Tonnage Swap Agreement with Gibson Gas Tankers LTD.
NGC will take over the LPG/E/C Teviot (1989/8327 cbm, with ethylene-capacity) from the Belship ASA-subsidiary Gibson Gas Tankers Ltd, which prior to July 97 had been sailing in the NGC-pool for eight years on time-charter. In return Gibson Gas Tankers Ltd will take over the two LPG-vessels Norgas Mariner (1982/6568 cbm), and Norgas Transporter (1982/6077 cbm). In addition they receive an agreed cash compensation of $6 mill. Teviot, which has ethylene-capacity, will be re-named Norgas Carine and will operate in the NGC-pool from mid-December. Norgas Mariner and Norgas Transporter will exit the NGC-pool at about the same time. Neither of these two have ethylene capacity.
The transaction is expected to generate a net result of NOK 44 mill. in 4Q97, mainly due to the sale of Norgas Mariner. Teviot is in its construction similar to Norgas Patricia, which was taken over in 1991 and currently sails in the NGC pool. The vessels involved in the transaction are valued at a total of $46 mill., which corresponds well with valuations of independent ship brokers.
The transaction generates an expanded operational flexibility for the fleet, and the vessels will thus more easily adapt to the clients§ transportation-programmes. The transaction provides a foundation for better profit margins for NGC due to the fact that the two vessels to be sold have been much idle in the NGC-pool during the last couple of years, and hence have only shown moderate earnings. The combination of Teviot´s flexibility and NGC§s contract- and operational pattern with our customers indicates low future levels of idle time even in a weak market. The average age of the fleet will be somewhat reduced thanks to the transaction and we see this as a step toward a renewal of the fleet.
LPG Norgas Victory will not be sold.
On September 8th it was announced that LPG Norgas Victory (1982/8936 cbm, without ethylene-capacity) would be bareboat chartered to South American interests with an obligation for the charterer to purchase. The agreement was valued at $13.2 mill spanning over 5 years, including the purchase-obligation. It was also announced that aspects of the agreement were outstanding, but would be concluded shortly. The transaction will now most likely not take place. The closure of the deal was obstructed by essential matters related to documentation. Among other items, there was some disagreement about the size and substance of security that should be put up as a guarantee concerning future payments from the charterer. For I. M. Skaugen, a part owner of 45% in the shipowning company, the transaction was expected to generate a positive net result of NOK 5 million in 4Q97.
- We were uneasy concerning various matters related to the documentation on the sale and therethrough matters of financial security. Amongst other items we were not prepared to accept the other side§s offer of security for a situation were the charterparty not to be honoured, says Jan Ivar Thomas, Asst. Vice President of Finance at I.M. Skaugen.
LPG Norgas Victory is to remain in the NGC- pool, as it has been ever since the transaction was first reported.
Strategic Implications
After the tonnage swap, the active NGC fleet will, save for one vessel, consist of vessels with the necessary flexibility to carry ethylene. All vessels in the fleet have a capacity ranging between 6.000 and 9.000 CBM. The current fleet composition make the vessels operationally compatible. It is our firm belief that this further improvement of strategic focus will strenghten NGC§s competitiveness towards future challenges in the market for transportation of petrochemical gasses and LPG. Four times per year, NGC obtain estimates of vessel values for the fleet from external brokers. The transactions mentioned are all made at values that either exceed or are equal to the average of the brokers§ latest estimates. This was also the case for the transaction reported earlier this autumn, regarding the Norgas Pioneer.
In case of questions, please contact Mr. Jan Ivar Thomas, Asst. Vice President of Finance, Pho No (47)91535682, Tfax (47)22831665 or by e-mail jan.ivar.thomas@ngc.no.