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Kolesnikov sees investor appetite for Sovcomflot

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21 March 2017

Andy Pierce

TradeWinds

Chief finance officer confident of attracting shareholder interest when state pushes through shares sale.

Sovcomflot is confident of sufficient investor demand for its stock when the Russian state looks to complete the partial-privatisation of the company. 

Russian ministers have suggested the state could sell 25% of its shares in the long-term IPO candidate in the first half of this year. 

Nikolay Kolesnikov, chief financial officer of Sovcomflot, told TradeWinds in an interview today: “We can envisage some spin-offs further down the road if it helps to optimize capital structure for a business line but to begin with I believe they will be looking at the company as a whole.

“I think the company as a whole will appeal to certain groups of investors as we will be positioning ourselves as a diversified energy shipping group.” 

While Kolesnikov did not offer any clarity on the timing of the partial-privatisation, he believes the $8.1bn in contracted revenue held by Sovcomflot is unmatched among shipping or oil service groups today. 

“We are an energy services provider for the oil and gas industry and as such I would be surprised if the company is not able to generate attention and interest from a broad range of potential investors,” he said. 

Cautious on tankers.

Kolesnikov was speaking to TradeWinds the day after the Russian shipowner - also known as SCF Group - reported a reduced full-year profit of $206.8m for 2016, with a substantial correction in the tanker market behind the fall. 

“We are cautious about 2017,” Kolesnikov said of the tanker market, noting that in 2016 over 40% of the owner’s operating profit was generated by its gas and offshore shipping divisions. 

“We are heading towards the end of Q1, we have seen [tanker] spot rates have been weaker than they were in the same period last year. This is obviously the high season and as we move into the summer months it’s hard to imagine that demand will be picking up.”

Sovcomflot last year swept up the former Prisco fleet of nine ice-class tankers and in the past week placed an order at Hyundai Heavy Industries for the world’s first LNG-fuelled aframax tankers. “It was very appropriate to announce this green project on St Patrick’s Day,” Kolesnikov joked.

Finance and investment

While Sovcomflot is fully funded for its 2017 newbuilding deliveries, the executive says it has time to find loans for the latest order. 

“We have not experienced any issues with raising finance,” Kolesnikov said. “Probably, Sovcomflot is an exception to the rule and we have ongoing access to various sources of finances,” he added noting its successful Eurobond issue last year and use of both the international and Russian banking markets.

Sovcomflot is the world’s largest oil tanker owner by vessel count and has diversified in the past few years with a view that 50% of its income will be generated by industrial shipping activity. 

Asked about further investment in the tanker business given a decline in asset values, Kolesnikov said: “We are a big tanker owner and the tanker fleet by deadweight tonnage and number of vessels is big. 

“Do we need to grow it further? I’m not sure but we will continue to invest in fleet renewal to maintain an adequate age profile and capture the technical developments to keep the fleet as efficient as it gets.” 

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