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Norwegian Bank to finance up to $4B LNG ship orders
The tripling cost of chartering LNG vessels to $110,000/day and the likes of Qatar and Peru offering new supplies indicate that the shipping sector could be an investment safe haven.
August 11, 2011 11:58 by Reuters
Norway’s biggest bank, DnB NOR is in talks on lending between $3.5 billion and $4 billion in the second half of this year to finance orders for new liquefied natural gas (LNG) vessels, it said on Wednesday.
“We are working on 5-6 LNG financing projects with various different, mostly European, owners…the bank debt on these deals is between $3.5 and $4 billon,” DnB NOR’s head of shipping, Harald Serck-Hansen, told Reuters in a telephone interview.
If the deals are agreed, LNG financing will account for up to a quarter of the bank’s new shipping business generated in the second half of 2011, Serck-Hansen said.
The vessels under discussion are with “strong industrial players,” and are slated for 2013/14 delivery.
The rash of new LNG tanker orders over the past 3-6 months marks a reawakening of investment appetite following years of poor demand, although the window of opportunity is narrowing, he added.
Years of stagnation in terms of fleet expansion, combined with surging global shipping demand has helped drive the cost of chartering vessels to multi-year highs, encouraging the latest ordering binge ahead of a projected peak in demand from 2015 onwards.
Serck-Hansen said many of the most recent orders are speculative, meaning reserved for spot market business where rates show little sign yet of running out of steam.
New build orders confirmed by shipyards have risen in recent months, helped by established Greek and Scandinavian shipowners sensing business opportunities from escalating day rates.
Many of the 25 recent orders are speculative punts designed to reap the benefits of increasingly fat chartering returns, he said, adding that banks are part-bankrolling these forays.
“With a strong sponsor we are typically talking about a 70 percent debt and 30 percent equity split,” Serck-Hansen said.
That’s a far cry from the peripheral presence speculators and banks occupied earlier in the last decade.
DAY RATES TO TEST $130,000 THIS YEAR
The cost of chartering vessels has more than tripled since mid-2010, towards $110,000 a day, as demand rises.
Swedish shipper Stena Bulk sees rates exceeding $130,000/day this year before climbing further on the back of tighter availability towards the middle part of the decade.
The tables began to turn after new supplies from Qatar and Peru led to greater demand for product from buyers in Asia and South America in 2010, stretching the capabilities of an ageing fleet and putting upward pressure on rates.
The nuclear capacity reductions following Japan’s March 11 earthquake and tsunami also drew attention to LNG as a replacement fuel, further reducing availability as diversions between the basins tied vessels to longer routes.
LNG A ‘BRIGHT SPOT’
“There is a fundamental belief that with continued high oil prices there will be a steep increase in LNG demand and supply going forward,” DnB NOR’s Serck-Hansen said.
“My feeling is that the first orderers will be the ones to benefit…while those entering later (and) looking to make a quick buck might get caught out,” he added.
The recent rash of new orders is targeting the onset of several vast Australian liquefaction projects scheduled to start producing from 2015 onwards.
Taken together, Australia plans to more than double existing output to 42 million tonnes a year of LNG, requiring an additional 40-45 tankers, according to Arctic Securities.
The interest in speculative orders on LNG vessels also owes something to weakness in…
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August 11, 2011