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BERLIAN LAJU: To list on Oslo after M&A makes it global market leader |
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Written by Sim Kih
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Tuesday, 06 October 2009
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This is the second of our 2-part report on Berlian Laju Tanker. The first report
highlighted the leading chemical tanker operator’s low-cost fleet
expansion opportunity at a time when Cabotage allows it to grab market
share from foreign-flagged vessel operators.
 Demand for chemical tankers is replacing that for product tankers, says Peter Chayson. Photo by Leong Chan Teik.
BERLIAN
LAJU’S takeover of Olso-listed Camillo Eitzen (CECO), which it expects
to complete by Nov, will create the world’s largest chemical tanker
operator.
The world's No. 3 chemical tanker operator
announced yesterday its intention to launch a “voluntary exchange
offer” for all the shares in CECO, another leading chemical tanker
operator.
And it intends to seek a secondary listing on the Oslo stock exchange following the merger.
The
current bad market condition is an opportunity to buy growth since
quite a few good companies with strong track record have been affected
by the crisis, said Peter Chayson, who is Berlian Laju's general
manager.
CECO, for example, incurred a net loss of US$21.8 million during 1H09.
CECO is headquartered in Copenhagen and has more than 80 offices worldwide.
Total revenues of the merged entity for the past 12 months amount to about US$2.3 billion, and EBITDA amounts to US$499 million.
In comparison, Berlian Laju generated revenues of US$305.7 million and EBITDA of US$134.5 million for 1H09.
Including new vessels, the enlarged group will operate 157 chemical tankers, or double that of the next largest players.
In addition, it will have 14 oil tankers, 42 gas tankers, 50 to 60 bulk carriers and one FPSO.
Berlian
Laju also wants to buy vessels that are 5 to 10 years of age for
deployment in Indon waters for opportunities arising from the Cabotage
rule.
This year’s capex was U$60 million, and Peter expects another whopping US$424.5 million in the following 3 years.
 Berlian Laju keeps its fleet young at average age of 7.7 years, half that of its competitors.
Large capex is no issue where there’s financing
While
the size of Berlian Laju’s expansion plans may seem imposing, Peter is
confident the company has the clout to raise external finances.
CECO
shareholders will be offered mandatory exchangeable bonds with an
indicative face value equivalent to NOK 25 per share, which works out
to an estimated US$175 million of bonds.
In Aug, it raised about
S$85 million via a one-for-three rights issue at 6.1 cents (Rp425) per
share, and lowered its gearing to 1.6X.
The company is operating
short and long term credit lines with numerous banks. Additional loan
facilities in the pipeline, especially from local banks, said Peter.
During
2Q09, Berlian Laju managed to obtain another two long term loan
facilities - 500 billion rupiah from Bank Mandiri and US$31.5 million
from DnBNor.
The Indonesian government has also passed several
important laws and regulations, such as the new Shipping Law, the Law
on Arrest of Ships, the Law on Mortgage.
These policy changes will encourage local bank lending to local shipping companies.
Another
possible source of funding is the sale and leaseback of vessels, such
as the 19,900-dwt chemical tanker that it sold and leased back in 1Q09.
Even
during the pit of the recent economic crisis, Berlian Laju managed to
complete significant amounts of sale and lease back transactions and
continued to receive substantial amounts of funding from its shipping
banks, said Peter.
 1H09 operating profits were hit by lower freight rates and high costs, but Peter believes demand outlook is positive.
Confident about revenue outlook
Other
than replacement demand for foreign-flagged vessels, shifts in
production and consumption trends may also increase demand for tanker
shipping.
For example, export of chemicals from Asia and the Middle East is expected to grow.
Chemical tanker demand in South America is also very strong, says Peter.
Charter revenues from chemical tankers contributed 74% to Berlian Laju’s 1H09 top line.
As
for gas tankers, freight rates remained resilient through the global
economic crisis, and pockets of growth opportunities exist.
Most revenues from gas are also secured by contracts, added Peter.
For
example, natural gas released during oil exploration and production is
difficult to store and transport, so in the past, oil majors used to
just burn the gas.
However, with IMO’s regulation on prohibition of flare gas, demand for small gas tankers will increase.
Charter revenues from gas tankers (which carry LPG and LNG) contributed 6.8% to group 1H09 top line.
Finally, Indonesia is a net importer of oil, and wants to increase domestic production.
He
expects oil exploration and production by the global oil majors in
Indonesian waters to increase and thereby boost demand for FPSOs.
The
plan is to buy cheap second-hand tankers, which are not double hulled,
and commission an external yard to convert these to FPSOs.
Charter revenues from the company’s FPSO vessel contributed 1.8% to group 1H09 top line.
The
FPSO (floating production supply and offloading) vessel sails to an
offshore platform, loads and processes oil and gas, and stores it until
the oil or gas can be offloaded onto a tanker or transported through a
pipeline.
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