LNG

Japanese shipping company Mitsui OSK Lines has presented its annual update on activities, praising the role of the LNG fleet as it cemented its position as the world’s third-largest shipping group behind Japan’s NYK Line and the giant Chinese company COSCO Shipping.

The overview from President and Chief Executive Takeshi Hashimoto was contained in the updated presentation called “Blue Action 2035”, involving an initial first phase of 1.2 trillion yen ($8 billion) in investments.

“To date, the group has worked to strengthen its LNG carrier business and offshore business to increase the ratio of stable earnings,” Hashimoto explained.

“In particular, MOL’s LNG carrier business has grown to become one of the world’s leading businesses in terms of both scale and competitiveness,” he added.

Long-term contracts

“Furthermore, the group intends to increase the asset allocation to areas within the shipping industry where long-term contracts can be obtained, such as crude oil carriers and liquefied petroleum gas carriers, as well as to businesses different from industrial cargo transport, such as domestic ferries and cruise ships, and to land-based businesses such as real estate property and warehouses,” the CEO explained.

“We aim for the best mix of businesses that can resist recession, maintain stable dividends, and enjoy large profits when market conditions are favorable, by striking a good balance between market driven businesses such as containerships, which offer high returns but also large fluctuations in earnings and stable revenue businesses such as LNG carriers and real estate,” Hashimoto declared.

“The opportunity to enjoy unexpected profits over a long period can be said to be an attractive feature of the shipping business,” said the CEO.

“On the other hand, however, considering the huge capital investment required for consistent fleet renewal to continue the business, the company cannot solely rely on this irregular economic boom,” he added.

Hashimoto stated that while the shipping business would continue to be the core of the group and a source of “competitive advantage that generates high returns during market boom” MOL would also be looking to diversify and invest in other businesses to help stabilize the earnings base. 

LNG stability

MOL said that LNG continued to be a “stable revenue business” while containerships was a “market driven business” along with the car-carrier fleet.

MOL said it was currently the third-largest global shipping company with a fleet of799 vessels, just behind Japan’s NYK Line with 800-plus vessels, though well behind Chinas COSCO Shipping with around 1,300 vessels

Hashimoto noted thatLNG shipping was rapidly increasing around the world as an environmentally friendly and clean energy source.

“Since first participating in LNG transport in 1983, we have accumulated considerable expertise in this field, and boast the world’s leading share in the ownership, management, and operation of LNG carriers,” he stated.

In what it called its “energy business fleet”, MOL currently has 367 vessels operating, including 158 tankers for oil and other products and 94 LNG carriers and more than 30 other gas carriers including floating storage and regasification units, ethane carriers and LNG bunkering vessels.

“We have also entered the business of transporting ammonia, which is attracting attention as a next-generation clean fuel that does not emit CO2 when burned,” noted Hashimoto.

Titan LNG, the bunkering fuel supplier in the Amsterdam-Rotterdam-Antwerp (ARA) area of northwest Europe, has partnered with Malaysian energy company Petronas for a successful re-fuelling operation for an LNG-powered Very Large Crude Carrier chartered by Koch Industries of the US.

GasLog Ltd, the LNG carrier fleet owner with 36 ships split with its US affiliate GasLog Partners, has held a private share placement “par excellence” with the participation of Greek and Chinese shipping dynasties, including the Tung family of China, the Onassis Foundation and the Greek Livanos family.

“I’m pleased to welcome the Tung family, with their long maritime history and roots in Asia, as shareholders,” said Paul Wogan, Chief Executive of GasLog.

“We look forward to working with them to deliver the value inherent in the GasLog fleet and our leading operating and commercial platform,” he added.

In 2017, the Tung family sold its controlling block of shares in Orient Overseas (International), the shipping company led by Tung Chee-hwa to China’s Cosco Shipping and Shanghai International Port Group.

The family received HK$34 billion (US$4.4Bln) from the transaction.

Orient Overseas was founded by Tung Chee-hwa's father, Tung Chao-yung, in 1969 and became the seventh-largest container shipping company in the world.

Clarksons Platou Securities AS acted as financial advisor to GasLog during the placement.

A special committee of the board of directors of GasLog, comprised entirely of independent members, reviewed the transaction.

Evercore served as financial advisor to the special committee.

In the placement, GasLog sold 14.40 million common shares at a price of $2.50 per share for total gross proceeds of $36.0M. The net proceeds of the placement are expected to be used for general corporate purposes.

About 75 percent of shares issued in the placement were purchased by GasLog’s directors and affiliates, including 6.50M shares purchased by Blenheim Holdings, wholly owned by the Livanos family and 4.0M common shares were purchased by an affiliate of the Onassis Foundation.

GasLog had posted a first-quarter 2020 loss as LNG demand faced multiple headwinds.

GasLog reported a quarterly net loss of $39.43 million versus a profit of $5.89M in the same three months a year ago.

In between the two earnings statements, GasLog brought in cost-cutting measures and among them was moving its headquarters from Monaco to the Greek port of Piraeus.

In the share placement, Blenheim Holdings also agreed not to sell the shares purchased for a period of 180 days.

“Our first-quarter results announcement set out a series of management actions to address the unprecedented market disruption caused by the Covid 19 pandemic,” said GasLog.

“We also updated the market on the progress of the refinancing of our 2021 debt maturities and the status of our interest rate and foreign exchange swap exposures,” it added.

In order to further supplement the management actions announced on May 6, 2020, the board has decided to raise $36M, or 17.8 percent percent of shares outstanding of the company prior to the private placement, to increase liquidity and further strengthen the capital structure of GasLog.

The board decided to execute the financing on a private placement basis with its core shareholders to provide both certainty and minimise any disruption against a volatile market backdrop.

CEO Wogan explained that he was delighted two of the major shareholders had provided this level of support to the company at this time and as they had done since GasLog’s initial public offering in 2012.

Cosco Shipping Energy Transportation, the Chinese shipping line with more than 30 liquefied natural gas carriers in it fleet, said it approved a plan to order three more LNG carriers.

Teekay LNG Partners, the US-listed tanker fleet owner and operator of about 50 LNG vessels, reported record net earnings after an eventful third quarter when it was briefly caught up in the Iran oil sanctions issue amid the delivery of more LNG newbuilds and ahead of the start-up by year-end of the Bahrain regasification project.