DESSC and Marine Harvest agreed to establish an aquaculture shipping JV
Cyprus based offshore supply company Deep Sea Supply (DESSC) and one of the largest seafood companies Marine Harvest ASA (Marine Harvest) have entered into a Heads of Agreement to establish a 50/50 owned aquaculture shipping joint venture that is to build, own and operate aquaculture vessels, DESSC said Thursday in a press release.
The JV represents a unique opportunity for Deep Sea Supply to capitalize on the Company's experience from the OSV sector to enter into a new and attractive market together with an industry leading partner. Marine Harvest and Deep Sea Supply believe there is significant room for efficiency improvements across the value chain in aquaculture shipping, ranging from reduction in newbuilding cost to more cost-efficient operations. Accordingly, Deep Sea Supply and Marine Harvest aims to significantly reduce costs related to vessel services through establishing the JV. Over the past few years aquaculture vessels have increasingly become an integrated part of the value chain.
Marine Harvest charters today 44 vessels with a combined cost of approximately EUR 100 million per year, making Marine Harvest the industry's largest charterer of such vessels. The JV expects to enter into contracts for the construction of aquaculture vessels which will be chartered by Marine Harvest upon delivery. Current discussions indicate a substantial reduction in newbuilding cost compared to solutions provided by alternative aquaculture providers. The JV entity will be Marine Harvest's preferred provider of aquaculture vessels.
The intention of the JV is to also compete for external contracts. Deep Sea Supply will enter into management agreements with the JV covering all necessary management services, including technical management, ship management and other corporate services. The aquaculture shipping industry is fragmented and characterised by lack of competition.
Through the JV, Deep Sea Supply and Marine Harvest aim to consolidate the industry to achieve economies of scale. The JV will explore any opportunity that may improve building cost or operating cost, including taking advantage of the current imbalance in the offshore service vessel market through potentially convert surplus offshore vessels into aquaculture vessels if project economics are favourable.
Deep Sea Supply sees the establishment of the JV together with Marine Harvest as an attractive opportunity for the Company to expand its business into a related industry where we can benefit from long term charters at attractive rates. The JV also allows the Company to further capitalize on our strong operational platform through management of the JV's vessels.
Deep Sea Supply will establish a new 100% owned subsidiary to be the 50% owner of the JV and will seek to finance the JV-investment on a stand-alone basis directly through this subsidiary. With back-end loaded payment terms on the newbuilds, no material upfront investment is expected.
The Company's largest shareholder, Hemen Holding Limited, currently owning approximately 35% of the shares in the Company, has indicated support for the establishment of the JV. Limassol, 02 June 2016 Deep Sea Supply Plc.
About DESSC
Deep Sea Supply Plc (DESSC or The Company) is a Cyprus based offshore supply company. The Company operates a total of 39 Offshore Support Vessels. The Company intends to become one of the leading Owner and operator of supply vessels on a global basis. Deep Sea Supply Plc will seek to obtain medium to long term contracts. The vessels currently operate in the North Sea, West Africa, Mediterranean, South East Asia and Brazil. The Company (DESSC) is incorporated in Cyprus and is listed on the Oslo Børs.
About Marine Harvest
Marine Harvest ASA is one of the largest seafood companies in the world, and the world’s largest producer of Atlantic salmon. The company employs 11 700 people, and is represented in 24 countries. In 2015 the company had a turnover of NOK 28 billion. Marine Harvest is listed on the Oslo Stock Exchange (OSE) and the New York Stock Exchange (NYSE). Marine Harvest supplies healthy, delicious and sustainably farmed salmon and processed seafood to more than 70 markets worldwide. The company is present and trusted in all major salmon farming regions in the world. In 2015 harvest volumes of salmon was 420 000 tonnes (GWE).