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  • 2014 February 20

    On Sovcomflot privatization

    Privatization of Sovcomflot OJSC is expected in the second half of 2014. Analysts say that despite poor market conditions, the Company’s shares will be attractive.

    RF Prime Minister Dmitry Medvedev has recently held a meeting with his deputies to discuss among other issues the privatization of Sovcomflot OJSC. As Olga Dergunova, head of the Federal Property Management Agency (Rosimushchestvo), commented the meeting results, Sovcomflot OJSC is highly ready for IPO.

    “The readiness of agents on privatization of Sovcomflot will be higher in QII’14”, Dergunova said.

    “2 years ago we discussed and 1 year ago we confirmed the readiness of the company to go to Moscow or to New-York Exchange. … Double floating is under discussion today.

    We remind that Sovcomflot privatization has been under discussion for a long time already. However poor market conditions have been slowing down the process. Meanwhile, experts say market situation is to improve with the orders for new tankers. According to the forecast of Teekay Tankers, the global fleet is expected to grow by only 2.5 percent in 2013 and 1.0 percent in 2014, net of removals, which is the smallest fleet growth rate since 2002. In 2013, a majority of the orders were for Medium-Range (MR) and LR2 product tankers. 

    “- The situation in tanker markets was still tough over the 9-month period of the year, - Sergey Frank, President and CEO of Sovcomflot OJSC, said when commenting on the company 9M’13 results. - Reflecting the challenges facing the global tanker industry over the past five years, the Clarksea tanker index remained at its level of 2009 having demonstrated the lowest level in the 20-year period. Despite the challenges facing the global tanker industry over the past five years, Sovcomflot’s business model remains robust. Our conservative chartering policy, with 65 per cent of vessels engaged in long-term employment and industrial projects, continues to serve the company well. Consistent  implementation of Sovcomflot’s strategy and our many years of experience in shipping in Arctic and Sub-Arctic seas contribute to  expanding  Sovcomflot’s share in the continuously growing sectors of Russia’s oil and gas industry.”

    In fact, Sovcomflot’s development strategy is aimed at the expansion of the fleet of hi-tech specialized vessels flying the flag of the Russian Federation subject to the development of new oil & gas projects at the continental shelf of Russia. Sovcomflot currently numbers 18 vessels of this type with total value exceeding $1 bln.

    LNG carrier Velikiy Novgorod joined the fleet of Sovcomflot in January 2014. “The expansion of the LNG tanker fleet with the addition of modern, high ice class vessels from the Velikiy Novogorod series marks an important stage in the implementation of the OAO Sovcomflot development strategy, which provides for significant growth in the gas transportation segment subject to the development of new industrial projects in the Russian Arctic. SCF fleet currently has 11 gas carriers. A further three vessels, including sistership of Velikiy Novogorod - LNG carrier Pskov, will be delivered within 2014-2015. Counting these deliveries SCF will be certain leader among the LNG operators of ice class gas carriers,” Sergey Frank said.

    The company’s fleet (owned and chartered) specialises in hydrocarbon transportation from regions with challenging icy conditions and includes 158 vessels with a combined deadweight of over 12 million tonnes. A third of these vessels have a high ice class.

    All these make Sovcomflot attractive for investors despite the situation in the global tanker fleet.

    As Dmitry Baranov, leading expert of Finam Management, commented IAA PortNews, RF Government sees the key motive for privatization of the shipping company in the budget replenishment. Less attention is given to other factors today.

    “As for the attractiveness of this asset, there are no doubts about it, - Dmitry Baranov says. It is one of the largest transportation companies in the world operating all over the globe ... to summarize, it can be characterized as an efficient business, which is certainly attractive for investors. Besides, as the Company says its results in 2013 are quite the same as in 2012 which is a success amid the stagnation of both global and Russian economy of the passed year. So, there are no doubts, the company’s shares will attract high interest and their value can rise as compared with the estimation”.

    Vitaly Chernov

     

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