Nikolay Kolesnikov explains shipping and capital markets remain against long-awaited listing of tanker owner
Volatile markets remain the only barrier to Russian tanker giant Sovcomflot’s long-anticipated initial public offering (IPO).
Nikolay Kolesnikov, chief financial officer of Sovcomflot, tells TradeWinds the state-owned shipowner remains high on the government’s list of candidates for privatisation.
In an interview following the shipowner’s third-quarter results today, Kolesnikov explained: “The company is fully ready to go ahead.
"The government is still keen to continue with its policy of structural reforms and privatisation of certain enterprises under their control."
He says the idea is for a sell-down of Russia’s shareholding in the company and a concurrent equity issue, with 25% of the shares likely to be privatised.
“The final structure will be determined when the shareholder decides to push the button and go ahead,” Kolesnikov said.
“That is, as before, dependent on market conditions and the conditions remain fairly unstable and volatile, both from a capital markets perspective and industry perspective.”
Balanced business
Sovcomflot today reported net profit of $52.1m in the three months to the end of September, down by more than a third year-on-year.
Kolesnikov says the company is happy with the performance, which was aided by a balance of industrial and mainstream shipping exposure.
He explains just over half of the owner’s operating profit presently comes from conventional tankers, with 42% from crude tankers and over 12% from oil products transportation. The balance is derived from its liquefied gas an offshore services.
“As and when the conventional tanker markets are ticking they become overweight but the overall direction is very much in line with our strategy,” he explained.
Primorsk deal explained
The quarter saw the acquisition of the Primorsk International Shipping fleet of nine tankers and two ice-class supply vessels from Swire Pacific Offshore.
Socvomflot paid $215m for the Primorsk fleet, outbidding Hafnia Tankers of Denmark, which had $208m on the table. It marked the second time Sovcomflot had taken a fleet of Primorsk ships after a 2010 deal involving six aframax shuttle tankers.
“It was a special situation that we did not feel we could stand aside from,” Kolesnikov said. “The vessels have been in play for some time and were continuously marketed to us over the years.
“It was only now that we felt that the acquisition looked sufficiently attractive to us from a return point of view.
"It was our first experience with a US bankruptcy court and we were hesitant to get involved. In the end it worked out well for us."
An attractive price, charter coverage and the tankers’ technical specifications all contributed to the appeal of the deal, Kolesnikov says.
“It’s also not the first M&A transaction we have done historically,” he continued.
“We are open to these situations as they arrive and we just have to react. Sometimes a non-organic move is as good as placing an order for a newbuilding."
Sovcomflot will take delivery of newbuildings worth over $1bn through until the summer of 2017. “That will keep us busy and we are conscious we should not be over-stretching ourselves,” Kolesnikov said.
“Going forward we will be looking at how we manage the portfolio — when we need to take any further steps on the renewal of the conventional fleets.
"In the meantime we will keep building up the pipeline of project business and participating in tenders to win new business.”