Presentation on theme: "Financing / investing the offshore and maritime"— Presentation transcript:
1Financing / investing the offshore and maritime energy transportationGood Afternoon Ladies & Gentlemen.It is a great honor for me to participate in Mare Forum’s 2nd Conference in Cyprus.Mr. Kostoulas and his Team have done an excellent job organizing this successful event for 2 years in a row which clearly demonstrate Cyprus’ importance in the Offshore / LNG Energy space.Last year, when I also had the honor to join the 1st Mare Forum, I had communicated to the audience, that I have strong personal links with this island. My wife is from Cyprus, my two boys were born here and I worked in Nicosia on the banking side from 2000 to 2003.As a result I am very familiar with Cypriot’s desire to excel, through disciplined and hard work.It is through this Hard Work, Discipline and Commitment that Cyprus has become an important player in the Energy space.The purpose of my speech is to provide you an overview of the Financing Environment for the Offshore and Maritime Energy Transportation.Presentation toIoannis Alexopoulos, Director.: London.: Athens.: SingaporeEurofinEurofin S.A.Seafin
2Eurofin Group (Overview) Oldest, largest, specialized ship-financing investment boutique with global coverage30 Years Committed in Ship-FinanceUS$15 Billion Ship-Financing Deals (globally)Flexibility Tailor made structuresCommitment Team dedicated to ship-financingStrong Relationships Ship-financing Providers / OwnersRecognition Representing KfW IPEX-BankGlobal Coverage Offices in major shipping centersBefore I begin with my presentation allow me to provide you with a small overview of our Group.(READ FROM SLIDE)At present, we are actively involved both on the Arrangement side but also with our associates in Frankfurt from KfW IPEX-Bank, on the financing of a number of Maritime Energy transactions.LondonAthensSingapore
3Freight Rates & Asset values have plummeted Shipping environmentFreight Rates & Asset values have plummetedIn all three main shipping sectorsShipping Charter Rates (Indexed - as at Q )Asset Values (US$ mm - as at June 2013)Dry150~(79%)5-year Peak: $150m% Change to Current: ~(79%)315-Year old CapesizeIn order for us to understand what is happening on the Ship-Financing side, we have to briefly review the state of the shipping market.I.e. What is Happening with the EARNINGS & ASSET Values.For the Traditional shipping sectors the picture is not good.Since 2008, we have witnessed a sharp correction in both Freight Rates & Asset Values.July June 2013Container65~(72%)5-year Peak: $65m% Change to Current: ~(72%)18.55-Yr 3,500 Teu vesselJuly June 2013(80%)(74%)(69%)% ChangeTanker79~(66%)5-year Peak: $79m% Change to Current: ~(66%)275-Year old AframaxJuly June 2013Source: Clarkson’s Research, Baltic Exchange
4A totally different picture Offshore & Energy Maritime EnvironmentA totally different pictureIncreased demand for specialized offshore / energy maritime assetsCoupled with a tight supply of available tonnageLNG – Freight RatesOn the offshore and Energy Maritime front there’s a totally different picture.Freight Rates ( ) are at historically high levels (despite a correction which you can see on the graph)Newbuilding Prices (2003 – 2013) are relatively low making newbuilding acquisitions relatively attractive.AS A RESULT ONE CAN ARGUE THAT FOR THE OFFSHORE / ENERGY MARITIME SECTOR NUMBERS MAKE SENSE.LNG – Newbuilding PricesSource: RS Platou
5The (Traditional – Plain Vanilla) Senior DEBT Ship-Financing Environment TURNING NOW on the AVAILABILITY OF CAPITAL for the Offshore Maritime Energy sector, one has to look first of all on the availability of Senior DEBT Financing.5
7Senior Debt – GLOBAL Ship-Financing environment Reduction in Global Shipping Banks’ Capacity25 Largest Global Shipping Banks Portfolios in Dec 2012: US $347.6 billion (from US $358 billion in 2008)INCREASE from 2008DECREASE from 2008You may not be able to read this graph as fonts are small but I understand the presentations will be available from Mare Forum. This shows the 25 Largest Shipping Banks globally and their capacity from 2008 to 2012.RED columns indicate reduction in exposure by a number of shipping banks.Source: Marine Money, May 2013
8Are Shipping Banks still there? Senior Debt – Global Ship-Financing environmentAre Shipping Banks still there?Greek Banks : CLOSEDUK Banks: LIMITED Capacity (if any)FRENCH Banks: LIMITED Capacity (if any)GERMAN Banks: SOME Capacity for new dealsScandinavian / Swiss Banks / US / Australian: (SELECTIVE )All Re-organizing Balance Sheets / Re-building regulatory capital (BASEL III )So Overall Are Shipping Banks open?Greek Banks : These are CLOSED as they have severe liquidity issues.UK Banks: There is Limited Capacity (if any) as they are adversely affected by the economic crisis – Shipping is a non Core sector for some whilst a number of them have issues with Problem loans in their portfolios.French Banks: Again there is Limited Capacity as they are adversely affected by European sovereign debt crisisGerman Banks: These have some Capacity for new deals / but again one has to remember that they have US$ Funding CostScandinavian / Swiss Banks / US / Australian are open SELECTIVELY for new deals.All in All one has to remember there is an on-going effort for Banks to Re-organize their Balance Sheets and Re-building regulatory capital (BASEL III )
9A (totally) different picture Senior Debt – Offshore & Energy MaritimeA (totally) different pictureCapacity is thereSyndication & Club Deals structures are availableWide range of different Banks:(German / US / Swiss / Norwegian / Swedish / Australian)Benchmark on Pricing and Leverage (Gaslog)Although Shipping Companies may find it difficult to attract interest from the last few remaining Banks Standing, this is exactly opposite for Companies involved in the Offshore and Maritime Energy sector.Capacity is there from the Few banks that are still activeSyndication market is activeDifferent Banks of different nationality are interestedOn the Leverage and Pricing one can review Gaslog IPO prospectus and can find information on these.
10ALTERNATIVE Ship-Financing Sources Filling the gapCHINESE BANKSCAPACITY IS NOT AN ISSUEPOLICY BANKSChina Exim BankChina Development BankChinese Banks are IMPORTANT for Global Ship-financing as these are the Biggest in the World in terms of capitalization.CAPACITY is not an issue.The most active of these are the Policy Banks.
11Chinese Newbuilding Requirement is not being met Chinese BanksAre they really there?Issues for (NON policy) Chinese Shipping Banks(a) Credit Tightening (to control possible inflation pressures)(b) HIGH US $ Funding Cost (Scarce Availability)Requirements(A) Strong Chinese Element:(China Newbuilding / Time Charter to Chinese SOE)Chinese Newbuilding Requirement is not being met.ALTHOUGH ADMITTEDLY THEY DO HAVE HUGE CAPACITY they have Issues and Requirements and which make them not particularly suitable for Offshore and Maritime Energy dealsIssues for (NON policy) Chinese Shipping Banks(a) Credit Tightening to control an overheated economy(b) US $ Funding (Availability is scarce and Funding Cost is High); Liquidity is with the People’s Bank of China.Requirements(A) Strong Chinese Element: ( China Newbuilding / Time Charter to Chinese SOEEspecially in view of these requirements and as Drillships / LNG Carriers / Shuttle Tankers are very specialized shipping assets and are not being built in China we are not seeing Chinese Banks being particularly interested for this sector.Not particularly relevant at presentfor the Offshore & Energy Maritime
12ALTERNATIVE Ship-Financing Sources Filling the gapExport Credit Agency (ECA) Ship-Financing StructuresAn important financing source for Offshore and Maritime Energy transactions are Export Credit Agency schemes.
13Competition at a political level Export Credit Agency (ECA) StructuresCompetition at a political levelGOVERNMENT AGENCIES assisting EXPORT financeJAPANNEXI: Nippon Export and Investment InsuranceJBIC: Japan Bank for International CooperationKOREAK-sure: Korea Trade Insurance Corp.Korea Exim BankNORWAYGIEK: Insurance AgencyEksportfinansGERMANYEuler HermesKfW IPEX-BankThese are government agencies that support their countries export either by providing the necessary financing to the Buyer / Borrower (the Importer) or by providing an Insurance cover for the financing to the Bank that is providing same.The ECA financing schemes are governed under OECD rules.Examples of ECA are provided on the slide.KfW IPEX is Germany’s state owned Bank that is responsible for Export financing.
14Competition at a political level Export Credit Agency (ECA) StructuresCompetition at a political levelKfW IPEX-Bank finances Royal CaribbeanGerman ship financier KfW Ipex led the export credit financing $997 millionfor USA shipowner Royal Caribbean International.The vessel was ordered from Papenburg-based Meyer Werft.As an example of ECAs involvement and role one can see a recent transaction that came into press about KfW supporting Royal Carribean in a sizeable debt financing deal. The vessel was built in a German yard.The loan is covered by a government export guarantee administered by credit insurer Euler Hermes.
15Competition at a political level Export Credit Agency (ECA) StructuresCompetition at a political levelTHENAMARIS SECURED $400 MILLION LOAN FACILITY FOR ITS 3 LNG NB.A $200 million tranche was extended by KEXIMThe remaining $200 million was equally shared between 3 banks; DnB NOR, ABN AMRO and ITF (part of DVB)Another example of ECA role is KEXIM’s involvement in THENAMARIS’ 3 x LNGS vessels financing.
16ALTERNATIVE Ship-Financing Sources Filling the gapPublic EquityPublic DebtPrivate EquityBesides, Senior Debt and ECA financing schemes an important source of Capital for Offshore and Maritime Energy projects is the Capital Markets and Private Equity.
17Public equity helped (if you were public) Alternative ship financing: Public EquityPublic equity helped (if you were public)Powerful for already listed shipping companiesMostly Follow On Offerings to reduce Debt ExposureGolar:Equity raised (for Expansion in the LNG , FSRU energy sector) of more than $0.5 Billion in 6 MonthsJuly 2012: 1st Follow-On : $223 MillionNovember 2012: 2nd Follow-On : $181 MillionFebruary 2013: 3rd Follow-On : $130 MillionOPEN - for Offshore & Energy MaritimeFor Shipping Companies the Capital Markets are closed.For the Offshore and the Marime Energy sector however these are open.As an example one can see Golar LNGIt should be remembered that the Capital markets are particularly important for this sector as Capital requirements are very big.
18Golar LNG Partners LP (6-Month) Alternative ship financing: Public EquityGolar LNG Partners LP (6-Month)Also one can see here that despite the repeated F.O. Offerings, the share price continued to increase as the investment community is particularly interested in the sector’s prospects.
19Attractive alternative to L/T amortising debt Alternative ship financing: Public DebtAttractive alternative to L/T amortising debtAccommodating for already listed companiesClosed in the heights of the credit crisis, but opened up quickly from Q2 2009, faster than expectedNon-investment grade bondsHigh yields / ConvertiblesGood opportunity to diversifyShipowners: Ability to meet near term liquidity needs and to improve near term cash flowGaslog announced that it has priced an offering of NOK 500,000,000 aggregate principal amount of senior unsecured notes due 2018Bond financing, and in particular High Yield and Convertible bonds have played an increasingly important part in the global ship financing. Over the last years Bond financing has increased and returned at the same levels as in 2004.We expect Bonds to become relatively more important for shipping companies going forward and especially for Offshore and Energy Maritime transactions this is an important source of capotal.OPEN - for Offshore & Energy Maritime
20Post 2008 Private Equity Transactions in Shipping Alternative ship financing: Private EquityPost Private Equity Transactions in ShippingThis graph provides information on joint ventures set up between PE firms and Shipowners.Prime names of PE firms investing in shipping are:(READ).In addition to these, Oaktree has acquired part of Lloyds Shipping portfolio at a discount.Overall Private Equity is important for the sector but other shipping sectors (e.g. Dry and Wet where Asset Values are at historical lows) attract more interest as PE funds are increasingly interested in the asset play.Source: Tiger Analysis
21Offshore & Energy Maritime ConclusionsOffshore & Energy MaritimeTOP ON THE AGENDA[of the Few Remaining Shipping Banks]DEBT: POSITIVE ELEMENTS[+ve Macros / Demand & Supply Balance / Modern Specialised Assets / Strong Corporates / Long Term Employment with Investment Grade Charterers / possible ECA cover]CAPITAL MARKETS: AN IMPORTANT ELEMENTHigh Capital Intensive sector; it is necessary to establish a well diversified Capital Structure (with different capital sources).To Summarize the position:The Offshore / Maritime Energy sector is at the TOP of the Agenda of the Few Remaining Shipping Banks.Senior Debt Providers are particularly attracted for these type of transactions as there are a number of Positive Elements:+ve MacrosDemand & Supply BalanceModern Specialised AssetsStrong CorporatesLong Term Employment with Investment Grade Chartererspossible ECA coverCapital Markets also have an interest for this sector in view of the visibility and the strength of its Earning Capacity.As a result and since the Offshore / Maritime Energy sector is Highly Capital Intensive, Companies operating in it should develop access to the Capital markets and develop a diversified Capital structure in order to ensure uninterrupted access to all capital sources.
22U.S. becoming a major LNG exporter Developments (to watch out for)U.S. becoming a major LNG exporterGlobal impacts of LNG exports from theUnited States
23The Global (Financial) state of Affairs Developments (to watch out for)The Global (Financial) state of AffairsSEC commissioner Dan Gallagher – April 2013$3.7 trillion muni bond market74% of that money came from retail investors.Detroit said on Friday it would stop making payments on some of its about $18.5 billion debt, ....called on most of its creditors to accept pennies on the dollarREUTERS – June 2013
24Ioannis Alexopoulos, Director Eurofin Group of Companies Thank YouIoannis Alexopoulos, Director11 Neofytou Douka Str., Athens, Greece - T: Website:Eurofin Group of Companies.: London.: Athens.: SingaporeEurofinEurofin S.A.Seafin