Earnings Call Transcript - GNK Q1 2026

Operator, Operator

Good morning, ladies and gentlemen, and welcome to the Genco Shipping & Trading Limited First Quarter 2026 Earnings Conference Call and Presentation. Before we begin, please note that there will be a slide presentation accompanying today's conference call. That presentation can be obtained from Genco's website at www.gencoshipping.com. To inform everyone, today's conference is being recorded and is now being webcast at the company's website, www.gencoshipping.com. A webcast replay will also be available via a link provided in today's press release as well as on the company's website. At this time, I will turn the conference over to the company. Please go ahead.

Peter Allen, Chief Financial Officer

Good morning. Before we begin our presentation, I note that in this conference call, we will be making certain forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements use words such as anticipate, budget, estimate, expect, project, intend, plan, believe and other words in terms of similar meaning in connection with the discussion of potential future events, circumstances or future operating or financial performance. These forward-looking statements are based on management's current expectations and observations. For a discussion of factors that could cause results to differ, please see the company's press release that was issued yesterday, the materials relating to this call posted on the company's website and the company's filings with the Securities and Exchange Commission, including, without limitation, the company's annual report on Form 10-K for the year ended December 31, 2025, and the company's reports on Form 10-Q and Form 8-K subsequently filed with the SEC. At this time, I would like to introduce John Wobensmith, Chairman and CEO of Genco Shipping & Trading Limited.

John Wobensmith, Chairman and Chief Executive Officer

Good morning, everyone. Welcome to Genco's First Quarter 2026 Conference Call. I will begin today's call by reviewing the progress we've made executing our comprehensive value strategy, and then we'll review our Q1 2026 highlights and dividend outlook for the remainder of the year. We will then provide additional details on our financial results as well as an update on the industry's current fundamentals before opening the call up for questions. For additional information, please also refer to our earnings presentation posted on our website. Starting on Slide 5. We believe that how a management team and Board allocate capital is critical for generating returns and value to shareholders, especially in a capital-intensive industry such as shipping. With this goal in mind, we created our comprehensive value strategy, a well-defined capital allocation strategy, which has resulted in Genco significantly increasing its earnings power and dividend capacity for the benefit of shareholders. When we implemented the strategy in 2021, we set out to achieve 3 main objectives: transform Genco into a low leverage, high dividend company, maintain significant flexibility to grow the fleet and pay a sizable quarterly dividend based on a transparent dividend formula. Over the last 5 years, we have successfully delivered on each pillar of our differentiated strategy. We fortified our balance sheet to effectively operate and grow in various rate environments and provided shareholders with consistent and sizable dividends. We also increased the number of premium earning Capesize vessels in our fleet to better take advantage of a strengthening dry bulk market and enhance shareholders' upside potential. Specifically, over this time, we have invested $557 million in high-quality modern vessels and distributed $293 million in dividends to shareholders. We also paid down $119 million in debt, reducing our cash flow breakeven rate. Moving to Slide 6. Following a strong finish to 2025, we are pleased to have carried this positive momentum into 2026. During the first quarter, we generated strong cash flows driven by a time charter equivalent rate of over $19,300 per day, our highest first quarter TCE since 2022. We also maximized our revenue generation days during the quarter, achieving fleet-wide utilization of 99.2%. In what is typically a seasonally softer period, we declared a Q1 dividend of $0.35 per share, more than double our first quarter 2025 dividend. The Q1 dividend also marks our 27th consecutive dividend, the longest uninterrupted period in our dry bulk peer group. Complementing our strong financial performance, we continue to grow and renew the fleet with modern, high-specification premium earnings assets and reduce exposure to older, less fuel-efficient vessels. In March, we took delivery of two 2020-built high-specification Newcastlemax vessels that were immediately deployed in the spot market at firm rates. With both vessels expected to operate for a full quarter in Q2, we anticipate the vessels to have a positive impact on our results and earn a premium to benchmark indices in the spot market. Capitalizing on the strong and liquid sale and purchase market, we also divested the two oldest and smallest vessels in our fleet during March and April. These sales were at levels above recent broker valuations and demonstrate the rising asset value environment that we currently operate in. Importantly, we will be redeploying these sale proceeds into a high-specification 2019 Imabari-built scrubber-fitted Capesize vessel that we agreed to acquire in April and expect to take delivery of in June. Looking at our recent sale and purchase activity together, these were well-timed investments that further enhanced our operating leverage and increased our focus on sectors with compelling near- and long-term supply and demand fundamentals. Specifically, we have added to our fleet growth through immediate cash flow accretion and further increased our operating leverage, asset value and dividend capacity for the benefit of shareholders. We also ended the first quarter with a low net loan-to-value of 20%, which supports our low cash flow breakeven levels and increased earnings power. As depicted on Slide 7, we achieved multiyear highs in Q1 dividend and TCE with strong momentum going into the remainder of the year. Based on our strong Q2 fixtures to date of $23,900 per day for 66% of our available days, we are well positioned to provide shareholders with growing dividends. Slide 8 underscores how the current market is demonstrating the power of our dividend model. Including our Q1 dividend, we will have paid $340 million or $7.915 per share in quarterly dividends over the past 7 years. Our Q1 dividend of $0.35 per share reflects an increase of 133% year-over-year. With the growth of our premium earning assets, our spot focused commercial strategy and our sizable operating leverage in a strengthening dry bulk market, we expect to significantly increase our dividend starting in the second quarter and have strong prospects for Q3 and Q4. Based on our fixtures to date and assuming the FFA curve for the balance of the quarter, we project a Q2 dividend of approximately $0.70 per share. Assuming the current forward freight rate curve for the balance of the year, our dividend formula would produce a Q3 dividend of $0.75 per share and a Q4 dividend of $0.70 per share, bringing our full year dividend to approximately $2.50 per share. Of course, the FFA curve is subject to change, but these projections show the opportunities provided by our low leverage, high dividend model. On the next few slides, we outline the foundation of Genco's strong earnings power and dividend capacity. Turning to Slide 9. Genco has one of the lowest cash flow breakeven rates in our peer group. This key differentiator is directly related to our industry low net loan to value as well as not having mandatory debt amortization, which further reduces our cash flow breakeven rate and increases our earnings potential. In addition to increasing Q1 and Q2 TCE to date by 63% and 76%, respectively, we continue to far exceed our low cash flow breakeven rate. Specifically, our Q2 TCE of nearly $24,000 per day compares very favorably to our cash flow breakeven rate prior to maintenance CapEx of under $10,000 per day. Complementing our low breakeven rate is our balanced approach to fleet composition, which we present on Slide 10. Following recent fleet renewal and the expected Cape delivery in June, we will own a fleet of 20 Capesize and Newcastlemax vessels as well as 24 Ultramax and Supramax vessels. We continue to balance the high beta and the upside potential of the Capesize sector, along with the steadier earnings profile of minor bulk ships. On a vessel ownership basis, our splits are 45% Capes and 55% Ultra Supras. However, when viewed on a net revenue basis over the last 2 years, we are over 50% weighted towards Capesize vessels, putting us in a unique position in our peer group to benefit from a strengthening freight rate environment. Turning to Slide 11. We balance our high operating leverage with low financial leverage, which provides us with financial flexibilities in various freight market conditions. In strong markets, Genco generates meaningful cash flow with its industry low breakeven rate and scalable fleet. In market downturns, Genco's low financial leverage and undrawn revolver availability allow the company to take advantage of countercyclical growth opportunities. On Slide 12, we highlight the significant operating leverage provided by our pro forma fleet of 44 vessels. Every $1,000 fleet-wide TCE increase equates to $16 million of incremental annualized EBITDA or $0.36 per share. Every $5,000 increase in TCE for our 20 Newcastlemax and Capesize vessels equates to $36 million or $0.81 per share of incremental earnings and dividend capacity. The positioning of our fleet today is the result of a steady execution of our strategic plan over multiple years. In 2023, our management team and Board formulated a strategy focused on capitalizing on the compelling supply and demand fundamentals of the Capesize sector, led by the sector having the lowest order book with long-haul ton mile expansion on the horizon. Our thesis has played out as expected. Since we began reinvesting in Capes in Q4 2023, Capesize vessels have been the best-performing dry bulk class from an earnings and asset value appreciation perspective. Notably, we have generated an IRR of over 30% on these ships since acquisition. Lastly, turning to Slide 13. Genco continues to prioritize strong corporate governance, which has distinguished our company from our peers and underpinned our shareholder-focused outperformance. We are the only U.S.-listed dry bulk shipping company with no related party transactions, and we provide detailed disclosures on our strategy and performance with compensation aligned to shareholders' interest. We have a majority independent and diverse Board with 50% female directors, and we are the only U.S.-listed dry bulk company with an annually elected Board. We are also consistently ranked in the top quartile on corporate governance among public shipping companies by Weber Research. Our corporate governance is a core part of our identity and reflects our Board's commitment to upholding the highest standards of fiduciary duty and governance excellence. I will now turn the call over to Peter Allen, our Chief Financial Officer.

Peter Allen, Chief Financial Officer

Thank you, John. On Slides 15 through 17, we highlight our first quarter financial results. Genco recorded net income of $9.3 million or $0.21 basic and diluted earnings per share. Adjusted net income is $11.3 million or $0.26 basic and diluted earnings per share, excluding a gain on sale of vessels of $2.1 million, other operating expenses of $3.8 million for shareholder-related expenses, impairment on vessel assets of $0.5 million and unrealized fuel gains of $0.2 million. Adjusted EBITDA for Q1 totaled $36.2 million, an increase of 358% as compared to Q1 2025. This was led by a TCE of $19,346 per day, which rose by 63% as compared to Q1 2025, while the cost structure was similar on a year-over-year basis, highlighting the operating leverage inherent in our fleet. We continue to generate meaningful cash flow and maintain significant financial flexibility. Our cash and debt positions as of March 31, 2026, were $55 million and $330 million, respectively. Our undrawn revolver availability at quarter end was $350 million. We also continue to make good progress renewing and growing our fleet, having entered into sale and purchase transactions that were immediately accretive to cash flow and net asset value. In March, we took delivery of 2 2020 built Newcastlemax vessels. We drew down $130 million from our revolver to fund the remaining CapEx. Additionally, in March, we sold the Genco Pacardy, a 2005-built Supramax vessel to third-party buyers for gross proceeds of $10.6 million, well above broker estimates, demonstrating the rising asset value environment. We recorded a gain of $2.1 million in the first quarter relating to the sale. In April, we delivered the Genco Creditor, another 2005-built Supramax vessel to buyers, and we expect to record a similar gain in Q2. Also in April, we agreed to purchase a 2019-built high-specification Capesize vessel, which we expect to take delivery of in June. We have $65 million of CapEx for this acquisition, which we expect to fund primarily through proceeds from our revolver and redeployment of capital from the aforementioned vessel sales. We believe that the Capesize sector will continue to be the best performer in the dry bulk market with the highest returns given low net fleet growth and longer trading distances. We believe the tightness in the Capesize market is not temporary, but structural, providing Capesize with the highest baseline earnings profile, but also the highest upside potential. Despite multiple years of outperformance from an earnings and asset value appreciation perspective, Capes still offer the best returns among the dry bulk sectors. With our full revolving credit facility structure, we plan to continue to actively manage our cash and debt positions to reduce interest expense while maintaining access to capital to act on growth opportunities as we have demonstrated in recent years. We view our strong balance sheet as a strategic asset that enables us to act quickly and decisively as we have demonstrated in recent years with our accretive growth initiatives. As outlined on Slide 18, we believe that Genco is in an advantageous position, a pro forma fleet of 44 high-quality modern dry bulk vessels, our significant operating leverage combined with low financial leverage, a sub-$10,000 cash flow breakeven rate and $350 million of undrawn revolver availability. Collectively provide an attractive risk-reward balance for shareholders. Furthermore, we continue to reward shareholders through our compelling quarterly dividends. Our established and transparent dividend policy targets a distribution based on 100% of operating cash flow less a voluntary reserve as described on Slide 19. In the first quarter, our Board declared a $0.35 per share dividend based on operating cash flow of $35 million and a voluntary quarterly reserve of $19.5 million, which is more than double our first quarter 2025 dividend. Looking ahead to Q2 2026, we currently have 66% of owned available days fixed at a rate of approximately $23,900 per day as compared to our anticipated cash flow breakeven rate, excluding drydocking-related CapEx of approximately $9,800 per vessel per day. Importantly, Q2 2026 TCE is on pace to increase by over 70% year-over-year. As a result, we expect a significantly higher dividend in Q2 as compared to both Q1 2026 and Q2 2025. Our quarterly dividend has a near perfect correlation to dry bulk freight rates. Said differently, when freight rates move up like they have been in 2026, so do our dividends. Q2 will also mark the first quarter in which our 2025 acquisitions will be fully integrated into our fleet. These acquisitions alone are expected to have a quarterly dividend impact of approximately $0.15 per share in Q2 to Q4 of 2026, exemplifying how accretive these acquisitions have been. These acquisitions, which grew the fleet 20% were funded with our existing liquidity, accentuating the benefit for shareholders as each share immediately received this uplift in earnings, making these transactions highly accretive to cash flows, to the dividend and to all Genco shareholders. I will now turn the call over to Michael Orr, our drybulk market analyst, to discuss the current industry landscape.

Michael Orr, Drybulk Market Analyst

Thank you, Peter. Beginning on Slide 21, the dry bulk freight rate market ended 2025 on a strong note and carried that momentum over to the start of 2026. The Baltic Capesize Index averaged approximately $23,000 per day during the first quarter, one of the highest first quarter averages over the last 15 years. In Q2 to date, the BCI has averaged over $32,000 per day, while the forward curve points to continued strength at similar levels through the remainder of the year. Turning to Slide 22. China continues to import large volumes of iron ore led by abundant seaborne supplies from Brazil and Australia. Specifically, China's iron ore imports in Q1 2026 increased by 11% on a year-over-year basis. Brazilian iron ore export growth has been flat to start the year, but expected to ramp up as the year progresses. Historically, Brazilian exports are approximately 20% higher in the second half as compared to the first half of the year. Turning to Slide 23. We highlight the long-haul iron ore and bauxite trade growth expected from Brazil and West Africa in the coming years. In the first quarter of 2026, the bauxite trade continued to exhibit firm growth rates. China's imports rose by 23% year-over-year in Q1 to nearly 60 million tons with any accumulating approximately 80% market share. This trade has been supported to Capesize vessels in recent months given the ton-mile intensity of the trade route. Going forward, given the scale of the expected growth projects from Simandou on the iron ore side as well as continued iron ore growth from Vale in Brazil and Bauxite out of West Africa, these incremental volumes could absorb potentially over 200 Capesize vessels, which is the majority of the current Capesize newbuilding order book. Supply constraints in the newbuilding activity, combined with added long-haul trading distances are two key catalysts for the sector. We expect West African iron ore flows to ramp up in 2026 and in the years ahead after first shipments were made in 2025. Furthermore, as detailed on Slide 24, with the escalation of geopolitical tensions in recent months, the key theme of energy security has once again risen to the forefront. For drybulk specifically, that translates to augmented demand for coal as a potential replacement for other sources of energy that have either experienced disruptions or rising prices. Notably, we have seen an increase in coal cargoes originating from the United States and Colombia with Asian destinations. These long-haul trade routes once again further stretch the drybulk fleet. With the increase in fuel prices, we've also seen an approximate 3% decrease in global fleet speeds, which is another driver of a reduction in fleet capacity supportive of freight rates. In terms of newbuilding deliveries in the year-to-date, as outlined on Slide 25, net fleet growth in Q1 2026 was 3.7%, split between 1% net fleet growth for the Capesizes and 4% to 6% net fleet growth for Panamaxes down to Handysize. Specifically, we have only seen 11 Capes delivered to the global fleet so far this year, which represents a reduction of 75% as compared to the 15-year average, highlighting the impact of the low order book coming to fruition in 2026, which is a key pillar of the Cape and drybulk thesis. Additionally, as scrapping has remained low in recent years, the average age of the global fleet has risen to nearly 13 years old, the highest average age of the global drybulk fleet since 2010. This has increased the pool of potential scrapping candidates as 12% of the on-the-water fleet is 20 years old or older, which is directly identical to the global drybulk order book as a percentage of the fleet of 12%. This implies net replacement tonnage over time as opposed to any material net fleet growth. While we expect volatility in the freight market to persist, the foundation of a low supply growth picture provides a solid basis for a positive view of the drybulk market going forward. I'll now turn the call back over to John to conclude the call.

John Wobensmith, Chairman and Chief Executive Officer

Thank you, Michael. Turning to Slide 27. We are pleased with the significant momentum we achieved in the first quarter, building off a strong end to 2025. The first quarter marked another period of disciplined execution of our comprehensive value strategy, highlighted by fleet growth and increased earnings power and dividend capacity. With the expansion of our premium earning asset base, our leading commercial operating platform, strong balance sheet and significant operating leverage in a strengthening drybulk market, we are well positioned to create meaningful value and superior returns for shareholders in 2026 and beyond. Assuming the current forward freight rate curve for the balance of the year, our dividend formula would produce a total dividend of approximately $2.50 per share in 2026. I also note that asset values continue to move higher, and our NAV has significantly increased thus far in 2026. The average NAV published by five Genco equity analysts is $25.80 per share. As we move through the year, we remain focused on advancing our low leverage, high dividend payout model, further growing our high specification premium earning fleet and maintaining our industry-leading corporate governance standards to benefit all Genco shareholders. Before we turn the call over to Q&A, I'd like to briefly address the important vote our shareholders will have at our upcoming annual meeting. This morning, we filed our definitive proxy statement, which includes the Board's recommendation that Genco shareholders vote for the reelection of our highly qualified and experienced directors, all of whom are deeply committed to driving shareholder value. As many of you know, one of our direct competitors, Diana Shipping, is attempting to take control of Genco at a discount. To achieve its objective, Diana has made a series of inadequate private and public acquisition proposals. Our Board established a committee comprised of independent directors, which evaluated Diana's recent proposals with the assistance of external advisers. That committee and the full Board unanimously rejected Diana's proposals, determining that they undervalued the company. Instead of engaging constructively, Diana has acquired a significant stake in Genco stock and recently commenced a tender offer. They have also nominated directors to replace the entire Genco Board with their own handpicked nominees. Our Board has addressed Diana's actions appropriately in accordance with its fiduciary duties at every step of the way, and we'll continue to take actions that are in the best interest of all Genco shareholders. The earnings results that we announced today demonstrate that our comprehensive value strategy is working. We are delivering strong results and returns, and our shareholders are poised to continue benefiting as we create additional value in a strengthening drybulk market. In contrast, Diana's lowball proposals and its proxy fight put our shareholders' investments at serious risk. If Diana's nominees are added to our Board, they could force Genco into a sale at an inadequate price that deprives shareholders of the full value of their investment or they could take other value-destructive actions. That is why we are standing firm in our belief that the current Genco Board is best positioned to guide the company forward and drive superior returns for shareholders. After saying all that, please note that the purpose of today's call is to discuss our strong first quarter results and compelling opportunities ahead given our differentiated position in the strengthening drybulk market. We ask that you please keep your questions focused on our results, performance and industry trends. Thank you in advance. This concludes our presentation, and we are now happy to take your questions.

Operator, Operator

And your first question comes from Omar Nokta from Clarksons.

Omar Nokta, Analyst (Clarksons)

I appreciate the comments on Diana. That's helpful. I'll stick, as you requested, to the industry and the company. Maybe just touching on something, and I know you discussed this in the opening comments, but clearly you've had a nice quarter. It's nice to see drybulk rates really gaining momentum. From your perspective, what's been driving this strength? There's been a lot of focus, particularly within the energy sector, on the impact of Hormuz. Is that affecting drybulk? Is that driving things, or is it more structural in terms of what we're seeing in the iron ore trade?

John Wobensmith, Chairman and Chief Executive Officer

I think it's more of a structural supply and demand balance, which is obviously very positive. The order book is very low, as Mike pointed out, but we have not had a lot of growth. I think there's only been 11 Capes delivered all year, which is down, I don't know, 70%, 75% from the 15-year run rate. So you've got a low supply situation, but then you also have a growing demand side. Iron ore was up 11% in Q1 year-over-year. Bauxite was up 23% in Q1 year-over-year. So big picture, it's the supply and demand balance in a very favorable position for rising freight rates. And then we also have volume growth. So I don't think too much is centered around the Hormuz Strait. It's only around 2% of the drybulk trade actually goes in and out of there. So it's not very much. The other thing that's been happening is that we've seen a real increase in coal exports out of Baltimore and Colombia in particular. When you start to see those increases in those ports, it really indicates a firming demand picture. The added coal that we've seen come on in April, we think is going to continue for a while even after the Hormuz situation is resolved.

Omar Nokta, Analyst (Clarksons)

Yes, makes sense. I mean 11 ships on a base of 2,000 is not going to move the needle in terms of supply. The sort of strength we've seen in Capes was expected, and we've certainly seen that. But we've also seen the Ultras continue to move upwards close to that $20,000 number. What's been driving that, do you think? Is that a trickle-down from the Capes? Or is there something specific to the Ultras?

John Wobensmith, Chairman and Chief Executive Officer

No. I think there's a trickle-down effect that certainly happens. There's a high correlation between Capes and the minor bulks. I also think the minor bulk trades are quite strong. We've had bookings that are $20,000 and above on some voyages, which is quite strong, and you can see it in our numbers. In general, commodities have been doing well across the board in drybulk, not just iron ore, bauxite and coal. The minor bulk commodities also have seen demand growth.

Omar Nokta, Analyst (Clarksons)

Okay. Makes sense. One final one for you, John. In terms of the fleet strategy, based on what we're seeing in the spot market, you'd think time charter interest might gain momentum. We've seen some reports of increased inquiry. How do you think about adding coverage? Do you think now is the time to consider it? Or do you really want to be more exposed to spot as we move forward?

John Wobensmith, Chairman and Chief Executive Officer

Well, I think now is the time to think about it and analyze it for sure, which we're doing almost on a daily basis. We have not done anything in the long-term market as of yet. But as you know, we have in the past; we do like to run a portfolio approach to the Cape sector because of the volatility. So it's something we're going to continue to look at and monitor, but we have not pulled the trigger yet. Quite frankly, we believe strongly in the second half of the year. The second half of the year tends to be stronger than the first half, and we've obviously started out very well.

Operator, Operator

And your next question comes from Chris Robertson from Deutsche Bank.

Christopher Robertson, Analyst (Deutsche Bank)

John, just taking a look at the strong rate environment and the lack of substantial deliveries, on the other side of the equation, could you give some commentary around the scrapping or ship retirement environment this year? Has the strong rate environment incentivized people to hold on longer? What are you seeing there? And what's your outlook given the rate strength around ship retirements for the rest of the year?

John Wobensmith, Chairman and Chief Executive Officer

At these rates, I would think that scrapping numbers will be on the low side. Having said that, it eventually will have to come. Almost 12% of the existing fleet is 20 years or older. You can only stretch that for so far. To answer your question directly, I think scrapping is probably going to be on the low side this year.

Christopher Robertson, Analyst (Deutsche Bank)

Following up, as these ships age and get to that 20-year mark or beyond, what are the realistic limitations? How long can they be stretched until it's an immediate need rather than something someone opts to extend?

John Wobensmith, Chairman and Chief Executive Officer

The useful life for the overall fleet is somewhere around 25 years. For Capes, that number is lower, and for Ultramax/Supramax and Handysize, they can go longer. It comes down to cost of drydocking, steel renewal and fuel efficiency. When you get into the third and fourth special surveys, it becomes very expensive and you're really looking at a pure economic equation. You have to decide whether you're spending money that you're going to get back and also receive a return on. That's why you're seeing a move out of older, smaller, less fuel-efficient vessels into larger, more fuel-efficient vessels, which aligns with our strategy.

Christopher Robertson, Analyst (Deutsche Bank)

Got it. That makes sense. A follow-up question related to the Middle East: We've heard commentary in the tanker market about potential air pockets if this conflict continues. I realize drybulk dynamics are different. But is there any situation where fallout or ramifications of the current conflict, now or in the future, could create air pockets for the sector?

John Wobensmith, Chairman and Chief Executive Officer

On the positive side for us, scrubber spreads have increased, which has increased our earnings capacity, the spread between HSFO and VLSFO. Regarding coal, there are two aspects: increased demand and several countries shifting stance on coal due to energy security concerns. That creates a double effect in the coal market. Also, higher fuel prices encourage slow steaming, and we've seen the drybulk fleet slow down, which effectively decreases supply in the supply-demand equation.

Operator, Operator

And your next question comes from Liam Burke from B. Riley Securities.

Liam Burke, Analyst (B. Riley Securities)

John, two years ago you were moving toward a net positive cash position on your balance sheet. You chose to allocate capital toward investments, primarily Capesize. Looking forward, are there opportunities to add to the fleet? Or are you going to focus on reducing your debt load?

John Wobensmith, Chairman and Chief Executive Officer

We'll keep our fleet renewal plan intact. You'll continue to see us execute on selling some of the older minor bulk vessels and focusing on larger, more fuel-efficient Capesize and Newcastlemax vessels. Over the last roughly 2.5 years, we've invested about $400 million and generated a 30% IRR on those investments. While we'll continue to pay down debt and maintain a reserve each quarter, we'll remain focused on fleet renewal and growth. Large-scale transactions are difficult to do with just cash given current vessel values, and our NAV has increased. At some point, there may be opportunities to use equity as currency, but only on an accretive basis to cash flows and NAV.

Liam Burke, Analyst (B. Riley Securities)

Great. This is for Michael. Coal could structurally see demand come back. Do you see growth in bauxite shifting coal away from the Capes to smaller vessels? Or are Capes carrying enough coal so the benefit is across the fleet?

John Wobensmith, Chairman and Chief Executive Officer

Capes are definitely carrying coal. We've done a few lifts over the last month. Coal overall is increasing, and it depends on which ports the demand increases come from and what those ports can handle in terms of vessel size. There's no clear shift; it's more a normalization with increased volumes.

Operator, Operator

And your next question comes from the line of Sherif Elmaghrabi from BTIG.

Sherif Elmaghrabi, Analyst (BTIG)

Just one for me today, kind of sticking with fleet growth. Thinking about tools in your toolbox, you highlighted the pace Genco is on for a healthy Q2 dividend. I'm wondering, how do you think about the voluntary reserve? Any thought to a temporary increase, which would keep more dry powder for opportunistic growth? You talked about doing large-scale transactions and the benefit of adding NAV with stable value.

John Wobensmith, Chairman and Chief Executive Officer

The advantage of having a low cash flow breakeven and a low net loan-to-value allows us to pay high dividends and grow. We have a large revolver in place that's non-amortizing if we find the right opportunity. The reserve is important because the asset base is depreciating and needs renewal. I do not see us changing our dividend policy this year. The reserve will stay as is for the remainder of the year.

Operator, Operator

And your next question comes from Poe Fratt from Alliance Global Partners.

Charles Fratt, Analyst (Alliance Global Partners)

On fuel cost and insurance, can you highlight any potential bottom-line impact from cost escalation in those two areas?

John Wobensmith, Chairman and Chief Executive Officer

On the fuel side, almost everything we're doing is on a spot basis, so when we're pricing cargo we price the current fuel level. We do some hedging because fuel has been volatile; if we lock in a cargo we may hedge fuel. There's no additional fuel cost impact we've experienced and I don't expect that to occur. Regarding insurance, we are not operating in the Red Sea and not in the Persian Gulf, per our strategy, so we haven't had to deal with increased insurance costs.

Charles Fratt, Analyst (Alliance Global Partners)

Great. Peter, can you highlight the potential shareholder-related cost for the annual meeting and proxy fight? I think you said $3.8 million was broken out in Q1. Can you give a ballpark for Q2?

Peter Allen, Chief Financial Officer

Thanks for the question. Historically, with these types of situations, our costs have run anywhere between $2 million and $4 million, as you've seen in Q4 and Q1 here as well as in 2024. We didn't specifically provide Q2 guidance, but looking at history, that's a fair assumption in the $2 million to $4 million range.

Charles Fratt, Analyst (Alliance Global Partners)

Great. John, on corporate governance: why did you put the poison pill vote into the annual meeting instead of waiting until it expired in September? And why increase the threshold from 10% to 15%?

John Wobensmith, Chairman and Chief Executive Officer

In terms of the shareholder vote, we think it's proper governance to allow shareholders to vote on it and to have it in place for a medium-term period. Regarding moving from 10% to 15%, we've engaged with shareholders and the Board considered data and governance practices. We elected to move the threshold based on that input and our governance standards.

Charles Fratt, Analyst (Alliance Global Partners)

Was there any consultation with proxy consultants or recommendations at all?

John Wobensmith, Chairman and Chief Executive Officer

We have a full host of advisers, and everyone had the opportunity to weigh in. Our decisions are based on data and high governance standards.

Operator, Operator

There are no further questions at this time. This concludes your conference call for today, and we thank you for participating and ask that you please disconnect your line. Thank you.