believe 2013 will be a probably better year as demand will likely increase and supply concerns will become less noticeable. We are optimistic about the improvements in the ship industry and believe we are well positioned to strengthen our industry-leading franchise.
Specifically, we believe we have now fully secured financing for our building contracted fleet growth and have further enhanced our financial flexibility. Going forward, we intend to continue to focus on our significant building growth and to enhance our flexibility and our capital structure in order to capitalize on future growth that meets our strict return requirements.
We’ll now begin the Q&A session. Operator, please begin.
Operator
Thank you. (Operator Instructions) Our first question comes from Justin Yagerman of Deutsche Bank.
Your line is open.
Josh Casevan – Deutsche Bank
Hi, guys. It's Josh Casevan [ph] for Justin.
Sai Chu
Hi, Josh.
Josh Casevan – Deutsche Bank
Hi. I just wanted to start off with – just a couple macro questions.
You've really touched on the container shipping industry and I was wondering if you guys have had any kind of read-through from some of your customers on kind of the Q4, Q1 outlook? There's been a lot of talk about increased idle, vessels going idle and the normal seasonal demand.
Do you see this as being normal or is it – or there is potential for kind of a worse than expected?
Gerry Wang
The short answer to your question is, most likely it will be better than anticipated. I was in China just last week and I spent some time with the leading customers there.
The situation right now is actually better than anticipated, certainly better than Q4 last year.
Josh Casevan – Deutsche Bank
Great. Thank you.
And given the comments that 2013 is expected to be better than the next couple years. Does that mean now is a good time to place newbuilding orders?
Gerry Wang
Obviously, 2013 will be pretty good because we – if we look at the supply side, most newbuildings will have been delivered by the end of 2012. If the demand continues to hold up then we're going to see a pretty decent year for 2013 in terms of charter rates and freight rates and everything else.
Obviously, we're looking at whatever opportunities that available and to position ourselves to growth the company when the opportunities arise and if the opportunities meet our strict return requirements.
Josh Casevan – Deutsche Bank
Great. Thanks.
And just one more question. Have you guys still seen a shortage of containers?
Has that still been an issue for the liners?
Gerry Wang
There's still shortage there but it is not as severe as it was for the Q1 and Q2 for this year.
Josh Casevan – Deutsche Bank
Great. Thank you for your time.
Gerry Wang
Thank you.
Sai Chu
Thanks.
Operator
Thank you. Our next question comes from Ken Hoexter of Merrill Lynch.
Your line is open.
Ken Hoexter – Merrill Lynch
Hey. Good afternoon, guys or good morning.
Gerry, I think, I missed the last – your answer to that last one on thoughts on expansion. When do you think about going back in, I mean, you've always said you might look at some shorter term leases, you might look at some used vessels.
Now that you've finished the financing on your core vessel, when do you think the time is right to make that next opportunity considering the market that we're in now?
Gerry Wang
Well, basically, Ken, I want to emphasize Seaspan already has a huge building growth over the next 16, 17 months. We have another 14 vessels to be delivered.
They are the (inaudible) TEUs for COSCO and 4500 TEU wide-beam vessels for K-Line and also two 8500 TEUs for COSCO. That is a substantial building growth representing approximately if we do the numbers that would be around 30% of our carrying capacity to be delivered over the next 16, 17, 18 months.
That represents also approximately 50% increase in terms of our capacity and a 60% increase in our cash flows. So, there's substantial building growth we need to take care of.
Obviously, we'll evaluate transactions and after opportunistically if the opportunities come up, they meet our return capital structure requirements and we, Seaspan has demonstrated the history of funding acquisitions and doing deals that meet our requirements. And we also did one little transaction at the beginning of the year for the acquisition of one 4250 TEU now called UASC Madinah.
That ship was fixed on charter for two years, taking advantage of pretty strong charter rates. And I think we will just continue to grow if the right opportunities arise and also when we have the funding capabilities to do so.
But one thing I just want to reiterate we're not going to grow for the sake of growth.
Ken Hoexter – Merrill Lynch
And then, just on your – you kind of said everything over there, meaning China was looking better than you thought expectations were. But it does seem like we've had a pretty decent swelling at the ports.
LA and Long Beach posted a decline sequentially in volumes. Air Cargo seems to be slowing a bit.
Just wondering, if you step back and look at global trade right now, it does seem to be just taking a bit of a cooling off here, can you throw out your thoughts on that?
Gerry Wang
As I said, I was in Asia, in China, Hong Kong area last week and I did speak with a number of operators in that area. The general sentiment is Q4 is seasonally a slow season but the volume is better that what they anticipated.
They were prepared for a big correction after the Chinese October Golden Week holidays, but volume has actually recovered better than they thought. The freight rates have come down a little bit, which is seasonal but maintained at pretty decent rate.
They are very happy, to be honest. And they are cautiously optimistic about next year.
They think the volume will continue to move up at 3% to 5% that's their anticipation and the supply side, there will be new vessels to be delivered. So, they think and we agree, next year will be going through a moderation, which means it won't be as good as 2010, which is a record year, Ken and but it's still very good compared with '09, '08.
For 2012, the same picture holds. For 2013, we're seeing a little bit different picture, which basically is related to the deliveries of the newbuildings, which have been all completed.
So, 2013 will be, generally speaking, a brighter year if our assumptions are proven to be correct. So, generally speaking, the industry is quite relaxed at this point in time.
Ken Hoexter – Merrill Lynch
Sai, you noted that you can go online and check out the deliveries, specific delivery dates of the future vessels. Can you just talk to us maybe a bit about your discussions with the charters?
Are they – do they want to get them any quicker right now, are they looking to push those off to later dates in the contract? How are your counterparties looking at the deliveries of these next 14 vessels?
Sai Chu
We actually discussing with COSCO for example, for the remaining four 13000 TEUs to be delivered for 2012 and we're also discussing with shipyard as to what would be the earliest delivery dates. And we haven't finalized anything, but there is some discussion going on looking at the possible earlier deliveries and we are working very closely with them to make sure our customer requirements are met.
Ken Hoexter – Merrill Lynch
So, they're looking to get them a little faster if they can.
Sai Chu
Correct.
Ken Hoexter – Merrill Lynch
Interesting. Okay.
And then, just a technical thing. In the release you note that we believe the equity covers our remaining equity needs.
I'm just wondering was that – was there a reason for the cautious tone on that or is that just happen to be how you phrased it?
Gerry Wang
Well, that's just how we do that, Ken, and we're comfortable with the situation we're in and the margin that we have. So, we have taken care of all the financing requirements for the strong building growth that is 14 vessels to be delivered.
So, we're happy with where we are today.
Ken Hoexter – Merrill Lynch
My last question. Just on the debt, can you just talk a bit about when, maybe timing of when you need to start to making some of your larger post-amortization payments on that?
And then, Sai, can you throw in what the growth of debt should look like over the next year or two years until all the vessels are on?
Sai Chu
Yeah. Hey, Ken, it's Sai.
In terms of the growth in the debt, it's, let's see. Growth in the debt, we're looking at the end of 2011, I mean, it's going to be fairly consistent generally with the growth in the fleet.
So, in terms of any debt balances, we're looking at probably around 3 point, call it $3.5 billion or so, and that's going to be fairly steady. And 2014 is the first year where we have some larger debt repayments but 2015 is where we have the first maturity of our debt being the $1.3 billion and some of the $400 million U.K.
Tax Lease.
Ken Hoexter – Merrill Lynch
Okay. Great.
Thank you for that. Appreciate the time, guys.
Thanks, Sai.
Sai Chu
Thank you.
Operator
Thank you. Our next question comes from Michael Webber of Wells Fargo.
Your line is open.
Michael Webber – Wells Fargo
Hey. Good morning, guys.
How are you?
Gerry Wang
Good. How are you, Mike?
Michael Webber – Wells Fargo
Good, good. Just wanted to touch base on the sale-leasebacks.
How much additional financing would you consider raising that way and have you given any thought to potentially doing a couple of more and maybe buying back some of those more expensive preferred shares?
Sai Chu
Well, first off, in terms of availability, I think that it's important to note that we are in a fortunate position where we are able to raise long-term financing, 12-year financing at 80% of the original cost, not fair market value. If you look at today's market, most owners would only be able to raise 65% of the current market value and at five to seven-year money.
In terms of the availability for us, we certainly have more capacity to do that with a few of the banks out there but we're prudent about doing any transactions and sort of timing. We are also looking at other opportunities, different instruments within the capital structure that would open up some additional room.
So, it's not just the sale-leasebacks, but there's other transactions that we are considering. In terms of buying back preferred, the preferred A's, we cannot call them.
Michael Webber – Wells Fargo Securities
Okay.
Sai Chu
There's an automatic conversion at 15. However, we can call them post-2014.
Well, they all automatically convert once you hit 15. If it's below 15, then we have the option to call.
Michael Webber – Wells Fargo Securities
Right, right. Okay.
No, that makes a lot of sense. I guess the only other question I have is more just a macro question.
And Gerry, I mean, can you talk a bit about I guess the deals that are being shot to you guys right now? I know there's always stuff coming across your desks.
When you think about those deals, are you seeing any sort of trend as far as vessel size, both in terms of I guess nominal size and the number of vessels that lines are looking to add? And I guess what sort of trends can you see as far as the deals that are coming across your desk now versus what you were seeing say three or six months ago?
Gerry Wang
All right. Mike, a good question.
There is tremendous appetite for fuel efficient, environmental friendly and also economic designs, for the size, ranging between 8000 TEUs to 10000 TEUs.
Michael Webber – Wells Fargo Securities
Okay.
Gerry Wang
And those are proven workhorses. They're good for Asia-Europe trades and they're also good for Asia-North American trades, or the two main trade routes.
Michael Webber – Wells Fargo Securities
Interesting. Are you seeing any sort of – that 8000 to 10000 TEU range, is that – would you kind of consider that almost a new cap as far as the larger – demand for the larger vessels, or do you still think there's demand for additional 13000 TEU vessels and beyond?
Gerry Wang
I think the appetite for 13000 TEU or beyond has become a little bit less. I think the focus right now is on the 8000 to 10000 TEUs.
Michael Webber – Wells Fargo Securities
Okay.
Gerry Wang
Through the financial crisis, those vessels were proven to be very handy and very economic to operate. Worth mentioning here, talking about trends, definitely there's a requirement for fuel efficiency and operating efficiency as well in terms of loadability.
I think that's where the industry is heading to, in terms of newbuilding development.
Michael Webber – Wells Fargo Securities
All right. Great.
Thanks a lot for the time, guys.
Gerry Wang
Thank you.
Sai Chu
Thank you.
Operator
Thank you. Our next question comes from Gregory Lewis of Credit Suisse.
Your line is open.
Greg Lewis – Credit Suisse
Thank you and good morning. Gerry, just a follow-up on that last question.
I mean, there have been a few of the major liner companies have come in and placed shipbuilding orders. Has any of those liner companies, are those companies approaching container ship charter owners like yourselves, looking to split up the orders with container ship charter owners?
Or are those liner companies simply looking to place these orders by themselves?
Gerry Wang
The answer to your question, yeah, they've been approaching us and others for sharing the orders or working together on some additional newbuild orders. Again, the focus is on fuel efficient, environmentally friendly new designs, which also has a good loadability.
That is where the focus is right now.
Greg Lewis – Credit Suisse
Okay. Great.
And then just drilling down into the leaseback, did you disclose what the leaseback and rate is to Seaspan?
Sai Chu
No, we do not.
Greg Lewis – Credit Suisse
Is there plans to do that?
Sai Chu
No. I think it's really just a financing at – in terms of your modeling.
It's within our range of our weighted cost of capital.
Greg Lewis – Credit Suisse
Okay. So, when we think about the return on that vessel, I mean, clearly you guys target that low-teen type return.
I would think with the sale-leaseback transaction that return probably drops into the low single digits. Is that the right way to think about it?
Sai Chu
Well, there's a bit more debt attached to it, but it's not marginally different. It's within the ranges that we've stated in the past.
Greg Lewis – Credit Suisse
Okay. So – okay.
Thank you.
Gerry Wang
Thank you.
Sai Chu
Thank you, Greg.
Operator
Thank you. Our next question comes from Noah Parquette of Cantor Fitzgerald.
Your line is open.
Noah Parquette – Cantor Fitzgerald
Thank you. Most of my questions have been answered, but I just wanted to know, as your cash flows expand, I mean, what thought have you given to potentially inching up the dividend a little bit?
Sai Chu
Yeah. Hi, Noah.
It's Sai. I mean, I think answering this question, I think it's first – you have to consider where we were a year ago.
And since making that decision in Q1 of 2009, the difficult decision related to retain more cash and redeploy it to the cash flows, towards our newbuild program, we made a lot of progress in executing transactions that have increased the financial flexibility and the financial strength and just the growth in the cash flows. I think that the most important thing is that we maintain a very high cash flow per share for our shareholders.
And the Board has a decision that they're going to consider very carefully about the dividend and certainly the growth in the cash flows and the best mix of returning capital to our shareholders and retaining whatever portion of cash for growth. So, at this time I think the Board – what's important is its very comfortable with the current dividend policy and its going to continue to review it and take into consideration the long-term benefits for our shareholders.
Noah Parquette – Cantor Fitzgerald
Great. Thank you very much.
Sai Chu
Thanks, Noah.
Gerry Wang
Thank you.
Operator
Thank you. Our next question comes from Urs Dur of Lazard Capital Markets.
Your line is open.
Urs Dur – Lazard Capital Markets
Hi, guys. Good morning.
Gerry Wang
Good morning, Urs.
Urs Dur – Lazard Capital Markets
I had to jump on the call late, so you may be approached this before. And Greg mentioned that there have been some ship orders, but I didn't hear it in that answer.
I mean, the ship orders that we've been seeing has largely been to replace capacity of older ships, not to expand capacity of these liner operators, such as Evergreen or NOL. Is that what you're seeing?
Gerry Wang
Correct. Those orders are primarily for replacing the older vessels.
There's one thing that I want to highlight here. Due to the slow steaming requirements and also the high fuel costs, there's tremendous pressure on phasing out the very old vessels, ships that are over 25, 30 years old, because they are just not fuel efficient, that's what Evergreen and NOL or APL have done and to replace those older vessels with the new ones.
The trend is the new ships tend to focus on fuel efficiency and also on environmental concerns. They are also better in terms of loadability compared with the earlier designs that we saw 5, 10 years ago.
Urs Dur – Lazard Capital Markets
Great. No, that's useful.
On distributable cash flow, it's growing. There's been a lot of – you've discussed it a lot in answers that I've heard.
Given the delivery of the ships now, where do you forecast it's going to be year-on-year on a quarterly basis? I mean, you're at 50-plus million this quarter.
What does it look like for this time next year in your model?
Sai Chu
Well, distributable cash. For next year we're looking at – it's certainly going to be in the range again of about $60 million.
Urs Dur – Lazard Capital Markets
Nice. But you will – the Board will decide as to whether or not you want to deploy that for growth, say, in 2013, when demand is better and/or dividends and or both, correct?
That's not what is going to be distributed.
Sai Chu
No. I mean, certainly the Board's going to consider that balance.
And as we've stated in the past, we would not pay 100% of our distributable cash flow. There's a certain amount that we would retain for replacing CapEx, which is reinvesting into the fleet.
So, certainly again, what we want to focus on is this tremendous growth in the cash flows and the value of this enterprise.
Urs Dur – Lazard Capital Markets
Sure. Okay.
That's very clear. In 2015, with the maturities coming up and what's your contract cover on that debt maturity?
And what's your – let’s say, your confidence today as to the ability to recharter it, should the ships be the same age with the same amount of contract cover? Would you be able to do it?
Gerry Wang
As a matter of fact, the charter rates today are actually higher, 20% to 30% higher, than the original contracted charter rates. So, we are quite relaxed in the rechartering.
But we don't have anything until the very – the fourth quarter of next year.
Urs Dur – Lazard Capital Markets
Right.
Gerry Wang
For most vessels, the possibility. And the two China shipping vessels are virtually already extended for the next two years.
So, I wish we had some interesting hands at this point in time.
Urs Dur – Lazard Capital Markets
All right. It was more of a question and that's a great point, Gerry.
And I hope you – I think I might have been slightly misunderstood. If you – you have some debt maturities coming up in 2015, I believe.
Let's just say it is 2015 today in today's bank environment and those ships are five years older, would you feel confident in the ability, given the length of the contracts you have remaining on those vessels that are encumbered, that you'd be able to redo that debt at this time, or would that be more challenging?
Gerry Wang
We think we should be quite easily doing the debt renewal given the charter profile that has with those ships and also our own overall balance sheet in terms of financing capital structure.
Urs Dur – Lazard Capital Markets
Excellent. Thank you so much for your time, guys.
Thank you.
Gerry Wang
Thank you.
Sai Chu
Thank you, Urs.
Operator
Thank you. (Operator Instructions) Okay.
I'm showing no further questions in the queue.
Gerry Wang
Okay. So, if there is no further questions, I just want to give you a brief highlight and to conclude the Q3 earnings call.
I'd like to thank all the participants for taking the time to joining the call to listen to us. Seaspan's business model has been designed to be conservative and stable.
And we have been profitable through all those years and we've been stress-tested through the financial crisis. Now, Seaspan has entered into a stage where our financing has been fully taken care of for the building growth, so we're very happy with where we are today.
And we're also looking at the potential incremental growth that would meet our requirements. That would be in terms of helping us meeting all the requirements that we have set from day one.
So, we're excited about our future and we're looking forward to talking to you again for Q4. And again, thank you very much.
Thanks for participating. Thank you.
Operator
Thank you. Ladies and gentlemen, this concludes the conference for today.
You may all disconnect and have a wonderful day. Thank you.
Gerry Wang
Thank you.
Sai Chu
Thank you.
Gerry Wang
Bye-bye.
Sai Chu
Bye.