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Must-know: An overview of Tsakos Energy Navigation

Part 5
Must-know: An overview of Tsakos Energy Navigation (Part 5 of 7)

Tsakos Columbia Shipmanagement’s relationship provides leverage

Tsakos Columbia Shipmanagement

Tsakos Columbia Shipmanagement (or TCM) S.A. provides management, operation, and crewing services for a diversified marine fleet consisting of tanker, container, and dry cargo vessels for ~70 ships with capacity of about 8 million deadweight tonnage (or dwt). TCM offers these services to fleets including all types of tanker vessels from small product carriers to VLCCs Container vessels up to 5,000 TEUs and bulk carriers up to 180,000 dwt.

Vessels StructureEnlarge Graph

Established in July, 2010, in Athens, Greece, TCM was established as a joint venture between Tsakos Shipping (or TNP) and Trading S.A.—best-in-class ship management—and Schoeller Holdings Ltd., the owner and operator of Columbia Shipmanagement Ltd.—best client service skills.

With a track record of 40 years in shipping, Tsakos management claims that it has a significant leverage from its relationship with various company entities. As a result, it enjoys economies of scale in procurement, safety, vetting, and regulatory procedures.

TNP has effectively controlled its operating expenses while maintaining its high standards of operating performance. This is a reflection of management’s oversight supported by its technical management by Tsakos Columbia Shipmanagement. TCM has the ability to spread costs over a larger vessel base than Tsakos Shipping. It’s able to capture even greater economies of scale that may lead to additional cost savings for the company.

For the 1Q14, vessel operating costs had recorded an increase to $36.4 million from $31.3 million in the same quarter last year, due to the new fleet additions. However, with TNP taking advantage of economies of scale and its association with TCM, the company claims that its operating costs would be lower in the remainder of 2014.

Sister vessels concept

The sister-ship concept is a permanent theme for TNP because it provides customers with choice and inter changeability. At the same time, it generates economies of scale that provide savings and support the company’s bottom line.

The addition of the two modern suezmaxes to the existing sister units further solidifies Tsakos’ presence in the crude sector and reaffirms the company’s chartering strategy. Two vessels are on long time charters with profit sharing, while the third is on a medium time charter with escalations. The fourth vessel is already taking advantage of an improving spot market.

TNP has peers like DHT Holdings Inc. (DHT), Teekay Tankers Ltd. (TNK), Navios Maritime Acquisition (NNA), and Nordic American Tankers (NAT), while the Guggenheim Shipping ETF (SEA) tracks the shipping companies.

Let’s move on to learn about the company’s dividend and cash flow.

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