The I.M. Skaugen Board of Directors has decided to accept NGC's placement of the LPG vessel Norgas Victory (IMS owns 42.5%) on a 5 year bareboat charter, with an obligation for the charterer to purchase upon completion of the charter. The earnings of the vessel owning company from the charter party and the obligation to purchase will be USD 13.2M (NOK 100M) for the period. For IMS the transaction is estimated to result in a gain of NOK 5M in the 4Q. Some minor aspects of the agreement remain, however, but are assumed to be solved shortly.
NGC will purchase Loki ASA's 50% share in the LPG/E/C Norgas Pioneer. As a consequence, NGC will become sole owner of the vessel. The fleet adjustments will give NGC an improved focus and bettered flexibility and will enable the company to better meet future challenges in the area of transportation of petrochemical gases and LPG.
Charter placement and sale of the LPG Norgas Victory
The LPG Norgas Victory (built 1982, 8936 CBM, no ethylene capacity) will be placed on a 5 year bareboat charter, with an obligation for the charterer to purchase the vessel upon completion of the charter. The Norgas Victory will be employed in transportation of LPG on the West coast of South America, and will not compete directly with NGC's activities. Theses trades are usually carried out by the importers' own tonnage and are seldom put into the market. LPG Norgas Victory will exit the NGC Pool during 4Q. Certain outstanding documentation aspects in respect of this deal are expected to be solved shortly.
Purchase of 50% share in the LPG/E/C Norgas Pioneer
NGC will be buying Loki ASA's 50% share in the company that owns the Norgas Pioneer (built 1979, 6133 CBM, stainless tanks with ethylene- and chemical capacity). The vessel will continue to sail in the NGC Pool. NGC also owns the sister vessel, Norgas Energy.
Resulting from the tonnage changes, the NGC fleet will constitute solely semi-refrigerated ethylene vessels of 6000 to 8000 CBM, which corresponds with the Group's policy of focus on the customers' transportation requirements and desires, additional to an increased operational flexibility.
It is IMS's opinion that NGC through this sharpened strategic focus, will improve its competitive situation in respect of future challenges in the market for transportation of petrochemical gases and LPG.
The fleet adjustments are expected to improve the company's results long-term.
The impact on the 4Q is assumed to be approximately NOK 5M.
Four times a year NGC gathers estimates of vessel values from independent brokers. The above transactions are executed at prices marginally above average broker values.
Financing and P&L effect
In the 2Q the Group reached an agreement with one of its main banking connections regarding refinancing of the Group's debts. The refinancing package includes the above projects. The loan facility contains a framework for future capital demands related to renewal of the Group's gas tonnage fleet, as well as the building up and developing of the chemical trade and other supplementary areas of activity. The term of the loan facility will go beyond the year 2005. To IMS the facility will mean considerable annual interest savings and an improved cost and repayment profile compared with the current financing. Resulting from the refinancing, the Group has decided to repay a number of loan facilities, one of which is a convertible bond loan and another is a Variable Rate Note loan.
The I. M. Skaugen Group is engaged in marine transportation of petrochemical gases, LPG and organic chemicals, as well as ship to ship transfer of crude oil. Our customers, the international oil refineries and the petrochemical industry, are located in Europe, USA and Asia, and we therefore maintain offices in Singapore, Shanghai, Jingzhou, Seoul, Houston, Brussels and Haugesund, in addition to our main office in Oslo. The Group operates a total of 28 units, consisting of 15 gas vessels, 3 chemical vessels, 5 Aframax tankers and 4 working ships engaged in the lightering business. NGC, being responsible for our gas transport, is one of the world's leading players in the segment of petrochemical gas transport, handling almost every fifth cargo of ethylene and every sixth propylene cargo world-wide. SPT is the leading player within the area of ship to ship transfer, with a market share of approximately 40%. The group is also involved in the development of supplemental areas of ac! tivity, mainly in Asia, particularly China. These activities are not expected to impact significantly on the P/L statement before 1998.
Should you have further questions, please contact Jan-Ivar Thomas on phone (47) 22 83 30 60, mobile phone (47) 915 35 682, fax (47) 22 83 16 65 or e-mail address: jan-ivar.thomas@ngc.no or X.400:G= JAN-IVAR;S=THOMAS;P=NGC;A=TELEMAX;C=NO. This press release and other information concerning I.M. Skaugen are also available on the Internet: http://www.huginonline.no/SKA/index_e.shtml
Oslo, September 8, 1997
Board of Directors of I.M. Skaugen ASA