Odfjell SE

OSE:ODF

Earnings Call Transcript 2020-Q4

[Kristian Verner Morch, Chief Executive Officer]

Okay. Hello, and welcome to the presentation of the Odfjell Fourth Quarter Results and the Preliminary 2020 Results. We are live streaming it here from Bergen today. My name is Kristian Mørch. I'm the CEO of Odfjell SE. And with me today, I have Terje Iversen, who is the CFO; and Bjørn Kristian Røed, who's head of Investor Relations and Business Analytics in Odfjell SE. If you're watching this presentation live, there should be a button on the top right-hand corner of your screen where you are able to post questions. And towards the end of the presentation today, we will be happy to answer any questions that you are posting. Let's just get going with the presentation itself. On the agenda, I will start to take you through the highlights, both for the quarter and for the year. Then Terje, he will come on and give you a more detailed run-through of the financials, and then I will come back to speak about operational review and strategy and Odfjell prospects and markets update. And as I said, towards the end of the presentation, we will take any questions that you have. If we start by looking at the highlights -- and these are the highlights for the fourth quarter. We had a stable chemical tanker market rates, but the very weak CPP markets and the increasing bunker prices has kept the pressure on our earnings. Our EBITDA came in at $66 million, which is $6 million down compared to the third quarter, and our net results came in at minus $3 million compared to $4 million last quarter, so that was a drop of $7 million. We continue to renew our COA rates based on upgoing rates, so 2.7% during the fourth quarter, and that continues the firming trend we have seen in the last couple of quarters. Also during the quarter, we have established 2 new pools, an MR Pool and an Handy Pool, where we are very happy to welcome 2 new pool partners to Odfjell Tankers, and I'll speak a little bit more about that later on in the presentation. Also during the quarter, we announced that we have acquired Lindsay Goldberg's indirect shareholding in Odfjell Terminals Korea, which means that we now own 50% of that terminal, and I will also speak about that transaction later on. Unfortunately, during the quarter, we also had a fire at our terminal in Houston. We view that as a serious incident, but the situation was handled. The fire was very quickly under control, and we had no injury and no harm. And we do not expect that this fire has any impact on our financial results. Subsequent events. In January, we placed the shipping's first sustainability-linked bond, which was oversubscribed, and it was a success. And we are very happy as a company to go first on the ESG agenda. And we can see that our investors and the lenders to Odfjell appreciate the ambitious climate plan that we have set for the company. On the right-hand side, we say that the fourth quarter concluded the year with challenging circumstances. But despite the challenges and circumstances, we continued to operate very well. We have completed the largest fleet renewal program in the history of the company. We have further streamlined our terminal organization. So in every respect the company is ready, we believe, in the strong fundamentals, although that we are saying that the first quarter is starting on a slightly softer note than 2020. But that's nothing that we believe is fundamentally concerning, and I'll speak about that on the prospects. But we do believe that the struggling CPP market and high bunker prices will mean that we will report weaker results for the first quarter, but I'll get back to that in more detail a little bit later as well. The headlines for 2020. I covered some of them. It was a challenging year. We have been operating more or less by remote control, most of us sitting in our home offices. And when we see how well we have operated and how safely we have operated, then I think it shows that we have a very strong and operationally capable platform. Our EBIT came in at $120 million, which is up $61 million compared to the last year or it was double. And our net profit came in positively at $28 million compared to a loss of $37 million in 2019. I spoke about the largest fleet renewal program in the history of our company and also about the terminals, but we are today at a point where with 0 CapEx on the tanker side and a self-funded terminal division, we have good visibility on our balance sheet, where we have a good cash position, and we are -- we believe that the strong fundamentals will kick in, and we are prepared to take advantage of that when that happens. On the bottom of this slide, you can see in the last 3 years, we have been trying to compare the 4 quarters from an EBIT development perspective. And as you can see, we are on an upgoing trend, and I think that kind of supports our view that there are strong fundamentals in our market. The only word of caution I will give you when you look at this is that the second quarter was not a normal quarter. There was a major spike in the CPP markets and that hit us. So that kind of is a slight anomaly. But the trend is clear from the other quarters. And as you can see, in 2020, it was not a bad year for Odfjell at all. At this point, I will hand it over to Terje Iversen, and then I will come back to speak about our operational update a little bit later.

[Terje Iversen, Chief Financial Officer]

Thank you, Kristian, and good morning to all of you.As normal, I will start with chemical tanker business. Looking at the last quarter, if you see that time-charter earnings this quarter, that was slightly down compared to the third quarter. Reason for that mainly being lower spot rates. Going back to figures, actually, we had larger volumes, especially spot volumes increased this quarter, but that also was related to more vessels coming into the fleet, into the new pool arrangement that Kristian talked about. And operating expenses, slightly up from $42 million to $43.2 million this quarter. That was mainly driven by technical expenses, but also due to increased fleets, the last newbuildings being delivered in the second half and also some increasing the traveling cost in the fourth quarter. Then we are left an EBITDA of $59.1 million compared to $63.6 million in the third quarter. Depreciation increased slightly also. That is also related to delivery of newbuildings in the second half 2020. And then we have an EBIT of $18.2 million compared to $25.0 million in the third quarter. Net interest expenses and other financial items, very much at the same level as preceding quarter. And then we are left with a net result of negative $2.3 million compared to positive $2.6 million in the third quarter. Terminal business, quite stable revenue, but slightly down due to the fire at OTH or Houston terminal with lower revenue, especially related to throughputs and other services. Other terminals quite stable actually and also continued high occupancy at the various terminals. Operating expenses increased from $6.1 million to $6.5 million. That is also related to the fire at the Houston terminal with the kind of cost associated to that to have the terminal up and running again. And after G&A, we are then left with EBITDA of $6.6 million compared to $7.8 million in the third quarter. As I said, the kind of decrease in the EBITDA mainly then relates to the development at the Houston terminal. But as we also stated, the terminal is more or less back on normal operations, so we shouldn't see that continue going forward. We also had a small impairment at the Houston terminal related to the fire of USD 0.9 million and then after capital gain of $0.2 million, we are left with EBITDA of $0.3 million compared to a positive $2.2 million in the third quarter. EBITDA also included a depreciation of surplus values around $1.7 million related to previous restructuring within the terminal division. After finance, we are then left with a net result of negative $0.6 million compared then to $1.5 million positive in the third quarter. Looking at the total, we then had an EBITDA of $66 million compared to $71.7 million. EBIT went from $27.1 million to $18.9 million, and net result ended at negative $2.6 million compared to $3.9 million positive in the third quarter. If you adjust for nonrecurring items related to mark-to-market derivatives and also the impairment this quarter, we are then left with adjusted result of negative $1 million compared to a positive result of -- adjusted positive result in the third quarter of USD 5 million. If we continue with the balance sheet. We saw that shipbuilding -- ships and newbuilding contracts increased because of the last delivery of the super-segregator from Hudong Shipyard. We also see that the investments in associates and joint ventures increased, that is related to the acquisition of the terminal share, the 25% share in the terminal in Korea. Then we also saw that cash increased slightly to USD 103.1 million this quarter and it includes undrawn amounts under the revolving credit facility, we are around USD 145 million in available cash and liquidity. Equity ratio stands around 26%. And if you adjust for right-of-use of assets, then we are around 30% equity share to round off 2020. Noncurrent interest-bearing debt increased somewhat. That is also related to the last newbuilding being delivered this quarter. And we also see that we have a current portion of interest-bearing debt end of 2020 at $178.8 million. And of course, that includes also then the bond that was refinanced January this year with a rate around USD 82 million. So that has been -- came down to a lower level turning the end of the year or the beginning of this year. The cash flow this quarter, we see that the cash flow from operating activities actually increased even though we had a lower EBITDA mainly related to more favorable development of working capital. So we had $39.3 million in positive compared to USD 30.1 million in the third quarter. Investments in noncurrent assets related to primarily around the last super-segregator of USD 41 million. In addition, it was quite a busy quarter when it comes to drydocking activities. We booked around USD 15 million in dry dockings in this quarter. Other of $16.3 million is related to the acquisition of the share in the terminal in Korea. And then we are left then with the cash flow investing activity is negative $73.2 million compared to $48.7 million in the third quarter. On the financing side, new interest-bearing debt related to the newbuilding, $62.7 million. That also includes $33 million in drawn debt on some vessel that was repaid end of the third quarter. So it's actually not adding any debt, but because the kind of the vessels were refinanced into a new quarter, then it appears that we have increased the debt on these vessels this quarter. And then other on USD 90 million, that is also related to the acquisition of the share in OTK or Korea. So net cash flow from financing activities ended at $44.1 million, and net cash flow for the quarter at $10.8 million, increasing it slightly, then, the cash line from $92.4 million to $103.1 million during the fourth quarter. Bunker costs, as also Kristian talked about, that is partly showing why we are delivering out slightly reduced result this quarter. But even though when you compare to the average last 5 years, we are still at the lower level. We should also then remember that we have kind of went into using only low sulfur fuel oil compared to heavy fuel oil before end of last -- or before end of 2019. We also see we get the effect -- positive effect from bunker adjusted clauses, adjustment clauses that we have in our contracts and also the -- partly the financial hedging that we do. So we don't see the kind of large increase in the bunker expenses on the back of increased bunker prices in the market. Going forward, we still have quite a good coverage through the bunker adjustment clauses in our contracts, around 50%. And we also have some finance -- financial hedging positions that have a positive market value end of 2020 that will help us also into 2021. Cash breakeven has been on agenda for some time now and it will continue to be there going forward. Looking at the financial year 2020, we ended with a cash breakeven around $21,400. That is slightly up compared to previous year, but that is also related to newbuildings that we have taken delivery of and amortization of debt financing. So we're still kind of not at the target level that we have talked about around USD 18,000 to USD 19,000, but of course, going forward, we should be able to be more focused on that also based on we don't have any CapEx of any material size for the coming years. End of 2020, we had a time-charter rate of around $21,000, very close to the cash breakeven. But as Kristian told towards the end of the year and also into 2019 -- 2021 at the beginning, we are at a lower level when you come to the time-chart rates that we have been throughout the last months and quarters. And also that we have guided on, cash breakeven for next year is around $21,400 before we kind of continue with taking down the amortization profiles or extending the amortization profiles and reducing the debt for the company. This is the debt maturing in the coming quarters, both repayments, installments and maturing loans and balloons. As you can see, we don't have any large maturities before second quarter 2022. The one we highlighted on the left here in the first quarter was the bond of USD 82 million that was refinanced in January. Quite a good timing. We dropped along the new loan. I think 2 days before, we repaid the maturing loan. So that is quite a good transfer. Normally, we would refinance many months before, but this will, of course, then reduce our cash cost, if we can kind of transfer -- make a smooth transfer as we've done here. We continue to work on optimizing our debt portfolio. This is showing on the lower part what will happen if we continue to repay according to the repayment schedules and also repay the maturing loans. We will look into how we can further optimize our debt portfolio. At this stage, now we are looking into 2 finance leases that we have and also 2 mortgage financing. So we are looking at a possible refinancing of that should reduce the cash breakeven for the 4 vessels we are talking about. We are around $4,500 per day. And that is the way we are going to look at the debt side going forward, look for opportunities to take down the cost or capital and also reduce the cash breakeven. To reach the indicated level here around USD 750 million to USD 900 million in debt end of 2023, of course, that is also market dependent based on how many of the maturing loans we are going to refinance or just redeem at maturity. The debt side has, if you compare to where we were 2 years ago, end of 2018, that has increased. That is, of course, then, related to the newbuildings that we have taken, delivered through these 2 years. So it has increased around USD 1.22 billion, USD 276 million of that is related to the newbuildings. So if we exclude that, we have taken down the debt quite substantially throughout the 2 last years. We have also reduced the loan-to-value for the vessel that we have in our portfolio. And then we have concluded a newbuilding program, as I mentioned, which should be able then to continue to focus on deleveraging and taking down the debt going forward. A few words on the end towards -- related to the newbuilding or the sustainability-linked bond that we did in January. We started with that for more than 1 year ago, looking at how we could do that or we could structure that. So we are very happy that we succeeded in doing that, issuing the first sustainability-linked bond in the shipping market globally and also the first in the Nordics. We also then secured, of course, quite a good liquidity going forward, making sure that we have kind of flexibility we need as a company. And we can also now focus on how we can further optimize our debt portfolio also using the proceeds from this new financing. The financing framework we have established now, we will also look into how we can use that for kind of traditional financing of our fleets. Most likely, we use that in kind of the refinancing that we are looking into now and also going forward, and we also have ambitions to kind of get a lower capital cost, including this structure into the new financing that we are going to look at. So that was my part, and then I will leave the word to Kristian again.

[Kristian Verner Morch, Chief Executive Officer]

Thank you very much, Terje. I can see that we have not had any post -- any questions posted yet. As I said, if you're watching this presentation live, you have the ability to post questions, and please do. There should be a button on the top right-hand corner of your screen. So if you have any questions to us, we'll be happy to answer them after the presentation. So it's not too late to post these questions. All right. Operational review. I will start by speaking about our COA portfolio. Our COA -- share of COA is now back at around 50%, which is the level where we kind of want it to be. But you have to remember that at the same time, our fleet has been growing. So in terms of actual numbers, absolute numbers, as you see on the bottom part of this slide, our COA volumes actually have been growing in the fourth quarter. And it also means that we are capable of increasing our COA share together with the growth that we are having. Another point that's important to note here is that the renewal rates for the contracts continue to go up, not as much as in the previous quarters, but it's still up and on a firming trend. And I also caution you to look too much into quarter-by-quarter because when you're extending a fronthaul COA and versus a backhaul COA, there might be different dynamics. But I think the important point here is the trend is upgoing for the COAs, and that's a sign that there's a tightness in our -- fundamental tightness for chemical tankers. If you look a little bit at the fleet growth, as I said, we have completed the largest fleet transition in the history of our company. We are now up at 91 vessels, which is very close to our target of 100 ships. So we are pretty much where we would like to be on a fleet composition perspective. What you can see in this slide is that we have also increased -- we have used pools as a part of our growth. And I'll speak about that on the next page. So 2 new pools on the coated side. And as you're looking at this slide, the more you go to the left, the more strategic the ships are for us, ships that we want to own and control ourselves. Whereas towards the right side of the slide, they become more, let's say, commoditized assets. And we think that it's a very effective way of growing with those pools. So we operate 4 pools today. We have added, as I mentioned, recently, 13 coated ships. And if you just pause for a minute and ask why is Odfjell spending time on growing via pools. I think there are a number of very important arguments for that. First of all, there's no downside for Odfjell when you have a ship in pool. We have an upside. We have a fixed fee and a management fee, and on most of them, we also have an upside in earnings. So if we do well as a pool manager, we get a share of that upside. So we are exposed positively to the market while we don't have any downside. It brings us scale effects, it adds to the consolidation in the market, we are accumulating tonnage and doing it without really using our balance sheet. So it's a very capital-efficient way of growing, and it positively impacts our bottom line in every market scenarios. So that's really important, and that's what the small graph on your left-hand side is showing. It shows that you don't have exactly the same upside as if you took a ship on TC, but you don't carry any of the downside. And when you then take the, let's say, strategic considerations about the consolidation into place and using our platform, so the marginal cost of doing that is very limited, then it’s just a good business for Odfjell to be in. But I also want to say that pools is not going to kind of take over from us. We are not a pool management company, we are a chemical tanker company, but we can see that with selected partners, good partners, then we can use that as a tool. On terminals, the EBITDA in the fourth quarter came in at $7 million, which was $1 million down. And Terje, he spoke about that slight impact from the OTH fire. But other than that, there are 2 important highlights this quarter. First of all, we have acquired Lindsay Goldberg’s shareholding of the terminal in Korea, which means that we now own that together with a local partner in Korea. And when you look at the performance of that terminal, then the price of that was around 8x EBITDA, which we think is an attractive valuation for that terminal, which is centered in the largest petrochemical complex in Asia. The second thing to note about terminal is the fire that we had in Houston. I touched upon that previously a little bit. It was an incident that had the potential to become a much more serious incident, but our team in Houston handled this crisis very, very well and quickly got the fire under control. And although we did have to declare a force majeure, then we were quickly back up and running and that force majeure has been lifted. And for all practical purposes, that terminal is in operation again, but we do have some repair work and upgrade to handle. Okay. So that was the operational review and the strategy. Then I'll turn to prospects and markets updates. First of all, we say that in the highlights of this quarter that the chemical tanker rates were stable, and that's the picture you’re looking at on the left-hand side. If you take dollar per tonne in the main trades, in some of the main trades, you can see that it's a stable picture. But of course, with increasing bunker prices for spot business, then that will affect. But what had just as big an effect on us is that because of the very low CPP markets, we don't carry any CPP or very, very little CPP. But it does mean that we are getting more competition from swing tonnage. And that's the picture you're looking at on the right-hand side of the slide. You can see that the share of the MRs that’s capable of swinging into chemicals that is doing it. It's now back up at 22.1%, which is up from 20.7%. So that does not sound like a lot, but with a fairly finely balanced market, it is something that is teasing us a little bit, and that's why it's affecting our earnings. One of the reasons why the slight resistance at the moment is not really worrying us structurally is this picture. Because what you're seeing on the left-hand side, industrial production is picking up. The chemical activity parameter is up. And so fundamental demand for chemicals is following the trend line that we have foreseen, which is a growth scenario. But what has happened in the fourth quarter is what you're looking at in the middle of this picture, and that is that it has actually been based on stock drawdowns. So that means that the demand for actual transportation of chemicals is contracting slightly in the period of July to October. But as I said, we think that this is kind of a temporary phenomenon. We think that the strength -- the underlying strength of demand for chemicals is strong and that we will be back in growth territory. And it's also worth noting, when you look at the amount of growth that has happened in the past couple of years with 4%, 6% and 8% growth that those volumes have not been eroded really. So we have a fairly strong and robust -- fundamental robust demand picture for chemicals. On the supply side, there's not a lot of new things to add. We have an order book and order book -- newbuilding activity, which is far below historic averages. It is far below product tankers and crude tankers in general. But in terms of real supply, we are, of course, as I mentioned already, taking a little bit of impact from swing tonnage. Part of the reason for that is that we still have unwinding offloading storage for product tankers. And that's what this graph on the bottom slide. So in terms of real supply, there is a little bit of turbulence going on. But fundamentally, it's a very strong supply picture. And we don't think that there's a risk of massive orders coming in, in the near future. So that supply picture is very much under control. If you put those 2 things together, there's nothing really that has changed our fundamental view that demand is going to outgrow supply. We think that 3% compounded growth in demand for transportation is realistic, and we don't think that the supply is going to grow by more than 1%. But of course, COVID-19 and the effects on the economy is still a choker. I think IMF still believes that there's going to be 5.5% growth in '21. Vaccines are being rolled out, but it's happening slower pace. And in many ways, the pandemic feels closer in the first quarter than it did in the fourth quarter. So -- but we can see light at the end of the tunnel. So whereas it might be a little bit difficult to see clearly an economic growth in 2021, then the underlying picture is a strong one as far as we see it. And as I said, supply is not going to surprise us negatively. So summary and prospects. The fourth quarter, and indeed, the full 2020 was a good year for Odfjell. We had stable rates. We had good earnings. We made a profit, we are operating safely and efficiently, and it has been a true test of our platform. COVID-19 is a challenge, getting seafarers around, changing crew on board the ships and being unable to travel on sea, for instance, our terminals and our joint ventures and so on is a challenge, but we make do with the tools that we have. We think that the market outlook is, in general, positive. Nothing has really changed our fundamental view. There is a little -- there is the factor that '21 has started on a slightly more challenging note than 2020. But the drawdown on stock in chemicals and the low CPP market and a higher-than-expected bunker prices are the main reasons. And we don't think that there's anything fundamentally that shakes our belief in these markets are coming. And when they do, then we are well prepared to take advantage of that. That was the presentation. So I think we -- the encouragement has worked, and I think there are some questions being posted.

[Bjørn Kristian Røed, Manager Investor Relations & Research]

Yes. Starting with one question from Anders Karlsen in Danske Bank. How is the progress on COA renewals looking into the first quarter? Are rates still up? And what portion of the COA portfolio do you expect per quarter in 2021?

[Kristian Verner Morch, Chief Executive Officer]

I don't have the exact percentage in terms of the volume, but I do think that the vast majority of our COAs are being renewed in the third and the fourth quarter. So I don't think there are any significant portion, but we will have to get back to you on exactly what that percentage is. We think that there's a firming trend and there continues to be a firming trend in the COA rates that we do renew and we don't think that that's going to go away with the tightness in supply that we're looking at. But I think, Bjørn Kristian, we'll just make a note and get back to you on the actual percentage in the first quarter.

[Bjørn Kristian Røed, Manager Investor Relations & Research]

And then one question from David Bhatti. Could you shed some more light on bunker cost impact on your results for the fourth quarter and how it will impact first quarter? Can you mitigate the impact if oil prices go significantly higher?

[Kristian Verner Morch, Chief Executive Officer]

Well, I think, first of all, it's important to note that 50% of our business, which is the COAs, they are covered under bunker adjustment clauses. So we don't have any exposure for half of our volumes. And we have a hedge in place that covers another 25% of our exposed volumes. But the rest, we are really at the mercy of what happens. And I think you can -- when you look at the data and you look over a long period of time, there's a correlation between the markets and the bunker prices. But when you compact that into a shorter period, say, into a quarter, you're not seeing that. So when bunker prices go from $300 to $400, the freight rate will not go from 55% to, say, 60%, if that's what is needed to compensate. It will probably jump just a little bit in the short term. So we are exposed. Whether we can do anything to counter that, the only thing we can do is to take a further hedge. I personally think when you -- when we as a company, we are hedged around 60% of our volume, you should be careful taking more hedging. I -- personally, I struggle to understand an oil price of $60 in the current environment. So -- but I don't want to sound like an oil expert here, but I think there taking more coverage could have the opposite effect. So I think we'll just have to, let's say, accept the fact that it is impacting us. And I don't think we will be taking significant hedges.

[Bjørn Kristian Røed, Manager Investor Relations & Research]

Given your current fleet profile and completion of the renewal program, when do you consider that you will need to start ordering new vessels again?

[Kristian Verner Morch, Chief Executive Officer]

Not for a while. I think we have that luxury that we have a very modern and efficient fleet. But we have been announcing our new ESG target, which means we have to reduce our emissions by 50% by 2030 and be climate neutral by 2050. That cannot happen without newbuildings. But the problem we have is that the technology or the designs, although the technology actually exists, it doesn't really exist on the scale that we need. So we need to make sure that we know what we're doing when we pick the new technology, and that's going to take a lot of effort and a lot of time, I would say. So it will not be in -- for a couple of years before we have to start ordering again. And maybe even longer. I don't know. We are working on several concepts at the moment, but we don't see any investments in newbuildings in the foreseeable future.

[Bjørn Kristian Røed, Manager Investor Relations & Research]

And one question from Lars Bastian Østereng in Arctic Securities. You have previously outlined the connection between crude, CPP and chemical tanker markets. How would you expect chemical tanker rates to develop if crude and CPP remains depressed for the next 12 months?

[Kristian Verner Morch, Chief Executive Officer]

Well, I think that could be a very long answer, and you're probably better at answering that, Bjørn Kristian. But one point I want to make is we don't need the CPP markets to boom. We just need them to normalize. And a normalized MR market, I guess, is like kind of $15,000 per day, given around that number. And I think that will make a big difference. So it's important to note that we don't need the markets to really boom. Also, in a strange way, as I said, we don't carry any CPP. So the effect for us is actually not on freight rates. It's on the added supply. And as I said, a normalized market will fix that. So I guess what I'm saying is that I don't think we are hugely dependent on it. I don't think that our contract rates will be dependent on it. But the spot markets are dependent on it because we have added competition.

[Bjørn Kristian Røed, Manager Investor Relations & Research]

And then from [indiscernible] in Kepler. How much is your share of remaining expansion CapEx in tank terminals post Q4?

[Kristian Verner Morch, Chief Executive Officer]

Terje, can you -- do you remember that number? Can you speak about that?

[Terje Iversen, Chief Financial Officer]

Around $30 million.

[Kristian Verner Morch, Chief Executive Officer]

I don't know if you can hear that, but around $30 million, I'm told. I don't -- sorry, I don't remember that by heart. And it also it all depends a little bit on those plans. I mean we have not taken final investment decisions yet. So plans will change and I think Bay 13, we referred to in OTH, we have a fairly good handle on. But when you start talking about what we call The Point in Houston, it's a very different situation. So I think there's some uncertainty about how big those investments can be. But I think the main point for us is that the terminals we have, the joint ventures, they will have to be self-funded. So it will come without capital injections from what we see.

[Bjørn Kristian Røed, Manager Investor Relations & Research]

And one terminal question from Anders Karlsen in Danske Bank. Can you say anything more around the expansion plans at the Houston terminal and what the potential income effect could be, long term?

[Kristian Verner Morch, Chief Executive Officer]

I think when you -- when -- first of all, we have 2 -- I just mentioned, we have what we call Bay 13, and we have The Point. And I think from the top of my head, we have the ability to grow Houston with around 50% compared to the current 350,000 cubic meter, I think. But in terms of EBITDA, Terje do you have that number? Do you have a good answer to that?

[Terje Iversen, Chief Financial Officer]

We haven't come up [ just yet ], it depends on the project and the size of it and the contracts and yes, it's too early to say.

[Bjørn Kristian Røed, Manager Investor Relations & Research]

And one question from David Bhatti in SEB. Congrats on the new pool setup. How will growth in this business look? Any plans to grow it further? And what is the economic impact of the pool, the cost versus revenues?

[Kristian Verner Morch, Chief Executive Officer]

The last part is easy to answer because we have taken in now 13 ships, and we do have to hire a few more people, but the marginal cost of operating that pool is very limited. So basically, the fee income and the profit shares we get under those pools, that will be straight to the bottom line in reality. I think it's -- the second part of that -- or the first part of that question about whether we can expect it to grow more. I think we are open to those discussions, but it's very important for us not to be confused about what Odfjell is, and Odfjell is a chemical tanker owner and operator and terminals owner and operator. And pools, while they are very valuable, it's important to have the right partners and not to have too many partners and not to let the – to have the pools themselves take over. So we're open for selected growth, but it's not going to take over as the most prominent way of securing tonnage for Odfjell SE.

[Bjørn Kristian Røed, Manager Investor Relations & Research]

Then one question from Bendik Engebretsen in Danske Bank. Congrats on a solid result for the full year. Could you elaborate on whether you will prioritize debt and cost reduction versus dividend payments going forward?

[Kristian Verner Morch, Chief Executive Officer]

I think the dividend question is one that really is dependent on what the Board recommends to the AGM. So -- and we haven't had that yet. So I prefer not to comment on whether we have any dividend plans. But what we have said is that we want to be attractive to shareholders, and we hope that the operation of the company will allow us to have a, let's say, transparent and attractive dividend policy in action. But I do also think that it's fair to say that delevering is a higher priority as far as we think. We do have too much debt and we want to reduce that. And with the CapEx under control and with the self-funded terminal division, I think -- and the market view that we have, I think we can do that and follow that plan. So we can both delever, but we should also be able to have a transparent and, I would say, attractive dividend policy. But it is market dependent. So I hope I answered that question.

[Bjørn Kristian Røed, Manager Investor Relations & Research]

And then one question here. Can you quantify how much weaker you expect the first quarter to be? And could you offer any quantitative comments on 2021 results? That will be helpful.

[Kristian Verner Morch, Chief Executive Officer]

Yes. We don't do guidance on the full year. And I think there is some uncertainty about what's happening in the market at the moment, which direction it is. So I think we will just leave it at the weaker outlook. We are not seeing a collapse. Maybe that's -- in any way, but it is a weaker earnings picture, but I prefer not to be more specific than that.

[Bjørn Kristian Røed, Manager Investor Relations & Research]

One question from Theis Lunden. Nice achievement to realize the sustainability-linked bond. Could you share some insights into the possibilities you see of creating sustainability-linked traditional vessel financing and how this should work in practice? Thank you.

[Kristian Verner Morch, Chief Executive Officer]

Do you want to answer that, Terje?

[Terje Iversen, Chief Financial Officer]

Yes, happy to. Yes, thank you. The framework that we have in place, we have been using, I think, a lot of time and resource on establishing together with our financial advisors. And we also have third-party kind of confirming the plan and the data in the plan that we have now established. When we restructured the bond, we did that as a kind of -- we have to deliver according to the plan to reduce the carbon emission by 50% from 2008 to 2030, and we have to deliver according to that plan, not having to pay a step-up when the bond -- towards the end of the bond when that is maturing. We are discussing to implement the same structure with the banks when it comes to the additional mortgage financing. And we see there's a lot of interest amongst the banks to use that framework. It will most likely be structured somewhat different than instead of kind of paying a penalty if you're not reaching your targets. Most likely, we see a step down on the margin running through the loan period. If you deliver according to the plan, there will be a step-down on the margins. So you actually get a lower financing cost when you deliver according to the plan. But that said, I also think that's kind of the framework in itself is very attractive. So the competition among the banks wanting to participate in traditional financing for Odfjell will increase, and we should also see a lower margin because of the increased competition.

[Bjørn Kristian Røed, Manager Investor Relations & Research]

Thank you. There appears to be no further questions for now.

[Kristian Verner Morch, Chief Executive Officer]

All right. Thank you for your interest in the company, and thank you for your time, and thank you for the questions. If you haven't had a chance to ask your question or you're watching this offline, please don't hesitate to contact any one of us, and we’ll be happy to answer any questions that you have. And in the meantime, I hope that you stay safe and hang in there while we are seeing the corona situation, hopefully, improving significantly as soon as possible. So thanks for listening, and stay safe.