Risks and Challenges - The company faces numerous risks that could materially affect its business, financial condition, and results of operations, including general economic and political conditions, LNG market fluctuations, and compliance with governmental regulations [40]. - Demand for LNG carriers (LNGCs) is dependent on global economic conditions and the willingness of oil and gas companies to invest in natural gas production, which may be affected by capital availability and costs [41][42]. - Climate change poses risks to the company's operations, potentially increasing the frequency and severity of natural disasters that could disrupt service [47]. - Political and economic instability in regions where the company operates could adversely impact its business, particularly due to ongoing conflicts and sanctions [55]. - The company must navigate evolving regulations related to climate change and sustainability reporting, which could impose additional costs and risks [51]. - The company may face challenges related to shipping route disruptions and increased operational costs due to geopolitical tensions and environmental regulations [55]. - The company faces risks from potential disruptions in LNG supply chains due to equipment shortages, labor shortages, and climate change impacts, which could negatively affect operations [57]. - Trade protectionism may lead to increased costs for goods and shipping, potentially reducing global trade and adversely impacting the company's business and cash flows [60]. - The company is exposed to risks from geopolitical conditions and economic downturns in major LNG import regions, which could negatively impact demand for its services [66]. - Increased tariffs and trade barriers could depress shipping demand, leading to a material adverse effect on the company's business and financial condition [62]. - The LNG shipping market is cyclical, with recent declines in time charter and spot market rates for LNG vessels falling below operating costs [94]. - The company may face difficulties in expanding its fleet through newbuild vessels and acquisitions, with profitability uncertain for any completed acquisitions [93]. - High inflation has increased operational and financing costs, potentially adversely affecting the company's financial results and market share price [104]. - The company operates in a highly competitive market, with new competitors potentially offering lower charter rates and modern fleets [102]. - A shortage of qualified officers and crew could impair the company's ability to operate vessels effectively, increasing operational costs [99]. - The company may face significant litigation costs and potential judgments that could adversely impact earnings and cash flows [111]. - The company may experience impairment losses on long-lived assets due to significant negative industry or economic trends [127]. - The company faces risks related to fraud and corruption in jurisdictions vulnerable to bribery and collusion [118]. - Acts of war or terrorism may disrupt the global market for LNG, affecting the company's operations and financial results [124]. - The company may not be able to effectively manage multiple global offices, leading to operational inefficiencies [123]. - The company anticipates increased working capital needs as business grows, which could limit its ability to pursue strategic initiatives [147]. Financial Condition and Debt - The company has outstanding gross long-term debt of 300.3 million [137]. - The primary debt facilities include a 520 million term loan facility maturing in May 2029 [137]. - The company may face increased financing costs due to volatility in global financial markets and uncertain economic conditions [141]. - As of December 31, 2024, the company anticipates needing to refinance its major debt facilities before maturity [140]. - A substantial portion of cash flows is required for debt principal and interest payments, limiting funds available for operations and growth opportunities [144]. - The company is currently in compliance with all financing covenants but cannot guarantee future compliance due to potential changes in economic conditions [146]. Regulatory and Compliance Issues - The company is subject to regulatory approvals for LNG shipping, and failure to obtain these could impede operations and adversely affect financial performance [100]. - Future regulations, such as the EU Emissions Trading System, will require the company to manage CO2 emissions, impacting operational costs starting January 2024 [158]. - The FuelEU Maritime regulation mandates a gradual decrease in greenhouse gas intensity of fuels used by the shipping sector, with a target of 80% reduction by 2050 [159]. - Compliance with international safety regulations is critical; failure could lead to increased liability and potential denial of access to ports [162]. - The company has installed ballast water treatment systems on all vessels to comply with international regulations, but future amendments may incur additional costs [163]. - The company is subject to various anti-corruption laws, and non-compliance could result in significant penalties and impact business relationships [164]. - The company is subject to various governmental export, trade, and economic sanctions laws, which could lead to significant liabilities and adverse impacts on its business operations [166]. - Compliance with privacy and data protection laws, such as GDPR, could result in fines up to €20 million or 4% of global annual turnover, which may adversely affect the company's financial condition [171]. Taxation and Legal Matters - The company opened a U.K. establishment on May 1, 2024, and has been a U.K. tax resident since that date, which subjects it to U.K. corporation tax on worldwide income [172]. - Future changes in U.K. tax laws or the company's tax residency status could lead to higher tax liabilities, adversely impacting financial results [173]. - The Bermuda Corporate Income Tax Act, effective January 1, 2025, will impose a 15% corporate income tax on Bermuda entities part of multinational groups with annual revenues of at least €750 million [179]. - The company has obtained assurance from the Bermuda Minister of Finance that no new taxes will apply until March 31, 2035, unless overridden by the CIT Act [180]. - The company does not currently believe it has carried out a "relevant activity" under Bermuda's economic substance requirements, but future changes could subject it to Bermuda tax [181]. - The Republic of the Marshall Islands was recently placed on the EU's list of non-cooperative jurisdictions, which could affect the company's operations in that region [182]. - The company has subsidiaries in Liberia, which currently has no economic substance requirements, but future legislation could impose compliance obligations [183]. - The company may be affected by the EU's potential reclassification of the Marshall Islands and Liberia as non-cooperative jurisdictions, which could lead to new economic substance legislation impacting its operations [184]. - The company intends to classify its gross income from time chartering activities as services income, which it believes does not constitute "passive income" under U.S. tax law [186]. - There is substantial legal authority supporting the company's position on time charter income, but there is no guarantee that the IRS will accept this classification [187]. - The company believes it was not a Passive Foreign Investment Company (PFIC) in prior years, but future changes in operations or tax law could result in PFIC status [188]. - If classified as a PFIC, U.S. shareholders could face adverse tax consequences, including taxation on excess distributions and gains [189]. - The company may be subject to a 4% U.S. federal income tax on 50% of its gross shipping income attributable to U.S. transportation, unless exempt under Section 883 of the U.S. tax code [190]. - The company believes it qualifies for benefits under the U.S.-U.K. Income Tax Convention for 2024, potentially exempting it from U.S. federal income tax on certain income [191]. - If the company or its subsidiaries do not qualify for tax exemptions, they could face a 4% U.S. federal income tax, negatively impacting earnings available for distribution [192]. Corporate Governance and Shareholder Matters - EPS owns approximately 58.2% of the company's issued and outstanding shares, which may lead to conflicts of interest and significant influence over management decisions [222]. - The company may face challenges in maintaining an active and liquid trading market for its common shares, leading to potential volatility in share price [209]. - Future offerings of debt or equity securities may dilute existing shareholders' ownership and adversely affect the market price of common shares [213]. - The company is classified as an "emerging growth company," allowing it to avoid certain reporting requirements until 2027, which may result in less information available to investors [220]. - The company's ability to repurchase shares is subject to various limitations, and there is no assurance that share repurchases will occur in the future [227]. - The company may experience fluctuations in revenue and operating results due to factors beyond its control, potentially leading to share price declines [226]. - Legal and regulatory restrictions in the Norwegian and U.S. markets could limit or prohibit share repurchases [228]. - The company may face additional risks from geopolitical factors affecting significant shareholders, which could impact operations [224]. - The company may not be able to attract and retain qualified individuals for its Board of Directors due to increased costs associated with being a public company [208]. Management and Operational Issues - The company relies on key management personnel, and the loss of such personnel could materially impact its business and financial condition [201]. - Compliance with public company regulations may strain the company's resources and increase costs, potentially affecting its financial condition and results of operations [203]. - The company suspended dividend payments in 2023 and 2024, with no assurance of future dividends due to financial conditions and debt covenants [214].
l pany .(CLCO) - 2024 Q4 - Annual Report