DYNAGAS LNG PARTNERS LP
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(Exact name of Registrant as specified in its charter)
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Republic of the Marshall Islands
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(Jurisdiction of incorporation or organization)
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Poseidonos Avenue and Foivis 2 Street
166 74 Glyfada, Athens, Greece
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(Address of principal executive offices)
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Michael Gregos
Poseidonos Avenue and Foivis 2 Street
166 74 Glyfada, Athens, Greece
Tel. +30 210 891 7960
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(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
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Title of Each Class
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Trading Symbol(s)
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Name of Each Exchange on Which Registered
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Common units representing limited partnership interests
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DLNG
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New York Stock Exchange
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9.00% Series A Cumulative Redeemable Preferred Units
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DLNG PR A
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New York Stock Exchange
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8.75% Series B Fixed to Floating Rate Cumulative Redeemable Perpetual Preferred Units
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DLNG PR B
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New York Stock Exchange
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[_] Yes
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[X] No
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[_] Yes
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[X] No
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[X] Yes
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[_] No
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[X] Yes
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[_] No
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Large accelerated filer [_]
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Accelerated filer [ ]
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Non-accelerated filer [X]
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Emerging growth company [_]
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Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
☐
Indicate by check mark which basis of accounting the Registrant has used to prepare the financial statements included in this filing:
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[X] U.S. GAAP
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[_] International Financial Reporting Standards as issued by the International Accounting Standards Board
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[_] Other
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If "Other" has been checked in response to the previous question, indicate by check mark which
financial statement item the Registrant has elected to follow.
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[_] Item 17
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[_] Item 18
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[_] Yes
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[X] No
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[_] Yes
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[_] No
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• |
LNG market trends, including charter rates, factors affecting supply and demand, and opportunities for the profitable operations of LNG carriers;
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• |
our anticipated growth strategies, including potential expansion into and acquisition of assets and businesses in other sectors of the shipping industry;
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• |
the effect of a worldwide economic slowdown;
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• |
potential turmoil in the global financial markets;
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• |
stability of Europe and the Euro;
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• |
fluctuations in currencies and interest rates;
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• |
the impact of the discontinuance of the London Interbank Offered Rate, or LIBOR, after 2021 on interest rates of our debt that reference LIBOR;
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• |
general market conditions, including fluctuations in charter hire rates and vessel values;
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• |
changes in our operating expenses, including dry-docking, crewing and insurance costs, bunker prices and fuel prices;
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• |
the adequacy of our insurance to cover our losses;
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• |
our ability to make cash distributions on the units or any increase or decrease in or elimination of our cash distributions;
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• |
our future financial condition or results of operations and our future revenues and expenses;
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• |
our ability to repay or refinance our existing debt and settling of interest rate swaps (if any);
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• |
our ability to incur additional indebtedness on acceptable terms or at all, to access the public and private debt and equity markets and to meet our restrictive covenants and other obligations
under our credit facilities, including our $675 Million Credit Facility (as defined below);
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• |
our Sponsor's ability to fund our $30 Million Revolving Credit Facility (as defined below);
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• |
planned capital expenditures and availability of capital resources to fund capital expenditures;
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• |
our ability to comply with additional costs and risks related to our environmental, social and governance policies;
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• |
our ability to maintain long-term relationships with major LNG traders;
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• |
our ability to leverage our Sponsor's relationships and reputation in the shipping industry;
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• |
our ability to realize the expected benefits from our vessel acquisitions;
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• |
our ability to purchase vessels from our Sponsor and other parties in the future;
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• |
our continued ability to enter into profitable long-term time charters;
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• |
our ability to maximize the use of our vessels, including the re-deployment or disposition of vessels no longer under long-term time charters;
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• |
future purchase prices of newbuildings and secondhand vessels and timely deliveries of such vessels;
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• |
our ability to compete successfully for future chartering opportunities and newbuilding opportunities (if any);
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• |
acceptance of a vessel by its charterer;
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• |
termination dates and extensions of charters;
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• |
changes in governmental rules and regulations or actions taken by regulatory authorities, including the implementation of new environmental regulations;
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• |
the expected cost of, and our ability to comply with, governmental regulations, including regulations relating to ballast water and fuel sulphur, maritime self-regulatory organization
standards, as well as standard regulations imposed by our charterers applicable to our business;
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• |
availability of skilled labor, vessel crews and management;
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• |
our anticipated incremental general and administrative expenses as a publicly traded limited partnership and our fees and expenses payable under the fleet management agreements and the
administrative services agreement with our Manager;
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• |
our anticipated taxation and distributions to our unitholders;
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• |
estimated future maintenance and replacement capital expenditures;
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• |
our ability to retain key employees;
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• |
charterers' increasing emphasis on environmental and safety concerns;
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• |
potential liability from any pending or future litigation and potential costs due to environmental damage and vessel collisions;
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• |
potential disruption of shipping routes due to accidents, political events, public health threats, pandemics, international hostilities and instability, piracy, acts by terrorists or events,
including "trade wars";
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• |
the impact of public health threats and outbreaks of other highly communicable diseases;
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• |
the length and severity of the coronavirus ("COVID-19") outbreak, including its impacts across our business on demand, operations in China and the Far East and knock-on impacts to our global
operations;
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• |
the impact of adverse weather and natural disasters;
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• |
future sales of our common units in the public market;
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• |
any malfunction or disruption of information technology systems and networks that our operations rely on or any impact of a possible cybersecurity event;
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• |
our business strategy and other plans and objectives for future operations; and
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• |
other factors detailed in this annual report and from time to time in our periodic reports.
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PART I.
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1
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ITEM 1.
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IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
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1
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ITEM 2.
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OFFER STATISTICS AND EXPECTED TIMETABLE
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1
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ITEM 3.
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KEY INFORMATION
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1
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ITEM 4.
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INFORMATION ON THE PARTNERSHIP
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54
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ITEM 4A.
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UNRESOLVED STAFF COMMENTS
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97
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ITEM 5.
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OPERATING AND FINANCIAL REVIEW AND PROSPECTS
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98
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ITEM 6.
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DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
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118
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ITEM 7.
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MAJOR UNITHOLDERS AND RELATED PARTY TRANSACTIONS
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122
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ITEM 8.
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FINANCIAL INFORMATION
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130
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ITEM 9.
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THE OFFER AND LISTING.
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134
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ITEM 10.
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ADDITIONAL INFORMATION
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135
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ITEM 11.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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144
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ITEM 12.
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DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
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146
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PART II
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146
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ITEM 13.
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DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
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146
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ITEM 14.
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MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
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146
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ITEM 15.
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CONTROLS AND PROCEDURES
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146
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ITEM 16.
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RESERVED
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147
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ITEM 16A.
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AUDIT COMMITTEE FINANCIAL EXPERT
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147
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ITEM 16B.
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CODE OF ETHICS
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147
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ITEM 16C.
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PRINCIPAL ACCOUNTANT FEES AND SERVICES
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148
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ITEM 16D.
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EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
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148
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ITEM 16E.
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PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
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148
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ITEM 16F.
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CHANGE IN REGISTRANTS' CERTIFYING ACCOUNTANT
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148
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ITEM 16G.
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CORPORATE GOVERNANCE
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149
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ITEM 16H.
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MINE SAFETY DISCLOSURE
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150
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PART III
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150
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ITEM 17.
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FINANCIAL STATEMENTS
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150
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ITEM 18.
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FINANCIAL STATEMENTS
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150
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ITEM 19.
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EXHIBITS
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150
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ITEM 1. |
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
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ITEM 2. |
OFFER STATISTICS AND EXPECTED TIMETABLE
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ITEM 3. |
KEY INFORMATION
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A. |
SELECTED FINANCIAL DATA
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BALANCE SHEET DATA:
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||||||||||||||||||||
Total current assets
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$
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27,120
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$
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18,172
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$
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112,963
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$
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70,404
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$
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60,195
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||||||||||
Vessels, net
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884,900
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916,697
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947,377
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977,298
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1,007,617
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|||||||||||||||
Total assets
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965,837
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989,187
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1,063,436
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1,054,319
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1,106,676
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|||||||||||||||
Total current liabilities
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62,845
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64,635
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272,742
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22,898
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53,056
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|||||||||||||||
Total long-term debt, including current portion, gross of deferred financing fees
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615,000
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663,000
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722,800
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727,600
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722,500
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|||||||||||||||
Total partners' equity
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336,493
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313,707
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326,485
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318,318
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367,836
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|||||||||||||||
CASH FLOW DATA:
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||||||||||||||||||||
Net cash provided by operating activities
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$
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68,603
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$
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43,177
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$
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42,994
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$
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59,339
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$
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103,618
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||||||||||
Net cash used in investing activities
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-
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-
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(409
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)
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-
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(37,472
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)
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|||||||||||||
Net cash used in financing activities*
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(59,830
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)
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(86,888
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)
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(132
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)
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(74,470
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)
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(32,844
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)
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||||||||||
FLEET PERFORMANCE DATA:
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||||||||||||||||||||
Number of vessels at the end of the year
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6
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6
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6
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6
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6
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|||||||||||||||
Average number of vessels in operation (3)
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6.0
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6.0
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6.0
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6.0
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6.0
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|||||||||||||||
Average age of vessels in operation at end of year (years)
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10.4
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9.4
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8.4
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7.4
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6.4
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|||||||||||||||
Available Days (4)
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2,196.0
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2,190.0
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2,144.7
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2,140.3
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2,196.0
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|||||||||||||||
Fleet utilization (5)
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99.8
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%
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98.5
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%
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100
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%
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98
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%
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100
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%
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||||||||||
OTHER FINANCIAL DATA:
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||||||||||||||||||||
Time Charter Equivalent (in US dollars) (6)
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$
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61,098
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$
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58,535
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$
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57,972
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$
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63,249
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$
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75,997
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||||||||||
Adjusted EBITDA (6)
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$
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96,451
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$
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90,357
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$
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96,094
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$
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107,545
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$
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139,531
|
* |
Comparative amounts have been reclassified due to the current presentation of restricted cash following the adoption of ASU No. 2016-18-Statement of Cash Flows-Restricted Cash.
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(1) |
Voyage expenses include mainly commissions of 1.25% paid to our Manager.
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(2) |
In July 2020 and as amended and restated in August 2020, we entered into an ATM Sales Agreement for the offer and sale of common units representing limited partnership interests, having an
aggregate offering price of up to $30.0 million. For more information on our current "at-the-market" offering program, please see "Item 4.—Information on The Partnership History and Development of The Partnership."
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(3) |
Represents the number of vessels that constituted our Fleet for the relevant year, as measured by the sum of the number of days each vessel was a part of our Fleet during the period divided by
the number of calendar days in the period.
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(4) |
Available Days are the total number of calendar days that our vessels were in our possession during a period, less the total number of scheduled off-hire days during the period associated with
major repairs, or dry-dockings.
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(5) |
We calculate fleet utilization by dividing the number of our revenue earning days, which are the total number of Available Days of our vessels net of unscheduled off-hire days, during a
period, by the number of our Available Days during that period. The shipping industry uses fleet utilization to measure a company's efficiency in finding employment for its vessels and minimizing the amount of days that its vessels are off
hire for reasons other than scheduled off-hires for vessel upgrades, dry-dockings or special or intermediate surveys.
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(6) |
Non-GAAP Financial Information
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Year Ended December 31,
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||||||||||||||||||||
(In thousands of Dollars, except for TCE rate data)
|
2020
|
2019
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2018
|
2017
|
2016
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|||||||||||||||
Voyage revenues
|
$
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137,165
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$
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130,901
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$
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127,135
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$
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138,990
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$
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169,851
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||||||||||
Voyage expenses - including related party
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$
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(2,994
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)
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$
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(2,709
|
)
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$
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(2,802
|
)
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$
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(3,619
|
)
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$
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(2,961
|
)
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|||||
Time charter equivalent revenues
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$
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134,171
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$
|
128,192
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$
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124,333
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$
|
135,371
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$
|
166,890
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||||||||||
Total Available Days
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2,196.0
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2,190.0
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2,144.7
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2,140.3
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2,196.0
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|||||||||||||||
Time charter equivalent (TCE) rate
|
$
|
61,098
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$
|
58,535
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$
|
57,972
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$
|
63,249
|
$
|
75,997
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B. |
CAPITALIZATION AND INDEBTEDNESS
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C. |
REASONS FOR THE OFFER AND USE OF PROCEEDS
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D. |
RISK FACTORS
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• |
the vessel suffers a total loss or is damaged beyond repair;
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• |
we default on our obligations under the charter, including prolonged periods of vessel off-hire;
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• |
war or hostilities significantly disrupt the free trade of the vessel;
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• |
the vessel is requisitioned by any governmental authority; or
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• |
a prolonged force majeure event occurs, such as war, political unrest or a pandemic which prevents the chartering of the vessel, in each such event in accordance with the terms and conditions
of the respective charter.
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• |
restructuring our debt;
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• |
seeking additional debt or equity capital;
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• |
selling assets;
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• |
reducing distributions relating to our preferred units;
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• |
reducing, delaying or cancelling our business activities, acquisitions, investments or capital expenditures; or
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• |
seeking bankruptcy protection.
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• |
deterioration of economic conditions and activity and of demand for shipping;
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• |
operational disruptions to us or our customers due to worker health risks and the effects of new regulations, directives or practices implemented in response to the pandemic (such as travel
restrictions for individuals and vessels and quarantining and physical distancing);
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• |
potential delays in (a) the loading and discharging of cargo on or from our vessels, (b) vessel inspections and related certifications by class societies, customers or government agencies and
(c) maintenance, modifications or repairs to, or drydocking of, our existing vessels due to worker health or other business disruptions;
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• |
reduced cash flow and financial condition, including potential liquidity constraints;
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• |
credit tightening or declines in global financial markets, including to the prices of our publicly traded securities and the securities of our peers, could make it more difficult for us to
access capital, including to finance our existing debt obligations;
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• |
potential reduced ability to opportunistically sell any of our vessels on the second-hand market, either as a result of a lack of buyers or a general decline in the value of second-hand
vessels;
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• |
potential decreases in the market values of our vessels and any related impairment charges or breaches relating to vessel-to-loan financial covenants;
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• |
potential disruptions, delays or cancellations in the construction of new vessels, which could reduce our future growth opportunities;
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• |
due to quarantine restrictions placed on persons and additional procedures using commercial aviation and other forms of public transportation, our crew has had difficulty embarking and
disembarking on our ships. Although the restrictions have on certain cases delayed crew embarking and disembarking on our ships, they have not far functionally affected our ability to crew out vessels;
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|
• |
international transportation of personnel could be limited or otherwise disrupted. In particular, our crews generally work on a rotation basis, relying largely on international air transport
for crew changes plan fulfillment. Any such disruptions could impact the cost of rotating our crew, and possibly impact our ability to maintain a full crew synthesis onboard all our vessels at any given time. It may also be difficult for our
in-house technical teams to travel to ship yards to observe vessel maintenance, and we may need to hire local experts, which local experts may vary in skill and are difficult to supervise remotely for work we ordinarily address in-house; and
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• |
potential non-performance by counterparties relying on force majeure clauses and potential deterioration in the financial condition and prospects of our customers, joint venture partners or
other business partners.
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• |
fail to realize anticipated benefits, such as new customer relationships, cost-savings or cash flow enhancements;
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• |
be unable to attract, hire, train or retain qualified shore and seafaring personnel to manage and operate our growing business and Fleet;
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• |
decrease our liquidity by using a significant portion of available cash or borrowing capacity to finance acquisitions;
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• |
significantly increase our interest expense or financial leverage if we incur additional debt to finance acquisitions;
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• |
incur or assume unanticipated liabilities, losses or costs associated with the business or vessels acquired; or
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• |
incur other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges.
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|
• |
the rates we obtain from our charters;
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• |
the level of our operating costs, such as the cost of crews and insurance;
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• |
the continued availability of natural gas production;
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|
• |
demand for LNG;
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• |
supply of LNG carriers;
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|
• |
prevailing global and regional economic and political conditions, including the any economic downturns caused by the spread of the novel COVID-19 virus;
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|
• |
currency exchange rate fluctuations; and
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|
• |
the effect of governmental regulations and maritime self-regulatory organization standards on the conduct of our business.
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|
• |
the level of capital expenditures we make, including for maintaining or replacing vessels, building new vessels, acquiring secondhand vessels and complying with regulations;
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|
• |
the number of unscheduled off-hire days for our Fleet and the timing of, and number of days required for, scheduled dry-docking of our vessels;
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• |
our debt service requirements and restrictions on distributions contained in our debt instruments;
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• |
the level of debt we will incur to fund future acquisitions;
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|
• |
fluctuations in interest rates;
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• |
fluctuations in our working capital needs;
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• |
variable tax rates;
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|
• |
the expected cost of and our ability to comply with environmental and regulatory requirements, including with respect to emissions of air pollutants and greenhouse gases, as well as future
changes in such requirements or other actions taken by regulatory authorities, governmental organizations, classification societies and standards imposed by our charterers applicable to our business;
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|
• |
our ability to make, and the level of, working capital borrowings;
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|
• |
the performance of our subsidiaries and their ability to distribute cash to us; and
|
|
• |
the amount of any cash reserves established by our Board of Directors.
|
|
• |
size, age, technical specifications and condition of the ship;
|
|
• |
efficiency of ship operation and reputation for operation of highly specialized vessels;
|
|
• |
LNG shipping experience and quality of ship operations;
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|
• |
shipping industry relationships and reputation for customer service;
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|
• |
technical ability and reputation for operation of highly specialized ships;
|
|
• |
quality and experience of officers and crew;
|
|
• |
safety record;
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|
• |
the ability to finance ships at competitive rates and financial stability generally;
|
|
• |
relationships with shipyards and the ability to get suitable berths;
|
|
• |
its willingness to assume operational risks;
|
|
• |
construction management experience, including the ability to obtain on-time delivery of new ships according to customer specifications; and
|
|
• |
competitiveness of the bid in terms of overall price.
|
|
• |
provides that our General Partner may make determinations or take or decline to take actions without regard to our or our unitholders' interests. Our General Partner may consider only the
interests and factors that it desires, and it has no duty or obligation to give any consideration to any interest of, or factors affecting us, our affiliates or our unitholders. Decisions made by our General Partner will be made by its sole
owner. Specifically, our General Partner may decide to exercise its right to make a determination to receive common units in exchange for resetting the target distribution levels related to the incentive distribution rights, call right,
pre-emptive rights or registration rights, consent or withhold consent to any merger or consolidation of the Partnership, appoint certain of our directors or vote for the election of any director, vote or refrain from voting on amendments to
our Partnership Agreement that require a vote of the outstanding units, voluntarily withdraw from the Partnership, transfer (to the extent permitted under our Partnership Agreement) or refrain from transferring its units, the general partner
interest or incentive distribution rights or vote upon the dissolution of the Partnership;
|
|
• |
provides that our directors and officers are entitled to make other decisions in "good faith," meaning they reasonably believe that the decision is in our best interests;
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|
• |
generally provides that affiliated transactions and resolutions of conflicts of interest not approved by the conflicts committee of our Board of Directors, or our Conflicts Committee, and not
involving a vote of unitholders must be on terms no less favorable to us than those generally being provided to or available from unrelated third-parties or be "fair and reasonable" to us and that, in determining whether a transaction or
resolution is "fair and reasonable," our Board of Directors may consider the totality of the relationships between the parties involved, including other transactions that may be particularly advantageous or beneficial to us; and
|
|
• |
provides that neither our General Partner nor our officers or our directors will be liable for monetary damages to us, our members or assignees for any acts or omissions unless there has been
a final and non-appealable judgment entered by a court of competent jurisdiction determining that our General Partner, our directors or officers or those other persons engaged in actual fraud or willful misconduct.
|
|
• |
The unitholders are unable to remove our General Partner without its consent because our General Partner and its affiliates, including our Sponsor, own sufficient units to be able to prevent
its removal. The vote of the holders of at least 66 2/3% of all outstanding common units (including common units held by the General Partner and its Affiliates) voting together as a single class is required to remove our General Partner. Our
Sponsor currently owns 15,595,000 of our common units, representing approximately of the outstanding common units.
|
|
• |
Our Partnership Agreement contains provisions that limit the removal of members of our Board of Directors. Appointed Directors may be removed (i) without Cause (as defined in the Partnership
Agreement) only by the General Partner and (ii) with Cause only by the General Partner, the vote of the holders of a majority of the outstanding units at a properly called meeting of our Limited Partners, or by vote of the majority of the
other members of our Board of Directors. Elected Directors may be removed with Cause only by vote of the majority of the other members of our Board of Directors or by a vote of the majority of the outstanding common units at a properly called
meeting of our Limited Partners.
|
|
• |
Common unitholders are entitled to elect only three of the five members of our Board of Directors. Our General Partner in its sole discretion appoints the remaining two directors.
|
|
• |
Election of the three directors elected by unitholders is staggered, meaning that the members of only one of three classes of our elected directors are selected each year. In addition, the two
directors appointed by our General Partner serve until a successor is duly appointed by the General Partner.
|
|
• |
Our Partnership Agreement contains provisions limiting the ability of unitholders to call meetings of unitholders, to nominate directors and to acquire information about our operations as well
as other provisions limiting the unitholders' ability to influence the manner or direction of management.
|
|
• |
Unitholders' voting rights are further restricted by the Partnership Agreement providing that if at any time any person or group, other than our General Partner and its affiliates, or a direct
or subsequently approved transferee of our General Partner or its affiliates or a transferee approved by the Board of Directors, acquires, in the aggregate, beneficial ownership of more than 4.9% of any class or series of our limited partner
interests then outstanding, that person or group will lose voting rights on all of its limited partner interests of such class or series in excess of 4.9%, except for the Series A Preferred Units and Series B Preferred Units, and such limited
partner interests will not be considered to be outstanding when sending notices of a meeting of limited partners, calculating required votes (except for nominating a person for election to our Board of Directors), determining the presence of
a quorum, or for other similar purposes. The voting rights of any such limited partner interests in excess of 4.9% will effectively be redistributed pro rata among the other limited partner interests (as applicable) holding less than 4.9% of
the voting power of such class or series. Our General Partner, its affiliates and persons who acquired limited partner interests with the prior approval of our Board of Directors will not be subject to this 4.9% limitation except with respect
to voting their common units in the election of the elected directors. Units held in nominee or street name account will be voted by the broker or other nominee in accordance with the instruction of the beneficial owner unless the
arrangement between the beneficial owner and his nominee provides otherwise.
|
|
• |
There are no restrictions in our Partnership Agreement on our ability to issue additional equity securities.
|
|
• |
renew existing charters upon their expiration;
|
|
• |
obtain new charters;
|
|
• |
successfully interact with shipyards;
|
|
• |
obtain financing on commercially acceptable terms;
|
|
• |
maintain access to capital under the Sponsor credit facility; or
|
|
• |
maintain satisfactory relationships with suppliers and other third-parties.
|
|
• |
the amount and timing of asset purchases and sales;
|
|
• |
cash expenditures;
|
|
• |
borrowings;
|
|
• |
estimates of maintenance and replacement capital expenditures;
|
|
• |
the issuance of additional units; and
|
|
• |
the creation, reduction or increase of reserves in any quarter.
|
|
• |
increases in interest rates or other events that may affect the availability of sufficient financing for LNG projects on commercially reasonable terms;
|
|
• |
increases in the cost of natural gas derived from LNG relative to the cost of natural gas generally;
|
|
• |
increases in the production levels of low-cost natural gas in domestic natural gas consuming markets, which could further depress prices for natural gas in those markets and make LNG
uneconomical;
|
|
• |
increases in the production of natural gas in areas linked by pipelines to consuming areas, the extension of existing, or the development of new pipeline systems in markets we may serve, or
the conversion of existing non-natural gas pipelines to natural gas pipelines in those markets;
|
|
• |
decreases in the consumption of natural gas due to increases in its price, decreases in the price of alternative energy sources or other factors making consumption of natural gas less
attractive;
|
|
• |
any significant explosion, spill or other incident involving an LNG facility or carrier;
|
|
• |
infrastructure constraints, including but not limited to, delays in the construction of liquefaction facilities, the inability of project owners or operators to obtain governmental approvals
to construct or operate LNG facilities, as well as community or political action group resistance to new LNG infrastructure due to concerns about the environment, safety and terrorism;
|
|
• |
labor or political unrest or military conflicts affecting existing or proposed areas of LNG production or regasification;
|
|
• |
concerns regarding the spread of disease, for example, the COVID-19 virus, safety and terrorism;
|
|
• |
decreases in the price of LNG, which might decrease the expected returns relating to investments in LNG projects;
|
|
• |
new taxes or regulations affecting LNG production or liquefaction that make LNG production less attractive; or
|
|
• |
negative global or regional economic or political conditions, including the economic downturn caused by the spread of the novel COVID-19 virus, particularly in LNG consuming regions, which
could reduce energy consumption or its growth.
|
|
• |
price and availability of crude oil and petroleum products;
|
|
• |
worldwide and regional supply of, demand for and price of natural gas;
|
|
• |
the costs of exploration, development, production, transportation and distribution of natural gas;
|
|
• |
expectations regarding future energy prices for both natural gas and other sources of energy, including renewable energy sources;
|
|
• |
the level of worldwide LNG production and exports;
|
|
• |
government laws and regulations, including but not limited to environmental protection laws and regulations;
|
|
• |
local and international political, economic and weather conditions, including an economic downturn caused by the spread of the novel COVID-19 virus;
|
|
• |
political and military conflicts; and
|
|
• |
the availability and cost of alternative energy sources, including alternate sources of natural gas in gas importing and consuming countries as well as alternate sources of primary energy such
as renewables.
|
|
• |
Due in part to COVID-19 outbreak as well as actions by OPEC members and other oil producing countries, energy prices have declined significantly during 2020. If the energy price environment
remains low for a prolonged period of time, this could materially and adversely affect our business. In April 2020, oil, natural gas and LNG prices reached their lowest levels since 2002. Although energy prices recovered in the last quarter
of 2020 from such lows, demand for energy remains below levels before the pandemic. A continuation of current low natural gas and LNG prices could negatively affect us in a number of ways, including the following a reduction in exploration
for or development of new natural gas reserves or projects, or the delay or cancellation of existing projects as energy companies lower their capital expenditures budgets, which may reduce our growth opportunities;
|
|
• |
low oil prices negatively affecting the market price of natural gas, to the extent that natural gas prices are benchmarked to the price of crude oil, in turn negatively affecting the economics
of potential new LNG production projects, which may reduce our growth opportunities;
|
|
• |
high oil prices negatively affecting the competitiveness of natural gas to the extent that natural gas prices are benchmarked to the price of crude oil;
|
|
• |
low gas prices globally and/or weak differentials between prices in the Atlantic Basin and the Pacific Basin leading to reduced inter-basin trading of LNG and reduced demand for LNG shipping;
|
|
• |
lower demand for vessels of the types we own and operate, which may reduce available charter rates and revenue to us upon redeployment of our vessels following expiration or termination of
existing contracts or upon the initial chartering of vessels;
|
|
• |
customers potentially seeking to renegotiate or terminate existing vessel contracts, or failing to extend or renew contracts upon expiration;
|
|
• |
the inability or refusal of customers to make charter payments to us due to financial constraints or otherwise; or
|
|
• |
declines in vessel values, which may result in losses to us upon vessel sales or impairment charges against our earnings and could impact our compliance with the covenants in our loan
agreements.
|
|
• |
worldwide supply and demand for natural gas;
|
|
• |
the cost of exploration, development, production, transportation and distribution of natural gas;
|
|
• |
expectations regarding future energy prices for both natural gas and other sources of energy;
|
|
• |
the level of worldwide LNG production and exports;
|
|
• |
government laws and regulations, including but not limited to environmental protection laws and regulations;
|
|
• |
local and international political, economic and weather conditions, such as the recent worldwide economic downturn caused by the spread of the novel COVID-19 virus;
|
|
• |
political and military conflicts; and
|
|
• |
the availability and cost of alternative energy sources, including alternate sources of natural gas in gas importing and consuming countries.
|
|
• |
prevailing economic conditions in the natural gas and energy markets;
|
|
• |
a substantial or extended decline in demand for LNG;
|
|
• |
increases in the supply of vessel capacity;
|
|
• |
the size and age of a vessel; and
|
|
• |
the cost of retrofitting or modifying secondhand vessels, if possible, as a result of technological advances in vessel design or equipment, changes in applicable environmental or other
regulations or standards, customer requirements or otherwise.
|
|
• |
marine disasters;
|
|
• |
piracy;
|
|
• |
environmental accidents and hazards;
|
|
• |
weather;
|
|
• |
mechanical failures;
|
|
• |
grounding, fire, explosions and collisions;
|
|
• |
human error; and
|
|
• |
war, political unrest and terrorism.
|
|
• |
death or injury to persons, loss of property or environmental damage;
|
|
• |
delays or failure in the delivery of cargo;
|
|
• |
loss of revenues from or termination of charter contracts;
|
|
• |
governmental fines, penalties or restrictions on conducting business;
|
|
• |
spills, pollution and the liability associated with the same;
|
|
• |
higher insurance rates; and
|
|
• |
damage to our reputation and customer relationships generally.
|
|
• |
our payment of cash distributions to our unitholders;
|
|
• |
actual or anticipated fluctuations in quarterly and annual results;
|
|
• |
fluctuations in the seaborne transportation industry, including fluctuations in the LNG carrier market;
|
|
• |
mergers and strategic alliances in the shipping industry;
|
|
• |
changes in governmental regulations or maritime self-regulatory organization standards;
|
|
• |
shortfalls in our operating results from levels forecasted by securities analysts; announcements concerning us or our competitors;
|
|
• |
the failure of securities analysts to publish research about us, or analysts making changes in their financial estimates;
|
|
• |
general economic conditions;
|
|
• |
terrorist acts;
|
|
• |
business interruptions caused by the ongoing COVID-19 pandemic;
|
|
• |
future sales of our units or other securities;
|
|
• |
investors' perception of us and the LNG shipping industry;
|
|
• |
the general state of the securities market; and
|
|
• |
other developments affecting us, our industry or our competitors.
|
|
• |
investor reaction to our business strategy;
|
|
• |
our continued compliance with the listing standards of Nasdaq;
|
|
• |
regulatory or legal developments in the United States and other countries, especially changes in laws or regulations applicable to our industry;
|
|
• |
variations in our financial results or those of companies that are perceived to be similar to us;
|
|
• |
our ability or inability to raise additional capital and the terms on which we raise it;
|
|
• |
declines in the market prices of stocks generally;
|
|
• |
trading volume of our common units;
|
|
• |
sales of our common units by us or our unitholders;
|
|
• |
general economic, industry and market conditions;
|
|
• |
an increase in interest rates or reduction in demand for our common units resulting from other relatively more attractive investment opportunities; and
|
|
• |
other events or factors, including those resulting from such events, or the prospect of such events, including war, terrorism and other international conflicts, public health issues including
health epidemics or pandemics, such as the ongoing COVID-19 pandemic, adverse weather and climate conditions could disrupt our operations or result in political or economic instability.
|
|
• |
our existing unitholders' proportionate ownership interest in us will decrease;
|
|
• |
the amount of cash available for distribution per unit may decrease;
|
|
• |
the relative voting strength of each previously outstanding unit may be diminished; and
|
|
• |
the market price of our common units may decline.
|
|
• |
arise out of or relate in any way to the Partnership Agreement (including any claims, suits or actions to interpret, apply or enforce the provisions of the Partnership Agreement or the duties,
obligations or liabilities among limited partners or of limited partners to us, or the rights or powers of, or restrictions on, the limited partners or us);
|
|
• |
are brought in a derivative manner on our behalf;
|
|
• |
assert a claim of breach of a fiduciary duty owed by any director, officer or other employee of us or our General Partner, or owed by our General Partner, to us or the limited partners;
|
|
• |
assert a claim arising pursuant to any provision of the Partnership Act; or
|
|
• |
assert a claim governed by the internal affairs doctrine,
|
|
• |
incur or guarantee indebtedness outside of our ordinary course of business;
|
|
• |
sell, lease, transfer or otherwise dispose of our assets;
|
|
• |
redeem, repurchase or otherwise reduce any of our equity or share capital; and
|
|
• |
declare or pay any dividend, charge, fee or distribution to our common unitholders (as described below).
|
|
• |
maintain cash and cash equivalents of not less than 8 per cent of our total liabilities; and
|
|
• |
maintain a consolidated leverage ratio of total liabilities to the aggregate market value of our total assets of no more than 0.7:1.0.
|
|
• |
obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes on favorable terms, or at all;
|
|
• |
make distributions to unitholders;
|
|
• |
incur additional indebtedness, create liens or issue guarantees;
|
|
• |
charter our vessels or change the terms of our existing charter agreements;
|
|
• |
sell, transfer or lease our assets or vessels or the shares of our vessel-owning subsidiaries;
|
|
• |
make investments and capital expenditures;
|
|
• |
reduce our partners' capital; and
|
|
• |
undergo a change in ownership or Manager.
|
|
• |
failure to pay any principal, interest, fees, expenses or other amounts when due;
|
|
• |
failure to observe any other agreement, security instrument, obligation or covenant beyond specified cure periods in certain cases;
|
|
• |
default under other indebtedness;
|
|
• |
an event of insolvency or bankruptcy;
|
|
• |
failure of any representation or warranty to be materially correct; and
|
|
• |
a change of control whereby the Partnership or its affiliates no longer hold, indirectly or directly, 100% of the interests in Arctic LNG Carriers.
|
|
• |
neither our Partnership Agreement nor any other agreement requires our Sponsor or our General Partner or their respective affiliates to pursue a business strategy that favors us or utilizes
our assets, and their officers and directors have a fiduciary duty to make decisions in the best interests of their respective unitholders, which may be contrary to our interests;
|
|
• |
our Partnership Agreement provides that our General Partner may make determinations or take or decline to take actions without regard to our or our unitholders' interests. Specifically, our
General Partner may exercise its call right, pre-emptive rights, registration rights or right to make a determination to receive common units in exchange for resetting the target distribution levels related to the incentive distribution
rights, consent or withhold consent to any merger or consolidation of the Partnership, appoint certain directors or vote for the election of any director, vote or refrain from voting on amendments to our Partnership Agreement that require a
vote of the outstanding units, voluntarily withdraw from the Partnership, transfer (to the extent permitted under our Partnership Agreement) or refrain from transferring its units, the General Partner interest or incentive distribution rights
or vote upon the dissolution of the Partnership;
|
|
• |
our General Partner and our directors and officers have limited their liabilities and any fiduciary duties they may have under the laws of the Marshall Islands, while also restricting the
remedies available to our unitholders, and, as a result of purchasing common units, unitholders are treated as having agreed to the modified standard of fiduciary duties and to certain actions that may be taken by the General Partner and our
directors and officers, all as set forth in the Partnership Agreement;
|
|
• |
our General Partner and our Manager are entitled to reimbursement of all reasonable costs incurred by them and their respective affiliates for our benefit; our Partnership Agreement does not
restrict us from paying our General Partner and our Manager or their respective affiliates for any services rendered to us on terms that are fair and reasonable or entering into additional contractual arrangements with any of these entities
on our behalf;
|
|
• |
our General Partner may exercise its right to call and purchase our common units if it and its affiliates own more than 80% of our common units; and is not obligated to obtain a fairness
opinion regarding the value of the common units to be repurchased by it upon the exercise of its limited call right; and
|
|
• |
although a majority of our directors are elected by common unitholders, our General Partner will likely have substantial influence on decisions made by our Board of Directors.
|
|
• |
on terms no less favorable to us than those generally being provided to or available from unrelated third-parties; or
|
|
• |
"fair and reasonable" to us, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous
to us).
|
ITEM 4. |
INFORMATION ON THE PARTNERSHIP
|
A. |
HISTORY AND DEVELOPMENT OF THE PARTNERSHIP
|
B. |
BUSINESS OVERVIEW
|
|
• |
optimal sizing with a carrying capacity of between approximately 150,000 and 155,000 cbm (which is a medium- to large-size class of LNG carrier) that maximizes operational flexibility as such
vessel is compatible with most existing LNG terminals around the world;
|
|
• |
the vessels in our Fleet consist of two series of sister vessels, which are vessels built at the same shipyard, Hyundai Heavy Industries Co. Ltd., that share (i) a near-identical hull and
superstructure layout, (ii) similar displacement, and (iii) roughly comparable features and equipment;
|
|
• |
utilization of a membrane containment system that uses insulation built directly into the hull of the vessel with a membrane covering inside the tanks designed to maintain integrity and that
uses the vessel's hull to directly support the pressure of the LNG cargo, which we refer to as a "membrane containment system" (see "—The International Liquefied Natural Gas (LNG) Shipping Industry—The LNG Fleet" for a description of the
types of LNG containment systems); and
|
|
• |
double-hull construction, based on the current LNG shipping industry standard.
|
(1) |
On August 2, 2018, the Arctic Aurora was delivered to Equinor under a time charter contact with an initial term of three years +/- 30 days. This
charter is in direct continuation of the vessel's previous charter with Equinor, which means that this new charter commenced immediately following the prior charter. In April 2021, we entered into a new
time charter party agreement with Equinor for the employment of Arctic Aurora, with an initial contract term of two years + 45 days. Under the new time charter agreement, the Arctic Aurora is expected to be delivered to Equinor in September
2021. This charter is in direct continuation of the current charter with Equinor, which means that it will commence immediately following the current charter.
|
(2) |
On August 14, 2018, the Yenisei River was delivered early to Yamal immediately upon completion of its mandatory statutory class five-year special
survey and dry-docking, pursuant to an addendum to the charter party with Yamal under which we agreed to extend the firm charter period from 15 years to 15 years plus 180 days. The charter contract for the Yenisei
River with Yamal in the Yamal LNG Project has an initial term of 15.5 years, which may be extended at Charterers' option by three consecutive periods of five years.
|
(3) |
On July 1, 2019, the Lena River commenced employment under its long term charter with Yamal. The charter contract for the Lena River with Yamal in the Yamal LNG Project has an initial term of 15 years, which may be extended at Charterers' option by three consecutive periods of five years.
|
Exporters
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
2017
|
2018
|
2019
|
2020e
|
% Change 19-20
|
ALG
|
15.3
|
14.1
|
12.5
|
10.5
|
10.9
|
12.6
|
11.8
|
11.6
|
12.3
|
12.0
|
12.2
|
10.9
|
-10.9%
|
USA#
|
0.6
|
1.2
|
1.5
|
0.5
|
0.1
|
0.3
|
0.6
|
3.2
|
12.2
|
18.5
|
33.8
|
50.8
|
50.4%
|
LIB
|
0.5
|
0.0
|
0.1
|
-
|
-
|
-
|
-
|
-
|
-
|
|
0.0
|
0.0
|
-
|
BRU
|
6.4
|
6.4
|
6.9
|
6.6
|
6.9
|
6.0
|
6.4
|
6.0
|
6.9
|
6.8
|
6.4
|
6.3
|
-1.3%
|
UAE
|
5.1
|
5.8
|
5.8
|
5.5
|
5.4
|
5.8
|
5.6
|
5.4
|
5.6
|
5.8
|
5.8
|
5.0
|
-14.4%
|
INO
|
19.0
|
22.9
|
21.3
|
17.5
|
16.4
|
15.8
|
16.0
|
15.5
|
18.7
|
18.0
|
15.5
|
13.7
|
-11.4%
|
MAL
|
21.6
|
22.3
|
24.3
|
23.2
|
24.7
|
24.8
|
24.9
|
23.4
|
26.9
|
24.3
|
26.2
|
23.0
|
-12.1%
|
AUS
|
17.7
|
18.5
|
18.9
|
20.5
|
22.1
|
23.1
|
29.0
|
41.5
|
55.6
|
67.8
|
75.4
|
77.9
|
3.3%
|
QAT
|
36.1
|
55.3
|
74.9
|
76.7
|
77.0
|
75.5
|
77.6
|
76.2
|
77.5
|
78.0
|
77.8
|
76.9
|
-1.2%
|
TNT
|
14.4
|
15.1
|
13.8
|
13.7
|
14.4
|
14.1
|
12.4
|
10.4
|
10.2
|
10.1
|
12.5
|
11.9
|
-4.8%
|
NIG
|
11.7
|
17.4
|
18.9
|
19.9
|
16.3
|
18.5
|
20.1
|
17.3
|
20.3
|
20.0
|
20.8
|
18.9
|
-9.5%
|
OMA
|
8.4
|
8.4
|
8.0
|
8.2
|
8.4
|
7.8
|
7.4
|
7.8
|
8.2
|
8.0
|
10.3
|
8.5
|
-17.1%
|
EGY
|
9.4
|
7.1
|
6.3
|
4.9
|
2.7
|
0.3
|
-
|
0.5
|
0.8
|
0.8
|
3.5
|
3.4
|
-1.4%
|
EQG
|
3.4
|
3.8
|
3.8
|
3.5
|
3.7
|
3.7
|
3.6
|
3.2
|
3.9
|
3.8
|
2.8
|
2.6
|
-7.1%
|
NOR
|
2.3
|
3.4
|
2.9
|
3.3
|
2.8
|
3.9
|
4.4
|
4.6
|
3.9
|
3.9
|
4.7
|
3.3
|
-30.1%
|
RUS
|
4.8
|
9.8
|
10.5
|
10.8
|
10.4
|
10.6
|
10.6
|
10.2
|
11.5
|
16.2
|
29.3
|
30.8
|
5.1%
|
YMN
|
0.3
|
4.0
|
6.5
|
5.2
|
7.0
|
6.5
|
1.4
|
-
|
-
|
|
0.0
|
0.0
|
-
|
PER
|
-
|
1.3
|
3.7
|
3.9
|
4.1
|
4.2
|
3.6
|
4.0
|
3.7
|
3.8
|
3.8
|
3.6
|
-5.3%
|
FRA
|
|
|
|
|
|
|
|
1.1
|
1.1
|
1.0
|
0.0
|
0.0
|
-
|
BEL#
|
0.2
|
0.4
|
0.4
|
0.3
|
1.1
|
1.1
|
0.9
|
-
|
0.0
|
0.0
|
0.0
|
0.0
|
-
|
ESP#
|
-
|
-
|
0.5
|
1.2
|
2.1
|
3.8
|
2.3
|
0.1
|
0.0
|
0.0
|
0.0
|
0.0
|
-
|
Papua
|
-
|
-
|
-
|
-
|
-
|
3.4
|
7.1
|
7.6
|
8.1
|
8.0
|
8.2
|
8.2
|
-1.0%
|
Others##
|
-
|
-
|
-
|
0.7
|
0.9
|
1.5
|
1.4
|
3.2
|
3.2
|
6.2
|
5.7
|
1.7
|
-70.3%
|
Total
|
177.2
|
217.3
|
241.5
|
236.9
|
237.5
|
243.3
|
247.4
|
253.0
|
290.7
|
313.0
|
354.7
|
357.3
|
0.7%
|
Importer
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
2017
|
2018
|
2019
|
2020e
|
Argentina
|
0.7
|
1.3
|
3.2
|
3.4
|
4.7
|
4.8
|
4.3
|
3.8
|
3.4
|
3.0
|
1.2
|
1.2
|
Belgium
|
4.8
|
4.7
|
4.8
|
3.1
|
1.6
|
2.1
|
2.8
|
2.1
|
0.9
|
1.6
|
5.1
|
5.3
|
Brazil
|
0.3
|
2.0
|
0.8
|
2.5
|
4.1
|
5.8
|
5.2
|
2.2
|
1.6
|
2.0
|
2.3
|
2.5
|
Canada
|
0.7
|
1.5
|
2.4
|
1.3
|
0.8
|
0.6
|
0.5
|
0.2
|
0.3
|
0.4
|
0.4
|
0.4
|
Chile
|
0.5
|
2.2
|
2.8
|
3.0
|
3.0
|
2.8
|
3.1
|
3.1
|
3.3
|
3.6
|
2.5
|
2.4
|
China
|
5.6
|
9.3
|
12.1
|
14.6
|
18.3
|
19.8
|
19.1
|
26.2
|
38.2
|
53.9
|
61.7
|
67.9
|
Dom. Rep.
|
0.4
|
0.6
|
0.7
|
0.9
|
1.2
|
0.9
|
1.3
|
1.3
|
0.9
|
1.2
|
1.2
|
1.0
|
Egypt
|
-
|
-
|
-
|
-
|
-
|
-
|
2.8
|
0.6
|
6.2
|
2.5
|
0.1
|
0.0
|
France
|
9.5
|
10.2
|
10.6
|
7.5
|
6.4
|
5.4
|
4.8
|
7.0
|
7.4
|
7.8
|
15.6
|
15.8
|
Greece
|
0.5
|
0.9
|
0.9
|
0.7
|
0.5
|
0.4
|
0.3
|
0.0
|
1.3
|
1.5
|
2.1
|
1.5
|
India
|
9.2
|
8.9
|
12.5
|
15.0
|
12.8
|
13.8
|
15.9
|
16.5
|
18.7
|
22.3
|
23.4
|
25.9
|
Indonesia
|
-
|
-
|
-
|
0.7
|
1.0
|
1.6
|
2.0
|
2.0
|
2.6
|
2.0
|
3.7
|
3.4
|
Israel
|
-
|
-
|
-
|
-
|
0.4
|
0.3
|
0.4
|
0.0
|
0.5
|
0.0
|
0.6
|
0.4
|
Italy
|
2.1
|
6.6
|
6.4
|
5.2
|
3.7
|
3.5
|
4.3
|
4.1
|
6.0
|
5.6
|
9.8
|
10.1
|
Japan
|
62.7
|
68.2
|
78.1
|
86.7
|
87.0
|
88.0
|
86.2
|
83.3
|
83.6
|
82.9
|
76.9
|
74.5
|
Jordan
|
-
|
-
|
-
|
-
|
-
|
-
|
2.9
|
3.3
|
3.3
|
3.0
|
1.4
|
1.3
|
Kuwait
|
0.7
|
2.0
|
2.3
|
2.0
|
1.6
|
2.7
|
2.7
|
2.7
|
3.5
|
3.0
|
3.6
|
3.2
|
Lithuania
|
-
|
-
|
-
|
-
|
-
|
0.1
|
0.4
|
0.0
|
0.9
|
0.0
|
1.4
|
1.2
|
Malaysia
|
-
|
-
|
-
|
0.1
|
1.5
|
1.7
|
1.6
|
1.2
|
1.8
|
1.1
|
2.7
|
2.5
|
Mexico
|
2.6
|
4.2
|
3.0
|
3.5
|
5.7
|
6.8
|
5.2
|
4.3
|
4.8
|
4.2
|
4.9
|
5.2
|
Netherlands
|
-
|
-
|
0.6
|
0.6
|
0.6
|
0.4
|
0.4
|
1.1
|
0.8
|
1.0
|
5.8
|
6.2
|
Pakistan
|
-
|
-
|
-
|
-
|
-
|
-
|
1.1
|
2.9
|
4.6
|
6.0
|
8.1
|
7.6
|
Portugal
|
2.1
|
2.2
|
2.2
|
1.5
|
1.8
|
1.2
|
0.7
|
0.7
|
2.7
|
1.2
|
4.1
|
3.7
|
Puerto Rico
|
0.6
|
0.6
|
0.5
|
1.0
|
1.3
|
1.3
|
1.2
|
0.9
|
0.9
|
1.0
|
1.4
|
1.1
|
South Korea
|
25.1
|
32.4
|
36.0
|
35.9
|
39.6
|
37.3
|
31.9
|
32.1
|
37.8
|
44.0
|
40.1
|
39.9
|
Spain
|
19.7
|
20.1
|
17.6
|
14.7
|
10.9
|
11.5
|
9.5
|
9.6
|
12.1
|
10.0
|
15.7
|
16.1
|
Singapore
|
-
|
-
|
-
|
-
|
0.9
|
1.9
|
2.2
|
2.2
|
3.0
|
3.2
|
3.3
|
3.1
|
Taiwan
|
8.6
|
10.9
|
11.9
|
11.7
|
12.6
|
13.2
|
13.7
|
14.2
|
16.6
|
16.7
|
16.7
|
18.3
|
Thailand
|
-
|
-
|
0.7
|
1.0
|
1.5
|
1.4
|
2.6
|
3.1
|
3.8
|
4.4
|
5.0
|
5.2
|
Turkey
|
4.2
|
5.8
|
4.5
|
5.7
|
4.0
|
5.3
|
5.5
|
5.6
|
7.3
|
7.1
|
9.4
|
10.6
|
UAE
|
-
|
0.1
|
1.0
|
1.0
|
1.1
|
1.3
|
1.6
|
1.5
|
2.5
|
2.8
|
1.4
|
1.2
|
UK
|
7.5
|
13.6
|
18.5
|
10.0
|
6.8
|
6.1
|
9.4
|
7.7
|
4.9
|
6.6
|
13.6
|
13.6
|
USA
|
9.3
|
8.9
|
7.3
|
3.7
|
2.0
|
1.2
|
1.9
|
1.8
|
1.5
|
1.8
|
1.0
|
0.8
|
Africa
|
|
|
|
|
|
|
|
7.4
|
|
|
|
|
Others
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
3.4
|
2.8
|
5.6
|
9.0
|
4.2
|
World Total
|
177.2
|
217.3
|
241.5
|
236.9
|
237.4
|
243.3
|
247.3
|
258.3
|
290.3
|
313.0
|
354.7
|
357.3
|
Class
|
Standard
|
1A Super (1AS)
|
Design notional level ice thickness of 1.0m. For extreme harsh ice conditions.
|
1A
|
Design notional level ice thickness of 0.8m. For harsh ice conditions.
|
1B
|
Design notional level ice thickness of 0.6m. For medium ice conditions.
|
1C
|
Design notional level ice thickness of 0.4m. For mild ice conditions.
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
2017
|
2018
|
2019
|
2020
|
|
Number of Vessels
|
34
|
46
|
71
|
23
|
18
|
19
|
NA
|
NA
|
37
|
64
|
Total Cargo Volume (tons)
|
820,789
|
1,261,545
|
1,355,897
|
274,000
|
39,586
|
214,513
|
NA
|
NA
|
697,277
|
1,281,010
|
Size
|
No.
|
000 Cbm
|
0-17,999 cbm
|
31
|
198
|
18-49,999 cbm
|
21
|
540
|
50-74,999 cbm
|
4
|
278
|
75-124,999 cbm
|
3
|
255
|
125-149,999 cbm
|
192
|
26,921
|
150-199,999 cbm
|
311
|
52,253
|
200-219,999 cbm
|
31
|
6,608
|
220,000+ cbm
|
14
|
3,727
|
Total
|
607
|
90,782
|
Size Range in CBM
|
|
Average Age (Years)
|
0-18,000
|
|
9.5
|
18-50,000
|
|
8.8
|
50-75,000
|
|
18.6
|
75-125,000
|
|
22.5
|
125-150,000
|
|
18.9
|
150-200,000
|
|
4.9
|
200-220,000
|
|
12.4
|
220,000+
|
|
11.7
|
Average Age -Total Fleet
|
|
10.4
|
|
i. |
injury to, destruction or loss of, or loss of use of natural resources and related assessment costs;
|
|
ii. |
injury to, or economic losses resulting from, the destruction of real and personal property;
|
|
iii. |
loss of subsistence use of natural resources that are injured, destroyed or lost;
|
|
iv. |
net loss of taxes, royalties, rents, fees or net profit revenues resulting from injury, destruction or loss of real or personal property, or natural resources;
|
|
v. |
lost profits or impairment of earning capacity due to injury, destruction or loss of real or personal property or natural resources; and
|
|
vi. |
net cost of increased or additional public services necessitated by removal activities following a discharge of oil, such as protection from fire, safety or health hazards, and loss of
subsistence use of natural resources.
|
|
• |
on-board installation of automatic identification systems to provide a means for the automatic transmission of safety-related information from among similarly equipped ships and shore
stations, including information on a ship's identity, position, course, speed and navigational status;
|
|
• |
on-board installation of ship security alert systems, which do not sound on the vessel but only alert the authorities on shore;
|
|
• |
the development of vessel security plans;
|
|
• |
ship identification number to be permanently marked on a vessel's hull;
|
|
• |
a continuous synopsis record kept onboard showing a vessel's history including, the name of the ship, the state whose flag the ship is entitled to fly, the date on which the ship was
registered with that state, the ship's identification number, the port at which the ship is registered and the name of the registered owner(s) and their registered address; and
|
|
• |
compliance with flag state security certification requirements.
|
C. |
ORGANIZATIONAL STRUCTURE
|
D. |
PROPERTY, PLANT AND EQUIPMENT
|
ITEM 4A. |
UNRESOLVED STAFF COMMENTS
|
ITEM 5. |
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|
A. |
RESULTS OF OPERATIONS
|
|
• |
Ownership days. The number of vessels in our Fleet is a key factor in determining the level of our revenues. Aggregate expenses also increase as the size of our Fleet increases;
|
|
• |
Charter rates. Our revenue is dependent on the charter rates we are able to obtain on our vessels. Charter rates on our vessels are based primarily on demand for and supply of LNG carrier
capacity at the time we enter into the charters for our vessels, which is influenced by LNG market trends, such as the demand and supply for natural gas and in particular LNG as well as the supply of LNG carriers available for profitable
employment. The charter rates we obtain are also dependent on whether we employ our vessels under multi-year charters or charters with initial terms of less than two years. As of the date of this annual report, all the vessels in our Fleet
are employed under multi-year time charters with staggered maturities, which will make us less susceptible to cyclical fluctuations in charter rates than vessels operated on charters of less than two years. However, we will be exposed to
fluctuations in prevailing charter rates when we seek to re-charter our vessels upon the expiry of their respective current charters and when we seek to charter vessels that we may acquire in the future;
|
|
• |
Utilization of our Fleet. Historically, our Fleet has had a limited number of unscheduled off-hire days. However, an increase in annual off-hire days would reduce our utilization. The
efficiency with which suitable employment is secured, the ability to minimize off-hire days and the amount of time spent positioning vessels also affects our results of operations. If the utilization of our Fleet is reduced, our financial
results would be affected;
|
|
• |
Operating expenses. The level of our vessel operating expenses, including crewing costs, insurance and maintenance costs. Our ability to control our vessel operating expenses also affects our
financial results. These expenses include crew wages and related costs, the cost of insurance, expenses for repairs and maintenance, the cost of spares and consumable stores, lubricating oil costs, tonnage taxes and other miscellaneous
expenses. In addition, factors beyond our control, such as developments relating to market premiums for insurance and the value of the U.S. dollar compared to currencies in which certain of our expenses, primarily crew wages, are paid, can
cause our vessel operating expenses to increase;
|
|
• |
The timely delivery of the vessels we may acquire in the future;
|
|
• |
Our ability to maintain solid working relationships with our existing charterers and our ability to increase the number of our charterers through the development of new working relationships;
|
|
• |
The performance of our charterer's obligations under their charter agreements;
|
|
• |
The effective and efficient technical management of the vessels under our Management Agreements;
|
|
• |
Our ability to obtain acceptable debt financing to fund our capital commitments;
|
|
• |
The supply and demand relationship for LNG shipping services;
|
|
• |
Our ability to obtain and maintain regulatory approvals and to satisfy technical, health, safety and compliance standards that meet our charterer's requirements;
|
|
• |
Economic, regulatory, political and governmental conditions that affect shipping and the LNG industry, which includes changes in the number of new LNG importing countries and regions, as well
as structural LNG market changes impacting LNG supply that may allow greater flexibility and competition of other energy sources with global LNG use;
|
|
• |
Our ability to successfully employ our vessels at economically attractive rates, as our charters expire or are otherwise terminated;
|
|
• |
Our access to capital required to acquire additional ships and/or to implement our business strategy;
|
|
• |
Our level of debt, the related interest expense, our debt amortizations levels and the timing of required principal installments;
|
|
• |
The level of our general and administrative expenses, including salaries and costs of consultants;
|
|
• |
Our charterer's right for early termination of the charters under certain circumstances;
|
|
• |
Performance of our counterparties, which are limited in number, including our charterer's ability to make charter payments to us; and
|
|
• |
The level of any distribution on all classes of our units.
|
(1) |
For these definitions see Important Financial and Operational Terms and Concepts and "Item 3. Key information—A. Selected Financial Data"
|
(2) |
Revenue Earning Days are the total number of Available Days of our vessels net of unscheduled off-hire days, during a period.
|
(3) |
Daily vessel operating expenses, which include crew costs, provisions, deck and engine stores, lubricating oil, insurance, spares and repairs and flag taxes, are calculated by
dividing vessel operating expenses by fleet Ownership Days for the relevant time period.
|
(4) |
Ownership days are the total days that the Partnership possessed the vessels in its fleet for the relevant period.
|
Carrying Value
(in millions of US dollars)
|
||||||||||||||||
Vessel
|
Capacity
(cbm) |
Year Built/
Purchased |
December 31,
2020 |
December 31,
2019 |
||||||||||||
Clean Energy
|
149,700
|
2007
|
$
|
115.8
|
$
|
120.5
|
||||||||||
Ob River
|
149,700
|
2007
|
116.1
|
120.8
|
||||||||||||
Amur River
|
149,700
|
2008
|
125.1
|
130.1
|
||||||||||||
Arctic Aurora
|
155,000
|
2014
|
174.2
|
180.0
|
||||||||||||
Yenisei River
|
155,000
|
2014
|
163.5
|
168.8
|
||||||||||||
Lena River
|
155,000
|
2015
|
190.2
|
196.5
|
||||||||||||
TOTAL
|
914,100
|
$
|
884.9
|
$
|
916.7
|
|
• |
reports by industry analysts and data providers that focus on our industry and related dynamics affecting vessel values;
|
|
• |
news and industry reports of similar vessel sales;
|
|
• |
news and industry reports of sales of vessels that are not similar to our vessels where we have made certain adjustments in an attempt to derive information that can be used as part of our
estimates;
|
|
• |
approximate market values for our vessels or similar vessels that we have received from shipbrokers, whether solicited or unsolicited, or that shipbrokers have generally disseminated; and
|
|
• |
vessel sale prices and values of which we are aware through both formal and informal communications with ship-owners, shipbrokers, industry analysts and various other shipping industry
participants and observers.
|
|
i) |
the Ob River which completed employment under its multi-year charter contract with Gazprom Global LNG Limited ("Gazprom") in April 2018 and
subsequently began employment under a ten-year charter party with an entity that is part of the wider Gazprom group of companies at a lower charter rate;
|
|
ii) |
the Arctic Aurora, which, on August 2, 2018, rolled-over into a new charter with Equinor ASA ("Equinor") (which was in direct continuation of its
previous charter contract with Equinor) at a lower charter rate.
|
|
iii) |
The Lena River following its positioning period by approximately one month for the purpose of the vessel's delivery to its multi-year charter contract
with Yamal.
|
|
iv) |
the Clean Energy, which was delivered in accordance with its eight-year charter party with Gazprom on July 13, 2018, whereas, prior to this date the
vessel was traded in the spot market at a lower charter rate; and
|
|
v) |
the Yenisei River, further to its delivery to its multi-year contract with Yamal in August 2018.
|
B. |
LIQUIDITY AND CAPITAL RESOURCES
|
|
• |
the Mortgages over each of the Ships;
|
|
• |
the Deeds of Covenant in relation to each of the Ships in respect of which the Mortgage is in account current form;
|
|
• |
the General Assignments in relation to each of the Ships in respect of which the Mortgage is in preferred form;
|
|
• |
the Charter Assignment in relation to each Ship's Charter Documents;
|
|
• |
the Account Security in relation to each Account;
|
|
• |
the Management Agreement Assignment in relation to each Management Agreement for each Ship;
|
|
• |
a Manager's Undertaking by each Manager of each Ship; and
|
|
• |
a Quiet Enjoyment Agreement for each of Ship E and Ship F duly executed by the relevant Owner, the Security Agent and the relevant Charterer.
|
Year Ended December 31,
|
||||||||||||
(Amounts in thousands of Dollars)
|
2020
|
2019
|
2018
|
|||||||||
Net cash provided by operating activities
|
$
|
68,603
|
$
|
43,177
|
$
|
42,994
|
||||||
Net cash used in investing activities
|
—
|
—
|
(409
|
)
|
||||||||
Net cash used in financing activities
|
(59,830
|
)
|
(86,888
|
)
|
(132
|
)
|
||||||
Cash and cash equivalents and restricted cash at beginning of year
|
66,206
|
109,917
|
67,464
|
|||||||||
Cash and cash equivalents and restricted cash at end of year
|
$
|
74,979
|
$
|
66,206
|
$
|
109,917
|
C. |
RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES
|
D. |
TREND INFORMATION
|
E. |
OFF-BALANCE SHEET ARRANGEMENTS
|
F. |
CONTRACTUAL OBLIGATIONS
|
Payments due by period
|
||||||||||||||||||||
Obligations
|
Total
|
Less than
1 year |
1-3 years
|
3-5 years
|
More than
5 years |
|||||||||||||||
Long-term debt
|
$
|
615,000
|
48,000
|
96,000
|
471,000
|
-
|
||||||||||||||
Interest on long term debt (1)
|
63,006
|
19,040
|
33,485
|
10,481
|
-
|
|||||||||||||||
Interest rate swap payment(2)
|
2,666
|
1,332
|
1,712
|
(378
|
)
|
-
|
||||||||||||||
Management fees & commissions payable to the Manager (3) (4)
|
81,291
|
7,458
|
15,188
|
15,970
|
42,675
|
|||||||||||||||
Executive services fee (5)
|
1,902
|
660
|
1,242
|
-
|
-
|
|||||||||||||||
Administrative services fee (6)
|
40
|
40
|
-
|
-
|
-
|
|||||||||||||||
Total
|
$
|
763,905
|
76,530
|
147,627
|
497,073
|
42,675
|
|
(1) |
Our variable rate long-term debt outstanding as of December 31, 2020 bears variable interest at a margin over LIBOR. The calculation of interest payments has been made assuming interest rates
based on the one-month period LIBOR, specific to our $675 Million Credit Facility as of December 31, 2020 and our applicable margin rate.
|
|
(2) |
The variable leg of the derivative instrument has been calculated on the basis of the three-month period forward LIBOR rates as of December 31, 2020.
|
|
(3) |
Under the terms of the Master Agreement signed in March 2021 and effective as from January 1, 2021, we currently pay a management fee of $2,750 per day which is subject to an annual increase
of 3% and further annual increases to reflect material unforeseen costs increases of providing the management services, by an amount to be agreed between us and our Manager, which amount will be reviewed and approved by our Conflicts
Committee. The Management Agreements also provide for commissions of 1.25% of charter-hire revenues arranged by the Manager. The agreements will terminate automatically after a change of control of the applicable shipping subsidiary and/or of
the owner's ultimate parent, in which case an amount equal to fees of 6 months, will become payable to the Manager.
|
|
(4) |
Not including $1.9 million of the "Management fees & commissions payable to the Manager" related to the commissions on variable hire contained in certain time charter contracts with Yamal,
which represents the operating expenses of the vessel and is subject to annual adjustments on the basis of the actual operating costs incurred within each year. The actual amount of "Management fees & commissions payable to the Manager"
payable to the Manager in respect of such variable hire rate may therefore differ from the amounts included in the contractual obligations, due to the annual variations in each vessel's respective operating cost.
|
|
(5) |
On March 21, 2014, we entered into the Executive Services Agreement with our Manager, with retroactive effect to the date of the closing of our IPO, pursuant to which our Manager provides us
with the services of our executive officers, who report directly to our Board of Directors. Under the Executive Services Agreement, our Manager is entitled to an executive services fee of €538,000 per annum, for the initial five year term,
payable in equal monthly installments. The Executive Services Agreement had an initial term of five years and, on November 18, 2018, has been automatically renewed for successive five year terms, unless terminated earlier. The calculation of
the contractual services fee set forth in the table above assumes an exchange rate of €1.000 to $1.2271 the EURO/USD exchange rate as of December 31, 2020 and does not include any incentive compensation which our Board of Directors may agree
to pay.
|
|
(6) |
On December 30, 2014 and effective as of the IPO closing date, we entered into the Administrative Services Agreement with our Manager, pursuant to which the Partnership is provided with
certain financial, accounting, reporting, secretarial and information technology services, for a monthly fee of $10,000, plus expenses, payable in quarterly installments. The Agreement can be terminated upon 120 days' notice granted either by
the Partnership's Board or by the Manager as per the provisions of the agreement.
|
G. |
SAFE HARBOR
|
ITEM 6. |
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
|
A. |
DIRECTORS AND SENIOR MANAGEMENT
|
Name
|
Age
|
Position
|
Georgios Prokopiou
|
74
|
Chairman of the Board of Directors and Appointed Director
|
Tony Lauritzen
|
44
|
Chief Executive Officer and Appointed Director
|
Michael Gregos
|
49
|
Chief Financial Officer
|
Levon Dedegian
|
69
|
Class III Director
|
Alexios Rodopoulos
|
73
|
Class II Director
|
Evangelos Vlahoulis
|
74
|
Class I Director
|
B. |
COMPENSATION
|
C. |
BOARD PRACTICES
|
D. |
EMPLOYEES
|
E. |
UNIT OWNERSHIP
|
ITEM 7. |
MAJOR UNITHOLDERS AND RELATED PARTY TRANSACTIONS
|
A. |
MAJOR UNITHOLDERS
|
Name of Beneficial Owner
|
Number
|
Percent
|
||||||
Dynagas Holding Ltd.(2)
|
15,595,000
|
42.4
|
%
|
|||||
Cobas Asset Management SGIIC SA(3)
|
4,460,675
|
12.1
|
%
|
|||||
Dell Loy Hansen (5)
|
3,563,020
|
9.7
|
%
|
|||||
All executives, officers and directors as a group(3)(4)
|
*
|
*
|
(1) |
Based on 36,795,807 common units outstanding as of the date of this annual report.
|
(2) |
Dynagas Holding Ltd. is beneficially owned by the Prokopiou Family, including the chairman of our Board of Directors, Georgios Prokopiou and his daughters Elisavet Prokopiou, Johanna
Procopiou, Marina Kalliope Prokopiou, and Maria Eleni Prokopiou, which collectively have a business address at 23, Rue Basse, 98000 Monaco.
|
(3) |
This information is derived from Schedule 13G/A filed with SEC on February 16, 2021.
|
(4) |
Neither any member of our Board of Directors or executive officer individually, nor all of them taken as a group, hold more than 1% of our outstanding common units apart from Mr. Georgios
Prokopiou, whose ownership interests are separately presented in the above table.
|
(5) |
This information is derived from Schedule 13G filed with the SEC on October 15, 2020.
|
B. |
RELATED PARTY TRANSACTIONS
|
(1) |
acquiring, owning, operating or chartering any Non-Four-Year LNG carriers;
|
(2) |
(i) acquiring or owning one or more Four-Year LNG carrier(s) if such Dynagas Holding Entity (as defined in the Omnibus Agreement) offers to sell such Four-Year LNG carrier to us for the
acquisition price plus any administrative costs in accordance with the procedures set forth in the Omnibus Agreement (and we do not fulfill our obligation to purchase such Four-Year LNG carrier in accordance with the terms of the Omnibus
Agreement) and (ii) owning any Optional Interests (as defined in the Omnibus Agreement) in the entities relating to the Optional Vessels at any time on or after the time at which such interests are treated as a Four-Year LNG carrier pursuant
to the Omnibus Agreement, if the related Dynagas Holding Entities (as applicable), offer to sell such Optional Interests to us for the pro rata portion of the acquisition price relating to the corresponding LNG carrier owned by such entity
plus any administrative costs in accordance with the procedures set forth in the Omnibus Agreement (and we do not fulfill our obligation to purchase such Optional Interests in accordance with the terms of the Omnibus Agreement);
|
(3) |
operating or chartering an LNG carrier under a charter with a term of four or more years if such Dynagas Holding Entity offers to sell such LNG carrier to us for fair market value (i) promptly
after the time it becomes a Four-Year LNG carrier and (ii) at each renewal or extension of that charter if such renewal or extension is for a term of four or more years, in each case in accordance with the procedures set forth in the Omnibus
Agreement;
|
(4) |
acquiring and owning a controlling interest in one or more Four-Year LNG carriers as part of the acquisition of an interest in business or package of assets that owns, operates or charters
such Four-Year LNG carriers; provided, however; if a majority of the value of the business or assets acquired is attributable to Four-Year LNG carriers, as determined in good faith by our Sponsor's board of directors, the Dynagas Holding
Entity must offer to sell such Four-Year LNG carrier(s) to us for their fair market value plus any administrative costs in accordance with the procedures set forth in the Omnibus Agreement (for the avoidance of doubt, nothing herein shall
prohibit the acquisition and owning of one or more Four-Year LNG carriers as part of the acquisition of a minority interest in a business or package of assets that owns, operates or charters Four-Year LNG carriers);
|
(5) |
acquiring a non-controlling interest in any company, business or pool of assets;
|
(6) |
acquiring, owning, operating or chartering any Four-Year LNG carrier if we do not fulfill our obligation to purchase such Four-Year LNG carrier in accordance with the terms of the Omnibus
Agreement;
|
(7) |
acquiring, owning, operating or chartering any Four-Year LNG carrier that is subject to the offers to us described in paragraphs (2), (3) and (4) above pending our determination whether to
accept such offers and pending the closing of any offers we accept;
|
(8) |
providing vessel management services relating to any LNG carrier;
|
(9) |
acquiring and owning any Four-Year LNG carrier as part of a financing arrangement, including by way of a sale leaseback transaction, which is accounted for as a financial lease under United
States generally accepted accounting principles; or
|
(10) |
acquiring, owning, operating or chartering any Four-Year LNG carrier if we have previously advised our Sponsor that we consent to such acquisition, operation or charter.
|
|
• |
tax liabilities attributable to the operation of the assets contributed or sold to us prior to the time they were contributed or sold.
|
|
• |
approved by our Conflicts Committee, although neither our General Partner nor our Board of Directors are obligated to seek such approval;
|
|
• |
approved by the vote of a majority of the outstanding common units, excluding any common units owned by our General Partner or any of its affiliates, although neither our General Partner nor
our Board of Directors is obligated to seek such approval;
|
|
• |
on terms no less favorable to us than those generally being provided to or available from unrelated third-parties, but neither our General Partner nor our Board of Directors is required to
obtain confirmation to such effect from an independent third-party; or
|
|
• |
fair and reasonable to us, taking into account the totality of the relationships between the parties involved, including other transactions that may be particularly favorable or advantageous
to us.
|
|
• |
the fiduciary duties imposed on our General Partner and our directors by the Partnership Act;
|
|
• |
material modifications of these duties contained in our Partnership Agreement; and
|
|
• |
certain rights and remedies of unitholders contained in the Partnership Act.
|
C. |
INTERESTS OF EXPERTS AND COUNSEL
|
ITEM 8. |
FINANCIAL INFORMATION
|
A. |
CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
|
|
• |
Under the terms of the $675 Million Credit Facility, the Partnership is restricted from paying distributions to its common unitholders while borrowings are outstanding under the $675 Million
Credit Facility.
|
|
• |
Our unitholders have no contractual or other legal right to receive distributions other than the obligation under our Partnership Agreement to distribute available cash on a quarterly basis,
which is subject to the broad discretion of our Board of Directors to establish reserves and other limitations.
|
|
• |
We are and will be subject to restrictions on distributions under our existing financing arrangements as well as under any new financing arrangements or other transactions that we may enter
into in the future. Our new and existing financing arrangements may contain financial and other covenants that must be satisfied prior to paying distributions in order to declare and pay such distributions or that may restrict or prohibit the
payment of distributions. If we are unable to satisfy the requirements contained in any of our financing arrangements or are otherwise in default under any of those agreements, there could be a material adverse effect on our financial
condition and our ability to make cash distributions to our unitholders notwithstanding our cash distribution policy.
|
|
• |
We are required to make substantial capital expenditures to maintain and replace our Fleet. These expenditures may fluctuate significantly over time, particularly as our vessels near the end
of their respective useful lives. In order to minimize these fluctuations, our Partnership Agreement requires us to deduct estimated, as opposed to actual, maintenance and replacement capital expenditures from the amount of cash that we would
otherwise have available for distribution to our unitholders. In years when estimated maintenance and replacement capital expenditures are higher than actual maintenance and replacement capital expenditures, the amount of cash available for
distribution to unitholders will be lower than if actual maintenance and replacement capital expenditures were deducted.
|
|
• |
Although our Partnership Agreement requires us to distribute all of our available cash, our Partnership Agreement, including provisions contained therein requiring us to make cash
distributions may be amended, with the approval of a majority of the outstanding common units.
|
|
• |
Even if our cash distribution policy is not modified or revoked, the amount of distributions we pay under our cash distribution policy and the decision to make any distribution is determined
by our Board of Directors, taking into consideration the terms of our Partnership Agreement.
|
|
• |
Under Section 57 of the Marshall Islands Act, we may not make a distribution to our unitholders if the distribution would cause our liabilities to exceed the fair value of our assets.
|
|
• |
We may lack sufficient cash to pay distributions to our unitholders due to decreases in total operating revenues, decreases in hire rates, the loss of a vessel or increases in operating or
general and administrative expenses, principal and interest payments on outstanding debt, taxes, working capital requirements, maintenance and replacement capital expenditures or anticipated cash needs. See "Item 3. Key Information—D. Risk
Factors" for a discussion of these factors.
|
|
• |
Our ability to make distributions to our unitholders depends on the performance of our subsidiaries and their ability to distribute cash to us. The ability of our subsidiaries to make
distributions to us may be restricted by, among other things, the provisions of existing and future indebtedness, applicable limited partnership and limited liability company laws in the Marshall Islands and other laws and regulations.
|
Marginal Percentage Interest in Distributions
|
||||||||||||||
Total Quarterly
Distribution Target
Amount
|
Unitholders
|
General
Partner
|
Holders
of IDRs
|
|||||||||||
Minimum Quarterly Distribution
|
$0.365
|
99.9
|
%
|
0.1
|
%
|
0.0
|
%
|
|||||||
First Target Distribution
|
up to $0.420
|
99.9
|
%
|
0.1
|
%
|
0.0
|
%
|
|||||||
Second Target Distribution
|
above $0.420 up to $0.456
|
85.0
|
%
|
0.1
|
%
|
14.9
|
%
|
|||||||
Third Target Distribution
|
Above $0.456 up to $0.548
|
75.0
|
%
|
0.1
|
%
|
24.9
|
%
|
|||||||
Thereafter
|
above $0.548
|
50.0
|
%
|
0.1
|
%
|
49.9
|
%
|
B. |
SIGNIFICANT CHANGES
|
ITEM 9. |
THE OFFER AND LISTING.
|
A. |
OFFER AND LISTING DETAILS
|
B. |
PLAN OF DISTRIBUTION
|
C. |
MARKETS
|
D. |
SELLING SHAREHOLDERS
|
E. |
DILUTION
|
F. |
EXPENSES OF THE ISSUE
|
ITEM 10. |
ADDITIONAL INFORMATION
|
A. |
SHARE CAPITAL
|
B. |
MEMORANDUM AND ARTICLES OF ASSOCIATION
|
C. |
MATERIAL CONTRACTS
|
D. |
EXCHANGE CONTROLS
|
E. |
TAXATION
|
|
• |
we are organized in a foreign country (our "country of organization") that grants an "equivalent exemption" to corporations organized in the United States; and
|
|
• |
more than 50% of the value of our units is owned, directly or indirectly, by individuals who are "residents" of our country of organization or of another foreign country that grants an
"equivalent exemption" to corporations organized in the United States, which we refer to as the "50% Ownership Test," or
|
|
• |
our units are "primarily and regularly traded on an established securities market" in our country of organization, in another country that grants an "equivalent exemption" to United States
corporations, or in the United States, which we refer to as the "Publicly-Traded Test."
|
|
• |
we have, or are considered to have, a fixed place of business in the United States involved in the earning of shipping income; and
|
|
• |
substantially all of our U.S.-source shipping income is attributable to regularly scheduled transportation, such as the operation of a vessel that follows a published schedule with repeated
sailings at regular intervals between the same points for voyages that begin or end in the United States.
|
|
• |
an individual citizen or resident of the United States (as determined for United States federal income tax purposes),
|
|
• |
a corporation (or other entity that is classified as a corporation for United States federal income tax purposes) organized under the laws of the United States or any of its political
subdivisions,
|
|
• |
an estate the income of which is subject to United States federal income taxation regardless of its source, or
|
|
• |
a trust if (i) a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more United States persons have the authority to
control all substantial decisions of the trust or (ii) the trust has a valid election in effect to be treated as a United States person for United States federal income tax purposes.
|
|
• |
at least 75% of our gross income (including the gross income of our vessel-owning subsidiaries) for such taxable year consists of passive income (e.g., dividends, interest, capital gains and
rents derived other than in the active conduct of a rental business); or
|
|
• |
at least 50% of the average value of the assets held by us (including the assets of our vessel-owning subsidiaries) during such taxable year produce, or are held for the production of, passive
income.
|
|
• |
the excess distribution or gain would be allocated ratably over the Non-Electing Holder's aggregate holding period for the common units;
|
|
• |
the amount allocated to the current taxable year and any taxable year prior to the taxable year we were first treated as a PFIC with respect to the Non-Electing Holder would be taxed as
ordinary income; and
|
|
• |
the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayers for that year, and an interest charge
for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year.
|
|
• |
fails to provide an accurate taxpayer identification number;
|
|
• |
is notified by the IRS that it has failed to report all interest or corporate distributions required to be reported on its U.S. federal income tax returns; or
|
|
• |
in certain circumstances, fails to comply with applicable certification requirements.
|
F. |
DIVIDENDS AND PAYING AGENTS
|
G. |
STATEMENTS BY EXPERTS
|
H. |
DOCUMENTS ON DISPLAY
|
I. |
SUBSIDIARY INFORMATION
|
ITEM 11. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Charterer
|
2020
|
2019
|
2018
|
|||||||||
Gazprom
|
45
|
%
|
47
|
%
|
69
|
%
|
||||||
Yamal
|
39
|
%
|
31
|
%
|
8
|
%
|
||||||
Equinor (formerly, Statoil)
|
16
|
%
|
16
|
%
|
18
|
%
|
||||||
Major energy company
|
-
|
%
|
6
|
%
|
2
|
%
|
||||||
PetroChina
|
-
|
%
|
-
|
%
|
3
|
%
|
||||||
Total
|
100
|
%
|
100
|
%
|
100
|
%
|
ITEM 12. |
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|
ITEM 13. |
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
|
ITEM 14. |
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|
ITEM 15. |
CONTROLS AND PROCEDURES
|
A. |
Disclosure Controls and Procedures
|
B. |
Management's Annual Report on Internal Control over Financial Reporting
|
|
• |
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Partnership;
|
|
• |
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our
receipts and expenditures are being made only in accordance with authorizations of Partnership's management and directors; and
|
|
• |
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial
statements.
|
C. |
Attestation Report of the Registered Public Accounting Firm
|
D. |
Changes in Internal Control Over Financial Reporting
|
ITEM 16. |
RESERVED
|
ITEM 16A. |
AUDIT COMMITTEE FINANCIAL EXPERT
|
ITEM 16B. |
CODE OF ETHICS
|
ITEM 16C. |
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
2020
|
2019
|
|||||||
Audit Fees
|
€
|
189,000
|
€
|
162,750
|
||||
Total
|
€
|
189,000
|
€
|
162,750
|
ITEM 16D. |
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
|
ITEM 16E. |
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
|
ITEM 16F. |
CHANGE IN REGISTRANTS' CERTIFYING ACCOUNTANT
|
ITEM 16G. |
CORPORATE GOVERNANCE
|
|
• |
Executive Sessions. The NYSE requires that non-management directors meet regularly in executive sessions without management. The NYSE also requires
that all independent directors meet in an executive session at least once a year. As permitted under Marshall Islands law and our Partnership Agreement, our non-management directors do not regularly hold executive sessions without management
and we do not expect them to do so in the future.
|
|
• |
Nominating/Corporate Governance Committee. The NYSE requires that a listed U.S. company have a
nominating/corporate governance committee of independent directors and a committee charter specifying the purpose, duties and evaluation procedures of the committee. As permitted under Marshall Islands law and our Partnership Agreement, we
do not currently have a nominating or corporate governance committee.
|
|
• |
Audit Committee. The NYSE requires, among other things, that a listed U.S. company have an audit committee with a minimum of three members, all of
whom are independent. As permitted by Rule 10A-3 under the Exchange Act, our audit committee consists of two independent members of our Board, Alexios Rodopoulos and Evangelos Vlahoulis.
|
|
• |
Corporate Governance Guidelines. The NYSE requires that a listed U.S. Company adopt and disclose corporate
governance guidelines. The guidelines must address, among other things: director qualification standards, director responsibilities, director access to management and independent advisers, director compensation, director orientation and
continuing education, management succession and an annual performance evaluation. We are not required to adopt such guidelines under Marshall Islands law or our Partnership Agreement and we have not adopted such guidelines.
|
|
• |
Unitholder Approval of the Issuance of Certain Securities, including Equity Compensation Plans. The NYSE requires that unitholders be given the
opportunity to vote on certain security issuances, including security issuances above certain thresholds and all equity-compensation plans and material revisions thereto, with limited exemptions for employment inducement awards, certain
grants, plans and amendments in the context of mergers and acquisitions, and certain specific types of plans. As permitted under Marshall Islands law and our Partnership Agreement, we do not require unitholder approval on security issuances,
including security issuances that are senior to our common units, and equity-compensation plans and any material revisions thereto.
|
|
• |
Proxies. As a foreign private issuer, we are not required to solicit proxies or provide
proxy statements to the NYSE pursuant to the NYSE corporate governance rules or Marshall Islands law. Consistent with Marshall Islands law and as provided in our Partnership Agreement, we will notify our unitholders of meetings between 10 and
60 days before the meeting. This notification will contain, among other things, information regarding business to be transacted at the meeting. In addition, our Partnership Agreement provides that any unitholder or group of unitholders that
beneficially own 15% or more of our outstanding common units are entitled to nominate directors for election at an annual meeting if written notice is given to the Board of Directors not more than 120 days and not less than 90 days prior to
the date of the annual meeting.
|
ITEM 16H. |
MINE SAFETY DISCLOSURE
|
ITEM 17. |
FINANCIAL STATEMENTS
|
ITEM 18. |
FINANCIAL STATEMENTS
|
ITEM 19. |
EXHIBITS
|
(1) |
Incorporated by reference to the Partnership's Registration Statement on Form F-1, as amended, which was declared effective by the Securities and Exchange Commission on November 12, 2013
(Registration No. 333-191653).
|
(2) |
Incorporated by reference to the Partnership's Annual Report on Form 20-F, which was filed with the Securities and Exchange Commission on March 25, 2014.
|
(3) |
Incorporated by reference to the Partnership's Current Report on Form 6-K, which was filed with the Securities and Exchange Commission on October 23, 2018.
|
(4) |
Incorporated by reference to the Partnership's Annual Report on Form 20-F, which was filed with the Securities and Exchange Commission on March 10, 2015.
|
(5) |
Incorporated by reference to the Partnership's Annual Report on Form 20-F, which was filed with the Securities and Exchange Commission on April 18, 2016.
|
(6) |
Incorporated by reference to Exhibit 1.1 of the Partnership's Current Report on Form 6-K, which was filed with the Securities and Exchange Commission on August 19, 2020.
|
(7) |
Incorporated by reference to the Partnership's Annual Report on Form 20-F, which was filed with the Securities and Exchange Commission on April 24, 2019.
|
(8) |
Incorporated by reference to the Partnership's Annual Report on Form 20-F, which was filed with the Securities and Exchange Commission on April 16, 2020.
|
DYNAGAS LNG PARTNERS LP
|
|||||
By:
|
/s/ Michael Gregos
|
||||
Name:
|
Michael Gregos
|
||||
Title:
|
Chief Financial Officer (Principal Financial Officer)
|
||||
Date:
|
April 29, 2021
|
Page
|
|
Report of Independent Registered Public Accounting Firm
|
F-3
|
Consolidated Balance Sheets as of December 31, 2020 and 2019
|
F-5
|
Consolidated Statements of Income for the years ended December 31, 2020, 2019 and 2018
|
F-6
|
Consolidated Statements of Partners’ Equity for the years ended December 31, 2020, 2019 and 2018
|
F-7
|
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018
|
F-8
|
Notes to the Consolidated Financial Statements
|
F-9
|
Impairment/recoverability assessment of vessels
|
|
Description of the matter
|
As of December 31, 2020, the carrying value of the Partnership’s vessels was $884.9 million, and the Partnership did not recognize any impairment loss in relation to
its vessels during the year. As discussed in Note 2 to the consolidated financial statements, the Partnership evaluates its vessels for impairment whenever events or changes in circumstances indicate that the carrying value of a vessel
might exceed its fair value in accordance with the guidance in ASC 360 – Property, Plant and Equipment. If indicators of impairment exist, management analyzes the future undiscounted net operating cash flows expected to be generated
throughout the remaining useful life of each vessel and compares it to the carrying value. Where the vessel’s carrying value exceeds the undiscounted net operating cash flows, management will recognize an impairment loss equal to the
excess of the carrying value over the fair value of the vessel.
Auditing management’s recoverability assessment was complex given the judgement and estimation uncertainty involved in determining
certain assumptions in forecasting undiscounted net operating cash flows, specifically the future charter rates for non-contracted revenue days. These rates are particularly subjective as they involve the development and use of
assumptions about the liquefied natural gas (LNG) shipping market through the end of the useful lives of the vessels which are forward
looking and subject to the inherent unpredictability of future global economic and market conditions.
|
How we addressed the matter in our audit
|
We analyzed management’s impairment assessment by comparing the methodology used to evaluate impairment of each vessel against the accounting
guidance in ASC 360 – Property, Plant and Equipment. To test management’s undiscounted net operating cash flow forecasts, our procedures included, among others, comparing the future vessel charter rates for non-contracted revenue days
against internal and external data sources such as available market data from various analysts, historical data for the vessels, and recent economic and industry changes. Our procedures included testing the completeness and accuracy of
the data used within the forecasts.
In addition, we performed sensitivity analyses to assess the impact of changes to future charter rates for non-contracted revenue days in the
determination of the net operating cash flows. We also evaluated whether these assumptions were consistent with evidence obtained in other areas of the audit. We
assessed the adequacy of the Partnership’s disclosures in Note 2 to the consolidated financial statements.
|
Note
|
2020
|
2019
|
2018
|
|||||||||||||
REVENUES:
|
||||||||||||||||
Voyage revenues
|
7
|
$
|
137,165
|
$
|
130,901
|
$
|
127,135
|
|||||||||
EXPENSES:
|
||||||||||||||||
Voyage expenses
|
(1,275
|
)
|
(1,078
|
)
|
(1,148
|
)
|
||||||||||
Voyage expenses-related party
|
3
|
(1,719
|
)
|
(1,631
|
)
|
(1,654
|
)
|
|||||||||
Vessel operating expenses
|
(28,830
|
)
|
(28,351
|
)
|
(25,042
|
)
|
||||||||||
Dry-docking and special survey costs
|
—
|
—
|
(7,422
|
)
|
||||||||||||
General and administrative expenses
|
(1,795
|
)
|
(1,985
|
)
|
(1,452
|
)
|
||||||||||
General and administrative expenses- related party
|
3
|
(733
|
)
|
(723
|
)
|
(757
|
)
|
|||||||||
Management fees-related party
|
3
|
(6,752
|
)
|
(6,537
|
)
|
(6,347
|
)
|
|||||||||
Depreciation
|
4
|
(31,797
|
)
|
(30,680
|
)
|
(30,330
|
)
|
|||||||||
Operating income
|
$
|
64,264
|
$
|
59,916
|
$
|
52,983
|
||||||||||
OTHER INCOME/(EXPENSES):
|
||||||||||||||||
Interest and finance costs
|
5, 11
|
(27,058
|
)
|
(58,591
|
)
|
(50,490
|
)
|
|||||||||
Interest income
|
221
|
2,331
|
1,051
|
|||||||||||||
Loss on derivative financial instruments
|
12
|
(3,148
|
)
|
—
|
—
|
|||||||||||
Other, net
|
(227
|
)
|
(43
|
)
|
69
|
|||||||||||
Total other expenses, net
|
(30,212
|
)
|
(56,303
|
)
|
(49,370
|
)
|
||||||||||
Partnership’s Net Income
|
$
|
34,052
|
$
|
3,613
|
$
|
3,613
|
||||||||||
Common unitholders’ interest in Net Income
|
$
|
22,466
|
$
|
(7,942
|
)
|
$
|
(4,042
|
)
|
||||||||
Series A Preferred unitholders’ interest in Net Income
|
$
|
6,750
|
$
|
6,750
|
$
|
6,750
|
||||||||||
Series B Preferred unitholders’ interest in Net Income
|
$
|
4,813
|
$
|
4,813
|
$
|
909
|
||||||||||
Subordinated unitholders’ interest in Net Income
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||||
General Partner’s interest in Net Income
|
$
|
23
|
$
|
(8
|
)
|
$
|
(4
|
)
|
||||||||
(Loss)/Earnings per unit, basic and diluted:
|
||||||||||||||||
Common unit (basic and diluted)
|
10
|
$
|
0.63
|
$
|
(0.22
|
)
|
$
|
(0.11
|
)
|
|||||||
Weighted average number of units outstanding, basic and diluted:
|
||||||||||||||||
Common units
|
10
|
35,546,823
|
35,490,000
|
35,490,000
|
Series A Preferred
|
Series B Preferred
|
Common
|
General Partner
|
Series A Preferred
|
Series B Preferred
|
Common
|
General Partner
|
Total
|
||||||||||||||||||||||||||||
BALANCE, December 31, 2017
|
3,000,000
|
—
|
35,490,000
|
35,526
|
$
|
73,216
|
$
|
—
|
$
|
245,055
|
$
|
47
|
$
|
318,318
|
||||||||||||||||||||||
—Net income
|
—
|
—
|
—
|
—
|
6,750
|
909
|
(4,042
|
)
|
(4
|
)
|
3,613
|
|||||||||||||||||||||||||
— Issuance of Series B Preferred Units, net of issuance costs (Note 9)
|
—
|
2,200,000
|
—
|
—
|
—
|
52,976
|
—
|
—
|
52,976
|
|||||||||||||||||||||||||||
— Distributions declared and paid (common and preferred units) (Note 9)
|
—
|
—
|
—
|
—
|
(6,750
|
)
|
—
|
(41,613
|
)
|
(59
|
)
|
(48,422
|
)
|
|||||||||||||||||||||||
BALANCE, December 31, 2018
|
3,000,000
|
2,200,000
|
35,490,000
|
35,526
|
$
|
73,216
|
$
|
53,885
|
$
|
199,400
|
$
|
(16
|
)
|
$
|
326,485
|
|||||||||||||||||||||
—Net income
|
—
|
—
|
—
|
—
|
6,750
|
4,813
|
(7,942
|
)
|
(8
|
)
|
3,613
|
|||||||||||||||||||||||||
— Distributions declared and paid (common and preferred units) (Note 9)
|
—
|
—
|
—
|
—
|
(6,750
|
)
|
(5,200
|
)
|
(4,437
|
)
|
(4
|
)
|
(16,391
|
)
|
||||||||||||||||||||||
BALANCE, December 31, 2019
|
3,000,000
|
2,200,000
|
35,490,000
|
35,526
|
$
|
73,216
|
$
|
53,498
|
$
|
187,021
|
$
|
(28
|
)
|
$
|
313,707
|
|||||||||||||||||||||
—Net income
|
—
|
—
|
—
|
—
|
6,750
|
4,813
|
22,466
|
23
|
34,052
|
|||||||||||||||||||||||||||
— Issuance of common stock, net of issuance costs (Note 9)
|
—
|
—
|
122,580
|
—
|
—
|
—
|
297
|
—
|
297
|
|||||||||||||||||||||||||||
—Distributions declared and paid (common and preferred units) (Note 9)
|
—
|
—
|
—
|
—
|
(6,750
|
)
|
(4,813
|
)
|
—
|
—
|
(11,563
|
)
|
||||||||||||||||||||||||
BALANCE, December 31, 2020
|
3,000,000
|
2,200,000
|
35,612,580
|
35,526
|
$
|
73,216
|
$
|
53,498
|
$
|
209,784
|
$
|
(5
|
)
|
$
|
336,493
|
2020
|
2019
|
2018
|
||||||||||||||
Cash flows from Operating Activities:
|
||||||||||||||||
Net income:
|
$
|
34,052
|
$
|
3,613
|
$
|
3,613
|
||||||||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||||||||||
Depreciation
|
4
|
31,797
|
30,680
|
30,330
|
||||||||||||
Amortization and write-off of deferred financing fees
|
11
|
2,527
|
10,696
|
3,261
|
||||||||||||
Deferred revenue amortization
|
400
|
(377
|
)
|
(45
|
)
|
|||||||||||
Amortization of deferred charges
|
217
|
181
|
68
|
|||||||||||||
Loss on derivative financial instruments
|
12
|
3,148
|
—
|
—
|
||||||||||||
Amortization of fair value of acquired time charter
|
7
|
—
|
—
|
5,267
|
||||||||||||
Changes in operating assets and liabilities:
|
||||||||||||||||
Trade accounts receivable
|
(241
|
)
|
(95
|
)
|
107
|
|||||||||||
Prepayments and other assets
|
156
|
(413
|
)
|
389
|
||||||||||||
Inventories
|
(90
|
)
|
502
|
(421
|
)
|
|||||||||||
Due from/to related parties
|
(496
|
)
|
2,982
|
31
|
||||||||||||
Trade accounts payable
|
(1,033
|
)
|
(101
|
)
|
1,149
|
|||||||||||
Accrued liabilities
|
6
|
(2,565
|
)
|
155
|
||||||||||||
Deferred charges
|
(90
|
)
|
(1,000
|
)
|
(1,472
|
)
|
||||||||||
Deferred revenue
|
—
|
—
|
1,445
|
|||||||||||||
Unearned revenue
|
(1,750
|
)
|
(926
|
)
|
(883
|
)
|
||||||||||
Net cash provided by Operating Activities
|
$
|
68,603
|
$
|
43,177
|
$
|
42,994
|
||||||||||
Cash flows from Investing Activities:
|
||||||||||||||||
Other additions to vessels’ equipment
|
—
|
—
|
(409
|
)
|
||||||||||||
Net cash used in Investing Activities
|
$
|
—
|
$
|
—
|
$
|
(409
|
)
|
|||||||||
Cash flows from Financing Activities:
|
||||||||||||||||
Net proceeds from issuance of common units
|
9
|
297
|
—
|
—
|
||||||||||||
Net proceeds from issuance of preferred units
|
9
|
—
|
—
|
53,138
|
||||||||||||
Payment of securities registration and other filing costs
|
(90
|
)
|
(139
|
)
|
(48
|
)
|
||||||||||
Distributions declared and paid
|
9
|
(11,563
|
)
|
(16,391
|
)
|
(48,422
|
)
|
|||||||||
Proceeds from long-term debt
|
5
|
—
|
675,000
|
—
|
||||||||||||
Repayment of long-term debt
|
5
|
(48,000
|
)
|
(734,800
|
)
|
(4,800
|
)
|
|||||||||
Payment of derivative instruments
|
12
|
(474
|
)
|
—
|
—
|
|||||||||||
Payment of deferred finance fees
|
—
|
(10,558
|
)
|
—
|
||||||||||||
Net cash used in Financing Activities
|
$
|
(59,830
|
)
|
$
|
(86,888
|
)
|
$
|
(132
|
)
|
|||||||
Net increase/ (decrease) in cash and cash equivalents and restricted cash
|
8,773
|
(43,711
|
)
|
42,453
|
||||||||||||
Cash and cash equivalents and restricted cash at beginning of the year
|
66,206
|
109,917
|
67,464
|
|||||||||||||
Cash and cash equivalents and restricted cash at end of the year
|
$
|
74,979
|
$
|
66,206
|
$
|
109,917
|
||||||||||
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
|
||||||||||||||||
Cash and cash equivalents
|
24,979
|
16,206
|
109,917
|
|||||||||||||
Restricted cash
|
50,000
|
50,000
|
—
|
|||||||||||||
Cash and cash equivalents and restricted cash
|
$
|
74,979
|
$
|
66,206
|
$
|
109,917
|
||||||||||
SUPPLEMENTAL CASH FLOW INFORMATION
|
||||||||||||||||
Cash paid during the year for:
|
||||||||||||||||
Interest
|
$
|
24,440
|
$
|
48,879
|
$
|
47,033
|
1. |
Basis of Presentation and General Information:
|
Company Name
|
Country of incorporation/ formation
|
Vessel Name
|
Delivery date from shipyard
|
Delivery date to Partnership
|
Cbm Capacity
|
Pegasus Shipholding S.A. (“Pegasus”)
|
Marshall Islands
|
Clean Energy
|
March 2007
|
October 2013
|
149,700
|
Lance Shipping S.A.(“Lance”)
|
Marshall Islands
|
Ob River
|
July 2007
|
October 2013
|
149,700
|
Seacrown Maritime Ltd.(“Seacrown”)
|
Marshall Islands
|
Amur River
|
January 2008
|
October2013
|
149,700
|
Fareastern Shipping Limited(“Fareastern”)
|
Malta
|
Arctic Aurora
|
July 2013
|
June 2014
|
155,000
|
Navajo Marine Limited(“Navajo”)
|
Marshall Islands
|
Yenisei River
|
July 2013
|
September 2014
|
155,000
|
Solana Holding Ltd.(“Solana”)
|
Marshall Islands
|
Lena River
|
October 2013
|
December 2015
|
155,000
|
1. |
Basis of Presentation and General Information (continued):
|
Company Name
|
Country of incorporation/formation
|
Purpose of incorporation
|
Dynagas Equity Holding Limited (“Dynagas Equity”)
|
Marshall Islands
|
Holding company that owns all of the outstanding share capital of Arctic LNG Carriers Ltd. (“Arctic LNG”).
|
Dynagas Operating GP LLC (“Dynagas Operating GP”)
|
Marshall Islands
|
Limited Liability Company in which the Partnership holds a 100% membership interest and which has 100% of the Non-Economic General Partner Interest in Dynagas Operating LP.
|
Dynagas Operating LP (“Dynagas Operating”)
|
Marshall Islands
|
Limited partnership in which the Partnership holds a 100% limited partnership interest and which owns 100% of the issued and outstanding share capital of Dynagas Equity.
|
Dynagas Finance Inc.
|
Marshall Islands
|
Wholly owned subsidiary of the Partnership whose activities were limited to the co-issuance of the 2019 Notes discussed under Note 5 and engaging in other activities incidental thereto.
|
Arctic LNG
|
Marshall Islands
|
Wholly owned subsidiary of the Partnership which is directly wholly owned by Dynagas Equity and which owns all of the issued and outstanding share capital of Pegasus, Lance, Seacrown,
Fareastern, Navajo, Solana and Dynagas Finance LLC.
|
Dynagas Finance LLC
|
Delaware
|
Wholly owned subsidiary of Arctic LNG and co-borrower of the Partnership’s Term Loan B discussed under Note 5.
|
2. |
Significant Accounting Policies and Recent Accounting Pronouncements:
|
|
(a) |
Principles of Consolidation: The accompanying consolidated financial statements have been prepared in accordance with Generally
Accepted Accounting Principles in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of Dynagas Partners and its wholly-owned subsidiaries. All intercompany balances and transactions have
been eliminated upon consolidation. Dynagas Partners, as the holding company, determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest
entity. Under Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 810 “Consolidation”, a voting interest entity is an entity in which the total equity investment at risk is deemed sufficient to absorb the
expected losses of the entity, the equity holders have all the characteristics of a controlling financial interest and the legal entity is structured with substantive voting rights.
|
|
(b) |
Use of Estimates: The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
|
2. |
Significant Accounting Policies and Recent Accounting Pronouncements (continued):
|
|
(c) |
Other Comprehensive Income: The Partnership follows the provisions of ASC 220, “Comprehensive Income”, which requires separate
presentation of certain transactions which are recorded directly as components of equity. The Partnership has no such transactions which affect other comprehensive income and accordingly, for the years ended December 31, 2020, 2019 and
2018, comprehensive income equaled net income.
|
|
(d) |
Foreign Currency Translation: The functional currency of the Partnership is the U.S. Dollar because the Partnership’s vessels
operate in international shipping markets and therefore, the Partnership primarily transacts business in U.S. Dollars. The Partnership’s books of accounts are maintained in U.S. Dollars. Transactions involving other currencies during the
year are converted into U.S. Dollars using the exchange rates in effect at the time of such transactions. At the balance sheet date, monetary assets and liabilities, which are denominated in other currencies, are translated into U.S.
Dollars using the balance sheet date exchange rates. Resulting gains or losses are included in “Other, net” in the accompanying consolidated statements of income.
|
|
(e) |
Cash and Cash Equivalents: The Partnership considers highly liquid investments, such as time deposits with an original maturity
of three months or less, to be cash equivalents.
|
|
(f) |
Restricted cash: Restricted cash may comprise of (i) minimum liquidity collateral requirements or minimum required cash deposits
that are required to be maintained under the Partnership’s financing arrangements, (ii) cash deposits in so-called “retention accounts” which may only be used as per the Partnership’s borrowing arrangements for the purpose of serving the
loan installments coming due or, (iii) other cash deposits required to be retained until other specified conditions prescribed in the Partnership’s debt agreements are met. In the event that the obligation to maintain such deposits is
expected to elapse within the next operating cycle, these deposits are classified as current assets. Otherwise, they are classified as non-current assets.
|
|
(g) |
Trade Accounts Receivable: The amount shown as trade accounts receivable at each balance sheet date, mainly includes receivables
from charterers for hire from lease agreements, net of any provision for doubtful accounts, if any. At each balance sheet date, all potentially uncollectible accounts are assessed individually for purposes of determining the appropriate
provision for doubtful accounts primarily based on the aging of such balances and any amounts in dispute. Operating lease receivables under ASC 842 are not in scope of ASC 326 for assessment of credit loss. ASC 842 requires lessors to
evaluate the collectability of all lease payments. If collection of all operating lease payments, plus any amount necessary to satisfy a residual value guarantee, is not probable (either at lease commencement or after the commencement
date), lease income is constrained to the lesser of cash collected or lease income reflected on a straight-line or another systematic basis, plus variable rent when it becomes accruable. Provision for doubtful accounts as of December 31,
2020 and 2019, was nil.
|
|
(h) |
Inventories: Inventories consist of lubricants which are stated at the lower of cost or net realizable value, following the
adoption of ASU 2015-11, “Simplifying the Measurement of Inventory”. Cost is determined by the first in, first out method. Inventories may also consist of bunkers during periods when vessels are unemployed or under voyage charters and
spares in warehouses, in which case, they are also stated at the lower of cost or net realizable value and cost is still determined by the first in, first out method. When evidence exists that the net realizable value of inventory is lower
than its cost, the difference is recognized as a loss in earnings in the period in which it occurs.
|
|
(i) |
Insurance Claims: The Partnership records insurance claim recoveries for insured losses incurred on damage to fixed assets, loss
of hire and for insured crew medical expenses. Insurance claim recoveries are recorded, net of any deductible amounts, at the time when (i) the Partnership’s vessels suffer insured damages or at the time when crew medical expenses are
incurred, (ii) recovery is probable under the related insurance policies, (iii) the Partnership can estimate the amount of such recovery following submission of the insurance claim and (iv) provided that the claim is not subject to
litigation.
|
2. |
Significant Accounting Policies and Recent Accounting Pronouncements (continued):
|
|
(j) |
Vessels, Net: Vessels are stated at cost, which consists of the contract price and any material expenses incurred upon delivery
(initial repairs, improvements and delivery expenses, capitalized interest and on-site supervision costs incurred during the construction periods). Subsequent expenditures for conversions and major improvements are also capitalized when
such expenditures appreciably extend the life, increase the earning capacity or improve the efficiency or safety of the vessels; otherwise these amounts are charged to expense as incurred. The cost of each of the Partnership’s vessels is
depreciated beginning from the time when the vessel is ready for her intended use, on a straight-line basis, to the time that the vessel reaches the end of its economic useful life, after considering the estimated residual value of the
vessel which is based on its lightweight tonnage times an estimated scrap rate. Following a reassessment of the scrap rates effective from October 1, 2019, the Partnership reduced the average scrap rate estimate from $0.685 per lightweight
ton per LNG carrier to $0.500 per lightweight ton per LNG carrier. This change in accounting estimate which did not require retrospective adoption as per ASC 250 "Accounting Changes and Error Corrections," results in additional future
annual depreciation of $1.4 million. For the fiscal years 2020 and 2019, the effect of the change in the estimate on net income was a decrease by $1.4 million and $0.3 million respectively and an increase in loss per share by $0.04 and
$0.01 respectively. Management estimates that the useful life of each of the Partnership’s vessels to be 35 years from the date of initial delivery from the shipyard. Secondhand vessels are depreciated from the date of their acquisition
through their remaining estimated useful life. When regulations place limitations on the ability of a vessel to trade on a worldwide basis, such vessel’s remaining useful life is adjusted as of the date such regulations are adopted.
|
|
(k) |
Impairment of Long-Lived Assets: The Partnership follows ASC 360-10-40 “Impairment or Disposals of Long-Lived Assets”, which
addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The standard requires that long-lived assets held and used by an entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of such assets may not be recoverable. When the estimate of undiscounted projected operating cash flows, excluding interest charges, expected to be generated by the use of the asset is less than its
carrying amount, the asset is evaluated for an impairment loss. Measurement of the impairment loss is based on the fair value of the asset. The Partnership reviews its long-lived assets for impairment whenever events or changes in
circumstances, such as business plans to dispose a vessel earlier than the end of its useful life and prevailing market conditions, indicate that the carrying amount of the assets may not be recoverable. When such indications are present,
the Partnership determines undiscounted projected net operating cash flows for each vessel and compares the result to the vessel’s carrying value. The fair values of the assets are determined through Level 2 inputs of the fair value
hierarchy as defined in ASC 820, “Fair value measurements and disclosures” based on management’s estimates, assumptions, use of available market data, use of third party valuations and other market observable data. In developing estimates
of future cash flows, the Partnership must make assumptions about future charter rates, vessel operating expenses, fleet utilization and the estimated remaining useful life of the vessels. These assumptions are based on historical trends as
well as future expectations.
|
2. |
Significant Accounting Policies and Recent Accounting Pronouncements (continued):
|
|
(l) |
Intangible Assets/Liabilities Related to Time Charters Acquired: When and where the Partnership identifies any assets or
liabilities associated with the acquisition of a vessel, the Partnership records all such identified assets or liabilities at fair value. Fair value is determined by reference to market data. In connection with the acquisition of a vessel,
the Partnership determines the fair value of any asset or liability acquired based on the market value of the time charters assumed when a vessel is acquired. The amount to be recorded either as an asset or a liability on the date the
vessel is acquired, is determined by comparing the charter rate in the existing time charter agreement of the acquired vessel with the market rates for equivalent time charter agreements prevailing at the time the vessel is acquired. When
the present value of the time charter assumed is greater than the current fair value of such charter, the difference is recorded as an asset. When the present value of the existing time charter assumed is less than the current fair value of
such charter, the difference is recorded as liability. Assets and liabilities are amortized as adjustments to revenues over the remaining term of the assumed time charter and are classified as non-current assets or liabilities, as
applicable, in the accompanying consolidated balance sheets. Impairment testing is performed when events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable.
|
|
(m) |
Accounting for Special Survey and Dry-Docking Costs: The Partnership follows the direct expense method of accounting for
dry-docking and special survey costs, in which case, such costs are expensed in the period incurred. The vessels undergo dry-dock or special survey approximately every five years during the first fifteen years of their life and,
subsequently, every two and a half years to the end of their useful life. Costs relating to routine repairs and maintenance are also expensed in the period they are incurred.
|
|
(n) |
Financing Costs: In accordance with ASU 2015-03, “Interest – Imputation of Interest”, costs associated with long-term debt,
including but not limited to, fees paid to lenders, fees required to be paid to third parties on the lender’s behalf in connection with debt financing or refinancing, or any unamortized portion thereof, are presented by the Partnership as a
reduction of long-term debt. Such fees are deferred and amortized to interest and finance costs during the life of the related debt instrument using the effective interest method. Unamortized fees relating to loans repaid or refinanced as
debt extinguishments and loan commitment fees are expensed as interest and finance costs in the period incurred in the accompanying consolidated statements of income. Any unamortized balance of costs relating to refinanced long-term debt is
deferred and amortized over the term of the credit facility in the period that such refinancing occurs, subject to the provisions of the accounting guidance with respect to “Debt – Modifications and Extinguishments”.
|
|
(o) |
Concentration of Credit Risk: Financial instruments, which may potentially subject the Partnership to significant concentrations
of credit risk, consist principally of cash and cash equivalents and trade accounts receivable. The maximum exposure to loss due to credit risk is the book value at the balance sheet date. The Partnership places its cash and cash
equivalents, consisting mostly of deposits, with high credit qualified financial institutions. The Partnership performs periodic evaluations of the relative credit standing of those financial institutions. The Partnership limits its credit
risk with trade accounts receivable by performing ongoing credit evaluations of each of its charterer’s financial condition and generally does not require collateral for its trade accounts receivable. The Partnership is exposed to credit
risk in the event of non-performance by the counterparty to the derivative instrument; however, the Partnership limits its exposure by entering into transactions with counterparties with high credit ratings.
|
2. |
Significant Accounting Policies and Recent Accounting Pronouncements (continued):
|
Charterer
|
2020
|
2019
|
2018
|
|||||||||
A
|
45
|
%
|
47
|
%
|
69
|
%
|
||||||
B
|
39
|
%
|
31
|
%
|
—
|
%
|
||||||
C
|
16
|
%
|
16
|
%
|
18
|
%
|
||||||
Total
|
100
|
%
|
94
|
%
|
87
|
%
|
|
(p) |
Accounting for Revenues and Related Expenses: The Partnership generates its revenues from charterers under time charter
agreements, which contain a lease as they meet the criteria of a lease under ASC 842 or ASC 840 under transition accounting. In particular, under ASC 842, the Partnership elected certain practical expedients, which allowed the Partnership’s
existing lease arrangements, in which it was a lessor, classified as operating leases under ASC 840 to continue to be classified as operating leases under ASC 842. Leases, which commenced on or after January 1, 2018, were classified as
operating leases under ASC 842. The Partnership’s vessels are each employed under a time charter agreement, where a contract is entered into with a charterer for the charterer’s use of a vessel for a specific period of time and at a
specified daily charter hire rate. If a time charter agreement exists and collection of the related revenue is reasonably assured, revenue is recognized, as it is earned ratably over the duration of the period of the time charter. Revenues
from time chartering of vessels are accounted for as operating leases. The Partnership early adopted ASC 842 as of September 30, 2018, with adoption reflected as of January 1, 2018, the beginning of the annual period in accordance with ASC
250. The Partnership has determined that the non-lease components in its time charter contracts relate to services for the operation of the vessel, which include crew, technical, safety, commercial services, among others. The Partnership
has elected to account for the lease and non-lease component of time charter agreements as a combined component in its consolidated financial statements, having taken into account that the non-lease components would be accounted for ratably
on a straight-line basis over the duration of the time charter and that the lease component is considered as the predominant component. The Partnership qualitatively assessed that more value is ascribed to the vessel rather than to the
services provided under the time charter agreements. Such revenues are recognized on a straight line basis at the average minimum lease revenue over the rental periods of such charter agreements, as service is performed.
|
2. |
Significant Accounting Policies and Recent Accounting Pronouncements (continued):
|
|
(q) |
Repairs and Maintenance: All repair and maintenance expenses
including underwater inspection costs are expensed in the period incurred. Such costs are included in vessel operating expenses in the accompanying consolidated statements of income.
|
|
(r) |
Earnings/ (Loss) Per Unit: As of December 31, 2020, the
Partnership’s capital structure consisted of common units, two separate classes of preferred units and a general partner interest. The incentive distribution rights are a separate class of non-voting interests that are currently held by
the Partnership’s General Partner but, subject to certain restrictions, may be transferred or sold apart from the General Partner’s interest. The Partnership calculates basic earnings/ (loss) per each class of units by allocating period
distributed and undistributed earnings/ (losses) to the General Partner, limited partners and incentive distribution rights holders using the two-class method and in accordance with the Partnership’s Fourth
Amended and Restated Limited Partnership Agreement dated October 23, 2018 (the “Limited Partnership Agreement”). Basic earnings/ (losses) per common unit are computed by allocating distributed and undistributed net income/ (losses)
available to common unitholders, after subtracting the interest on the Partnership’s net income/ (loss) of all classes of preferred unitholders, and the General Partner by the weighted average number of common units outstanding during the
year. Any undistributed earnings for the period are allocated to the various unitholders based on the distribution waterfall for cash available for distribution specified in the Limited Partnership Agreement. Where distributions relating
to the period are in excess of earnings, the surplus is also allocated according to the cash distribution model. Diluted earnings per common unit reflect the potential dilution that could occur if securities or other contracts to issue
units were exercised, if any. The Partnership had no dilutive securities outstanding during the three-year period ended December 31, 2020.
|
|
(s) |
Segment Reporting: The Partnership operates under one reportable
segment relating to its operations as it operates solely LNG vessels. The Partnership reports financial information and evaluates its operations and operating results by the type of vessel and not by the length or type of vessel
employment for its customers i.e. time charters. The Partnership’s management does not use discrete financial information to evaluate operating results for each type of charter. Although revenue can be identified by charter type,
management cannot and does not identify expenses, profitability or other financial information in such a manner. When the Partnership charters a vessel to a charterer, the charterer is free to trade the vessel worldwide. As a result, the
disclosure of geographic information is impracticable.
|
|
(t) |
Fair Value Measurements: The Partnership follows ASC 820, “Fair Value Measurements and Disclosures”, which defines and provides
guidance for the measurement of fair value. This guidance creates a fair value hierarchy of measurement and indicates that, when possible, fair value is the price that would be received in the sale of an asset or the price that would be
paid in the transfer of a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. The fair value hierarchy gives the highest priority to quoted prices in active markets for
identical assets or liabilities (Level 1) and the lowest priority to unobservable data that are not corroborated by market data (Level 3). For example, the reporting entity’s own data has a Level 3 priority because it is not or not yet
observable or corroborated by market data. Observable market based inputs or unobservable inputs that are corroborated by market data are classified under Level 2 of the fair value hierarchy. Under the standard, fair value measurements
would be separately disclosed by level within the fair value hierarchy. ASC 820 applies when assets or liabilities in the consolidated financial statements are to be measured at fair value, but does not require additional use of fair value
beyond the requirements in other accounting principles.
|
2. |
Significant Accounting Policies and Recent Accounting Pronouncements (continued):
|
|
(u) |
Commitments and Contingencies: Commitments are recognized when the Partnership has a present legal or constructive obligation as a
result of past events and it is probable that an outflow of resources embodying economic benefits will likely be required to satisfy such obligation and a reliable estimate of the amount of such obligation can be made. Provisions are
reviewed at each balance sheet date and adjusted to reflect the present value of the expenditure expected to be required to settle the obligation. Contingent liabilities are not recognized in the consolidated financial statements but are
disclosed unless there is a remote possibility of an outflow of resources embodying economic benefits. Contingent assets are not recognized in the consolidated financial statements but are disclosed when an inflow of economic benefits is
probable (Note 8).
|
|
(v) |
Accounting for Financial Instruments: The principal financial assets of the Partnership consist of cash and cash equivalents,
restricted cash, amounts due from related parties and trade accounts receivable. The principal financial liabilities of the Partnership consist of trade and other accounts payable, accrued liabilities, long-term debt, amounts due to related
parties and a derivative financial instrument (interest rate swap). The Partnership may also consider, from time to time, entering into interest rate swap agreements to manage its exposure to fluctuations of interest rate risk associated
with its borrowings. Derivative financial instruments are generally used to manage risk related to fluctuations of interest rates. ASC 815, “Derivatives and Hedging”, requires all derivative contracts to be recorded at fair value, as
determined in accordance with ASC 820, Fair Value Measurements and Disclosures (Note 6). The changes in fair value of a derivative contract are recognized in earnings unless specific hedging criteria are met. At the inception of a hedge
relationship, the Partnership formally designates and documents the hedge relationship with respect to hedge accounting, the risk management objective and the strategy undertaken for the hedge. The documentation includes identification of
the hedging instrument, hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting exposure to changes in the hedged item’s cash flows attributable to
the hedged risk. A cash flow hedge is the mitigation of risk exposure resulting from variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecasted transaction
that could affect profit or loss. Such hedges are expected to be highly effective in achieving offsetting changes in cash flows and are assessed on an ongoing basis to determine whether they actually have been highly effective throughout
the financial reporting periods for which they were designated. All derivatives are recorded on the balance sheet as assets or liabilities and measured at fair value. For derivatives designated as cash flow hedges, the effective portion of
the changes in fair value of the derivatives is recorded in “Accumulated Other Comprehensive Income/ (Loss)” and subsequently recognized in earnings when the hedged items impact earnings.
|
|
(w) |
Derivative Financial Instruments: The Partnership entered into an interest rate swap contract to manage its exposure to
fluctuations of interest rate risks associated with its loan facility.
|
|
(x) |
Going concern: The Partnership’s policy is in accordance with ASU No. 2014-15,
"Presentation of Financial Statements - Going Concern", issued in August 2014 by the FASB. ASU 2014-15 provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about an entity’s ability to
continue as a going concern and on related required footnote disclosures. For each reporting period, management is required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to
continue as a going concern within one year from the date the consolidated financial statements are issued.
|
i) |
On January 1, 2020, the Partnership adopted ASU No. 2016-13—Financial Instruments—Credit Losses (Topic 326)—Measurement of Credit Losses on Financial Instruments, which
amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities, using the modified retrospective method. This new guidance is amended by: ASU 2018-19, “Codification Improvements to
Topic 326, Financial Instruments—Credit Losses”, which clarify that receivables arising from operating leases are not within the scope of Subtopic 326-20 and should be accounted for in accordance with Topic 842, Leases; ASU 2019-04,
“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 clarify the modification of
accounting for available for sale debt securities excluding applicable accrued interest, which must be individually assessed for credit losses when fair value is less than the amortized cost basis; 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. The fair value option election does not apply to held-to-maturity debt securities. The adoption of this new accounting guidance did not have a material impact on the Partnership’s
consolidated financial statements and related disclosures.
|
ii) |
On January 1, 2020, the Partnership adopted 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 GAAP to make disclosures about recurring and non-recurring fair value measurements. 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.
|
iii) |
On January 1, 2020, the Partnership adopted ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (ASU No.
2017-12), which amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activities in the consolidated financial statements and ASU 2018-16, “Derivatives and
Hedging (Topic 815)—Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes”, which permits the use of the OIS rate based on SOFR as a U.S.
benchmark interest rate for hedge accounting purposes under Topic 815 in addition to the UST, the LIBOR swap rate, the OIS rate based on the Fed Funds Effective Rate and the SIFMA Municipal Swap Rate, as further amended through ASU 2019-04,
“Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825 Financial Instruments”. The adoption of this new accounting guidance had no effect on the Partnership’s
consolidated financial statements.
|
iv) |
On January 1, 2020, the Partnership adopted ASU 2018-17, “Consolidation (Topic 810)—Targeted Improvements to Related Party Guidance for Variable Interest Entities”, which
improves the accounting for the following areas: (i) applying the variable interest entity (VIE) guidance to private companies under common control and (ii) considering indirect interests held through related parties under common control
for determining whether fees paid to decision makers and service providers are variable interests, thereby improving general purpose financial reporting. The Partnership applied the amendments in this Update retrospectively, as required.
The adoption of this new accounting guidance did not have a material effect on the Partnership’s consolidated financial statements and related disclosures.
|
3. |
Transactions with related parties:
|
Years ended
December 31,
|
||||||||||||
2020
|
2019
|
2018
|
||||||||||
Included in voyage expenses – related party
|
||||||||||||
Charter hire commissions (a)
|
$
|
1,719
|
$
|
1,631
|
$
|
1,654
|
||||||
Included in general and administrative expenses – related party
|
||||||||||||
Executive services fee (d)
|
$
|
613
|
$
|
603
|
$
|
637
|
||||||
Administrative services fee (e)
|
$
|
120
|
$
|
120
|
$
|
120
|
||||||
Management fees-related party
|
||||||||||||
Management fees (a)
|
$
|
6,752
|
$
|
6,537
|
$
|
6,347
|
Year ended December 31,
|
||||||||
2020
|
2019
|
|||||||
Assets:
|
||||||||
Security deposits to Manager (a)
|
$
|
1,350
|
$
|
1,350
|
||||
Total assets due from related party, non-current
|
$
|
1,350
|
$
|
1,350
|
||||
Liabilities included in Due to related party:
|
||||||||
Working capital due to Manager (a)
|
$
|
1,032
|
$
|
1,198
|
||||
Executive service charges due to Manager (d)
|
$
|
159
|
$
|
148
|
||||
Administrative service charges due to Manager (e)
|
$
|
30
|
$
|
30
|
||||
Management fees due to Manager (a)
|
$
|
-
|
$
|
701
|
||||
Other Partnership expenses due to Manager
|
$
|
485
|
$
|
125
|
||||
Total liabilities due to related party, current
|
$
|
1,706
|
$
|
2,202
|
3. |
Transactions with related parties (continued):
|
(i) |
a commission of 1.25% over charter-hire agreements arranged by the Manager; and
|
(ii) |
a lump sum new-building supervision fee of $700 for the services rendered by the Manager in respect of the construction of the vessel, if applicable, plus out of pocket expenses.
|
3. |
Transactions with related parties (continued):
|
4. |
Vessels, net:
|
Vessel
Cost |
Accumulated
Depreciation |
Net Book
Value |
||||||||||
Balance December 31, 2018
|
$
|
1,167,909
|
$
|
(220,532
|
)
|
$
|
947,377
|
|||||
Depreciation
|
—
|
(30,680
|
)
|
(30,680
|
)
|
|||||||
Balance December 31, 2019
|
$
|
1,167,909
|
$
|
(251,212
|
)
|
$
|
916,697
|
|||||
Depreciation
|
—
|
(31,797
|
)
|
(31,797
|
)
|
|||||||
Balance December 31, 2020
|
$
|
1,167,909
|
$
|
(283,009
|
)
|
$
|
884,900
|
|||||
5. |
Long-Term Debt:
|
Year Ended December 31,
|
|||||||||
Debt instruments
|
Borrowers-Issuers
|
2020
|
2019
|
||||||
$675 Million Credit Facility
|
Fareastern Shipping Limited, Pegasus Shipholding S.A., Lance Shipping S.A., Seacrown Maritime Ltd., Navajo Marine Limited, Solana Holding Ltd.
|
615,000
|
663,000
|
||||||
Total debt
|
$
|
615,000
|
$
|
663,000
|
|||||
Less deferred financing fees
|
(7,319
|
)
|
(9,846
|
)
|
|||||
Total debt, net of deferred finance costs
|
$
|
607,681
|
$
|
653,154
|
|||||
Less current portion, net of deferred financing fees
|
$
|
(45,715
|
)
|
$
|
(45,482
|
)
|
|||
Long-term debt, net of current portion and deferred financing fees
|
$
|
561,966
|
$
|
607,672
|
5. |
Long-Term Debt (continued):
|
|
• |
meet a specified minimum ratio of Cash and Cash Equivalents to Total Liabilities;
|
|
• |
meet a specified maximum ratio of Total Liabilities to the Market Value Adjusted Total Assets; and
|
|
• |
maintain a minimum liquidity of $50.0 million in a restricted Cash Collateral Account.
|
Year ending December 31,
|
Amount | |||
2021
|
$
|
48,000
|
||
2022
|
48,000
|
|||
2023
|
48,000
|
|||
2024
|
471,000
|
|||
Total long-term debt
|
$
|
615,000
|
||
5. |
Long-Term Debt (continued):
|
6. |
Fair Value Measurements:
|
|
◾ |
Cash and cash equivalents, trade accounts receivable, amounts due from/to related parties and trade accounts payable: The carrying values reported in
the accompanying consolidated balance sheets for those financial instruments (except for the fair value of non-current portion of amounts due from related party) are considered Level 1 items as they represent liquid assets and liabilities
with short-term maturities and are reasonable estimates of their fair values. The carrying value of these instruments is separately reflected in the accompanying
consolidated balance sheets. The fair value of the non-current portion of the amounts due from related parties, determined through Level 3 inputs of the fair value hierarchy by discounting future cash flows using the Partnership’s estimated
cost of capital, is $892 as of December 31, 2020, compared to its carrying value of $1,350 as of the same date.
|
|
◾ |
Long-term debt: The $675 Million Credit Facility discussed in Note 5, has an approximate recorded value due to the variable interest rate payable and
is thus considered a Level 2 item in accordance with the fair value hierarchy as LIBOR rates are observable at commonly quoted intervals for the full terms of the loans.
|
|
◾ |
Derivative financial instrument: The carrying values reported in the accompanying consolidated balance sheets for the swap transaction are determined
through Level 2 of the fair value hierarchy and are derived principally from interest rates, yield curves and other items that allow value to be determined.
|
|
◾ |
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
|
|
◾ |
Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar
assets and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data; and
|
|
◾ |
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the determination of the fair value of the assets or liabilities.
|
6. |
Fair Value Measurements (continued):
|
|
Significant Other
Observable Inputs
(Level 2)
|
|||
Recurring measurements:
|
December 31,
2020 |
|||
Interest rate swaps
|
(2,666
|
)
|
||
Total
|
(2,666
|
)
|
7. |
Time charters acquired:
|
8. |
Commitments and Contingencies:
|
8. |
Commitments and Contingencies (continued):
|
Year ending December 31,
|
Amount
|
|||
2021
|
114,794
|
|||
2022
|
103,824
|
|||
2023
|
103,824
|
|||
2024
|
103,935
|
|||
2025
|
103,478
|
|||
2026 and thereafter
|
447,063
|
|||
Total
|
$
|
976,918
|
8. |
Commitments and Contingencies (continued):
|
9. |
Partners’ Equity:
|
9. |
Partners’ Equity (continued):
|
Total Quarterly
Distribution Target Amount |
Unitholders
|
General
Partner |
Holders
of IDRs |
|||||||||||
Minimum Quarterly Distribution
|
$0.365
|
99.9
|
%
|
0.1
|
%
|
0.0
|
%
|
|||||||
First Target Distribution
|
up to $0.420
|
99.9
|
%
|
0.1
|
%
|
0.0
|
%
|
|||||||
Second Target Distribution
|
above $0.420 up to $0.456
|
85.0
|
%
|
0.1
|
%
|
14.9
|
%
|
|||||||
Third Target Distribution
|
Above $0.456 up to $0.548
|
75.0
|
%
|
0.1
|
%
|
24.9
|
%
|
|||||||
Thereafter
|
above $0.548
|
50.0
|
%
|
0.1
|
%
|
49.9
|
%
|
9. |
Partners’ Equity (continued):
|
9. |
Partners’ Equity (continued):
|
10. |
(Loss)/ Earnings per Unit:
|
10. |
(Loss)/ Earnings per Unit (continued):
|
Year ended December 31,
|
||||||||||||
2020
|
2019
|
2018
|
||||||||||
Partnership’s Net income
|
$
|
34,052
|
$
|
3,613
|
$
|
3,613
|
||||||
Less:
|
||||||||||||
Net Income attributable to preferred unitholders
|
11,563
|
11,563
|
7,659
|
|||||||||
General Partner’s interest in Net Income
|
23
|
(8
|
)
|
(4
|
)
|
|||||||
Net income/(loss) attributable to common unitholders
|
$
|
22,466
|
$
|
(7,942
|
)
|
$
|
(4,042
|
)
|
||||
Weighted average number of common units outstanding, basic and diluted
|
35,546,823
|
35,490,000
|
35,490,000
|
|||||||||
Earnings/ (Losses) per common unit, basic and diluted
|
$
|
0.63
|
$
|
(0.22
|
)
|
$
|
(0.11
|
)
|
11. |
Interest and Finance Costs:
|
Year ended December 31,
|
||||||||||||
2020
|
2019
|
2018
|
||||||||||
Interest expense (Note 5)
|
$
|
24,146
|
$
|
46,638
|
$
|
46,884
|
||||||
Amortization of deferred financing fees
|
2,527
|
3,199
|
3,261
|
|||||||||
Write-off of deferred financing fees
|
—
|
7,497
|
—
|
|||||||||
Commitment fees (Note 5)
|
—
|
791
|
—
|
|||||||||
Other
|
385
|
466
|
345
|
|||||||||
Total
|
$
|
27,058
|
$
|
58,591
|
$
|
50,490
|
12. |
Derivative financial instrument:
|
12. |
Derivative financial instrument (continued):
|
|
|
2020
|
|||||||
Derivative
|
Balance Sheet Location
|
Assets
|
Liabilities
|
||||||
Interest rate swap
|
Derivative financial Instruments, Current
|
—
|
1,332
|
||||||
Interest rate swap
|
Derivative financial Instruments, non- Current
|
—
|
1,334
|
||||||
Total
|
—
|
2,666
|
Derivative
|
Net Realized and Unrealized Loss Recognized on Statement of Comprehensive Income Location
|
Amount 2020
|
|||
Interest rate swap
|
Loss on derivative instruments
|
3,148
|
|||
Total
|
3,148
|
13. |
Taxes:
|
13. |
Taxes (continued):
|
14. |
Subsequent Events:
|
(a) |
Quarterly Series A Preferred unit cash distribution: On January 21, 2021, the Partnership’s Board of Directors declared a cash distribution of
$0.5625 per unit on its Series A Preferred Units for the period from November 12, 2020 to February 11, 2021. The cash distribution was paid on February 12, 2021, to all Series A preferred unitholders of record as of February 5, 2021.
|
(b) |
Quarterly Series B Preferred unit cash distribution: On January 28, 2021, the Partnership’s Board of Directors declared a cash distribution of
$0.546875 per unit on its Series B Preferred Units for the period from November 22, 2020 to February 21, 2021. The cash distribution was paid on February 22, 2021, to all Series B preferred unitholders of record as of February 15, 2021.
|
(c) |
“At the market” equity program: Following December 31, 2020, the Partnership sold $3.5 million of common units at an average price per unit of
$2.9153 pursuant to the A&R Sales Agreement (as defined above), which has $26.5 million of remaining availability for future repurchases.
|
(d) |
New master management agreement (the “Master”) with Dynagas Ltd.: On March 3, 2021, the Partnership entered into a new master management agreement
(the “Master”) with Dynagas Ltd. (the “Manager”), which includes a new standard set of terms for commercial, technical, crew, accounting and vessel administrative services (“Standard Management Terms”) for the Partnership’s six vessels
effective as from January 1, 2021. This agreement amends, restates and supersedes the previous technical and commercial management agreements and reduces the technical management fees payable from $3,167 per day per vessel to $2,750 per day
per vessel commencing on January 1, 2021.
|
(e) |
Quarterly Series A Preferred unit cash distribution: On April 20, 2021, the Partnership’s Board of Directors declared a cash distribution of $0.5625
per unit on its Series A Preferred Units for the period from February 12, 2021 to May 11, 2021. The cash distribution will be paid on May 12, 2021, to all Series A preferred unitholders of record as of May 5, 2021.
|
(f) |
Quarterly Series B Preferred unit cash distribution: On April 27, 2021, the Partnership’s Board of Directors declared a cash distribution of
$0.546875 per unit on its Series B Preferred Units for the period from February 22, 2021 to May 21, 2021. The cash distribution will be paid on May 24, 2021, to all Series B preferred unitholders of record as of May 17, 2021.
|
(g) |
Legal Proceedings: In relation to the class action lawsuit filed against the Partnership in April 2019 (Note 8 (b)), the parties reached an
agreement in principle to settle the litigation in April 2021. The settlement is subject to documentation and court approval and will be covered in full by the Partnership´s directors’ and officers’ insurance.
|
|
• |
senior to the Junior Securities (including our common units);
|
|
• |
on a parity with the Parity Securities; and
|
|
• |
junior to the Senior Securities.
|
|
• |
issue any Parity Securities or Senior Securities if the cumulative distributions payable on outstanding Series A Preferred Units are in arrears; or
|
|
• |
create or issue any Senior Securities.
|
|
• |
senior to the Junior Securities (including our common units);
|
|
• |
pari passu with the Parity Securities (including the Series A Preferred Units);
|
|
• |
junior to all of our indebtedness and other liabilities with respect to assets available to satisfy claims against us; and
|
|
• |
junior to the Senior Securities
|
|
• |
issue any Parity Securities if the cumulative distributions payable on outstanding Series B Preferred Units are in arrears; or
|
|
• |
create or issue any Senior Securities.
|
|
• |
the Three Month LIBOR Rate will be the rate (expressed as a percentage per year) for deposits in U.S. dollars having an index maturity of three months, in amounts of at least $1,000,000, as such rate appears on “Reuters Page LIBOR01” at
approximately 11:00 a.m. (London time) on the relevant Distribution Determination Date; or
|
|
• |
if no such rate appears on “Reuters Page LIBOR01” or if the “Reuters Page LIBOR01” is not available at approximately 11:00 a.m. (London time) on the relevant Distribution Determination Date, then the calculation agent, after consultation
with us, will select four nationally-recognized banks in the London interbank market and request that the principal London offices of those four selected banks provide the calculation agent with their offered quotation for deposits in U.S.
dollars for a period of three months, commencing on the first day of the applicable Distribution Period, to prime banks in the London interbank market at approximately 11:00 a.m. (London time) on that Distribution Determination Date for the
applicable Distribution Period. Offered quotations must be based on a principal amount equal to an amount that, in the calculation agent’s discretion, is representative of a single transaction in U.S. dollars in the London interbank market at
that time. If at least two quotations are provided, the Three-Month LIBOR Rate for such Distribution Period will be the arithmetic mean (rounded upward if necessary, to the nearest 0.00001 of 1%) of those quotations. If fewer than two
quotations are provided, the Three-Month LIBOR Rate for such Distribution Period will be the arithmetic mean (rounded upward if necessary, to the nearest 0.00001 of 1%) of the rates quoted at approximately 11:00 a.m. (New York City time) on
that Distribution Determination Date for such Distribution Period by three nationally-recognized banks in New York, New York selected by the calculation agent, for loans in U.S. dollars to nationally-recognized European banks (as selected by
the calculation agent), for a period of three months commencing on the first day of such Distribution Period. The rates quoted must be based on an amount that, the calculation agent’s discretion, is representative of a single transaction in
U.S. dollars in that market at that time. If no quotation is provided as described above, then the calculation agent, after consulting such sources as it deems comparable to any of the foregoing quotations or display page, or any such source
as it deems reasonable from which to estimate LIBOR or any of the foregoing lending rates, shall determine LIBOR for the second London Business Day immediately preceding the first day of such Distribution Period in its sole discretion. If the
calculation agent is unable or unwilling to determine LIBOR as provided in the immediately preceding sentence, the calculation agent will use a substitute or successor base rate that it has determined in its sole discretion is most comparable
to the Three-Month LIBOR Rate, provided that if the calculation agent determines there is an industry-accepted substitute or successor base rate, then the calculation agent shall use such substitute or successor base rate. If the calculation
agent has determined a substitute or successor base rate in accordance with the immediately preceding sentence, the calculation agent in its sole discretion may determine what business day convention to use, the definition of business day,
the distribution determination date to be used and any other relevant methodology for calculating such substitute or successor base rate, including any adjustment factor needed to make such substitute or successor base rate comparable to the
Three-Month LIBOR Rate, in a manner that is consistent with industry accepted practices for such substitute or successor base rate.
|
Marshall Islands
|
Delaware
|
|
Shareholder Meetings
|
||
Held at a time and place as designated in the bylaws.
|
May be held at such time or place as designated in the certificate of incorporation or the bylaws, or if not so designated, as determined by the board of directors.
|
|
Special meetings of the shareholders may be called by the board of directors or by such person or persons as may be authorized by the articles of incorporation or by the bylaws.
|
Special meetings of the shareholders may be called by the board of directors or by such person or persons as may be authorized by the certificate of incorporation or by the bylaws.
|
|
May be held within or without the Marshall Islands.
|
May be held within or without Delaware.
|
|
Notice:
|
Notice:
|
|
Whenever shareholders are required to take any action at a meeting, written notice of the meeting shall be given which shall state the place, date and hour of the meeting and, unless it is an annual meeting,
indicate that it is being issued by or at the direction of the person calling the meeting. Notice of a special meeting shall also state the purpose for which the meeting is called.
|
Whenever shareholders are required to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, and the means of remote
communication, if any.
|
|
A copy of the notice of any meeting shall be given personally, sent by mail or by electronic mail not less than 15 nor more than 60 days before the meeting.
|
Written notice shall be given not less than 10 nor more than 60 days before the meeting.
|
Shareholders’ Voting Rights
|
||
Unless otherwise provided in the articles of incorporation, any action required to be taken at a meeting of shareholders may be taken without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, is signed by all the shareholders entitled to vote with respect to the subject matter thereof, or if the articles of incorporation so provide, by the holders of outstanding shares having not less
than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.
|
Any action required to be taken at a meeting of shareholders may be taken without a meeting if a consent for such action is in writing and is signed by shareholders having not fewer than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.
|
|
Any person authorized to vote may authorize another person or persons to act for him by proxy.
|
Any person authorized to vote may authorize another person or persons to act for him by proxy.
|
|
Unless otherwise provided in the articles of incorporation or bylaws, a majority of shares entitled to vote constitutes a quorum. In no event shall a quorum consist of fewer than one-third of the shares
entitled to vote at a meeting.
|
For stock corporations, the certificate of incorporation or bylaws may specify the number of shares required to constitute a quorum but in no event shall a quorum consist of less than one-third of shares
entitled to vote at a meeting. In the absence of such specifications, a majority of shares entitled to vote shall constitute a quorum.
|
|
When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholders.
|
When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholders.
|
|
The articles of incorporation may provide for cumulative voting in the election of directors.
|
The certificate of incorporation may provide for cumulative voting in the election of directors.
|
|
Merger or Consolidation
|
||
Any two or more domestic corporations may merge into a single corporation if approved by the board and if authorized by a majority vote of the holders of outstanding shares at a shareholder meeting.
|
Any two or more corporations existing under the laws of the state may merge into a single corporation pursuant to a board resolution and upon the majority vote by shareholders of each constituent corporation at
an annual or special meeting.
|
|
Any sale, lease, exchange or other disposition of all or substantially all the assets of a corporation, if not made in the corporation’s usual or regular course of business, once approved by the board, shall be
authorized by the affirmative vote of two-thirds of the shares of those entitled to vote at a shareholder meeting.
|
Every corporation may at any meeting of the board sell, lease or exchange all or substantially all of its property and assets as its board deems expedient and for the best interests of the corporation when so
authorized by a resolution adopted by the holders of a majority of the outstanding stock of the corporation entitled to vote.
|
|
Any domestic corporation owning at least 90% of the outstanding shares of each class of another domestic corporation may merge such other corporation into itself without the authorization of the shareholders of
any corporation.
|
Any corporation owning at least 90% of the outstanding shares of each class of another corporation may merge the other corporation into itself and assume all of its obligations without the vote or consent of
shareholders; however, in case the parent corporation is not the surviving corporation, the proposed merger shall be approved by a majority of the outstanding stock of the parent corporation entitled to vote at a duly called shareholder
meeting.
|
|
Any mortgage, pledge of or creation of a security interest in all or any part of the corporate property may be authorized without the vote or consent of the shareholders, unless otherwise provided for in the
articles of incorporation.
|
Any mortgage or pledge of a corporation’s property and assets may be authorized without the vote or consent of shareholders, except to the extent that the certificate of incorporation otherwise provides.
|
Directors
|
||
The board of directors must consist of at least one member.
|
The board of directors must consist of at least one member.
|
|
The number of board members may be changed by an amendment to the bylaws, by the shareholders, or by action of the board under the specific provisions of a bylaw.
|
The number of board members shall be fixed by, or in a manner provided by, the bylaws, unless the certificate of incorporation fixes the number of directors, in which case a change in the number shall be made
only by an amendment to the certificate of incorporation.
|
|
If the board is authorized to change the number of directors, it can only do so by a majority of the entire board and so long as no decrease in the number shall shorten the term of any incumbent director.
|
If the number of directors is fixed by the certificate of incorporation, a change in the number shall be made only by an amendment of the certificate.
|
|
Removal:
|
Removal:
|
|
Any or all of the directors may be removed for cause by vote of the shareholders.
|
Any or all of the directors may be removed, with or without cause, by the holders of a majority of the shares entitled to vote unless the certificate of incorporation otherwise provides.
|
|
If the articles of incorporation or the bylaws so provide, any or all of the directors may be removed without cause by vote of the shareholders.
|
In the case of a classified board, shareholders may effect removal of any or all directors only for cause.
|
|
Dissenters’ Rights of Appraisal
|
||
Shareholders have a right to dissent from any plan of merger, consolidation or sale of all or substantially all assets not made in the usual course of business, and receive payment of the fair value of their
shares. However, the right of a dissenting shareholder under the BCA to receive payment of the appraised fair value of his shares shall not be available for the shares of any class or series of stock, which shares or depository receipts in
respect thereof, at the record date fixed to determine the shareholders entitled to receive notice of and to vote at the meeting of the shareholders to act upon the agreement of merger or consolidation, were either (i) listed on a securities
exchange or admitted for trading on an interdealer quotation system or (ii) held of record by more than 2,000 holders. The right of a dissenting shareholder to receive payment of the fair value of his or her shares shall not be available for
any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the shareholders of the surviving corporation.
|
Appraisal rights shall be available for the shares of any class or series of stock of a corporation in a merger or consolidation, subject to limited exceptions, such as a merger or consolidation of corporations
listed on a national securities exchange in which listed stock is offered for consideration is (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders.
|
A holder of any adversely affected shares who does not vote on or consent in writing to an amendment to the articles of incorporation has the right to dissent and to receive payment for such shares if the
amendment:
|
||||
•
|
Alters or abolishes any preferential right of any outstanding shares having preference; or
|
|||
•
|
Creates, alters, or abolishes any provision or right in respect to the redemption of any outstanding shares; or
|
|||
•
|
Alters or abolishes any preemptive right of such holder to acquire shares or other securities; or
|
|||
•
|
Excludes or limits the right of such holder to vote on any matter, except as such right may be limited by the voting rights given to new shares then being authorized of any existing or new class.
|
|||
Shareholder’s Derivative Actions
|
||||
An action may be brought in the right of a corporation to procure a judgment in its favor, by a holder of shares or of voting trust certificates or of a beneficial interest in such shares or certificates. It
shall be made to appear that the plaintiff is such a holder at the time of bringing the action and that he was such a holder at the time of the transaction of which he complains, or that his shares or his interest therein devolved upon him by
operation of law.
|
In any derivative suit instituted by a shareholder of a corporation, it shall be averred in the complaint that the plaintiff was a shareholder of the corporation at the time of the transaction of which he
complains or that such shareholder’s stock thereafter devolved upon such shareholder by operation of law.
|
|||
A complaint shall set forth with particularity the efforts of the plaintiff to secure the initiation of such action by the board or the reasons for not making such effort.
|
Other requirements regarding derivative suits have been created by judicial decision, including that a shareholder may not bring a derivative suit unless he or she first demands that the corporation sue on its
own behalf and that demand is refused (unless it is shown that such demand would have been futile).
|
|||
Such action shall not be discontinued, compromised or settled, without the approval of the High Court of the Republic of the Marshall Islands.
|
||||
Reasonable expenses including attorney’s fees may be awarded if the action is successful.
|
||||
A corporation may require a plaintiff bringing a derivative suit to give security for reasonable expenses if the plaintiff owns less than 5% of any class of outstanding shares or holds voting trust certificates
or a beneficial interest in shares representing less than 5% of any class of such shares and the shares, voting trust certificates or beneficial interest of such plaintiff has a fair value of $50,000 or less.
|
|
(1) |
DYNAGAS LNG PARTNERS LP, a company incorporated under the laws of The Marshall Islands and having its registered office at Trust Company Complex, Ajeltake
Road, Ajeltake Island, Majuro, Marshall Islands MH96960 (“DLNG”) on its own account and as agent for and on behalf of each of its existing wholly owned subsidiaries (as set out in Schedule 1) (“SPVs”) as well as any future LNG vessel owning
subsidiaries wholly owned by DLNG (“Future SPVs”) (the SPVs and Future SPVs jointly referred to as the “DLNG SPVs”);
|
|
(2) |
DYNAGAS LTD., a company incorporated under the laws of Liberia and having its registered office at 80 Broad Street Monrovia Liberia (the “Manager”);
|
|
(1) |
Each SPV: (i) owns one LNG Carrier already on the water and is a wholly owned subsidiary of DLNG; (ii) may in the future own or control LNG carriers purchased or chartered in (together the
“Vessels”). References to “control” or “controlled” herein means owned or chartered.
|
|
(2) |
The Manager has provided and continues to provide technical and commercial management services to the SPV’s. Each of the SPVs and the Manager have previously entered into various technical and
commercial management agreements, as amended and supplemented from time to time (the “Existing Management Agreements”).
|
|
(3) |
The Parties have agreed on a standard set of terms for technical and commercial management services, which shall be applicable to all Vessels.
|
|
(4) |
The standard set of terms for the technical and commercial management services to be provided to the Vessels is hereby attached as Annex I (“Standard Management Terms”) and forms an integral part of
this Master.
|
|
(5) |
This Master together with the Standard Management Terms as confirmed and amended by the terms and conditions in the appliable Confirmation (as defined below) will amend, restate and supersede the
Existing Management Agreements.
|
|
(6) |
The Parties have agreed that the Management Fee in the Standard Management Terms shall, as of the Effective Date, amount to $2,750 per day per Vessel compared to $3,167 per day per Vessel under the
Existing Management Agreements and in consideration of such reduction the Parties have agreed to this Master Agreement and the Standard Management Terms.
|
|
(1) |
The Standard Management Terms contain the terms and conditions relating to the technical and commercial management services to be provided by the Manager to each Vessel controlled by the DLNG SPVs.
|
|
(2) |
All owned or controlled Vessels, existing and future will be governed by the Standard Management Terms as confirmed and amended by the terms and conditions in a written confirmation (substantially in
the form set out in Schedule 2 executed by and between DLNG as agent for and on behalf of the relevant DLNG SPV on the one hand and the Manager on the other hand (the “Confirmation”).
|
|
(3) |
The management services to be provided by the Manager pursuant to the Standard Management Terms as amended by the terms and conditions detailed in the Confirmation shall be effective as from January
1, 2021 for the SPV’s and as of the date prescribed in the Confirmation for the Future SPV’s (the “Effective Date”).
|
|
(4) |
The Standard Management Terms (as applicable) as amended by the terms and conditions detailed in the Confirmation will supersede the terms of the Existing Management Agreements as from the Effective
Date; provided that the Parties agree that the Existing Management Agreements will be terminated with no further effect and no liability to the parties thereto as of the Effective Date notwithstanding the applicable duration and notice
provisions as provided in the Existing Management Agreements
|
|
(5) |
This Master may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.
|
|
(6) |
The governing law and dispute resolution provisions in Clause 23 of the Standard Management Terms shall apply to this Master.
|
|
(7) |
No provision of this Master shall be enforceable under the Contracts (Rights of Third Parties) Act 1999 by any person who is not a party to this Master.
|
Signed by
|
)
|
|
For and on behalf of
|
)
|
/s/ Michael Gregos
|
Dynagas LNG Partners L.P.
|
)
|
Michael Gregos
|
Signed by
|
)
|
/s/ Efstratios Athanasakos
|
For and on behalf of
|
)
|
Efstratios Athanasakos
|
Dynagas Ltd.
|
)
|
Number
|
Entity
|
Vessel
|
1
|
Pegasus Shipholding S.A.
|
Clean Energy
|
2
|
Lance Shipping S.A.
|
Ob River
|
3
|
Seacrown Maritime Ltd.
|
Amur River
|
4
|
Fareastern Shipping Limited
|
Arctic Aurora
|
5
|
Navajo Marine Limited
|
Yenisei River
|
6
|
Solana Holding Ltd.
|
Lena River
|
VESSEL NAME
|
VESSEL DETAILS
|
REGISTERED OWNER OR DISPONENT OWNER
|
DATE OF ENTRY INTO DLNG FLEET
|
DATE OF ENTRY INTO MANAGEMENT ON STANDARD MANAGEMENT TERMS (THE “EFFECTIVE DATE”)
|
NOTES/AMENDMENTS TO STANDARD MANAGEMENT TERMS
|
SHIPMAN 2009
Standard ship management agreement |
PART 1
|
Signature(s) (Owners)
|
Signature(s) (Managers)
|
SECTION 1 – Basis of the Agreement
|
|
1. |
Definitions
|
|
2. |
Commencement and Appointment
|
|
3. |
Authority of the Managers
|
SECTION 2 – Services
|
|
4. |
Technical Management
|
|
(a) |
ensuring that the Vessel complies with the requirements of the law of the Flag State;
|
|
(b) |
ensuring compliance with the ISM Code;
|
|
(c) |
ensuring compliance with the ISPS Code;
|
|
(d) |
providing competent personnel to supervise the maintenance and general efficiency of the Vessel;
|
|
(e) |
arranging and supervising dry dockings, surveys, inspections, repairs, alterations and the maintenance of the Vessel and the Vessels’ equipment to the
standards agreed with the Owners and in compliance with the obligations of the Owners (or their lawful successors) under and throughout the duration of any time charter party the Owner enters into from time
to time, provided that the Managers shall be entitled to incur the necessary expenditure to ensure that the Vessel will comply with all requirements and recommendations of the classification society (free
of overdue requirements and recommendations and, if there are any such overdue requirements and/or recommendations, the Managers shall promptly notify and consult with the Owners and present a plan for rectification for the Owners’
consideration), and with the law of the Flag State and of the places where the Vessel is required to trade, and in order to keep the Vessel in good efficient and seaworthy condition and otherwise to
ensure that the Vessel is in compliance with requirements of the charter parties the Owner has entered into;
|
|
(f) |
arranging the supply of necessary stores, spares and lubricating oil;
|
|
(g) |
appointing surveyors, service engineers and technical consultants as the Managers may consider from time to time to be necessary;
|
|
(h) |
in accordance with the Owners’ instructions, supervising the sale and physical delivery of the Vessel under the sale agreement. However services under this Sub-clause 4(h) shall not include
negotiation of the sale agreement or transfer of ownership of the Vessel;
|
|
(i) |
arranging for the supply of provisions unless provided by the Owners;
|
|
(j) |
arranging for the sampling and testing of bunkers;
|
|
(k) |
subject as is provided in any charter party in force in respect of the Vessel, the arrangement of the loading and discharging from time to time of the Vessel and all matters
pertaining thereto;
|
|
(l) |
arranging port services;
|
|
(m) |
ensure that the Vessel is compatible with existing primary LNG liquefaction terminals, regasification terminals and ship/shore interfaces and to maintain such compatibility and all
necessary certificates and documentation;
|
|
(n) |
undertake vessel-terminal compatibility studies as requested by Owners;
|
|
(o) |
the handling and (subject to the final approval of the Owners) settlement of all insurance, average, salvage and other claims in connection with the Vessel and matters pertaining
thereto.;
|
|
5. |
Crew Management and Crew Insurances
|
|
(a) |
Crew Management
|
(i) |
selecting, engaging and providing for the administration of the Crew, including, as applicable, payroll arrangements, pension arrangements, tax, social security contributions and other mandatory dues
related to their employment payable in each Crew member's country of domicile;
|
(ii) |
ensuring that the applicable requirements of the law of the Flag State or as set out in any charter party in respect of rank, qualification and certification
of the Crew and employment regulations, such as Crew's tax and social insurance, are satisfied;
|
(iii) |
ensuring that all Crew have passed a medical examination with a qualified doctor certifying that they are fit for the duties for which they are engaged and are in possession of valid medical
certificates issued in accordance with appropriate Flag State requirements or such higher standard of medical examination as may be agreed with the Owners. In the absence of applicable Flag State requirements the medical certificate shall be
valid at the time when the respective Crew member arrives on board the Vessel and shall be maintained for the duration of the service on board the Vessel;
|
(iv) |
ensuring that the Crew shall have a common working language and a command of the English language of a sufficient standard to enable them to perform their duties safely;
|
(v) |
arranging transportation of the Crew, including repatriation;
|
(vi) |
the training of the Crew and supervising their efficiency and competence, consistent with Owners’ requirements but in any event never less than the applicable
international or Flag State standard for LNG vessels;
|
(vii) |
conducting union negotiations;
|
(viii) |
if the Managers are the Company, ensuring that the Crew, on joining the Vessel are given proper familiarisation with their duties in relation to the Vessel's SMS and that instructions which are
essential to the SMS are identified, documented and given to the Crew prior to sailing.
|
|
|
|
|
(xi) |
ensuring that a sufficient number of Crew are trained, experienced, qualified and certificated in accordance with the applicable standards then required under any charter party
entered into from time to time;
|
(xii) |
ensuring that each member of the Crew shall hold all certificate(s) required for his/her position which are valid and unexpired during the whole time he/she is onboard the Vessel
and;
|
(xiii) |
maintaining for all Crew members a record of expiry dates of all their certificates and procuring the renewal of the certificates well in advance of their expiry dates.
|
(b) |
Crew Insurances
|
|
(i) |
arranging Crew Insurances in accordance with the best practice of prudent managers of vessels of a similar type of the Vessel, with sound and reputable insurance companies, underwriters or
associations. Insurances for any other persons proceeding to sea onboard the Vessel may be separately agreed by the Owners and the Managers (see Box 10);
|
|
(ii) |
ensuring that the Owners are aware of the terms, conditions, exceptions and limits of liability of the insurances in Sub-clause 5(b)(i);
|
|
(iii) |
ensuring that all premiums or calls in respect of the insurances in Sub-clause 5(b)(i) are paid by their due date;
|
|
(iv) |
if obtainable at no additional cost, ensuring that insurances in Sub-clause 5(b)(i) name the Owners as a joint assured with full cover and, unless otherwise agreed, on terms such that Owners
shall be under no liability in respect of premiums or calls arising in connection with such insurances.
|
|
(v) |
providing written evidence, to the reasonable satisfaction of the Owners, of the Managers' compliance with their obligations under Sub-clauses 5(b)(ii), and 5(b)(iii) within a
reasonable time of the commencement of this Agreement, and of each renewal date and, if specifically requested, of each payment date of the insurances in Sub-clause 5(b)(i).
|
|
6. |
Commercial Management
|
|
(a) |
Seeking, developing and negotiating employment for the Vessel and the conclusion (including the execution thereof) of charter parties or other contracts
relating to the employment of the Vessel. If such a contract exceeds the period stated in Box 9, consent thereto in writing shall first be obtained from the Owners;
|
|
(b) |
arranging for the provision of bunker fuels of the quality specified by the Owners as required for the Vessel's trade,
|
|
(c) |
voyage estimating and accounting and calculation of hire, freights, demurrage and/or despatch monies due from or due to the Charterers of the Vessel; assisting in the collection of any sums due to
the Owners related to the commercial operation of the Vessel in accordance with Clause 11 (Income Collected and Expenses Paid on Behalf of Owners);
|
|
(d) |
issuing voyage instructions;
|
|
(e) |
appointing agents;
|
|
(f) |
appointing stevedores;
|
|
(g) |
arranging surveys associated with the commercial operation of the Vessel;
|
|
(h) |
carrying out the necessary communications with the shippers, charterers and others involved with the receiving and handling of the Vessel at the relevant loading and discharging
ports, including sending any notices required under the terms of the Vessel’s employment at the time;
|
|
(i) |
invoicing on behalf of the Owners all freights, hires, demurrages, outgoing claims, refund of taxes, balances of disbursements, statements of account and other sums due to the
Owners and account receivables arising from the operation of the Vessel and, upon the request of the Owners, issuing releases on behalf of the Owners upon receipt of payment or settlement of any such amounts and;
|
|
7. |
Insurance Arrangements
|
SECTION 3 – Obligations
|
|
8. |
Managers' Obligations
|
|
(a) |
The Managers undertake to use their best endeavours to provide the Management Services as agents for and on behalf of the Owners in accordance with sound ship management practice and to protect and
promote the interests of the Owners in all matters relating to the provision of services hereunder.
|
|
(b) |
Where the Managers are providing technical management services in accordance with Clause 4 (Technical Management), they shall procure that the requirements of the Flag State are satisfied and they
shall agree to be appointed as the Company, assuming the responsibility for the operation of the Vessel and taking over the duties and responsibilities imposed by the ISM Code and the ISPS Code, if applicable.
|
|
9. |
Owners' Obligations
|
|
(a) |
The Owners shall pay all sums due to the Managers punctually in accordance with the terms of this Agreement. In the event of payment after the due date of any outstanding sums the Manager shall be
entitled to charge interest at the rate stated in Box 13.
|
|
(b) |
Where the Managers are providing technical management services in accordance with Clause 4 (Technical Management), the Owners shall:
|
|
(c) |
Where the Managers are not providing technical management services in accordance with Clause 4 (Technical Management), the Owners shall:
|
|
d) |
unless otherwise agreed, arrange for the supply of provisions at their own expense. Where the Managers are providing crew management services in accordance with Sub-clause 5(a) the Owners shall:
|
|
(e) |
|
SECTION 4 – Insurance, Budgets, Income, Expenses and Fees
|
|
10. |
Insurance Policies
|
|
(a) |
at the Owners' expense, the Vessel is insured for not less than its current market value or entered for its full gross tonnage, as the case may be for:
|
|
(i) |
hull and machinery marine risks (including but not limited to crew negligence) and excess liabilities;
|
|
(ii) |
protection and indemnity risks (including but not limited to pollution risks, diversion expenses and
|
(iii) |
war risks (including but not limited to blocking and trapping, protection and indemnity, terrorism and crew risks); and
|
(iv) |
such optional insurances as may be agreed (such as piracy, kidnap and ransom, loss of hire and FD & D) (see Box 12)
|
|
(b) |
all premiums and calls on the Owners’ Insurances are paid by their due date;
|
|
(c) |
the Owners' Issuances name the financiers of the Vessel, the Managers and, subject to underwriters' agreement, any third party designated by the Managers as a
joint assured (or co-assured as the case may be), with full cover. It is understood that in some cases, such as protection and indemnity, the normal terms for such cover may impose on the Managers and
any such third party a liability in respect of premiums or calls arising in connection with the Owners' Insurances and the Owners shall indemnify the Managers in respect thereof.
|
|
(d) |
written evidence is provided, to the reasonable satisfaction of the Managers, of the Owners’ compliance with their obligations under this Clause 10 within a reasonable time of the commencement of the
Agreement, and of each renewal date and, if specifically requested, of each payment date of the Owners’ Insurances.
|
11. |
Income Collected and Expenses Paid on Behalf of Owners
|
|
(a) |
Except as provided in Sub-clause 11(c) all monies collected by the Managers under the terms of this Agreement (including working capital received by the
Managers pursuant to Clause 13, but excluding other monies payable by the Owners to the Managers) and any interest thereon shall be held to the credit of the Owners.
|
|
(b) |
All expenses incurred by the Managers under the terms of this Agreement on behalf of the Owners (including expenses as provided in Clause 12(c)) may be debited against the Owners
|
|
(c) |
All monies collected by the Managers under Clause 6 (Commercial Management) shall be paid into a bank account in the name of the Owners or as may be otherwise advised by the Owners in writing.
|
|
12. |
Management Fee and Expenses
|
|
(a) |
The Owners shall pay to the Managers an annual management fee as stated in Box 14 for their services as Managers under this Agreement, which shall be payable in equal monthly instalments in advance,
the first instalment (pro rata if appropriate) being payable on the commencement of this Agreement (see Clause 2 (Commencement and Appointment) and Box 2) and subsequent instalments being payable at the beginning of every calendar month. The
management fee shall be payable to the Managers’ nominated account stated in Box 15.
|
|
(b) |
The management fee shall be subject to
|
|
(c) |
The Managers shall, at no extra cost to the Owners, provide their own office accommodation, office staff, facilities and stationery and the management fee shall
include all postage and communication expenses. Without limiting the generality of this Clause 12 (Management Fee and Expenses) the Owners shall reimburse the Managers for
|
|
(d) |
If the Owners decide to layup the Vessel and such layup lasts for more than the number of months stated in Box 17, an appropriate reduction of the Management Fee for the period exceeding such
period until one month before the Vessel is again put into service shall be mutually agreed between the parties. If the Managers are providing crew management services in accordance with Sub-clause 5(a), consequential costs of
reduction and reinstatement of the Crew shall be for the Owners' account.
|
|
(e) |
Save as otherwise provided in this Agreement, all discounts and commissions obtained by the Managers in the course of the performance of the Management
Services shall be credited to the Owners.
|
|
13. |
Budgets and Management of Funds
|
|
(a) |
Managers will be preparing budgets in connection with, inter alia, the provision of the Management Services which the Managers will be submitting for as the Owners
reasonably require
|
|
(b) |
The Owners shall state to the Managers in a timely manner, but in any event within one month of presentation, whether or not they agree to each proposed annual budget. If the Owners do not respond within one month of presentation, the proposed annual budget shall be deemed to be accepted.
|
|
(c) |
Following the agreement of the budget, the Managers shall prepare and present to the Owners their estimate of the working capital requirement for the Vessel and shall each month request the Owners in
writing to pay the funds required to run the Vessel for the ensuing month, including the payment of any unbudgeted, contingency and occasional or extraordinary item of expenditure, such as emergency
repair costs, additional insurance premiums, bunkers or provisions. Such funds shall be received by the Managers within ten running days after the receipt by the Owners of the Managers’ written request and shall be held to the credit of the
Owners in a separate bank account.
|
|
(d) |
The Managers shall at all times maintain and keep true and correct accounts in respect of the Management Services in accordance with the relevant International Financial Reporting Standards or such
other standard as the parties may agree, including records of all costs and expenditure incurred, and produce a comparison between budgeted and actual income and expenditure of the Vessel in such form and at such intervals as shall be
mutually agreed.
|
|
(e) |
Notwithstanding anything contained herein, the Managers shall in no circumstances be required to use or commit their own funds to finance the provision of the Management Services.
|
SECTION 5 – Legal, General and Duration of Agreement
|
|
14. |
Trading Restrictions
|
|
15. |
Replacement
|
|
16. |
Managers' Right to Sub-Contract
|
|
17. |
Responsibilities
|
|
(a) |
Force Majeure - Neither party shall be liable for any loss, damage or delay due to any of the following force majeure events and/or conditions to the extent
that the party invoking force majeure is prevented or hindered from performing any or all of their obligations under this Agreement, provided they have made all reasonable efforts to avoid, minimize or prevent the effect of such events and/or
conditions:
|
(i) |
acts of God;
|
(ii) |
any Government requisition, control, intervention, requirement or interference;
|
(iii) |
any circumstances arising out of war, threatened act of war or warlike operations, acts of terrorism, sabotage or piracy, or the consequences thereof;
|
(iv) |
riots, civil commotion, blockades or embargoes;
|
(v) |
epidemics;
|
(vi) |
earthquakes, landslides, floods or other extraordinary weather conditions;
|
(vii) |
strikes, lockouts or other industrial action, unless limited to the employees (which shall not include the Crew) of the party seeking to invoke force majeure;
|
(viii) |
fire, accident, explosion except where caused by negligence of the party seeking to invoke force majeure; and
|
(ix) |
any other similar cause beyond the reasonable control of either party.
|
|
(b) |
Liability to Owners
|
|
(i) |
Without prejudice to Sub-clause 17(a), the Managers shall be under no liability whatsoever to the Owners for any loss, damage, delay or expense of whatsoever nature, whether direct or
indirect, (including but not limited to loss of profit arising out of or in connection with detention of or delay to the Vessel) and howsoever arising in the course of performance of the Management Services UNLESS same is proved to have
resulted from the negligence, gross negligence or wilful default of the Managers or their employees or agents, or sub-contractors employed by them in connection with the Vessel, in which case (save where loss, damage, delay or expense has
resulted from the Managers' personal act or omission committed with the intent to cause same or recklessly and with knowledge that such loss, damage, delay or expense would probably result) the Managers' liability for each incident or series
of incidents giving rise to a claim or claims shall never exceed a total of
|
|
(ii) |
Acts or omissions of the Crew - Notwithstanding anything that may appear to the contrary in this
Agreement, the Managers shall not be liable for any acts or omissions of the Crew, even if such acts or omissions are negligent, grossly negligent or wilful, except only to the extent that they are shown to have resulted from a failure by the
Managers to discharge their obligations under Clause 5(a) (Crew Management), in which case their liability shall be limited in accordance with the terms of this Clause 17 (Responsibilities
|
|
(c) |
Indemnity - Except to the extent and solely for the amount therein set out that the Managers would be liable under Sub-clause 17(b), the Owners hereby
undertake to keep the Managers and their employees, agents and sub-contractors indemnified and to hold them harmless against all actions, proceedings, claims, demands or liabilities whatsoever or howsoever arising which may be brought against
them or incurred or suffered by them arising out of or in connection with the performance of this Agreement, and against and in respect of all costs, loss, damages and expenses (including legal costs and expenses on a full indemnity basis)
which the Managers may suffer or incur (either directly or indirectly) in the course of the performance of this Agreement.
|
|
(d) |
"Himalaya" – It is hereby expressly agreed that no employee or agent of the Managers (including every sub-contractor from time to time employed by the
Managers) shall in any circumstances whatsoever be under any liability whatsoever to the Owners for any loss, damage or delay of whatsoever kind arising or resulting directly or indirectly from any act, neglect or default on his part while
acting in the course of or in connection with his employment and, without prejudice to the generality of the foregoing provisions in this Clause 17 (Responsibilities), every exemption, limitation, condition and liberty herein
contained and every right, exemption from liability, defence and immunity of whatsoever nature applicable to the Managers or to which the Managers are entitled hereunder shall also be available and
shall extend to protect every such employee or agent of the Managers acting as aforesaid and for the purpose of all the foregoing provisions of this Clause 17 (Responsibilities) the Managers are or shall be deemed to be acting as
agent or trustee on behalf of and for the benefit of all persons who are or might be their servants or agents from time to time (including sub-contractors as aforesaid) and all such persons shall to this extent be or be deemed to be parties
to this Agreement.
|
18. |
General Administration
|
|
(a) |
The Managers shall keep the Owners and, if appropriate, the Company informed in a timely manner of any incident of which the Managers become aware which gives
or may give rise to delay to the operation of the Vessel or claims or disputes involving third parties.
|
|
(b) |
The Managers shall handle and settle all claims and disputes arising out of the Management Services hereunder, unless the Owners instruct the Managers otherwise. The Managers shall keep the Owners
appropriately informed in a timely manner throughout the handling of such claims and disputes.
|
|
(c) |
The Owners may request the Managers to bring or defend other actions, suits or proceedings related to the Management Services, on terms to be agreed.
|
|
(d) |
The Managers shall have power to obtain appropriate legal or technical or other outside expert advice in relation to the handling and settlement of claims in relation to Sub-clauses 18(a) and
18(b) and disputes and any other matters affecting the interests of the Owners in respect of the Vessel, unless the Owners instruct the Managers otherwise.
|
|
(e) |
On giving reasonable notice, the Owners may request, and the Managers shall in a timely manner make available, all documentation, information and records in respect of the matters covered by this
Agreement either related to mandatory rules or regulations or other obligations applying to the Owners in respect of the Vessel (including but not limited to STCW 95, the ISM Code, ISPS Code) to the extent permitted by relevant legislation.
|
|
(f) |
The Owners shall arrange for the provision of any necessary guarantee bond or other security.
|
|
(g) |
Any costs incurred by the Managers in carrying out their obligations according to this Clause 18 (General Administration) shall be reimbursed by the Owners.
|
|
19. |
Inspection of Vessel
|
|
20. |
Compliance with Laws and Regulations
|
|
21. |
Duration of the Agreement
|
|
(a) |
This Agreement shall come into effect at the date stated in Box 2; in which event this Agreement shall terminate upon the expiration of the later of the number of months stated in Box 18
(the “Term”) or a period of two (2) months from the date on which such notice is received, unless terminated earlier in accordance with Clause 22 (Termination). Upon expiry of the Term, this Agreement shall automatically be renewed for a further five-year period if notice of termination is not provided by the Owners in the fourth quarter of the year immediately preceding the end of the
respective Term until terminated by either party by giving notice to the other.
|
|
(b) |
Where the Vessel is not at a mutually convenient port or place on the expiry of such period, this Agreement shall terminate on the subsequent arrival of the Vessel at the next mutually convenient
port or place.
|
|
22. |
Termination
|
|
(a) |
Owners' or Managers' default
|
|
(b) |
Notwithstanding Sub-clause 22(a):
|
(i) |
The Managers shall be entitled to terminate the Agreement with immediate effect by giving notice to the Owners if any monies payable by the Owners and/or the owners of any associated vessel
|
(ii) |
If the Owners proceed with the employment of or continue to employ the Vessel in the carriage of contraband, blockade running, or in an unlawful trade or operations,
or on a voyage which in the reasonable opinion of the Managers is unduly hazardous or improper, the Managers may give notice of the default to the Owners, requiring them to remedy it as soon as practically possible. In the event that the
Owners fail to remedy it within a reasonable time to the satisfaction of the Managers, the Managers shall be entitled to terminate the Agreement with immediate effect by notice.
|
(iii) |
If either party fails to meet their respective obligations under Sub-clause 5(b) (Crew Insurances) and Clause 10 (Insurance Policies), the other party may give notice to the party in
default requiring them to remedy it within ten (10) days, failing which the other party may terminate this Agreement with immediate effect by giving notice to the party in default.
|
|
(c) |
Extraordinary Termination
|
|
(d) |
For the purpose of Sub- clause 22(c) hereof:
|
(i) |
the date upon which the Vessel is to be treated as having been sold or otherwise disposed of shall be the date on which the Vessel's owners cease to be the registered owners of the Vessel;
|
(ii) |
the Vessel shall be deemed to be lost either when it has become an actual total loss or agreement has been reached with the Vessel's underwriters in respect of its constructive total loss or if such
agreement with the Vessel's underwriters is not reached it is adjudged by a competent tribunal that a constructive loss of the Vessel has occurred; and
|
(iii) |
the date upon which the Vessel is to be treated as declared missing shall be ten (10) days after the Vessel was last reported or when the Vessel is recorded as missing by the Vessel's underwriters,
whichever occurs first. A missing vessel shall be deemed lost in accordance with the provisions of Sub-clause 22(d)(ii).
|
|
(e) |
in the event the parties fail to agree
|
|
(f) |
This Agreement shall terminate forthwith in the event of an order being made or resolution passed for the winding up, dissolution, liquidation or bankruptcy of either party (otherwise than for the
purpose of reconstruction or amalgamation) or if a receiver or administrator is appointed or if it suspends payment ceases to carry on business or makes any special arrangement or composition with its creditors.
|
|
(g) |
In the event of the termination of this Agreement for any reason other than default by the Managers (any such termination being by agreement by the Owners and the Managers) the management fee payable
to the Managers according to the provisions of Clause 12 (Management Fee and Expenses), shall continue to be payable for a further period of the number of months stated in Box 19 as from
the effective date of termination. If Box 19 is left blank then ninety (90) days shall apply.
|
|
(h) |
In addition, where the Managers provide Crew for the Vessel in accordance with Clause 5(a) (Crew Management):
|
|
(i) |
the Owners shall continue to
|
|
(ii) |
the Owners shall pay an equitable proportion of any Severance Costs which may be incurred, not exceeding the amount stated in Box 20. The Managers shall use their reasonable endeavours to minimise
such Severance Costs.
|
(i) |
On the termination, for whatever reason, of this Agreement, the Managers shall release to the Owners, if so requested, the originals where possible, or otherwise certified copies, of all accounts and
all documents specifically relating to the Vessel and its operation.
|
(j) |
The termination of this Agreement shall be without prejudice to all rights accrued due between the parties prior to the
date of termination.
|
23. |
BIMCO Dispute Resolution Clause
|
|
(a) |
This Agreement shall be governed by and construed in accordance with English law and any dispute arising out of or in connection with this Agreement shall be referred to arbitration in London in
accordance with the Arbitration Act 1996 or any statutory modification or re-enactment thereof save to the extent necessary to give effect to the provisions of this Clause.
|
|
|
|
|
|
|
|
(b) |
Notwithstanding Sub-clauses 23(a), above, the parties may agree at any time to refer to mediation any difference and/or dispute arising out of or in connection with this Agreement.
|
(i) |
In the case of a dispute in respect of which arbitration has been commenced under Sub-clauses 23(a), above, the following shall apply:
|
(ii) |
Either party may at any time and from time to time elect to refer the dispute or part of the dispute to mediation by service on the other party of a written
notice (the "Mediation Notice") calling on the other party to agree to mediation.
|
(iii) |
The other party shall thereupon within 14 calendar days of receipt of the Mediation Notice confirm that they agree to mediation, in which case the parties shall thereafter agree a mediator within a
further 14 calendar days, failing which on the application of either party a mediator will be appointed promptly by the Arbitration Tribunal ("the Tribunal") or such person as the Tribunal may designate for that purpose. The mediation shall
be conducted in such place and in accordance with such procedure and on such terms as the parties may agree or, in the event of disagreement, as may be set by the mediator.
|
(iv) |
If the other party does not agree to mediate, that fact may be brought to the attention of the Tribunal and may be taken into account by the Tribunal when allocating the costs of the arbitration as
between the parties.
|
(v) |
The mediation shall not affect the right of either party to seek such relief or take such steps as it considers necessary to protect its interest.
|
(vi) |
Either party may advise the Tribunal that they have agreed to mediation. The arbitration procedure shall continue during the conduct of the mediation but the Tribunal may take the mediation timetable
into account when setting the timetable for steps in the arbitration.
|
(vii) |
Unless otherwise agreed or specified in the mediation terms, each party shall bear its own costs incurred in the mediation and the parties shall share equally the mediator's costs and expenses.
|
(viii) |
The mediation process shall be without prejudice and confidential and no information or documents disclosed during it shall be revealed to the Tribunal except to the extent that they are disclosable
under the law and procedure governing the arbitration.
|
|
(c) |
If Box 21 in Part I is not appropriately filled in, Sub-clause 23(a) of this Clause shall apply.
|
24. |
Notices
|
|
(a) |
All notices given by either party or their agents to the other party or their agents in accordance with the provisions of this Agreement shall be in writing
and shall, unless specifically provided in this Agreement to the contrary, be sent to the address for that other party as set out in Boxes 22 and 23 or as appropriate or to such other address as the other party may designate
in writing.
|
|
(b) |
Any notice given under this Agreement shall take effect on receipt by the other party and shall be deemed to have been received:
|
(i) |
if posted, on the seventh (7th) day after posting;
|
(ii) |
if sent by facsimile or electronically, on the day of transmission; and
|
(iii) |
if delivered by hand, on the day of delivery.
|
25. |
Entire Agreement
|
26. |
Third Party Rights
|
27. |
Partial Validity
|
28. |
Interpretation
|
|
(a) |
Singular/Plural
|
|
(b) |
Headings
|
|
(c) |
Day
|
29. |
Commercial Services
|
|
(a) |
Conducting a thorough assessment of the market on specific issues, seeking the possible employment of the Vessel based on constant contacts of the Managers with their brokering and chartering
connections and generally, carrying out worldwide market research and providing consultancy services as the Owners may from time to time specifically require;
|
|
(b) |
Keep the Owners informed regarding any incident of which the Managers become aware which gives or may give rise to claims or disputes involving charterers or other third parties under any charter.
|
|
(c) |
Initiate, handle and defend all actions and other legal proceedings and demands arising in connection with the employment of, and the provision of services relating to, the Vessel and arising under
any charter.
|
30. |
Management Fees
|
|
(a) |
a fee of US$2,750 per day per Vessel, payable monthly in arrears (the “Management Fee Period”) (pro-rated to reflect the number of days that the Owners owns the Vessel during the applicable quarter),
which amount shall be payable on the first of every month (the “Payment Date”). The Management Fee shall then be increased by 3% annually on 1 January each year, commencing on 1 January 2022. The Management Fees for the Vessel payable
pursuant to this clause, may be further adjusted upwards if the Manager has incurred a material unforeseen increase in the cost of providing the Management Services, by an amount to be agreed between the Manager and the Owners, each acting in
a commercially reasonable manner.
|
|
(b) |
a fee equal to 1.25% calculated on the aggregate of the gross freight, charter hire, ballast bonus or other income obtained for the employment of the Vessel during the Term of this Agreement, payable
to the Manager monthly in arrears, only to the extent such freight, charter hire, ballast bonus or other income is received as revenue. Such fee will be payable in USD. For the avoidance of any doubt and regardless of anything stipulated in
this Agreement, such chartering commissions shall survive the termination of this agreement until the termination of the charter party in force at the time or termination of any other employment arranged under all circumstances including but
not limited to a Change of Control as defined in Clause 32.
|
|
(c) |
It is acknowledged that under the Existing Management Agreements the Owners stated in Schedule 1 have placed with the Manager for the duration of this agreement an amount equal to $1.35 million as
security (the “Existing Security”) which shall continue to be maintained by the Manager for the duration of this agreement. Future SPV’s shall place with the manager for the duration of this agreement an amount equal to $225,000 per Vessel
as security.
|
|
(d) |
Such amounts as are necessary to reimburse the Manager for all out-of-pocket costs and expenses, to include travelling, legal assistance and all extraordinary expenses in connection with technical
and/or operational assistance and other unexpected expenses, incurred in connection with the provision of the Management Services
|
|
(e) |
The Owners hereby acknowledge that any capital expenditure, financial costs, operating expenses for the Vessel and any general and administrative expenses of the Owners whatsoever are not covered by
the management fees and any such expenditure, costs and expenses shall be
|
|
i. |
fees, interest, principal and any other costs due to the Owner's financiers and their respective advisors;
|
|
ii. |
all voyage expenses and vessel operating and maintenance expenses relating to the operation and management of the Vessels (including crew costs, surveyor’s attendance fees, bunkers, lubricant oils,
spares, survey fees, classification society fees, maintenance and repair costs, vetting expenses, etc.);
|
|
iii. |
any commissions, fees, remuneration or disbursements due to lawyers, brokers, agents, surveyors, consultants, financial advisors, investment bankers, auditors, insurance advisors or any other third
parties whatsoever appointed by the Manager whether in its name or on behalf and/or in the name of the Owners;
|
|
iv. |
applicable deductibles, insurance premiums and/or P&I calls;
|
31. |
Right to Receive Management Fee in DLNG Common Units
|
|
a) |
If the Manager wishes to receive the Management Fees in Unit Payment, the Manager will provide written notice to the Owner no later than 5 business days prior to the date such Management Fees would
be due (the “Due Date”). The Owner shall use its commercially reasonable efforts to cause the Unit Payment to be issued to the Manager on or about the Payment Date.
|
|
b) |
If the Unit Payment election is made, the number of common units representing limited partnership interests of DLNG (the “DLNG Units”) to be issued to the Manager as Unit Payment shall be calculated
by dividing the Management Fees owed to the Manager for the Management Fee Period by the average daily volume weighted average price per unit of DLNG’s units as calculated by Bloomberg for each day of the Management Fee Period and the
quotient (rounded up to the nearest whole number) shall be the number of DLNG Units issued to the Manager as payment in full of the Management Fees. The Unit Payment will be made pursuant to Section 4(a)(2) of the Securities Act of 1933, as
amended (the “Securities Act”), or another available exemption from the registration requirement under the Securities Act, and any DLNG Units that may be issued to the Manager will bear a standard Securities Act restrictive legend; provided
that the Manager agrees to provide all documentation and information reasonably requested by Owner in connection with the issuance of the Unit Payment. The Manager agrees that all sales, transfers, or other dispositions of DLNG Units issued
pursuant to Unit Payments shall be made in strict compliance with DLNG’s policies and procedures and all applicable laws, including the U.S. securities laws.
|
|
c) |
The Manager may nominate any entity to receive the Unit Payment so long as such entity agrees to be bound by the relevant provisions of this Master.
|
32. |
Change of Control
|
|
a) |
the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all
of a DLNG Entity’s or its subsidiaries’ assets, taken as a whole, to any Person other than to a Permitted Owner;
|
|
b) |
an order made for, or the adoption by the Board of Directors of a plan of, liquidation or dissolution of a DLNG Entity;
|
|
c) |
the consummation of any transaction (including any merger or consolidation) the result of which is that any Person, other than a Permitted Owner, becomes the beneficial owner, directly or indirectly,
of a majority of a DLNG Entity’s Voting Securities, measured by voting power rather than number of shares;
|
|
d) |
the consolidation of a DLNG Entity with, or the merger of a DLNG Entity with or into, any Person, other than a Permitted Owner or the consolidation of any Person, other than a Permitted Owner, with,
or the merger of any Person, other than a Permitted Owner, with or into, a DLNG Entity, in any such event pursuant to a transaction in which any of the common stock outstanding immediately prior to such transaction are converted into or
exchanged for cash, securities or other property or receive a payment of cash, securities or other property, other than any such transaction where a DLNG Entity’s Voting Securities outstanding immediately prior to such transaction are
converted into or exchanged for Voting Securities of the surviving or transferee Person constituting a majority (measured by voting power rather than number of shares) of the outstanding Voting Securities of such surviving or transferee
Person immediately after giving effect to such issuance; or
|
|
e) |
a change in directors after which a majority of the members of the Board of Directors are not directors who were either nominated by, appointed by or otherwise elected with the approval of current
board members at the time of such election.
|
Name
|
Jurisdiction of Formation
|
Description
|
Percentage ownership
(direct or indirect)
|
Dynagas Operating LP
|
Marshall Islands
|
Holding Company
|
100%
|
Dynagas Operating GP LLC
|
Marshall Islands
|
General Partner of Dynagas Operating LP
|
100%
|
Dynagas Equity Holding Ltd.
|
Marshall Islands
|
Holding Company
|
100%
|
Dynagas Finance Inc.
|
Marshall Islands
|
Finance Company
|
100%
|
Dynagas Finance LLC
|
Delaware
|
Finance Company
|
100%
|
Pegasus Shipholding S.A.
|
Marshall Islands
|
Vessel Company
|
100%
|
Seacrown Maritime Ltd.
|
Marshall Islands
|
Vessel Company
|
100%
|
Lance Shipping S.A.
|
Marshall Islands
|
Vessel Company
|
100%
|
Fareastern Shipping Limited
|
Malta
|
Vessel Company
|
100%
|
Navajo Marine Limited
|
Marshall Islands
|
Vessel Company
|
100%
|
Solana Holding Limited
|
Marshall Islands
|
Vessel Company
|
100%
|
Arctic LNG Carriers Ltd.
|
Marshall Islands
|
Holding Company
|
100%
|
/s/ Tony Lauritzen | ||||
Tony Lauritzen
|
||||
Chief Executive Officer and Director
|
/s/ Michael Gregos | |||
Michael Gregos
|
|||
Chief Financial Officer
|
(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.
|
/s/ Tony Lauritzen | ||||
Tony Lauritzen
|
||||
Chief Executive Officer
|
(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.
|
/s/ Michael Gregos | |||
Michael Gregos
|
|||
Chief Financial Officer
|