Will SCF fall into good hands?
The Russian government has approved additions to the Program of privatization of state shares. In particular, we plan to sell 100% shares of "SCF", starting with a package of 25% negative equity. However, market conditions for the sale of the company currently does not look favorable.
Approve, but verify
The Russian Government has approved recently the draft decree “On changes in the program of privatization of the federal property and the main directions of the federal property privatization for 2011 – 2013," which means the adjustment of plans to privatize the largest state-owned stakes in joint stock companies in 2016.
These plans include, among others, complete pull-out of the government from stockholders of SCF Group.
As Minister of Economic Development of Russia Andrei Belousov said, the inclusion in the program of privatization does not mean that it becomes impossible to take into account market conditions or any characteristics of these companies.
"It's not that we are now launching a process and stop controlling it, just the opposite ... After the adoption of the proposed program of privatization of the Economy Ministry will carry out the selection of investment consultants to prepare proposals for the optimal timing, phasing and methods of sale of shares and on possible criteria of potential buyers," the official said.
The government cautious approach to the privatization is understandable - the global economy is unstable, and it is very hard on the tanker market.
Besides, introduction of new environmental stringent requirements for sulfur content in marine fuel (less than 0.1% as of 2015 in ECA), and the need to equip vessels with onboard ballast water management systems (in conjunction with the expected ratification of relevant conventions) will force shipowners to have expensive equipment installed on their ships. As Nikolai Zinenko, head of Novoship’s fleet technical operations (member of SCF Group), the cost of the equipment will be "enormous," payback period of scrubber, according to the expert, reaches 7 or 10 years, while the infrastructure to operate on alternative fuels - LNG, has not yet been developed.
"Despite some recovery in the global charter markets in early 2012, the tankers owners are still experiencing a difficult period and it’s still too early to tell after a long decline about the industry restoration,” the Group’s press service quoted SCF President & CEO Sergey Frank as saying. For example, in the first quarter of 2012 low rates and an imbalance of demand and supply of vessels persisted, tankers ClarkSea Index slumped more than 20 percent.
Equity stake price
Meanwhile, Andrei Belousov announced at the last meeting of the government a figure, which the state expects to gain from the sale of a 25% (minus 1 share) stake of SCF – RUB 25-27 billion. The minister said the sale of the stake can take place shortly.
As a leading expert of “Finam Management" Dmitry Baranov commented PortNews, the cost of the equity stake mentioned by Mr. Belousov is seen as a kind of a limit, below which the authorities are not ready to sell the company. "This means that the starting price of the stake is likely to be very close to the mentioned figures and the government expects that it will grow as a result of the auction. However, the figures mentioned – that kind of a signal to bidders, what they should be prepared for and how much they should "carry about," the expert believes.
While the Russian Government plans to pull out of the shipping company in 2016, SCF expects that by 2017 at least 40% (versus 20% in 2011) of the Group’s revenue will be generated by proceeds received from participation in offshore projects. SCF vessels are operating in the "Sakhalin-1", "Sakhalin-2" projects; the company’s plans include servicing of promising oil and gas deposits on the continental shelf of Russia - "Prirazlomnoye", "Stockman" and "Yamal LNG." In this regard, we believe, the implementation of these projects could affect the market value of SCF’s shares in the future.
According to the first quarter 2012 performance results, income from oil tankers carrying crude oil, accounted for 41% of the total revenue in a time-charter equivalent (TCE). At the end of the reporting period the Group’s newbuilds program includes six oil tankers, among them two VLCCs of 320,000DWT each.
In the first quarter of 2012, the product carriers segment brought 26% of total revenue. During the period, the Group’s fleet expanded with five LR1 tankers - SCF Progress, SCF Plymouth, SCF Pacifica, SCF Pearl and SCF Prudencia, built in 2011. The vessels are operated in a joint venture of SCF (51%) and Glencore International AG.
The fleet of gas carriers generated about 9% of revenue. The Group signed a long-term charter agreement for two LNG carriers of capacity 20,600 cbm (ice class 1B) for the regular year-round transportation of liquefied petroleum gas of Sibur Holding.
Vitaly Chernov.