Tsakos Energy Navigation Ltd 6-K, filed Oct 9, 2020
Tsakos Energy Navigation Ltd (TEN)
About this 6-K
Tsakos Energy Navigation Ltd filed this 6-K on October 9, 2020.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of October, 2020
Commission File Number 001-31236
(Translation of registrant’s name into English)
367 Syngrou Avenue, 175 64 P.
Faliro, Athens, Greece
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
TSAKOS ENERGY NAVIGATION LIMITED
FORM 6-K
This report on Form 6-K is hereby incorporated by reference into the following Registration Statements of the Company:
| · | Registration Statement on Form F-3 (No. 333-240253) filed with the SEC on July 31, 2020; |
| · | Registration Statement on Form F-3 (No. 333-234279) filed with the SEC on October 21, 2019; |
| · | Registration Statement on Form F-3 (No. 333-206852) filed with the SEC on September 9, 2015; |
| · | Registration Statement on Form F-3 (No. 333-159218) initially filed with the SEC on May 13, 2009, as amended; |
| · | Registration Statement on Form F-3 (No. 333-111615) filed with the SEC on December 30, 2003; |
| · | Registration Statement on Form S-8 (No. 333-183007) initially filed with the SEC on August 2, 2012, as amended; |
| · | Registration Statement on Form S-8 (No. 333-134306) initially filed with the SEC on May 19, 2006, as amended; |
| · | Registration Statement on Form S-8 (No. 333-104062) filed with the SEC on March 27, 2003; and |
| · | Registration Statement on Form S-8 (No. 333-102860) filed with the SEC on January 31, 2003. |
TSAKOS ENERGY NAVIGATION LIMITED
THREE AND SIX MONTHS ENDED JUNE 30, 2020
MANAGEMENT’S DISCUSSION AND ANALYSIS
Results of operations
On June 22, 2020, the Company announced a one-for-five (1-for-5) reverse share split of the Company’s common shares which was approved by its shareholders at the annual meeting on May 28, 2020. The reverse split became effective on July 1, 2020. All share and per share amounts disclosed below and in the accompanying consolidated financial statements and notes give effect to this reverse stock split retroactively, for all periods presented.
(Percentage calculations are based on the actual amounts shown in the accompanying financial statements)
Voyage revenues
Voyage revenue earned for the three months ended June 30, 2020 and 2019:
| 2020 |
2019 | |||
| $ |
% |
$ |
% | |
| Time charter-bareboat | 2.6 | 1 % | — | 0 % |
| Time charter-fixed rate | 63.4 | 33 % | 65.6 | 45 % |
| Time charter-variable rate (profit-share) | 43.5 | 23 % | 23.8 | 17 % |
| Voyage charter-spot market | 78.4 | 41 % | 46.1 | 32 % |
| Voyage charter-contract of affreightment | 2.9 | 2 % | 8.5 | 6 % |
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| Total voyage revenue | 190.8 | 100 % | 144.0 | 100 % |
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Voyage revenue earned for the six months ended June 30, 2020 and 2019:
| 2020 |
2019 | |||
| $ |
% |
$ |
% | |
| Time charter-bareboat | 5.1 | 1 % | — | 0 % |
| Time charter-fixed rate | 125.9 | 34 % | 127.0 | 44 % |
| Time charter-variable rate (profit-share) | 87.6 | 24 % | 49.7 | 17 % |
| Voyage charter-spot market | 141.8 | 38 % | 97.4 | 33 % |
| Voyage charter-contract of affreightment | 9.3 | 3 % | 17.0 | 6 % |
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| Total voyage revenue | 369.7 | 100 % | 291.1 | 100 % |
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Voyage revenue earned during the three months ended June 30, 2020 totaled $190.8 million, a 32.5% increase, compared to $144.0 million earned in the three months ended June 30, 2019. Following a strong first quarter, market conditions for tankers further improved during the second quarter of 2020, the increase being primarily driven by falling oil prices, due to the Covid-19 pandemic which significantly reduced global oil demand as a result of extensive world-wide lock-down measures. This led to traders and consuming countries, either speculatively or strategically, stockpiling crude oil in onshore storage facilities and offshore in tankers which positively affected market rates. This was in addition to the impact of environmental legislation imposed by the IMO that reduced the size of the active fleet as older vessels were scrapped, and scrubber installations kept vessels out of the market, affecting spot rates which reached new peaks. The Company, by following a diversified employment strategy, benefitted from the upward trend in the market, mainly for the suezmaxes, aframaxes and panamaxes which enjoyed strong results by either participating in the spot market or earning profit share above their fixed time-charter rates.
Total utilization achieved by the fleet (total days that the vessels were actually employed as a percentage of total days in the period that the Company owned or controlled the vessels) was 95.7% in the second quarter of 2020 compared to 96.6% in the second quarter of 2019. The lost days were mainly due to the dry-docking of the handysize tanker Didimon and to long haul repositioning voyages of certain vessels to achieve more lucrative rates. In the previous second quarter, lost days related to the dry-docking of the panamax vessel Salamina and various repositioning voyages.
Operating days utilized on time-charter with profit-share arrangements decreased to 1,488 days in the second quarter of 2020 from 1,554 days in the second quarter of 2019. Despite the decrease in operating days by 4.2%, revenue earned by vessels operating on this type of charter, increased by 82.5% to $43.5 million compared to $23.8 million in the second quarter of 2019 as a result of increased rates. Operating days on pure time-charter without profit-share arrangements increased to 2,412 days in the second quarter of 2020 from 2,272 in the second quarter of 2019, mainly due to the addition of two suezmax vessels being fully operational during the second quarter of 2020. The amount of revenue earned remained relatively stable at $66.0 million and $65.6 million, respectively, mainly due to revenue amounting to $3.7 million determined by a tribunal as being due to the Company, during the second quarter of 2019 which related to late redelivery by the charterer of the VLCC Millennium in previous periods.
Employment days on spot and contract of affreightment decreased to 1,756 for the second quarter of 2020 from 1,799 for the equivalent period of 2019. Although revenue days on this type of employment decreased by 2.4%, the contribution of additional revenue earned reached $26.7 million, a 49.0% increase over the previous quarter, with spot rates generated by suezmax, aframax and handymax vessels during the second quarter of 2020 generating considerably higher freight per vessel than in the prior second quarter.
During the six months ended June 30, 2020, voyage revenues increased to $369.7 million from $291.1 million earned in the first half of 2019, an increase of $78.6 million, or 27.0%. For the first six months of 2020, the utilization rate remained relatively stable, achieving a 96.3%, compared to a 96.7% rate for the first six months of 2019.
The Company was able to benefit from the higher rates achieved in the spot market during the six-month period ended June 30, 2020 due to vessels being well positioned in the market, as evidenced by their TCE performance. Our aframax vessels generated additional revenue of $22.4 million, the increase being driven by the spike of spot market rates during the first and second quarter of 2020, with average time charter equivalent rate reaching $26,321 for the period ended June 30, 2020, compared to $20,813 for the equivalent period of 2019, a 26.5% increase. Our suezmax tankers also enjoyed strong results with profit share earnings surging up to $31.4 million for the first half of 2020, compared to $5.5 million profit share earned for the first six months of 2019. An additional contribution of $16.3 million in revenue was also generated by our panamax carriers for the six-month period ended June 30, 2020, compared to the corresponding period of 2019, mainly due to time charters’ renewals with higher rates and increased portions of profit share earned.
For the six-month period of 2020, the average daily TCE was $27,689 compared to $20,418 for the equivalent period of 2019, a 35.6% increase. For the second quarter of 2020, the time charter equivalent was $28,767 per day compared to $19,783 per day for the previous year’s second quarter, a 45.4% increase. Average daily TCE rate earned for the three- and six-month periods ended June 30, 2020 and 2019, per vessel category were:
| Three months ended |
Six months ended | |||
| 2020 |
2019 |
2020 |
2019 | |
| $ | $ | $ | $ | |
| LNG carrier | 55,774 | 52,732 | 54,169 | 45,937 |
| VLCC | 34,096 | 48,335 | 49,114 | 38,073 |
| Suezmax | 36,897 | 15,947 | 33,554 | 17,664 |
| DP2 Suezmax | 50,853 | 50,310 | 50,853 | 50,310 |
| Aframax | 26,551 | 18,451 | 26,321 | 20,813 |
| Panamax | 23,706 | 14,194 | 20,726 | 13,662 |
| Handymax | 16,304 | 13,026 | 14,760 | 13,315 |
| Handysize | 18,993 | 12,359 | 19,071 | 13,998 |
TCE is calculated by taking voyage revenue less voyage costs divided by the number of revenue days less 192 days lost for the second quarter of 2020 and 392 for the first half of 2020 as a result of calculating revenue on a loading to discharge basis compared to 124 for the second quarter and 214 for the first half of 2019. In the case of the bare-boat charter, we add an estimate of operating expenses of $10,000 per day in order to render the bare-boat charter comparable to a time-charter. Time charter equivalent revenue and TCE rate are not measures of financial performance under U.S. GAAP and may not be comparable to similarly titled measures of other companies. However, TCE is a standard shipping industry performance measure used primarily to compare period-to-period changes in shipping performance despite changes in the mix of charter types (i.e. spot voyage charters, time charters and bareboat charters) under which the vessels may be employed between the periods. The following table reflects the calculation of our TCE rate for the period presented (amount in thousands of U.S. dollars, except for TCE rate, which is expressed in U.S. dollars, and available days):
| Three months ended |
Six months ended | |||
| 2020 |
2019 |
2020 |
2019 | |
| Voyage revenues | $ 190,770 | $ 144,020 | $ 369,669 | $ 291,064 |
| Less: Voyage Expenses | (35,412) | (35,191) | (68,120) | (66,755) |
| Add: Representative operating expenses for Bareboat charter ($10,000 daily) | 1,820 | — | 3,580 | — |
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| Time charter equivalent revenues | $ 157,178 | $ 108,829 | $ 305,129 | $ 224,309 |
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| Divided by: net earnings (operating) days | 5,464 | 5,501 | 11,020 | 10,986 |
| Average TCE per vessel per day | $ 28,767 | $ 19,783 | $ 27,689 | $ 20,418 |
Voyage expenses
Voyage expenses include costs that are directly related to a voyage, such as port charges, agency fees, canal dues and bunker (fuel) costs. These voyage expenses are borne by the Company unless the vessel is on time-charter, in which case they are borne by the charterer. Commissions on revenue are included in voyage expenses and they are borne by the Company for all types of charter.
Voyage expenses for the three months ended June 30, 2020 and 2019:
| Voyage expenses |
Average daily voyage | |||||
| 2020 |
2019 |
2020 |
2019 |
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| $ |
$ |
increase/ |
$ |
$ |
increase/ | |
| Bunker expenses | 17.4 | 18.4 | (5.6) % | 9,900 | 10,237 | (3.3 )% |
| Port and other expenses | 10.9 | 11.8 | (7.0) % | 6,234 | 6,546 | (4.7) % |
| Commissions | 7.1 | 5.0 | 41.6 % | 4,031 | 2,778 | 45.1% |
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| Total | 35.4 | 35.2 | 0.6 % | 20,165 | 19,561 | 3.1% |
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| Days on Spot and COA | 1,756 | 1,799 | ||||
Voyage expenses for the six months ended June 30, 2020 and 2019:
| Voyage expenses |
Average daily voyage | |||||
| 2020 |
2019 |
2020 |
2019 |
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| $ |
$ |
increase/ |
$ |
$ |
increase/ | |
| Bunker expenses | 34.9 | 35.6 | (1.9) % | 10,685 | 10,760 | (0.7)% |
| Port and other expenses | 19.8 | 20.9 | (5.5) % | 6,052 | 6,324 | (4.3) % |
| Commissions | 13.5 | 10.3 | 31.2 % | 4,119 | 3,102 | 32.8 % |
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| Total | 68.1 | 66.8 | 2.0 % | 20,856 | 20,186 | 3.3 % |
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| Days on Spot and COA | 3,266 | 3,307 | ||||
Voyage expenses were $35.4 million during the quarter ended June 30, 2020, compared to $35.2 million during the prior year’s second quarter, a minor 0.6% increase. As commissions are highly correlated to revenue patterns, the increase in voyage expenses is attributable to the additional revenue generated in the second quarter of 2020 compared to the equivalent period of 2019. The bunker expenses decrease of $1.0 million was driven mainly by the falling oil prices during the second quarter of 2020 and was partially offset by the volume of bunkers consumed, which was approximately 13.3% higher in the second quarter of 2020 compared to the second quarter of 2019. Total port expenses decreased by $0.9 million for the second quarter of 2020 compared to the equivalent period of 2019 and the average port expenses per vessel per day were 4.7% lower as a result of a long haul repositioning voyages and lower number of port calls during the second quarter of 2020 compared to the second quarter of 2019.
Voyage expenses were $68.1 million in the first six months of 2020, compared to $66.8 million in the first six months of 2019, a 2.0% increase. The increase in voyage expenses over the six-month periods is attributable to the increase of commission expenses and due to additional revenue earned during the corresponding periods. Bunker expenses in the first half of 2020 compared to the first half of 2019 decreased by $0.7 million, mainly due to the decrease in the average bunker prices by 15.2%, counterbalanced by the increase in volume of bunkers consumed on long-haul voyages. Port and other expenses decreased by $1.1 million between the six-month periods and decreased by 4.3% on a daily basis, as a result of long-haul voyages and a fewer number of port calls.
Commissions amounted to $7.1 million, or 3.7% of voyage revenue, during the second quarter of 2020 compared to $5.0 million, or 3.5% of voyage revenues, during the second quarter of 2019. The increase was due to higher voyage charter revenues, with commission rates remaining at similar levels on average as the prior equivalent period. For the six-month period ended June 30, 2020, commissions amounted to $13.5 million, or 3.6% of voyage revenue, compared to $10.3 million, or 3.5% of voyage revenues, in the corresponding period of 2019.
Vessel operating expenses
Operating expenses for the three months ended June 30, 2020 and 2019:
| Operating expenses |
Average daily operating | |||||
| 2020 |
2019 |
2020 |
2019 |
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| $ |
$ |
increase/ |
$ |
$ |
increase/ | |
| Crew expenses | 23.7 | 26.8 | (11.4)% | 4,144 | 4,599 | (9.9)% |
| Insurances | 4.1 | 3.8 | 6.6% | 712 | 657 | 8.4% |
| Repairs and maintenance, and spares | 7.1 | 7.5 | (3.5) % | 1,247 | 1,270 | (1.8)% |
| Stores | 2.9 | 3.2 | (6.1)% | 514 | 538 | (4.4)% |
| Lubricants | 2.0 | 1.7 | 14.1% | 349 | 301 | 16.1% |
| Other (quality and safety, taxes, registration fees, communications) | 2.7 | 3.2 | (18.1 )% | 465 | 557 | (16.7)% |
| Foreign currency losses (gains) | 0.2 | (0.1 ) | (332.7)% | 27 | (11 ) | (336.7)% |
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| Total | 42.7 | 46.1 | (7.3)% | 7,458 | 7,911 | (5.7) % |
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| Earnings capacity days excluding vessel on bare-boat charter | 5,726 | 5,824 | ||||
Operating expenses for the six months ended June 30, 2020 and 2019:
| Operating expenses |
Average daily operating | |||||
| 2020 |
2019 |
2020 |
2019 |
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| $ |
$ |
increase/ |
$ |
$ |
increase/ | |
| Crew expenses | 50.7 | 53.7 | (5.5 )% | 4,415 | 4,635 | (4.7)% |
| Insurances | 7.8 | 7.6 | 1.6% | 675 | 660 | 2.4% |
| Repairs and maintenance, and spares | 13.6 | 12.4 | 9.5 % | 1,185 | 1,074 | 10.4% |
| Stores | 5.9 | 5.7 | 2.6% | 513 | 496 | 3.5% |
| Lubricants | 4.1 | 3.6 | 17.9% | 358 | 301 | 18.8% |
| Other (quality and safety, taxes, registration fees, communications) | 5.8 | 6.5 | (11.8)% | 500 | 564 | (11.1)% |
| Foreign currency losses (gains) | 0.3 | (0.1) | (306.1)% | 26 | (13) | (307.7)% |
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| Total operating expenses | 88.2 | 89.4 | (1.3)% | 7,672 | 7,717 | (0.5)% |
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| Earnings capacity days excluding vessel on bare-boat charter | 11,493 | 11,584 | ||||
Vessel operating expenses include crew expenses, insurances, repairs and maintenance, spares, stores, lubricants, and other expenses relating to quality and safety, tonnage tax, registration fees, communications and foreign currency gains or losses.
Total operating costs were $42.7 million during the quarter ended June 30, 2020 compared to $46.1 million during the second quarter of 2019, a decrease of 7.3%. The decrease is partly attributable to a strengthening of the US dollar plus travel restrictions and repatriation difficulties due to the Covid-19 pandemic, which affected crew travelling costs for the second quarter of 2020 compared to the equivalent period of 2019. Significant re-stocking of spares and stores and supplies in the first quarter of 2020 contributed to a decrease in spares and stores’ expenses during the second quarter of 2020 compared to the second quarter of 2019. Operating expenses were $88.2 million in the first six months of 2020, compared to $89.4 million in the first six months of 2019, a 1.3% decrease. The decrease is partially offset by additional expenses performed for spares, stores and repairs due to a re-stocking of supplies during the first quarter of 2020. The operating fleet remained relatively the same for the second quarter and the six-month period of 2020, compared to the equivalent periods of 2019, while a minor increase of 1.4% and 2.3% in the earning capacity days is attributed to the delivery of vessels Mediterranean Voyager and Caribbean Voyager during late October 2019 and early January 2020, respectively, with both vessels being chartered under bareboat arrangements and bearing no operational expenses. The increase is partially offset by the sale of Suezmax vessel Silia T. in January 2020 and handysize vessel Didimon in June 2020.
Average operating expenses per ship per day decreased by $453 to $7,458 for the second quarter of 2020 from $7,911 in the second quarter of 2019, a reduction of 5.7%, mainly attributable to a decrease in crew related costs. For the six-month periods, average daily operating expenses per vessel remained stable at $7,672 in the first half of 2020 from $7,717 in the first half of 2019, a decrease of $45 daily, or 0.5%, due to higher expenditure during the first quarter of 2020, as stated above.
Depreciation and amortization of deferred charges
Depreciation and amortization charges totaled $34.5 million in the second quarter of 2020 compared to $34.3 million in the second quarter of 2019, a 0.7% increase. For the first half of 2020 depreciation and amortization decreased to $69.3 million from $69.5 million for the first half of 2019.
Depreciation amounted to $32.1 million in the second quarter of 2020 and $31.7 million in the second quarter of 2019, a $0.4 million increase, attributed to the delivery of two aframax vessels during the fourth quarter of 2019 and first quarter of 2020. The increase is partially offset by the sale of vessel Silia T. and the impairment charge taken on five vessels of the fleet during the fourth quarter of 2019. For the first six months of 2020, depreciation was $64.2 million compared to $64.3 million in the first six months of 2019, a 0.2% decrease.
Amortization of deferred dry-docking charges was $2.4 million during the second quarter of 2020, compared to $2.6 million during the second quarter of 2019. For the six-month periods ended June 30, 2020 and 2019, amortization of deferred dry-docking charges was $5.1 million and $5.2 million, respectively.
Gain (loss) on sale of vessels
In February 2020, the Suezmax Silia T. was sold for net proceeds of $15.3 million, resulting in a net gain of $1.6 million. In addition, handysize vessel Didimon was sold in June 2020 for net proceeds of $8.9 million, incurring a net loss on sale of $4.7 million. There were no vessel sales during the first half of 2019.
Impairment
In the first half of 2020, 54 of our vessels had carrying values in excess of their market values. Our fleet is for the most part young, with an average age of 9.2 years as of June 30, 2020 and every vessel in the fleet is expected to generate considerably more cash during their remaining expected lives than their carrying values. As at June 30, 2020 and 2019, the Company’s cash flow tests per vessel did not indicate that such an impairment charge was required for any vessel of the fleet intended to be held and used, other than described below.
As of June 30, 2020, the Company decided not to sell Izumo Princess, which was previously classified as held for sale and classified it as held and used. The carrying amount written down to $22.8 million consists of the lower of its carrying amount, adjusted for any depreciation that would have been recognized had the vessel been continuously classified as held and used and its fair value as of June 30, 2020, resulting in an impairment charge of $2.8 million and is reflected in the accompanying Consolidated Statements of Comprehensive Income (Loss). As of June 30, 2020, the Company classified Sakura Princess as held for sale and wrote down to $22.8 million based on the lower of the carrying amount and Level 1 inputs indicative of the vessel’s sales price less cost to sell. The resulting impairment charge was $10.7 million and is reflected in the accompanying Consolidated Statements of Comprehensive Income (Loss).
General and administrative expenses
General and administrative expenses include management fees, administrative expenses, management incentive awards and stock compensation expense.
General and administrative expenses (G&A expenses) increased to $7.7 million in the second quarter of 2020 compared to $6.8 million for the second quarter of 2019. Additionally, for the first six months of 2020 general and administrative expenses increased by $2.0 million, compared to the equivalent period of 2019.
The Company pays to Tsakos Energy Management fixed fees per vessel under a management agreement. The fee includes compensation for services that cover both the management of the individual vessels, as described below, and of the enterprise as a whole. Management fees, including those paid to third-party ship management companies, totaled $5.5 million during the quarter ended June 30, 2020, a 1.0% increase over the quarter ended June 30, 2019. For the six months ended June 30, 2020 management fees were $11.0 million compared to $10.8 million for the first six months of 2019, a 1.5% increase. The management fee per vessel may be increased annually if certain criteria defined in the management agreement are met. The management fee to Tsakos Energy Management has not been increased since the beginning of 2012.
In the first half of 2020, all the vessels in the fleet were technically managed by Tsakos Columbia Shipmanagement, S.A., apart from the LNG carriers Neo Energy and Maria Energy, the VLCCs Ulysses and Hercules I, the suezmax Eurochampion 2004 and the aframaxes Maria Princess and Sapporo Princess, which have been managed by a third-party manager. Monthly management fees for operating conventional vessels are $27,500 per month. The monthly fee relating to vessels chartered-in or chartered-out on a bare-boat basis or for vessels under construction is $20,400. Management fees for the LNG carriers are $37,280, of which $10,000 are payable to the management company and $27,280 to the third-party manager. Management fees for Eurochampion 2004, Maria Princess, Sapporo Princess, Millennium (until its sale), Hercules I and Ulysses are $27,500per month, of which $14,721 are payable to a third-party manager. Management fees for the DP2 shuttle tankers are $35,000 per month.
Office administrative expenses consist primarily of professional fees, office supplies, investor relations, advertising costs, directors’ liability insurance, directors’ fees and travel-related expenses. Administrative expenses totaled $1.5 million during the second quarter ended June 30, 2020 compared to $1.4 million during the previous year’s second quarter.
The Board of Directors approved an incentive award to the management company, of which $1.5 million has been accounted for the first six months of 2020, based on various performance criteria and taking into account cash availability and market conditions. No such award was granted in the first six months of 2019.
General and administrative expenses, including the management fee, plus any incentive or stock compensation award, represent the overhead of the Company. On a per vessel basis, the daily overhead was $1,297 and $1,167 for the second quarter of 2020 and 2019, respectively. For the six-month period ended June 30, 2020, the daily overhead per vessel was $1,288 compared to $1,142 for the six-month period ended June 30, 2019.
Operating income
Income from vessel operations was $46.9 million during the second quarter of 2020, compared to $19.0 million during the second quarter of 2019, the increase being attributed to additional revenue earned and operating expenses maintained at lower levels for the second quarter of 2020 compared to the equivalent period of 2019. During the first half of 2020, income from vessel operations was $101.7 million, compared to $46.8 million during the first half of 2019, the significant increase being mainly due to vessels benefiting from a strong first and second quarter, with freight rates reaching high peaks compared to the lower levels of 2019 and operating expenses maintained at equivalent levels for the six-month period ended June 30, 2020 compared to the six-months ended June 30, 2019.
Interest and finance costs
Interest and finance cost analysis in the table below is not presented according to U.S. GAAP guidelines. However, management believes that this analysis may provide its users a better understanding of the Company’s finance cost. Management also uses this analysis in making financial and planning decisions.
| Three months ended |
Six months ended | ||||
| 2020 |
2019 |
2020 |
2019 | ||
| $ |
$ |
$ |
$ | ||
| Interest on loans | 12.0 | 18.1 | 26.4 | 36.9 | |
| Interest rate swaps cash settlements | 0.2 | — | 0.3 | 0.1 | |
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| Total interest | 12.2 | 18.1 | 26.7 | 37.0 | |
| Less: Interest capitalized | (0.3 ) | (0.3 ) | (0.6 ) | (0.5 ) | |
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| Interest expense, net | 11.9 | 17.8 | 26.1 | 36.5 | |
| Bunker hedging instruments cash settlements | 1.5 | 0.4 | 4.8 | 0.7 | |
| Change in fair value of non-hedging bunker instruments | (2.1) | 1.9 | 11.4 | (0.6 ) | |
| Change in fair value of hedging interest rate swaps | 1.6 | 0.1 | 1.2 | 0.1 | |
| Discount of long-term receivables, net | (0.1) | — | 2.0 | — | |
| Other finance costs | 1.1 | 1.1 | 2.0 | 2.2 | |
| x |
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| Net total | 13.9 | 21.3 | 47.5 | 38.9 | |
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Interest and finance costs, net, were $13.9 million for the second quarter of 2020, compared to $21.3 million for the second quarter of 2019, a 34.7% decrease, mainly attributed to the positive change in fair value of non-hedging bunker swaps of $4.0 million for the second quarter of 2020 compared to the equivalent period of 2019, and the downward trend of LIBOR resulting in lower interest on loans. Average loan interest rate decreased to 3.2% for the second quarter of 2020 from 4.6% in the second quarter of 2019, and loan interest (excluding the impact of interest rate swaps) decreased by $4.3 million for the second quarter of 2020 compared to the second quarter of 2019.
The Company paid interest on swaps of $0.2 million for the second quarter of 2020, whereas no payment was performed in the second quarter of 2019. For the six-month period ended June 30, 2020, interest paid on swaps amounted to $0.3 million compared to $0.1 million for the six-month period ended June 30, 2019.
For the six months ended June 30, 2020, interest and finance costs, net, were $47.5 million compared to $38.9 million for the six months ended June 30, 2019, a 22.2% increase. Loan interest (excluding the impact of interest rate swaps) decreased to $26.4 million in the six months ended June 30, 2020 from $36.9 million in the six months ended June 30, 2019 due to the decrease in the average loan interest rate to 3.5% from 4.7%, a 24.9% decrease.
Capitalized interest is based on expenditure incurred to date on vessels under construction. As of June 30, 2020, the Company had three vessels under construction, two suezmax and one LNG carrier, and four vessels, two aframax and two suezmax vessels as of June 30, 2019. Capitalized interest amounted to $0.3 and $0.6 million for the three and six-month periods ended June 30, 2020 compared to $0.3 million and $0.5 million for the equivalent periods of 2019.
During the first half of 2020, the Company entered into six bunker put option agreements in order to reduce the losses of its bunker swap agreements. The Company paid a total premium of $1.7 million and received $0.4 million. The fair value of the six put options on June 30, 2020, was $1.8 million (positive), and the change in the fair values in the first half of 2020 was $1.8 million (positive).
During the first half of 2020, the Company held one bunker call option agreement compared to three call option agreements for the equivalent period of 2019. In the first half of 2019, the Company paid a premium of $0.7 million compared to no premium paid for the respective six-month period of 2020. The changes in fair value of the call options for both first half of 2020 and 2019 amounted to $0.1 million (negative).
As of June 30, 2020, and June 30, 2019, the Company held twenty-nine and twenty-five bunker swap agreements, respectively, to hedge its exposure to bunker price fluctuations associated with the consumptions of bunkers by its vessels. The change in the fair value of these instruments for the second quarter of 2020 and 2019, was $3.8 million (negative) and $1.6 million (negative), respectively. The changes in the fair values in the first half of 2020 and 2019 were $13.1 million (negative) and $0.8 million (positive), respectively, and have been included in Change in fair value of non-hedging financial instruments in the table above.
The Company as of June 30, 2020 has a long-term receivable of $24.8 million, which relates to the sale and leaseback transaction of four of its suezmax vessels with a financial institution. The Company has proceeded with the discount of the residual guarantees, of which net of unwinding, amounted to $2.0 million (negative) and $0.1 million positive for the six month and three month ended June 30, 2020, respectively.
Other finance costs amounted to $1.1 million for both second quarters of 2020 and 2019. In the first half of 2020, other finance costs amounted to $2.0 million compared to $2.2 million in the first half of 2019.
Interest income
During the second quarter of 2020, interest income was $0.1 million compared to $1.8 million during the second quarter of 2019. For the six-month periods ended June 30, 2020 and 2019, interest income was $0.5 million and $2.5 million, respectively. The decrease is mostly attributed to additional interest of $0.9 million determined by a tribunal during the second quarter of 2019, relating to the late redelivery of the VLCC Millennium by her charterer in previous periods.
Non-controlling interest
There is a non-controlling interest of 49% in the subsidiary Mare Success S.A., which owns 100% of each of the companies that own the panamax vessels Maya, Inca, Selini and Salamina. In the second quarter of 2020, Mare Success S.A, owned 51% by the Company, increased its paid-in capital by $8.2 million, of which $4.2 million constituted the 51% portion contributed by the Company and the $4.0 million constituted the 49% portion contributed by Polaris Oil Shipping Inc. (“Polaris”), an affiliate of Flopec Petrolera Ecuatoriana (“Flopec”). After the recapitalization, the shareholding of Mare Success S.A. remained at 51% owned by the Company and 49% owned by Polaris. The additional paid-in capital was made to finance part of the intragroup sale of vessels, in particular the panamax tankers, Byzantion and Bosporos. During the second quarter of 2020, the Company transferred the net assets of Byzantion and Bosporos to Mare Success. S.A. The Company accounted the transaction at the carrying amounts of the net assets. During the second quarter of 2019, the Company transferred the net assets of Selini and Salamina to Mare Success. S.A. The Company accounted for the transaction at the carrying amounts of the net assets.
There was net income attributable to the non-controlling interest in the second quarter of 2020 amounting to $1.8 million, compared to a net loss of $0.8 million in the prior year second quarter. For the six months ended June 30, 2020 the net income attributable to the non-controlling interest was $2.6 million and for the equivalent period of 2019 the net loss attributable to the non-controlling interest was $1.1 million.
Net income (loss)
As a result of the foregoing, the net income attributable to Tsakos Energy Navigation Limited for the second quarter of 2020, was $20.4 million, or $1.07 earnings per share basic and diluted, taking into account the impact of preferred stock dividends of $9.4 million on our Series C, Series D, Series E, Series F and Series G Preferred Shares and undistributed income to Series G participants of $1.7 million, compared to net loss of $12.6 million, or $0.72 loss per share basic and diluted, after preferred share dividends of $10.2 million and deemed dividend on Series B preferred shares of $2.7 million for the second quarter of 2019. The net income attributable to Tsakos Energy Navigation Limited for the six months ended June 30, 2020, was $31.4 million, or $1.64 earnings per share including the effect of cumulative dividends on our preferred shares of $19.1 million and undistributed income to Series G preferred share participants of $2.2 million, versus $11.6 million net loss, or $0.66 loss per share, including the effect of preferred share dividends of $20.4 million and deemed dividend on Series B preferred shares of $2.7 million for the six months ended June 30, 2019.
Liquidity and capital resources
Liquidity requirements relate to servicing debt, funding the equity portion of investments in vessels, funding working capital and controlling fluctuations in cash flow. In addition, our new building commitments, other expected capital expenditure on dry-dockings and vessel acquisitions will require us to expend cash in the remainder of 2020 and in future years. Net cash flow generated by operations is the main source of liquidity. Apart from the possibility of issuing further equity, additional sources of cash include proceeds from asset sales and borrowings, although all borrowing arrangements to date have specifically related to the acquisition of specific vessels.
With the current cash holdings and the number of vessels on time charter, and considering that market conditions remain relatively stable throughout the remainder of 2020 and 2021, the Company’s financial resources, including the cash expected to be generated within the year, will be sufficient to meet liquidity and working capital needs for the next twelve months, taking into account existing capital commitments and debt service requirements. If market conditions worsen significantly due to the current pandemic of COVID-19, then the Company’s cash resources may decline to a level that may put at risk the Company’s ability to service timely its debt and capital expenditure commitments. In order to avoid such an eventuality, management would expect to be able to raise extra capital through the alternative sources described above. See “the Impact of COVID-19 on our business” below.
Working capital (non-restricted net current assets) amounted to a positive $50.6 million as of June 30, 2020 compared to a positive $27.0 million as of December 31, 2019, respectively. The increase is mainly attributed to higher cash balances and the decreased current portion of loan facilities for the period ended June 30, 2020. The increase is partially offset due to the aframax vessel Sakura Princess classified as held for sale as of June 30, 2020 compared to two suezmax and one aframax vessel Archangel, Alaska and Izumo Princess classified as held for sale for the year ended December 31, 2019. The negative movement of the fair values of bunkers and interest rates swaps by $14.3 million and the increase of current portion of obligations under operating lease, attributed to the sale and lease back transaction for two of our suezmax vessels Archangel and Alaska have contributed to the increase of current liabilities.
Current assets decreased to $382.7 million at June 30, 2020 from $397.0 million at December 31, 2019, mainly due to one vessel accounted for as held for sale compared to three vessels, partially offset by an increase in cash and cash equivalents during the six-month period. Current liabilities decreased to $317.4 million at June 30, 2020 from $354.2 million at December 31, 2019, mainly due to the decrease in the current portion of debt which relates to the sale of three vessels during the first six months of 2020 and the decrease of accrued liabilities. This decrease is partially offset by the increase of the current portion of financial instruments and obligations under operating leases.
Net cash from operating activities was $142.1 million in the six-month period ended June 30, 2020, compared to $84.6 million in the first six months of 2019. The $57.5 million increase is primarily attributable to a stronger tanker market with higher TCE rates which contributed to an increase in voyage revenues by $78.6 million as more fully described in the paragraph “Voyage Revenues” in the “Results of operations” above. While revenue increased during the six-month period, cash expenditure remained relatively stable in the first half of 2020 compared to the equivalent period of 2019. Total cash expenditure on voyage expenses, operating expenses, charter-in costs, G&A expenses, finance expenses, net of interest income and other, net expenses amounted to $212.2 million during the first six months of 2020, compared to $209.6 million in 2019, an increase of $2.6 million or 1.2%. The expense movements are fully described in the respective paragraphs in the “Results of operations” above. Inventories, mainly consisting of bunker fuel, increased by $1.8 million in the first half of 2020, with a $4.8 million positive turnaround compared to the period ended June 30, 2019, as the number of vessels operating under the spot market increased. Unearned revenue, arising from collection of time-charter hire during the second quarter of 2020 for services not rendered, increased by $3.0 million due to certain charterers paying early, compared to a $5.0 million increase in the first half of 2019 as several charterers paid hire in advance. Payments for dry-docking expenses decreased by $3.2 million due to only one handysize vessel undergoing its scheduled drydock compared to two panamax vessels dockings performed during the period ended June 30, 2019. Accrued liabilities and payables decreased by $13.0 million due to payments made to suppliers of fuel to the spot vessels, with such suppliers requiring payment in advance of delivery, compared to a decrease in accrued liabilities and payables by $2.9 million in the first six months ended June 30, 2019. Receivables and advances decreased by $5.5 million compared to a decrease in receivables of $3.6 million in the first six months of 2019, a $1.9 million improvement in rate of collectability. During the six-month period ended June 30, 2020, the Company deposited cash collateral of $5.6 million related to its derivative instruments, while no collateral security was provided during the equivalent period of 2019.
Net cash provided by operating activities increased to $84.6 million in the second quarter of 2020, compared to $45.4 million in the previous year’s second quarter. The $39.2 million increase is primarily attributable to the increase in voyage revenues by $46.8 million, or 32.5% due to a stronger tanker market with higher charter rates partially offset by an increase in charter hire expenses by $2.7 million.
Net cash used in investing activities was $6.4 million for the second quarter of 2020, compared to $12.0 million used for the equivalent period of 2019. Net cash provided by investing activities was $16.1 million for the six months ended June 30, 2020, compared to $32.8 million used in investing activities during the six months ended June 30, 2019. The cash inflow from investing activities was generated by the sale of three suezmax vessels, Silia T., Archangel and Alaska for net proceeds of $64.6 million during the first quarter of 2020, and the sale of handysize vessel Didimon for net proceeds of $8.9 million during the second quarter of 2020. Cash outflow from investing activities during the first six months of 2020, was due to the final payment of $31.6 million for the acquisition of aframax vessel Caribbean Voyager, in addition to yard installments for three vessels under construction, one LNG carrier and two suezmaxes, amounting to $24.5 million and $14.5 million for the second quarter of 2020. For the first half of 2019, cash outflow from investing activities related to payments for four vessels under construction and amounted to $31.9 million and $11.3 million for the second quarter of 2019. As at June 30, 2020 there were two suezmax and one LNG carrier new-buildings on order and the remaining yard installments to be paid for those vessels amounted to $269.2 million ($134.7 million in the second half of 2020 and $134.5 million in 2021), the majority of which will be covered through secured debt that we have arranged or that we expect to arrange. One suezmax tanker has been delivered during the third quarter of 2020, while the second suexmax vessel and the LNG carrier are expected to be delivered in the fourth quarter of 2020 and 2021, respectively. On July 1, 2020, the Company signed a shipbuilding contract for the construction of one 155,000 DP2 shuttle tanker tankers) from Daehan Shipbuilding Corporation.
Net cash used in financing activities was $48.1 million for the second quarter of 2020, compared to $32.5 million used during the second quarter of 2019. In the second quarter of 2020, the Company drew down $13.7 million for the financing of two under construction suezmax vessels and $22.6 million for the refinancing of certain loans. In addition, the amount of $33.8 million was paid in scheduled installments and the amount of $23.8 million was prepaid for the refinancing of loans. Cash inflow from financing activities was partially offset by funds expended under the stock repurchase program announced on March 24, 2020. The Company has acquired 413,533 common shares under this program for a total amount of $5.1 million through June 30, 2020. In the second quarter of 2019, the Company drew down $38.3 million for the refinancing of certain loans and $10.3 million for the financing of two under construction aframax vessels. In addition, the amount of $39.9 million was prepaid for the refinancing of loans and a further $37.1 million was paid in scheduled installments during the second quarter of 2019. Cash inflow from financing activities during the second quarter of 2019 was achieved by the capital contribution of $10.0 million relating to the increase of paid in capital of Mare Success S.A. Net cash used in financing activities was $105.0 million in the six months ended June 30, 2020, compared to $79.7 million used during the six months ended June 30, 2019. In addition to the second-quarter transactions of 2020 mentioned above, during the six months ended June 30, 2020, we drew down $65.7 million, of which $25.9 million related to the financing and delivery of the aframax vessel Caribbean Voyager, and the remaining for the refinancing of one vessel. In addition, the Company proceeded with scheduled loan repayments of $49.8 million, debt prepayment of $37.5 million relating to the sale of three vessels and $31.9 million prepayment regarding the refinancing of one vessel for the first quarter of 2020. An additional $4.0 million relates to the increase of paid in capital of Mare Success S.A, as also discussed above. During the first half of 2019, and in addition to the second-quarter transactions mentioned above, there were scheduled loan repayments amounting to $41.2 million, $150.7 million were drawn down for the refinancing of five vessels and repayment of the same amount of debt and $5.2 million for the financing of one under construction aframax vessel.
Total debt outstanding decreased from $1.54 billion at December 31, 2019, to $1.47 billion at June 30, 2020. The debt to capital (equity plus debt) ratio was 49.8% at June 30, 2020 (or 45.1% on a net of cash basis).
During the first half of 2020, the Company issued 172,227 common shares for net proceeds of $3.5 million. During the first half of 2019, the Company issued 53,575 common shares for net proceeds of $0.9 million.
On March 24, 2020, the Company announced that its Board of Directors had approved a stock repurchase program for open market purchases for up to $50 million of its common and/or its preferred shares. As of June 30, 2020, the Company had acquired 413,533 common shares for a total amount of $5.1 million, which shares are held as treasury stock.
On January 30, 2020 and April 30, 2020, the Company paid dividends of $0.55469 per share, $2.2 million in total, on its 8.875% Series C Preferred Shares and $0.59375 per share, $7.1 million in total, on its 9.50% Series F Preferred Shares. On January 30, 2019 and April 30, 2019, the Company paid dividends of $0.50 per share, $2.0 million in total, on its 8.00% Series B Preferred Shares, $0.55469 per share, $2.2 million in total, on its 8.875% Series C Preferred Shares and $0.59375 per share, $7.1 million in total, on its 9.50% Series F Preferred Shares.
On February 28, 2020, and May 29, 2020, the Company paid dividends of $0.54687 per share, $3.7 million in total, on its 8.75% Series D Preferred Shares and $0.57812 per share $5.3 million in total, on its Series E Preferred Shares. On February 28, 2019, and May 29, 2019, the Company paid dividends of $0.54687 per share, $3.7 million in total, on its 8.75% Series D Preferred Shares and $0.57812 per share $5.3 million in total, on its Series E Preferred Shares.
As of June 30, 2020, the Company was in full compliance with all the covenants contained within the terms of its Series C Preferred Shares. There are no financial covenants in the Company’s other outstanding series of preferred shares.
On June 26, 2020, the Company paid a dividend of $0.375 per common share, or $7.1 million in total, to common shareholders and $0.7 million in total to Series G Convertible Preferred shareholders, which participate in dividends paid on the common shares. On May 30, 2019, the Company paid a dividend of $0.25 per common share, $4.4 million in total.
The Company continues to be fully compliant with its scheduled debt service requirements, repaying capital and paying interest promptly in accordance with respective bank agreements without fail. As a percentage of total liabilities against total assets at fair value, our consolidated leverage (a non-GAAP measure) as computed in accordance with our loan agreements at June 30, 2020 was below the loan covenant maximum of 70%, which is applicable to all the above loans on a fleet and total liabilities basis. As at June 30, 2020, the Company and its wholly and majority owned subsidiaries were compliant with the financial covenants in its thirty loan agreements totaling $1.47 billion, apart from the collateral value-to-loan requirement in one of its loan agreements, which is expected to be compliant in the first quarter of 2021 as a result of regularly scheduled installment payments.
Impact of COVID-19 on our Business
The impact of the COVID-19 pandemic continues to unfold and it may continue to negatively affect the global economy and energy consumption which may have a negative effect on the Company’s business, financial performance and the results of its operations. The impact of the COVID-19 pandemic has negatively impacted demand for oil in 2020, however, in the first half of 2020, while LNG charter rates weakened, crude and product tanker freight and charter rates remained strong, in part due to off-shore oil storage and longer-haul voyages reducing the number of vessels available for trade. A continued slowdown in the global economy and demand for oil may result in decreased demand for seaborne transportation of oil and oil products, as began to develop in the third quarter of 2020, and a continued decline in demand for seaborne transportation of LNG, and in turn charter rates for our vessels not fixed on long-term fixed-rate charters, the extent of which will depend largely on future developments. Travel restrictions imposed on a global level also caused disruptions in scheduled crew changes on our vessels and delays in carrying out of certain hull repairs and maintenance during the first half of 2020, which disruptions could also continue to affect our operations.
TSAKOS ENERGY NAVIGATION LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2020 AND DECEMBER 31, 2019
(Expressed in thousands of U.S. Dollars - except share and per share data)
| June 30, |
December 31, | |
| (UNAUDITED) | ||
| ASSETS | ||
| CURRENT ASSETS: | ||
| Cash and cash equivalents | $ |
$ |
| Restricted cash | | |
| Margin deposits (Note 12) | ||
| Accounts receivable, net | | |
| Capitalized voyage expenses | | |
| Due from related companies (Note 2) | | |
| Advances and other | | |
| Vessels held for sale (Note 4) | | |
| Inventories | | |
| Prepaid insurance and other | | |
| Current portion of financial instruments-Fair value (Note 7,12) | | |
|
|
| |
| Total current assets | | |
|
|
| |
| FINANCIAL INSTRUMENTS - FAIR VALUE, net of current portion (Note 7,12) | | |
| RIGHT OF USE ASSET UNDER OPERATING LEASES (Note 4) | | |
| LONG TERM RECEIVABLE (Note 4) | | |
| FIXED ASSETS (Note 4) | ||
| Advances for vessels under construction | | |
| Vessels | | |
| Accumulated depreciation | ( |
( |
|
|
| |
| Vessels’ Net Book Value | | |
|
|
| |
| Total fixed assets | | |
|
|
| |
| DEFERRED CHARGES, net (Note 5) | | |
|
|
| |
| Total assets | $ |
$ |
|
|
| |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||
| CURRENT LIABILITIES: | ||
| Current portion of long-term debt (Note 6) | $ |
$ |
| Payables | | |
| Due to related companies (Note 2) | | |
| Accrued liabilities | | |
| Unearned revenue (Note 3) | | |
| Current portion of obligations under operating lease (Note 4) | | |
| Current portion of financial instruments - Fair value (Note 7,12) | | |
|
|
| |
| Total current liabilities | | |
|
|
| |
| LONG-TERM DEBT, net of current portion (Note 6) | | |
| LONG-TERM OBLIGATIONS UNDER OPERATING LEASE (Note 4) | | |
| FINANCIAL INSTRUMENTS - FAIR VALUE, net of current portion (Note 7,12) | |
| June 30, |
December 31, | |
| (UNAUDITED) | ||
| STOCKHOLDERS’ EQUITY (Note 8): | ||
| Preferred shares, $ par value; shares authorized and Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares, Series F Preferred Shares and Series G Convertible Preferred Shares issued and outstanding at June 30, 2020 and Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares, Series F Preferred Shares and Series G Convertible Preferred Shares issued and outstanding at December 31, 2019 | | |
| Common shares, $ par value; shares authorized at June 30, 2020 and December 31, 2019; shares issued and shares outstanding at June 30, 2020 and shares issued and outstanding at December 31, 2019, respectively | | |
| Additional paid-in capital | | |
| Cost of treasury stock | ( |
|
| Accumulated other comprehensive loss | ( |
( |
| Retained earnings | | |
|
|
| |
| Total Tsakos Energy Navigation Limited stockholders’ equity | | |
| Non-controlling Interest | | |
|
|
| |
| Total stockholders’ equity | | |
|
|
| |
| Total liabilities and stockholders’ equity | $ |
$ |
|
|
|
The accompanying notes are an integral part of these consolidated financial statements
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
FOR THE THREE MONTHS ENDED JUNE 30, 2020 AND 2019
(Expressed in thousands of U.S. Dollars - except share and per share data)
| Three months ended June 30 | ||
| 2020 |
2019 | |
| VOYAGE REVENUES (Note 3): | $ |
$ |
| EXPENSES: | ||
| Voyage expenses | | |
| Charter hire expense | | |
| Vessel operating expenses | | |
| Depreciation and amortization | | |
| General and administrative expenses | | |
| Loss on sale of vessels (Note 4) | ||
| Impairment charges (Note 4) | ||
|
|
| |
| Total expenses | | |
|
|
| |
| Operating income | | |
|
|
| |
| OTHER INCOME (EXPENSES): | ||
| Interest and finance costs, net (Note 7) | ( |
( |
| Interest income | | |
| Other, net | ( | |
|
|
| |
| Total other expenses, net | ( |
( |
|
|
| |
| Net income (loss) | ( | |
| Less: Net (income) loss attributable to the non-controlling interest | ( |
|
|
|
| |
| Net income attributable to Tsakos Energy Navigation Limited | $ |
$ |
|
|
| |
| Effect of preferred dividends | ( |
( |
| Undistributed income to Series G participants | ( |
|
| Deemed dividend on Series B preferred shares | ( | |
| Net income (loss) attributable to common stockholders of Tsakos Energy Navigation Limited | ( | |
| Earnings (loss) per share, basic and diluted attributable to Tsakos Energy Navigation Limited common stockholders | $ |
$ ( |
|
|
| |
| Weighted average number of shares, basic and diluted | |
|
|
|
| |
The accompanying notes are an integral part of these consolidated financial statements
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(Expressed in thousands of U.S. Dollars - except share and per share data)
| Six months ended June 30 | ||
| 2020 |
2019 | |
| VOYAGE REVENUES (Note 3): | $ |
$ |
| EXPENSES: | ||
| Voyage expenses | | |
| Charter hire expense | | |
| Vessel operating expenses | | |
| Depreciation and amortization | | |
| General and administrative expenses | | |
| Loss on sale of vessels (Note 4) | ||
| Impairment charges (Note 4) | ||
|
|
| |
| Total expenses | | |
|
|
| |
| Operating income | | |
|
|
| |
| OTHER INCOME (EXPENSES): | ||
| Interest and finance costs, net (Note 7) | ( |
( |
| Interest income | | |
| Other, net | ( | |
|
|
| |
| Total other expenses, net | ( |
( |
|
|
| |
| Net income (loss) | | |
| Less: Net (income) loss attributable to the non-controlling interest | ( |
|
|
|
| |
| Net income attributable to Tsakos Energy Navigation Limited | $ |
$ |
|
|
| |
| Effect of preferred dividends | ( |
( |
| Undistributed income to Series G participants | ( |
|
| Deemed dividend on Series B Preferred Shares | ( | |
| Net income (loss) attributable to common stockholders of Tsakos Energy Navigation Limited | ( | |
| Earnings (loss) per share, basic and diluted attributable to Tsakos Energy Navigation Limited common stockholders | $ |
$ ( |
|
|
| |
| Weighted average number of shares, basic and diluted | |
|
|
|
| |
The accompanying notes are an integral part of these consolidated financial statements
CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
FOR THE THREE MONTHS ENDED JUNE 30, 2020, AND 2019
(Expressed in thousands of U.S. Dollars)
| Three months ended June 30 | ||
| 2020 |
2019 | |
| Net income (loss) | $ |
$ ( |
| Other comprehensive loss | ||
| Unrealized gain (loss) from hedging financial instruments | ||
| Unrealized loss on interest rate swaps, net (Note 9) | ( |
( |
|
|
| |
| Comprehensive income (loss) | ( | |
|
|
| |
| Less: comprehensive (income) loss attributable to the non-controlling interest | ( |
|
|
|
| |
| Comprehensive income (loss) attributable to Tsakos Energy Navigation Limited | $ |
$ ( |
|
|
| |
The accompanying notes are an integral part of these consolidated financial statements
CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2020, AND 2019
(Expressed in thousands of U.S. Dollars)
| Six months ended | ||
| 2020 |
2019 | |
| Net income | $ |
$ |
| Other comprehensive income (loss) | ||
| Unrealized gain (loss) from hedging financial instruments | ||
| Unrealized loss on interest rate swaps, net (Note 9) | ( |
( |
|
|
| |
| Comprehensive income (loss) | | |
|
|
| |
| Less: comprehensive (income) loss attributable to the non-controlling interest | ( |
|
|
|
| |
| Comprehensive income (loss) attributable to Tsakos Energy Navigation Limited | $ |
$ |
|
|
| |
The accompanying notes are an integral part of these consolidated financial statements
TSAKOS ENERGY NAVIGATION LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2020, AND 2019
(Expressed in thousands of U.S. Dollars - except share and per share data
| Treasury stock | ||||||||||
| Preferred |
Common |
Additional |
Shares |
Amount |
Retained |
Accumulated |
Tsakos Energy |
Non- |
Total | |
| BALANCE, January 1, 2019 | $ |
$ |
$ |
$ |
$ ( |
$ |
$ |
$ | ||
| Net income | ( |
|||||||||
| Capital contribution from noncontrolling interest owners to subsidiary | ||||||||||
| Sale of Common Shares | |
|||||||||
| Cash dividends paid ($ per common share) | ( |
( |
( | |||||||
| Cash dividends declared ($ per Series B preferred share) | ( |
( |
( | |||||||
| Redemption of Series B Redeemable preferred shares | ( |
( |
( |
( |
( | |||||
| Dividends paid on Series B preferred shares | ( |
( |
( | |||||||
| Dividends paid on Series C preferred shares | ( |
( |
( | |||||||
| Dividends paid on Series D preferred shares | ( |
( |
( | |||||||
| Dividends paid on Series E preferred shares | ( |
( |
( | |||||||
| Dividends paid on Series F preferred shares | ( |
( |
( | |||||||
| Other comprehensive loss | ( |
( |
( | |||||||
|
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|
| |
| BALANCE June 30, 2019 | $ |
$ |
$ |
$ |
$ ( |
$ |
$ |
$ | ||
| Treasury stock | ||||||||||
|
|
Preferred |
Common |
Additional |
Shares |
Amount |
Retained |
Accumulated |
Tsakos Energy |
Non- |
Total |
| BALANCE, January 1, 2020 | $ |
$ |
$ |
|
|
$ |
$ ( |
$ |
$ |
$ |
| Net income | |
|
|
| ||||||
| Capital contribution from noncontrolling interest | |
| ||||||||
| Sale of Common Shares | |
|
|
| ||||||
| Purchase of Treasury Stock | $ ( |
( |
( | |||||||
| Conversion of Series G Convertible Preferred Shares | ( |
( |
||||||||
| Cash dividends paid ($ per common share) | ( |
( |
( | |||||||
| Dividends paid on Series C preferred shares | ( |
( |
( | |||||||
| Dividends paid on Series D preferred shares | ( |
( |
( | |||||||
| Dividends paid on Series E preferred shares | ( |
( |
( | |||||||
| Dividends paid on Series F preferred shares | ( |
( |
( | |||||||
| Dividends paid on Series G preferred shares | ( |
( |
( | |||||||
| Other comprehensive loss | ( |
( |
( | |||||||
|
|
|
|
|
|
|
|
|
|
| |
| BALANCE June 30, 2020 | $ ( |
( |
$ | |||||||
The accompanying notes are an integral part of these consolidated financial statements
TSAKOS ENERGY NAVIGATION LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(Expressed in thousands of U.S. Dollars)
| Six months ended June 30 | ||
| 2020 |
2019 | |
| Cash Flows from Operating Activities: | ||
| Net income | $ |
$ |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||
| Depreciation | | |
| Amortization of deferred dry-docking costs | | |
| Amortization of loan fees | | |
| Interest expense on long-term receivable, net | ||
| Change in fair value of derivative instruments | ( | |
| Loss on sale of vessel | ||
| Impairment charges | ||
| Payments for dry-docking | ( |
( |
| (Increase) Decrease in: | ||
| Accounts receivables | | |
| Margin deposits | ( |
|
| Inventories | ( |
|
| Prepaid insurance and other | ( |
( |
| Capitalized voyage expenses | ( |
( |
| Increase (Decrease) in: | ||
| Payables | ( |
( |
| Accrued liabilities | ( |
( |
| Unearned revenue | | |
|
|
| |
| Net Cash provided by Operating Activities | | |
|
|
| |
| Cash Flows from Investing Activities: | ||
| Advances for vessels under construction and acquisitions | ( |
( |
| Vessel acquisitions and/or improvements | ( |
( |
| Proceeds from sale of vessels | ||
|
|
| |
| Net Cash provided by (used in) Investing Activities | ( | |
|
|
| |
| Cash Flows from Financing Activities: | ||
| Proceeds from long-term debt | | |
| Financing costs | ( |
( |
| Payments of long-term debt | ( |
( |
| Purchase of treasury stock, net | ( |
|
| Proceeds from stock issuance program, net | | |
| Cash dividends | ( |
( |
| Capital contribution from noncontrolling interest to subsidiary | | |
|
|
| |
| Net Cash used in Financing Activities | ( |
( |
|
|
| |
| Net increase (decrease) in cash and cash equivalents and restricted cash | ( | |
| Cash and cash equivalents and restricted cash at beginning of period | | |
|
|
| |
| Cash and cash equivalents and restricted cash at end of period | $ |
$ |
|
|
| |
| Reconciliation of cash, cash equivalents and restricted cash: | ||
| Current Assets: | ||
| Cash and cash equivalents | | |
| Restricted cash | | |
| Total Cash and cash equivalents and restricted cash | | |
The accompanying notes are an integral part of these consolidated financial statements
TSAKOS ENERGY NAVIGATION LIMITED AND SUBSIDIARIES
CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2020 AND 2019
(Expressed in thousands of U.S. Dollars, except for share and per share data, unless otherwise stated)
1. Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements of Tsakos Energy Navigation Limited (the “Holding Company”) and subsidiaries (collectively, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 6-K and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. Operating results for the six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.
On July 1, 2020, the Company effected a
The consolidated balance sheet as of December 31, 2019, has been derived from the audited consolidated financial statements included in the Company’s annual report on Form 20-F filed with the SEC on April 14, 2020 (“Annual Report”), but does not include all of the footnotes required by U.S. GAAP for complete financial statements.
Impact of COVID-19 on the Company’s Business
The spread of the COVID-19 virus, which has been declared a pandemic by the World Health Organization, in 2020 has caused substantial disruptions in the global economy and the shipping industry, as well as significant volatility in the financial markets, the severity and duration of which remains uncertain.
The impact of the COVID-19 pandemic continues to unfold and it may continue to negatively affect the global economy and demand for oil which may have a negative effect on the Company’s business, financial performance and the results of its operations, including due to decreased demand for seaborne transportation of oil and oil products which began to develop in the third quarter of 2020 and any continued decline in demand for seaborne transportation of LNG, and in turn charter rates,the extent of which will depend largely on future developments. As a result, many of the Company’s estimates and assumptions required increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, the Company’s estimates may change in future periods.
Significant Accounting Policies
A discussion of the Company’s significant accounting policies can be found in Note 1 of the Company’s consolidated financial statements included in the Annual Report. There have been no material changes to these policies in the six-month period ended June 30, 2020, except as discussed below:
Reporting Assets held for sale: If circumstances arise that previously were considered unlikely and, as a result, the Company decides not to sell a long-lived asset previously classified as held for sale, the asset shall be reclassified as held and used. A long-lived asset that is reclassified shall be measured individually at the lower of its carrying amount before the asset or disposal group was classified as held for sale, adjusted for any depreciation expense that would have been recognized had the asset or disposal group been continuously classified as held and used and its fair value at the date of the subsequent decision not to sell.
Expected credit losses: In June 2016, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13—Financial Instruments—Credit Losses (Topic 326) —Measurement of Credit Losses on Financial Instruments. ASU No. 2016-13 amended guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. In November 2018, the FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses” (“ASU 2018-19”), which clarifies that receivables arising from operating leases are not within the scope of the credit losses standard, but rather, should be accounted for in accordance with the lease standard.
In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments ("ASU 2019-04") to clarify certain accounting topics from previously issued ASUs, including ASU 2016-13. ASU 2019-04 addresses certain aspects of ASU 2016-13, including but not limited to, accrued interest receivable, loan recoveries, interest rate projections for variable-rate financial instruments and expected prepayments. ASU 2019-04 provides alternatives that allow entities to measure credit losses on accrued interest separate from credit losses on the principal portion of a loan, clarifies that entities should include expected recoveries in the measurement of credit losses, allows entities to consider future interest rates when measuring credit losses and elect to adjust effective interest rates used to discount expected cash flows for expected loan prepayments.
In May 2019, the FASB issued ASU 2019-05, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825 Financial Instruments”, the amendments of which provide entities that have certain instruments within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost, with an option to irrevocably elect the fair value option in Subtopic 825-10, Financial Instruments—Overall, applied on an instrument-by-instrument basis for eligible instruments, upon adoption of Topic 326.
As of January 1, 2020, the Company adopted ASU 2016-13—Financial Instruments—Credit Losses (Topic 326) and respective amendments. The accounting standard amends the current financial instrument impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. Under the new guidance, an entity recognizes as an allowance its estimate of lifetime expected credit losses which will result in more timely recognition of such losses. The Company adopted the accounting standard using the prospective transition approach as of January 1, 2020, which resulted in an immaterial adjustment in the opening balance of retained earnings. The Company maintains an allowance for credit losses for expected uncollectable accounts receivable, which is recorded as an offset to trade accounts receivable and changes in such, if any, are classified as Bad debt provisions in the Consolidated Statements of Comprehensive Income (Loss).
The adoption of ASC 326 primarily impacted trade receivables recorded on the Consolidated Balance Sheet. The Company assessed collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when the Company identifies specific customers with known disputes or collectability issues. In determining the amount of the allowance for credit losses, the Company considered historical collectability based on past due status. The Company also considered customer-specific information, current market conditions and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical loss data.
The Company assessed that any impairment of receivables arising from operating leases, i.e. time charters, should be accounted for in accordance with Topic 842, Leases, and not in accordance with Topic 326. Impairment of receivables arising from voyage charters, which are accounted for in accordance with Topic 606, Revenues from Contracts with Customers, are within the scope of Subtopic 326 and must therefore be assessed for expected credit losses. No additional allowance was warranted for the six-month period ended June 30, 2020.
Fair value measurements: In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820)—Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”, which improves the effectiveness of fair value measurement disclosures. In particular, the amendments in this Update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements, including the consideration of costs and benefits. The amendments in the Update apply to all entities that are required under existing U.S. GAAP to make disclosures about recurring and non-recurring fair value measurements. ASU 2018-13 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this Update. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this Update and delay adoption of the additional disclosures until their effective date. The adoption of this new accounting guidance did not have a material effect on the Company’s consolidated financial statements and related disclosures.
New Accounting Pronouncements—Not Yet Adopted
In March 2020, the FASB issued ASU 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848)”, which is intended to provide temporary optional expedients and exceptions to U.S. GAAP guidance on contracts, hedge accounting and other transactions affected by the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This ASU is effective for all entities beginning on March 12, 2020 through December 31, 2020. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements and related disclosures.
In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. The ASU reduces the number of accounting models for convertible debt instruments by eliminating the cash conversion model. As compared with current U.S. GAAP, more convertible debt instruments will be reported as a single liability instrument and the interest rate of more convertible debt instruments will be closer to the coupon interest rate. The ASU also aligns the consistency of diluted Earnings Per Share ("EPS") calculations for convertible instruments by requiring that (1) an entity use the if-converted method and (2) share settlement be included in the diluted EPS calculation for both convertible instruments and equity contracts when those contracts include an option of cash settlement or share settlement. The ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The FASB has specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements and related disclosures.
2. Transactions with Related Parties
(a) Tsakos Energy Management Limited (the “Management Company”): The Holding Company has a Management Agreement (“Management Agreement”) with the Management Company, a Liberian corporation, to provide overall executive and commercial management of its affairs for a monthly fee, which may be adjusted per the Management Agreement of March 8, 2007, effective from January 1, 2008, at the beginning of each year, in accordance with the terms of the Management Agreement, if both parties agree. The monthly fees include fees which are paid to the technical managers on a monthly basis, including third-party managers for the LNG carriers Maria Energy, Neo Energy, the VLCCs Ulysses, Hercules I, the aframax tankers Sapporo Princess and Maria Princess and the suezmax tanker Eurochampion 2004. The Management Company, for services rendered, charged $
In addition to the management fee, the Management Agreement provides for an incentive award to the Management Company, which is at the absolute discretion of the Holding Company’s Board of Directors. The amount of $
The Holding Company and the Management Company have certain officers and directors in common. The President, who is also the Chief Executive Officer and a Director of the Holding Company, is also the sole stockholder of the Management Company. The Management Company may unilaterally terminate its Management Agreement with the Holding Company at any time upon one year’s notice. In addition, if even one director is elected to the Holding Company without the recommendation of the existing Board of Directors, the Holding Company would be obligated to pay the Management Company an amount calculated in accordance with the terms of the Management Agreement. Under the terms of the Management Agreement between the Holding Company and the Management Company, the Holding Company may terminate the Management Agreement only under specific circumstances, without the prior approval of the Holding Company’s Board of Directors.
Estimated future management fees payable over the next ten years under the Management Agreement, exclusive of any incentive awards and based on existing vessels and known vessels scheduled for future delivery, as at June 30, 2020, are $
Management fees for vessels are included in General and administrative expenses in the accompanying interim Consolidated Statements of Comprehensive Income (Loss). Also, under the terms of the Management Agreement, the Management Company provides supervisory services for the construction of new vessels for a monthly fee of $
As of June 30, 2020, the amount due to the Management Company was $
(b) Tsakos Columbia Shipmanagement S.A. (“TCM”): The Management Company appointed TCM to provide technical management to the Company’s vessels from July 1, 2010. TCM is owned jointly and in equal part by related party interests and by a private German group. TCM, with the consent of the Holding Company, may subcontract all or part of the technical management of any vessel to an alternative unrelated technical manager.
Effective July 1, 2010, the Management Company, at its own expense, pays technical management fees to TCM and the Company bears and pays directly to TCM most of its operating expenses, including repairs and maintenance, provisioning and crewing of the Company’s vessels, as well as certain charges which are capitalized or deferred, including reimbursement of the costs of TCM personnel sent overseas to supervise repairs and perform inspections on Company vessels. TCM for services rendered charged $
As of June 30, 2020, the amount due from TCM was $
TCM has a
(c) Tsakos Shipping and Trading S.A. (“Tsakos Shipping”): Tsakos Shipping provides chartering services for the Company’s vessels by communicating with third party brokers to solicit research and propose charters. For this service, the Company pays to Tsakos Shipping a chartering commission of approximately
Certain members of the Tsakos family are involved in the decision-making processes of Tsakos Shipping and of the Management Company and are also shareholders and directors of the Holding Company.
Tsakos Shipping for services rendered charged $
(d) Argosy Insurance Company Limited (“Argosy”): The Company places its hull and machinery insurance, increased value insurance and war risk and certain other insurances through Argosy, a captive insurance company affiliated with Tsakos Shipping. For the second quarter of 2020, Argosy, for services rendered, charged $
(e) AirMania Travel S.A. (“AirMania”): Apart from third-party agents, the Company also uses an affiliated company, AirMania, for travel services. For the second quarter of 2020, AirMania, for services rendered, charged $
The amount due to AirMania as of June 30, 2020, was $
3. Revenue from Contracts with Customers
Voyage charters and contracts of affreightment: Revenues from voyage charters and contracts of affreightment amounted to $
Time and bareboat charters: Revenues from time charter hire arrangements amounted to $
Unearned revenue: Unearned revenue represents cash received within the reporting period, for which related service has not been provided, primary relating to time charter agreements and to revenue resulting from charter agreements with varying rates. As of June 30, 2020, unearned revenue amounted to $
4. Vessels
Sale and Leaseback
On December 21, 2017, the Company entered into a five-year sale and leaseback agreement for each of the two suezmaxes, Eurochampion 2004 and Euronike. The agreed net sale price was $
On January 9, 2020, the Company entered into a new
Upon adoption of ASC 842, the Company as at January 9, 2020 and January 1, 2019 recognized on the interim consolidated balance sheet right-of-use assets of $
The incremental borrowing rate used to determine the right-of-use asset and the obligations under operating lease was
Vessels (Table)
| Year |
Lease Commitment |
| July 1 to December 31, 2020 | |
| 2021 | |
| 2022 | |
| 2023 | |
| 2024 | |
|
| |
| Minimum net lease payments | |
| Less: present value discount | ( |
|
| |
| Total Obligations under operating lease (current and non-current portion) | |
|
|
The Company has subleased the vessels and has recognized sublease revenue, net of voyage expenses of $
Vessels held for sale
As of June 30, 2020, the Company reclassified the aframax tanker Izumo Princess as held and used, previously classified as held for sale. On the same date, the vessel was replaced with the aframax tanker Sakura Princess, which met the held for sale criteria and is expected to be sold within a year.
At December 31, 2019, the Company considered that the suezmax tankers Archangel, Alaska, Silia T and the aframax tanker Izumo Princess met the criteria to be classified as held for sale.
Sales
During the first half of 2020, the Company sold its suezmax tanker, Silia T (previously classified as held for sale), and its handysize vessel, Didimon, realizing a net loss of $
There were no vessel sales during the first half of 2019.
Impairment
As of June 30, 2020, the Company reviewed the carrying amount in connection with the estimated recoverable amount and probability of sale for each of its vessels and vessels under construction. This review indicated that such carrying amount was not fully recoverable for two of the Company’s vessels; Izumo Princess and Sakura Princess. As of June 30, 2020, the Company decided not to sell Izumo Princess, which was previously classified as held for sale and reclassified it as held and used. The carrying amount written down to $
5. Deferred Charges
Deferred charges consisting of dry-docking and special survey costs, net of accumulated amortization, amounted to $
6. Long-Term Debt
Long-Term Debt (Table)
| Facility |
June 30, |
December 31, |
| Term Bank Loans | |
|
| Less deferred finance costs, net | ( |
( |
|
|
|
| Total long-term debt | |
|
| Less current portion of debt | ( |
( |
| Add deferred finance costs, current portion | |
|
|
|
| |
| Total long-term portion, net of current portion and deferred finance costs | |
|
|
|
|
Term bank loans
Term loan balances outstanding at June 30, 2020, amounted to $
On January 9, 2020, the Company prepaid the amount of $
On February 3, 2020, the Company prepaid the amount of $
On March 19, 2020, the Company signed a new ten-year loan agreement amounting to $
On March 20, 2020, the Company signed a four and a half-year amended agreement on the loan dated May 31, 2019, for $
On March 25, 2020, the Company signed a new five-year loan agreement amounting to $
On April 3, 2020, the Company signed an amended agreement on the loan dated August 22, 2014, for a $
On June 23, 2020, the Company prepaid the amount of $
On July 15, 2020, the Company signed a new six-year loan agreement amounting to $
On July 17, 2020, the Company signed a new two-year loan agreement amounting to $
On September 9, 2020, the Company signed a new five-year loan agreement amounting to $
The weighted-average interest rates on the above executed loans for the applicable periods were:
Long-Term Debt - Weighted-Average Interest Rates (Table)
| Three months ended June 30, 2020 | |
| Three months ended June 30, 2019 | |
| Six months ended June 30, 2020 | |
| Six months ended June 30, 2019 | |
The above term bank loans are secured by first priority mortgages on all vessels, by assignments of earnings and insurances of the respectively mortgaged vessels, and by corporate guarantees of the relevant vessel-owning subsidiaries.
The loan agreements include, among other covenants, covenants requiring the Company to obtain the lenders’ prior consent in order to incur or issue any financial indebtedness, additional borrowings, pay dividends if an event of default has occurred, sell vessels and assets, and change the beneficial ownership or management of the vessels. Also, the covenants require the Company to maintain a minimum liquidity, not legally restricted, of $
As of June 30, 2020, the Company and its wholly and majority owned subsidiaries had thirty loan agreements, with an aggregate principal amount outstanding thereunder totaling $
The Company’s liquidity requirements relate primarily to servicing its debt, funding the equity portion of investments in vessels and funding expected capital expenditure on dry-dockings and working capital.
The annual principal payments required to be made after June 30, 2020, are as follows:
Long-Term Debt - Principal Payments (Table)
| Period/Year |
Amount |
| July to December 2020 | |
| 2021 | |
| 2022 | |
| 2023 | |
| 2024 | |
| 2025 and thereafter | |
|
| |
| | |
|
|
7. Interest and Finance Costs, net
Interest and Finance Costs, net (Table)
| Three months ended |
Six months ended | |||
| 2020 |
2019 |
2020 |
2019 | |
| Interest expense | |
| ||
| Less: Interest capitalized | ( |
( |
( |
( |
|
|
|
|
| |
| Interest expense, net | |
| ||
| Bunkers swap, put and call options cash settlements | |
| ||
| Bunker put options premium, net | ( |
|
| |
| Amortization of loan fees | |
| ||
| Bank charges | |
| ||
| Discount of long-term receivables, net | ( |
|||
| Change in fair value of non-hedging financial instruments | ( |
|
( | |
|
|
|
|
| |
| Net total | |
| ||
|
|
|
|
| |
At June 30, 2020, the Company was committed to
As of June 30, 2020, and December 31, 2019,
As of June 30, 2020, and December 31, 2019, the Company held
As of June 30, 2020, and December 31, 2019, the Company held
As of June 30, 2020, and December 31, 2019, the Company held
During the first half of 2020, the Company entered into
8. Stockholders’ Equity
During the first half of 2020, the Company issued common shares for net proceeds of $
On May 15, 2020, the Company launched the stock repurchase program for open market purchases for its common and/or its preferred shares, which program was authorized by its Board of Directors on March 23, 2020. The Company has available up to $ million of common and preferred shares with $ par value per share. As of June 30, 2020, the Company has acquired as treasury stock, common shares for a total amount of $
On June 22, 2020, the Company announced a one-for-five (
On January 30, 2020 and April 30, 2020, the Company paid dividends of $ per share, $
On January 30, 2019 and April 30, 2019, the Company paid dividends of $ per share, $
On February 28, 2020, and May 29, 2020, the Company paid dividends of $ per share, $
As of June 30, 2020, the Company was in full compliance with all the covenants contained within the terms of its Series C Preferred Shares. There are no financial covenants in the Company’s other outstanding series of preferred shares.
On June 26, 2020, the Company paid a dividend of $ per common share , of $
In the second quarter of 2020, Mare Success S.A, owned
In the second quarter of 2019, Mare Success S.A, owned
In September 2019, the Company entered into a share purchase agreement for the private placement of Series G Redeemable Convertible Perpetual Preferred Shares, par value $ per share and liquidation preference $ per share (the “Series G Convertible Preferred Shares”), at a purchase price of $ per share, raising $, net of structuring fee and other expenses. The Series G Convertible Preferred Shares have a stated coupon rate of
The Series G Convertible Preferred Shares are convertible at any time, at the option of the holder,
The conversion price is subject to customary anti-dilution and other adjustments relating to the issuance of common shares as a dividend or the subdivision, combination, or reclassification of common shares into a greater or lesser number of common shares. The Company may also redeem in full or in part the Series G Convertible Preferred Shares prior to September 1, 2020, for cash, at the as-converted value of the Series G Convertible Preferred Shares, if the trading price of the common shares exceeds certain levels.
The Series G Convertible Preferred Shares did not generate a beneficial conversion feature (BCF) upon issuance as the fair value of the Company’s common shares was lower than the conversion price. The Series G Convertible Preferred Shares did not meet the criteria for mandatorily redeemable financial instruments. Additionally, the Company determined that the nature of the Series G Convertible Preferred Shares was more akin to an equity instrument and that the economic characteristics and risks of the embedded conversion options were clearly and closely related to the Series G Convertible Preferred Shares. As such, the conversion options were not required to be bifurcated from the equity host under ASC 815, Derivatives and Hedging. The Company also determined that the redemption call option did meet the definition of a derivative, but that the value of the derivative was zero due to the expectations under which the call option would be exercised. On September 1, 2020 the redemption call option expired unexercised.
On December 23, 2019 and January 15, 2020, and Series G Convertible Preferred Shares converted into and common shares, respectively.
The holders of the Series G Convertible Preferred Shares generally do not have voting rights. However, without the affirmative vote or consent of the holders of at least two-thirds of the outstanding Series G Convertible Preferred Shares, voting as a single class, the Company may not adopt any amendment to its memorandum of association or bye-laws that materially or adversely alters or affects the preferences, powers or rights of the Series G Convertible Preferred Shares in any respect or any amendment to the Series G Convertible Preferred Shares Certificate of Designations. The Series G Convertible Preferred Shares rank pari passu with the Company’s other outstanding series of preferred shares and senior to the Company’s common shares with respect to dividend distributions and distributions upon any liquidation event.
On February 1, 2021 (the “Redemption Date”), subject to certain limitations, outstanding Series G Convertible Preferred Shares having a redemption price of up to $
On June 28, 2019, the Company declared the redemption of all of its Series B Preferred Shares, $ per share and the payment of the final dividend of $ per share, on the same date, July 30, 2019. Upon declaration, the Company re-classified an amount equal to the fair value of the Series B Preferred Shares from equity to current liabilities. The difference between the carrying value and the fair value of the Series B Preferred Shares, amounting to $
9. Accumulated other comprehensive loss
In the first half of 2020 and 2019, accumulated other comprehensive loss increased with unrealized losses of $
The Company calculates basic earnings (loss) per share in conformity with the two-class method required for companies with participating securities. The Company considered its Series G Convertible Preferred Shares to be participating securities as the holders are entitled to receive dividends on as-converted basis in the event that dividends are declared and paid on the Company’s common shares. The Company calculates diluted earnings (loss) per share using the most dilutive of the two-class method and the treasury stock method.
Under the two-class method, basic earnings (loss) per share is calculated by dividing the net income (loss) by the weighted-average number of common shares outstanding during the period, less shares subject to repurchase. Diluted earnings (loss) per share is computed by giving effect to all potentially dilutive common share equivalents outstanding for the period.
The two-class method requires income available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. Any remaining earnings would be distributed to the holders of common stock and the holders of the Series G Convertible Preferred Shares on a pro-rata basis assuming conversion of all Series G Convertible Preferred Shares into common shares. This participating security does not contractually require the holders of such shares to participate in the Company’s losses. As such, net losses for the periods presented were not allocated to the Company’s participating security.
Earnings (Loss) per Common Share (Table)
| Three months ended |
Six months ended | |||
| 2020 |
2019 |
2020 |
2019 | |
| Numerator | ||||
| Net income attributable to Tsakos Energy Navigation Limited | |
|
|
|
| Preferred share dividends Series B | |
( |
|
( |
| Preferred share dividends Series C | ( |
( |
( |
( |
| Preferred share dividends Series D | ( |
( |
( |
( |
| Preferred share dividends Series E | ( |
( |
( |
( |
| Preferred share dividends Series F | ( |
( |
( |
( |
| Preferred share dividends, Convertible Series G | ( |
( |
| |
| Undistributed income to Series G participants... | ( |
( |
||
| Deemed dividend on Series B Preferred shares | |
( |
|
( |
|
|
|
|
| |
| Net income (loss) attributable to common stockholders of Tsakos Energy Navigation Limited | ( |
|
( | |
|
|
|
|
| |
| Denominator | ||||
| Weighted average number of shares, basic and diluted | |
|
|
|
| Earnings (loss) per share, basic and diluted attributable to Tsakos Energy Navigation Limited | $ |
$ ( |
$ |
$ ( |
|
|
|
|
||
11. Commitments and Contingencies
As of June 30, 2020, the Company had
The total contracted amount plus extra costs agreed for the three vessels under construction as of June 30, 2020, was $
In the ordinary course of the shipping business, various claims and losses may arise from disputes with charterers, agents and other suppliers relating to the operations of the Company’s vessels. Management believes that all such matters are either adequately covered by insurance or are not expected to have a material adverse effect on the Company’s results from operations or financial condition.
Charters-out
The future minimum revenues of vessels in operation at June 30, 2020, before reduction for brokerage commissions, expected to be recognized on non-cancelable time charters are as follows:
Commitments and Contingencies (Table)
| Period/Year |
Amount |
| July 1 to December 31, 2020 | |
| 2021 | |
| 2022 | |
| 2023 | |
| 2024 to 2028 | |
|
| |
| Minimum charter revenues | |
|
|
These amounts do not assume any off-hire.
12. Financial Instruments
(a) Interest rate risk: The Company is subject to interest rate risk associated with changing interest rates with respect to its variable interest rate term loans as described in Notes 6 and 7.
(b) Concentration of credit risk: Financial instruments that are subject to credit risks consist principally of cash, trade accounts receivable, investments, and derivatives. The Company places its temporary cash investments, consisting mostly of deposits, primarily with high credit qualified financial institutions. The Company performs periodic evaluations of the relative credit standing of those financial institutions that are considered in the Company’s investment strategy. The Company limits its credit risk with accounts receivable by performing ongoing credit evaluations of its customers’ financial condition and generally does not require collateral for its accounts receivable and does not have any agreements to mitigate credit risk. The Company limits the exposure of non-performance by counterparties to derivative instruments by diversifying among counterparties with high credit ratings and performing periodic evaluations of the relative credit standing of the counterparties. The Company reviewed its revenue concentration risk, the recoverability of its accounts receivable (i.e. credit risk) and tested its assets for potential impairment. As a result of this evaluation it was determined that COVID-19 did not have material adverse effect on its business, results of operation and financial condition as of June 30, 2020.
(c) Fair value: The carrying amounts reflected in the accompanying Consolidated Balance Sheet of cash and cash equivalents, restricted cash, trade receivables, margin deposits, accounts payable and due from/to related parties, approximate their respective fair values due to the short maturity of these instruments, as at June 30, 2020 and December 31, 2019. The fair value of long-term bank loans with variable interest rates approximate the recorded values, generally due to their variable interest rates. The Company performs relevant enquiries on a periodic basis to assess the recoverability of the long-term receivable estimates that the amount presented on the accompanying Consolidated Balance Sheet approximates the amount that is expected to be received by the Company in the event of the end of the non-cancellable lease period.
The fair values of the interest rate swap agreements, bunker swap agreements and call option agreement and put option agreements discussed in Note 7 above, are determined through Level 2 of the fair value hierarchy as defined in FASB guidance for Fair Value Measurements and are derived principally from or corroborated by observable market data, interest rates, yield curves and other items that allow value to be determined.
The estimated fair values of the Company’s financial instruments, other than derivatives as of June 30, 2020 and December 31, 2019, are as follows:
Financial Instruments - Fair Values (Table)
| Carrying |
Fair Value |
Carrying |
Fair Value | |
| Financial assets (liabilities) | ||||
| Cash and cash equivalents | |
|
| |
| Restricted cash | |
| ||
| Margin deposits | ||||
| Debt | ( |
( |
( |
( |
The Company does not offset fair value amounts recognized for derivatives by the right to reclaim cash collateral or the obligation to return cash collateral. The amount of collateral to be posted is defined in the terms of respective master agreement executed with counterparties or exchanges and is required when agreed upon threshold limits are exceeded. As of June 30, 2020, the Company deposited cash collateral related to its derivative instruments under its collateral security arrangements of $5,617, which is recorded within margin deposits in the Consolidated Balance Sheets. No cash collateral was posted as of December 31, 2019.
Tabular Disclosure of Derivatives Location
Derivatives are recorded in the consolidated balance sheet on a net basis by counterparty when a legal right of set-off exists. The following tables present information with respect to the fair values of derivatives reflected in the consolidated balance sheet on a gross basis by transaction. The tables also present information with respect to gains and losses on derivative positions reflected in the Statement of comprehensive income (loss) or in the Balance sheet, as a component of Accumulated other comprehensive income (loss).
Fair Value of Derivative Instruments
Financial Instruments - Balance Sheet Location (Table)
| Asset Derivatives |
Liability Derivatives | ||||
| Derivative |
Balance Sheet Location |
June 30, |
December 31, |
June 30, |
December 31, |
| Derivatives designated as hedging instruments | |||||
| Interest rate swaps | Current portion of financial instruments - Fair value | |
| ||
| Financial instruments - Fair value, net of current portion | |
| |||
|
|
|
|
| ||
| Subtotal | |
| |||
|
|
|
|
| ||
| Asset Derivatives |
Liability Derivatives | ||||
| Derivative |
Balance Sheet Location |
June 30, |
December 31, |
June 30, |
December 31, |
| Derivatives not designated as hedging instruments | |||||
| Interest rate swaps | Current portion of financial instruments - Fair value | |
|
||
| Interest rate swaps | Financial instruments - Fair value, net of current portion | |
|
| |
| Bunker swaps | Current portion of financial instruments - Fair value | |
| ||
| Bunker swaps | Financial instruments - Fair value, net of current portion | |
| ||
| Bunker put options | Current portion of financial instruments - Fair value | |
|||
| Bunker put options | Financial instruments - Fair value, net of current portion | ||||
| Bunker call options | Current portion of financial instruments-Fair value | ||||
| Bunker call options | Financial instruments-Fair value, net of current portion | |
|||
|
|
|
|
| ||
| Subtotal | |||||
|
|
|
|
| ||
| Total derivatives | |||||
|
|
|
|
| ||
Derivatives designated as Hedging Instruments-Net effect on the Consolidated Statements of Comprehensive Income (Loss)
Financial Instruments - Derivatives Designated as Hedging Instruments - Gain (Loss) Recognized in Accumulated Other Comprehensive Income on Derivative (Effective Portion) (Table)
| Gain (Loss) Recognized in Accumulated | ||||
| Derivative |
Amount |
Amount | ||
| 2020 |
2019 |
2020 |
2019 | |
| Interest rate swaps | ( |
( |
( |
( |
|
|
|
|
| |
| Total | ( |
( |
( |
( |
Financial Instruments - Derivatives Designated as Hedging Instruments - Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion) (Table)
| Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | |||||
| Derivative |
Location |
Amount |
Amount | ||
| 2020 |
2019 |
2020 |
2019 | ||
| Interest rate swaps | Depreciation expense | ( |
( |
( |
( |
| Interest rate swaps | Interest and finance costs, net | ( |
( |
( | |
|
|
|
|
| ||
| Total | ( |
( |
( |
( | |
|
|
|
|
| ||
Derivatives not designated as Hedging Instruments–Net effect on the Consolidated Statement of Comprehensive Income (Loss)
Financial Instruments - Derivatives Not Designated as Hedging Instruments - Net effect on the Statement of Comprehensive Income (Table)
| Gain (Loss) Recognized on Derivative | |||||
| Derivative |
Location |
Amount |
Amount | ||
| 2020 |
2019 |
2020 |
2019 | ||
| Interest rate swaps | Interest and finance costs, net | ( |
( |
( | |
| Bunker swaps | Interest and finance costs, net | ( |
( |
||
| Bunker put options | Interest and finance costs, net | ( |
|||
| Bunker call options | Interest and finance costs, net | ( |
( |
( |
( |
|
|
|
|
| ||
| Total | ( |
( | |||
|
|
|
|
| ||
The accumulated loss from Derivatives designated as Hedging instruments recognized in Accumulated Other Comprehensive Loss as of June 30, 2020 and December 31, 2019 was $
The following tables summarize the fair values for assets and liabilities measured on a recurring basis as of June 30, 2020 and December 31, 2019 using level 2 inputs (significant other observable inputs):
Financial Instruments - Fair Value of Assets and Liabilities Measured on Recurring Basis (Table)
| Recurring measurements: |
June 30, |
December 31, |
| Interest rate swaps | ( |
( |
| Bunker swaps | ( |
( |
| Bunker put options | ||
| Bunker call options | |
|
|
|
| |
| ( |
( | |
|
|
|
13. Subsequent Events
The Company evaluated subsequent events (other than those disclosed above), until the date these interim consolidated financial statements were available to be issued.
(a) On July 1, 2020, the Company signed a shipbuilding contract for the construction of one DP2 Shuttle tanker from Daehan Shipbuilding Co, ltd.
(b) On July 1, 2020, the Company drew down an amount of $
(c) On July 30, 2020, the Company paid dividends of $and $per share on its 8.875% Series C and its 9.50% Series F Preferred Shares, respectively.
(d) On August 26, 2020, the Company drew down an amount of $
(e) On August 28, 2020, the Company paid dividends of $per share on its 8.75% Series D Preferred Shares and $per share on its 9.25% Series E Preferred Shares, respectively.
(f) On September 16, 2020, the Company drew down an amount of $
(g) On September 30, 2020, the Company announced the redemption of all of its Series C Preferred Shares on
(h) Subsequent to June 30, 2020, the Company acquired as treasury shares, common shares for a total amount of $
EXHIBIT INDEX
99.1 Capitalization at June 30, 2020
99.2 Amendment to Certificate of Designation of Series G Preferred Shares
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: October 8, 2020
TSAKOS ENERGY NAVIGATION LIMITED
By: __/s/_Paul Durham_____
Paul Durham
Chief Financial Officer
Exhibit 99.1
CAPITALIZATION
The following table sets forth our (i) cash and cash equivalents, (ii) restricted cash and (iii) consolidated capitalization as of June 30, 2020 on:
| • | an actual basis; and |
| • | an as adjusted basis giving effect to (i) scheduled debt repayments of $55 million, (ii) the declaration of $50 million redemption of Series C Preferred Shares, (iii) the payment of $9.2 million of preferred share dividends, (iv) the buyback of 377,001 common shares, and held as treasury shares, for an aggregate of $3.3 million, (v) debt prepayments of $63.2 million for three aframax tankers, Bergen TS, Izumo Princess and Asahi Princess, one handysize tanker, Aegeas and the panamax tanker Andes and $82.6 million of debt drawdowns with respect to the same vessels, (vi) debt drawdowns of $63.0 million and $21.3 million of equity contributions to shipyard payments for Apollo Voyage, Hull 8042, the LNG carrier Hull 3157 and the shuttle tanker Hull 5800 and (vii) the declaration of $4.7 million of preferred share dividends.. |
Other than these adjustments, there has been no material change in our capitalization from debt or equity issuances, re-capitalization or special dividends between June 30, 2020 and October 5, 2020.
This table should be read in conjunction with our consolidated financial statements and the notes thereto and “Management’s Discussion and Analysis—results of operations” contained in the Report on Form 6-K to which this capitalization table is an exhibit, and “Item 5. Operating and Financial Review and Prospects,” included in our Annual Report on Form 20-F for the year ended December 31, 2019.
| As of June 30, 2020 | ||||||||
| In thousands of U.S. Dollars | Actual | Adjusted | ||||||
| Cash |
||||||||
| Cash and cash equivalents |
244,497 | 175,156 | ||||||
| Restricted cash |
12,055 | 12,055 | ||||||
|
|
|
|
|
|||||
| Total cash |
256,552 | 187,211 | ||||||
|
|
|
|
|
|||||
| Capitalization |
||||||||
| Redeemable Series C Preferred Shares |
— | 50,000 | ||||||
| Debt: |
||||||||
| Long-term secured debt obligations (including current portion) |
1,469,835 | 1,497,273 | ||||||
|
|
|
|
|
|||||
| Stockholders’ equity: |
||||||||
| Preferred shares, $1.00 par value; 25,000,000 shares authorized on an actual and as adjusted basis and 2,000,000 Series C Preferred Shares, 3,424,803 Series D Preferred Shares, 4,600,000 Series E Preferred Shares, 6,000,000 Series F Preferred Shares and 2,615,000 Series G Convertible Preferred Shares issued and outstanding on an actual basis and 3,424,803 Series D Preferred Shares, 4,600,000 Series E Preferred Shares, 6,000,000 Series F Preferred Shares and 2,615,000 Series G Convertible Preferred Shares issued and outstanding on an adjusted basis |
18,640 | 16,640 | ||||||
| Common shares, $5.00 par value; 35,000,000 shares authorized on an actual and as an adjusted basis; 19,194,615shares issued and 18,781,082 shares outstanding on an actual basis and 19,194,615 shares issued and 18,404,081 shares outstanding on an as adjusted basis |
95,973 | 95,973 | ||||||
| Additional paid-in capital |
994,597 | 950,199 | ||||||
| Cost of treasury stock |
(5,071 | ) | (8,341 | ) | ||||
| Accumulated other comprehensive loss |
(42,673 | ) | (42,673 | ) | ||||
| Retained earnings |
390,537 | 374,168 | ||||||
| Non-controlling interest |
27,468 | 27,468 | ||||||
|
|
|
|
|
|||||
| Total stockholders’ equity |
1,479,471 | 1,413,434 | ||||||
|
|
|
|
|
|||||
| Total capitalization |
2,949,306 | 2,960,707 | ||||||
|
|
|
|
|
|||||
1
Exhibit 99.2
AMENDMENT TO
CERTIFICATE OF DESIGNATIONS
OF
SERIES G REDEEMABLE CONVERTIBLE PERPETUAL PREFERRED SHARES
(Par Value US$1.00 Per Share)
OF
TSAKOS ENERGY NAVIGATION LIMITED
TSAKOS ENERGY NAVIGATION LIMITED, a Bermuda exempted company limited by shares (hereinafter called the “Company”), does hereby certify that:
| A. | Pursuant to authority contained in Sections 3.4 and 27.6 of its Bye-laws, the Board of Directors of the Company, acting by unanimous written consent dated September 23, 2019, duly adopted a resolution providing for the issuance of a series of preferred shares, of a par value US$1.00 per share, of the Company each with the rights set forth in a Certificate of Designations dated September 25, 2019 (the “Original Certificate of Designations” and the shares authorized thereby, the “Series G Preferred Shares”). |
| B. | Pursuant to authority contained in Sections 3.4 and 27.6 of the Company’s Bye-laws, and the Original Certificate of Designations, the Board of Directors of the Company, acting by unanimous written consent dated October 5, 2020, duly adopted a resolution providing for the amendment to the Original Certificate of Designations and the sole holder of the Series G Preferred Shares, acting by written consent dated October 6, 2020, duly adopted a resolution providing for the amendment to the Original Certificate of Designations. |
Amendment to the Special Terms of the Series G Preferred Shares
Section 1. Definition of First Mandatory Redemption Date. Section 9(x) of the Original Certificate of Designations is hereby deleted in its entirety and replaced with the following:
(x) “First Mandatory Redemption Date” means February 1, 2021.
Section 2. Definition of Share Purchase Agreement. Section 9(fff) of the Original Certificate of Designations is hereby deleted in its entirety and replaced with the following:
(fff) “Share Purchase Agreement” means that certain share purchase agreement dated September 23, 2019 among the Company, Shyris Shipping and the purchaser named therein, as it may be amended or supplemented from time to time.
Section 3. Definition of Shyris Shipping Series B Preferred Shares. Section 9(jjj) of the Original Certificate of Designations is hereby deleted in its entirety and replaced with the following:
(jjj) “Shyris Shipping Series B Preferred Shares” means the Series B Cumulative Redeemable Perpetual Preferred Shares of Shyris Shipping with the terms set forth in that Statement of Designation dated September 25, 2019, as it may be amended or supplemented from time to time.
Section 4. Definition of “Vessel” is Deleted. Section 9(ooo) of the Original Certificate of Designations is hereby deleted in its entirety and replaced with the following:
(ooo) [Reserved]
Section 5. Headings. A new Section 19 is hereby added to the Original Certificate of Designations as follows:
Section 19. Headings. The headings and other captions in this Certificate of Designations are for convenience and reference only; they shall not be used in interpreting, construing or enforcing any provision of this Certificate of Designations.
Section 6. Applicability of Amendment; Defined Terms. All other terms and conditions of the Original Certificate of Designations shall remain in full force and effect and the Original Certificate of Designations shall be read and construed as if the terms of this Amendment to Certificate of Designations were included therein by way of addition or substitution, as the case may be. Capitalized terms used herein but not otherwise defined herein shall have the respective meanings set forth in the Original Certificate of Designations.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
2
IN WITNESS WHEREOF, TSAKOS ENERGY NAVIGATION LIMITED, has causes this amendment to certificate to be signed on this October 8, 2020.
| TSAKOS ENERGY NAVIGATION LIMITED |
| /s/ Nikolas P. Tsakos |
| Name: Nikolas P. Tsakos |
| Title: CEO |
Signature Page to Amendment to Certificate of Designations – Series G Preferred