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Rally round the flag
FLEETS While not quite qualifying for saviour status, LPG is nevertheless becoming something of a beacon to the beleaguered shipping industry as executives and investors pile in to the sector. Certainly, the number of shipping companies eyeing expansion – either through beefing up existing fleets or diving into the sector anew - is on the up
The latest foray into the LPG sector will see Avance Gas, the Oslo-based LPG tanker owner, contemplating an initial public offering “within a year”, according to press reports. The company is said to expanding its fleet by adding the 82,000 m3 Progress and Prospect - both built in 2009 - from Transpetrol of Belgium. Payment will be in cash and shares, making the Belgian owner an equal partner in Avance with Sungas Holdings (Gulf Marine) and Stolt-Nielsen.
According to the report, the ships are likely to be priced around the same level as the 2008/2009-built 85,000 m3 sisterships Maran Gas Vergina and Maran Gas Knossos, which were recently acquired by Avance from Maran Gas at $72m apiece. The two deals lift the Avance very large gas carrier (VLGC) fleet to nine, of which eight are wholly owned.
Some observers have argued that Avance Gas is paying a fairly steep price for the four ships, given that it would cost some $75m to order a newbuilding in South Korea. The company is aiming for a fleet of some 16 VLGCs before conducting its IPO, which sources suggest could happen within a year. That means, however, that the newbuilding route is out of the question: it would take too long.
Speaking about the Transpetrol deal, Niels G Stolt-Nielsen, CEO of Stolt-Nielsen Ltd, said: “As the fundamentals for the transportation of LPG continue to look favorable for the next several years we believe the strategy to focus on secondhand tonnage with prompt delivery versus ordering new ships for delivery several years in the future will offer a better return to the joint venture partners."
Stolt-Nielsen has never stated publicly said it would float its LPG arm but a report in Tradewinds says it understands that the company, which is primarily a chemical tanker player, has plans to conduct an LPG tanker IPO when the time is right. A 16-strong fleet would put Avance on par with AP Møller as the second-biggest player in the VLGC segment after BW Gas, but Møller has more ships on relatively short charters.
Stolt-Nielsen set up its LPG subsidiary in 2007 and in 2010 Sungas sold three VLGCs to Stolt-Nielsen, becoming a 50 per cent partner in Avance. Niels Stolt-Nielsen clearly believes there are more investment opportunities out there. Speaking about the latest deal, he said: “We are pleased to have reached this agreement with Transpetrol which is another step in [Avance’s] stated strategy of consolidating the VLGC market through mergers and acquisitions of secondhand ships.”
Starting a trend
Where Stolt-Nielsen leads, its closest rival in the chemical parcel tanker business, Odfjell, is sure to follow. It is to buy two 9,100-m3 ethylene carriers from the financially embarrassed Indonesian shipowner Berlian Laju Tanker. The two, Gas Sumbawa and Gas Lombok, were built in 2008 and brokers suggest a price of $31m per ship.
Odfjell said in a statement that a return to gas shipping makes sense because the trade is closely related to its core business of chemical transport. “We have know-how and competence related to this market segment. Our brand-name and global marketing/operational network will give us a competitive advantage,” the company said.
A more established LPG tanker player, Belgium-based Exmar, is reported to be planning to separate its three operating divisions: LPG shipping, LNG shipping and offshore. The idea of spinning LPG away from the big-kit businesses was first mooted by owner Nicolas Saverys this past March when a series of newbuildings were ordered from Hyundai Mipo. Saverys was reported as saying that each of the three divisions would be valued at around $300m, which would add up to the group’s current market capitalisation.
Moving in the opposite direction, however, is Indian shipowner Great Eastern, which has sold off its last remaining LPG carrier. The company is said to be disposing of the 22,900 m3 Jag Viraj, built in 1991, to Negmar of Turkey for some $9.5m. It bought the vessel in 2004 as Gaz Diamond for $28m. In 2009, Great Eastern sold its other gas carrier, the 31,000 m3 Jag Vayu, built in 1978, for demolition.
In an interview with Tradewinds, Norwegian shipping magnate John Fredriksen has said that he ordered up to six very large gas carriers from a Chinese ship yard, which the paper’s sources say is most likely to be the Jiangnan Shipyard in Shanghai; the yard has extensive experience in LPG carriers, albeit of a smaller scale. It has been suggested that the new ships have a price tag of less than $70m each.
Qatar’s Nakilat has taken over management of its four VLGCs from Shell. The in-house deal is in line with the company’s ultimate aim of managing its own 54-strong LNG carrier fleet as well. The LPG ships involved are the 82,450 m3 Al Wukir, Bu Sidra, Umm Laqhab (all built in 2008) and Lubara (2009), all jointly owned by Nakilat and Milaha, the former Qatar Navigation.