Dec 8, 2021
Operator
Hello, and welcome to the Eneti Incorporated Third Quarter 2021 Conference Call. I would now like to turn the call over to Hugh Baker, Chief Financial Officer.
Please go ahead, sir.
Hugh Baker
Thank you, operator. Thank you for joining us today.
On the call with me are Emanuele Lauro, Chairman and Chief Executive Officer; Robert Bugbee, our President; Cameron Mackey, Chief Operating Officer; James Doyle, Senior Financial Analyst; David Morant, Managing Director; Tim Sanger, Managing Director; and Sebastian Brooke, Chief Operating Officer of Seajacks. The information discussed on this call is based on the information as of today, Wednesday the 12th of December 2021, and our press release and earnings press release presentation as of this morning, which may contain forward-looking statements that involve risk and uncertainty.
Actual results and events may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the forward-looking statement disclosure in the presentation issued today and in the press release that we issued today as well as Eneti Inc.’
s SEC filings, which are available at www.eneti-inc.com and www.sec.gov. Call participants are advised that the audio of this conference call is being broadcast live on the Internet and is also being recorded for playback purposes.
An archive of the webcast will be made available on the Investor Relations page of our website for approximately 14 days. In addition to the call today, there is a short presentation that has been uploaded to our website on the Investor Relations page under Reports and Presentations.
Now I’d like to introduce Emanuele Lauro.
Emanuele Lauro
Thank you, Hugh, and thanks, everybody for joining us today. We’ve discussed the company at length most recently in conjunction with our equity raise.
The raise itself has placed us on the front foot in building the world leading wind turbine installation base of business. We’re looking forward to execute on our plans.
And on what we said we would do. In the mean time, the integration of the Seajacks business continues well.
We are delighted at the quality of the platform and the reputation it enjoys with customers. And I’m personally also extremely happy to have found the business run by great people.
The business remains profitable and continues to generate strong cash flows. There is volatility, which is pertaining specifically to the industry in the ironing, but as I said profitable and generating strong cash flows.
We’re optimistic about the outlook for offshore wind in general, and more specifically for the markets in which we operate in. As I said before, we’re focused on execution at this stage and have already exercised the second option or actually the option for the second vessel at Daewoo.
This will deliver in early 2025. And as far as the Jones Act project is concerned, it is an exciting development area for us discussions continue with customers and capital providers slash U.S.
local content partners. The project has certainly accelerated following the recent equity raise, and we look forward to update you as soon as we have tangible news, which we expect in the not too distant future.
So we also expect a steady flow of contract announcement and news flow through the inflection point with the delivery of the new builds in Q4 2024 and Q1 2025. From an industry perspective, the visibility to 2030 and beyond is getting clearer every day.
The demand curve for our services continues to steepen against an ongoing under supply of wind turbine installation vessels. We’re excited about our prospects as the leading U.S.
listed company in the growth industry of offshore wind both as far as the U.S. market and the international market is concerned.
And more importantly, we look forward to many years of partnership with so many new substantial shareholders to our register. After the transition, it feels good now that we have exited our legacy conventional shipping business merged with Seajacks concluded our equity raise.
We do look forward, as I mentioned before, to execute on our plan going forward starting from now really. I do not have any more opening remarks.
So I think operator, we can turn the call to questions.
Operator
Thank you. [Operator Instructions] We have a question from the line of Randy Giveans with Jefferies.
Your line is open. Randy, your line is open.
Chris Robertson
Hey guys, this is Chris Robertson on for Randy, thanks for taking our call.
Emanuele Lauro
Sure. Hi.
Chris Robertson
Hi, I just wanted to ask about I guess the dividend at this point why maintain it as it stands with kind of uncertainty around the new building program, just things can come up. Why not just preserve that cash on hand just to be safe?
Robert Bugbee
I think it’s a very minimal dividend. I think that it’s sort of a rather than chopping and changing around.
I think it’s much better to keep that dividend in there at the moment. And we have – we clearly have enough cash and enough liquidity to and deal with all the things that we are committing with going forward.
And this may have been an appropriate question in another time. I don’t think it’s relevant now related to the cash savings.
And as we would expect over the coming months to announce various increases in secure revenue going forward. And I think it will – if it’s not clear to people now, I think it’ll be clear to people reasonably shortly that the balance sheets in good shape for the commitments that we have at the moment.
Chris Robertson
Okay. Yes.
That’s fair. All right.
Moving on to our next question. Just in terms of the proceeds that were raised with the offering, I guess why that specific amount and can you talk about the use of the proceeds?
Robert Bugbee
Well, the use of the proceeds were defined in to exercise in the money option in a Daewoo shipyard. And to put us in a position to put in a more permanent financing than we have at the moment to and create a solid balance sheet from which to go forward and to put us in a position to try and move on the American Jones Act venture.
Chris Robertson
Got you. And one quick market question if I could sneak a third one in.
There was an article recently talking about the demand for WTIV vessels in Asia and that taking some of the European vessels out of that market where they can earn a higher rate in the Asian market. Do you have any commentary just on the vessels on the water right now in terms of the markets they’re operating in?
Is there any chance that they might be shifted over to the Asian market if they’re not already there?
Robert Bugbee
Yes. I would just do one comment before Sebastian chats on this is that I think in a more broader context, so whatever Sebastian says in the short-term, in the longer-term, I think that you’re going to see activity in many of the regions of the world now, the developing Asian market as you’ve said, and continuation in Europe, the United States likely from time to time in a tighten market, especially as there’ll be projects that will be extended or vessels that, that, you might said projects need more vessels that you are likely to be see opportunities of arbitrage between two markets and increase more and more.
But Sebastian, if you could sort of answer in a more detailed question.
Sebastian Brooke
Yes. I mean I think that the big change that’s happened in the last couple of years is we’ve gone from one local market to now having kind of four regional markets, whether that be Europe, Asia-Pacific, America, and even within Asia-Pacific a couple of kind of core markets there.
And as Robert said, each of those markets will end up having their own dynamics based on the available supply and demand. And it will create opportunities and yes, as we’ve shown with the seller, we were prepared to transit over to Asia-Pacific in order to achieve high day rates just based on the local demand supply characteristics in the area.
So yes, it’s a mobile fleet and people will shift out of areas towards the regions, which offer the best economics, which will obviously create shortages and opportunities as they go.
Chris Robertson
Okay, great. Yes, it’s good to hear that the current fleets are going to be just as mobile as the older dry bulk fleet.
Thanks for taking our questions.
Emanuele Lauro
Thank you.
Operator
Thank you. [Operator Instructions] We have question from Greg Lewis with BTIG.
Your question, please.
Greg Lewis
Hey, thank you, and good morning, everybody. Hey guys, I was hoping for a little bit more clarity around the Seajacks performance this quarter.
I realizing that the deal closed mid-August, I believe. Could you talk about the full quarter financials around that?
Hugh Baker
Greg, we can’t talk about that in too much detail. And we’re obviously aware that the financials really only show the performance of Seajacks from the period, which we bought it.
But if you go to the presentation that that’s been uploaded in our website, you’ll see that we’ve provided additional detail in terms of the revenues that Seajacks earned between July 1 and the time of acquisition. And that is, you’ll see that we’ve shown revenue around $30 million for the quarter, but prior to that period in the from July 1, August 12, with is showing revenues of $35.5 million.
So we have a combined revenue figure for the quarter and the same with operating expenses and project costs. I’m afraid that’s what we can provide at this time.
Greg Lewis
Okay. That’s fair enough.
Thanks for that Hugh. And I guess, while I got your voice right now.
Could you talk a little bit about, I saw the pro forma, the – I believe the ING facility was retired. I believe, more recently you’ve talked about coming up with a new – I guess, a new facility to replace the two existing facilities and any kind of progress or timing and any kind of color you can give around that.
Emanuele Lauro
Yes, I think we can certainly in our equity issuance, the prospective supplement, we talked about a proposal we’d received and we are developing that proposal and other proposals to be in a position to refinance our existing debt facilities in the first quarter, but potentially might drag it into the second quarter. So there is a refinancing underway and that process is we’re not in a hurry.
So that process is going on, but we’ll certainly probably be able to report more next quarter.
Greg Lewis
Okay, perfect. Hey, thank you guys very much for the time.
Emanuele Lauro
Thank you.
Operator
Thank you. And we have a question from the line of William Burke with B.
Riley. Your line is open.
William Burke
Thank you. Just a quick follow on to Greg’s question on the ING facility, the debt you have left on the balance sheet is subordinated.
Does that mean that your current vessels are unencumbered?
Hugh Baker
No, no. Liam, the debt that we have on the balance sheet is secured by the operating fleet that we own on the water.
So it’s the five Seajacks specials that we acquired and there are security for that loan. So we – it’s not subordinated.
It is secured.
William Burke
Okay. So all the vessels you have are secured by that current debt.
Emanuele Lauro
Yes.
William Burke
Okay. And I guess, you didn’t state a backlog number, but directionally, could you give us a sense as to how the backlog is shaping up?
Emanuele Lauro
I think, probably, I’ll push that to Sebastian Brooke.
Sebastian Brooke
Yes. On the backlog perspective, as we discussed previously, the contracting horizons for the NG2500 are relatively short.
It’s kind of the end of the budget – year or the end of the calendar year and into the first quarter of next year. But we do see quite a high number of inquiries coming for next year.
With regards to the existing fleet, this is with regards to Zaratan fleet out on the turbine installation of the key to next year with ongoing conversations about work into the next year and beyond and with Scylla, she’s contracted through next year the Greater Changhua project. And we’re in advanced discussions about follow on projects for a following year.
And I can’t give much more detail than that at the moment. There are also regards to new builds, multiple projects being pursued from delivery and onwards.
And I think that the message that we given previously that we expect announcements or contract awards made compliant.
William Burke
Okay. Well, thank you, thank you, Sebastian.
Operator
Thank you. And our next question comes from Turner Holm with Clarksons Platou.
Your line is open.
Turner Holm
Hey, good morning, gentlemen. Thanks for taking the question.
So first one is on the Jones Act project. I was just wondering if you all could kind of outline the milestones for that project.
I mean, I guess with the November share issue, you’ve now kind of secured your equity piece of the deal, but kind of what are the next steps kind of progressing the project from concept, equity raise, finding the partners eventually to sort of contract. And then the second part of that question is just if there’s been any feedback from your client so far after you’ve announced the announced the project.
Thanks.
Emanuele Lauro
Sorry, Turner. My line was disturbed.
Can you repeat the question please? I apologize.
I don’t know why it was…
Turner Holm
Okay. Yeah, maybe it was an issue with my headphones.
Forgive me if that. No, my first question is just on the Jones Act new build project.
I was just wondering if you all could kind of guide us through milestones on that project and you kind of raise the equity now through the share issue in November for your portion of the deal. But what are the events that we should expect coming ahead for that, and then is a kind of corollary to that question.
What has been the response from customers with developments in the U.S. with regards to your Jones Act concept?
Thanks.
Emanuele Lauro
Thanks very much. I’ll start.
And then my colleagues can chime in as they please. I think it’s difficult to give clear guidance on what the milestones are for the Jones of project.
Because there are a number of things that are being discussed in parallel namely the U.S. partner, the financing of it, the contractual position with the yard, as well as the employment.
So the contractual position on the employment side. So it is difficult to depict and give details on this topic at this stage.
That’s why I was a little vague in my opening remark saying that we’re going to get back as soon as we have relevant news in the not too distant future really is what we expect to – we expect all these aspects to come together relatively promptly. However, it is – as I said, difficult to depict and give you more detail or guidance at this stage where we cannot really disclose anything in more detail.
And then the second part of your question was Turner?
Turner Holm
It was just around the customer response to second Jones Act new build, right? It’s only second unit end the market.
So I was just curious how customers are reacting to the point of the project.
Emanuele Lauro
Tim, do you want to take this very well, the phone keeps on ringing, but Tim or Sebastian, do you want to take this?
Tim Sanger
Sure. I think developers are very excited about the opportunity of having a Jones Act, WTIV I think there are other solutions available.
It’s a highly attractive one that minimizes installation risk at the end of a long and expensive project. So we’ve been receiving a lot of phone calls and discussions of a very advanced with a number of customers.
Turner Holm
Understand. Okay.
Just moving on, we’ve been hearing from some of your competitors and hearing some talking to market that the maintenance market. So I guess, a little bit is the lower end of the WTIV market has actually been heating up quite well.
And that’s there’s been some improvement in day rates. Are you all seeing any difference, maybe for the Leviathan, Hydra, the Kraken in terms of what the market opportunities are for those assets, as you look forward into 2022, maybe 2023, compared to what you’ve kind of experienced over the last year or two?
Sebastian Brooke
Definitely. It’s Sebastian.
So I think that there are a number of factors that go into 2,500 market going through next year. And the following is one of which is some of the deferred projects from last year and/or this year and the previous year due to COVID.
But in addition, yes, I would agree with what the market chatter is, which is that a lot of this first generation of turbines are approaching 10 years into their useful life and requiring increasing amounts of maintenance. So we are hearing and seeing more inquiries and generally or with some of them there are indications that they’re across multiple years.
So yes, the direction of travel is in the right direction for us, I think, with regards to maintenance.
Turner Holm
Very good. And then just one high level question.
I mean, it’s been now three, four months since you closed the transaction between Eneti and Seajacks. And I know it’s a short period of time, but I’m just wondering if there’s been any directional change in terms of, what you believe for the outlook for this market.
Especially, in regards to the new builds and higher end assets like the Scylla and the Zaratan. Is there any difference to report or is it kind of strong as it was when you close the transaction?
Thanks.
Sebastian Brooke
I think Turner that’s more than changes that have been confirmation. So the direction of travel really remains the same.
The pieces remains the same. We had three were very busy, transformative quarters now on the back of us.
And we really are looking forward to be able to execute on the plan starting two weeks ago, when – two, three weeks ago, when we closed the equity raise, which has allowed us to sort of cement our position and be able to give us the chance to go and execute, which is what we’re doing. And we understand that we couldn’t – it’s frustrating for us as well, not being able to give you the level of details, disclosure that we want to do ASAP but we’re working as outage we can to get there.
And it shouldn’t take long to start being the first step coming together. So it’s exciting.
We have the position now and look forward to push things through.
Turner Holm
Okay, thanks so much and best of luck next year. Thanks.
Sebastian Brooke
Thank you.
Operator
And I’m not showing any further questions. I will pass the call to Mr.
Baker for any final remarks.
Emanuele Lauro
Thank you, operator. We have no further comment.
So we thank everyone for being on the call.
Operator
Thank you. This concludes today’s conference call.
Thank you for participating. And you may now disconnect.
Have a great day.