Kirby Corporation (KEX) Earnings Call Transcript & Summary

[Audio Gap] I've been practicing in the area of transportation finance for more than 30 years. And for almost the last 20 years in maritime finance, much of that time working in transactions involving the Jones Act. We'll be discussing recent developments in the Jones Act sector and where those sectors are going. And those sectors will include the transportation of crude and petroleum products, dry bulk like coal and aggregates, containers and motor vehicles and the provision of services, such as offshore supply, construction and hedging support. So your first question might be what is the Jones Act. Most of the delegates here in the U.S. probably know about it. But since for the first time, this forum has been webcast worldwide, including to delegates outside of the U.S. who may not have heard about the Jones Act, let me give you a quick summary. We could spend the entire day delving into the legal, political and economic intricacies of the act, but I thought it would be helpful to summarize some of the provisions to give you context for the discussion. The Jones Act is a body of U.S. cabotage laws restricting the transportation of merchandise by water between points in the U.S. to certain vessels. The core provision became law as part of the Merchant Marine Act of 1920 following World War I. So the law is almost just about 100 years old, which -- it provides that with certain exceptions, the transportation of merchandise between points in the U.S. is restricted to vessels that are owned by citizens in the U.S., built in the United States and documented under U.S. flag, one of the consequences of which is that must be crewed by citizens of the U.S. Over the years, the Jones Act has been amended to create special exemptions and rules as to how it's applied. There was great body of dispute -- or not dispute, but great body of interpretation regarding what constitutes merchandise, what constitutes a point in the United States and what a citizen is. The policy behind -- the Jones Act is enforced by the United States Customs and Border Protection with assistance from MARAD, the United States Marine -- Maritime Administration and United States Coast Guard. The policy behind the Jones Act, for those who aren't familiar with it, is really the promotion of National Defense by supporting U.S. shipyards since Jones Act vessels must be built in the U.S., so that if needed, they can produce warships and supply vessels in times of conflict and help maintain a pool of U.S. skilled ship workers -- shipyard workers to build those vessels and a pool of skilled U.S. merchant mariners to operate them. There are similar laws applying to the transportation of passengers, such as cruise ships, vessel escort, towing, dredging and commercial fishing. Let me first introduce the panelists here who will discuss the market for the Jones Act. The Jones Act has multiple sectors, as I mentioned earlier. And as I introduce each panelist, we'll go alphabetically, I ask that they tell us a little bit about what they do. And if they're an executive at one of the -- at a company, Jones Act company, that they've described before us the sectors in which they're involved and tell us a little bit more about the company. The first panelist is David Grzebinski, who's President and Chief Executive Officer of Kirby Corporation. David, can you tell us a little bit about yourself and the company?

Yes, fine. Thanks for having Kirby participate in this panel. Really appreciate it. Yes, Kirby is a public company listed on New York Stock Exchange. We are in 2 main businesses: one, marine transportation of liquids around the United States using barges and tugboats and towboats; and we're also in the distribution and services business around diesel engines and transmissions throughout the industrial parts of the United States. In our marine business, we have approximately 1,200 barges, and we use about 350 towboats and tugboats to move the barges around the United States. We're principally liquid. We do, do some dry cargo, but 99% of what we move is liquid, and that includes petrochemicals, crude oil, refined products such as gasoline, diesel and jet fuel. That's Kirby in a nutshell.

Okay. Ben, you're not a CEO of a Jones Act company, but you know quite a bit about it as Head of Maritime Research. Tell us a little bit about what you do and what you follow?

Sure. So I do -- I guess I hold the distinction of being the analyst that covers the most Jones Act companies, as far as I know but I cover shipping more broadly. Obviously, both Jones Act and international as well as some energy infrastructure-type companies. And gosh, I guess, I've been covering the space since 2005. So certainly have learned a little, not as much as some of these guys, but a little over the years.

Sam, Sam Norton is President and CEO of Overseas Shipholding Group or OSG, as it's more commonly described. Sam [Audio Gap]

Thanks to Capital Link for organizing this forum. I appreciate the opportunity to attend and listen to my distinguished colleagues in the industry and field questions from your delegates. OSG is a sort of long storied company in the United States, founded in the 1940s, was one of the first publicly listed shipping companies listing in the late '60s, has gone through a number of iterations of what that actually has been, always involved in shipping but across many sectors. In 2016, the company split off its international shipping division to become a separately listed company and left behind, but is essentially Jones Act-focused business. Today, 24 vessels that are operating in the transportation of crude oil and refined petroleum products not in the river sectors as Kirby is, but principally along the coastal areas in the United States. Our principal business is moving transportation fuel from the production areas and what's known as PAD III, that's Texas, Louisiana, where the refineries are located into the main consuming market in Florida. Florida is unique along the East Coast of the United States and that it has neither a refining base nor is supported by pipelines. Therefore, all of the transportation fuel that moves into the state of Florida comes by sea. We're also active in the West Coast and distributing petroleum products along the West Coast states from the refining centers in those -- in that geographic area. And we are -- as of March, owning and operating crude oil tankers to bring crude oil from the state of Alaska into the West Coast refineries on the West Coast. We're a publicly listed company, listed on the New York Stock Exchange. And I'll turn it back to you, John.

Okay. Thank you, Sam. I appreciate it. The next Dan Thorogood is President and Chief Executive Officer of Seabulk and Vice President at SEACOR. Dan, can you tell us a little bit about Seabulk and SEACOR and what activities they're engaged in, in the Jones Act space?

Yes. John. Pleased to be here. Representing on behalf of the SEACOR Group. SEACOR is a public company and is a diversified maritime transportation and logistics platform. It's been around since 1989, currently has 2 main divisions. One, servicing dry cargo on the river system and the other serving ocean and coastal transportation in the U.S. Jones Act and harbor towing support in various ports along the U.S. Gulf Coast and Florida coast. My responsibility is for the U.S. ocean group, the coastal group, and that comes under the Seabulk brand.

Thank you, Dan. To another, Dan Warner is Senior Vice President and Treasurer of Crowley Corporation, which in contrast to the other companies represented here, is a private company. Dan, tell us a little bit about Crowley and its involvement in the Jones Act space.

Certainly. Thanks, John, and welcome to all. It's nice to connect with everyone albeit virtually and not in person that these conferences that are held with a fair amount of regularity. Crowley Maritime is a company that was founded in San Francisco back in 1892, so that gives us about 128 years of continuous operation. We're currently headquartered in Florida, in Jacksonville, and enjoying our third generation of ownership and leadership under the Crowley family, and Tom Crowley it the principal owner and CEO of the corporation. We're privately held, as you mentioned. We're actually an S corporation for tax purposes. We have diversified service offering in transportation and logistics services with the traditional maritime base. Approximately 50% of our earnings, I would say, are related to Jones Act activities. Our sectors would be categorized as petroleum transportation through tankers and articulated tug barges, container shipping to Puerto Rico, the ship assistant escort work primarily on the West Coast. And then we have a dedicated fleet of heavy lift barges and dynamic positioning tugs that aren't exactly in the offshore space, but tangentially related and those are really our main Jones Act activities. Other assets for the corporation, terminals, warehouses, specialty equipment, obviously, container equipment. In terms of size, we've got about 6,000 employees worldwide and the size of the company do about $2.5 billion in sales. Balance sheet is about the same. And as a private company, that's all the financial disclosure I'm going to offer. So thank you.

Thank you, Dan. I'll use your last names to distinguish you from Dan Thorogood. We have 2 Dans on the panel. Finally, let me introduce Mr. Joel Wine, the Chief Executive -- or Chief Financial Officer at Matson. So a slightly different company. Joel, what can you tell us about Matson in the Jones Act space?

Thank you, John, and thanks, Capital Link, for inviting us to be on the panel. So Matson is also an old company, similar with Crowley, we're a 138-year old company. 2 main segments. One, ocean transportation, which is about a $2 billion revenue business, focused on container shipping all in the Pacific. So our big Jones Act markets are Hawaii, Alaska and Guam. We also participate significantly in the China to the U.S. trade as well as South Pacific trades in New Zealand Samoa and other South Pacific Islands. And in the case of Hawaii, we've been delivering freight to Hawaii since our founding in 1882. Our other main segment is logistics for about a $500 million logistics business focused on freight forwarding, transportation brokerage, which is intermodal and trucking brokerage and also warehousing and supply chain management. And Matson itself is a publicly traded company as well on the -- on the New York Stock Exchange.

Thank you, Joel. Well, look, let's start off with the state of the Jones Act market today. And what I would first propose to do is maybe get a general overview and then look at -- drill down on each individual sector and how they fared over the past year; what the biggest market factors are influencing the sector; the effects of COVID-19 and the economic downturn on your business and how your companies have had to adapt; what initiatives you may have taken in the environmental, social and corporate governance area or ESG; and what other developments over the past years have happened with your company. But first, let me turn it over to Ben to sort of give a general -- his general view of the Jones Act market as it exists today. Ben, what can you tell us?

Sure. So I mean it feels awkward talking about a market when there's all these other experts in their own fields. Although I do think one of the things that brings it all together is that they are so diverse, that it's an eclectic group of businesses that really only have a legislation in common. And as a function of that, I think as we're looking -- or as I look at Jones Act companies or businesses within the Jones Act, their relative performance and strength sort of varies depending on where they are at the moment. As you might expect, anything that is a little bit more oil and gas related is a little bit more challenging. And probably the closer to the drill bit you are, the more challenging it is. Conversely -- and I'm sure that Joel can speak to this, the U.S. consumer is humming right now. And so if you are maybe a little bit more on the consumer side, then your business is doing very good. And that would probably also be true of assist vessels and things that connect, let's say, consumers to the broader economy. So I don't know that it's fair right now to paint all Jones Act businesses with the same brush. And maybe it never is fair to do that. I do think that in general, that the Jones Act market is not an area where usually you would think of it as high growth. It's more sort of people playing in their lanes, but there's a high barrier to entry generally. And so that is an advantage that the Jones Act has relative to a broader shipping universe. And that doesn't remove cyclicality, but that same competitive advantage can sometimes also make a little bit or create an impediment to growth. But that's sort of where I think we're at. The answer is mixed. Some things are doing well, some things are not doing quite as well.

Okay. Thank you, Dan. Why don't we first turn to the tankers sector, that slice of the Jones Act. And that can really be divided into inland shipments, inland waterways, the movement of petroleum and petroleum products on the inland waterways and rivers and the coastal-type activity. David is your -- Kirby is much more of an inland company. Sam, for example, at OSG, is more coastal. Let me start with you, David, since this is one of your main sectors. Tell us a little bit about what's going on in the tanker section.

Yes. So when you look at Kirby's marine revenue, about 70% of it is inland based and then another 30% is coastwise or blue water. Inland, really we transit the Mississippi River and all her tributaries, which include the Illinois, the Ohio, et cetera. And also, we're blessed with an intercoastal waterway that goes essentially from Mexico all the way around to Florida. And it's a protected canal where we can have inland barges transit. When you look at what we move, we move at -- we can move cargo all the way from Pittsburgh, for example, down to Mexico on an inland barge, which is -- the U.S. is blessed to have such an inland waterway. When we look at what's going on in the market right now, as been indicated, COVID and anything oil related is down, the demand is down. You can just look at us doing this remote conference now. There's a lot of plane tickets that weren't purchased for this conference. And so demand has fallen off, particularly for jet fuel, but refined products in general. So diesel, gasoline and jet fuel have come down considerably because of COVID. You can look at refinery utilization, if you track those companies, and you can see that pre-COVID, refinery utilization was essentially in the low 90% area. I think during COVID, the worst point, it got down to 67%, 68%, 69%. It bounced back up to about 80% at one point, and now it's about 75%, 76%. So that's the refiners cutting back because the demand is just not there. So on the inland barge side, we felt that. I mean that's been the demand moves that we just don't have now. I would say conversely, petrochemicals have rebounded not quite to their full extent pre-COVID level, but the demand for petrochemicals is -- has come back better than refined products. Just to put it in terms of chemical plant utilization, I think chemical plants were running in the high 70% range, and now they're kind of in the low 70% range. So yes, maybe 5%, 10% off at the most in terms of what they were doing versus something larger in the refined products. The good news, I think, is that there's a lot of new chemical facilities in the United States. And these are the most efficient chemical plants in the world now because they're brand new. I've got cheap feedstocks. So in the long run, the demand will come back because this is the place where they can manufacture the chemicals very efficiently. So that's just a broad overview, John.

Thank you. Appreciate it, David. Sam, how about in the coastal and ocean-going arena for tankers, Jones Act tankers? Is it -- are you observing the same kind of drop in demand and gradual recovery? Or has it been different for OSG?

So I'll kind of take that at a couple of levels. The blue water marine sector for transportation fuels in the United States entered 2020 in a very strong position. The market was quite tight demand and supply wise and entering the first quarter of this year, in fact, the entire Jones Act blue water fleet was time chartered out. So the net effect of that was over the last several quarters, the impact of the demand destruction that Dave referred to and the other secondary aspects of COVID have not really directly affected the Jones Act operators in the blue water fleet that includes Crowley and SEACOR and ourselves and Kinder Morgan, who is not presenting today. That time charter book, if you will, will begin to roll off as we move through the latter part of this year and into next year. And so some of the utilization or disutilization of those assets that arose from -- from the demand disruption that occurred during COVID, it will start to be transferred back to the owners as opposed to the end users directly. I'd like to sort of piggyback off David's comments about demand being destroyed by COVID and the high level of confidence that demand will come back by painting a picture that the international shipping, which many of the panelists -- many of the members that are participating in this -- of this forum are more familiar with more often, the cyclicality of the industry is driven by supply rather than demand disruption. International market, supply becomes lumpy. It comes in waves and tends to be countercyclical timed with movements in the economy, which leaves large swaths of the fleet of oversupply, waiting for demand to come back. The Jones Act is not really that way at all. And if you look at the deepwater sector, there are no vessels on order currently other than 1 barge, which is to be delivered in December of this year, that's our barge. There are no tankers on order nor. In fact, if you wanted to order any tankers, could one be delivered for many years? In a similar way, the barge building capacity is relatively constrained with many of the domestic shipyards having their capacity taken up with doing work for the government at the moment. So the supply situation is very stable. In fact, it's -- the blue water is probably slightly declining as some of the older assets continue to be aged out. And therefore, it's really a function of demand. And when we look around at the trajectory of the demand recovery in the United States, everybody has a big question mark. How much stimulus will be passed in the government? What's the consumer behavior? How quickly can a vaccine come back? How quickly will people be joining airlines and airplanes to take us from where we are today? All of that is relatively unknown, but I think the fundamental belief of everyone that's involved in these sectors is that it's not a question of if, it's a question of when, how long will it take? It's not likely to be a sustained period. There's quite a bit of cause for optimism that what everyone characterizes normalized behavior could come back within a year or so. And therefore, the sort of medium-term outlook for this sector is very positive, as I said, underlined by the fact that the supply-demand balance is very tight. And as long as that demand comes back at levels that were consistent with what we saw at the beginning of this year, the market should be quite strong.

Okay. Let me toss it over to Dan Warner at Crowley. Do you concur with the -- with Sam's assessment?

Yes. I don't have a lot of disagreement with the comments that have been made, I think, in terms of Crowley's experience. For the last year or so, again, everything is under -- the fleet has been under time charter. So utilization has been high. As Sam points out, some of those vessels are coming up for renewal, and we'll see what the market will bear. I think the uncertainty around demand is certainly going to drive those pricing dynamics. We're not overly concerned that there'll be a dramatic drop in utilization of the fleet. But I think current charter terms and commitments will shorten up, and then -- and frankly, there may be some softening of the rates is so we're up to see what emerges here. But by and large, I think that's correct. And the demand uncertainty and the disruption that we've seen on that front, I think it's consistent with the remarks made by Kirby and OSG. Our numbers are saying the same thing. About 20% of the refining capacity has been idled for the U.S. and obviously, that's had an effect on pricing. So it's been a good run so far. But I think we are going into a little bit of an uncertain territory here, and we'll have to see what emerges as we go through our renewal process.

Any thoughts from Seabulk, Dan Thorogood? And 2-part question. Tell us a little bit about the ESG initiatives you've been undertaking at Seabulk, including your carbon offset initiative.

Sure, John. Before I get to that, I think the other speakers covered the Jones Act tank vessel, blue water, state as well. But just so looking through COVID, because it takes up a lot of our attention. I think as you come out of that, to reiterate Sam's point, you have a very stable fleet from a supply side. Demand is always very hard to predict, but there clearly are elements of sort of future growth, albeit incremental around petrochemicals and sitting here in Florida, where we're headquartered and providing the harbor towing services. We've seen the rebound in activity for ships calling with finished products into Florida, creeping back up from the lows in May and June. And we think as we come out of this key demand centers like Florida will remain very, very healthy, as you actually see a declining supply of available vessels to service it. To segue into the ESG question, we have undertaken experiment in 2020 in our Seabulk towing group, which is a harbor towing provider along the Gulf Coast and Florida ports. And we effectively purchased carbon offsets and retired them, thereby creating a carbon-neutral footprint for every docking job we undertake this year. And we have obviously marketed that hard to our charterers. Some have responded very, very well. BP and Shell have been very pleased with the approach. Others yet to see the value. But we didn't do it to claim we're now carbon neutral forever. We have more work to do on that, and it's something that I think the industry is a challenge and an opportunity for the Jones Act industry going forward. But we did it to really test how our customers felt about it. And you would have seen some recent press releases from the Global Maritime Forum and The Sea Cargo Charter. There's definitely a trend emerging where folks in our space need to start to think about decarbonizing, and these are opportunities to invest and change the trajectory in the Jones Act. And actually, for Joel and others in the container shipping lines, there's been a lot of leadership at Crowley on getting to lower carbon solutions, really leadership across ahead of some of the international folks, too. So I'll hand it back to you.

We'll come to Matson in a second because I'm familiar with their LNG and newbuild vessels came out with a real splash a couple of years ago, I think. But we'll come back to containers in a minute, but let me switch quickly to dry bulk. I think Dan Thorogood at SEACOR, that's your area, tell us a little bit about dry bulk. I think dry bulk -- I think, primarily inland and coal, what effect have you seen from COVID and the availability of cheap natural gas, has that been -- put a dampening effect on dry bulk transportation of coal?

So John, I'm going to dodge the question a little bit because I'm not as close to the inland river barge market, which is the other key segment at SEACOR. But we do run dry cargo ships in the blue water side, and our view is that sort of a tale of an industry with coal clearly disappearing. There is a fairly robust fertilizer and phosphate rock movement that goes between Tampa and Mississippi River but may, over time, need assets to be either repurposed or newbuilds, but it is a limited space. And it's not an area we would expect to spend a whole lot of time on going forward.

David, how about what do you think at Kirby?

Yes. We don't have much dry bulk. We -- our dry bulk is really offshore. We do -- we have 2 barges that take coal from New Orleans area over to the Tampa area, and then we've moved sugar up the East Coast. So we haven't seen a lot of impact there. I mean obviously, what's going on in the coal market and the move to natural gas, but we only have 2 barges there. What I hear in terms of dry cargo on the inland side, on the inland water side, is it's held up pretty good. I mean most of it's grain and food stuff. And I think it's done okay. Aggregate is probably okay. It would be things like coal that would be down, but I don't think that's a new trend. And I don't think it's at all related to COVID.

Okay. Anybody else have any thoughts about dry bulk, Ben? Do you want to add something?

No, I agree with David. I mean you can go look at the barge rates, the hopper barge rates. And especially in September, they surged pretty well on the back of a pretty good harvest. So -- but again, I would tend to agree with David. I think it's -- if there's anything that's been sort of unimpacted by COVID, it's probably that particular business.

Okay. Anyone else have anything to say before I turn to containers? Containers. Let me start with Joel at Matson. You have a very specific kind of container trade in the Pacific which is, of course, it's Jones Act. So it's from U.S. point to U.S. point, but I'm wondering if you've seen any changes in -- over the year, past couple of years as a result of international trade tensions and any knock-on effect on the Jones Act traders?

So on the Jones Act business, no. So the -- what we're driven by our Jones Act trades on the container side, is that underlying demand from consumers primarily in Hawaii, Guam and Alaska. So as those economies go, as those consumers have discretionary income to spend money on products that you buy in a store, that's what drives our containerized freight to those markets. We do participate, though, in the international market from China and the United States. And that piece was impacted from the trade relations with the United States and China and the tariffs over the last couple of years. But I would say that was more of a 2018/2019 phenomenon in terms of what products and what tiering was impacted for various types of products on the tariff negotiations between the 2 countries. And that has all changed dramatically with COVID. So since March, the U.S. consumers obviously hunkered down very dramatically in the second quarter, but we're seeing an uptick now in that trade because the U.S. consumer is now spending more and has less money being spent on travel, entertainment, going to movies, going to restaurants and spending more money in some instances on consumable items that you get delivered to your door on e-commerce. And a lot of those products do originate in China. So we've seen a big uptick in e-commerce demand out of China to the United States, especially from mid-summer to today. But I'd say, on the Jones Act side, the Jones Act side has never really been impacted by the U.S. trade relations.

No real knock-on effect?

Right.

Let me ask you this question because I alluded to it a little bit earlier. You've been quite active in your green emissions for lower carbon emissions. The number of your container vessels recently delivered container vessels are LNG-powered. What can you tell us about that?

It's a very exciting development for us. So we spent $1 billion on a 4-ship new order program, 2 ships built in Philly Shipyard in Philadelphia and 2 ships in NASCO. 3 of those 4 have been delivered, and the last 1 is scheduled to be delivered here in the fourth quarter. And those 4 new Jones Act ships will replace the capacity of previously 6 ships prior. So the net of all of that is that we'll be burning a lot less fuel to be delivering the same amount of freight. So that's very, very good from an overall fuel consumption perspective. Those ships -- all 4 the ships are dual-fuel, meaning they can burn regular fuel oil, but they also have the capability in the engines, the capability to burn LNG. And so we're actively watching the LNG availability markets on the West Coast ports that we operate in. So when LNG becomes available, and it makes sense, we can install the final tanks and piping systems. So those ships could run LNG in the future.

Okay. Very good. Dan Thorogood at SEACOR. You have containers as well. I mean have -- and Ben alluded to this a little bit earlier that the international container trade has really risen up and gotten some strength, but you've seen the same in the Jones Act trade?

So SEACOR is the majority shareholder of Trailer Bridge, which is a RORO and container line of service that operates to scheduled weekly sailings between Jacksonville, Florida and San Juan, Puerto Rico. And we have seen a similar kind of consumer rebound, all alluded to, in the Puerto Rico trade lane in the last 8 to 10 weeks through the early part of the lockdown and Puerto Rico had a fairly significant lockdown. We did see a significant reduction in cargo, but volumes have come back very strong. And we are at full capacity servicing that trailing right now.

There are a number of other sectors that are only sort of tangentially represented by this panel. But let me give you all an opportunity to speak to it. And maybe, Ben, you want to give us your views as well. The Jones Act includes heavy lift and specialty vessels. I think Dan Warner at Crowley and Crowley has some heavy lift vessels. Offshore, where I know Dan, Crowley provides assistance in the offshore sector, but there are really no true offshore companies who are operating PSVs and AHTS in the Gulf represented here. And there's also dredging and construction and believe it or not, cruise -- I mean they're cruise ships on river lines and cruise ships on the coast. We don't really have anybody here representing cruise, but everyone knows it's probably suffering as a result of COVID. Does anybody want to offer any views on any of those sectors before we switch gears and go into financing?

Maybe just a quick comment on the offshore space to the extent that we're tangentially involved. So Crowley has a fleet of 10 heavy lift barges, [ 4,100 ] approximate dimension and 4 dynamic high-spec DP2 tugs that were designed to support offshore work for oil, the E&P space in the Gulf of Mexico. So that was a wonderful idea about 10 years ago, which subsequently dried up once oil prices corrected and declined. So it's interesting when you talk about offshore and the Jones Act, it is going through an evolution. We feel moving away from oil production and moving towards more renewable sources of energy. In particular, the concept of wind farm installation and the future that, that may hold, I think it's particularly topical. There's a lot of hurdles and decision points along with developing that sector. Not to mention our upcoming elections, of course, but that's something that I think is going to be important for operators in the Jones Act space with these types of capabilities and try to really evolve that and move towards cleaner energy sources and modernize the way we utilize and drive energy for the country. Obviously, Europe is well ahead of us. I think using their technologies, partnering with companies that have more advanced offshore wind farm installation and maintenance capabilities is going to be important. The assets, of course, are very expensive. And involvement in support from large power generators and companies that can help put the bill will also be important. And of course, I think there's a role for private equity to step in as well. So that's a little bit of a long discourse, but I feel the offshore space is still important. It's just going through a bit of a metamorphosis from oil into new sources of energy.

Let me switch to -- quickly to financing because I think we're running a little bit behind. I'm going to ask this as sort of a big picture question and throw it out through the panel to see what they think about it. Have you been finding capital readily available for investment? Is it equity? Is it debt? And what level of interest in the Jones Act is there among finance providers on the equity and debt side? Ben, maybe you can talk a little bit about the equity.

Sure. So I think that in general, Jones Act investors are different than probably most other shipping investors. In that, they tend to be more long-only, generally speaking, and longer term, value-oriented or growth at a reasonable price-oriented investors who tend to be a little bit more maybe industrial-focused or maybe transportation-focused, but not necessarily the same group in most situations. And I think the reason for that is, generally speaking, Jones Act shipping companies are -- have a deep remote and the cyclicality is not as great as it is in other shipping categories. And while it's hard, as I mentioned earlier, to get comfortable with sort of a real pathway to long-term growth, there are many very smart dedicated investors who sort of play the stocks from a value perspective. And I think that has not changed at all. I think the Jones Act from an equity perspective, at least in the United States, which is a big caveat in the United States, I think Jones Act shipping companies should and do have better access to equity capital than international shipping companies, for instance. But I'll let the others talk to their views in perhaps debt financing and so forth.

Does anyone else want to attribute to that to Ben's answer? I have heard from investors that looking to provide debt financing that the Jones Act companies are often a little bit more thinly capitalized with equity than other companies because anybody have any thoughts as to that. There seems to be a bit of a sticking point for some lenders to the space. Is that not true?

John, it's Joel. I think it's not sure across the board. I think Ben's comments were spot on. Investors are seeking returns, and they evaluate returns based upon risks. And one of the great benefits of Jones Act is it does provide clear rules and stability to a lot of these core markets. I know in our economies in Alaska and Hawaii, in particular, that are such remote economies, the Jones Act provides reliable stability of containership supply, which really helps those economies from an overall planning perspective and reduces cost in general. So I think the stability piece of it lowers cost of capital, no question about it. And in our case, we believe it's important to be an investment-grade company. We have an investment-grade balance sheet. So we've got ready access to all sorts of debt capital, but I wouldn't say that we are definitely not a thinly equitized company. We're a pretty solidly equitized company as well. So to me, it's more -- investors aren't just Jones Act investors or otherwise, they're looking for the best risk-adjusted returns on their investments, and they'll evaluate Jones Act investments across the spectrum of other things they can invest in. And without a bias one way or the other, they're seeking the best returns they can.

Joel -- to throw you a bone here, Joel, what was the interest rate on that last loan that you did?

That -- our last loan was 1.3% for 25-year money. So the capital is there.

Before -- anybody else have any comments? I want to turn before we run out of time here to what you see coming in the next few years. You want to have any further comments on financing?

Just one comment on accessing debt capital. And as a private company, obviously, that's an important source of external capital when we go to raise funds. We're certainly not investment grade. We're not hopefully too far off, but we've had plenty of interest from banks and various debt sources over the years. Obviously, there's the commercial bank market, insurance companies. There are the Title 11 government guarantee bonds and financing program that's available through MARAD in the Department of Transportation. U.S. private placement plays an important role and of course, equipment lessors as well. So I think access to capital and debt capital is not really an issue, and I don't believe the Jones Act itself is the main driver, as Joel pointed out. I think really it's about the more traditional credit considerations that any borrower would face when you're going to market for raising funds.

[indiscernible] talk exactly for a moment, at least, whether it's safer now or is likely to be repealed or amended, one of the potential amendments is to include Puerto Rico among the U.S. territories that are excluded from the Jones Act, and there are even some discussion, Joel, about excluding Hawaii. What do you think you see coming politically in the Jones Act, especially with U.S. presidential elections coming up in the next month?

Yes. I can say in the case of the Hawaii delegation, there's very, very strong support, and there always has been. And there's been recent studies showing that Jones Act is helpful to the Hawaiian economy. There's a recent study looking at a basket of a very significant number of consumable items and what are they cost to purchase in Hawaii versus California, and there was no discernible difference. So the stability and the reliability of the Jones Act is absolutely critical, and that's well understood and supported in the Hawaii market. So I don't think there's an issue there in terms of support. And broadly, I'll offer my colleagues to all speak as well, but we view the Jones Act is in solid support on both sides of the aisle in D.C., and we feel good about that support continuing.

Okay. Sorry, go ahead, go ahead, David.

I don't know whether you saw the trade wins article, I think it was just out today or yesterday, but it shows both Biden and Trump is strongly supporting the Jones Act. So -- I know we've got the presidential elections, but they both have stated unequivocally that they're in support of the Jones Act. And I would say even back when there was an attempt back in the John McCain era when he brought -- when McConnell opened the Senate back up for the first time in that era to do the business of the Senate, McCain offered an amendment to another bill to address the Jones Act. And I think only 6 senators sided with them. So there's pretty broad support, both bipartisan support for the Jones Act.

Anyone else want to talk something in? Dan Warner or Dan Thorogood?

Sure. So totally agree with the previous comments. We see very little risk to the Jones Act being eroded with regards to our operations in Puerto Rico since that was mentioned. Crowley, too, has invested considerable amounts of money to modernize its fleet, to provide reliable, safe, emission-compliant vessels dedicated solely to the Puerto Rico-U.S. Mainland trade. So to have regulations changed that would promote that investment, not to mention some of the other competitors in the trade lane, it seems a little illogical. And again, our read on the presidential outcome is that both administrations seem to be very supportive of the Jones Act at this time.

Good. Let me turn a little bit to where we're going next. Thinking about working from home and social distancing in the age of COVID-19 and the state of the economy, how is that going to affect your businesses and your employees going forward? Does anyone want to try that one?

This is Sam. Maybe I can take that one first. Broadly speaking, OSG has not skipped a beat working from home. To -- I say to people, oftentimes, we have 24 vessels that operate remotely all the time. So as an organization, we're accustomed to sort of remote operations and how to set up communication and work processes to allow for teams to work together that aren't sitting across from each other. I'm a big believer that work from home is going to be a big part of the future. I don't see, for OSG, a situation where everybody works from home all the time. But I think that the last 8, 10 months have proven that there is a large degree of credibility and allowing people to have much more flexibility in the way they choose to work and where they choose to work from. And I think that's going to be a permanent feature of our office environment going forward.

Just to wind up because I'd like to give the audience a chance to ask questions. I've been monitoring the questions, I think we've got most of them covered, but let me ask this. Where do you see the Jones Act -- your companies in the Jones Act going in the next 10 years or so? For example, there's been a flurry of activity around U.S. offshore wind power and a bill was introduced and approved by the U.S. House of Representatives. So it still needs to go to the Senate and sign it in law called the Clean Energy and Jobs Innovation Act that would extend -- would clarify it would extend the Jones Act to wind towers and electric supply -- electric service platforms that work with them or connected to them, would extend the Jones Act to those kinds of installations because -- as currently worded, it's somewhat doubtful, I think that the Continental Shelf Lands Act would apply to offshore wind. And although most developers, I think, to avoid any question about it or trying to comply with the Jones Act in building and maintaining offshore wind power. Any of you see -- what's -- are any of you looking to get into that sector or any others that are Jones Act related?

John, this is Dan. Yes, we are looking hard at wind farm installation. And we do expect it to remain under Jones Act jurisdiction. And that's the way we're planning on going forward. I think will the bill proceed? I think it depends -- I think it will eventually. It will go a little faster if Biden wins and maybe a little slower if Trump wins. But by and large, I think that is the future, and we expect that to remain a Jones Act sector in the future.

Let's see.

John, maybe I can chime in with some thoughts on the future. My own view is looking at the tanker sector, the ATP sector and the Jones Act, the fleet is relatively modern. And Jones Act vessels tend to have a little bit longer life from a customer acceptability than foreign vessels. So I think the principal challenge for our company and others that are in the sector is how to transition to the global dialogue is about what's the next generation of engines and fuels, and how do you then invest in that capital and technology to be able to meet a goal 0 by 2050. And I think that the Jones Act investment is going to be caught in awkward time period between maybe the transitional LNG and other type of fuels and whatever comes next, which is not really understood at this stage. And that has to be an area of thought-provoking concerns for me and from my colleagues in terms of how do we look at the next generation of assets in our fleet.

Well, I'm afraid we're out of time. I had many more questions to ask, but I wanted to mention that after the conference, after this panel, the panelists will be available in the Capital Link chat room to discuss any questions you have or any questions that we didn't answer. Please let me thank the panelists for joining the conference and thank Capital Link for this wonderful opportunity to connect with these very knowledgeable executives and analysts in the Jones Act space. Thank you very much.

Well, thank you from me as well. It's been a great panel, I have to say, I'm particularly proud that we got everybody who can from this business to be on this panel. Thank you so much. It's been very insightful. And again, thank you very, very much. Thank you, John. Thank you, Ben. Thank you for to each one of you.

Thank you.

Thank you.

Thank you. Pleasure to be here. Take care, guys.